Our Investment Philosophy
We match our clients with risk-appropriate portfolios. These comprise globally diversified blends of index funds.
Our investment philosophy is based on five principles derived from academic research, much of which has been recognised with the awarding of the Nobel Prize in Economic Sciences:
1. Financial markets are efficient
Prices in free markets fully incorporate available information, and prices change to reflect any unexpected new information so that the current price is the best estimate of a fair price.
2. Risk and return are inseparable
While there is no such thing as return without risk, not all risks are rewarded. Long-term historical risk and return data informs Locumsgroup’s investment selection process, and Locumsgroup’s Index Portfolios seek to capture the risk factors that have been shown to most appropriately compensate investors for the risks taken.
These risk factors include: market, size, value and profitability for equity; and term and default for fixed income.
3. Diversification is essential
Diversification both within and among asset classes allows investors to effectively capture the returns offered by the financial markets, in accordance with their risk capacity.
4. Structure explains performance
The expected return of a diversified portfolio is determined by its exposure to the compensated risk factors, as explained previously. The high costs and risks of active management are unnecessary and potentially harmful to an investor’s long-term outlook.
5. Advisor Advantage
There are distinct and quantifiable benefits to enlisting the services of a passively oriented advisor. These benefits include disciplined re-balancing, tax loss harvesting, asset location and glide path. At Locumsgroup we add value by adhering to the principals of controlling costs, maintaining discipline, and tax awareness.
Tailored investment solutions.
Your portfolio will be designed to match your risk profile determined using a risk assessment questionnaire developed in conjunction with the University of NSW. Portfolios are designed to match seven key risk profiles. The lever to determine management of risk is the ratio of growth and defensive investments.
The seven portfolios are summarised below as: (defensive assets/growth assets)
1. Defensive: 90% / 10%
A Defensive Investor is primarily concerned with capital preservation; they are not prepared to take risks with their investment funds.
2. Moderately Defensive: 70% / 30%
A Moderately Defensive Investor is primarily concerned with capital preservation; they are not prepared to take minimal risks with their investment funds.
3. Conservative: 60% / 40%
A Conservative Investor is prepared to sacrifice higher returns for the benefit of capital protection.
4. Balanced: 40% / 60%
A Balanced Investor has some understanding of the behaviour of investment markets and is prepared to accept short term capital risk and volatility in order to gain longer term capital growth.
5. Moderate: 30% / 70%
A Moderate Investor understands that there will be a level of volatility in the value of their investments and is prepared to accept a small amount of risk in order to benefit from some capital appreciation.
6. Growth: 20% / 80%
A Growth Investor is prepared to sacrifice short term safety in order to maximise long term capital growth, therefore their portfolio is strongly biased toward Australian and International shares with fixed interest and property providing some income and stability of returns.
7. High Growth: 10% / 90%
A High Growth Investor is prepared to sacrifice investment capital in pursuit of the highest long term capital growth.
The key to money is understanding not what it can buy, but what it can do!
And the key outcome of that understanding improves the chance of you achieving financial independence.
Our specialists work with you to ensure that your financial objectives are identified, clarified, and ultimately achieved. This occurs in a timely and efficient manner.
We apply rigorous discipline, Nobel Prize winning research, and years of capital markets knowledge to the construction of our clients’ portfolios.
Identifying and using these factors does not require us to pick winners, time markets, or increase risk in a clients’ overall portfolio. Our methodology, under-pinned by rigorous academic research, enables portfolios to be engineered with a view to providing certainty of outcome.
We believe that through our access to a range of strategies and best-of-breed investment solutions we can accommodate our clients’ risk and return needs.
Financial independence is the outcome of a process, and ours is a focused, systemised approach that concentrates on balance; on growth; and on asset protection. Our financial advice service delivers an effective infrastructure within which to achieve your financial objectives.
We leverage our experience and aim to achieve superior risk-adjusted returns for our clients using a range of investments.
The financial advice process includes the input of our accounting division to consider the tax implications of every investment strategy.
To achieve these outcomes we build upon a legacy of insight in our firm that goes back over sixty years.
Key Service Offerings
We prepare portfolios which are individualised and indexed.
We match the portfolio by carefully qualifying and quantifying your risk profile, and matching it to the risk exposure of Locumsgroup’s portfolios. This replaces speculation with science, employing a disciplined approach that emphasises broad diversification and consistent structure.
Your arrangements are managed within a framework that is designed to provide maximum tax efficiency.
Our team provides leading-edge taxation advice enabling you to manage your affairs.
Access to Nobel Prize winning investment expertise embedded in academia and economic science enables you to avoid the mistakes of others that have gone before you.
Technical advice has as much a role to play as experienced-based advice such as don’t follow the herd, and hasten slowly!
Assets that have taken years to accumulate can be placed under threat if correct planning is not considered.
Owners’ loans to private companies should be protected to the benefit of the owner, and any exposure that you may have as a company director should also be considered.
Wills and Estate Planning
The three key areas for you to consider are: make your arrangements easy to administer; develop a plan that will lower the taxes payable on your estate; and work out how to leave your estate so that it can be put to the best use by your heirs.
