Accounting & Advisory
The PCR Blog
Helpful news, tips and business advice for small to medium business owners about how to maximise profit, minimise waste and grow and protect your business.
You’ve no doubt travelled on a plane at some point in your life. But have you ever stopped to think about just how massive aviation operations are? Well, we can thank the significant amount of checklists and processes within our…
As a director, you have a responsibility to the company and its shareholders. But what does this mean though? And what does it actually entail? In essence, it means that you are responsible for almost everything that happens within your…
As the end of JobKeeper draws near with the end of March looming, many businesses are looking at the available options to help soften the blow of the ongoing impacts of the new COVID norm and get their companies back on track by hiring more staff.
Since the outbreak of the Coronavirus, we have seen an enormous amount of change in how we go about our day to day living.
When COVID-19 first impacted Australia and the country went into lockdown, one of the first casualties were our jobs.
The bushfire disasters across Australia over the past months have demonstrated the enormous generosity of Australians – from sporting stars, Hollywood heavyweights and business leaders through to ordinary people from across the country, all just wanting to help and make a difference. While the simple satisfaction from doing this can’t be measured in dollars, with the right knowledge and planning aligned to your circumstances and objectives, there are also dollar rewards on offer for the giver come tax time. Taking philanthropy to the next level Australians are generous when it comes to opening their wallet for a good cause. But you may have reached a point in life where you want to make a more substantial contribution with control over how your money is spent. You may also wish to get your children involved to instill shared values. While it hasn’t received much publicity, increasing numbers of Australians are using charitable trusts to give in a more planned and tax-effective way. The turning point came in 2001, when the Howard Government introduced the Private Ancillary Fund (PAF) with the aim of encouraging more individual and corporate philanthropy. PAFs are charitable trusts that can be used by an individual or family for strategic long-term giving. Since then, the number of PAFs and the amount of money contained in them has grown steadily. In early 2018, there were 1600 PAFs, housing $10 billion and distributing $500 million a year.i Claiming a tax benefit According to Philanthropy Australia, in the 2015-2016 financial year, 14.9 million Australians collectively donated $12.5 billion to charities and not-for-profits (NFPs).ii Though donations to accredited charities and not-for-profits are tax deductible, the figures indicate two-thirds of taxpayers don’t bother to claim. It’s well worth keeping track of receipts so you can claim when you think that, for example, a single donation of $5000 to a charity or NFP in a financial year will reduce your taxable income by $5000. A core principle of tax-deductible philanthropy is that, the giver shouldn’t stand to receive any material benefit. For example, if you buy tickets in a raffle run by a charity, you can’t claim a tax deduction on the cost of the tickets. In order to receive a tax deduction for your donation, the recipient must also be registered as a deductible gift recipient (DGR). There are many ways to be charitable, but the impact on your tax bill will vary depending on how you go about it. A more sophisticated approach These days, people who want to take philanthropy to the next level with an ongoing, tax-effective approach have a variety of trusts to choose from. The Private Ancillary Fund
PAFs are the best-known of the new breed of trusts. The money placed in a PAF is tax-deductible and assets in the fund aren’t subject to income or capital gains tax (but do qualify for franking credits). Let’s say a dentist sets up a PAF, and gifts half his $500,000 annual income into the fund. The dentist’s taxable income now drops to $250,000. What’s more, no tax is paid on the returns made on the $250,000 that has been invested in the PAF. The dentist must distribute a minimum of five per cent of their PAF’s net asset value annually, or a minimum of $11,000. After meeting that requirement, the dentist has a relatively free hand about which charities to support and how much they receive. The Public Ancillary Fund (PuAF)
PuAFs work the same way as PAFs, but operate on a larger scale. For example, 10 dentists may set up a PuAF to finance the building of dental hospitals in Africa. As well as gifting part of their incomes, the 10 dentists can (in fact, are obliged to) invite the general public to make tax-deductible donations to their PuAF. Testamentary Trust (or Will Trust)
These are used by individuals wanting to leave money in their will to charity. The two advantages of this type of trust are that, the trustee(s) can distribute the income generated by the trust in a way that minimises the tax burden of beneficiaries, and the assets in the trust can’t be accessed by parties such as creditors. Few people give to get a tax deduction, but by supporting good causes in a tax-effective manner, you can achieve a bigger bang for your philanthropic buck. If you would like to know more about tax-effective giving, give us a call. i J.B.Were Support Report, 4 April 2018, https://www.strategicgrants.com.au/au/free-resources/blog/19-blog-kate/280-grantseeking-donor-giving ii http://www.philanthropy.org.au/tools-resources/fast-facts-and-stats/
This article was written by Olivia Long, and appeared on Morningstar. The impact of Australia’s ongoing bushfire crisis is devastating. Not only are Australians losing their homes and entire belongings, but many are also hit by the loss of their business or means to generate an income. They may be in urgent need of cash as a result, and charitable and government support will be limited. In the first instance, people impacted may be entitled to a disaster recovery payment and should contact Centrelink. The disaster recovery allowance is a short-term payment to help anybody if a declared disaster directly affects his or her income. You can access it for a maximum of 13 weeks, and is payable from the date you lose income as a direct result of the bushfires. How does early access work? Whilst the Australian Taxation Office (ATO) does allow for early access to superannuation under compassionate grounds or for those suffering ‘severe financial hardship’, its recommended access to super remains a last resort to those in need. This is due to the nature of superannuation, and its intended use to ‘provide an income upon retirement’. It may also be difficult to put money back into super after it is taken out. Members of SMSFs and large super funds, however, may try to access their superannuation due to severe financial hardship, in addition to the disaster recovery payment. A super withdrawal due to severe financial hardship is paid and taxed as a super lump sum. The minimum amount is $1,000 (unless a super balance is less than $1,000), and the maximum amount is $10,000. Superannuation members can only make one withdrawal because of severe financial hardship in any 12-month period. Another option available to those eligible is to commence a transition to retirement pension, called a TRIS. It allows access to super without having to retire or leave a job. A TRIS permits super members to draw down a maximum of 10% of their super account balance during a financial year, which can be used to fund expenses. In an SMSF, funds are accessible immediately. To be eligible, a member must have reached their preservation age (if another condition of release has not been attained). For those born before 1 July 1960, the preservation age is 55, but the age increases for those born after that date. For more details, see the ATO website. Sympathetic judgement needed Given the magnitude of the devastation caused by the bushfires, the Federal Government should allow early access to super to assist those impacted during these horrific times. If you have been impacted, call our office. We can discuss your situation and contact the trustee of your super fund. > Don’t sell your home when you are a non-resident The law now provides that, if you sell your home in Australia, you will not get any exemption for the capital gain made if you are a non-resident of Australia at the time. An exception is, if you have been a foreign resident for a period of 6 years or less, and certain life events have occurred i.e. your death, or divorce (and equivalent) or terminal illness, or the death or terminal illness of your spouse, or child under 18 years old. Transitional provisions provide an exemption if the dwelling was held before 9 May 2017, and sold on or before 30 June 2020. > Special rule for high-income employees with more than one employer If you are an employee with more than one employer and salary exceeding $263,157, your employers’ contributions will result in you breaching the $25,000 concessional contributions cap. To avoid this, you can now apply to the ATO for an “employer shortfall exemption certificate”. An employer who receives this certificate will not have to pay SG for you. If you apply for this certificate for your employer, we recommend you negotiate to receive additional cash or non-cash remuneration, instead of SG contributions.
Over the next 20 years, an estimated 12.7 million people will benefit from the greatest transfer of wealth to occur1. All up, over $3.5 trillion will be bequeathed to the children and grandchildren of the Baby Boomer generation. The boomtime generation The Baby Boomer generation comprises of those Australians born between 1946 and 1964. They represent almost 25% of the Australian population1 and own 60% of Australia’s private wealth.2 The accumulation of wealth in this segment is because of: • high level of home ownership • steady increase in property values • years of stable economic growth • smaller families compared to previous generations • compulsory superannuation in the 1990s leading to substantial growth in retirement savings In fact, in the last decade, the wealth held by the Baby Boomer generation has virtually doubled.3 The net wealth of older households has grown substantially The generation gap The result is an increased gap with subsequent generations. This gap in wealth is likely to widen with declining rates of home ownership among younger Australians. Another factor is in superannuation savings. In fact, current data suggests that some members of Generation X will not have enough superannuation savings to support their retirement lifestyle.4 To make up this disparity, some may rely on receiving an inheritance to supplement retirement savings. Contributing all or part of an inheritance to super, or investing it in the non-super environment, may be an effective option for many. But for those that will not have this option, having a clear view of the amount you are likely to need to fund your retirement and working towards that goal is important. Sharing the wealth For those thinking about who to bequeath their assets to, effective estate planning becomes important. Having an effective plan can ensure that the right beneficiaries receive the right inheritance at the right time, and in a tax effective manner. A properly considered Will, and an appropriately drafted superannuation death benefit nomination, are two key instruments to ensure the appropriate transfer of wealth. However, it is not unusual for disputes to occur over provisions that have been made in a Will. An analysis of 195 court decisions suggests that many of these disputes are because of changing family dynamics including previous spouses, children from previous relationships, and stepchildren, having expectations around inheritances.5 A good plan is key Not all estate disputes can be avoided, however careful planning and appropriate documentation will go a long way in avoiding disputes. A transfer of wealth can provide an opportunity for financial independence across generations if managed properly. A good level of financial literacy, coupled with appropriate financial advice, becomes extremely important to ensure that any financial windfall or bequest is not wasted. 1 Australian Bureau of Statistics (2016) ‘Talking ‘bout our Generations: Where are Australia’s Baby Boomers, Generation X & Y and iGeneration?’, 2 Ibid. 3 Source: Grattan Institute, ‘Generation gap: ensuring a fair go for younger Australians’ 4 Hunt, K et al, ‘Intergenerational Wealth Transfer: The Opportunity of Gen X & Y in Australia’ Griffith University 2017. 5 Estate Contestation in Australia – An Empirical Study of a Year in Case Law, White, Tilse, Wilson, Rosenman, Purser and Coe. UNSW Law Journal, Volume 38(3) p.890
Tax time can often feel like a hassle, but it’s all worth it when that tax refund lands in your account. So, what’s the best way to spend it? With last year’s average refund being $2,574, it’s no small question.i And if you are one of the lucky ones to receive a refund your options are endless. From paying down debt to investing in your future to blowing it all on a big holiday, the choice of how you spend your refund will depend on your goals and your circumstances. Pay down debt It may not be particularly glamorous, but paying down any debts you have can be a very wise way to spend your tax refund. Especially because you’ll probably save even more on the future interest you won’t end up paying. Australians have a whopping $45 billion in credit card debt.ii Consider clearing any overdue balance, and while you’re at it why not reduce your limit so you’re not as likely to go that far again. You might also consider putting some of your tax refund towards your home loan. Again, a $2,000 reduction in what you owe now could mean a much bigger saving over the lifetime of your loan. Invest in your future Your tax refund could also be a fantastic way to pay for an investment in your future. A good way to start is by putting a little more towards your super. Superannuation is still the most tax effective way of saving for the retirement you dream of, and the interest on the additional contribution now could compound to make a big difference to the overall size of your nest egg. Investing in your future might also mean taking a short course to upskill, or diversify your talents. There are TAFEs and adult education facilities across the country that offer a plethora of short courses from the vocational, to ones that purely play to personal interest. Have a google and see what’s going on in your neighbourhood. If you’re feeling generous, you might even consider directing some of your refund towards the future of a loved one. This might include starting a fund to help your kids towards a house deposit, a first car or their future education. Talk to us about what your options are. Save for a rainy day It’s awful to think about, but you never know what the future holds, so having a little money aside for a rainy day is never a bad idea. It might help with future medical expenses or a loss of income, or even those everyday unexpected expenses such as a broken fridge or car repairs. Getting in the habit of putting a portion of your tax refund towards a rainy-day fund could make a real difference if life takes a turn for the worse. Have a little fun You work hard, and there’s nothing quite like the feeling of having a few extra thousand in the bank. So, you’ll be forgiven if you want to have a little bit of fun. From a weekend away to a retail binge, there are many ways you can blow a tax refund. Our advice to you: be cautious. By all means splurge on some pampering, but make sure you get the mix right by either reducing any unpaid debt or investing in your future. The right mix The truth is you can use your tax refund in a number of ways and none of them are right or wrong. Perhaps the wisest thing to do then is mix it up, spending the bulk of it prudently while saving a little bit just to do something that really makes your heart sing. Source: ME’s Tax Back Survey 2018
i https://www.moneysmart.gov.au/managing-your-money/income-tax/howaustralians-spend-their-tax-refunds ii https://www.abc.net.au/news/2018-07-04/1-in-6-credit-card-usersstruggle-under-mountain-of-debt/9936826
You can reduce your tax by hundreds of dollars (if not thousands), with some of the following strategies. Here’s how to do it: The Strategy behind Tax Planning The tax you pay depends on your taxable income, and the tax rates that apply to that income. Therefore, your tax is reduced if you: 1. Reduce your income, or 2. Increase your tax deductions. Seeing we all want to earn more, reducing your income isn’t an option! But increasing your tax deductions definitely is. We have shared below links to two Tax Planning Flyers, which both list a number of items that can be claimed as tax deductions. You can use them as a guide, but you should contact us if you are not sure of anything. To illustrate: If you need something in July that is classified as a tax deduction, it makes sense to bring this purchase forward and buy it in June. You then get the tax deduction this year, and not next year. Warning: Don’t fall into the trap of buying something simply to get the tax deduction from it. If your tax rate (including Medicare Levy) is for example 34.5%, you would only get 34.5% of the purchase price back as a tax refund (or reduced tax payable) from the tax deductible item. You DON’T get 100% of the amount that you spend back as a tax refund (or reduced tax payable). If you do need an item for your business or work and it is tax deductible, we recommend buying it BEFORE 30 June so that you get the tax deduction this year. Your Tax Planning Strategy Checklists Business Owners: Click Here for our ‘Tax Planning Flyer for Business Owners’. Individuals: Click Here for our ‘Tax Planning Flyer for Individuals’. If you are a business owner, we will look at both for you. If you want to minimise your tax burden, then help us to help you, and get in contact with us today! By spending a little bit of time with us reviewing your situation, we may be able to help you save thousands!! Now is the time to do it – please contact our office TODAY to get started.
