It’s officially 2021! After the year that’s been, we’re sure that many of you are looking forward to a new year filled with endless possibilities. The beginning of 2021 may have got you thinking about your goals for the year ahead, especially when it comes to improving your financial world. You might even be set on finding a way to turn your New Year’s resolutions into your future reality.
But let’s face it, you’ve been here before. You start the year with the best of financial intentions, whether that includes getting your financial world sorted, taking the plunge and investing or finally saving enough to put a deposit on a house. But somehow, life always seems to get in the way of your well-meaning goal.
So, how exactly can you make sure that 2021 is different?
The answer is simple: partnering your goals with a comprehensive financial plan that considers every part of your financial world before clearly laying out how to achieve your goals. Having a financial plan and expert advice at the tips of your fingers means that you’ll never have to worry about whether a financial decision is a right move for you. Think of it as having a personal guide to helping you achieve this year’s New Year’s resolution and that of every year afterwards.
Here’s just a few areas where having a financial plan to guide you can help you improve:
Grow Your Wealth
When it comes to the New Year’s resolutions, most people will likely have some kind of savings related goal at the top of the priority list. Whether it’s something simple like putting more into your savings account or something more complicated like considering investing, everybody wants to do more with their money. Even with the best intentions, this goal becomes more and more unachievable as the year progresses.
With so many unexpected costs that may come up during the year, who can blame you for dipping into the savings occasionally account, right?
In reality, going over budget here or cutting into the savings fund there is doing your well-intentioned financial goals more damage than you may think. You created your savings account for a specific reason; the only way to achieve that savings goal is to help your savings account do its job and keep growing.
There are a few ways you can do this.
The first is by sitting down to define clear financial goals that you can work towards. Having these goals in mind will help guide you when the temptation to dip into the savings fund strikes. You could also consider setting up forced savings account if you find attraction getting the better of you more often than not. Or, if you’re ready to take your savings goals one step further, you could also consider investing. Investments form an essential part of growing your wealth and vital in achieving your dream financial future.
With interest rates at an all-time low in Australia, it may be time to speak to an investment advisor about whether any savings you have currently sitting in cash could be put to better use.
Consider Rent Vs. Home Ownership
Housing plays a surprisingly large part in your financial world. Considering this, it makes sense just how much of your time and energy you may spend thinking about your current housing situation. Whether you’re currently renting or paying off a home loan, there’s likely something you wish you could improve upon in 2021.
For renters, 2021 provides the perfect opportunity to reflect on whether you’d like to continue down the rental path in the future. If you, like many everyday families, daydream of owning your own home, this may be the time to weigh up the cost of renting versus the repayments on a home loan. You could also consider whether a home loan is a right move for you after viewing your current financial circumstances.
In 2020, the RBA slashed interest rates in Australia to record lows, which was passed on to consumers in the form of mortgages with super-low interest rates. This resulted in many being able to leap from renting to purchasing a home finally. 2021 may be the year that you decide to do the same.
For homeowners, 2021 should be all about making sure you’re making the most of your home loan. We know what you may be thinking: debt is debt.
But there are several ways you could structure your home loan debt to take advantage of different strategies, such as debt recycling, to ensure you’re paying off your loan while using every spare cent to grow your wealth at the same time.
You could also approach your bank or financial advisor about restructuring your current home loan to take advantage of the RBA’s interest rate cuts, potentially freeing up cash to put towards achieving your other financial goals.
Make 2021 the time you turn your bad debt into good debt, which works hard to help you achieve your financial goals.
Cut Down On Expenses
Whether it’s that pricey gym membership you didn’t have the opportunity to use or a surplus of Netflix accounts within your household, 2021 provides an excellent opportunity to gain a comprehensive overview of every single one of your expenses. Still paying for a magazine subscription, you stopped reading months ago?
Or you are splashing out on multiple music streaming apps when you only use one of them? By sitting down to work out precisely what expenses your hard-earned money is going towards, you’ll be much more able to take action to stop those hidden costs that had previously escaped your attention.
After gaining a comprehensive picture of your expenses and financial world, it’s time to take it one step further and decide what you can realistically afford to cut down on to help you grow your wealth in the year ahead. Not sure where to start?
A financial plan can help by serving as a roadmap designed just for you that lays out a practical way to achieve your short, medium and long-term financial goals. That means that you’ll have a practical guide to help you make every decision with confidence when it comes to your expenses.
Sort Your Super
We know what you’re thinking: superannuation isn’t something that one usually makes a New Year’s resolution about.