The protection of your financial well-being, and the protection of your dependents, can be achieved with a considered risk management strategy. Properly planned using a range of insurance products that consider both your needs and key tax consequences will serve as a keystone to your overall financial arrangements.
Your debt-structure is a defining issue in the management of your affairs. The separation of loans into individual, clearly identified sub-loans makes the management of your borrowings tax-efficient and easier to manage.
Your business structure and the flow of revenue from operations should be reviewed to ensure you are operating for maximum efficiency. Asset disposal and acquisition should occur with appropriate advice and guidance. Prevention, when it comes to tax-planning, is always less costly than the cure!
It’s about you taking control of your finances.
The staggering statistic that 84.00% of Australians retire on less than $21,000 is a sad indictment on nearly 20 years of compulsory superannuation contributions for Australian workers.
There are 16 million superannuation funds in Australia, with accounts for multiple super funds per person. Remember, the total population of the country is only 25 million!
The majority of superannuation funds are managed in default funds and this one-size-fits-all investment approach has seen a dramatic reduction in wealth over the past five years.
In Australia, most people have money in superannuation funds – however that money is nearly all invested in what has been shown to be highly volatile stock markets and bonds.
In the main, managed super funds are either invested in either retail funds or industry funds. The only real point of differentiation is that industry funds, with a one-size-fits-all investment philosophy, charge lower fees to members as they don’t pay commissions.
A self-managed superannuation fund enables you to take greater control of your retirement savings and that position, combined with professional advice, will enable you get control of the planning process and providing for your future.
More Self-Managed Super
What is a Self-Managed Super Fund
A self managed superannuation fund (SMSF) is a form of superannuation fund that can offer members greater control over their retirement savings compared to other types of superannuation funds such as industry or retail super funds.
This increased control includes wider investment choice and greater control over investments.
You also have the ability to pay retirement benefits, such as pensions and annuities, directly from the fund.
Self managed superannuation funds must be established for the sole purpose of providing benefits to fund members on retirement. Or, if the member dies before retirement, a benefit to that member’s dependants. This is referred to as the Sole Purpose Test.
Why establish a SMSF?
A SMSF can provide many benefits to you including:
- greater control over your retirement savings with the ability to develop your own investment strategy and make decisions on when to buy and sell individual investments
- a wide choice of investment options including corporate bonds, managed investments, listed shares, listed Investment Companies (LICs), exchange traded funds (ETFs) and direct property
- potential tax advantages over other forms of super, and
- potentially lower annual fees than retail and industry funds.
Learn more about the benefits of self managed super funds.
What are the requirements for establishing an SMSF?
To establish an SMSF, the fund must meet the following conditions:
- have fewer than 5 members
- each individual trustee of the fund must also be a member of the fund
- each member of the fund must be a trustee of the fund
- no fund member can be an employee of another fund member, unless they are related, and
- no trustee of the fund can receive remuneration for their services as a trustee.
An SMSF can alternatively have a corporate trustee (that is use a trustee company for that purpose). Each director of the trustee company must be a fund member, and each fund member must be a director of the company.
There are some exceptions involving single member funds and minors. A Locumsgroup adviser can explain the rules to you regarding exceptions to SMSF member requirements.
Contact Locumsgroup and find out if a self managed superannuation fund is right for you.
In a staggering statistic, 84.00% of Australians will retire on an income of less than $21.000 per annum.
Of the $1.23 trillion invested in super at 30 June 2010, $390.8 billion was in self managed super funds (SMSFs). That’s 31.8% of all superannuation funds, with SMSFs now representing the largest slice of the superannuation industry.
For many Australians, SMSFs offer four major advantages:
1. More control over your investments.
2. Greater investment flexibility and choice.
3. Generally lower fees than industry and retail funds.
4. On average, better performance than industry and retail funds.
More control and greater flexibility over investments
SMSF members can choose where their retirement savings are invested, with options including listed shares, bonds, listed investment companies (LICs), exchange traded funds (ETFs) and direct property.
This flexibility in investment options allows SMSF members to actively manage their investments. With a hands-on investment approach, SMSF members can quickly adjust their portfolios as markets change.
Lower fees and better performance
A Commonwealth Government report titled: A Statistical Summary of Self-Managed Superannuation Funds (Dec 2009), based on ATO and APRA data, found SMSF members generally pay lower fees and that, on average, SMSF investments performed better than all other super funds over 2006, 2007 and 2008.
How an SMSF could benefit you
Depending on your individual situation, the advantages of an SMSF may include:
- tailored tax management on investment income and capital gains
- greater flexibility in investment choices and asset selection
- control over your total investment portfolio, with the ability to take account of the risk profile of all your assets, including those held outside superannuation
- the ability to pool your resources with up to 4 fund members with similar financial objectives, such as family members
- maximum flexibility in establishing and managing pensions, including account based, transition to retirement and term allocated pensions
- greater flexibility for accessing Centrelink benefits such as the age pension
- the ability to invest in direct property
- the ability to transfer personally owned listed shares, business real property and managed funds directly into your superannuation fund, and
- the ability to own business real property in your superannuation fund, to assist your business cash-flow.
