You don’t need money to start investing

Kane Leersen is an authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

I regularly hear people stating that they do not have enough money to start investing. Anyone can start investing, right at this second. You don’t even need money to start investing. Sounds silly, doesn’t it? You might not believe me, but this is fact. Investing in yourself, your family and your future.

Now before you start shaking your head and muttering that I have lost my marbles, bear with me and I will tell you how you can do this with three different ways, anyone can start investing, and by anyone, I mean anyone. Teenagers, parents, millionaires, grandmas and granddads.  So no excuses because this applies to you. I will give you the strategies, but then it’s up to you to take responsibility.

 

1. Start investing in yourself. 

Now, this is the easiest and the hardest investment to make, it’s also the most rewarding and by far the most valuable. You can start nice and simple and slowly progress it from there. Your first investment in yourself is to finish reading this article. Open up your mind to different ideas and strategies. Go onto bookdepositry.com, amazon.com, dymocks.com.au, or pop into your local book store and purchase any book that piques your interest. Read what ever your heart desires. Personal development, sci-fi, autobiographies, finance, marketing. It doesn’t matter what it is, just read as much as you can. Learn from other peoples experiences, highlight words you don’t understand, write questions on the side of the page.

The next step, when you are feeling ready, enrol in that course you always wanted to do. Make sure, no matter how long it takes you, finish that course. Then maybe find another course, never stop learning. Find yourself a mentor, someone doing something you have always wanted to do and ask them how they have done it, why they do it and what have they learnt from these experiences. Turn up to work early and tell your boss that you want to be the best employee that you can be.

All of these little investments eventually add up and they make you the rare and valuable asset. Remember, every day we are going to work we are trading our time for money. By being the best that you can be, you will make your time as expensive as possible.

 

2. Invest a few dollars, regularly

Now that you have started investing in yourself you can start to invest some money for your future. Maybe you have received a payrise, or picked up a few extra shifts.

Now the next step.

To start investing money you do not need hundreds of thousands of dollars, you don’t even need thousands of dollars. Many of my clients start investing in the hundreds, the trick is to do it regularly, don’t try and be too clever and most of all ask for advice if you are not quite sure.

I have recently purchased the 300 biggest companies in Australia, 300 of the biggest and brightest companies built by some of the best brains in Australia. The best part is, these companies are going to pay me to invest in them! Imagine, this investment returns around 10% for shareholders over the next five years. If I contribute $200 a week this means I will be investing $10,400 a year. On a 10% rate of return, I could have $69,842 invested in five years time. Not a bad investment, when we consider the early years of compounding returns are the hardest!


3. Invest in your superannuation

In Australia it is compulsory for businesses to pay 9.5% of your wage into a superannuation account for your working life. The reality is many Australians don’t understand the impact of what our employers are doing for us. Many people haven’t consolidated multiple superannuation funds into one account. They don’t ensure that they have appropriate levels of insurance to protect their family if something goes wrong. They have no idea that they can invest in just about anything they want inside of their superannuation, no different to everyday life.

Yes, inside super we can buy shares, we can buy property, we can have term deposits. We don’t have to rely on the default option. You can even put more money into superannuation to help it grow by salary sacrificing from your wage before you have paid tax. You can also contribute your inheritance after you have paid tax.

So my challenge to you is to step up, and take charge. I don’t want any excuses. We all know life can be hard sometimes, but we also must be thankful that we are living through a period of time that has generously provided us with an abundance of wealth. Think of running water, electricity, employment, aviation and globalisation for example.

So please master these three investments. Invest in yourself, start investing a little a lot and understand what your superannuation is doing. It is simple and incredibly effective. Fortunately or unfortunately, it requires discipline, commitment and understanding.

Good luck.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.  Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. 

Who is Financial Planning For?

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

 

Financial Planning really is for everyone. It’s a misnomer that you have to have a lot of money to see a financial planner. Your financial advisor will tailor your advice and strategies to your specific life stage and current situation. As you progress through different life stages your advisor will work with you to evolve your financial plan to suit your needs.

