Financially intelligence means understanding finance and accounting principles so that you can improve your financial position through earning more, leveraging your assets, protecting your assets, and using financial information effectively to budget and adapt your financial strategy as appropriate.
Goals and Aspirations
Your financial goals are about your priorities – what are you hoping to achieve? Your goals may be simple or complex and are likely to evolve through your lifetime. Depending on whether you are starting out, scaling up or securing your financial future, may impact decisions such as what asset types are most appropriate for you to invest in. You may also want to consider your risk profile, the amount of time you have to earn or save, the impacts and opportunities of borrowing and negative gearing.
Understanding your current position and creating measured plans for the future is vital to achieving your financial goals. A budget will help you assess how you are travelling, and with the latest technology, the numbers can be instantly available at your convenience for review and monitoring.
Assets may be owned individually by one person, joint tenants or tenants in common or in a structure such as a trust or in a superannuation fund. Assets may include Cash & Term deposits, Bonds, Property or Shares. Each asset type has its own benefits and drawbacks… and it’s own tax treatments.
Every investor has their own risk profile, and this is often influenced by your stage of life and your income to expenditure ratio. Whether you’re risk-averse; or want a balanced; or high-growth strategy will influence both the types of assets you choose to hold and your longterm financial strategy.
Borrowing and Negative Gearing
An income-producing asset is negatively geared when your return is less than interest repayments or other ongoing expenses. The losses you make on this asset reduces your taxable income and therefore how much tax is owed. Many investors choose a negative gearing strategy to offset income, while holding assets they expect to increase in value over time.
An important part of managing your finances is protecting your existing assets. Asset protection involves employing legal strategies to prevent your assets from being seized or claimed if you are sued. Asset protection plans often involve separating business risk from your personal wealth through strategies such as implementation of discretionary trusts, spousal ownership and business restructuring.
An Estate Plan provides a holistic view of your assets, how your assets will be preserved, managed and distributed after death or in the event of incapacitation, and who has the power to make decisions on your behalf. Your Estate Plan is an integral part of your financial strategy and it is wise to seek professional advice from your Accountant at Enspira as well as your Lawyer. Read more.