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“I want them to not only do what’s legal obviously, but I want them to judge every action by how it would appear on the front page of their local paper.” (Warren Buffett)

That’s master investor and CEO Warren Buffett describing how he wants his 330,000 employees at Berkshire Hathaway to work every day.

Imagining how your own life would look on the printed page can be a helpful exercise when you’re building a Life-Centred Financial Plan. After all, the purpose of a financial plan isn’t just to earn more money. It’s to grow assets that help you live a life that fulfills you and that you’re proud of.

As you think about the story of your life, ask yourself these three questions to reflect on what’s happened so far and to write an inspiring rough draft of the chapters ahead.

1. What goals have I achieved?

A legacy filled with positive stories doesn’t just happen. The happiest and most successful people are often those who live their lives the most intentionally. Rather than waiting around for life to happen to them, they dream big, set goals, and work hard every day to make progress.

If you want to be thought of as a consistently high achiever, start out small. Identify one or two goals you’d like to achieve in six months to a year that build towards bigger overall goals. Then, break down those goals into daily actionable steps.

The great thing about this technique is that you can apply it to just about any aspect of your life. Long-term financial goals might start with a brown bag lunch three days per week and increasing monthly contributions to your retirement accounts. A fitness goal might start with taking a long walk every morning. And creating your own dream company might start with an online class you take to learn a new skill or earn a new certification.

2. How did I learn from the mistakes I made?

No person’s life journey avoids every bump in the road. There were, and perhaps will be, times when you make the easy choice instead of the right choice. You’ll do things that hurt others or embarrass yourself. A big business swing could come up empty. You might lose perspective and place your friends and family behind things that aren’t as important.

Try to accept that these kinds of mistakes are a given. But will you let these errors define your life? Or do you want people to remember how you responded, rebounded, made amends, course corrected, and came out the other side a better, more thoughtful, more caring person? When you’re looking back on your life decades from now, these stories of learning and growth will be far more important than the stumbles along the way.

3. How did I impact others?

Many people don’t start thinking about their legacy planning until they’re retired and nearing the end of their lives. But your legacy is bigger than what you bequeath in your last will and testament. Your legacy is defined by the actions you take and the choices you make every single day.

You may not love everything about your job. But you can choose to show up every morning with a smile on your face and to treat every coworker and customer with kindness. You may not be rich, but the weekend volunteer shifts you put in at your local food bank will make life easier for folks who are in need. You may never achieve perfect work-life balance. But your family will always remember the summers when you coached the kids’ soccer teams or carved out enough free time to take that big family vacation.

Again, authoring these kinds of life stories doesn’t just happen. Living your best life possible with the money you have is a process that combines long-term vision with intentional planning. If you need help writing your next chapter, please get in touch and we can talk about our Life-Centreed Planning process, your life, your goals, and your legacy.

The unexpected events of the past few years, have made financial protection a front of mind matter for most Australians. Now more than ever we appreciate that life does not always go the way we plan. Having a plan in place if things do take an unexpected turn can mean that our health, lifestyle and family are better protected.

If you don’t have any type of personal insurance cover, or you have not reviewed it with your Financial Adviser for a while, now is a good time to do so.

Types of insurance

There are a few different types of insurance that you should consider, based on what matters to you and what you would most like protected if you were to suffer illness, injury, disablement or premature death. It’s best to discuss insurance options with your Financial Adviser as they can tell you what different types of insurance policies are available, what they cover, and how to structure them in your overall financial plan, based on your individual situation and goals.

The types of insurance policies you may discuss are:

• Life insurance
• Total and Permanent Disablement insurance
• Critical illness insurance also called Trauma cover
• Income Protection insurance.
• The benefits of an insurance policy

Family first

You and your loved ones count on your income to enjoy a certain standard of living, which is why insurance is particularly important if you have dependents. It means the people who matter most in your life are protected from financial hardship if your income stopped.

Less stress

Profound unforeseen illness, injury, permanent disability, and death –are not nice to think about but these events happen. If it happened to your family it would probably be an extremely challenging time, wrought with emotional stress, and even grief. With personal insurance in place, the financial stress can be reduced, allowing you to focus on getting well, and rebuilding your life.

Financial security

Illness, injury and disablement do not come cheap. If you needed funds to recover from illness or injury would you have enough disposable income to cover medical bills whilst still paying your household expenses? Could you modify the home if need be? Would you want access to the best medical cover, treatments and rehabilitation options?

Insurance provides financial security so your life can continue with as much normalcy as possible, whilst you seek the best care available.

At a time when everything else seems out of control, it is good to know your financial security isn’t!

The difference a Financial Adviser can make

Data collected by APRA found that in the case of Total & Permanent Disability cover, the “claim declined” rate was around double  for claimants who arranged their cover direct with the insurer than for claimants who went through an adviser. In other words, you have a much greater chance of success with an adviser.[1]

A Financial Adviser looks at your specific circumstances, your lifestyle, goals and appetite to risk. Together you can discuss personal insurance policies, tapping into their expert knowledge and understanding of the requirements of insurance providers. You can also discuss options for holding insurance inside and outside of superannuation and, should you need to make a claim on a policy, your Financial Adviser can liaise with insurance companies and superannuation entities on your behalf as your advocate.