We can review your current situation and put strategies in place around your superannuation, personal insurances, investments, debt management, retirement planning and estate planning.

It does not matter what life stage you are in, we will tailor your plan to help you achieve your goals. At Income Solutions we believe the best place to start is education and we hold free, no obligation information sessions monthly that cover all life stages:

  • Kickstart! Your Financial Future
    • Have you recently started your first full-time job? Or perhaps you’re a uni student and need some guidance around setting up your banking structures? Kickstart! has been developed for anyone who needs some advice around how to get themselves set up
  • Pivot – Your Financial Direction
    • This event is ideal if you want to actively plan, and taking the right steps toward achieving what is important to you. We can help you with setting goals, investing in yourself, investing in your career, managing your cash flow, protecting your wealth, protecting your lifestyle, and making a plan for now – don’t wait for later
  • Common Sense Investing
    • This information evening is designed to help you understand some of the basics of financial planning and will cover conquering debt, volatility and the impact on your investment strategy, what asset class will look after you long term and how to build a passive income stream
  • Income Solutions for Women
    • This event is designed specifically for women. Why women? What if we told you that statistics show us that women earn less than men, women have lower super balances than men, women are more likely to have breaks in their employment, women live longer and retire with less money than men. There are solutions and we believe that education is the first step
  • Common Sense Estate Planning
    • Presented by our Financial Planners with Coulter Roache Lawyers in Geelong and Hunt&Hunt Lawyers in Melbourne. This information session will cover why you should have a will, intestacy, enduring powers of attorney, testamentary trusts, capital gains on estates, and estate planning for your superannuation

I really believe the best time to start is now, the earlier you get started the more potential there is to increase your retirement savings. Don’t leave it until you are ready to retire to get your finances organised.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

When? How Much? Where From?

– Retirement in the eyes of a 24 year old –

When? How much? Where from? These three questions are asked of all Income Solutions’ prospective clients, and from time to time, asked of our current clients as well. Let’s break down what we mean by these questions, shall we?

When would you like to retire? Do you have an age in mind where you would like to be able to clock off from a day’s work, never intending to return? How much income would you need to be able to live your desired retirement lifestyle? Finally, and in my opinion most importantly, where will this income come from?

The first 2 of those questions are quite ambiguous and a bit of an unknown, particularly for a 24-year-old. So, I’ll use myself as an example. I have no idea when I would like to retire exactly. By that I mean I do not know the age when I would like to walk out of works door for the last time. I love my job, and hope to forge a long and successful career as a Financial Planner, however, we all must stop at some point, I am mindful of that. One goal of mine is to volunteer 2-3 days per week of my time in helping 2 charities very close to me: MND Australia/Fight MND and the Epilepsy Foundation. I would like to be able to retire at an age when I can be of some real value when I am volunteering my time assisting these great organisations; whatever age that is, I am not sure at this moment.

I also have no idea how much income I will need to support my desired retirement lifestyle. The obvious answer you may be thinking is ‘as much as possible’. True, but let’s be realistic. I would like to have the affordability to travel overseas on an annual basis. Treat myself to some luxuries in life. Hopefully by then I will have a lovely family to spoil; maybe help pay the grandkids school fees; spend time tending to a little hobby farm I hope to one day have. Most importantly, I do want an absence of financial worry, an income stream I can’t outlive and I would be content if I could leave a meaningful legacy to those whom I love. Funnily enough, this is the definition of the term ‘wealth’ here at Income Solutions.

Now question three, where from? This one is considerably less ambiguous and unknown because I have the capacity to be able to influence this variable of my future now. I do know that to be able to achieve my goals, I need to be in receipt of a passive income stream – preferably one that is reliable, replenish-able and in an ideal world, growing. So, as a prudent 24-year-old, I began to contemplate the best way I can generate the passive income I will need in retirement. To do this I decided to educate myself on the 3 true asset classes available to us all: cash, property and shares.

