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Money Matters

The simple fact is our elections don't generally move markets as they do in some other countries.  The reason for this is that our major parties (Liberal/National and Labour) just don't differ enough in policy to have a huge impact.

But of course there have been some unique circumstances in the years leading up to this particular election, which may have greater impact than usual in a few key areas:

A few points which seem worthy of raising include:
The policies of the new Government if implemented are likely to lead to smaller government, less regulation and over time improved productivity and economic growth.
Expect a mini-budget around November that may contain more aggressive budget savings.
The historical experience combined with the more business friendly approach of the Coalition suggests a positive share market response over time.
The key uncertainty relates to the new Senate.
For more on how we're likely to be effected, especially with regards to investment markets, I recommend taking a look at economist Dr Shane Oliver's latest article.  As always, he cuts to the chase and is an interesting read. Click here to read Dr Oliver's insights.

If you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,
Caren 

PS. Please don't keep me a secret.  If you'd know someone who'd enjoy this or find it useful, pass it on! 

 

 

 

 

Can you guess the most recognised brand in the world?  If you guessed Coca-Cola, you'd be right.  

But does anyone remember "New Coke"?

In 1985 the Coca-Cola Company tested a new formulation.  This formulation was largely perceived to be better than Coke and Pepsi in the "blind" taste tests.  However, five years and millions of dollars later, the product refused to sell.

In fact, consumers demanded that the "old" Coke be brought back!

This was despite the fact that market research showed that the vast majority of people either preferred the taste of New Coke or couldn't tell the difference.  So what's all that about?

Loyalty to the brand name folks.

Believe it or not, the value of Coke's brand name is about 100 times more than its actual product!

I often get asked about the importance of branding for smaller businesses compared to big companies.  Frankly, your branding is crucial regardless of size.

Click here to find out what you should be considering for your brand!

And if you'd like to hear more of what I have to say on the matter click here for a recording of my most recent "You & Your Business" radio segment on 98.1FM Radio Eastern.

Talk soon,

Caren 

 

 

 

 

 

In our last 4 Ways Bulletin I included an article on teaching our kids about credit cards.  Since then I've been quite shocked to learn exactly how hard some banks are pushing credit cards on them.

A few weeks ago our 19 year old Ashlee received a marketing call from one of the 4 major banks where she holds an account.  It was a fairly young guy who was extremely friendly, asking her about what she was doing at uni and how she was going etc.  He then led the conversation to how she really should have a credit card.  First he used scare tactics - did she realise she'd never be able to get a home loan without a credit rating and a credit card would help her with that?  But then he went in for the real kill - "haven't you ever seen a pair of shoes you really wanted but couldn't afford..."!!!!!!

Terrific!  In one sentence, this guy had tried to undo years of us teaching our kids the value of saving for what they need, any not going into unnecessary debt.

When Ash explained she needed time to think about it, and might look at it in her uni holidays, he told her she shouldn't really wait when she could do it now, and told her he was putting her through to a Financial Planner, presumably to "seal the deal".  Again, the chap was very friendly when he started chatting to Ash, but when she explained that she really didn't want to commit on the spot, his attitude changed quickly and he all but hung up on her.

Some facts about Ash:
  • She is only 19;
  • She is studying Accounting at uni and does not have a full-time job;
  • She has just $50 in an account with the bank that called her;
  • She does love shoes;
  • She did go online afterward and applied for a card herself, but thankfully was declined!
As you'd imagine, finance is a fairly common topic in our household (1 Financial Adviser + 1 Accountant = wild family fun times) so Ash told Mick and I about the whole ordeal over dinner that night and we were able to have a frank discussion about the pros and cons of credit cards.  But I shudder to think about how many kids might get into credit card debt before anyone even realises they'd been given the card!  Or should I say "sold" the card.  Because I'm sorry, but if you dangle shoes in front of most females as the proverbial carrot, that's a hard sell!!!

I'd really like to encourage all parents to have the credit card conversation with your kidsbefore the bank does.  To that end, if you didn't catch my article in the 4 Ways Bulletin, just click here as it highlights some important issues everyone should know about the so-called "fantastic plastic".