If it’s time to consider personal insurance cover , or you want to review your existing policy, a Financial Adviser is willing and able to assist you.

Note:
[1] APRA: Life insurance Claims and Disputes Statistics, June 2021 (issued 19 October 2021)

It can be difficult to picture yourself without a 9-to-5 job, even if part of that picture involves a beach-house or daily tee times. Where some retirees see carefree days and endless possibilities, you might be staring at a blank calendar worried that you’re going to go crazy without meetings, deadlines, and tasks that fill you with purpose.

Answering these three questions will help you start to fill in those blanks and rethink what your retirement can be.

What does my ideal week look like?

Grab a calendar or a sheet of paper and divide every day of the week into three sections: Morning, Afternoon, and Night. Then, put at least one activity in every box. These don’t have to be bucket list items. Start small. Schedule a post-breakfast walk with your spouse on Monday, Wednesday, and Friday mornings. Reserve some afternoon time for reading. Find out when your retired friends are free and book a weekly dinner or some time on the tennis court.

Eventually, your daily boxes are going to fill up faster than you might expect. Even better, because you’ve put these items on a schedule, you’ll be much more likely to go out and do them. Retirees who spend their days on the couch muttering, “I’ll get to that,” often don’t. The more intentional you are with your time, the more successful your retirement is likely to be.

What have I observed about other retirees?

Although the classic image of retirement is a life of financial security and leisure, many of us have seen a less positive side of retirement as well. If your parents started arguing more once dad retired or if one of your newly retired friends is having money problems, you might worry that your own retirement is going to be less of an extended vacation and more of an endless worry.

Take a piece of paper and divide it in half. On one side, write down all of the things you’ve observed from people whom you consider successful retirees. How do those folks spend their time? Did they stay in the family home or move someplace new? What are their relationships like? What hobbies do they enjoy? How have they strengthened their connections to their communities?

On the other side of the paper, write down the things you’ve observed from less successful retirees. What words would you use to describe their mindsets and emotions? Do they seem intellectually stimulated? Are they in good health? Do they get the support they need from their social networks?

When you’ve finished with your lists, you should have a clearer picture of what kinds of attitudes and habits you want to incorporate into your own retirement and some potential pitfalls to avoid.

What’s really important to me?

Even people who love their jobs rarely love working. They love the way that their jobs allow them to put their top skills to good use, the opportunities for creativity and self-expression, the feeling that they’re contributing to society, and the bonds they build with other people. They also appreciate how their hard work provides a happier and more fulfilling life for them and the people they love the most.

Make a list of all the ways that your career has brought out the best in you and allowed you to put your values in action. Then, add in the people you want to spend your time with in retirement, the places you want to go, the things you want to do. Look over your complete list and you’ll start making some surprising connections that could lead you to some exciting new endeavours: family vacations, volunteer opportunities, talents you want to develop into skills, skills you want to use to create a new company.

Ready to go deeper on these and other important questions? Make an appointment with Cornerstone Wealth today! We’re confident that our planning process will give you a new, more positive, and more empowering perspective on your retirement.

By Dr Shane Oliver (Head of Investment Strategy and Economics and Chief Economist, AMP). Article used with permission.

Key points:

• Ukraine tensions have escalated with Russia ordering troops into Ukraine regions already occupied by Russian separatists.
• Share markets are at high risk of more downside on fear of further escalation and uncertainty about sanctions/gas supply to Europe.
• The history of crisis events shows a short term hit to markets followed by a rebound over 3 to 12 months.
• Given the difficulty in timing market reactions to geopolitical developments the best approach for most investors is to stick to an appropriate long term investment strategy.

Introduction

The last few days have seen a sharp escalation in the situation between Russia and Ukraine, with Russia recognising the independence of two regions in the Donbas area of eastern Ukraine that have been controlled by Russian separatists since 2014 and ordering Russian “peacekeeping” troops into the regions. At this stage its unclear how big the force will be, whether it will push beyond the areas controlled by the separatists and, if so, how far. Although President Putin continues to deny plans to invade Ukraine, his comments suggest a move into the areas of Donetsk and Luhansk in the Donbas that the rebels do not yet control.

As a result share markets have fallen further, with US and global shares falling just below their January lows and Australian shares under pressure too, albeit so far they have held up a bit better. Bond yields have also fallen due to safe haven demand and oil prices have pushed to new post 2014 highs. The market reaction reflects a combination of uncertainty around how far the conflict will go – with Ukraine being Europe’s second biggest country (after Russia), the threat of further sanctions (so far they have been limited) and uncertainty about how severe their economic impact will be. Although it has said it won’t, there is also the risk Russia cuts off its supply of gas to Europe where prices are already very high, with a potential flow on to oil demand at a time when conflict may threaten supply. In short, investors are worried about a stagflationary shock to Europe and, to a lesser degree, the global economy generally.

