With Christmas just around the corner, here are 5 tips to help plan ahead and avoid a financial hangover on New Year’s Day.

Think back to last Christmas and consider where the extra expenses came from. Was it petrol for the drive to the holiday destination? Gifts for new children in the extended family? Wine for the constant gatherings? And don’t forget the taxi fares for the journeys home from nights out. However you look at it, Christmas is a pricey time of year. If the expense causes stress then the holiday period is ruined. Here are some tips to prepare for, and enjoy Christmas.

1. Figure out a budget

What exactly are you going to spend on gifts, food, drink, accommodation, airfares, fuel, cabs etc.? Be realistic and even pessimistic. If you over-prepare then you’ll end up with a surplus, which is a great result.

2. Christmas saver

Consider opening a new account which you can put a weekly amount into over the next few months in order to cover most, if not all, of your Christmas expenses. Even better, if you have a mortgage account, consider putting the extra money into the redraw section – that way you could save some mortgage interest during the final quarter of the year.

3. Gifts

Figure out what you are happy to spend on each person and ensure you stick to it. Give yourself time to think about gifts, working out exactly what each person will receive, to keep your shopping trips short and avoid extra purchases. And negotiate with family members to stick below a certain amount, or to do Secret Santa, in order to keep costs down.

4. Credit card spending

From now until Christmas, make additional weekly payments onto your credit card so you’re not caught out, as many people are, with an unmanageable credit card debt once you roll into January.

5. New year goal

Figure out what you wish for in the New Year and start taking steps towards that goal right now. Whether it is a fitness goal, a new skill, a bucket list item or something as simple as a reunion with an old friend, make sure at least a small part of the Christmas period is about you by planning for and achieving something special.

Disclaimer
Information in this web page is based on regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document.
This web page may contain general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Being your own boss can be rewarding, but it’s also incredibly challenging. That’s why it’s important to future-proof your hard work by taking steps today that will prepare your business for tomorrow.

When you’re running your own business, it’s demanding enough to keep up with the day-to-day, which means it’s easy to lose sight on the big picture. But without careful planning, your business might not be prepared for whatever the future holds.

Here are five essentials that every small business owner should factor into their business plan.

1. Give it structure

Make sure you structure your finances, so your personal assets and business assets are kept separate. As a minimum, you should have a separate business bank account and credit card and pay yourself a salary. By untangling your personal finances from your business bookkeeping, you may even save time on administration.

2. Be prepared for the unexpected

If anything were to happen to your staff, your equipment or your intellectual property, it could have disastrous results for your business. The concept of business insurance is a veritable smorgasbord of safeguards against unexpected events, with options ranging from vehicle and key person insurance to public liability and professional indemnity cover. No matter what type of business you have, your financial adviser can help make sure it’s protected.

3. Have an exit strategy

One day you (hopefully) intend to retire – and a time may even come when you decide to leave the business earlier than expected. Regardless of when you eventually exit, it’s important to plan ahead so it can be done smoothly, with as little financial impact to the business as possible. Start thinking about succession management sooner rather than later – it’s a good opportunity to evaluate your business and identify its future leader.

4. Plan beyond yourself

Even with a retirement succession plan in place, there’s always a chance your business could be faced with involuntary succession – for example, if you die unexpectedly. So, as well as insuring your business, make sure you’re personally covered against death, disability and serious illness. You can also set up a legally binding buy-sell agreement that sets out how ownership of the business will be transferred in the case of involuntary succession. And to be certain your assets will be distributed to your chosen beneficiaries according to your wishes if you pass away, make sure you have a comprehensive, up-to-date estate plan.

5. Work to live, not the other way around

Your business is a big part of your life, but it’s important to remember that there’s also life beyond work. Many small business owners find it hard to separate work life and home life, which can cause tension with their loved ones. So, if you’re looking to secure your business’s finances, your financial adviser can give you the guidance you need to remove some of the stress of business ownership.

Disclaimer
Information in this web page is based on regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document.
This web page may contain general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

The idea of insuring against loss of income is one that has clear value. But many neglect to insure their most valuable asset. Income protection could be the answer – so how does it work?

We happily insure our homes, our vehicles, even our smartphones. But have you considered how your family’s lifestyle would be impacted if the main breadwinner was suddenly unable to earn an income due to injury or illness?

According to Lifewise, a body coordinated by the Financial Services Council, 83% of Australians insure their cars but only 31% insure their ability to earn an income. One obvious solution is income protection insurance – here’s how it works.

In a nutshell, income protection insurance can provide a percentage of your income for an agreed time if you have to stop work or you can only work in a reduced capacity due to injury or illness.

Income protection typically covers up to 75% of your salary earnings (or, if you’re self-employed, generally up to 75% of the business profits you’ve generated) until you can work again.

Policies typically don’t only offer cover for a specified list of conditions, as trauma insurance might. This means the cover is broader and can protect you against a wide range of health problems – from back injuries and serious illnesses to stress and other psychological issues.

If you make a successful claim, the income stream from your policy kicks in after an agreed waiting period. Typically, this is 30 to 90 days after the event. You may choose a longer waiting period – for instance, if you know that your first few months will be covered by annual leave and sick leave entitlements. A longer waiting period generally means you pay lower premiums. Shorter waiting periods are possible but may attract higher premiums.

Similarly, the income stream lasts for an agreed maximum period – perhaps 12 months, two years, or until you turn 65. Shorter periods will generally attract lower premiums. This is one of the reasons why income protection policies are so useful, because they can be customised to your specific needs.

Also, your income protection premiums are usually tax deductible, unless you’ve taken out cover through your super fund (in which case they are generally tax-deductible to your fund). However, if you make a claim, your benefit payments will generally be taxed at your marginal tax rate.

So, is income protection insurance right for you? That question is often answered by asking another one – how would your life be affected if you had no income? Imagine the result, six months from now, if today your income suddenly and unexpectedly dried up. Then imagine the difference if instead, after one month, an insurance provider started regularly paying 75% of your income into your bank account.

For many Australians, income protection insurance is one of the essential ingredients of a solid financial plan. Talk to your financial adviser if you’d like to know more.

Case study

Wendy is a single mother who works in an office. She relies on her fortnightly paycheque to pay her mortgage, support her young son and invest for the future. After a discussion with her financial adviser she decides to take out an income protection policy offering the highest level of cover available – 75% of her current income until the age of 65.

To help reduce her premium costs, Wendy’s financial adviser recommends that she investigate how much leave she’s accrued. This adds up to two weeks of annual leave, plus another 10 days of sick leave. Wendy also has an emergency savings fund that could cover her living costs for up to two months.

By stretching her waiting period from 30 days to 90 days, Wendy’s income protection premiums are reduced.

1 http://www.lifewise.org.au/facts-research

Disclaimer
Information in this web page is based on regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this document.
This web page may contain general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.