A summary of cash received and disbursed showing the beginning and ending amounts.
Individually tailored budget plan based on what can be realistically afforded on a weekly/fortnightly/monthly or annual basis.
A plan to support incoming and outgoing income and expenses so that they can be managed and to achieve a particular goal like saving or paying off debt.
*Note: These three terms cash flow, debt management and budgeting can often be interchanged depending on the conversation.
Involves managing your assets in such a way to ensure that the value of your assets does not decrease or erode. With wealth preservation objectives, the notion of maintaining existing wealth is more important than making more money. Many issues come into play with wealth preservation such as inflation, life insurance, retirement planning, long-term care, proper asset allocation and protection against capital market risk. Wealth preservation also involves estate planning strategies that help mitigate the effects of taxes, exit and succession strategies from businesses and tax-advantaged investments that are intended to maximize income while minimising tax burdens.
*The term wealth protection may also be used when talking about insurance.
A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.
Protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.
Could you support your family if you were injured and needed to take several months off work? Income protection insurance, also known as salary continuance, can help you manage your expenses if you are unable to work for a certain amount of time.
Trauma insurance will compensate you financially with the payment of a lump sum amount of money should you suffer what the life insurance company defines as being a traumatic occurrence. There are many events that you can be covered against and this varies between companies, but all companies agree on cover for incidents such as cancer, heart attack and stroke, as the three basic illnesses they compensate for.
Total & Permanent Disability Cover
Total and permanent disability (TPD) insurance provides cover if you are totally and permanently disabled. Your insurer will define TPD as either when you: You can’t work again in any occupation, or You can’t work in your usual occupation.
TPD insurance helps cover the costs of rehabilitation, debt repayments and the future cost of living.
Essentially, wealth is the accumulation of assets. People are said to be wealthy when they are able to accumulate many valuable resources or goods. Wealth is expressed in a variety of ways. For individuals, net worth is the most common expression of wealth.
*This term may also be used to encapsulate investing, shares, managed funds, property etc.
The act of committing money or capital to an endeavour (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit.
Investing is the key to building wealth, but just investing is not enough. You have to invest wisely!
A unit of ownership interest in a corporation or financial asset. While owning shares in a business does not mean that the shareholder has direct control over the business’s day-to-day operations, being a shareholder does entitle the possessor to an equal distribution in any profits, if any are declared in the form of dividends. The two main types of shares are common shares and preferred shares.
A managed fund is a professionally managed investment portfolio that individual investors can buy into, purchasing ‘units’ rather than shares. Each managed fund has a specific investment objective. This is usually based around the different asset classes (cash, fixed interest, property and shares). The money you invest is used to buy assets in line with this investment objective.
When you invest in a managed fund, you are allocated a number of ‘units’. The value of your units is calculated on a daily basis and changes as the market value of the assets in the fund rises and falls.
A real estate property that has been purchased with the intention of earning a return on the investment (purchase), either through rent (income), the future resale of the property, or both. An investment property can be a long-term endeavour, such as an apartment building, or an intended short-term investment in the case of flipping (where a property is bought, remodelled or renovated, and sold at a profit).
Superannuation or ‘super’ is saving money for when you retire. Although that might seem like a long way off, remember that it’s your money.
Money is put into a super fund by your employer. You can also make voluntary contributions from your pay or savings to increase your super. Your money is invested by your super fund to make it grow over time.
Self-Managed Superannuation Fund/SMSF
Self-Managed Superannuation Fund (SMSF), is a superannuation fund that is regulated by the Australian Taxation Office (ATO) and all members of the fund (maximum of 4) are the trustees of the fund. In such cases regulatory provisions state, that a member of a SMSF cannot be the trustee of the fund, and needs to be represented by some other trustee of the fund.
LRBA/Limited Recourse Borrowing
A self-managed super fund (SMSF) is able to borrow money under an arrangement to purchase a single asset, or a collection of identical assets. The acquirable asset is held on trust so that the SMSF trustee acquires a beneficial interest in the asset and has a right to acquire legal ownership of the asset by making one or more payments. Any recourse that the lender or any other party has under the LRBA against the SMSF trustee is limited to the single fund asset, including rights to income.
The process of determining retirement income goals and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating expenses, implementing a savings program and managing assets. Future cash flows are estimated to determine if the retirement income goal will be achieved.
The systematic and comprehensive recording of financial transactions pertaining to a business or individual. Accounting also refers to the process of summarising, analysing and reporting these transactions. The financial statements that summarise a large company’s operations, financial position and cash flows over a particular period are a concise summary of hundreds of thousands of financial transactions it may have entered into over this period. Accounting is one of the key functions for almost any business; it may be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at larger companies.
The collection of preparation tasks that serve to manage an individual’s asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.
Someone who makes funds available to another with the expectation that the funds will be repaid, plus any interest and/or fees. A lender can be an individual, or a public or private group. Lenders may provide funds for a variety of reasons, such as a mortgage, automobile loan or small business loan.