When deciding whether a self managed super fund (SMSF) may be right for you, you should consider both the advantages and the responsibilities.
Advantages of an SMSF
Depending on your situation, the advantages of SMSFs can include:
- greater control and flexibility over your investments
- tax concessions
- the ability to pool your resources with family members
- estate planning benefits, and
- lower management costs.
Control over your retirement savings
As a trustee of your SMSF, you can make your own investment and strategic decisions for your retirement savings.
Greater investment flexibility
- SMSFs provide greater flexibility in how you can invest your retirement savings. Members can choose to hold direct assets such as property, cash and listed shares.
- As a trustee of your SMSF, you can determine the investment choices and asset allocation of your SMSF.
- SMSFs can also directly acquire listed shares, business real property and managed funds from members.
Lower costs of managing SMSFs
For SMSFs with pooled assets of $200,000 or more, the average cost of your fund can drop below 1.0% pa. This is generally lower than many retail and industry funds.
- Earnings in your SMSF are taxed at concessional rates of 15.00%.
- Capital gains on investments held in your SMSF are taxed at an effective rate of 10.00% if held for longer than 12 months.
- Contribution tax payments in SMSFs are deferred until after the annual tax return is lodged unlike many industry and retail super funds where the 15% contribution tax is deducted when the contribution is paid into your super.
- Other strategies may also be available to help reduce the overall tax liability of your SMSF.
Pooling resources for greater cost effectiveness
Unlike other types of super, a SMSF enables up to four members (usually family members) to combine their assets to accumulate funds for retirement. This provides access to more cost-effective and efficient investment strategies.
Estate planning options
The flexible structure of an SMSF allows members to take advantage of estate planning strategies to efficiently transfer wealth from one generation to the next with minimum tax liability and maximum asset protection.
As a trustee of a self managed super fund (SMSF), you have certain responsibilities that you must adhere to for your SMSF to remain a complying fund that is eligible to receive favourable tax treatment.
As a trustee you are responsible for running your SMSF and you cannot receive any remuneration for your trustee duties.
As a trustee of an SMSF you must:
- always act honestly
- exercise the same degree of care, skill and diligence as an ordinary prudent person in managing your SMSF
- act in the best interest of all your SMSF’s beneficiaries
- keep the SMSF’s assets and money separate from other money and assets, such as business and personal money and assets
- retain control over your SMSF
- develop and implement your SMSF’s investment strategy
- not enter into contracts or behave in a way that hinders trustees from properly performing their duties or powers, and
- allow beneficiaries access to certain information about the SMSF.
What happens if you fail in your trustee duties?
As a trustee of a self managed super fund, if you fail to act in accordance with the superannuation regulations and tax laws, you risk the following:
- your SMSF becoming non-complying and losing its tax concessions
- disqualification, removal or suspension as a trustee of the SMSF
- civil or criminal prosecution, and/or
- financial penalties.
If you fail to act in accordance with your SMSF trust deed, other affected members of the fund may take legal action against you.
Locumsgroup can assist you in establishing your self managed superannuation fund, including attending to the process of rolling over and consolidating your existing superannuation arrangements. In general terms, the steps involved in setting up a self managed super fund (SMSF) include the following:
- Obtain a trust deed.
- Appoint trustees.
- Each trustee signs a consent to act as trustee.
- Each trustee signs the ATO Trustee Declaration.
- Elect to become a regulated fund.
- Obtain a tax file number (TFN) and Australian Business Number (ABN).
- Establish a separate bank account for the SMSF.
- Prepare and implement an investment strategy for the SMSF.
Obtaining a trust deed
An SMSF trust deed must be prepared which establishes the operating rules for the fund.
Locumsgroup provides a standard SMSF trust deed to all our clients. This trust deed is flexible and effectively allows your SMSF to do anything allowed by superannuation legislation.
All superannuation funds must appoint trustees. Trustees are responsible for ensuring the fund is properly managed and that it complies with all rules and legal obligations.
All SMSF members must be appointed as trustees of the fund. Learn who is eligible to become an SMSF trustee.
Under the SIS Act, trustees must consent in writing to their appointment as trustee.
Signing a trustee declaration
All new SMSF trustees (and directors of corporate trustees) must sign an ATO Declaration confirming that they are aware of their duties and responsibilities within 21 days of becoming a trustee or a director of a corporate trustee.
Electing to become a regulated fund
Trustees must elect to be ‘regulated’ under SISA to receive concessional tax treatment within 60 days of establishing an SMSF. This can be done online or by submitting a paper form to the ATO.
Obtaining a Tax File Number (TFN)
Trustees must obtain a TFN for the SMSF. This can be done online or by submitting a paper form to the ATO.
Obtaining an Australian Business Number (ABN)
The Australian business number (ABN) is the identification system for all business-to-government dealings. An ABN can be obtained online or by submitting a paper form to the ATO.
Separate bank accounts
A separate bank account must be established for your SMSF to ensure that money belonging to the SMSF is held separate from accounts of the members, trustees and related employers. This is a SISA requirement but also helps SMSF trustees to preserve and protect their retirement income.
