Tuesday, 13 May 2014
Acting vs Reacting
Regular readers of this blog would know that our success is dependable on the right choices. These go hand in hand with recognising what we can control and focusing on just that.
Since we have zero control over proposed regulatory changes announced in 2014 Federal Budget, let's instead talk about how to be in the best position to cease the opportunities they bring.
In another words, we are far better off actively review our position on a regular basis, acting and planning our lives, compared to taking the re-active approach and get nasty surprises in the future.
Let's have a look at some things that will help you plan and be ready:
1. The government has done its yearly budget, have you?
When was the last time you had a look at how you spend your money and how much tax you pay? Your expenses dictate how much money stays in your pocket at the end of the day.
Budgetting is where it all starts when it comes to be in control of your money. If you haven't done your personal (or family) budget yet, allow me to inspire you and do one. Of course, as always a good financial planner will be able to assist you to complete it.
Here's an article I recently posted on @HumbleInvestors website and which has a link to a detailed budget - http://humbleinvestors.com.au/baby-steps-financial-freedom-ultimate-checklist/
A good budget will help you cope with the proposed fuel excise increase, the GP and medication co-payments and family tax benefit changes.
2. Tax management and planning
Increase in the tax levy is never popular, but good tax minimisation strategy and planning can help you manage that. If you earn over $180,000 per year, it's time to seek quality advice. You may be able to take advantage of many tax strategies available to you and decrease your taxable income back to pre-budget levels or even lower.
3. Planning your retirement means less dependence on government
The number of Australians retiring every year continues to increase to record levels and this government (as well as any future governments) has to address that. For them it practically means a growing number of people asking for government benefis. Naturally, the age pension eligibility will continue to be lower and more difficult to obtain.
A solid, time and dollar specific retirement plan will address your future lifestyle and income requirements. It will make sure you will be able to retire on your terms, independently and stay retired. It will ensure you are on track to save enough money and make your savings last longer than you.
That way, neither the increase in age pension age nor the lower age pension eligibility will drastically impact your future.
4. Start early to invest in your kids' future
Having children gives you a lot to think about and one common goal that a lot of parents have is to give their kids the education they deserve.
Planning the education expenses in advance means starting having this conversation and implementing the investment plans nice and early. It will also put you in the best position to cope with future government deregulation of uni and Tafe fees.
5. Teach your kids about debt
We don't learn anything practical about debt in schools. Yet debt is part of the everyday reality for the most of us.
Engaging a good financial planner can make a huge difference in your debt funding habits, correct structuring of loans and eventually in the amount of money you spend to fund your debt.
Your children learn from you and copy you (even they would probably never admit it). Learning how to tackle debt will equip you with great lessons to teach your kids. It will also help them focus on important issues when it comes to debt and help them repay any future education (HELP) loans in no time.
'Planning your life financially is not something you have to do on your own.'
There are lots of wise and helpful financial planners out there who will make sure that you'll have a plan and won't have to reactively adjust your lifestyle with every government budget.
After all, it's your family budget that you want to focus on anyway.
Let me know what you think and what steps you are going to do today. I'd be pleased to know I have inspired you to take action.
by Michal Bodi