Your Financial Journey

Our financial life cycle can be divided into 3 phases:

Click on the button that relates to you or keep reading for the full story.

Wealth Creation

Wealth creation involves taking steps now, to produce wealth in the future. These strategies can include saving or investing some of your income to buying a major asset, e.g. a home or investment property

Interestingly, wealth creation also includes improving your skills through further education, because it is well documented that college and university graduates have greater earning capacity.

What are your critical wealth creation years?

The wealth creation phase starts when we leave school and continues to retirement. Our critical income earning years are from our late teens/mid twenties until 60/70 when we can retire.

What can you do to create wealth?

If you're a Student

Students are fantastic at living off the “smell of an oily rag” and the idea of saving or investing given that there is limited spare cash seems difficult to comprehend. Particularly if the focus is on the next overseas adventure or buying a car. However, a simple strategy is to “salary sacrifice” a few extra dollars each pay into your superannuation, or a high yield cash management account. It is our experience that most do not miss the few extra dollars and the discipline will produce long terms benefits.

If you have just commenced full time work

Once we start full time work we experience is an urge to spend. To use our new found wealth to have a bit of fun. However, while it is important to enjoy ourselves, most people when they have just started full time work still have the budgeting mind set of a student. This means that if you save some of your income you will not miss it. The best way to do this, is to have it taken out of your pay and put into an investment.

If you have a mortgage

For most of us buying a home and having a mortgage is the first major financial decision we make. A common strategy after 2-5 years is to draw on any equity you may have and use it to invest. This could mean using the equity to buy an investment property or to invest in shares, commodities, private equity, etc.

There is also the Aspire strategy that allows you to invest from your first mortgage payment. Importantly, you do not need to wait until property prices have increased to access your equity.

If you already have investments

Once you have a range of investments the focus will very much be on ensuring that your investments are tax effective and correctly structured. Before you invest, it is important that you seek advice on the best structure, i.e. should the investment be outside of superannuation, and if so, be in your own name, a trust or company structure. If inside superannuation, should you have a Self Managed Superannuation Fund?

Wealth Management

What do we mean by Wealth Management?

There are three components to wealth management:

  • Protecting the wealth we have already created through changing or modifying our investment strategies, e.g. reducing our debt levels
  • Taking out insurance, e.g. Trauma or income protection insurance to cover you for an unexpected life style event, e.g. life threatening disease that without insurance we could be forced to sell our home
  • Planning your estate so that in the event of your untimely passing your wealth is protected and your wishes are carried out

What are your critical wealth management years?

The wealth management phase commences once we have created some wealth, so it goes hand in hand with wealth creation. For some this may be in their twenties, while for most it is once they have acquired a major asset, usually a home.

What can you do to manage wealth?

If you do not have any major assets

Whether you are a student or working, your wealth management strategies should be to ensure that your superannuation is managed by a reputable company. You should at least conduct a six monthly check of the asset mix of the fund, i.e. how much does the fund invest in cash, shares, property and alternative investments. Because you are young investing in growth assets means that you generally have time to recover in the event of a major market correction.

Another step you can take is to check that your fund has life and TPD insurance attached to your superannuation. If it does, you will see that you will need to nominate who the beneficiaries are of the life insurance in the event of your death. This may make you think about your mortality and the need to do a Will (estate planning).

If you have a mortgage

Once you have the financial responsibility of a home loan, then it's important that you take steps to protect your wealth. You should have Home and Contents insurance to cover fire and other events that could destroy or reduce the value of your investment. You need to protect yourself from the situation where your asset value is lost or diminished while your mortgage remains. If you have no insurance you could be paying a mortgage and rent. Obviously not a desirable outcome.

Wealth management strategies also include taking out Income Protection and Trauma Insurance. Both of which will cover you in the event of a major accident or disease. Trauma insurance provides a lump sum payment to cover your mortgage and other expenses, whereas Income Protection provides you with a regular income for a defined time period. For more information, see our Insurance section.

Making extra repayments onto your mortgage is another wealth management strategy as is diversifying your investments. Having all your “eggs in one basket” is not a sound strategy.

If you already have investments

If you already have investments the wealth management strategies include:

  • Asset diversification which will smooth the effects of market downturns, e.g. the property market may be down, while the equity markets may be up, and vice versa
  • Having a percentage of your investments in liquid assets, so that you will always be able to meet unexpected expenses. In order of liquidity the most liquid to least liquid are cash, shares, managed funds, commodities, property, then private investments where there is no or a limited market place
  • Reviewing the tax effectiveness of the strategy and the assets. Negative gearing may have run its course if you are planning for retirement

If you are in pre-retirement years

As we are all living longer it is reasonably common these days for people to leave full time work and work part time until their retirement. Many of us are made redundant and unexpectedly find ourselves in the position where it is not possible to get full time work and the few hours we work each week only pay the bills.

It is therefore important to plan for this possibility and take the appropriate wealth management steps, so that we do not find that we use up our assets, e.g. sell investments to fund our lifestyle. You need to talk to an expert about this.