But it is one of the most important investments that you may make in your life, which 2020 may have highlighted for those of you who may have depended on their super balance to help them through difficult times and is often neglected in the busy pace of life. Not exactly sure on your super account’s specifics or just want to know whether you could do more? Make 2021 the year you get your super sorted.
Some of the common mistakes many everyday families make when it comes to their super include:
- Having multiple super accounts, they may be unaware of
- Leaving their super in an underperforming fund due to lack of attention
- Staying with a fund that charges high fees
- Not ensuring their insurances reflect their current reality
Luckily, all of these mistakes can be easily solved with a little bit of love and attention. Carefully going over your current super fees and performance before comparing them to other funds will allow you to see whether your super is doing well or if it may be time to consider transferring to another fund.
Or, if you want to make sure your super is optimised for your particular financial situation but don’t have the time yourself, 2021 is the perfect time to seek help from a professional, super advisor.
Whatever your goal, just remember to make sure that you take action to ensure you’re making the most of this essential investment.
Get Practical About Retirement
For many, retirement remains a bit of an abstract concept that you’ll get to eventually. Whether your retirement looks like jet-setting to a new exotic location every month or just an escape from the daily grind to spend more time with the people and things you love, retirement isn’t called the golden years for nothing.
But the truth is, retirement requires careful planning and structuring to ensure you’re able to turn your dreams into your future reality.
Maybe you’ve been putting away a sum of money for your retirement without really knowing if it will be enough to support the lifestyle you want in retirement. Or maybe you’re convinced that the income from your super will be enough to help you for your entire retirement. But with expenses on the rise and people living longer than ever, you find yourself worrying whether you’re doing enough.
Working out how to achieve your dream retirement can feel overwhelming without the proper support and guidance to support you. That’s why the start of a new year provides a fantastic opportunity to seek help to set out a retirement plan.
With a retirement plan in place, you’ll be able to see exactly what steps you’ll need to take to get from where you are now to where you want to go.
To put it simply: having a retirement plan designed just for you means you’ll never have to worry about whether you’re doing enough again. And that sounds like the perfect New Year’s resolution to us.
Secure Your Financial Future
For many, 2020 was a year that disrupted many a financial plan and, for some, threw their financial futures into chaos.
As a result, it also highlighted how important securing your financial future is to you and your loved ones’ physical and mental well-being.
What would happen if either you or your partner unexpectedly lost an income? Or what about if any of your loved ones were hurt or needed care? What exactly would that mean when it came to the peace of mind and security of your family?
If you find yourself worrying about any of these things, 2021 may be the year to ensure that you and your family are covered for whatever life may throw at you. That’s where personal insurance comes in, protecting you and your family’s financial future in case the worst happens.
There is a range of personal insurance options available to suit your unique financial circumstances, so you can rest easy knowing that you and your family will be covered at every stage of your life journey.
With a personal insurance strategy in place, you’ll be able to welcome 2021 with the peace of mind of knowing you and your family are prepared to tackle whatever life has in store.
Turn Ideas Into Action
When it comes to New Year’s resolutions, it’s easy to get caught up in the excitement of setting a goal without thinking through exactly how you’ll be able to achieve it. But while creating goals is essential, purposes alone can only take you so far without a practical financial plan that sets out exactly how you can achieve them.
The best way to ensure you’re on track to turn your financial goals into your future reality is to combine your comprehensive financial plan with professional guidance. With a team of expert financial advisors at your fingertips, you’ll always be on track to achieve your 2021 resolutions and those of every year afterwards.
And do you want to know the best part?
Redundancy: Your Comprehensive Financial Guide
Being made redundant or fearing you may be short can be an extremely stress-inducing time.
With the loss or impending loss of your job, you may suddenly be faced with fears about how your redundancy will impact your financial world, anxiety about the process of finding a new job or perhaps even confusion about whether or not to continue working.
According to HR Advance, redundancy is defined as the termination of employment and is a form of dismissal by an employer. It has implications that the termination of the employee’s work is involuntary on the employee’s behalf. However, rather than being a fault-based dismissal like being let go, redundancy is usually caused by external factors such as economic conditions, business efficiency or technological development.
In other words, there may be several reasons why you may be currently facing redundancy – many of which are entirely out of your control.
Even so, we at Klear Pictures understand how personal and hurtful being made redundant can feel. And as you begin to think more about the impact your redundancy will have on your financial wellbeing, it can be easy to feel overwhelmed.
That’s why we just wanted to remind you: take a deep breath, then another, and then keep reading.
You don’t have to tackle this challenge alone.
We’re here to help you take back control of your financial world and get back on track.