The old folklore is that cash is safe. It can’t go anywhere; $100,000 today is $100,000 in 10 years. You may have lovely memories of Grandma or Grandpa telling you to put all your cash under the mattress and leave it there. The thing is that inflation ruins this because $100,000 today simply does not have the same purchasing power in 10 years. Plus, everybody knows how mediocre interest rates are now. This interest is the income produced by your cash. It is small, tax ineffective and can only grow if you contribute more cash to your account. This asset option is out.

Then we have the Great Australian Dream: Property. This country is internationally notorious for being obsessed with property. Why? Because we can see and touch it every day. (The GFC was actually caused by the domestic property market in the US – not shares. I recommend you watch The Big Short if you haven’t already) We can drive our friends past our investment properties. We have a perception that because we can touch and feel them it is a safe investment. This is quite deceptive, however, due to the hidden costs associated with this asset. I recently attended a very well run property investment seminar just outside Geelong to educate myself on the stats. A $470,000 investment property in the estate had an average rental yield of about 4.4%. I also learned that for my property to have the best chance of being tenanted I needed to have things like 900mm benchtops, a 1 metre wide fridge space, a sound dishwasher, a microwave compartment and good-quality blinds. These might seem standard for a home, but I learned that without them potential tenants can walk away – which means no rental income for the investor and no passive income. Then, once you have found a tenant, you must hope they pay their rent on time for you to be paid your income. You must hope the hot water system and that sound dishwasher do not break because as the landlord, that’s coming out of your pocket. And in 10-15 years down the track, the walls need to be painted, the carpet updated and the oven replaced. There are types of insurances available to cover these, but, again, these are simply another expense. This asset is asking you to pay for it, rather than it paying you! Most importantly, the rental income you receive – like bank interest – is tax-ineffective. Once you deduct all those expenses from the rent, you need to pay tax on the balance at your marginal tax rate. These are all headaches I do not want to have whilst I am volunteering at one of my charities, or spending a few weeks away escaping the Victorian winter whilst I am retired.

You might be reading this and are thinking to yourself something like ‘The capital growth seen with property over the past few years has been off the charts, why hasn’t he mentioned that?’ Good question. Yes, the capital growth of property is going bananas at the moment. Corresponingdly, as is the rapid rise in household debt. A home is worth what a buyer is willing to pay for it, which means whatever sum the bank are willing to loan to them. What happens when these record-low interest rates (which are already increasing) go up 1 or 2%? People are willing to pay less because the bank will give them less. So you’ll see a drop in the perceived capital value of property. Also, you cannot spend capital growth unless you sell. This brings in market timing risk, loads of transactional costs and is an issue I do not want to be worrying about when I need some cash fast.

This asset option is out.

Lastly, we have shares. Thanks to our friends in the media, the populous of this country have an ingrained fear of shares. ‘Share market crash’, ‘Sell while you still can’ and ‘Billions gone’ are all quotes you may have heard about the share market. The media paint horror stories out of anything to sell newspapers and increase viewership. Admittedly, the capital value of shares is volatile in the short term. We can thank the media again for that. If we can ignore this, and simply focus on the long-term and the income generated by shares – not their capital value – we start to see the true value they hold.

Having attended Common Sense Investing at Income Solutions, I learned the Australian share market has returned an average of about 12.5% over the past 100 years. Last financial year, it returned closer to 14%. This was the same year we saw Trump elected president, potential nuclear war in North Korea, Brexit and continuing warfare in the Middle East. All the while, the companies of this country endeavoured to carry on business as usual, and made a lot of corporate profits. As a shareholder, these profits are distributed to you in the form of a dividend. You did not need to worry about the air conditioner at your investment property breaking. How enjoyable does getting a call on Sunday afternoon to fix a front window or the hot water service sound? Or having to make a call to your property manager asking why rent hasn’t been paid for 3 weeks. You simply lived your life as you would, and relied on the businesses of this country living theirs. This sounds like passive income to me. The clients that Gareth Daniels looks after, shared in over $850,000 of investment distributions this past financial year. Without putting in an ounce of effort or worrying about the state of their investment property.