Talk soon,
Caren

 

 

It always surprises me when people say that one of the reasons they won't protect their family is because insurance companies don't want to pay out claims. My response is usually a confused "Huh? Whaddya mean? Ummmmm, that's their job…"

I'm a member of a great service called the Risk store which publishes insurance claim statistics each year. According to their figures, more than *$4.4 billion dollars was paid out in life insurance claims last year! We're talking death cover, total and permanent disability, income protection, and trauma.

That's $4.4 billion dollars paid out to help re-build family lifestyles, assets, and businesses after the devastating effects of illnesses and injuries.

To really break it down –an average of $17.6 million was paid to Australians every working day in 2012.

Ok, now think on this - not one of these claimants expected to claim on their insurance.

That's a lot of people who didn't ever want to claim – but had to. How glad do you think they and
their family were, to have been wise enough to plan for the unexpected?

And something else to think on - if these claimants hadn't had insurance policies in place, where else would they have got that kind of money?

Don't get me wrong, I have no doubt there are people with very legitimate grievances against their claim process, my point is that it's a rarity and that there are at least $4.4 billion reasons in the last year alone to protect yourself and your family's financial security.

In most cases conflicts over claims come down to the quality of the specific company or the definitions within the policy. That's why you should always get professional advice from people (like us!!!!) who can not only help you select the best company and policy for you - but even more importantly - in the event that something unforeseen does happen, we deal with as much of the claim work as possible on your behalf.

We feel this is the most valuable part of our insurance service, and obviously our clients do too because we recently received this email from one of our clients after the claims process: "Thanks Michael for a tremendous result. You have been very professional & balanced in your advice through this somewhat unsettling period."

So next time you're tempted to justify not protecting your family by saying insurance companies don't pay their claims, just remember that over $17 million dollars was probably paid out between breakfast and dinner.

Clearly this is a personal soapbox of mine, and if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,
Caren

With thanks to the Risk store for all statistics, and thought provoking claims information.

*Statistics based on claims from AIA Australia, AMP/AXA, Asteron/Suncorp, BT, Clearview, CommInsure, OnePath, Macquaire, MLC, TAL, Zurich.
The most successful businesses are run by people who love what they do. This is great, but of course there's real danger that your business can become all-consuming when you love what you do.

Your personal goals (family, lifestyle, community, spiritual) need to be in harmony with your business goals. When they're not, tensions develop, breakdowns occur, and achieving any of your long-term objectives becomes almost impossible.

And it's a lot more involved than simply striking a "work-home" balance. It's about ensuring your fundamental values and purpose are aligned for both yourself and your business. This involves:
   ·  Planning
   ·  decision making;
   ·  careful execution;
   ·  asset protection;
   ·  regular review; and
   ·  a clear picture of the "ultimate" reward you expect from
      your business.

  
I guess I understand this because Michael (Moschetti) and I live and breathe it. As partners at home as well as the office, we realised a long time ago that we could only achieve true success by reconciling our business aspirations with what we wanted from life personally.

Because it's so important, we recently wrote an e-Paper together called"Business – it's Personal". In this paper, we share our story, as well as give practical tips and strategies for you to implement in your own business including:
   ·  How to align your personal and business goals
      (a step by step guide);
   ·  How to protect against obstacles and risks that may
      prevent you from reaching your goals; and
   ·  The steps you must take now, to achieve the financial
      and personal rewards you're working towards.


To read "Business - it's Personal", just click here we've tried to keep it as entertaining and jargon-free as possible. 

You may also like to click here to listen to a recording of my most recent "You and Your Business" segment were I talk about this topic on Radio Eastern 98.1FM. 

Talk soon,
Caren

Blogging about retirement last week put me in mind of a particular client that came in to see us a year or so ago concerned about his retirement plans following the GFC. The reason he's memorable because of his great turn of phrase. He told us -"I think I'm up that proverbial creek."

 

So the first thing we did was prepare some projections to get a realistic picture of what his income position was likely to look like in retirement. He was very pleased (and surprised) to learn that based on his current financial position, it was very likely that he would still be able to achieve a reasonably comfortable level of income in retirement.

