Plan 2 Prosper

In general conversation, a colleague recently indicated to me he was astounded that his father hadn’t been provided information by his existing accountant  about a strategy that was relevent and could have helped his father transition to retirement (to the defense of many accountants, many are legally not able to provide such advice – although many others are).

The strategy could help those people aged 55 and over and still working, save more for retirement without reducing their current income. This same strategy has even greater benefits if you are over 60.  

If hanging up your tools or packing away your business suit forever are part of your retirement plans in the next five years, you might like to rethink your strategy. Retirement doesn’t have to be the big end to your career.

And, with last year’s changes to superannuation law, the Government gave a clear indication that it wasn’t only Prime Minister John Howard (who turned 68 in July this year) it expected to keep working. But what will retirement be like for the next generation? One thing is certain; it will be less of an event and more of a transition.

And, as retirees in waiting redefine notions of work and retirement, how this transition is funded will be a challenge for both the investors and their advisers. (more…)

The Government has recently amended the superannuation legislation to ensure instalment warrant arrangements that meet specific conditions do not contravene the borrowing or inhouse asset restrictions. This legislative change has created a number of opportunities for super fund trustees. (more…)

Financial Planning for Retirement

In today’s climate of ever increasing uncertainty, it is becoming increasingly difficult to generate sustainably reliable income and sound investment returns. This paper aims to increase the awareness of some of the key issues you may face in planning your retirment from a financial planning perspective. (more…)

This post continues the Budgeting series we have been working through together. This is the third post in a series of 6 on this topic. 

Now lets build on the work previously completed and get started on an income vs expenses comparison. Heres a cashflow chart which might help you focus your own thoughts – Cashflow.  (more…)

Summarizing Your Categories

Did you finish step one?

How many months did you log in your notebook?

Hopefully, you were able to go back at least 12 months. 18 -24 months would be even better. But whatever you have done, let’s move on from there.

If you have used a lot of cash the past few months, you may have noticed a lot of unaccounted for money. Going to the ATM machine every time you feel the urge to spend and taking out $20 can be more costly than you have imagined. That is the purpose of this exercise. To give you a reality check of where all your money is going.

From now on, whenever you spend cash, consider carrying a small calendar or notebook with you and documenting in it daily what you spend. Do this from now on for every cash expenditure. And when I say everything, I mean everything. This includes the $3.50 on a cup of coffee or $2 for the newspaper each Sunday morning. Some of the smaller items you can lump together into group categories or a misc category. But be sure to identify somewhere what it includes.

Don’t overlook the small expenditures. They add up quickly.

Back to our expenses for at least the past 12 months. Once every expenditure has been categorized, it is time to add up each category and give it a total.

You can total each category by month. Here is an example of what your notebook could look like:

Food
Jan $400
Feb $350
Mar $380
Apr $ 425
May $ 450
Jun $400
Jul $250
Aug $300
Sep $350
Etc.

Total Food for 12 months = $4,305
Average Per Month = $359

Fuel (same thing)

Rent/Home Loan (same thing)

You now have a very accurate picture of where your money is going each month and how much you spend on average in each category. Don’t forget to include things that you only pay for once or twice a year. Add them up in a category and divide them by 12. This will be important information when you create your budget.

Study this report; line the numbers up in different ways, change categories around until they make sense for you. This is a key part … make it work for you. Use the internet, there are some really helpful hints and tips that could make cents (sorry) to you.

What have you realised about your own habits that you didn’t fully understand before this exercise?