These investment distributions are a result of people paying their utility bill, filling their car up with petrol, shopping at Coles and even making the monthly trip to Bunnings to buy something to fix an issue at their investment property. All these things contribute to company profits. Most importantly, the income received as dividends is tax effective thanks to Paul Keating implementing the Franking Credit system. This is a real trump card for retirees; as they do not pay tax from an account-based pension in retirement!

Now the prudent 24-year-old in me is thinking that this asset sounds good. It does sound like a passive income stream that is generated by human consumption and endeavour. If businesses in this country keep on keeping on, human consumption and endeavour will never stop. The only thing I need worry about in retirement is where in the world do I want to go to next?

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Why Do Women Retire With Less?

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Women are multi-taskers, we are terrific at juggling a family and career and we find it hard to say no when someone needs help but we often forget to ask for help ourselves.

Essentially, women are living longer and spending more time in retirement than generations gone by. The time spent working in the last century has not changed dramatically, we are spending approximately 40 plus years working towards retirement. However, we are living longer and spending twice as long in retirement than our predecessors, so we have to stretch our retirement funds and superannuation for 35 plus years.

Women also tend to have less in super when we reach retirement, this is due to a number of factors such as:

  • The pay gap
  • Time taken off work to have a family
  • Time taken off work to care for elderly parents
  • Returning to work part-time or not all

But it’s not all doom and gloom, there are strategies that we can put in place to help us build a strong retirement fund and a passive income that will see us through our retirement.

We believe education is the best place to start, attending one of our Income Solutions for Women events is a no obligation information evening that will show you some of the tools that can be put in place to achieve this goal.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Tap & Go -A Disconnect-

Gareth Daniels is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

 

Budgeting has always been a watch word for people who want to plan for a successful financial future.  At times it has even been a  bit of swear word for some as it has implications of being restrictive, a list of things that you can’t do if your serious about saving for a house, a holiday or just putting away for a rainy day.

As a planner I have always been more inclined to regard budgeting as a positive action, I need to know where my money is going in order to ensure I can keep enjoying my today whilst I build for my future.  This concept of staying on top of cashflow has never been easier or more difficult.

Apps such as Pocketbook; TrackMySpend; MoneyBrilliant; and Goodbudget mean that rather than having to keep receipts, take note in a book or fill in columns on a spread sheet you can link these apps’ to your bank accounts so they automatically track your cashflows by picking up the transactions that take place.

This is incredibly powerful particular if you really engage with the app’ as by categorising transactions (such as phone and groceries) they learn what those expenses are going forward meaning it has never been easier to see where your money is going.

And then comes the down side; the disconnect being how much you are spending and the ‘tap happy habit’ meaning it has also never been easier to spend

Talking to an older client the other night she spoke about how powerful it was to her to physically spend paper notes; she hated ‘breaking’ a $20 as she would then run the risk of frittering the rest of it away.  It was a reality check to actually take a note or even coins out of your purse or wallet and hand over your hard earned in order to buy something.

The reality is that people’s budgets don’t only blow up because of spending on big ticket items; it’s the odd $20, $10, $30, $10, $20 here and there.  And that is now a very easy thing to do without realising.

The ability to simply tap a card to complete a transaction has created a disconnect between the reality of what is being spent and the understanding or perception of what is being spent.

https://www.abc.net.au/news/2017-07-26/cash-usurped-by-credit-and-debit-cards/8744024

So what to do?  Well take the good with the bad…

  1. Understand what you earn; know your take home pay
  2. Use a cashflow management tool (like an app’) to track your outflows specifically identifying
    1. Non-negotiable expenses (rent or mortgage, utilities*, petrol, groceries etc)
    2. Set savings
    3. Discretionary spend (enjoying yourself!)
  3. Make informed choices about where your savings should go
  4. Draw a connection between how often you’re tapping and what that means for your true level of expenditure

Knowledge is power and power is control; you’re working hard and its your lifestyle; be in control of what your spending and enjoy life today while building for your future and don’t get sucked into spending too much just because the banks have made it easier to spend!