To claim a tax deduction for Super, it needs to be physically paid. By paying your June quarter, or month’s Super before the end of the financial year 30th June, you will get a tax deduction for the year. Paying your employees’ Super a month earlier than you need to, can create a significant one-off tax benefit. If you have $20,000 to pay in Super for your employees prior to the 30th June, this can result in a tax saving of up to $9,400. If this is something that you want to do, you will need to ensure that the payment you are making is processed before the 30th June. To ensure this is done in time, it is best to process the payment a week before the end of financial year. Something to note is that, this creates a one-off tax benefit, as you are paying Super that you would usually pay in July earlier, to get the tax deduction.
In our last article, we discussed the power of budgeting. In this article, we explore my favourite way to formulate your budget. It is called a Zero-Sum Budget. The Power of a Zero-Sum Budget In the midst of the many articles on budgeting systems and strategies, a less publicised (but equally important technique) is the Zero-Sum Budget. This strategy involves “spending” every dollar that you make. However, you are not ‘spending’ your money in the usual sense of the word. In this situation, it refers to allocating your entire earnings into appropriate categories. The following steps demonstrate how you can apply this kind of budgeting: Step 1: Determine your Single or Combined Total Salary For most salaried workers who are paid on a monthly or fortnightly basis, this step is simple. Others may have to put in a little more effort if pay is based on an hourly rate, or particularly irregular. Try to work out your income as a monthly amount – you can then use the strategy of paying for next month’s bills using this month’s income. By always being “one month ahead”, you will find your budget much easier to plan and keep track of. Step 2: Itemise Your Bills Once you know the total amount of money coming in, your next step is to work out how much you need to spend next month for bills, groceries, everyday expenditures, etc. Be aware that some things may be yearly or quarterly expenses. Try and include everything you can think of, as the more accurate it is, the better your budgeting will be. Please find below an example list for your reference: – Mortgage: $1,426
– Fuel/Miscellaneous: $200
– Electricity: $200 (estimate)
– Mobile Phone: $55
– Gas: $25 (estimate)
– Internet: $35
– Groceries: $500
– Life insurance: $77.31 (paid quarterly)
– Daycare: $500
– Rubbish: $56.25 (paid quarterly)
– Health Insurance: $377
Total: $3451.56 Step 3: Compare and Contrast Once you have listed your income and expenses, you will notice how much is left over. How is this money currently being used? You may realise that you are wasting it on things you do not really need, or you may be gradually saving it. Regardless of what you decide to do with this money, the point is, you now have the knowledge of how much is left and can therefore make an informed decision on what to do with it. For example: If a couple had a net income of $7000 for the month, a zero-sum budget may look like this: – Mortgage: $1426
– Mobile Phone: $55
– Electricity: $200 (estimate)
– Health Insurance: $377
– Gas: $25 (estimate)
– Life insurance: $77.31 (paid quarterly)
– Groceries: $500
– Rubbish: $56.25 (paid quarterly)
– Daycare: $500
– Short-term savings: $1500
– Internet: $35
– Long-term savings: $1500
– Fuel/Miscellaneous: $200
– Holiday Fund: $548.44
Total: $7000.00 This strategy may also bring to your attention that you are actually spending every cent you earn. In this case, you might need to start considering the things you could live without. Some possible items you could cut back on are your pay TV, eating out, or excessive entertainment spending. Remember, everyone’s lifestyles and priorities are different and it is up to you how you allocate your money. Step 4: Make a choice and stick to it Once you know your excess cash flow, you can decide what you would like to do with the extra money. You might decide to pay off some debts, save, invest or put it towards a financial goal. The only trick is – if you decide to allocate a certain amount of money somewhere, stick to your decision and put it there straight away to avoid spending it on something else. Step 5: Keep on top of your spending It is important to check in every now and then throughout the month to make sure you are not spending over your self-allocated limit. Try to stick to the motto, “when it’s gone, it’s gone”. It may be painful in the first few months, but it can be one of the best ways to create good habits. Step 6: Make Adjustments It can take a few months before your Zero-Sum Budget is working efficiently. Do not be concerned if you have to make adjustments, as it is all part of the budgeting process. As with anything, you will become more aware of where you may need to allocate more funds to, or where you can easily shave a few dollars off here and there. Don’t Forget One last (but very important) part of your Zero-Sum Budget is an emergency fund. This is crucial in circumstances such as an unplanned medical emergency or car issue, and will allow a bit of leeway so that your whole month’s plan will not have to be abandoned. Just remember that when you have tapped into these funds, try to replace them again as soon as possible. Summary The power of using Zero-Sum Budget is that it allocates all of your money, so the opportunity to spend it on things that you don’t really need is no longer there. It helps you focus and prioritise. If you need help with your budgeting, call our office to make an appointment with one of our Team on 03 5134 1778.
If a business owner said to you that they run their business without a budget, what would you think? You would think they were incompetent! Or perhaps lazy, or even both? What do most families do? When you think about it, a family is actually like a mini business. There is income, expenses, and hopefully, something left over to invest and to enjoy. So why don’t most families operate to a budget? After all, a personal budget helps you to see your financial direction, and helps you stay (or get back!) on track. It is a great comfort. One reason some people do not put together a budget is because, it makes them feel overwhelmed, or too busy, and leaves them feeling like life is too complex to keep track of all that. Well the good news is, we can hold your hand through the process, which in turn, makes it easier for you. Before we look at the ‘how’ aspects, let’s consider 3 more reasons why a personal budget is such an important tool in helping you achieve your financial goals and dreams. 1. Most of your money is already spoken for long before you get it The money you earn has already been promised to keep the electricity on, make the loan repayments, and pay for the insurance. What most people don’t realise about budgeting is that, it is really honouring the commitments you already have. Now since we are all honest people and plan to pay these bills, the first step is to track these bills, and see what is left over for your day-to-day living. 2. Your day-to-day living money is spread all over the place Some of your day-to-day living money is in the bank, and some is in your purse or wallet. Some may even be with your partner or children, if you have them. You need a simple system that allows you to track day-to-day expenses, such as fuel for your car, shopping, and discretionary spending expenses. We do not suggest you try to keep track of every cent of your day-to-day living money, as this would provide little benefit for the amount of effort that would be required to obtain that level of detail. Instead, you need to identify your main day-to-day expenses, and make allowance for all other minor day-to-day expenses. Here’s a key: You need a system that is so easy to use, that you keep using it. You can track the day-to-day expenses by entering them into a spreadsheet, or better yet, use a tool like MyProsperity. MyProsperity can automatically pull in bank feeds, which can save you a lot of data entry. 3. The Number 1 reason people give up on their budgets is that they don’t have the right attitude It is ALL in the attitude! Have you ever attempted to budget and given up in frustration? What is the reason your budgeting attempt failed? What will make you stick to it? Think about this… One of the reasons, if not the top reason so many people give up at budgeting, is attitude. If you think of it as a penny-pinching sacrifice instead of a means for achieving your financial goals and dreams, how long are you likely to stick with it? Think about the difference between going on a diet, and eating healthy. One is negative and restrictive; the other is positive, and allows you to indulge every now and then while still achieving your goals. To increase your chances of success, work on your attitude first. Many people refuse to budget because of budgeting’s negative connotation. If you are one of those people, try thinking of it as a ‘spending plan’ instead of a ‘budget’. Once you have attempted to budget and failed, the bad feelings associated with any type of failure can keep you from trying again. Don’t give up! The cold hard reality Let’s face it. Money is a tool that enables you to reach your goals in life. But the cold hard reality is that, until you know where your money goes, you cannot make conscious decisions about how to use this tool effectively. A budget (or spending plan!) shows you exactly where your money goes and provides a clear plan. It also lets you save for the things that are important to you, like a new house, a new car, a comfortable retirement, a tertiary education, high quality health care, travel, or whatever your particular goals and dreams happen to be. Now that is exciting! Whatever YOU decide you want to achieve and save for, you can. All you need is the right attitude, a goal to aim for, and a (spending!) plan. Avoid This Pitfall There are several universal budgeting concepts that every successful budget will include. But one of the most important features of a successful budget is, for it to be easy to use and suitable for your needs. Trying to use a generic, complex, one-size-fits-all budget won’t work. A simpler approach makes it easier to stay committed. If you stick to a realistic and effective budget long enough, the rewards will keep you motivated. In the meantime, do whatever it takes to keep yourself going. To summarise, the 3 steps for effective personal budgeting (spending planning!) are: Build a Budget, Track Income and Spending, and Compare Budget to Actual. Once you start budgeting with a positive attitude, you will see the difference a budget (or spending plan) can make in your life. Your next step is to call us on 03 5134 1778 and organise a time to have a chat. We would love to discuss this with you further, and help you to get on track towards achieving your financial goals.
A key to creating a budget is to have a goal that you want to achieve; but how hard is it to achieve your goals? Well according to research, without outside assistance, it is very difficult to achieve your goals. There is nothing wrong with asking for help. The people who are the best in the world at what they do ask for help – by hiring Coaches and Trainers. So, why should you be any different for needing help?
The American Society of Training and Development (ASTD) conducted a study on Accountability, and have provided the following statistics: The probability of completing a goal if:• You have an idea or a goal: 10%• You consciously decide you will do it: 25%• You decide when you will do it: 40%• You plan how you will do it: 50%• You commit to someone you will do it: 65%• You have a specific accountability appointment with a person you have committed to: 95%
So, here you can see that just having a goal is not enough. If you want to achieve a goal that you need to budget for, it is important that you plan how you intend to do it, and have some accountability in place to help you achieve it. So, if you are serious about achieving your goals, what is stopping you from getting the assistance you need? As part of our Cashflow Budgeting Service, we can help you create goals and keep you accountable to them. No matter what you decide to do, make sure that you create some accountability to achieve your goals.
Everyone knows that they should be budgeting and managing their cash, but how many of us actually do it? There is a lot of power to be gained over your financial future, by preparing and taking control of your budget. Better yet, if you start comparing your budget to your actual expenditure, you will get to know yourself better, and be able to make more educated and beneficial changes for your future. A lot of us may have had some goals for 2019 that have already fallen by the way side, but all of us should have some financial goals. Did you know that just by having a goal, the probability of achieving that goal is only 10%? However, if you commit to someone that you will achieve your goal, you can increase that probability to 65%. Even better, if you have a specific Accountability appointment with a person you have committed to, you can increase it to 95%. We want to help You, our Clients, succeed and achieve financial freedom. The first step is to ensure that you fully understand your budget. That is why we are doing this series to help you take control of your budget.
Going into partnership in business is like a marriage. It is a collaboration of two or more people that share ownership of the business, as well as its profits & losses. It is a serious commitment of time, money and reputation; therefore, deciding to enter a business partnership should be of good judgement. If you are looking to bring other people on board in your business, there are certain things to consider before ‘taking the plunge’: Director & Public Officer Insurance This insurance is like Professional Indemnity for Directors. This is important to have, if they are going to come on board as Directors as well. Shareholders Agreements This should take into consideration how a voluntary exit (i.e. retirement or circumstantial) takes place, a forced exit (i.e. disagreement, non-performance, bankruptcy) or involuntary exit (i.e. death, significant trauma). It is important to get a Shareholders Agreement in place, if you are looking at bringing two or more people on board. Part of that would be looking at how you deal with each exit – what are the terms & conditions that surround that. Another part would be the Risk Management of it – if something happens to one of the partners, or if someone must exit for some unknown or unforeseen reason. Note that whenever you make a business proposal, you must include a clause about agreeing to a Shareholders Agreement and the terms & conditions set out in it. You will need to get a Solicitor to help you make and set in place a Shareholders Agreement. Voluntary Exit – retirement or circumstantial exit Any voluntary exit should be predetermined and managed. This could be an exit where someone retires, or it is just time for them to move on from the business. Shareholders Agreement should cover minimum terms on which a voluntary exit is dealt with. Forced Exit – disagreement, non-performance, bankruptcy Any forced exit might be somewhat more difficult to manage then a voluntary exit. This type of exit can come about due to disagreement, non-performance of a partner or even other things such as criminal conviction and/or bankruptcy. Should this arise, details of what is expected and how this is managed should be covered in your agreement as a minimum, to provide you with the security of knowing how to deal with it. Involuntary Exit (death or some significant trauma)
Buy/Sell Agreements & Risk Management Should one of the owners have an accident, there needs to be the appropriate mechanisms in place to protect the interests of the business and shareholders. A Buy/Sell Agreement covers the involuntary exit and is usually covered via some insurance policies, or vendor finance agreement agreed upon in the Shareholders Agreement. When you bring in two or more people into your partnership, there is a higher chance that something may happen, where someone must exit for some unknown or unforeseen reason. You should be prepared for that, because that could blow things out of proportion in your business. That unexpected change can have significant impact in your business organization and overall performance.
A Blood Pressure Test for your Business When was the last time you had your blood pressure tested? Taking your blood pressure is one of the first things most doctors do before treating you for just about anything. How much pressure your blood is under as it courses through your veins is a reliable indicator of your overall health; and it can be an early indicator of everything from heart disease to bad circulation. Does it tell the doctor everything they need to know about your health? Of course not, but one powerful little ratio can give the doctor a pretty good sense of your overall wellbeing. Likewise, your Value Builder Score can be a handy indicator of your business wellbeing. Like your blood pressure reading, your company’s Sellability Score is an amalgam of a number of different factors and can help a professional quickly diagnose your business’s overall health. Predicting Good Outcomes Too When a doctor takes your blood pressure, they not only rule out possible nasty ailments; they can also use the pressure reading to forecast a healthy life ahead. Similarly, your Value Builder Score can predict good things for the future. For example, based on more than 10,000 business owners who have completed their Value Builder Score questionnaire, we know the average multiple of pre-tax profit they are offered for their business when it is time to sell is 3.7. By contrast, those companies that have achieved a Value Builder of 80+ are getting offers of 6.6 times pre-tax profit. In other words, an average-performing business turning out $500,000 in pre-tax profit is likely worth around $1,850,000 ($500,000 x 3.7). If the same company improved its Sellability Score to 80+ while maintaining its profitability of $500,000, it would be worth closer to $3,300,000 ($500,000 x 6.6). Are you guaranteed to fetch 6.6 times pre-tax profit if you improve your Value Builder Score to 80? Of course not. But just like blood pressure, one little number can tell you and your advisor a whole lot about how well you are doing; and your advisor can then prescribe an action plan to start maximizing your company’s health – and its value down the road. Heart disease is called “The Silent Killer” because most people have no idea what their blood pressure is. People can walk around for years with dangerously high blood pressure because they haven’t bothered to get it tested. The first step on the road to health is to get tested. If you have a great score, you can sleep well at night knowing you have one less thing to worry about. If your score is not where it should be, then at least knowing your performance can get you started down the road to better health. If you’re interested in getting your Value Builder Score, please visit our website for more details.