We clients in the process of establishing separate bank accounts for each new SMSF. Generally, the main operating account established by Locumsgroup is a Macquarie Cash Management Account.
SMSF investment strategy
SMSF trustees must prepare and implement an investment strategy for their SMSF, and regularly review that investment strategy. This helps trustees to make the best possible investment decisions for their SMSF.
The SMSF investment strategy must reflect the purpose of the fund and consider:
- investing to provide sufficient member returns, taking into account investment risk
- appropriate diversification and the benefits of investing across asset classes (for example, shares, property, fixed interest) in a long-term investment strategy
- the ability of the SMSF to pay benefits as members retire and to pay other costs incurred by the SMSF, and
- the age, income, employment and retirement needs of the SMSF’s members.
All investment decisions must be made according to the SMSF’s investment strategy.
You can now buy direct property within your superannuation fund.
The biggest advantage that having a self managed super fund (SMSF) offers is the opportunity to invest in property. Property in super funds has not been an option until relatively recently. New legislation was introduced in 2007 that permitted borrowings to occur within self managed super funds to invest in direct property.
A circuit breaker in this spiral is for you to take more control in how your retirement funds are invested.
If you don’t have to have sufficient funds in your superfund to buy a property outright. it is now possible for your SMSF to borrow funds for property investment if structured in accordance with the ATO’s requirements. You should talk to Locumsgroup about the right way to structure your SMSF before you do anything else.
By taking control yourself with appropriate advice you can maximise your potential retirement benefits.
- The loan arranged by your self managed superannuation fund must be a Limited Recourse Borrowing Arrangement (‘LRBA”). Under this type of loan the the recourse available to a lender is limited to the asset and any rights of that asset (in the case of a property, the rent from that property).
- The borrowed funds must be used to acquire a Single Acquirable Asset. This can be defined as a single object of property; for example an apartment, free-standing residential apartment or a vacant block of land.
- The asset must be held in a specially designed trust commonly refererred to as a Bare Trust or a Property Trust.
- The SMSF must have the right to acquire the legal ownership of the asset from the property trust upon repayment of the outstanding loan.
- The SMSF can not purchase a property from a related party unless it is a Real Business Property acquired at market value.
- The borrowed money can be used to carry out repairs and maintenance, however the loan must not be used to make improvements to the asset.
Self managed superannuation funds (SMSFs) must be established for the sole purpose of providing benefits to fund members in retirement.
Or, if the member dies before retirement, a benefit to that member’s dependants.
Benefits can be in the form of lump sum payments, regular income payments. or a combination of both.
When members can access super benefits
The rules regarding access to self managed superannuation funds are the same as all superannuation funds. These rules impose restrictions regarding when payments can be made to fund members.
Generally, member benefits are classified into three categories which determine when they can be accessed by members. These categories are:
- preserved benefits: can be accessed when a suitable condition of release is met on or after reaching the member’s preservation age;
- restricted non-preserved benefits: can be accessed when a suitable condition of release is met, and
- unrestricted non-preserved benefits: can be accessed at any time.
The table below sets out the member’s preservation age which is determined by their date of birth.
Date of birth
Before 1 July 1960
1 July 1960 – 30 June 1961
1 July 1961 – 30 June 1962
1 July 1962 – 30 June 1963
1 July 1963 – 30 June 1964
After 30 June 1964
Types of income stream payments available
Superannuation benefits can be paid to fund members either as a lump sum payment or as an income stream, or a combination of the two. Your Locumsgroup financial adviser can provide focused advice on what is the best way for you to handle your suprannuation benefits and tailor a strategy that suits your requirements.
Getting your financial life organised is a process that takes different forms at each of the different stages of your life.
Your choice of your accountant and financial adviser is a fundamental key to your success and is the link to you being the best you can be at each of the different life stages.
Just imagine if you were living your ideal life?
What would it look like?
What would it feel like?
What would you be doing?
Who would you do it with?
Our purpose is to enhance the lives of the clients that we work with so that they can live their ideal life.
Every aspect of the Locumsgroup process reflects an uncompromising commitment at every stage of our clients’ lives to having a significant and positive impact on our clients’ well being.
The following summaries discuss the various events that are important to you.
The summaries outline some of the key points that you might consider and focus on to ensure your objectives are achieved in a timely manner.
At Locumsgroup we will help you to to identify your goals, assist you to evaluate them, and then work alongside you to ensure that they get achieved.
More Life Stages
Buying a home
Buying a home is likely to be one of the biggest financial commitments you will make. It can be exciting yet daunting at the same time.
There is a mystifying use of jargon in the real estate, mortgage lending and legal worlds which, as a first home buyer can leave you confused and anxious about the buying a home.
- We eliminate the confusion by taking the time to explain the process from start to finish, we keep it simple and cut through the jargon, so you understand exactly what is happening at each stage. It is important to us that you feel at ease throughout the process.
- Whether it’s advising you on the best ownership structure, the use of lenders’ mortgage insurance, loan structures, loan features, or packaging the loan to smooth the approval process, it’s our job to speak to you in a clear and straightforward way so that you can make decisions with peace of mind that comes from a clear understanding.
