Andrew Zbik, senior financial adviser with Creation Wealth, said budgeting is at the core of establishing an SMSF and the uncertain economic conditions are making the process of budgeting even more difficult for trustees.
“Generally, most people don’t know what the cost of living is at the best of times,” he said.
“Inflation has meant the price of everything has gone up, but when I ask clients they only know that prices have gone up but they couldn’t tell me what it costs to live each month.
“The thing is that for most people their core living expenses really don’t change too much. Whether you’re currently raising two or three children in your home, once your children move out the fixed costs of running a house are roughly the same irrespective if there are five people living in that home or two people living in that home.
“The discretionary spend, however, can change over time. Obviously, if you’re not working you have a lot more time to do other things. Do your hobbies or interests cost money? Or are your hobbies and interests relatively cost-free?”
Mr Zbik, who has developed an education course for trustees looking at starting an SMSF, said budgeting correctly is key in establishing a successful SMSF.
“You must know what your core living expenses are, and your discretionary spending, to understand what you must do to have the flexibility you need in retirement,” he said.
“The best thing to do is to start with how much capital you have and work backwards from there.”
Mr Zbik said people about to retire have only had around half of their working life with compulsory superannuation contributions, meaning understanding investment opportunities and estate planning can be a challenge.
The MyProsperity wealth education course designed by Mr Zbik provides a hands-on, two-pronged approach for both clients and advisers in the intricacies of setting up and operating an SMSF.
The course is designed to help both financial planners as well as people choosing to run their own wealth plans using a workbook.
“I sensed after the Banking Royal Commission that people were hesitant to seek help from an adviser because they feared that adviser would pull the wool over their eyes,” he said.
“Many people know the bare basics of SMSF but they soon realise it is very complex and they do need help.”
For more information about the MyProsperity education modules from Creation Wealth, go to https://creationwealth.com.au/portal/.