Will this be the year you seriously drive up the value of your Company? If you have resolved to make your company more valuable in 2017, you may want to think hard about how your customers pay. If you have a transaction business model where customers pay once for what they buy, expect your Company’s value to be a single-digit multiple of your Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA). If you have a recurring revenue model, by contrast, where customers subscribe and pay on an ongoing basis, you can expect your valuation to be a multiple of your revenue. Breedlove & Associates sells for 6X Revenue In 1992, Stephanie Breedlove started a Payroll Company to make it easier for parents to pay their Nannies on a recurring basis. It began small and Breedlove self-funded her growth, which averaged 20% per year. By 2012, Breedlove & Associates had hit $9 million in annual sales when Breedlove accepted an offer from Care.com of $55 million for her business—representing an astronomical multiple of more than six times Breedlove’s revenue. Buyers pay up for Companies with recurring revenue because they can clearly see how your Company will make money long after you hit the exit. Not sure how to create recurring revenue? Here are five models to consider: Products That Run Out If you have a product that people run out of, consider offering it on subscription. The retailing giant Target sells subscriptions to diapers for busy parents who don’t have the time (or interest) in running to the store to re-stock on Pampers. Dollar Shave Club, which was recently acquired by Unilever for five times revenue, sells razor blades on subscription. The Honest Company sells dish detergent and safe household cleaning products to environmentally conscious consumers and more than 80% of their sales come from subscriptions. Membership Websites If you are a Consultant and offer specialised advice, consider whether Customers might pay access to a Premium Membership website where you offer your know-how to subscribers only. Today there are membership websites for people who want to know about anything from Search Engine Marketing to running a restaurant. Services Contracts If you bill by the hour or the project, consider moving to a fixed monthly fee for your service. That’s what the marketing agency GoBrandGo! has done to steady cash flow and create a more predictable service business. Piggyback Services Ask yourself what your “one-off” Customers buy, after they buy what you sell. For example, if you make a Company a new website, chances are they are going to need somewhere to host their site. While your initial website design may be a one-off service, you could offer to host it for your customer on subscription. If you offer interior design, chances are your customers are going to want to keep their home looking like the day you presented your design, so they might be in the market for a regular cleaning service. Rentals If you offer something expensive that customers only need occasionally, consider renting access to it for those who subscribe. ZipCar subscribers can have access to a car when they need it without forking over the cash to buy a hunk of steel. WeWork subscribers can have access to the company’s co-working space without buying a building or committing to a long-term lease. You don’t have to be a Software Company to create Customers who pay you automatically each month. There is simply no faster way to improve the value of your Business this year than to add some recurring revenue.
You already know that your business turnover and profits play a big role in how much your business is worth. Do you also know the role cash flow plays in your valuation? Cash vs. Profits Cash flow is different from profits in that it measures the cash coming in and out of your business rather than an accounting “magic” of your profit and loss. For example, if you charge $10,000 upfront for a service that takes you three months to deliver, you will be recognising only $3,333 in revenue for 3 months. But since you charged upfront, you get all $10,000 of cash on the day your customer decides to buy (go you!). This positive cash flow cycle improves your business valuation because when it comes the time to sell your business, the buyer will have to write two cheques: one to you, the owner, and a second to your company to fund its working capital – the cash your company needs to fund its immediate obligations like payroll, rent, etc. The trick is that both cheques are drawn from the same bank account. So if you are receiving cash in advance, the requirement for working capital is reduced, which means more for you. Unfortunately, the inverse is also true. If your business is a cash suck, an acquirer is going to calculate that they need to inject on closing day, which depletes their resources and results in less for you. How To Improve Your Cash Flow There are many ways to improve your cash flow – and therefore, the value of your business. One often overlooked tactic is to spend less on the machines your business needs to operate. In the restaurant business, for example, there is an often repeated truism that it takes three bankruptcies at a single location before any restaurant can make money. The first owner of the restaurant walks in and – with all of the typical optimism of a new entrepreneur – pays cash for a brand new commercial kitchen complete with fancy stove, commercial grade walk-in coolers, etc., as well as all new dishware, pots and pans, thus depleting their cash reserves before opening night. Within a year, the restaurant owner runs out of cash and declares bankruptcy. Then along comes a second entrepreneur who decides to set up their restaurant at the same location and buys all of the shiny new equipment from owner number one’s creditors for 70 cents on the dollar, figuring they made a wonderful deal. But the outlay of cash is still too great and they too are out of business within a year. It’s not until the third owner comes along that the location actually survives. They save cash by buying all of the equipment off the second owner for 10 cents on the dollar. The moral of the story is: find a way to reduce the cash you spend on equipment, however you can. Can you buy your gear used on sites like eBay? Can you share a very expensive piece of machinery with another non-competitive business? Can you rent instead of buying? Profits are an important factor in your business value but so too is the cash your company generates. We call this phenomenon, The Valuation Seesaw and it is one of the eight key drivers of the value of your business.
Some owners focus on growing their profits, while others are obsessed with sales goals. Have you ever considered making it your primary goal to set up your business so that it can thrive and grow without you? A business not dependent on its owner is the ultimate asset to own. It allows you complete control over your time, so that you can choose the projects you get involved in and the vacations you take. When it comes to getting out, a business independent of its owner is worth a lot more than an owner-dependent company. Here are five ways to set up your business so that it can succeed without you: 1. Give Them A Stake In The Outcome Jack Stack, the author of The Great Game of Business and A Stake In The Outcome wrote the book on creating an ownership culture inside your company: you are transparent about your financial results and you allow employees to participate in your financial success. This results in employees who act like owners when you’re not around. 2. Get Them To Walk In Your Shoes If you’re not quite comfortable opening up the books to your employees, consider a simple management technique where you respond to every question your staff brings to you with the same answer, “If you owned the company, what would you do?” By forcing your employees to walk in your shoes, you get them thinking about their question as you would, and it builds the habit of starting to think like an owner. Pretty soon, employees are able to solve their own problems. 3. Vet Your Offerings Identify the products and services which require your personal involvement in either making, delivering or selling them. Make a list of everything you sell, and score each on a scale of 0 to 10 on how easy they are to teach an employee to handle. Assign a 10 to offerings that are easy to teach to employees and give a lower score to anything that requires your personal attention. Commit to stop selling the lowest scoring product or service on your list. Repeat this exercise every quarter. 4. Create Automatic Customers Are you the company’s best salesperson? If so, you will need to fire yourself as your company’s rainmaker in order to get it to run without you. One way to do this is to create a recurring revenue business model where customers buy from you automatically. Consider creating a service contract with your customers that offers to fulfill one of their ongoing needs on a regular basis. 5. Write An Instruction Manual For Your Business Finally, make sure your company comes with instructions included. Write an employee manual or what MBA-types called Standard Operating Procedures (SOPs). These are a set of rules that employees can follow for repetitive tasks in your company. This will ensure employees have a rulebook which they can refer to when you’re not around, and, when an employee leaves, you can quickly swap them out with a replacement to take on duties of the job. You proofing your business has enormous benefits. It will allow you to create a company and have a life. Your business will be free to scale up because it is no longer dependent on you, its bottleneck. Best of all, it will be worth a lot more to a buyer whenever you are ready to sell.
We are a few weeks into the new year, and old and potentially bad habits may have already come back to you. How are you going with your goals? There is nothing wrong with calling for help. In fact, this is one of the best ways to making sure you do achieve your goals. The American Society of Training and Development (ASTD) did a study on accountability and have put together the following statistics: The probability of completing a goal if:
You have an idea or a goal: 10%
You consciously decide you will do it: 25%
You decide when you will do it: 40%
You plan how you will do it: 50%
You commit to someone you will do it: 65%
You have a specific accountability appointment with a person you’ve committed to: 95% So, here you can see that just having a goal is not enough. As we have previously stated, it is important to plan on how you will do it, and when you will be doing it; but the biggest thing that improves the chances of success is committing to someone and being accountable to them. Now that you know this, what are you going to do to achieve your goals? If you have some business and financial goals you want to achieve, and you need help, please do not hesitate to contact us. We have some great accountability programs for business and personal goals.
Have you actually thought about how much it costs you to be unhealthy? Here are some of the costs if you don’t prioritise your health – Lower productivity and energy levels affecting your performance at work or in your business.
– Medical Costs later in life or even earlier in life (as I learned)
– Insurance premiums are higher.
– All that potential unpaid leave and/or missed opportunities
– A shorter lifespan and early mortality (reducing how much you can earn in your life) All of this is easy to say but how easy is it to implement and start becoming healthy. Like getting to financial freedom, it can be hard to know where to start; that is where having a coach to guide you and get you started to becoming and being healthy can be one of the best financial decisions you will ever make. A coach will give you the steps and knowledge to achieve your health goals and change your life for the better. Brad Cunningham of The Fit Shop says that: “You need to begin looking at your health like a bank account. We all understand that if you take too many withdrawals from your account you’re going to go into the red. So you need to continually make deposits. Same with your health, overtime you choose a poor food option, drink alcohol, skip exercise you make withdrawals. And soon enough you will hit the ‘red’ and in this case red meaning: sickness, illness, injury or other health concerns, So moving forward focus on making more deposits daily for your health.” Whilst it may take some time and patience to get to the level that you ideally want, it is worth it. You will feel better, you will look better and most importantly you will have the energy to LIVE LIFE!!
What do you want out of life? Do you want a new car, a new house, or financial freedom? Or maybe, you want all of it and more? Well, I can tell you that anything is possible. You just have to start with the END (what you want/your goals), then create a “Game Plan” to get there. In our business, we help our clients “Live Life”. We help them get to the END – to their goals and to attain what it is they want. More often than not, people come to us with really ambitious goals and tell us where they want to go. However, they lack a game plan – which is the “what” and the “how” to get there. Having goals are great, but without figuring out the “what” and the “how”, your chances of achieving your goals are slim. That is where we can help. Not only do we show our clients what’s possible, we also help create a “Game Plan” – the “what” and “how” to get there. The first step to creating a game plan is the No Action Gap Analysis. With this tool, we look at where you are now and based on what you are doing, where you are going to be. We will then work with you to go through different scenarios, and show you where you can go by making a few changes. This allows us to build a Game Plan to help you get there. It is a great tool because it provides the both of us great insight as to where you can be in the future. With the “Game Plan”, we can therefore monitor your progress and make adjustments as necessary. Contact us today so you can start creating your “Game Plan.” Here at Preston, Coe & Ring, we will help you “Live Life” the way you want to.
If you’re thinking that meetings waste your time and effort at work (or your business), they go for too long which is stopping you from completing what you need to finish, then you are having the WRONG meetings. Meetings should be short, sharp, and concise. We have a daily meeting which consists most days of 5 people. These meetings last between 90-120 seconds (that’s right, 1 and a half minutes to 2 minutes). That is on average 18-24 seconds per person. We also have a weekly meeting that runs for 20-40mins. So for the week, both meetings (weekly and daily) add up to 26-48 minutes. Doesn’t sound that bad, right? I think everyone could agree they could do that. I know of a business that has the daily meeting for each team (marketing, sales, product development, management, etc.) as well as the whole team (everyone together) daily meeting. The individual team meetings take about the same amount of time as ours (90-120 seconds) and the full team meeting (approximately 20 people) goes for about 7 minutes. You might be thinking that the secret is to spend less time in meetings, but have more of them. First of all, it is no secret: the answer is in Mastering the Rockefella Habits by Verne Harnish. What we do is an adaptation of what he mentions in his book. For us, this is how we go about our meetings; in our daily meetings there is no sitting down – stand up only. This means people don’t get comfortable and results in a much faster meeting. These are the 3 core questions that must be asked (we have added a 4th): 1. “What’s up?” – This is what are you doing for the day to add value to your team/business. Nobody wants to hear checking emails, returning phone calls – you should be doing that anyway.
2. “What will you complete?” – This is how you will measure success for the day so it must be easily measurable. Saying “I will get some applications complete,” is not adequate. It needs to be said “I will get 5 applications complete”. Easily measurable because you will either do it or not.
3. “Are you stuck?” – This is where you indicate who you might need help from to complete your task.
4. “How did you go?” – This is the 4th question we added at the beginning (after the first question). So stop wasting your time in the WRONG meetings and start having the RIGHT meetings.
Previously, I have mentioned about “Doing the RIGHT things”. The question is, what are the “RIGHT” things? To answer that, ask yourself these questions – What do you want to achieve? Where do you want to go? And lastly, what are your goals and aspirations? Doing the RIGHT things is different for everyone because where they want to go is different. An example of this is the typical small business owner. Nowadays, people go into business for a variety of reasons, but two of them seem fairly common; lifestyle and money. These individuals want to make more money so they can fund a better lifestyle, but what happens with a lot of small business owners? They end up working harder but making less money OR they end up with more money but no time to enjoy it. So, why does this happen? The answer is simple, they aren’t “doing the RIGHT things”. Most people get caught up in the day to day tasks of running and owning a business but only end up working IN the business rather than ON the business. How do you fix it? Well, I’m sorry to say that there is no magic bullet. It requires you to take the first step of taking time for self-reflection. Here, at Preston Coe and Ring, we help small businesses achieve more than what they thought was possible. We help them “Live Life” and this starts with looking at where you are now and where you want to go. If you want to improve your business and take the first step to an improved lifestyle, complete our free business review at prestoncoering.com.au and start the journey today. Live life like you have always wanted.