Our goal is for you to have confidence in the decisions that you make so that you can enjoy the process of your most exciting purchase.
Buying an Investment Property
Whether you are looking to buy your first investment property or add to your current portfolio, property is considered to be a good store-of-wealth asset.
Over the long term, property is a stable and reliable asset for wealth creation.
- Whether you are looking raise your deposit and purchase costs by borrowing, using the equity in an existing property (either your home or another property asset), using cash reserves, or selling down other investments, it is important you discuss your plans with us first. We will consider your situation and advise you on the most appropriate debt structure to gain the most appropriate, tax-efficient borrowings.
- The next step is to find your property. First time investors make common mistakes such as acting on emotion and not on research; or buying a property of a style that would like to live in; or acting too quickly or too slowly. Other errors include speculating, or not managing their cash-flow properly. These are all the types of mistakes that can make the vision of building a property portfolio fall apart at the seams – right from the start.
- It is critical you seek advice and invest in areas that have strong research that supports capital capital growth and future potential returns. Ensure your debt is structured correctly and the anticipated cash inflows and cash outflows from the property are reasonable and fit into your current budget.
Assemble your team of advisers. If Locumsgroup play a role in the process, we will assist you with advice regarding the structure of the transaction and your borrowings, and also if required advice on the tax effects of your investment choices and the preparation of your income tax returns.
You’ll need a great managing agent too; make sure you select a reputable, reliable agent to manage your property and don’t try to do it on your own.
Children’s Education Costs
If a private school education is something you would like to provide for your children, the earlier you plan for these education costs the better. Set up a regular savings plan to allow for this and add to that regular saving schedule by allocating lump sum receipts, such as income tax refunds.
Other things to consider are saving to be able to contribute toward the children’s deposit for a first home, their wedding, annual overseas family holidays etc.
Receive a Pay Increase
It is a rewarding time when you receive a pay increase. It’s nice to have recognition from your employer that your skill and effort is worthy of acknowledgement and that extra money in the bank each month is a sweetener too!
Be mindful that the pay-increase doesn’t trip you over to the next marginal tax rate otherwise the Commissioner of Taxation could end up with up to 45% of your new pay increase!
We recommend you portion your pay increase and allocate it to some or all of the following options:
- Pay down credit card debt. This is expensive non tax-deductible debt.
- Pay down your home loan. A little bit extra per month will save you thousands of dollars in interest in the long term.
- Additional savings. Put some aside for a rainy day, a good cash buffer is advisable for those unplanned events.
- Salary Sacrifice in Super. You can send some of your pre-tax income over to super. This strategy can be used to build up super and bring you down to a lower tax bracket. There are complex strategies around superannuation and we suggest you seek advice.
- ENJOY IT. Always allocate a portion of your pay increase to enjoy. As important as it is to save for the future you must also leave a little bit to enjoy today.
Receive an Inheritance
Managing a capital lump sum, in the form of an asset that has been left to you as a significant cash inheritance, is like driving a very fast car on an unfamiliar road. A guide is essential, if only to say: ‘slow down’.
The allocation of capital that has come from an inheritance is not a race. It is the time for a carefully considered set of action steps that will enable you to protect, enjoy, and possibly even grow the asset.
We have all heard the tale of Lotto winners being separated from their money in a startling short period of time. This is arguably the outcome of a toxic cocktail of bad advice mixed with haste.
There are various strategies that could be deployed ranging from debt-elimination or debt-transformation, to ensuring that sufficient income is generated from your investments to meet your long term goals.
Capital Gains Tax considerations are important as certain assets in a bequest may have imbedded CGT liabilities that require attention before sale or disposal.
Each situation is different, although over-arching principles apply. Contact Locumsgroup to obtain a documented action plan with cash-flows, before you take any steps or make decisions.
There are some significant tax advantages in the later stages of your working life; these include transition to retirement strategies (‘TTR’) which can assist you in reducing the amount of income tax paid on your personal income while building your retirement fund.
Think about it, if you retire at 65 in good health and you hope to beat the actuarial average and live to say 85, you will have 20 years of non-income production.
Perhaps we shouldn’t view retirement as 20 linear years and instead to think of four chunks of 5 years each.
In the period 65-70 for example, you are going to be more physically agile that in the period 80-85:
- So the first 5 years of your retirement might be the time when you realise your activity-based life goals of sailing boats, travelling, driving 4WD’s, and marching the Kokoda trail.
- The period between 70-75 will be characterised differently and while hopefully in good physical condition, you might hang up the trail hiking boots and reach for the golf clubs
- The period 75-80 might involve you taking a bit more interest in activities that involve a little less exertion, while remembering of course to keep your body moving!
- The period 80-85 you have earned the entitlement to relax back while remaining flexible and taking regular exercise, probably of a low impact nature.
During these periods there will be significant changes in the economic cycle as markets accelerate and decelerate. It is critical that you hold a range of investments in your Income Producing Asset Pool which do not correlate, that is to say, you should select assets that don’t all go through the roof at the same time and significantly, assets that don’t go through the floor in a uniform manner!