*You can make some strategic decision here too around what you ‘need’ to spend on your mobile phone and internet packages versus what you want!

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

What Financial Concerns Face Women?

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

 

I find women are incredibly organised, they are usually good at the day-to-day finances from paying bills on time to working out the weekly budget for groceries whilst running the household and juggling a career.

We can sometimes lose focus of the long-term as we are so busy with what is happening right now. It is very important that we do consider the long-term because we all want to stop working one day and enjoy more time with our family and friends.

Statistics show that women these days live longer and retire with less super for various reasons. More than likely it is due to taking time off work to have a family and care for elderly parents therefore women often find themselves either stopping work altogether or working in a part-time capacity to allow them to juggle these responsibilities.

One of the biggest barriers for seeking financial advice is finding time to schedule an appointment when both you and your partner are available. To assist you we can be flexible around the time of the appointment and technology allows skype appointments if that is better suited to your schedule.

We have also built an online portal, my.solutions, this makes it easy to complete your profile online and upload your details in your own time. By using this tool we find it helps you get the most out of the appointment with your advisor.

At Income Solutions we are committed to helping you overcome these hurdles and assist you in taking the steps towards long-term planning and helping you to build a passive income stream for the future. A solid financial plan really does make a huge difference to helping you reach your goals.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Is Buying Time a Good Investment?

Alison Adam is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

 

I have just read a news article about the benefits of spending money on time savings items.  Talk about an alluring title – it was called “Money really can buy happiness, if spent on the right thing – time”.  One of the driving forces at Income Solutions is the belief that the amount of income you can achieve is the driving force that funds your lifestyle.  It is not the amount of capital wealth you have accumulated that will necessarily be the defining factor for whether you are able to enjoy a lifestyle of your choosing.  The term “asset rich and income poor” has certainly been around as long as my living memory stands, and most likely well beyond, supporting our belief.  We are called Income Solutions for a reason.

The article is based around a study that has been undertaken by the Institute for Culture and Society at Western Sydney University.  The article goes on to say that the research has shown it doesn’t take a lot of money to improve your mood but it does need to be spent on the right thing.  The “right thing” has been defined as spending on small things which help buy back some time.  Some examples might be hiring a cleaner or a nanny to complete everyday tasks.  The benefit of spending money on outsourcing to a service is actually a purchase of free time for the spender.  This free time can then be spent doing something that makes the spender happy, such as spending time relaxing or spending quality time with family or friends.  Professor James Arvanitakis is quoted in the article as saying “Rather than looking at being busy and successful, we should look at success as having the time to do all the things we want: career, family and time with ourselves”.

The connection between Income Solutions and the key messages in this article is significant.  Income Solutions advocate goals based planning.  Every client is unique and the key to what separates one client from another is their goals.  While there are often recurring themes amongst our clients goals, often involving family or building wealth for the future, when you really dig a little bit deeper, a goal might evolve to become intensely personalised, such as “I want to buy a caravan in 2019, before my children enter high school, and travel around Australia for 6 months”.   Often, we see people who have similar dreams half formulated in their mind but think it’s something that they need to win Tattslotto to achieve.  This is where the other key message in the article comes into play: outsourcing to a professional service.  A Financial Planner can help define a half-formulated goal and put planning in place to achieve the goal.  It’s a very rewarding achievement for both a client and the Financial Planner and is truly a definition of spending money to buy happiness.

