6 ways the world has changed in 4 short yearsr
I recently read an article in the Australian Financial Review suggesting, among other things, that most of us will have to work until we’re 70. The article also noted that some 13% of workers aged over 45 never intend to retire. It made me think about just how much has changed in the last few years – and why it is so important to keep reviewing business and financial strategies in light of an ever changing world.
6 ways the world has changed:
- Widespread growth has become patchy – two speed (at least)
- Asset values have decreased – the All Ordinaries has lost 33%
- Interest rates have decreased – good for borrowers but not investors
- Exchange rates have increased – favouring importers but hurting exporters
- Regulation has increased – intensifying the burden on small business
- Business valuations have decreased – boom time valuations of up to 5 x EBIT are back to earth at 3.5 x EBIT (social media sites and mega brand Apple aside)
Business owners and entrepreneurs face new realities:
- Many nations face an aging population with baby boomers retiring and changing their spending patterns
- From a political perspective, a number of governments are operating without clear majorities which is hampering policy efforts
- Environmental policy remains a challenge as Australia legislates its carbon tax and other nations attempt to introduce similar disincentives to pollute
- Consumers have responded to calls to increase their savings and repay debt, with the natural consequence of diminishing global retail spending
- In Australia, long-term under investment in infrastructure has led to productivity bottlenecks and increased the costs of basics like electricity and gas
- Poor business confidence is leading to higher unemployment
Survival strategies for an uncertain world:
Despite tough conditions, we know that markets are cyclical and better times will return. But what can we do in the meantime? While the right move will depend on your personal situation, there are things you can do to shore up your position:- Reduce debt and increase saving – particularly reduce non deductible debt
- Extend your working life – Equal opportunity now provides that you can’t dismiss an employee because of age, so talk to your employer about what’s right for you
- If you’re self employed or a business owner, plan a longer exit strategy or delay retirement
- Continue life insurance policies longer than originally planned
- Review your lifestyle assets – can their cost be justified in light of other expenditure commitments?
- Reduce your lifestyle costs – clean the car yourself, enjoy less meals out
- Reassess the value of your business – and its resultant impact on your retirement plans (talk to us – we’ve instituted a number of very successful transition models for our clients in recent years)
- Review your investment asset mix – are you over weighted in shares, property or cash, has your appetite for risk changed due to market changes or life stage?
- Reassess eligibility for government assistance – and plan for it over at least a 5 year time frame
- Spend your capital – when you die there will be less or no money left for the next generation!
Posted by Doug Mitchell