In our daily lives, we are often forced to manage urgent and important tasks simultaneously that usually results to things getting out of control. Many people believe that urgent and important mean the same thing, or to put it more accurately, they don’t know the difference between the two. Knowing the difference between what is urgent versus what is important can help you become more productive, efficient, and organised. So, how do you determine what is urgent and what is important? After you decide which is which, how do you schedule it out? “What is important is seldom urgent, and what is urgent is seldom important.” – Dwight D. Eisenhower There is much to be learned about productivity and time management from the life of Dwight Eisenhower. He can be considered as a master organiser, with his historic roles as a five-star general during the WWII and as the 34th President of the United States. The figure below is the Eisenhower Box, a straightforward decision-making tool that you can use. Urgent tasks demand your immediate action or attention right now and have deadlines. Important tasks tend to bring you closer to your long-term goals, these can also be things that you personally find important (like family and exercise). – Urgent and Important (Quadrant 2) – tasks you will do immediately. Specific examples of activities under this quadrant are emergencies, tasks with meaningful deadlines, tax deadlines, etc. – Important, but not urgent (Quadrant 1) – tasks you will schedule to do later. Examples are saving for the future, daily exercise, planning, rewarding hobbies, car and home maintenance, etc. – Urgent, but not important (Quadrant 4) – tasks you can delegate to someone else. These can be phone calls, most emails (some emails could be urgent and important), recommendation letters, favors from colleagues, etc – the types of activities under this quadrant are more important to others, not you. – Neither urgent nor important (Quadrant 3) – tasks you can do later or eliminate. These are all the time-wasting activities such as browsing social media (Facebook, Twitter, etc), watching your favorite TV shows, surfing the web, gambling, etc. Successful people, even if they have the most demanding jobs, still schedule the “Important but not urgent” tasks into their day like spending time with their family and friends or exercising. Using the Eisenhower Box, you can look at the tasks that you’re neglecting and the tasks that you can eliminate.
They say that there are two things that are guaranteed in life; death and taxes. If you want to make sure that the right people, get the right money at the right time when you are gone or incapacitated – then estate planning is important. Estate Planning isn’t just about planning for if you die. It is also for if you become incapacitated. Nowadays, this is becoming even more important due to health improvements. It is now very common for people to become legally incapacitated before passing away. If you don’t have the right things in place, you can leave a nightmare of applications and paperwork for your family to deal with regarding your wealth. How you plan your estate, can also play a big part on the amount of tax the people you leave your wealth to, will be required to pay. Whilst there are no death taxes per se in Australia, there are a lot of other taxes. Without proper estate planning, this could potentially impact those you leave behind. As a result, you might leave behind $500,000 to someone with a $150,000 tax bill attached to it, whilst another family member gets $500,000 and no tax bill. Estate Planning is an important part of any wealth plan. If you would like to know more, please contact a Financial Adviser.
When I refer to your retirement, I like to think of it as your financial retirement. We always want people to aim for a particular goal so they are able to choose what they want to do. Part of that is having enough funds to do so. A big part of this for most people is using Superannuation. Superannuation in Australia is a great vehicle that can help anyone gain more wealth. With a low tax rate of 15% and even as low as 0%, Superannuation is important to any wealth plan. The use of the Superannuation system can save thousands, and even more for those who are getting closer to their retirement date. When you get there, using the Superannuation system to help fund your income is one of the best ways to get tax free money. Currently, you can receive money tax free from super after the age of 60. Also, when your fund is in pension mode, it doesn’t pay tax. So not only the income you receive in your hands is tax free, but the earnings are tax free also. It really is a win-win as tax is for a lot of people one of their largest expenses. So when planning for your financial retirement, it is important that you consider everything that is available to you to maximise what you have. If you would like to know more on how to save thousands heading into retirement, the best thing you can do is contact a Financial Adviser.
Why is debt important to wealth? Technically, you don’t need debt to create and have wealth. For most people, debt is part of their wealth. Whether it be for a home, car or just credit cards, most of us have it. As a result, we need to manage it to minimise its costs and maximise its benefits. Good debt management can substantially improve your wealth and cashflow. Whenever you are looking at investing for your financial future, you should always look at your debt and work out how you can use it to your advantage. I know that for many of our clients that we do financial planning for, we use debt recycling. Debt recycling just allows you to recycle non-deductible debt (like your home loan) for deductible debt. Apart from this, using appropriate amounts of leverage in an investment can help give you greater returns over the long term. However, like everything with your wealth, prudent management needs to take place to ensure you get the most out of it. If you aren’t sure about how you could manage your debt better, the best thing you can do is get professional assistance.
Investing for your freedom! When I say investing, I like to talk about investing outside of superannuation. Whilst superannuation is a great vehicle, it is subject to the whims of the government. For those of you that are still young, a big part of your wealth plan to achieving freedom will be about investing outside of your super. I am not sure about yourself but at 27 (at the time of writing), I don’t want to be waiting until I am at least 65 to access my super (as recommended by the Commission of Audit). I want to have the freedom to do what I want. As a result, for those of us who are younger (myself included), super is unable to help us meet all of our financial goals. I speak about financial freedom being the ability to have choice. If you are 25 now and want financial freedom at 50-55, you are going to need wealth outside of super because you won’t be able to access super until 60 (currently), but more likely older. One of the best ways to invest for your future is to invest a little bit a lot, starting as early as possible. By investing a little a lot, you can work an investment into your regular budget. Also, the earlier you start, the more you will have sooner thanks to compound interest (interest on interest). As you go on, you can adjust and hopefully improve your plan so that you can reach your goals earlier. Not sure where to start? Speak to one of our professionals to help you on your way.
Risk, protecting the downside! Our motto at Preston Coe & Ring is “Living for today, saving for tomorrow and protecting in between.” The protecting in between is about managing some of the unmanageables (I know it isn’t a word). An important part of any wealth plan is to minimise unnecessary risk. Usually the best and cheapest way to do this, is to look at your insurance. This ensures that you and your family can maintain its wealth and lifestyle. Everybody insures their homes and car, however it is even more important to insure your family and income. Without your income, you won’t be able to afford many of the things that you have. If something major and unexpected happens, you may have some significant medical and other costs to cover. It doesn’t matter how old you are either. One of our clients, Stephen, got Lymphoma at the age of 29. Unfortunately, he didn’t have insurance and as a result, ended up with what might have been unnecessary debt. Having appropriate insurance will help you manage and ensure that your family’s lifestyle and wealth plan are minimally impacted. It will also allow you the financial security to ensure that you can be available to support family members when they most need it. How comfortable are you that if something happened, you would be able to financially cope with it? If you aren’t sure, the best thing you can do is seek out professional help.
Over the coming weeks, we will be publishing a 6-part series called “6 keys to your wealth”. The 6 keys to wealth being:
– Your Income
– Your Risk
– Your Investment
– Your Debt
– Your Freedom (Retirement)
– Your Estate We know that you will find them insightful and look forward to hearing from you so that you can achieve your financial freedom. This week, we will be focusing on Income. Income, the money you make! When you are starting out, your income is really all you have. That, and your ability to earn more of it. Income supports our lifestyles and ensures there is food on the table. So when looking at your wealth, income is really important. What is most important about your income in relation to your wealth, is how you manage it. What does managing your money really mean? It is important to make sure that you understand what your income will support in terms of your lifestyle and what you want to achieve with your wealth. Even saving a little early on can make a big difference. Do you understand what you can afford, where you want to get to and most importantly have you created a plan to get from where you are now to where you want to be? If not, there is no time like the present to get on top of it. The earlier you start with getting everything in order and moving towards your goal, the greater the chance of success.
I remember at a swimming carnival at the start of the year, we decided that we needed to get food but because there was a music festival on; Caspian and I should walk rather than drive to the supermarket. So walk we did, a total of 4.7km’s there and back to the supermarket to get some food. Caspian is only 3 and a half so it was a long walk for him. Coaching him and seeing him make the full distance made me realise that the journey to financial freedom isn’t so different to Caspian’s walk to the supermarket and back. I knew where Caspian and I had to go and what was required to do it. I knew Caspian would find it hard at some point and would require some guidance and coaching along the way. People want financial freedom and have an idea of where they want to be; but they need to get someone to help them with the directions to get there. During the journey they will need guidance, coaching and support as it is a long journey. I used a few methods of getting Caspian to keep up and make it to the end. The first one was, “Every step you take is a step closer to the pool”. So it is the same with reaching your financial goals. People sometimes think it is just one big win that will get you there. It isn’t, it is a journey and you need to take steps. Getting good advice is just about getting guidance on what steps to take so you don’t take bad ones and go backwards. That way every step you take is a step closer to financial freedom. The last method I got to get Caspian to make it to the end played on his desire to always win. I would say “Do you want to win?”, he would respond “Yes” and I would say “Then get in front and stay there”. We made it to our destination.
I often see and hear people working in their ‘off-time’ regularly. Personally, I think this is one of the worst things you can do. I believe it is important that people remember “you work to live, not live to work”. With technology, people nowadays are always connected and so it can be hard to switch off. But, one of the most important things you can do for yourself, your work, your partner, and your family is to switch off from work. This inability to switch off is even worse for small business owners. So, why is it important to switch off and only work at the right time? It is about having a balanced life and ensuring you focus your energy and attention to one thing at a time. What do I mean by this? It is about putting your phone/tablet/computer away and giving the people who are most important in your life (friends and family) the attention and energy they deserve from you. A perfect example of someone I saw not working at the right time was recently at the park. I was there with my boys (age 7 & 4). I was having a great time chasing them around and playing with them – just enjoying them as they are. And there I saw another father in the park with 2 boys of similar age. Instead of playing with them, he was on the phone with work not paying much attention to his sons. This is a perfect example of when you shouldn’t be working. He should have switched off and gave his full attention and energy to his sons. Here are a few ways where I make sure to switch off so that I am always giving my full attention and I’m always at my best: Create separate space and time for work and the rest of your life. I believe having some physical separation helps create the mental separation needed. This doesn’t mean you shouldn’t work at home. It simply means that if you want to work at home, create a space for it. That way, when you go to that space you are “at” work and when you leave that space, you are not “at” work. Turn off your notifications. You do not immediately need to check that Facebook comment, or that Twitter mention, and even that email straight away. Allocate a specific time to go through these during the day. I personally check my emails only twice a day and deal with them then. I allocate 5 minutes a day to my Twitter and my LinkedIn. TURN THEM OFF, they aren’t that important. Make time in your working day when you switch off. I personally switch off and take a break for 5 minutes, thrice a day. This helps because it allows you to refresh yourself so that you are performing at your best.
There is NEVER enough time! WRONG! Anyone who complains about not having enough time is just making excuses. Each of us has the same amount of time as everyone else. The question is, what are you doing with it? I used to be a person who always felt there was NEVER enough time, but then I realised that what I was doing was procrastinating doing “busy” work, and doing other useless things that didn’t add value to myself, my family, my business, or my clients. After some self-reflection, some study, and perseverance, I now get my work done in the time I allocate. I also spend better quality time with my family and significantly add more value to my clients, my business, and myself. So with the realisation and the belief that I had the same amount of time as everyone else, I worked on managing my time more efficiently. Below are some of the things I have done: Work is for during work hours. So often I see people on the phone with a work ‘thing’ whilst at the park with their kids or some other activity. Come on guys, is it really that urgent to be missing out experience with your kids? Most of the time, it’s not, and can wait until the next day. The same goes with working at home during your family time. It is NOT cool, generally unproductive, and leads to a worse home life. So STOP IT! Uninterrupted time. This is a big one that a lot of professionals don’t do enough of. You should be blocking out interruptions to get things done. Uninterrupted time is best to be done 60-90 minute blocks. If you have 90 minutes to really get into your work and get things done, you’ll need a short break afterwards (5-10 minutes). If you do this, you will find that you can get a lot done in that time. More than you would think. If clients and customers call you during this time you are ‘with someone’. You are with yourself and it is a very important meeting. Checking emails. This can be a huge waste of time. If you’re like me, you might receive more than a hundred, or even 200 emails a day. Not uncommon, as it is an easy way for business to communicate and it works quite effectively. This contributes to time wasted, because people are constantly checking their emails all throughout the day and getting distracted by them. Turn off your notification and close your email program. You DO NOT need to read an email the instant it comes to your inbox. E-mail is mail so treat it like mail. Check it only once or twice a day, there is no need to check it more often than that. So turn off those notifications and that email program, get some real work done, or if you’re at home, enjoy your life with your family and friends. Meetings. The WRONG meetings can be a massive waste of productive time. What is worse about this is that they tend to waste multiple peoples’ productive time simultaneously. Change your business so that you start having the RIGHT meetings and get more productive time back. Phone Calls. Just because your phone rings doesn’t mean you need to answer it then and there. Answering or taking a call when it comes in can be highly disruptive. Most of the time, the phone call can wait. A key thing that I do is to get the person who receives the phone call (receptionist) find out when is the most appropriate time to call that person back – then an appointment is made. This stops phone tag and the disruption of productive time. DO THE RIGHT THINGS. This is the most important because there is no point saving and getting all this time back if you do the wrong things with it. So what are YOU going to do to improve how you use your time?
