Can You “Marie Kondo” your finances?

If you have communed with your socks, thanked your shoes for their hard work or bowed (even internally) to your home in appreciation, maybe it’s time to consider doing so with your money.

Marie Kondo, best-selling author and ‘all round tidy person’ sees tidying as a cheerful conversation in which anything that doesn’t “spark joy” is to be touched, thanked and ceremonially sent on its way towards a better life elsewhere, where it can discover a more appreciative owner.

Joy

That may not quite work for finances, but is there some thing ‘close’ and just as good. Maybe there is:

Budgeting based on what’s important to you
Just as Marie Kondo lays down the challenge to only keep things that bring you joy, it’s just as important to prioritise things we value when spending money in the first place. Understanding what you value most, and then taking a good look at where your money is actually going can be a powerful way to shift your spending habits.
How many bank accounts?
Although it can help to have different bank accounts for savings goals, and another to make sure all your regular expenses are covered, keep multiple accounts to a minimum to save time and effort. Monitoring balances, interest and outgoings for so many accounts just makes things complicated. You may find further benefit accessing our wealth portal, further info on which is here.
Simplify your super
Over a lifetime your super balance has the potential to become one of your biggest financial assets. So making sure you’re receiving all the super contributions you’re entitled to and knowing where they are is an important part of financial housekeeping. It’s not unusual to lose track of super if you’ve changed jobs or moved house a few times. The ATO estimates that there is approximately $14 billion dollars in lost super, which doesn’t include the ‘not lost’ super where people just have multiple accounts. Not only will consolidating super give you fewer funds and statements to keep track of, it can also save you a fair amount in fees. Before you decide to close any of your existing accounts, it’s important to check whether you’ll still have the right level of insurance cover as you’ll often have personal insurance policies – such as life or income protection insurance – arranged and paid for through each super fund.
Do away with debt
Clearing multiple personal debts once and for all can seem like an impossible task. As you struggle to get back to zero, temptation can creep in to just borrow more and become resigned to debt as a permanent part of your financial situation. One option is to consolidate your personal borrowing into a single repayment to make it easier to chip away at the outstanding balance. Your mortgage provider may be able to refinance your home loan so you can bundle debt repayments with your mortgage and benefit from a lower rate of interest as a result.

Budgeting, superannuation, insurance and debt may not sound like the most ‘joy inducing’ topics, but getting your fundamentals right goes a long way towards sparking some serious joy later in life.

6 things you can do to grow your assets

There are some common questions you hear as a financial planner. One of the most common among 30 – 40 year olds is “How can I grow my wealth?” (or something very similar).

The truth is, growing wealth doesn’t have the be complicated. Wealthy people don’t have some ‘secret’ you don’t. The universe isn’t providing for them, because they have manifested it. They just do things that most people aren’t willing to do. Not hard things, just consistent, common sense things. Like these 6 things below.
If you want to get serious about improving your financial situation, being better with money, and enjoying more of it, here’s what you need to start doing:

1. Make More Money than you spend
Well, this seems obvious, but Saving and investing money only works when you have money to begin with. If you don’t have a surplus, you can only reduce expenses so much before you need to look at the other side of the equation: earning more money.
Many people don’t even consider this because they feel the numbers on their pay slips are somewhat out of their control. But that’s not true. You can play an active role in determining how much you earn every year.
The right tactic for making more money looks different for everyone, and depends on your goals, needs, challenges, and opportunities. That being said, a few ways that might work for you include:
Negotiating for a raise after taking on more responsibility at work.
Changing jobs and seeking a higher-paid position (and negotiating your starting salary at the new company).
Starting something on the side, or freelancing on the side of your day job.
Working for yourself.
Investing is a form of creating more income, too — it’s just a much longer play. It will take years, possibly decades, for your money to start earning a significant amount of money on its own.

2. Tracking Your Spending And Sticking To A Budget
Yes, it sounds super basic and simple — because it is. It’s also a fundamental aspect of financial success.
Your cash flow (that is, money coming in and money going out) is a critical component to your financial life. If you can’t master it, you’re not going to be able to increase your net worth.
Start by tracking what you earn and spend. Do you live within your means, or are you in the red each month? If you live within your means, how far below your means do you live?

This is so important, because it’s not enough to live at your means. It’s good that you don’t spend more than you make — but if you just break even each month because you spend every available dollar, you’ll never have cash available to save and invest.
You need to live as far below your means as you can, so you widen the gap between what you earn, and what you actually spend.
A budget is the tool you can use to make sure you keep your spending reasonable over time. It can also help you prioritize your spending according to your values, so you can spend more freely on the things you truly care about — and skip (or scrimp) on the stuff that doesn’t matter as much.

We have a complete wealth portal that helps you keep track of your expenses, income, assets and liabilities. We’d be happy to show you how it could help you.

