For the most part, we might assume that our financial needs are too small to warrant professional financial advice. That may be true for various small financial transactions but there are some major life’s and financial milestones where the value of quality financial advice can unlock tremendous financial benefits and insulate you from catastrophe.
That is often the case with someone who is just on the verge of purchasing their first property or one who has just had a substantial mortgage reduction and needs to divert their financial priorities elsewhere. If you have become a high networth individual and your annual income is just approaching or has surpassed the $100,000 (six-figure) threshold, it may also be prudent to hire a professional financial planner that will help you make the most of your money. Another instance when high quality financial advice may count for a lot is when you are just on the verge of retirement and you need a plan on how you can maximize on your retirement savings. Generally, if you find yourself at a moment in your life or career when you are handling substantial amounts of money, you will definitely need professional financial planning advice.
Below is a look at the five key life stages when financial planning will come in handy:-
You are purchasing your first home
For many Aussies, buying that first and probably the only home will be the single largest financial transaction they will ever carry out in their lifetime. The amount of debt that you take during that transaction will have implications that will reverberate for decades as you pay back your mortgage.
Many will rely on the services of mortgage brokers but it is important to remember that brokers are paid based on the amount of debt that you take. They and the banks want to push as much debt as possible and may not be in a position to offer you the most prudent financial advice for your property purchase.
You must therefore give this a serious thought and seek out advice from a professional financial planner who can do a little “stress-test” on your finances and recommend for you the debt burden that you could comfortably carry without going bankrupt.
You are just five years from retirement
How well have you planned for your retirement? Most people begin maximizing their savings earlier on in their careers by planning two or three decades in advance. However, some people wait until it is too late in the day before they begin prioritizing on building their retirement nest egg by making concessional contributions to superannuation.
If you begin at least five years to your retirement, there is still some room for you to make things right by optimizing on your contributions.
Where possible, you can also take advantage of the non-concessional super contributions by leveraging on the three-year bring forward rule. At this age, at the sunset of your career, you will need to make careful and very deliberate financial plans that will secure your retirement future. The objective will be to make the most of what is left of your working life to maximize on the amounts that go into your super. A financial planner can help you structure out both your concessional and non-concessional contributions so as to meet your retirement objectives.
You are earning a six-figure income
Are you finally becoming a super-earner? Is your income crossing the six-figure threshold? Congratulations! You are finally in the tiny company of top-grossing Aussies. However, a high income without a concrete plan might be a curse more than a blessing. You might find yourself financing a high-rolling lifestyle while setting aside too little for your retirement.
If you are grossing that much, it is also prudent to insure your income. A future loss of income may radically alter your lifestyle choices and that is why you may want to hedge your bets by protecting your ability to earn future income. Talk to a financial planner at this stage to advise you on how best to juggle these goals and come out stronger, financially.
You are transferring your wealth to kids and other beneficiaries
Succession issues should be handled with great delicacy given their complexity. This is where you will need the services of a professional wealth planner to guide you steadily all the way. Some retired inheritors usually handle succession issues very early on in their lives while others wait on until very late in the day.
One of the popular options used by many Aussies wishing to pass on wealth to the next generation is testamentary trusts. These are popular because they provide plenty of tax advantages and asset protection for the estate. Parents are increasingly choosing to give their kids a financial boost through their estate while they still alive. These can be in the form of a gift or a loan. If you need help transferring some of your wealth to kids or on succession issues, talk to a professional financial planner to help you manage this transition seamlessly.
A mortgage reduction
Once you have reduced the remaining mortgage value to at least 50% of the home value, you can divert some of the funds that you were using to offset your mortgage quickly to other investment purposes.
Here, there is a plethora of investment choices that you can explore including making additional super contributions in order to maximize on the tax benefits. The funds could come from your mortgage offset account. While withdrawing these will incur some interest costs, the net tax benefit gained from this transaction will be much greater, allowing you to free up more money in the process for investments.
Apart from super contributions, you can also explore other wealth creation vehicles such as share investments and investment properties. To free up your mortgage cash, make alternative investments while still working to reduce the outstanding mortgage, you have to strike the right note in your balance of priorities.