You’ve no doubt travelled on a plane at some point in your life. But have you ever stopped to think about just how massive aviation operations are? Well, we can thank the significant amount of checklists and processes within our…
Going into partnership in business is like a marriage. It is a collaboration of two or more people that share ownership of the business, as well as its profits & losses. It is a serious commitment of time, money and reputation; therefore, deciding to enter a business partnership should be of good judgement. If you are looking to bring other people on board in your business, there are certain things to consider before ‘taking the plunge’: Director & Public Officer Insurance This insurance is like Professional Indemnity for Directors. This is important to have, if they are going to come on board as Directors as well. Shareholders Agreements This should take into consideration how a voluntary exit (i.e. retirement or circumstantial) takes place, a forced exit (i.e. disagreement, non-performance, bankruptcy) or involuntary exit (i.e. death, significant trauma). It is important to get a Shareholders Agreement in place, if you are looking at bringing two or more people on board. Part of that would be looking at how you deal with each exit – what are the terms & conditions that surround that. Another part would be the Risk Management of it – if something happens to one of the partners, or if someone must exit for some unknown or unforeseen reason. Note that whenever you make a business proposal, you must include a clause about agreeing to a Shareholders Agreement and the terms & conditions set out in it. You will need to get a Solicitor to help you make and set in place a Shareholders Agreement. Voluntary Exit – retirement or circumstantial exit Any voluntary exit should be predetermined and managed. This could be an exit where someone retires, or it is just time for them to move on from the business. Shareholders Agreement should cover minimum terms on which a voluntary exit is dealt with. Forced Exit – disagreement, non-performance, bankruptcy Any forced exit might be somewhat more difficult to manage then a voluntary exit. This type of exit can come about due to disagreement, non-performance of a partner or even other things such as criminal conviction and/or bankruptcy. Should this arise, details of what is expected and how this is managed should be covered in your agreement as a minimum, to provide you with the security of knowing how to deal with it. Involuntary Exit (death or some significant trauma)
Buy/Sell Agreements & Risk Management Should one of the owners have an accident, there needs to be the appropriate mechanisms in place to protect the interests of the business and shareholders. A Buy/Sell Agreement covers the involuntary exit and is usually covered via some insurance policies, or vendor finance agreement agreed upon in the Shareholders Agreement. When you bring in two or more people into your partnership, there is a higher chance that something may happen, where someone must exit for some unknown or unforeseen reason. You should be prepared for that, because that could blow things out of proportion in your business. That unexpected change can have significant impact in your business organization and overall performance.
Will this be the year you seriously drive up the value of your Company? If you have resolved to make your company more valuable in 2017, you may want to think hard about how your customers pay. If you have a transaction business model where customers pay once for what they buy, expect your Company’s value to be a single-digit multiple of your Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA). If you have a recurring revenue model, by contrast, where customers subscribe and pay on an ongoing basis, you can expect your valuation to be a multiple of your revenue. Breedlove & Associates sells for 6X Revenue In 1992, Stephanie Breedlove started a Payroll Company to make it easier for parents to pay their Nannies on a recurring basis. It began small and Breedlove self-funded her growth, which averaged 20% per year. By 2012, Breedlove & Associates had hit $9 million in annual sales when Breedlove accepted an offer from Care.com of $55 million for her business—representing an astronomical multiple of more than six times Breedlove’s revenue. Buyers pay up for Companies with recurring revenue because they can clearly see how your Company will make money long after you hit the exit. Not sure how to create recurring revenue? Here are five models to consider: Products That Run Out If you have a product that people run out of, consider offering it on subscription. The retailing giant Target sells subscriptions to diapers for busy parents who don’t have the time (or interest) in running to the store to re-stock on Pampers. Dollar Shave Club, which was recently acquired by Unilever for five times revenue, sells razor blades on subscription. The Honest Company sells dish detergent and safe household cleaning products to environmentally conscious consumers and more than 80% of their sales come from subscriptions. Membership Websites If you are a Consultant and offer specialised advice, consider whether Customers might pay access to a Premium Membership website where you offer your know-how to subscribers only. Today there are membership websites for people who want to know about anything from Search Engine Marketing to running a restaurant. Services Contracts If you bill by the hour or the project, consider moving to a fixed monthly fee for your service. That’s what the marketing agency GoBrandGo! has done to steady cash flow and create a more predictable service business. Piggyback Services Ask yourself what your “one-off” Customers buy, after they buy what you sell. For example, if you make a Company a new website, chances are they are going to need somewhere to host their site. While your initial website design may be a one-off service, you could offer to host it for your customer on subscription. If you offer interior design, chances are your customers are going to want to keep their home looking like the day you presented your design, so they might be in the market for a regular cleaning service. Rentals If you offer something expensive that customers only need occasionally, consider renting access to it for those who subscribe. ZipCar subscribers can have access to a car when they need it without forking over the cash to buy a hunk of steel. WeWork subscribers can have access to the company’s co-working space without buying a building or committing to a long-term lease. You don’t have to be a Software Company to create Customers who pay you automatically each month. There is simply no faster way to improve the value of your Business this year than to add some recurring revenue.
Some owners focus on growing their profits, while others are obsessed with sales goals. Have you ever considered making it your primary goal to set up your business so that it can thrive and grow without you? A business not dependent on its owner is the ultimate asset to own. It allows you complete control over your time, so that you can choose the projects you get involved in and the vacations you take. When it comes to getting out, a business independent of its owner is worth a lot more than an owner-dependent company. Here are five ways to set up your business so that it can succeed without you: 1. Give Them A Stake In The Outcome Jack Stack, the author of The Great Game of Business and A Stake In The Outcome wrote the book on creating an ownership culture inside your company: you are transparent about your financial results and you allow employees to participate in your financial success. This results in employees who act like owners when you’re not around. 2. Get Them To Walk In Your Shoes If you’re not quite comfortable opening up the books to your employees, consider a simple management technique where you respond to every question your staff brings to you with the same answer, “If you owned the company, what would you do?” By forcing your employees to walk in your shoes, you get them thinking about their question as you would, and it builds the habit of starting to think like an owner. Pretty soon, employees are able to solve their own problems. 3. Vet Your Offerings Identify the products and services which require your personal involvement in either making, delivering or selling them. Make a list of everything you sell, and score each on a scale of 0 to 10 on how easy they are to teach an employee to handle. Assign a 10 to offerings that are easy to teach to employees and give a lower score to anything that requires your personal attention. Commit to stop selling the lowest scoring product or service on your list. Repeat this exercise every quarter. 4. Create Automatic Customers Are you the company’s best salesperson? If so, you will need to fire yourself as your company’s rainmaker in order to get it to run without you. One way to do this is to create a recurring revenue business model where customers buy from you automatically. Consider creating a service contract with your customers that offers to fulfill one of their ongoing needs on a regular basis. 5. Write An Instruction Manual For Your Business Finally, make sure your company comes with instructions included. Write an employee manual or what MBA-types called Standard Operating Procedures (SOPs). These are a set of rules that employees can follow for repetitive tasks in your company. This will ensure employees have a rulebook which they can refer to when you’re not around, and, when an employee leaves, you can quickly swap them out with a replacement to take on duties of the job. You proofing your business has enormous benefits. It will allow you to create a company and have a life. Your business will be free to scale up because it is no longer dependent on you, its bottleneck. Best of all, it will be worth a lot more to a buyer whenever you are ready to sell.
What do you want out of life? Do you want a new car, a new house, or financial freedom? Or maybe, you want all of it and more? Well, I can tell you that anything is possible. You just have to start with the END (what you want/your goals), then create a “Game Plan” to get there. In our business, we help our clients “Live Life”. We help them get to the END – to their goals and to attain what it is they want. More often than not, people come to us with really ambitious goals and tell us where they want to go. However, they lack a game plan – which is the “what” and the “how” to get there. Having goals are great, but without figuring out the “what” and the “how”, your chances of achieving your goals are slim. That is where we can help. Not only do we show our clients what’s possible, we also help create a “Game Plan” – the “what” and “how” to get there. The first step to creating a game plan is the No Action Gap Analysis. With this tool, we look at where you are now and based on what you are doing, where you are going to be. We will then work with you to go through different scenarios, and show you where you can go by making a few changes. This allows us to build a Game Plan to help you get there. It is a great tool because it provides the both of us great insight as to where you can be in the future. With the “Game Plan”, we can therefore monitor your progress and make adjustments as necessary. Contact us today so you can start creating your “Game Plan.” Here at Preston, Coe & Ring, we will help you “Live Life” the way you want to.
If you’re thinking that meetings waste your time and effort at work (or your business), they go for too long which is stopping you from completing what you need to finish, then you are having the WRONG meetings. Meetings should be short, sharp, and concise. We have a daily meeting which consists most days of 5 people. These meetings last between 90-120 seconds (that’s right, 1 and a half minutes to 2 minutes). That is on average 18-24 seconds per person. We also have a weekly meeting that runs for 20-40mins. So for the week, both meetings (weekly and daily) add up to 26-48 minutes. Doesn’t sound that bad, right? I think everyone could agree they could do that. I know of a business that has the daily meeting for each team (marketing, sales, product development, management, etc.) as well as the whole team (everyone together) daily meeting. The individual team meetings take about the same amount of time as ours (90-120 seconds) and the full team meeting (approximately 20 people) goes for about 7 minutes. You might be thinking that the secret is to spend less time in meetings, but have more of them. First of all, it is no secret: the answer is in Mastering the Rockefella Habits by Verne Harnish. What we do is an adaptation of what he mentions in his book. For us, this is how we go about our meetings; in our daily meetings there is no sitting down – stand up only. This means people don’t get comfortable and results in a much faster meeting. These are the 3 core questions that must be asked (we have added a 4th): 1. “What’s up?” – This is what are you doing for the day to add value to your team/business. Nobody wants to hear checking emails, returning phone calls – you should be doing that anyway.
2. “What will you complete?” – This is how you will measure success for the day so it must be easily measurable. Saying “I will get some applications complete,” is not adequate. It needs to be said “I will get 5 applications complete”. Easily measurable because you will either do it or not.
3. “Are you stuck?” – This is where you indicate who you might need help from to complete your task.
4. “How did you go?” – This is the 4th question we added at the beginning (after the first question). So stop wasting your time in the WRONG meetings and start having the RIGHT meetings.
Previously, I have mentioned about “Doing the RIGHT things”. The question is, what are the “RIGHT” things? To answer that, ask yourself these questions – What do you want to achieve? Where do you want to go? And lastly, what are your goals and aspirations? Doing the RIGHT things is different for everyone because where they want to go is different. An example of this is the typical small business owner. Nowadays, people go into business for a variety of reasons, but two of them seem fairly common; lifestyle and money. These individuals want to make more money so they can fund a better lifestyle, but what happens with a lot of small business owners? They end up working harder but making less money OR they end up with more money but no time to enjoy it. So, why does this happen? The answer is simple, they aren’t “doing the RIGHT things”. Most people get caught up in the day to day tasks of running and owning a business but only end up working IN the business rather than ON the business. How do you fix it? Well, I’m sorry to say that there is no magic bullet. It requires you to take the first step of taking time for self-reflection. Here, at Preston Coe and Ring, we help small businesses achieve more than what they thought was possible. We help them “Live Life” and this starts with looking at where you are now and where you want to go. If you want to improve your business and take the first step to an improved lifestyle, complete our free business review at prestoncoering.com.au and start the journey today. Live life like you have always wanted.
As the end of JobKeeper draws near with the end of March looming, many businesses are looking at the available options to help soften the blow of the ongoing impacts of the new COVID norm and get their companies back on track by hiring more staff.
Since the outbreak of the Coronavirus, we have seen an enormous amount of change in how we go about our day to day living.
When COVID-19 first impacted Australia and the country went into lockdown, one of the first casualties were our jobs.