3. Saving And Investing A Percentage Of Your Income
For most people, investing and earning compound returns is the ticket to wealth.
If you want to follow the traditional path of working until you’re almost 70 years old, then retiring for a few years to enjoy some basic comforts before you pass away, you can simply put away about9.5% of your income in your superannuation and you’ll likely be okay.
But many people — myself and most of my clients included — want a lot more than that. We want financial independence; we want to be free from the need to earn a paycheck; we want to use our money to accomplish big things like traveling the world or starting businesses.
When your goals look like this, saving and investing 10 percent of your income doesn’t cut it. You need to look at saving 20 percent at a minimum, and saving at least 30 percent to be on target to hit those major wealth-building goals.

4. Holding Wealth In Assets — Not in Stuff
The people that drive the flashy cars, own the biggest houses, have the most stuff — they’re “glittering rich,” as Thomas J. Stanley puts it, but they’re not actually wealthy.
They may have high incomes, but that money gets spent instead of saved or invested. As a result, they only have the trappings of wealth. But they don’t have a significant net worth because all their “wealth” is tied up in their possessions.
Even worse? If that high income somehow dried up, they’d have nothing to fall back on.
If you want to grow wealth, focus on growing wealth — not spending it to show off how much money you have coming in each month.

5. Accepting Risk
Occasionally, I’ll work with people who refuse to take any risks with their money. They refuse to invest in the market because the thought of losing even a single dollar is too much.
The problem is, any investment comes with some degree of risk — and there’s a relationship between risk and return. You have to accept some degree of risk if you hope to earn a return on your money.
Not to mention, even sitting on cash comes with a lot of risks. You risk losing purchasing power to inflation, you risk opportunity costs associated with all the time you spend outside of the market, and you risk not being able to save enough cash on your own to meet your goals.

6. Paying Attention To The Little Things
Ultimately, the majority of people who succeed at growing wealth don’t do it because they hit the lottery or got lucky with one big investment or business deal.
(Yes, some people do this — but if we’re talking about how most people make their millions, this isn’t it.)
They succeed because they took the time and care to get the little things right… and they did that over and over and over again. People who become wealthy nail the fundamentals and they practice those good habits consistently.
Those little things include actions like:
Prioritizing their goals and values, so they know what to spend their money on — and when to say no to spending.
Paying attention to their finances, from their budget to their investments, and spending a lot of time minding and thinking about their money each month.
Setting up systems and processes to ensure actions happen, no matter what and despite things like temptation, distraction, and human error (an example of such a system: automating your contributions to savings and investment accounts).
Acknowledging when they don’t know something, and doing research to find the answer.
Asking for help and support, which often comes in the form of coaching and accountability from an objective financial planner.
If you want to join their ranks, it’s time to stop making excuses, avoiding the actions you need to take, or ignoring your finances altogether. Focus on what you can control and get proactive. It’s not always easy or fun to stick to this path, but it is simple — and you can do it if you’re willing to commit to the kinds of things that will lead you to financial success.
Consistency and commitment win over luck every time.

The Simplest Way to make the most of Volatility

Well, to start off, what does it mean? In short, it’s just rapid change and unpredictability. Australians are usually a fairly optimistic bunch (she’ll be right, mate), but when most people think of volatility and investment, it’s a different story. Most people would suggest, when it comes to markets, volatility means down. That’s not necessarily the case.

Now, lets talk for a minute about the recent uptick in volatility. Firstly, let’s put this into perspective.

In 2017 the S&P 500 Index (a broad measure of the US stock market) recorded eight days of a one per cent or greater move (either up or down), with no days seeing a move of two per cent or more for the entire year.
Since the start of 2018 (to 10 April) there have been 68 trading days in the US. Across this timeframe, the S&P 500 Index has recorded 28 days of a one per cent or greater move in either direction.
The largest daily move was more than four per cent, as well as one day of more than three per cent and six days of more than two per cent.
An increasing mix of factors has contributed to this noticeably higher level of volatility, including a divergence in price/value between classifications of stocks; industry trends; and macro-political influences.

What are we worried about?

The potential for rising interest rates;
The US Deficit;
Chinese Growth

That’s a start.

So, we can comfortably say that volatility is ‘likely’. Now, everyone would prefer (I imagine), a nice steady graph of their chosen investment market such as shares, property, bitcoin (just kidding) going steadily up and to the right. Like this.

But that’s not going to happen. In fact, over the last 12 months, the ASX 300 (the most commonly used proforma for the Australian Stock Market, has been like this.

That’s why there is a picture of a roller coaster in the heading.

But, and this is the good news, most Australians of working age are already making the most of this volatility without even knowing about it. Making regular contributions to investments (also known as Dollar Cost Averaging), helps smooth out these returns, and can even mean your investments make money when the price doesn’t rise. Huh?

The mathematics are a topic for another day (awww says everyone we love mathematics), but the good news is, if you have an employer (or are an employer) and are receiving regular super contributions, then volatility is probably your friend. There’s a few disclaimers like you don’t want too much volatility close to retirement, but if you are working, and say below 55, volatility may be the wind in your sails (Terry always likes a boating reference).