 

On top of that, we were able to give him some advice on some simple strategies he could put in place now to achieve a significantly better result and to be able to retire when he had originally hoped.

 

A great result for him, but the real point of relating that story is to again illustrate the importance of addressing the situation before you retire rather than leaving it to chance.

 

Picture this scenario. You've just retired, your last pay cheque has been paid into your bank account, and the realisation hits you - your super and savings need to fund your living needs – for the rest of your life! What if the money runs out too soon? How can you know if you have enough for all your retirement plans, as well as paying the usual bills? Knowing is definitely better. Which begs the question…

 

How much is enough?

 

Everyone's living needs are different, but a typical rule of thumb is that you'll probably need about 60%-80% of the annual income you earned before retirement to maintain a similar standard of living. Other factors to take into consideration include:

 

• your (and your partner's) life expectancy;

• the annual rate of interest or investment return you can reasonably achieve on your retirement savings;

• the annual rate of inflation;

• the type of lifestyle you'd like to maintain, and any plans that might require lumps sums (eg. travel, upgrading the car or home etc);

• the amount of tax you will have to pay;

• any other potential sources of income.

 

Where should you invest your savings in retirement?

 

The most secure investments are generally interest bearing and capital stable, eg. cash, bank accounts, government bonds, savings bonds, and term deposits. However, if you invest your retirement savings solely in a conservative spread of investments producing a return of, say, 4%-6%, you may not earn enough income to cover your needs. Other markets, such as shares or property, shouldn't be ignored altogether. These types of investments are likely to bring higher long-term returns and greater capital growth.

 

The right mix of investments, and the quality of the underlying assets are really important to the amount of income you can earn and the longevity of your savings. You also need to decide upon the most appropriate, and tax effective strategy for your income needs - annuities, allocated pensions, superannuation, managed funds, term deposits, bank accounts etc.

 

When's the right time to start preparing your finances for retirement?

 

There's no magic age to start the planning process but at least five years before you retire would seem sensible. And anyone who is 55 or over should definitely be looking at the very attractive tax savings available to you and the difference they could have to your retirement balance. For a lot of people we're talking tens of thousands of extra dollars…

 

As I mentioned last week, a very sensible first step is just getting some projections done so that you know where you stand. If you'd like to know more about what is involved in our projections service, click here.

 

And if you'd like more detail, please tune into my weekly local radio program "You and Your Money" Radio Eastern, 98.1FM, straight after the 9am news on Thursday.

 

Talk soon,

C





Money Matters

You don't need an inner-city address, Caren will help you tackle money matters in the 'burbs, through a better understanding of all the important issues – investing, superannuation, budgeting, tax, insurance, mortgages, gearing, shares, managed funds, small business, food, home, fashion, travel, and much more. 

A fun and entertainingly educational forum, specifically designed for Australian "suburbanites". 





There’s Wills, and then there’s Wills…

Last year we hosted a free information session and it was the most captivated we've ever seen an audience. The topic was Wills & Estate Planning, and the presenter was a solicitor!! 

Soooooooo, I figured there must be something in it and decided to run another session this month. I just went and had a look at the register to discover that this session has now booked out in less than a week.

What the?! Seriously guys, the speaker is asolicitor.

Of course I'm joking, because I was just as enthralled as everyone else last year when Mal gave us real life examples of how easily estate planning can go really wrong, and the dangers of Will Kits and executor trustee companies.

Clearly people are interested in getting their estate planning right, but it can be hard to know where to start. In my opinion, there are 4 main groups of people that need to take particular care when preparing their Wills and Powers of Attorney:

Blended families - Not surprisingly, this can be a veritable minefield and one where I have personal experience. Much care needs to be taken to protect the surviving spouse and children, children from previous relationships, and the estate itself. This is also an area where a challenge to the Will is more likely.

Mal has told me a few times now about a woman he knew whose stepchildren legally evicted her from her home because of her husband's poorly worded Will. Obviously a worst case scenario, but it did happen and neither she nor her husband would ever have meant for that to happen.

Parents with young children - Most people don't realise that appointing a guardian to their minor children in a Will is not legally binding. It still needs to go through the Supreme Court.