The bushfire disasters across Australia over the past months have demonstrated the enormous generosity of Australians – from sporting stars, Hollywood heavyweights and business leaders through to ordinary people from across the country, all just wanting to help and make a difference. While the simple satisfaction from doing this can’t be measured in dollars, with the right knowledge and planning aligned to your circumstances and objectives, there are also dollar rewards on offer for the giver come tax time. Taking philanthropy to the next level Australians are generous when it comes to opening their wallet for a good cause. But you may have reached a point in life where you want to make a more substantial contribution with control over how your money is spent. You may also wish to get your children involved to instill shared values. While it hasn’t received much publicity, increasing numbers of Australians are using charitable trusts to give in a more planned and tax-effective way. The turning point came in 2001, when the Howard Government introduced the Private Ancillary Fund (PAF) with the aim of encouraging more individual and corporate philanthropy. PAFs are charitable trusts that can be used by an individual or family for strategic long-term giving. Since then, the number of PAFs and the amount of money contained in them has grown steadily. In early 2018, there were 1600 PAFs, housing $10 billion and distributing $500 million a year.i Claiming a tax benefit According to Philanthropy Australia, in the 2015-2016 financial year, 14.9 million Australians collectively donated $12.5 billion to charities and not-for-profits (NFPs).ii Though donations to accredited charities and not-for-profits are tax deductible, the figures indicate two-thirds of taxpayers don’t bother to claim. It’s well worth keeping track of receipts so you can claim when you think that, for example, a single donation of $5000 to a charity or NFP in a financial year will reduce your taxable income by $5000. A core principle of tax-deductible philanthropy is that, the giver shouldn’t stand to receive any material benefit. For example, if you buy tickets in a raffle run by a charity, you can’t claim a tax deduction on the cost of the tickets. In order to receive a tax deduction for your donation, the recipient must also be registered as a deductible gift recipient (DGR). There are many ways to be charitable, but the impact on your tax bill will vary depending on how you go about it. A more sophisticated approach These days, people who want to take philanthropy to the next level with an ongoing, tax-effective approach have a variety of trusts to choose from. The Private Ancillary Fund
PAFs are the best-known of the new breed of trusts. The money placed in a PAF is tax-deductible and assets in the fund aren’t subject to income or capital gains tax (but do qualify for franking credits). Let’s say a dentist sets up a PAF, and gifts half his $500,000 annual income into the fund. The dentist’s taxable income now drops to $250,000. What’s more, no tax is paid on the returns made on the $250,000 that has been invested in the PAF. The dentist must distribute a minimum of five per cent of their PAF’s net asset value annually, or a minimum of $11,000. After meeting that requirement, the dentist has a relatively free hand about which charities to support and how much they receive. The Public Ancillary Fund (PuAF)
PuAFs work the same way as PAFs, but operate on a larger scale. For example, 10 dentists may set up a PuAF to finance the building of dental hospitals in Africa. As well as gifting part of their incomes, the 10 dentists can (in fact, are obliged to) invite the general public to make tax-deductible donations to their PuAF. Testamentary Trust (or Will Trust)
These are used by individuals wanting to leave money in their will to charity. The two advantages of this type of trust are that, the trustee(s) can distribute the income generated by the trust in a way that minimises the tax burden of beneficiaries, and the assets in the trust can’t be accessed by parties such as creditors. Few people give to get a tax deduction, but by supporting good causes in a tax-effective manner, you can achieve a bigger bang for your philanthropic buck. If you would like to know more about tax-effective giving, give us a call. i J.B.Were Support Report, 4 April 2018, https://www.strategicgrants.com.au/au/free-resources/blog/19-blog-kate/280-grantseeking-donor-giving ii http://www.philanthropy.org.au/tools-resources/fast-facts-and-stats/
Over the next 20 years, an estimated 12.7 million people will benefit from the greatest transfer of wealth to occur1. All up, over $3.5 trillion will be bequeathed to the children and grandchildren of the Baby Boomer generation. The boomtime generation The Baby Boomer generation comprises of those Australians born between 1946 and 1964. They represent almost 25% of the Australian population1 and own 60% of Australia’s private wealth.2 The accumulation of wealth in this segment is because of: • high level of home ownership • steady increase in property values • years of stable economic growth • smaller families compared to previous generations • compulsory superannuation in the 1990s leading to substantial growth in retirement savings In fact, in the last decade, the wealth held by the Baby Boomer generation has virtually doubled.3 The net wealth of older households has grown substantially The generation gap The result is an increased gap with subsequent generations. This gap in wealth is likely to widen with declining rates of home ownership among younger Australians. Another factor is in superannuation savings. In fact, current data suggests that some members of Generation X will not have enough superannuation savings to support their retirement lifestyle.4 To make up this disparity, some may rely on receiving an inheritance to supplement retirement savings. Contributing all or part of an inheritance to super, or investing it in the non-super environment, may be an effective option for many. But for those that will not have this option, having a clear view of the amount you are likely to need to fund your retirement and working towards that goal is important. Sharing the wealth For those thinking about who to bequeath their assets to, effective estate planning becomes important. Having an effective plan can ensure that the right beneficiaries receive the right inheritance at the right time, and in a tax effective manner. A properly considered Will, and an appropriately drafted superannuation death benefit nomination, are two key instruments to ensure the appropriate transfer of wealth. However, it is not unusual for disputes to occur over provisions that have been made in a Will. An analysis of 195 court decisions suggests that many of these disputes are because of changing family dynamics including previous spouses, children from previous relationships, and stepchildren, having expectations around inheritances.5 A good plan is key Not all estate disputes can be avoided, however careful planning and appropriate documentation will go a long way in avoiding disputes. A transfer of wealth can provide an opportunity for financial independence across generations if managed properly. A good level of financial literacy, coupled with appropriate financial advice, becomes extremely important to ensure that any financial windfall or bequest is not wasted. 1 Australian Bureau of Statistics (2016) ‘Talking ‘bout our Generations: Where are Australia’s Baby Boomers, Generation X & Y and iGeneration?’, 2 Ibid. 3 Source: Grattan Institute, ‘Generation gap: ensuring a fair go for younger Australians’ 4 Hunt, K et al, ‘Intergenerational Wealth Transfer: The Opportunity of Gen X & Y in Australia’ Griffith University 2017. 5 Estate Contestation in Australia – An Empirical Study of a Year in Case Law, White, Tilse, Wilson, Rosenman, Purser and Coe. UNSW Law Journal, Volume 38(3) p.890
You can reduce your tax by hundreds of dollars (if not thousands), with some of the following strategies. Here’s how to do it: The Strategy behind Tax Planning The tax you pay depends on your taxable income, and the tax rates that apply to that income. Therefore, your tax is reduced if you: 1. Reduce your income, or 2. Increase your tax deductions. Seeing we all want to earn more, reducing your income isn’t an option! But increasing your tax deductions definitely is. We have shared below links to two Tax Planning Flyers, which both list a number of items that can be claimed as tax deductions. You can use them as a guide, but you should contact us if you are not sure of anything. To illustrate: If you need something in July that is classified as a tax deduction, it makes sense to bring this purchase forward and buy it in June. You then get the tax deduction this year, and not next year. Warning: Don’t fall into the trap of buying something simply to get the tax deduction from it. If your tax rate (including Medicare Levy) is for example 34.5%, you would only get 34.5% of the purchase price back as a tax refund (or reduced tax payable) from the tax deductible item. You DON’T get 100% of the amount that you spend back as a tax refund (or reduced tax payable). If you do need an item for your business or work and it is tax deductible, we recommend buying it BEFORE 30 June so that you get the tax deduction this year. Your Tax Planning Strategy Checklists Business Owners: Click Here for our ‘Tax Planning Flyer for Business Owners’. Individuals: Click Here for our ‘Tax Planning Flyer for Individuals’. If you are a business owner, we will look at both for you. If you want to minimise your tax burden, then help us to help you, and get in contact with us today! By spending a little bit of time with us reviewing your situation, we may be able to help you save thousands!! Now is the time to do it – please contact our office TODAY to get started.
In our last article, we discussed the power of budgeting. In this article, we explore my favourite way to formulate your budget. It is called a Zero-Sum Budget. The Power of a Zero-Sum Budget In the midst of the many articles on budgeting systems and strategies, a less publicised (but equally important technique) is the Zero-Sum Budget. This strategy involves “spending” every dollar that you make. However, you are not ‘spending’ your money in the usual sense of the word. In this situation, it refers to allocating your entire earnings into appropriate categories. The following steps demonstrate how you can apply this kind of budgeting: Step 1: Determine your Single or Combined Total Salary For most salaried workers who are paid on a monthly or fortnightly basis, this step is simple. Others may have to put in a little more effort if pay is based on an hourly rate, or particularly irregular. Try to work out your income as a monthly amount – you can then use the strategy of paying for next month’s bills using this month’s income. By always being “one month ahead”, you will find your budget much easier to plan and keep track of. Step 2: Itemise Your Bills Once you know the total amount of money coming in, your next step is to work out how much you need to spend next month for bills, groceries, everyday expenditures, etc. Be aware that some things may be yearly or quarterly expenses. Try and include everything you can think of, as the more accurate it is, the better your budgeting will be. Please find below an example list for your reference: – Mortgage: $1,426
– Fuel/Miscellaneous: $200
– Electricity: $200 (estimate)
– Mobile Phone: $55
– Gas: $25 (estimate)
– Internet: $35
– Groceries: $500
– Life insurance: $77.31 (paid quarterly)
– Daycare: $500
– Rubbish: $56.25 (paid quarterly)
– Health Insurance: $377
Total: $3451.56 Step 3: Compare and Contrast Once you have listed your income and expenses, you will notice how much is left over. How is this money currently being used? You may realise that you are wasting it on things you do not really need, or you may be gradually saving it. Regardless of what you decide to do with this money, the point is, you now have the knowledge of how much is left and can therefore make an informed decision on what to do with it. For example: If a couple had a net income of $7000 for the month, a zero-sum budget may look like this: – Mortgage: $1426
– Mobile Phone: $55
– Electricity: $200 (estimate)
– Health Insurance: $377
– Gas: $25 (estimate)
– Life insurance: $77.31 (paid quarterly)
– Groceries: $500
– Rubbish: $56.25 (paid quarterly)
– Daycare: $500
– Short-term savings: $1500
– Internet: $35
– Long-term savings: $1500
– Fuel/Miscellaneous: $200
– Holiday Fund: $548.44
Total: $7000.00 This strategy may also bring to your attention that you are actually spending every cent you earn. In this case, you might need to start considering the things you could live without. Some possible items you could cut back on are your pay TV, eating out, or excessive entertainment spending. Remember, everyone’s lifestyles and priorities are different and it is up to you how you allocate your money. Step 4: Make a choice and stick to it Once you know your excess cash flow, you can decide what you would like to do with the extra money. You might decide to pay off some debts, save, invest or put it towards a financial goal. The only trick is – if you decide to allocate a certain amount of money somewhere, stick to your decision and put it there straight away to avoid spending it on something else. Step 5: Keep on top of your spending It is important to check in every now and then throughout the month to make sure you are not spending over your self-allocated limit. Try to stick to the motto, “when it’s gone, it’s gone”. It may be painful in the first few months, but it can be one of the best ways to create good habits. Step 6: Make Adjustments It can take a few months before your Zero-Sum Budget is working efficiently. Do not be concerned if you have to make adjustments, as it is all part of the budgeting process. As with anything, you will become more aware of where you may need to allocate more funds to, or where you can easily shave a few dollars off here and there. Don’t Forget One last (but very important) part of your Zero-Sum Budget is an emergency fund. This is crucial in circumstances such as an unplanned medical emergency or car issue, and will allow a bit of leeway so that your whole month’s plan will not have to be abandoned. Just remember that when you have tapped into these funds, try to replace them again as soon as possible. Summary The power of using Zero-Sum Budget is that it allocates all of your money, so the opportunity to spend it on things that you don’t really need is no longer there. It helps you focus and prioritise. If you need help with your budgeting, call our office to make an appointment with one of our Team on 03 5134 1778.
If a business owner said to you that they run their business without a budget, what would you think? You would think they were incompetent! Or perhaps lazy, or even both? What do most families do? When you think about it, a family is actually like a mini business. There is income, expenses, and hopefully, something left over to invest and to enjoy. So why don’t most families operate to a budget? After all, a personal budget helps you to see your financial direction, and helps you stay (or get back!) on track. It is a great comfort. One reason some people do not put together a budget is because, it makes them feel overwhelmed, or too busy, and leaves them feeling like life is too complex to keep track of all that. Well the good news is, we can hold your hand through the process, which in turn, makes it easier for you. Before we look at the ‘how’ aspects, let’s consider 3 more reasons why a personal budget is such an important tool in helping you achieve your financial goals and dreams. 1. Most of your money is already spoken for long before you get it The money you earn has already been promised to keep the electricity on, make the loan repayments, and pay for the insurance. What most people don’t realise about budgeting is that, it is really honouring the commitments you already have. Now since we are all honest people and plan to pay these bills, the first step is to track these bills, and see what is left over for your day-to-day living. 2. Your day-to-day living money is spread all over the place Some of your day-to-day living money is in the bank, and some is in your purse or wallet. Some may even be with your partner or children, if you have them. You need a simple system that allows you to track day-to-day expenses, such as fuel for your car, shopping, and discretionary spending expenses. We do not suggest you try to keep track of every cent of your day-to-day living money, as this would provide little benefit for the amount of effort that would be required to obtain that level of detail. Instead, you need to identify your main day-to-day expenses, and make allowance for all other minor day-to-day expenses. Here’s a key: You need a system that is so easy to use, that you keep using it. You can track the day-to-day expenses by entering them into a spreadsheet, or better yet, use a tool like MyProsperity. MyProsperity can automatically pull in bank feeds, which can save you a lot of data entry. 3. The Number 1 reason people give up on their budgets is that they don’t have the right attitude It is ALL in the attitude! Have you ever attempted to budget and given up in frustration? What is the reason your budgeting attempt failed? What will make you stick to it? Think about this… One of the reasons, if not the top reason so many people give up at budgeting, is attitude. If you think of it as a penny-pinching sacrifice instead of a means for achieving your financial goals and dreams, how long are you likely to stick with it? Think about the difference between going on a diet, and eating healthy. One is negative and restrictive; the other is positive, and allows you to indulge every now and then while still achieving your goals. To increase your chances of success, work on your attitude first. Many people refuse to budget because of budgeting’s negative connotation. If you are one of those people, try thinking of it as a ‘spending plan’ instead of a ‘budget’. Once you have attempted to budget and failed, the bad feelings associated with any type of failure can keep you from trying again. Don’t give up! The cold hard reality Let’s face it. Money is a tool that enables you to reach your goals in life. But the cold hard reality is that, until you know where your money goes, you cannot make conscious decisions about how to use this tool effectively. A budget (or spending plan!) shows you exactly where your money goes and provides a clear plan. It also lets you save for the things that are important to you, like a new house, a new car, a comfortable retirement, a tertiary education, high quality health care, travel, or whatever your particular goals and dreams happen to be. Now that is exciting! Whatever YOU decide you want to achieve and save for, you can. All you need is the right attitude, a goal to aim for, and a (spending!) plan. Avoid This Pitfall There are several universal budgeting concepts that every successful budget will include. But one of the most important features of a successful budget is, for it to be easy to use and suitable for your needs. Trying to use a generic, complex, one-size-fits-all budget won’t work. A simpler approach makes it easier to stay committed. If you stick to a realistic and effective budget long enough, the rewards will keep you motivated. In the meantime, do whatever it takes to keep yourself going. To summarise, the 3 steps for effective personal budgeting (spending planning!) are: Build a Budget, Track Income and Spending, and Compare Budget to Actual. Once you start budgeting with a positive attitude, you will see the difference a budget (or spending plan) can make in your life. Your next step is to call us on 03 5134 1778 and organise a time to have a chat. We would love to discuss this with you further, and help you to get on track towards achieving your financial goals.
A key to creating a budget is to have a goal that you want to achieve; but how hard is it to achieve your goals? Well according to research, without outside assistance, it is very difficult to achieve your goals. There is nothing wrong with asking for help. The people who are the best in the world at what they do ask for help – by hiring Coaches and Trainers. So, why should you be any different for needing help?
The American Society of Training and Development (ASTD) conducted a study on Accountability, and have provided the following statistics: The probability of completing a goal if:• You have an idea or a goal: 10%• You consciously decide you will do it: 25%• You decide when you will do it: 40%• You plan how you will do it: 50%• You commit to someone you will do it: 65%• You have a specific accountability appointment with a person you have committed to: 95%
So, here you can see that just having a goal is not enough. If you want to achieve a goal that you need to budget for, it is important that you plan how you intend to do it, and have some accountability in place to help you achieve it. So, if you are serious about achieving your goals, what is stopping you from getting the assistance you need? As part of our Cashflow Budgeting Service, we can help you create goals and keep you accountable to them. No matter what you decide to do, make sure that you create some accountability to achieve your goals.
Everyone knows that they should be budgeting and managing their cash, but how many of us actually do it? There is a lot of power to be gained over your financial future, by preparing and taking control of your budget. Better yet, if you start comparing your budget to your actual expenditure, you will get to know yourself better, and be able to make more educated and beneficial changes for your future. A lot of us may have had some goals for 2019 that have already fallen by the way side, but all of us should have some financial goals. Did you know that just by having a goal, the probability of achieving that goal is only 10%? However, if you commit to someone that you will achieve your goal, you can increase that probability to 65%. Even better, if you have a specific Accountability appointment with a person you have committed to, you can increase it to 95%. We want to help You, our Clients, succeed and achieve financial freedom. The first step is to ensure that you fully understand your budget. That is why we are doing this series to help you take control of your budget.