I will go into the specifics of how dollar cost averaging can work next week, but until then if you have any questions, please give us a shout.

Who owns you?

One of the things I hear regularly is people ask “What’s a good question to ask your adviser?” No questions guarantee you will find a good adviser, but some good questions may potentially throw up some red flags to avoid.

In light of the Banking Royal Commission, this is ever more relevant. There have been ‘independent’ planners with questionable activities as there have been with ‘institutional’ planners, but these questions are likely to give you a bit more insight into where you stand.

Who owns your business?

Most advice firms are owned by a handful of individuals. Be wary of those with institutional ownership, especially when those institutions also manufacture financial products. Massive conflicts of interest.

Who provides your licence (AFSL) to operate?

We have seen alleged examples of poor behaviour from CBA, Westpac and AMP aligned businesses. You may prefer a firms who has their own licence. This doesn’t guarantee a good adviser either. On key advantage of not being institutionally aligned, like AMP, Charter, BT, Hillross and the like is that firms without institutional ownership are likely to be free to recommend a broader universe of funds and insurance products. If you are meeting with a firm licensed by a bank, ask them what percentage of their clients’ funds or insurance contracts are placed with related entities. This should tell you all you need to know.

Do you own any shares in the company you are recommending I invest in?

This is a tricky one. If your adviser recommends you buy some CBA shares as a part of a direct share portfolio, chances are they may have some too. Thats probably not an issue. What may be an issue is that some advisers are developing their own in-house sector funds. For example, the Acme Financial Adviser Australian Share Fund (err, this is not actually a real fund). This creates a conflict of interest. Focus on those who have a broad Approved Product List (APL) to recommend only the best-in-breed and most fee-competitive funds.

What is an Approved Product List (APL)?

Put simply, an APL is a list of products that have been researched by the licence holder, and approved for use by the advisers. An institutionally owned licence that has an APL not much wider than their own products would appear restrictive of what the adviser could recommend.

Conversely, a wide list of available products should mean an advise is free to choose what really IS in your best interests.

To clarify, the issue with restrictive APL’s is to me, fairly clear. The banks are taking a lot of flak at the moment, most of which appears warranted. But that doesn’t mean that all the bank products are bad for all the people all the time. In fact, as an outside example an AMP super product MAY be the best thing for the next client that walks in the door. If that is the case, the adviser should be able to demonstrate that to their client. The problem is, would that same product be suitable for ALL clients, at ALL times? Maybe not. An ability then for an adviser to use that AMP product when it suits, and a wide range of other products to suit other clients at other times is likely to provide a better answer to all of the clients of that adviser.

At Accrue Financial, we still believe that the best way to get to know an adviser is to get a referral from a trusted friend or other professional. Word of mouth still works, as the people giving the recommendation have gone through the processes before.

If you have any other questions on this post, please let us know, and keep an eye out for more questions in the weeks to come.

A Third of Aussies treading water with money

A recent article by the Australian Associated Press Showed that more than a third of Australians are treading water financially, with many struggling and often running out of money for food or bills, according to new research.

The ANZ’s latest financial wellbeing snapshot, released on Thursday, reveals only about a quarter of all Australians have “no worries” when it comes to money. The majority of the 3,578 people surveyed by the ANZ say they are “struggling”, just “getting by” or describe their finances as “bad”, with little confidence in the immediate future. Of those, 13 per cent are “struggling” and often run out of money for food or bills.

While 23 per cent say they are “getting by”, the majority describe their finances as “bad” or are not confident about the next 12 months. Restaurateur and artist Miranda Scherger considers herself one of the “lucky” ones. When the 32-year-old started to feel the pinch a few years ago, she was able to move back in with her parents in regional Victoria. “I was living in Melbourne for a few years and got myself into a lot of debt,” Ms Scherger told AAP. “There was one point where I had no savings and it felt like I was going backwards.” Ms Scherger now thinks she’s doing “okay” financially.

About 24 per cent of Australians have “no worries” when it comes to money, the majority of whom are aged at least 50, and have substantial savings and investments. After paying off the bulk of her debt, Ms Scherger falls in with the 40 per cent of Australians who say they are “doing okay”. According to the report, financial wellbeing for people such as Ms Scherger depends not just on socioeconomic status and income, but on their state of mind. That means how people feel about their money situation right now and going forward. Despite having what she calls an “average” wage, Ms Scherger is now comfortable enough to start looking at buying a house in the country. “I don’t have a huge amount of debt,” she said. “I’m able to save a good amount of my wage. I have a financial plan and I’m good at sticking to it.”

Managing your cashflow is more than just ‘making a budget’ and can allow you to focus on the things you want to do. I have often heard people say they don’t want a financial plan, they just want to know how to manage their money.

Cashflow management (and by association debt management) can help you understand where your money is going and give you more confidence and control. From there, we can help you create a plan to help you achieve financial success.