That’s why we decided to create this guide on what to do if you’ve recently been made redundant or expect redundancy shortly. This guide, filled with advice from our team of award-winning financial advisors, covers the following topics:
- What happens when you’re made redundant
- How your redundancy payment is calculated
- The tax implications of redundancy
- An 8 step action plan for tackling redundancy
Facing a redundancy doesn’t have to mean saying goodbye to your plans for achieving financial success and security. This guide is the perfect place to start getting back on track to achieving the financial future you deserve.
Or, if you’d like advice surrounding redundancy and ongoing financial support tailored to your particular financial circumstances, our team of expert financial advisors is here to help.
What happens when I’m made redundant?
A legal redundancy, which is sometimes referred to as a “genuine” redundancy, can only occur if your employer no longer requires any person to perform the specific role you currently perform. We mentioned it before, but this can happen for several reasons, such as a shift in business direction, external economic factors and even the company’s insolvency, and usually isn’t personal. Essentially, since the role you perform is no longer needed, you, by extension, are no longer necessary as well within the company.
Redundancies can also occur if your employer has decided to divide and redistribute your role’s responsibilities to others within the workplace.
What is most important to keep in mind is that redundancy has nothing to do with your performance and so shouldn’t feel like a reflection on your ability to do your job well.
If you feel that you’ve been unfairly let go under the guise of a redundancy – which may be the case if the role you previously performed is still in existence at your workplace – further information is available on what options are available to you on the Fair Work website.
Okay, now that we’ve covered why redundancy may occur, let’s take a look at what your employer is obligated to offer you as part of your redundancy.
Under the National Employment Standards (NES), your employer must make the following minimum payments if you are made redundant:
- For any unused annual leave remaining to you
- For the notice given period, which can range from 1 to 5 weeks, pay to depend on your age and length of service.
- The redundancy itself can be up to 16 weeks’ worth of pay, depending on how long you previously worked in your role.
However, it should be noted that depending on your type of employment or how long you had been working for your employer; you may not be eligible for redundancy pay.
Those who aren’t able to claim redundancy pay include:
- Employees whose period of continuous service with their current employer was for less than 12 months
- Employees who were only employed on a contract for a stated period identified task or project or a particular season.
- Casual employees
- Employees terminated because of serious misconduct.
- Trainees employed only for the length of their training agreement
- Employees terminated because of ordinary and customary turnover of labour
How is my redundancy payment calculated?
If you’ve experienced a genuine redundancy and are eligible, you may receive several payments from your employer.
While there are many parts of an overall redundancy-related payout, the payments are usually broken down into:
- A ‘genuine redundancy’ payment is tax-free up to a point determined by the amount of time you worked for your employer. This will appear as a lump sum on your income statement or PAYG payment summary at the end of your employment
- An employment termination payment, or ETP, which is concessionally taxed for the amount it goes above your tax-free limit
- Any remaining payments offered by your employer, which will be taxed at your usual marginal tax rate for any amount exceeding your tax-free cap.
The tax-free portion of your redundancy payment will only be accessible to those aged below preservation age. If you are aged 65 or over, you are not eligible for a ‘genuine redundancy payment, and your entire payout will be treated as an ETP and taxed concessionally as a result.
If you’d like to know more about what your redundancy pay-out may look like, Fair Work currently offers a redundancy calculator that may assist you.
Alternatively, our expert team of financial advisors specialises in helping those experiencing redundancy calculate how much their payment is likely to be and how they can utilise it to pave the way to a brighter financial future.
Just like many aspects of your financial world, your redundancy payment is also subject to several tax rules that may make calculating your amount more complicated than it may first appear.
To start with, while your ‘genuine redundancy’ payment is tax-free up to a certain point, after this point, your payment will then become taxed according to two elements: a base amount and an annual amount for each year of service.
These two elements are indexed annually and thus are constantly changing. For the year 2019-2020, the base amount is $10,638, and the annual service amount is $5,320. That means that if you were made redundant after ten years of service, your tax-free limit for the year ending on the 30th of June 2020 is $63 838 (or $10,638 + [5,320 x 10]).
Any amount left over after reaching this tax-free threshold will be counted as part of your ETP and taxed at your usual marginal rate. Similarly, any unused annual leave and long-service leave paid to you on being made redundant will be taxed concessionally, up to 32%.
And for any of you that may be thinking about funnelling your ETP into your super fund to avoid these tax implications, unfortunately, your ETP must only be taken as a lump sum and cannot be rolled into super. However, you can make a post-tax or non-concessional contribution to super with all or part of your ETP. Just remember to seek a financial professional’s advice to understand your superannuation contribution cap limit and how making these contributions may affect your overall superannuation strategy.