A Blood Pressure Test for your Business When was the last time you had your blood pressure tested? Taking your blood pressure is one of the first things most doctors do before treating you for just about anything. How much pressure your blood is under as it courses through your veins is a reliable indicator of your overall health; and it can be an early indicator of everything from heart disease to bad circulation. Does it tell the doctor everything they need to know about your health? Of course not, but one powerful little ratio can give the doctor a pretty good sense of your overall wellbeing. Likewise, your Value Builder Score can be a handy indicator of your business wellbeing. Like your blood pressure reading, your company’s Sellability Score is an amalgam of a number of different factors and can help a professional quickly diagnose your business’s overall health. Predicting Good Outcomes Too When a doctor takes your blood pressure, they not only rule out possible nasty ailments; they can also use the pressure reading to forecast a healthy life ahead. Similarly, your Value Builder Score can predict good things for the future. For example, based on more than 10,000 business owners who have completed their Value Builder Score questionnaire, we know the average multiple of pre-tax profit they are offered for their business when it is time to sell is 3.7. By contrast, those companies that have achieved a Value Builder of 80+ are getting offers of 6.6 times pre-tax profit. In other words, an average-performing business turning out $500,000 in pre-tax profit is likely worth around $1,850,000 ($500,000 x 3.7). If the same company improved its Sellability Score to 80+ while maintaining its profitability of $500,000, it would be worth closer to $3,300,000 ($500,000 x 6.6). Are you guaranteed to fetch 6.6 times pre-tax profit if you improve your Value Builder Score to 80? Of course not. But just like blood pressure, one little number can tell you and your advisor a whole lot about how well you are doing; and your advisor can then prescribe an action plan to start maximizing your company’s health – and its value down the road. Heart disease is called “The Silent Killer” because most people have no idea what their blood pressure is. People can walk around for years with dangerously high blood pressure because they haven’t bothered to get it tested. The first step on the road to health is to get tested. If you have a great score, you can sleep well at night knowing you have one less thing to worry about. If your score is not where it should be, then at least knowing your performance can get you started down the road to better health. If you’re interested in getting your Value Builder Score, please visit our website for more details.
Will this be the year you seriously drive up the value of your Company? If you have resolved to make your company more valuable in 2017, you may want to think hard about how your customers pay. If you have a transaction business model where customers pay once for what they buy, expect your Company’s value to be a single-digit multiple of your Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA). If you have a recurring revenue model, by contrast, where customers subscribe and pay on an ongoing basis, you can expect your valuation to be a multiple of your revenue. Breedlove & Associates sells for 6X Revenue In 1992, Stephanie Breedlove started a Payroll Company to make it easier for parents to pay their Nannies on a recurring basis. It began small and Breedlove self-funded her growth, which averaged 20% per year. By 2012, Breedlove & Associates had hit $9 million in annual sales when Breedlove accepted an offer from Care.com of $55 million for her business—representing an astronomical multiple of more than six times Breedlove’s revenue. Buyers pay up for Companies with recurring revenue because they can clearly see how your Company will make money long after you hit the exit. Not sure how to create recurring revenue? Here are five models to consider: Products That Run Out If you have a product that people run out of, consider offering it on subscription. The retailing giant Target sells subscriptions to diapers for busy parents who don’t have the time (or interest) in running to the store to re-stock on Pampers. Dollar Shave Club, which was recently acquired by Unilever for five times revenue, sells razor blades on subscription. The Honest Company sells dish detergent and safe household cleaning products to environmentally conscious consumers and more than 80% of their sales come from subscriptions. Membership Websites If you are a Consultant and offer specialised advice, consider whether Customers might pay access to a Premium Membership website where you offer your know-how to subscribers only. Today there are membership websites for people who want to know about anything from Search Engine Marketing to running a restaurant. Services Contracts If you bill by the hour or the project, consider moving to a fixed monthly fee for your service. That’s what the marketing agency GoBrandGo! has done to steady cash flow and create a more predictable service business. Piggyback Services Ask yourself what your “one-off” Customers buy, after they buy what you sell. For example, if you make a Company a new website, chances are they are going to need somewhere to host their site. While your initial website design may be a one-off service, you could offer to host it for your customer on subscription. If you offer interior design, chances are your customers are going to want to keep their home looking like the day you presented your design, so they might be in the market for a regular cleaning service. Rentals If you offer something expensive that customers only need occasionally, consider renting access to it for those who subscribe. ZipCar subscribers can have access to a car when they need it without forking over the cash to buy a hunk of steel. WeWork subscribers can have access to the company’s co-working space without buying a building or committing to a long-term lease. You don’t have to be a Software Company to create Customers who pay you automatically each month. There is simply no faster way to improve the value of your Business this year than to add some recurring revenue.
You already know that your business turnover and profits play a big role in how much your business is worth. Do you also know the role cash flow plays in your valuation? Cash vs. Profits Cash flow is different from profits in that it measures the cash coming in and out of your business rather than an accounting “magic” of your profit and loss. For example, if you charge $10,000 upfront for a service that takes you three months to deliver, you will be recognising only $3,333 in revenue for 3 months. But since you charged upfront, you get all $10,000 of cash on the day your customer decides to buy (go you!). This positive cash flow cycle improves your business valuation because when it comes the time to sell your business, the buyer will have to write two cheques: one to you, the owner, and a second to your company to fund its working capital – the cash your company needs to fund its immediate obligations like payroll, rent, etc. The trick is that both cheques are drawn from the same bank account. So if you are receiving cash in advance, the requirement for working capital is reduced, which means more for you. Unfortunately, the inverse is also true. If your business is a cash suck, an acquirer is going to calculate that they need to inject on closing day, which depletes their resources and results in less for you. How To Improve Your Cash Flow There are many ways to improve your cash flow – and therefore, the value of your business. One often overlooked tactic is to spend less on the machines your business needs to operate. In the restaurant business, for example, there is an often repeated truism that it takes three bankruptcies at a single location before any restaurant can make money. The first owner of the restaurant walks in and – with all of the typical optimism of a new entrepreneur – pays cash for a brand new commercial kitchen complete with fancy stove, commercial grade walk-in coolers, etc., as well as all new dishware, pots and pans, thus depleting their cash reserves before opening night. Within a year, the restaurant owner runs out of cash and declares bankruptcy. Then along comes a second entrepreneur who decides to set up their restaurant at the same location and buys all of the shiny new equipment from owner number one’s creditors for 70 cents on the dollar, figuring they made a wonderful deal. But the outlay of cash is still too great and they too are out of business within a year. It’s not until the third owner comes along that the location actually survives. They save cash by buying all of the equipment off the second owner for 10 cents on the dollar. The moral of the story is: find a way to reduce the cash you spend on equipment, however you can. Can you buy your gear used on sites like eBay? Can you share a very expensive piece of machinery with another non-competitive business? Can you rent instead of buying? Profits are an important factor in your business value but so too is the cash your company generates. We call this phenomenon, The Valuation Seesaw and it is one of the eight key drivers of the value of your business.
They say that there are two things that are guaranteed in life; death and taxes. If you want to make sure that the right people, get the right money at the right time when you are gone or incapacitated – then estate planning is important. Estate Planning isn’t just about planning for if you die. It is also for if you become incapacitated. Nowadays, this is becoming even more important due to health improvements. It is now very common for people to become legally incapacitated before passing away. If you don’t have the right things in place, you can leave a nightmare of applications and paperwork for your family to deal with regarding your wealth. How you plan your estate, can also play a big part on the amount of tax the people you leave your wealth to, will be required to pay. Whilst there are no death taxes per se in Australia, there are a lot of other taxes. Without proper estate planning, this could potentially impact those you leave behind. As a result, you might leave behind $500,000 to someone with a $150,000 tax bill attached to it, whilst another family member gets $500,000 and no tax bill. Estate Planning is an important part of any wealth plan. If you would like to know more, please contact a Financial Adviser.
When I refer to your retirement, I like to think of it as your financial retirement. We always want people to aim for a particular goal so they are able to choose what they want to do. Part of that is having enough funds to do so. A big part of this for most people is using Superannuation. Superannuation in Australia is a great vehicle that can help anyone gain more wealth. With a low tax rate of 15% and even as low as 0%, Superannuation is important to any wealth plan. The use of the Superannuation system can save thousands, and even more for those who are getting closer to their retirement date. When you get there, using the Superannuation system to help fund your income is one of the best ways to get tax free money. Currently, you can receive money tax free from super after the age of 60. Also, when your fund is in pension mode, it doesn’t pay tax. So not only the income you receive in your hands is tax free, but the earnings are tax free also. It really is a win-win as tax is for a lot of people one of their largest expenses. So when planning for your financial retirement, it is important that you consider everything that is available to you to maximise what you have. If you would like to know more on how to save thousands heading into retirement, the best thing you can do is contact a Financial Adviser.
Why is debt important to wealth? Technically, you don’t need debt to create and have wealth. For most people, debt is part of their wealth. Whether it be for a home, car or just credit cards, most of us have it. As a result, we need to manage it to minimise its costs and maximise its benefits. Good debt management can substantially improve your wealth and cashflow. Whenever you are looking at investing for your financial future, you should always look at your debt and work out how you can use it to your advantage. I know that for many of our clients that we do financial planning for, we use debt recycling. Debt recycling just allows you to recycle non-deductible debt (like your home loan) for deductible debt. Apart from this, using appropriate amounts of leverage in an investment can help give you greater returns over the long term. However, like everything with your wealth, prudent management needs to take place to ensure you get the most out of it. If you aren’t sure about how you could manage your debt better, the best thing you can do is get professional assistance.
Investing for your freedom! When I say investing, I like to talk about investing outside of superannuation. Whilst superannuation is a great vehicle, it is subject to the whims of the government. For those of you that are still young, a big part of your wealth plan to achieving freedom will be about investing outside of your super. I am not sure about yourself but at 27 (at the time of writing), I don’t want to be waiting until I am at least 65 to access my super (as recommended by the Commission of Audit). I want to have the freedom to do what I want. As a result, for those of us who are younger (myself included), super is unable to help us meet all of our financial goals. I speak about financial freedom being the ability to have choice. If you are 25 now and want financial freedom at 50-55, you are going to need wealth outside of super because you won’t be able to access super until 60 (currently), but more likely older. One of the best ways to invest for your future is to invest a little bit a lot, starting as early as possible. By investing a little a lot, you can work an investment into your regular budget. Also, the earlier you start, the more you will have sooner thanks to compound interest (interest on interest). As you go on, you can adjust and hopefully improve your plan so that you can reach your goals earlier. Not sure where to start? Speak to one of our professionals to help you on your way.
Risk, protecting the downside! Our motto at Preston Coe & Ring is “Living for today, saving for tomorrow and protecting in between.” The protecting in between is about managing some of the unmanageables (I know it isn’t a word). An important part of any wealth plan is to minimise unnecessary risk. Usually the best and cheapest way to do this, is to look at your insurance. This ensures that you and your family can maintain its wealth and lifestyle. Everybody insures their homes and car, however it is even more important to insure your family and income. Without your income, you won’t be able to afford many of the things that you have. If something major and unexpected happens, you may have some significant medical and other costs to cover. It doesn’t matter how old you are either. One of our clients, Stephen, got Lymphoma at the age of 29. Unfortunately, he didn’t have insurance and as a result, ended up with what might have been unnecessary debt. Having appropriate insurance will help you manage and ensure that your family’s lifestyle and wealth plan are minimally impacted. It will also allow you the financial security to ensure that you can be available to support family members when they most need it. How comfortable are you that if something happened, you would be able to financially cope with it? If you aren’t sure, the best thing you can do is seek out professional help.
Over the coming weeks, we will be publishing a 6-part series called “6 keys to your wealth”. The 6 keys to wealth being:
– Your Income
– Your Risk
– Your Investment
– Your Debt
– Your Freedom (Retirement)
– Your Estate We know that you will find them insightful and look forward to hearing from you so that you can achieve your financial freedom. This week, we will be focusing on Income. Income, the money you make! When you are starting out, your income is really all you have. That, and your ability to earn more of it. Income supports our lifestyles and ensures there is food on the table. So when looking at your wealth, income is really important. What is most important about your income in relation to your wealth, is how you manage it. What does managing your money really mean? It is important to make sure that you understand what your income will support in terms of your lifestyle and what you want to achieve with your wealth. Even saving a little early on can make a big difference. Do you understand what you can afford, where you want to get to and most importantly have you created a plan to get from where you are now to where you want to be? If not, there is no time like the present to get on top of it. The earlier you start with getting everything in order and moving towards your goal, the greater the chance of success.
I remember at a swimming carnival at the start of the year, we decided that we needed to get food but because there was a music festival on; Caspian and I should walk rather than drive to the supermarket. So walk we did, a total of 4.7km’s there and back to the supermarket to get some food. Caspian is only 3 and a half so it was a long walk for him. Coaching him and seeing him make the full distance made me realise that the journey to financial freedom isn’t so different to Caspian’s walk to the supermarket and back. I knew where Caspian and I had to go and what was required to do it. I knew Caspian would find it hard at some point and would require some guidance and coaching along the way. People want financial freedom and have an idea of where they want to be; but they need to get someone to help them with the directions to get there. During the journey they will need guidance, coaching and support as it is a long journey. I used a few methods of getting Caspian to keep up and make it to the end. The first one was, “Every step you take is a step closer to the pool”. So it is the same with reaching your financial goals. People sometimes think it is just one big win that will get you there. It isn’t, it is a journey and you need to take steps. Getting good advice is just about getting guidance on what steps to take so you don’t take bad ones and go backwards. That way every step you take is a step closer to financial freedom. The last method I got to get Caspian to make it to the end played on his desire to always win. I would say “Do you want to win?”, he would respond “Yes” and I would say “Then get in front and stay there”. We made it to our destination.