Having a well considered plan, with focused pre-determined outcomes will give direction and momentum to these important periods of your life.
Saving for a Deposit
Saving up for a deposit for your first home can be overwhelming; the amount of money required for a deposit to purchase a home can take years to build.
The first step is to acknowledge it’s going to take commitment and determination to put money away for this future event; especially since there are so many distracting purchases you can make today that will take you away from achieving you goal.
You can save, you just need a plan. We often hear: ‘if only I earned an extra $10,000 a year I’d be able to save more money’. That theory just doesn’t work. It really doesn’t matter what level of income you earn, you will always find a way to spend all of your hard-earned money unless you have a plan.
To be successful you need to budget for your spending, and you need to have a plan. We all have to start somewhere, and the good news is that when you get focused, over time your house deposit will significantly grow and you will be ready for investment into the property market.
Help from your parents / your family.
These days most lenders will let your parents pledge 20.00% of the value of your home by way of offering the equity in their home as a type of security guarantee.
Help from the government -The First Home Saver Account.
While the first home saver account might not be for everyone if you fit the criteria than it can be a great way to save. The account can be open for up to four years and the government will contribute 17 per cent on the first $5,000 deposited. This means an individual contributing $5,000 will receive a Government contribution of $850.
If the funds are not used towards your first property than the money saved will be rolled over into your superannuation fund. This is helpful as it will add some extra money to your account, but also a bit of a pain. Should you inherit a property, decide not to buy an investment property – your money will have to be put into your superannuation fund.
This means that whatever you put into this account, whatever the dollar value – be prepared to either buy a house or deposit it into your super – there is no way of getting it back into your everyday account.
Be realistic – your first home most probably won’t be your dream home. By making this compromise and getting into the market early you should enjoy the benefit of capital growth in your first home and this will eventually allow you to buy that dream home.
Starting A Businesss
Congratulations, you’ve decided to start your own enterprise. This is no doubt the outcome of a carefully considered planning process, and a long-held passion to control your own destiny and run your own show.
Sadly, the statistics on new-start enterprises are not good. Analysis conducted in business schools can track these problems to perhaps two key areas: lack of planning, and lack of capital.
Before you start you need to get advice on the most effective structure within which to run your business. Key issues such as asset protection and ownership structures should be put in place – like the foundations of a house – at the beginning!
A correctly documented business-plan that exists as your own personal reference document should including a cash-flow forecast, your strategic objectives, and a clear explanation to the business owners and stake-holders of: who you are, what you do, how you do it, and what you intend to achieve.
- Remember, in life the only time you ever start at the top is when you dig a hole!
- Get advice on the most effective structure within which to run your business.
- Address key issues such as asset protection and ownership structures to be put in place, just like the foundations of a house, this should be done at the beginning!
A correctly documented business-plan will be your own personal reference document and will include a cash-flow, your strategic objectives, and a clear explanation to the business owners and stake-holders of who you are, what you do, how you do it, and what you intend to achieve.
Starting a Family
If you and your partner have made the exciting decision to start a family then congratulations, some would say there is no greater reward in life than watching your children grow.
These days the decision to start a family can be daunting with the added burden of financial commitments, and whether the household can afford for one partner to be out of work for a period of maternity/paternity leave.
- It is important to run a model in your family budget to account for the loss of income into the house, plus the additional expense of a child. This may also be the appropriate time to consider taking advantage of spouse co-contribution to superannuation if a partner is not going to be working for a period of time.
- A complete audit of your current insurance arrangements is required; if something were to happen to the main bread-winner of the family would existing insurance arrangements be enough to cover the cost of running the household until the children are no longer dependant?
- Generally speaking, the standard level of insurance arrangements offered through superannuation funds is not adequate; in fact they fail the adequacy test by a long shot! It is important that, in the unlikely event that something should happen to one of you, that a financial burden does not become part of the tragedy too.
- If private-education is something you would like to provide for your children, now is the time to think about allowing for education costs and perhaps set up a regular savings plan to allow for this.
Finally, you and your partner must have a current Will in place for the protection of the both of you and your children. Additional considerations to be addressed in the document are who will care for the children if something were to happen to you both.
Getting On Top of Your Debt
This page is currently being updated. Please be patient with us while we attend to the upgrade of this important feature of the Locumsgroup web-site.
Clearing Your Credit Cards
The less debt interest you pay, the more you can use your money effectively. This article goes back to the basic, yet essential, ways to reduce and pay off credit cards.
1. Fix a budget for reducing your debt
If you only make the minimum repayments on your credit card, it can take more than 30 years to clear a $5,000 debt, paying more than $5,000 in interest over that time! While it is likely that you will get sufficient money to clear the debt sooner, you will still pay vast amounts of interest on a debt that barely budges.
So work out how much money you can afford to pay towards your credit card debts each month, and set up direct debits to pay that fixed amount. $200 per month to clear a $5,000 debt will take three years, not 30!
2. Pay off the card debt with the highest interest first
You don’t have to spread repayments evenly. From your debt repayment budget, pay the minimum on each credit card except the one with the highest interest rate. Pay the remainder of your budget on that credit card debt. When you’ve paid that card off, close it down. You then have even more money to allocate to the repayment of your second-highest interest rate, and so on.