Goals obviously don’t just stop – they evolve, change course, are achieved and new goals formulated.  This is why Income Solutions seek long term relationships with our clients.  Goals are often long term and outsourcing the management of long term goals is definitely another aspect of spending money to buy happiness.  This can sometimes be hard, because there really isn’t any “big bang” moment where everything slots into place.  The reality of a long-term goals is that it takes time, commitment and focus.  It’s a journey.  It is hard to keep on track, especially if the achievement of the goal seems so far away and your everyday life keeps diverting your time and money off track.   Paying a professional Financial Planner to help you achieve a goal can seem like an expense you don’t need.  We have heard people who oppose paying for an ongoing service say “you’ve taught me a lot and I could see the value in learning it but now I think I can do the rest myself”.   This might be true, although if there hasn’t been a history of commitment and focus it is perhaps unlikely.  Even if it does prove to be true, how much time and energy will be dedicated to this task, taking precious time away from your personal and family life.

In a crazy modern world where there are so many distractions, spending money by outsourcing to a professional Financial Planner is actually buying you free time.  Free time…..  Makes me think of another saying “Money well spent.”

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.  Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Income Protection Insurance

Gareth Daniels from Income Solutions

Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

Are you looking at purchasing your first home or planning on starting a family soon? If so this is the perfect time to look at getting an income protection insurance policy in place or re-evaluating your current policy.

Buying a new home or starting a family, or both, is such an exciting time and you’re probably getting lots of different opinions from family and friends on what you should be doing, so let’s break down the facts.

What is Income Protection Insurance?

Essentially, it pays up to 75% of your income if you are unable to work due to injury or illness. If you have debt, dependants, or both. We all know that whether your income is coming in or not, the bills still need to be paid. It is advisable to have income protection insurance to help pay those bills and support your loved ones in unforeseen circumstances.

When paying your income protection insurance, you have main 2 options, paying through your superannuation fund or paying directly from your income.

Paying through your super fund

If you choose to pay your income protection through your super fund, it will cover the premium giving you more money in your pocket to pay for other things. This strategy is useful if you are trying to pay down your mortgage or have school fees to pay as the premium is coming from your superannuation, not your wage, so there is more money in your pocket to pay down your mortgage or pay for childcare or school fees.

However, there can be some restrictions on claims, dependant on your policy, we advise that you speak to your financial advisor to clarify these specifics.

Paying income protection from your wage

Alternatively, you can pay your premium straight from your wage, and in many cases, this can prove a greater tax deduction compared to the tax rebate that will be paid into your super fund.

For example, take the average Australian wage of $60,000. This person will pay around 32.5% tax each financial year (not including the Medicare levy). If they pay their income protection insurance from their wage they will get back about 32.5% of that premium at tax time.

How do I know if I have the right cover?

These days everyone has a super fund, and you may have a level of income protection insurance by default, however this policy may not be right for your personal situation. So, feel free to grab your super fund statement and come in for a coffee and a chat and we can look at the right coverage for your current situation.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

 

 

 

The “Trump Bump” – Myths Debunked

David Ramsay, Founder & CEO of Income Solutions

Income Solutions Pty Ltd, Authorised Representative, GWM Adviser Services Limited trading as Garvan Financial Planning, Australian Financial Services Licensee

I have been following Nick Murray for over 30 years, and he recently wrote an interesting article about the impact the “Trump Bump” has had on the US economy and it is very hard to argue with such clear and concise data.

Isn’t it funny, the power the media has on our society, they sell us doom and gloom on a daily basis, particularly when it comes to the finance sector, and we tend to believe them and follow their advice day-in day-out, very rarely checking the facts. Now I’m not here to rant about the media, but I am here to give a bit of perspective, and with the help of Nick Murray, break down some facts and figures.

The stats in his June newsletter really caught my eye and I have compiled a list of what I feel are the most relevant and interesting bits and pieces from this article.

Unemployment

  • U.S unemployment rate in April was 4.4% – down from 9.9% in April 2010
  • Part-time workers are increasingly able to find full-time work
  • Labour force participation rate is on the increase

Now isn’t that a great news story, this tells me that more people are working, they are happier and they are building their legacy. This also says to me that industry is booming, people are making more money, but they are also investing that money back into the economy.