You’ve no doubt travelled on a plane at some point in your life. But have you ever stopped to think about just how massive aviation operations are? Well, we can thank the significant amount of checklists and processes within our…
We are a few weeks into the new year, and old and potentially bad habits may have already come back to you. How are you going with your goals? There is nothing wrong with calling for help. In fact, this is one of the best ways to making sure you do achieve your goals. The American Society of Training and Development (ASTD) did a study on accountability and have put together the following statistics: The probability of completing a goal if:
You have an idea or a goal: 10%
You consciously decide you will do it: 25%
You decide when you will do it: 40%
You plan how you will do it: 50%
You commit to someone you will do it: 65%
You have a specific accountability appointment with a person you’ve committed to: 95% So, here you can see that just having a goal is not enough. As we have previously stated, it is important to plan on how you will do it, and when you will be doing it; but the biggest thing that improves the chances of success is committing to someone and being accountable to them. Now that you know this, what are you going to do to achieve your goals? If you have some business and financial goals you want to achieve, and you need help, please do not hesitate to contact us. We have some great accountability programs for business and personal goals.
Have you actually thought about how much it costs you to be unhealthy? Here are some of the costs if you don’t prioritise your health – Lower productivity and energy levels affecting your performance at work or in your business.
– Medical Costs later in life or even earlier in life (as I learned)
– Insurance premiums are higher.
– All that potential unpaid leave and/or missed opportunities
– A shorter lifespan and early mortality (reducing how much you can earn in your life) All of this is easy to say but how easy is it to implement and start becoming healthy. Like getting to financial freedom, it can be hard to know where to start; that is where having a coach to guide you and get you started to becoming and being healthy can be one of the best financial decisions you will ever make. A coach will give you the steps and knowledge to achieve your health goals and change your life for the better. Brad Cunningham of The Fit Shop says that: “You need to begin looking at your health like a bank account. We all understand that if you take too many withdrawals from your account you’re going to go into the red. So you need to continually make deposits. Same with your health, overtime you choose a poor food option, drink alcohol, skip exercise you make withdrawals. And soon enough you will hit the ‘red’ and in this case red meaning: sickness, illness, injury or other health concerns, So moving forward focus on making more deposits daily for your health.” Whilst it may take some time and patience to get to the level that you ideally want, it is worth it. You will feel better, you will look better and most importantly you will have the energy to LIVE LIFE!!
In our daily lives, we are often forced to manage urgent and important tasks simultaneously that usually results to things getting out of control. Many people believe that urgent and important mean the same thing, or to put it more accurately, they don’t know the difference between the two. Knowing the difference between what is urgent versus what is important can help you become more productive, efficient, and organised. So, how do you determine what is urgent and what is important? After you decide which is which, how do you schedule it out? “What is important is seldom urgent, and what is urgent is seldom important.” – Dwight D. Eisenhower There is much to be learned about productivity and time management from the life of Dwight Eisenhower. He can be considered as a master organiser, with his historic roles as a five-star general during the WWII and as the 34th President of the United States. The figure below is the Eisenhower Box, a straightforward decision-making tool that you can use. Urgent tasks demand your immediate action or attention right now and have deadlines. Important tasks tend to bring you closer to your long-term goals, these can also be things that you personally find important (like family and exercise). – Urgent and Important (Quadrant 2) – tasks you will do immediately. Specific examples of activities under this quadrant are emergencies, tasks with meaningful deadlines, tax deadlines, etc. – Important, but not urgent (Quadrant 1) – tasks you will schedule to do later. Examples are saving for the future, daily exercise, planning, rewarding hobbies, car and home maintenance, etc. – Urgent, but not important (Quadrant 4) – tasks you can delegate to someone else. These can be phone calls, most emails (some emails could be urgent and important), recommendation letters, favors from colleagues, etc – the types of activities under this quadrant are more important to others, not you. – Neither urgent nor important (Quadrant 3) – tasks you can do later or eliminate. These are all the time-wasting activities such as browsing social media (Facebook, Twitter, etc), watching your favorite TV shows, surfing the web, gambling, etc. Successful people, even if they have the most demanding jobs, still schedule the “Important but not urgent” tasks into their day like spending time with their family and friends or exercising. Using the Eisenhower Box, you can look at the tasks that you’re neglecting and the tasks that you can eliminate.
I often see and hear people working in their ‘off-time’ regularly. Personally, I think this is one of the worst things you can do. I believe it is important that people remember “you work to live, not live to work”. With technology, people nowadays are always connected and so it can be hard to switch off. But, one of the most important things you can do for yourself, your work, your partner, and your family is to switch off from work. This inability to switch off is even worse for small business owners. So, why is it important to switch off and only work at the right time? It is about having a balanced life and ensuring you focus your energy and attention to one thing at a time. What do I mean by this? It is about putting your phone/tablet/computer away and giving the people who are most important in your life (friends and family) the attention and energy they deserve from you. A perfect example of someone I saw not working at the right time was recently at the park. I was there with my boys (age 7 & 4). I was having a great time chasing them around and playing with them – just enjoying them as they are. And there I saw another father in the park with 2 boys of similar age. Instead of playing with them, he was on the phone with work not paying much attention to his sons. This is a perfect example of when you shouldn’t be working. He should have switched off and gave his full attention and energy to his sons. Here are a few ways where I make sure to switch off so that I am always giving my full attention and I’m always at my best: Create separate space and time for work and the rest of your life. I believe having some physical separation helps create the mental separation needed. This doesn’t mean you shouldn’t work at home. It simply means that if you want to work at home, create a space for it. That way, when you go to that space you are “at” work and when you leave that space, you are not “at” work. Turn off your notifications. You do not immediately need to check that Facebook comment, or that Twitter mention, and even that email straight away. Allocate a specific time to go through these during the day. I personally check my emails only twice a day and deal with them then. I allocate 5 minutes a day to my Twitter and my LinkedIn. TURN THEM OFF, they aren’t that important. Make time in your working day when you switch off. I personally switch off and take a break for 5 minutes, thrice a day. This helps because it allows you to refresh yourself so that you are performing at your best.
There is NEVER enough time! WRONG! Anyone who complains about not having enough time is just making excuses. Each of us has the same amount of time as everyone else. The question is, what are you doing with it? I used to be a person who always felt there was NEVER enough time, but then I realised that what I was doing was procrastinating doing “busy” work, and doing other useless things that didn’t add value to myself, my family, my business, or my clients. After some self-reflection, some study, and perseverance, I now get my work done in the time I allocate. I also spend better quality time with my family and significantly add more value to my clients, my business, and myself. So with the realisation and the belief that I had the same amount of time as everyone else, I worked on managing my time more efficiently. Below are some of the things I have done: Work is for during work hours. So often I see people on the phone with a work ‘thing’ whilst at the park with their kids or some other activity. Come on guys, is it really that urgent to be missing out experience with your kids? Most of the time, it’s not, and can wait until the next day. The same goes with working at home during your family time. It is NOT cool, generally unproductive, and leads to a worse home life. So STOP IT! Uninterrupted time. This is a big one that a lot of professionals don’t do enough of. You should be blocking out interruptions to get things done. Uninterrupted time is best to be done 60-90 minute blocks. If you have 90 minutes to really get into your work and get things done, you’ll need a short break afterwards (5-10 minutes). If you do this, you will find that you can get a lot done in that time. More than you would think. If clients and customers call you during this time you are ‘with someone’. You are with yourself and it is a very important meeting. Checking emails. This can be a huge waste of time. If you’re like me, you might receive more than a hundred, or even 200 emails a day. Not uncommon, as it is an easy way for business to communicate and it works quite effectively. This contributes to time wasted, because people are constantly checking their emails all throughout the day and getting distracted by them. Turn off your notification and close your email program. You DO NOT need to read an email the instant it comes to your inbox. E-mail is mail so treat it like mail. Check it only once or twice a day, there is no need to check it more often than that. So turn off those notifications and that email program, get some real work done, or if you’re at home, enjoy your life with your family and friends. Meetings. The WRONG meetings can be a massive waste of productive time. What is worse about this is that they tend to waste multiple peoples’ productive time simultaneously. Change your business so that you start having the RIGHT meetings and get more productive time back. Phone Calls. Just because your phone rings doesn’t mean you need to answer it then and there. Answering or taking a call when it comes in can be highly disruptive. Most of the time, the phone call can wait. A key thing that I do is to get the person who receives the phone call (receptionist) find out when is the most appropriate time to call that person back – then an appointment is made. This stops phone tag and the disruption of productive time. DO THE RIGHT THINGS. This is the most important because there is no point saving and getting all this time back if you do the wrong things with it. So what are YOU going to do to improve how you use your time?
This article was written by Olivia Long, and appeared on Morningstar. The impact of Australia’s ongoing bushfire crisis is devastating. Not only are Australians losing their homes and entire belongings, but many are also hit by the loss of their business or means to generate an income. They may be in urgent need of cash as a result, and charitable and government support will be limited. In the first instance, people impacted may be entitled to a disaster recovery payment and should contact Centrelink. The disaster recovery allowance is a short-term payment to help anybody if a declared disaster directly affects his or her income. You can access it for a maximum of 13 weeks, and is payable from the date you lose income as a direct result of the bushfires. How does early access work? Whilst the Australian Taxation Office (ATO) does allow for early access to superannuation under compassionate grounds or for those suffering ‘severe financial hardship’, its recommended access to super remains a last resort to those in need. This is due to the nature of superannuation, and its intended use to ‘provide an income upon retirement’. It may also be difficult to put money back into super after it is taken out. Members of SMSFs and large super funds, however, may try to access their superannuation due to severe financial hardship, in addition to the disaster recovery payment. A super withdrawal due to severe financial hardship is paid and taxed as a super lump sum. The minimum amount is $1,000 (unless a super balance is less than $1,000), and the maximum amount is $10,000. Superannuation members can only make one withdrawal because of severe financial hardship in any 12-month period. Another option available to those eligible is to commence a transition to retirement pension, called a TRIS. It allows access to super without having to retire or leave a job. A TRIS permits super members to draw down a maximum of 10% of their super account balance during a financial year, which can be used to fund expenses. In an SMSF, funds are accessible immediately. To be eligible, a member must have reached their preservation age (if another condition of release has not been attained). For those born before 1 July 1960, the preservation age is 55, but the age increases for those born after that date. For more details, see the ATO website. Sympathetic judgement needed Given the magnitude of the devastation caused by the bushfires, the Federal Government should allow early access to super to assist those impacted during these horrific times. If you have been impacted, call our office. We can discuss your situation and contact the trustee of your super fund. > Don’t sell your home when you are a non-resident The law now provides that, if you sell your home in Australia, you will not get any exemption for the capital gain made if you are a non-resident of Australia at the time. An exception is, if you have been a foreign resident for a period of 6 years or less, and certain life events have occurred i.e. your death, or divorce (and equivalent) or terminal illness, or the death or terminal illness of your spouse, or child under 18 years old. Transitional provisions provide an exemption if the dwelling was held before 9 May 2017, and sold on or before 30 June 2020. > Special rule for high-income employees with more than one employer If you are an employee with more than one employer and salary exceeding $263,157, your employers’ contributions will result in you breaching the $25,000 concessional contributions cap. To avoid this, you can now apply to the ATO for an “employer shortfall exemption certificate”. An employer who receives this certificate will not have to pay SG for you. If you apply for this certificate for your employer, we recommend you negotiate to receive additional cash or non-cash remuneration, instead of SG contributions.
To claim a tax deduction for Super, it needs to be physically paid. By paying your June quarter, or month’s Super before the end of the financial year 30th June, you will get a tax deduction for the year. Paying your employees’ Super a month earlier than you need to, can create a significant one-off tax benefit. If you have $20,000 to pay in Super for your employees prior to the 30th June, this can result in a tax saving of up to $9,400. If this is something that you want to do, you will need to ensure that the payment you are making is processed before the 30th June. To ensure this is done in time, it is best to process the payment a week before the end of financial year. Something to note is that, this creates a one-off tax benefit, as you are paying Super that you would usually pay in July earlier, to get the tax deduction.
Tax time can often feel like a hassle, but it’s all worth it when that tax refund lands in your account. So, what’s the best way to spend it? With last year’s average refund being $2,574, it’s no small question.i And if you are one of the lucky ones to receive a refund your options are endless. From paying down debt to investing in your future to blowing it all on a big holiday, the choice of how you spend your refund will depend on your goals and your circumstances. Pay down debt It may not be particularly glamorous, but paying down any debts you have can be a very wise way to spend your tax refund. Especially because you’ll probably save even more on the future interest you won’t end up paying. Australians have a whopping $45 billion in credit card debt.ii Consider clearing any overdue balance, and while you’re at it why not reduce your limit so you’re not as likely to go that far again. You might also consider putting some of your tax refund towards your home loan. Again, a $2,000 reduction in what you owe now could mean a much bigger saving over the lifetime of your loan. Invest in your future Your tax refund could also be a fantastic way to pay for an investment in your future. A good way to start is by putting a little more towards your super. Superannuation is still the most tax effective way of saving for the retirement you dream of, and the interest on the additional contribution now could compound to make a big difference to the overall size of your nest egg. Investing in your future might also mean taking a short course to upskill, or diversify your talents. There are TAFEs and adult education facilities across the country that offer a plethora of short courses from the vocational, to ones that purely play to personal interest. Have a google and see what’s going on in your neighbourhood. If you’re feeling generous, you might even consider directing some of your refund towards the future of a loved one. This might include starting a fund to help your kids towards a house deposit, a first car or their future education. Talk to us about what your options are. Save for a rainy day It’s awful to think about, but you never know what the future holds, so having a little money aside for a rainy day is never a bad idea. It might help with future medical expenses or a loss of income, or even those everyday unexpected expenses such as a broken fridge or car repairs. Getting in the habit of putting a portion of your tax refund towards a rainy-day fund could make a real difference if life takes a turn for the worse. Have a little fun You work hard, and there’s nothing quite like the feeling of having a few extra thousand in the bank. So, you’ll be forgiven if you want to have a little bit of fun. From a weekend away to a retail binge, there are many ways you can blow a tax refund. Our advice to you: be cautious. By all means splurge on some pampering, but make sure you get the mix right by either reducing any unpaid debt or investing in your future. The right mix The truth is you can use your tax refund in a number of ways and none of them are right or wrong. Perhaps the wisest thing to do then is mix it up, spending the bulk of it prudently while saving a little bit just to do something that really makes your heart sing. Source: ME’s Tax Back Survey 2018
i https://www.moneysmart.gov.au/managing-your-money/income-tax/howaustralians-spend-their-tax-refunds ii https://www.abc.net.au/news/2018-07-04/1-in-6-credit-card-usersstruggle-under-mountain-of-debt/9936826