And you need to consider what happens with the proceeds of your estate if have young children? Are Testamentary trusts in place to deal with this? Do you have a plan for the guardians to be able to afford to raise your children?

Elderly - One of the messier situations I see time and again is where elderly parents don't appoint Powers of Attorney while they can. Most people know about Financial and Medical attorneys, but a lot of people aren't aware of the importance of appointing an enduring Guardian for lifestyle decisions – particularly relevant for aged care accommodation.

Couples - Regardless of the age of your children if you die without a Will, your estate does not automatically go to the surviving spouse. Under Victorian law, if you have children and an estate worth more than $100,000 (which is most people with a house and a chunk paid off their mortgage) then the surviving spouse receives chattels + $100,000 + 1/3 of the estate balance. The remaining 2/3 of the balance is split between any children – regardless of how much it is!

Singles Having a Will in place may not seem important, but you leave your family to deal with unnecessary red tape without one. Oh and Powers of Attorney are an absolute must!!

Hmmmmmmmm, my four categories pretty much cover everyone, which suggests that careful estate planning is particularly relevant for everyone. A few years back John wrote a great paper called "What happens when you die…?" It's the story of a couple who made a number of simple mistakes and made a dog's breakfast of their children's inheritance.Click here for a light look at a pretty serious topic.

Talk soon,
C

A lesson in finance from Tulips

If you've read all the guff about me in my profile, you'll know I have a background in literature and history (yeah, small career swerve!). One of my favourite novels is Thomas Hardy's Far From the Madding Crowd. Great title eh? It was borrowed from a Thomas Gray poem (Elegy in a Country Churchyard).

Given my background, you can imagine how excited I was upon first entering the finance industry, to attend a lecture "Tulip Mania and the Madness of Crowds." And I wasn't disappointed. The protagonist of the story was the humble tulip, and I'm still not sure whether the moral of the story was supposed to be the role of supply and demand in economics, or the stupidity of the human race. 

In the early 17th century, the Dutch literally went mad for tulips and demand ultimately outstripped supply. If I remember rightly, someone brought (stole?) some back from Turkey and didn't want to share. Of course we know what happens when someone tells you that you can't have something – you want it even more right? So began the manic trade of tulips.

There are stories of farmer's mortgaging their farms just to get hold of a couple of tulip bulbs. Tulip traders made a fortune, and there was even a future's market for these much sought after flowers!! 

Obviously they became waaaaaaaaaaaaaaaaaaaaaay over-priced, and what has to happen then? Yep, you guessed it, a market correction! It started with some astute businessmen deciding that they would sell out and take some profits. This proved to be a prudent move given that new tulip varieties were being introduced, and thereby increasing the supply. Then a few more sold out of their "tulip position", then a few more, and suddenly people started to panic, and the tulip market went into freefall. 

To put things in perspective, tulip prices fell more than 90% in a matter of weeks. It's impossible to accurately convert this to current monetary value, however popular consensus puts the comparison at something like $80,000 per bulb to less than a dollar per bulb. 

You have to wonder at what point it occurred to some people that they had spent their life savings on flowers! OUCH.

More than one historian has linked this tulip phenomenon to the onset of the Great Depression in the Netherlands, not to mention "the madness of crowds"…

If you've seen the Wall Street sequel, you'll recall Gordon Gekko showing Jake a painting and comparing Tulip Mania to the GFC. Not a bad analogy. When it comes to the sharemarket, crowd behaviour is both fascinating and frustrating. And unfortunately sometimes it is just plain mad. Think back to Greece, Portugal, Spain, Ireland, and more recently, Egypt. The way the market reacted was not in proportion to the relative potential market impact. And don't forget our friend "Fat Fingers" who shook the US market by accidentally entering a trade in billions instead of millions.

I often tell my clients that if we took emotion out of the market, it would be extremely rational. However, it's risk that drives reward so if there was no emotion there'd be little opportunity to make money. I guess we can't have our proverbial cake.

The best advice I can give is to make sure you take a leaf out of Hardy's book (pun intended), and stay far from the madding crowd when it comes to investment decisions. Make your decisions based on fact and fundamentals, and with professional guidance from your Financial Planner.

Talk soon,
C
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