New Year’s resolutions are easy to make and even easier to break. One of the most common reasons we break our resolutions is that we set unrealistic goals that often cannot be achieved. The same rings true for New Year’s financial resolutions. That being said, it is also an opportunity to refresh and look ahead with a healthy mindset. By addressing these key areas, you can start the year off on the right foot and get your financial affairs in order from the very beginning.
All too often we commence the New Year without having a plan in place, which can lead to cashflow problems. To save yourself and your business from a tight spot, a budget is a must have. Being realistic and understanding the drivers of your business are the foundations for setting an accurate and achievable financial plan. Once you’ve looked ahead, it’s also important to look backwards and regularly review your actual results and take corrective action if necessary.
Remember “A failure to plan is a plan to fail”.
The mortgage and loan landscape is constantly changing, with lenders regularly releasing new products with improved interest rates. Routinely reviewing your loan against what is available in the marketplace will ensure that you find the best price available, save interest and pay down debt faster. Far too often this simple change is overlooked due to lack of time while a broker may be able to do the hard work for you.
We recommend getting your loans reviewed every 3 years to ensure you are still on the best deal possible.
Protecting your wealth is just as important as creating it. Many of us are so busy trying to achieve our goals that we forget to think about asset protection. Reviewing your personal circumstances at the start of each year is essential. This includes reviewing and updating your Will (if necessary) as well as ensuring power of attorneys are up to date. Similarly, risk insurance coverage should be evaluated when the yearly renewal invoice is issued, to ensure sufficient coverage for life, income protection and other risk insurances.
We don’t want to leave our family to pick up the pieces if something were to go wrong.
Reviewing general and business insurance policies and premiums is also important to ensure adequate cover and cost.
In 2019 more expensive premiums, higher excesses and narrower coverage are set to become an insurance reality for many Australian businesses, so we decided to speak to an expert in the field, Mark Vanzo, Managing Director of Smart Business Insurance (www.smartbusinessinsurance.com.au).
Why are we now in a HARD insurance market?
A hard market can occur when insurers experience large losses in their portfolios, or when there is a decreased availability of insurance capital.
With insurers focussed on trying to recoup losses and decreased availability can come higher premiums, lower policy limits, larger excesses, wider exclusions, narrower policy coverage and less competition between insurers.
Which business insurance markets are hardening?
Certain parts of the Australian insurance market are showing signs of hardening already, in that, we’re seeing insurers not supporting certain kinds of risks such high risk trades, and high-risk property.
The high-risk property risks are where they have a lot of issues around the building – buildings that are unoccupied, poorly maintained or generally in a distressed condition, or contain highly flammable contents.
Professions and businesses with a history of losses are also likely to find it harder to secure the kind of coverage they’re seeking, or will be forced to pay a premium for their cover.
How do you prepare a business for a HARD market?
There are two main ways in which you can ready your business for a hard market.
The first is by factoring in increased costs. If you’re aware of the cyclical nature of the insurance market, you have probably been taking advantage of its current state and may have prepared by saving for the inevitable: more expensive premiums, higher excesses, lower policy limits or narrower coverage.
If not, start factoring in these costs now; as the cost increase may be significant, and businesses must budget higher costs if they want to maintain their level of coverage.
The second way is by having a relationship with a good insurance broker; no matter what stage of the cycle the market is at, a good broker will understand it and your business. Having good long-term relationships with insurers will allow you to secure suitable cover for your individual circumstances, as well as being able to advise on likely future changes to insurance term.
A good broker is also invaluable in a hard market when policy wordings are narrower, limits are lower, and excesses are bigger. Brokers can also be your advocate should a claim be rejected.
In a hard market, insurers a focussed on making THEIR business profitable, so from the small business owner perspective, it can feel like you are beating your head up against a wall with their stringent standards and increased premiums.
Having an insurance broker that understands the changes and is prepared to seek out a suitable result for your business, can remove the burden from your own shoulders. A good broker may not always tell you what you want to hear; but they will explain things in a way that you can understand and will utilise their know-how and contacts to represent your interest’s vs the insurers.
It’s easy to set resolutions and goals for the year ahead, but it is another thing to actually follow through with them. In regard to financial resolutions, we often see this lack of application is due to either a shortage of knowledge in how to go about achieving the goal, or the misunderstanding of its importance to the business and the welfare of the family members behind the business.