The start of a new financial year is as good a time as any to assess your financial position and make some resolutions for the year to come. Here is a list of resolutions to help get your personal finances in order for the next 12 months written by Rob MacLean, my business partner and the founder, CEO and principal advisor of boutique private wealth management practice: Equitas Wealth.
#1 — Be the CFO of your own finances
Most professionals understand the role of a CFO in an organisation is to provide financial leadership as well as financial insights and analysis. Often they are also closely involved with developing strategy and guiding key business initiatives. Taking this process and applying it to your personal finances and treating your finances like a business can yield dramatic improvements to your overall financial position. These improvements can be both long and short term, enabling you to enjoy the lifestyle you desire for you and your family.
#2 — Examine how your assets are structured
The purpose of asset structuring is to provide the appropriate balance between flexibility of use and protection from creditors, excess taxes and spendthrift or unscrupulous family members. If done effectively, asset structuring can provide tax advantages, family tax protection and the longevity of assets. Asset structures should be reviewed on a regular basis, such as once a year, particularly when personal circumstances change, like divorce or starting a new business. This way you can make sure your structuring is appropriate to your needs and the complexity of your finances, plus provide sufficient protection from any potential risks.
Tip: Superannuation and the proceeds of life insurance policies are high value assets which need to be carefully dealt with as part of managing your future financial affairs. It is important to note that superannuation balances do not form part of a person’s estate so specific arrangements are required in your estate plan.
#3 — Review your super
Part of your long term financial strategy will involve building your superannuation. Whether you have your super in a retail fund or a self-managed super fund, it’s important to regularly review your super to make sure it is working for you.
Quick Test: Will the value of your primary residence be higher than the value of your funds held in super at the time of your retirement? If so, you may also want to consider getting professional financial advice as there may be better options for your super savings.
#4 — Implement a long term financial strategy
Most of us are guilty of reacting to the ‘here and now’. We often make decisions that don’t take into consideration our long term financial position and where we would like to be financially in the years to come. It is prudent to develop a long term financial strategy that allows for both foreseen and unforeseen changes in circumstances. This can often mean the difference between retiring when you would like in a comfortable financial position or having to keep working to ensure you have enough money to retire at all. Here are three simple tips to get started:
- What are your day-to-day cash flow requirements? Break down your assets into what you owe and what you own.
- Are you managing your risks? Put an asset structure in place that avoids exposing your assets to the risks of the commercial world, differing needs of family members or excess tax paid both now and in the future, and separate commercial risks from personal risks.
- Where will your future wealth come from? Seek professional financial advice about how to maximise your asset growth and turn it into a tool for long-term wealth creation.
#5 — Check that your will is up to date
An area many of us neglect is our will. If you died tomorrow, would you be confident your wishes would be carried out? A will can be challenged for reasons ranging from improper execution of the document through to complaints it did not adequately apportion the deceased’s estate to potential or actual beneficiaries. Sound estate planning will make sure the formalities needed to ensure the validity of the will are satisfied and the scope for dispute about its terms is minimised. Does your current will address these questions:
- What will my life look like in the future: Am I contemplating taking on company directorships or other business risks? Is my family changing shape, such as parents moving to aged care facilities, children marrying and having children? Do I intend to change my assets in the future, including buying and selling the family home?
- Who will look after my affairs if I become incapacitated through illness, accident or old age?
- Is there anybody who could be dissatisfied with the distribution of my estate and might seek to challenge the provisions of the estate plan?
- Is there anybody in my family with special needs (such as disabilities) who needs to be provided for in my estate plan?
- What do I want to happen to my assets if my spouse remarries?
- What may have seemed clear when you made your will may change over time and failing to have an up-to-date estate plan can lead to potentially expensive and painful family disputes.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation and needs. For further information, go to www.equitaswealth.com.au/contact-us/.