By tackling the higher rates in this way, you’ll massively reduce the amount of interest you pay and the time it takes to clear all your debts. This is a technique known as snowballing.
3. Reduce your interest rates
You get the same result by reducing your interest rates. Transfer the balance of the existing card debt with the highest interest rate onto a 0% balance-transfer card if you can. You’ll be charged a small fee for this, but you won’t have to pay interest on the transferred debt for a set period. This means you pay less interest and clear your debts much faster. Make sure you close down the high interest rate card as soon as you transfer the balance to the 0.% interest card.
4. Cancel Payment Protection Insurance PPI
The insurance you buy with your credit cards to protect your payments in the event of accident, sickness or unemployment is vastly over-priced, adding maybe $400 a year to a $5,000 debt.
Cancel your payment protection insurance (PPI), so that you can pay off your debts faster. If you really feel you need the insurance, search the internet for a stand-alone provider, which will be about 80% cheaper, and will likely have better terms.
5. Clear your debts before saving
The interest rates on savings accounts are much lower than credit-card interest rates – other than very special card deals. This means that you’ll be debt-free a lot more quickly if you clear your card debts before you save.
There is of course an argument for a reserve of savings before you’ve cleared your credit cards as it helps you build a savings habit. However, the numbers don’t support the argument, so we still advise you to eliminate your credit card debt first.
6. Limit your treats
If you spend a lot on clothes, restaurants, wine or whatever – start budgeting a sensible amount for these items. Once you’ve spent your budget for the week or month, the rule is: that is it till next time. Spend your money wisely and build up your willpower!
7. Don’t miss payments
Missing payments on your credit cards can be unbelievably expensive. You’ll get a penalty fine and interest, you’ll lose your introductory cheap interest rates, and you run the risk of your tardiness being recorded on your personal credit record. This could mean borrowing will be more expensive for you in future.
Automate the process; set up direct debits from your bank account to pay your credit card payments every month.
The only way that you’re going to reduce your debts is when you accept you need a realistic weekly, monthly and annual budget. It takes time to develop a budget that works; and it changes like your income and your needs. But it’s essential to keep at it. Once you’ve got it right, your debts will come down quickly. Go to the Client Services of the Locumsgroup website, download the budget and fill it in!
Preparing a Budget
The greater your understanding of your personal spending patterns the easier it is going to be for you to take a commanding role in the management of your money.
All businesses and practices have a clear understanding of income receipts including the sources of revenue and in turn, have a clear understanding of the expenses over the year.
The problem is, even in the cases where a business or practice budget exists, personal income and expenses remain a mystery! At the end of the year, most people simply don’t know how much money was spent on clothing, on food, on utilities… nothing!
In these cases the desperate single indicator of measurement arises in the form of the question: “Do we have enough money to meet monthly bills as they arise?”.
The pattern-breaker for this type of behavior is to complete a personal budget. It has nothing to do with changing your income and spending patterns; that will come later, it has everything to do with KNOWING where your money comes from, and where it goes to.
The personal income and expenses budget in the Client Services section of the Locumsgroup web-site will enable you to get this recorded. Do it now, if there are any numbers that you are not sure of right now, you can estimate or guess and go back and confirm later. The main thing is to get a first run-through to get a personal profile and get a grasp of your finances.
By completing this exercise you will immediately put yourself in an elite minority of people what can account for their own personal finances.
A personal budget can be found on the Cleint services section of this website.
These are the steps to follow:
- Gather together all your paperwork.
If you've been sensible, all of your paperwork will be be neatly filed away in alphabetical/chronological order. On the other hand, your paperwork may be in a disorganised pile!
The first step of budgeting is to get all of this together - that includes your bank statements, credit card statements, pay slips, utility bills etc. It's not the most exciting of tasks, but you'll feel a great sense of relief once it's done!
- Get to grips with your spending habits.
- It can be very easy to lose track of what you're spending . So to help you understand your spending habits, a good first step is to set up a spending diary to record what you spend and where. This will enable you to categorise all your transactions so you know exactly what you're spending your money on every month. Don't leave anything out, no matter how small - you'll be surprised how the little things add up! It's worth doing this for about a month to help you get a detailed picture.
- Make a list.
- Once you've got to grips with your spending habits, the next step is to make a list of all your regular fixed outgoings and earnings. It's a good idea to calculate this as an annual figure rather than monthly, because monthly figures can vary considerably - for example, you might be paying out for a holiday in one particular month, or Christmas presents the next. Once you've worked this out, you can divide the result by 12 (months) or 52 (weeks) to calculate your weekly or monthly expenditure
- Emergency Expenses
- It's also worth adding in an estimated cost for emergency expenses such as
to car repairs or a new hot water heater! It's better to overestimate than underestimate, so be generous. And don't forget about annual insurance policies, such as home insurance.
- Cut down!
Are you spending more than you earn? If, to your disbelief, the answer is yes, you'll need to tackle this head on. To do this it's worth examining your outgoings to see whether you can make any cutbacks. Perhaps you could reduce your discretionary spending or clothes shopping. It's important to be realistic when you're doing this - don't set yourself an impossible task that you know you'll never stick to.