Household Net Worth

  • In 2007 (pre-recession) the U.S household net worth peaked at $68 trillion
  • In the first quarter of 2017 this figure is over $95 trillion

Currently, “both single-family home values and financial assets making new all-time highs.”1 This figure astounds, as not only is it at an all-time high, it is set to exceed this peak by half as soon as the end of the year!

Debt Service Ratio

Nick also states that the “household debt service ratio – that is, household debt service as a percentage of disposable income – was a mere 10%, a level it has not seen since at least 1980.”1 So it looks like it’s not all doom and gloom in the finance sector as the media would have you believe, Americans are doing better than ever!

Corporate Cash

  • Corporate cash as a percentage of a current assets remains around 30%
  • This is twice what it was heading into the stock market collapse of 2000

Bank Reserves

  • Banks excess reserves stand at around $2.5trillion
  • The morning after the Lehman Brothers bankruptcy in September 2008 bank excess reserves were at zero

So, what does this mean? Essentially, these corporations and banks are making money, but they are hoarding this cash on their balance sheets.

S&P 500

  • The 2017 earnings estimate is at $131
  • The 2018 earnings estimate is currently at $147

Both figures will be records for the S&P 500, which is incredible as there was significant pause due to the global oil depression, but these new figures show that corporate earnings are now surging.

“Combining elements of points above, we may observe that never in American economic history have the balance sheets of banks, corporations and households been simultaneously stronger.”1

What does this mean for Australia?

Well, no one can really forecast what the market will do, and in the short term it is hard to predict what impact these results will have on the Australian economy. However, if we are looking long term and we take historical data into account, it shows that the Australian and U.S markets typically move in positive correlation to each other. Now, I’m not saying this will be the case but from where I sit it these figures do look promising.

 

  1. Murray, N. (2017). Nick Murray Newsletters. [online] Nickmurraynewsletters.com. Available at: https://www.nickmurraynewsletters.com/ [Accessed 27 Jun. 2017].

 

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

Generations of Wealth

Alison Adams from Income Solutions

Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee 

 

Sometimes financial advice is not about dollars and cents but instead becomes more about goals and objectives.   As Financial Advisors, in the business of building wealth for our clients, we felt it was important to define “wealth” What is wealth   The concept sounds simple enough, and in many ways it is simple. We like to quote John C Bogle, the author of The little book of Common Sense Investing, “simple but not easy”.  Often, the “not easy” part involves the goal of leaving a meaningful legacy to those whom you love.  We find this is a common theme amongst our clients. It is one thing to invest for your own future but once you have successfully taken that journey, commonly thoughts turn to making sure your hard work benefits your children and grandchildren. So, what is needed?  Successful estate planning takes an investment of time, careful consideration of your desired outcomes and the assistance of a quality Financial Advisor and specialist Estate Planning Lawyer. Did you know that your superannuation account balance and jointly held assets are not administered by your Will?   For estate planning purposes, these types of financial assets are called “non estate assets”. For the majority of people, their superannuation account is likely to be one of their biggest assets. Another contender for biggest asset may be the family home, commonly jointly owned.  In summary, the two assets often representing the bulk of an individual’s wealth may not be dealt with by their Will.  What about if the bulk of your financial assets are deemed “estate assets” and in the event of your death, these assets will be distributed to your loved ones in accordance with your Will. That should set them up for a financially sound future, right?  One of the biggest destroyers of wealth is the transfer of wealth from generation to generation. Consider your own family circumstances. Even if your family has so far been lucky enough to have escaped the statistics around relationship breakdowns, gambling or drug addiction, how do you know what the future holds for your children or even for your grandchildren?  There are ways that a quality Will can provide a regular income stream to your loved ones and at the same time, protect their inheritance.  David Ramsay, founder and Principal Financial Advisor at Income Solutions likes to say “you love your children and grandchildren; at best, you hope to like their partners”. Here’s some food for thought, consider these scenarios:

  1. Sadly your father passes away and in accordance with his Will, you and your brother inherit the family home. The home sits in prime real estate, with upcoming re-zoning changes making you and your brother think it’s a good idea to rent the house out for a couple of years and sell when all of the changes have passed, holding out for a bigger profit. It’s currently worth $1m, however you believe your strategy could triple that value. Your father had a very simple Will and the home passes to you and your brother, held jointly at 50% each (currently a $500,00 inheritance to each brother). Both you and your brother are married, with young children.  3 months later, you unfortunately pass away in a car accident. Your Will makes provisions for your wife and young family.  Your wife meets with the lawyer and lists all of your assets, including the $500,000 share of the inherited family house. Her Lawyer tells her that unfortunately a jointly held asset is not governed by the Will, and by law, the surviving brother is now the sole owner of the inherited family home. Your wife and children have no legal claim over your share of the house.
  1. 6 years ago you met your second wife, married and now have 3 beautiful girls together. You believe that your family is complete; you have your 3 girls and also 2 sons from your first marriage.  Your ex-wife lives nearby and, although you’ve had rough patches in the past, your 2 sons come and stay every other weekend and because you live nearby you are able to attend their various sporting and school events and enjoy a good relationship with them. The boys have a good relationship with their step sisters, however as they are entering their late teens, lately the relationship between your second wife and the boys is often strained.  Your motto is that things will improve once they get through their teenage years. Unfortunately you have an industrial accident at work and pass away.  You have a current Will which makes provisions for your current wife to inherit the majority of your assets, with smaller amounts distributed to all of your children.  You’ve had discussions with your second wife about how you would like her look after all of your children, and upon her passing, distribute your assets evenly. These wishes were reflected in her Will, drafted at the same time you drafted your Will. Your second wife is advised that, following your death, her existing Will is invalid and she makes arrangements with her Lawyer to draft a new Will immediately. After all, she’s the only parent left for her girls.  The new Will is drawn, making provisions for your 3 daughters but excluding any provisions for your 2 sons.
  1. You have worked hard and sacrificed through the years to build a sizeable investment portfolio. The portfolio derives enough income to support your lifestyle and consists of growth assets that should continue to support both your children and grandchildren when you pass.  You have never been in the business of spending money “for the sake of it” and when you hear about DIY Will kits that you can purchase for $69.95 at the local newsagents, you go for it. After all, it’s pretty simple – you want your kids to inherit it, don’t touch it and live off the income, just as you have. When they pass, you want their Will to provide the same directions to their children. You’ve even sat all of your kids down and told them as much and they all agreed.  You pass away a contented man, proud of your life’s achievements and the way you’ve provided for your family’s future. Only problem is:
  • Daughter number 1 has a marriage breakdown 2 years after you pass away.  She directly inherited your assets in her own name, meaning they formed part of the divorce settlement. Half of your inheritance has now been distributed to her ex-husband, who, truth be known, you never really liked anyway.
  • Son number 2 has never been good at managing his money. Before you passed, you asked your other children to keep an eye on him, but they’re so busy with their own lives that they can’t keep track of him as well.  A few ill advised investment decisions later and he’s lost at least 3/4 of his inheritance.
  • Son number 3 is self employed and just prior to your passing, he ran one of the biggest engineering businesses in town (a great source of pride for you). Unfortunately the majority of his business involved supplying and servicing the machinery at 2 local car manufacturers. Since those manufacturers have closed down, he’s put on a brave face but in truth, new business has proved too hard to find and he’s just about to declare bankruptcy.  The only thing that can save him is your inheritance but due to a quirk of bad timing, he is forced to use the inheritance to pay his debts and close his business. He’s not in debt, however he has no business and no inheritance.

These 3 scenarios are fictitious, however similar scenarios are happening each and every day.  Sadly, they are preventable. Advice from a good quality Financial Advisor and specialist Estate Planning Lawyer would ensure sound investment strategies could accompany estate planning protections. The outcome being that the transfer of wealth through generations can successfully be achieved.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.  Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.

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