Possible scenarios

Trying to work out which way this goes is not easy and I am not a geopolitical expert. But it still seems there are four scenarios, some of which may overlap:

1. Russia stands down – this would provide a brief boost for share markets, including Australian shares, (eg +2 to +4%) as markets reverse recent falls that were driven by escalating tensions.
2. Russia moves in to occupy the Donbas areas that are already controlled by Russian separatists with sanctions from the west but not so onerous that Russia cuts of gas to Europe – this could see a further hit to markets (say -2%), although it looks like it may be getting close to priced in. This may be similar to what happened in the 2014 Ukraine crisis (with Crimea) and if that’s all that happens then markets would soon forget about it and move on to other things. Much as occurred in 2014.
3. Russian invasion of all of Ukraine with significant sanctions and Russia stopping gas to Europe but no NATO military involvement – this would cause a stagflationary shock to Europe & to a less degree globally as oil prices rise further and could see a bigger hit to markets (say -10%) but then recovery over six months.
4. Invasion of all of Ukraine with significant sanctions, gas supplies cut & NATO military involvement – this could be a large negative for markets (say -15-20%) as war in Europe, albeit on its edge, fully reverses the “peace dividend” that flowed from the end of the cold war in the 1990s. Markets may then take longer to recover, say 6-12 months.

Given the path Russia has gone down and the stridency of President Putin’s recent comments, Scenario 1 is looking less and less likely, but is still possible if there is a breakthrough in talks. And Scenario 2 looks to be already on the way, with Putin’s ordering of “peacekeeping” troops into the Donbas region. This may be the “military-technical” action that Russia referred to last week. At the other extreme, it’s still hard to see Russia undertaking a full invasion of Ukraine given the huge cost it would incur. And it’s hard to see NATO troops being involved particularly given limited public support for it in Europe and the US. The US has said US forces would not go into Ukraine. However, some combination of scenarios 2 and 3 are possible whereby the crisis escalates further if, say, the Donbas separatists and the Russian “peacekeepers” push into Donbas territory that the separatists do not yet control and beyond.

And, of course, with Russian troops moving into the Donbas region of Ukraine investment markets will worry that we will move on to a wider invasion of Ukraine, until signs appear to the contrary. So, we could still see share markets fall further and oil prices rise further in the short term.

Crisis and share markets

Of course, there is a long history of various crisis events impacting share markets. This includes major events in wars, terrorist attacks, financial crisis, etc. The following table shows major crisis events since World War Two in the first column, the period over which the US share market initially reacts in the second column, the percentage share market fall in the third column and the percentage change from the low over 3, 6 and 12 months in the final three columns.

Based on the Dow Jones Index. Intended as a guide only as other developments also impact shares around the dates shown. Source: Ned Davis Research

The Bill implementing the majority of the super changes proposed in the 2021-22 Federal Budget has passed both houses of Parliament and awaits royal assent.

The Bill contains the following measures from 1 July 2022:

• changes to work test conditions
• extension of non-concessional bring-forward rule for people aged 67 to 74
• reduced eligibility age for downsizer contributions from age 65 to 60
• removal of $450 per month threshold for super guarantee

Remove work test requirement

Currently, a member aged 67 to 74 must satisfy a work test (or qualify for a work test exemption) to make voluntary super contributions (excluding downsizer contributions).

The Government proposed, in the May 2021 Federal Budget, removing the work test (or work test exemption) requirement for non-concessional contributions and salary sacrifice contributions from 1 July 2022.

This means that members no longer need to meet the ‘work test’ to be able to contribute to super in after-tax dollars (and salary sacrifice), up until age 74.

However, from 1 July 2022, the work test (or work test exemption) will still apply to personal tax-deductible contributions where a member is aged 67 to 74.

Extend NCC bring forward rule to clients under age 75

Currently, a member must be under age 67 at the start of a financial year in order to trigger the non-concessional contributions cap bring-forward rule in that year.

From 1 July 2022, the maximum age for the bring-forward rule will increase so that a member can trigger the bring-forward rule in a financial year where they are under age 75 at the start of the year.

This means that up to $330,000 can be contributed to super in after-tax dollars in one financial year and/or over a three year period – up until age 75.

Reduce minimum age to make a downsizer super contribution to 60

From 1 July 2022, the minimum age to make a downsizer contribution (measured at the time of contribution) will reduce from 65 to 60. This will allow some members aged 60 to 64 to potentially contribute $630,000 (or $1.26 million combined in the case of a couple) at one time to super by combining a downsizer contribution with the three year non-concessional contributions bring-forward rule.

Remove SG $450 income threshold

Currently, where an employee earns less than $450 in a calendar month, their employer is not required to pay superannuation guarantee (SG) on those earnings.

For SG quarters commencing 1 July 2022, this minimum SG threshold will be abolished and an employer will be required to pay SG on earnings less than $450 in a calendar month.

Source: Colonial First State, FirstTech Newsflash, 11 February 2022