Obviously, items such as your utility bills will still need to be paid. But that doesn't mean you can't save money.
Similarly, see if you can get a better broadband/mobile phone/insurance deal. If you're lucky enough to have some spare cash at the end of each month, don't leave your money sitting in your cheque account. Instead, move it to a savings account or pay off credit card debt.
- Finally, don't forget that this is a fluid process.
- You should review your budget on a regular basis to make room for any changes in your outgoings/earnings. For example: if you receive a pay review; your rental income from any property assets that you own increases; or your landlord increases your rent, or your mortgage costs change. Reviewing your budget will also help you to assess whether you're on track with your finances.
This page is currently being updated. Please be patient with us while we attend to the upgrade of this important feature of the Locumsgroup web-site.
Negotiating your way through a divorce is a complicated process. It is not an easy time and you need the support of those you can trust. Your friends, family and professionals can help you emotionally, your solicitor will give you legal support and, if needed, a barrister will represent you in court.
You also need someone to support you through the financial issues you are about to face. The earlier you understand your options, the sharper your strategy will be.
How Locumsgroup can help
There is a range of valuable information to help you understand some of the steps you are about to take.
One of the first steps in the divorce process is putting all your financial information together into one statement. This financial statement will form the basis of your negotiations and eventual financial agreement.
We can help you through each step to ensure you prepare your financial statement
For many it might be a straightforward listing of bank accounts, credit cards, superannuation funds and a mortgage. For others, it is much more complicated. And it’s critical to get these right.
It is important to manage your money in the interim, understand your options and their implications and, most importantly, get on with life after the settlement.
We will work alongside your solicitor to help you secure your financial future.
It’s important to be comfortable with your financial adviser, which is why our first consultation is free, and we charge on a fee-for-service basis.
In the first instance you should collate the following information and documentation:
- Banks statements for the last 12 months
- Credit card statements for the last 12 months
- Mortgage statements
- Personal loan documents
- Superannuation statements
- Investment property details
- Other investments eg. managed funds
- Family trust information
- Other significant assets such as art collections etc
- income and expenses
- Pay slips for both of you
- Tax returns
- Business tax returns
- Insurance policy details
- Employment benefits such as incentive schemes, share schemes etc.
How effective is the ownership structure of your business or practice?
Whether you are a start-up or an established business you have to consider if your business is structured correctly.
Critical analysis of your organisational or asset-ownership structure, and your business arrangements will result in your achieving the best outcomes from your enterprise.
Asset Protection arrangements that recognise the potential risks associated with a private business should be identified and where possible defended against.
Loan accounts to and from privately owned companies should be correctly documented and protected.
Locumsgroup has experience across a number of disciplines and across a number of industries and professions; this enables us to provide you with valuable tactical and strategic advice.
The Locumsgroup corporate advisory service can assist you with:
- Performance improvement
- Strategic consulting
- cash-flow solutions
- Enterprise enhancement
- Insolvency and re-structuring services
- Goodwill valuations
- Tax advice
Whether your enterprise is an established business with an organisational structure that needs review; or your business is a start-up you should get advice to ensure that you are getting the best outcome from your efforts.
Advanced planning is paramount. We believe the strategy without execution is a day-dream; but execution without strategy is a nightmare.
Managing exit strategies and Capital Gains Tax planning.
Locumsgroup brings senior level experience to bear at all stages of an engagement. Our process allows us the time and resources to accomplish agreed initiatives while we partner with you in achieving your business goals. Our business is the result of repeat client engagements in the areas of organisational structures, strategy, and operational advice including debt financing and advice on your exit strategy.
Valuations of business goodwill.
Determination of the value of an enterprise can assist in Capital Gains Tax planning; dispute resolution; in establishing enterprise value for asset transfers or asset sales; or equity raising within an enterprise.
Eliminating personal risk.In simple terms, an effective wealth preservation strategy separates assets from risk. Both personal and business assets are vulnerable to litigation and pursuit by creditors and by external risks. Appropriate consideration must be given to the various options available to you. A tax-efficient structure may provide no protection for assets; or a structure where all wealth is preserved may be too rigid to operate a business and manage your affairs.
Efficient distribution of enterprise profits.
Our firm advises our clients in the appropriate use of partnerships, limited liability companies, trusts and other pass-through entities to assist in a wide range of tax planning matters. This enables our clients to obtain the full benefit of tax losses or tax incentives, and to minimize the impact of various asset acquisitions or disposals. We use effective structures to minimize adverse tax consequences and we design and implement transactions that make the most of that flexibility.
Securing loans to private enterprises through General Security Arrangements.
If an investment in a private company is made by an owner of the company way of a secured loan instead of by way of straight equity, the owner making the secured loan will have priority over unsecured creditors. Even if the business assets already stand as security for existing indebtedness, perhaps as general security to a bank or other financial institution, an owner who is a secured creditor can be next in line after the bank has been satisfied should the business fail. Locumsgroup can advise you how to take protect your loan to your company or business by the use of a General Security Arrangement.