The last stage is retirement. This stage may be divided into:

  • Retirement planning
  • Transition to retirement
  • Pension
  • Estate Planning

Retirement Planning

In retirement planning it is important to consider:

  • The earlier you start planning to retire, the longer your money will last
  • Whether you should be debt free when you retire
  • Whether you will continue to work on a part-time or casual basis in retirement
  • What type of lifestyle you want in your retirement years and how much this will cost
  • What are your current lifestyle requirements
  • What type of capital expenses you will have in retirement e.g. car
  • What will these capital expenses cost
  • How much you will need for unexpected expenses
  • What is your current superannuation balance
  • How much income (earning rates) is your superannuation fund generating
  • How much you may be contributing to superannuation each year, both concessional (including the compulsory superannuation levy amount) and non-concessional contributions
  • How many years to retirement
  • Can and should you adopt a transition to retirement strategy once you reach the age of 55
  • Your current financial position including assets, income and importantly disposable income and living expenses

In considering these matters most people realise that there are gaps between the type of lifestyle they want in retirement and what they can afford. So the sooner steps are taken to address these gaps the better off you will be.

Therefore, it is important to talk and work with someone you can trust in planning for your retirement. There is no such thing as setting and forgetting your financial plan, it needs to be continually monitored to ensure that it reflects your changing circumstances.

Transition to Retirement

Once you have reached the age of 55, you can draw on your superannuation before you permanently retire. If you do this it is called Transition to Retirement (TTR) and it is a strategy being adopted by those who can because it can be very tax effective. The funds withdrawn may be used to:

  • Ease you into retirement by reducing your working hours without reducing your net income
  • boost your retirement savings without impacting your current net income, if you are still working full time.

This TTR strategy enables you to access your superannuation as regular income through a transition to retirement pension, even though you are still working.

The benefits of a TTR strategy are:

  • It’s tax effective particularly when combined with salary sacrifice while you are still working. This is because any salary sacrifice contributions are taxed at a lower tax rate when they go into your superannuation, you can then direct your work income into your super and replace it with a transition to retirement pension. This pension income generally attracts less tax (and based on Australian Taxation Laws is tax-free after age 60) than income earned through working
  • The income can be used to supplement or even replace your income
  • It generally allows you to work fewer hours and still have the same income assuming your employer agrees, or if you are contracting
  • It is an attractive strategy to Self Managed Superannuation Funds (SMSF) trustees


At this stage all the planning and asset disposal should have been done and it’s just a matter of enacting your plan. The plan should have determined the mix of pension and lump sum payments and the pension type, as these have implications for estate planning.

Retirement Income Streams

There are different types of income streams available in retirement.

Allocated Pensions and Annuities

Annuities and Allocated Pensions provide flexible income in retirement, although there are maximum limits on the amount that can be withdrawn each financial year. This type of income means your money is more accessible compared to other products such as fixed-term pensions. In some scenarios it may be possible to withdraw all or part of your capital as a lump sum at any time. Of course there may be tax implications in withdrawing all your capital.

You will receive income payments until the money runs out. The factors determining how long your income lasts are:

  • how much is withdrawn each year
  • how much the income earning rate on the investment is

Good estate planning will include nominating whether the payments will continue to be paid as a pension or converted to a lump sum and paid to a nominated beneficiary.

Fixed-term Pensions and Annuities

There are different types of fixed-term pensions and annuities. The feature they all have in common is that you will be paid regular income for a set period of time and at the end of the term, e.g. 25 years the payments cease. This type of income stream is inflexible if you want immediate access to your money.

Some of these products are designed to return:

  • all of the original capital invested at the end of the term
  • only part of the original capital invested
  • none of the original capital invested

With the last two options a higher rate of income is usually paid

If you die before the term is completed, you can nominate for payments to continue or for a lump sum to be paid to a nominated beneficiary. If no person has been nominated, a lump sum will be paid to your estate.

Lifetime Pensions and Annuities

Life time pensions and annuities pay a guaranteed income for life. Payments can be increased each year by a fixed percentage or to move in line with the Consumer Price Index (CPI). The benefit of this product type is that it provides security of receiving payments for someone’s lifetime, however this plan is inflexible as money is locked up so you cannot access for investment.

Which income strategy is best?

The answer to this depends on the level of flexibility you wish to have with your financial affairs. If you want:

  • Flexibility, then an allocated income stream may be the best option
  • Security more than flexibility, then a lifetime or life-expectancy income stream may be better
  • Higher returns more flexibility, then a market–linked income stream may be best
  • The best of all worlds, i.e. security, certainty of income for part of your money with flexibility with the balance of your investment, then investing in more than one income stream may be best

Deeming accounts

Many banks, building societies and credit unions offer a special at-call deeming account where the interest rate is based on the social security deeming rate. The rates of interest paid on deeming accounts will usually vary if the deeming rate changes.

Interest rates paid on deeming accounts differ across institutions and they may set different rates depending on the account balance. Interest may be calculated daily and paid monthly, or calculated daily and paid yearly. The greater the frequency of interest payment the better, as the benefits of compounding accrue, although the rate of interest will be lower for more frequent interest payments. You need to declare the interest received, rather than the amount deemed to be received, on your income tax return in the year it is paid. Institutions may charge fees. Features typically available for deeming accounts include:

  • Passbooks
  • Cheque facilities
  • Automatic teller machines (ATMs) access
  • No government charges
  • Interest paid monthly, quarterly, six-monthly or yearly
  • Interest calculated daily or on minimum monthly balance
  • Regular bills paid from your account
  • Regular income credited to your account
  • Taxation on deeming accounts

There may be restrictions on who can have a deeming account.

Estate Planning

This is a difficult subject to discuss, because no healthy person wants to die. The human spirit is strong and life is wonderful. However, as the saying goes there are only 2 certain things in life “death and taxes”.

It is important that you update your Will, but that is only part of the story. To stop arguments between family members and others after you die it is important to discuss your Will with all major beneficiaries. If you explain the reason why you are planning your estate as you do, it can resolve any potential issues before you die. This also has the added benefit that courts are less likely to interfere and amend your Will.

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