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February 2007 |
In this issue:Changes to superannuation – |
Welcome to our first edition of Common Cents for 2007!
HAPPY NEW YEAR! That seems to roll off of the tongue so easily, yet the frightening thing is, it will be just around the corner and we will be organising Christmas cards again before we know it!
How quickly do the years fly by? Or am I just starting to feel my age?
The start of the year is often the best time for us to 'start over' or 'wipe the slate clean' with regard to our plans or goals. I am sure that a few New Year resolutions would have crossed your mind, as they do mine. I suppose the challenge is how long they last.
My most exciting New Year resolution this year is to run the New York Marathon. So on November 4th, my good friend Brett Jackson and I will be pounding the pavement around Central Park!
One of the perhaps less exciting challenges that I have set for myself and for my family is to keep every receipt from every purchase we make, then put them into my “amateur” spreadsheet and really see the damage! So far both of my resolutions are holding up about 95% of the time, and I can tell you both the physical and the financial damage is becoming apparent!
You know, not all resolutions have to be big and “over the top”. I would encourage you to have some exciting and some not so exciting, but nonetheless important and achievable resolutions for the year. Perhaps we can keep each other accountable!
On another topic, within the next couple of weeks, you will receive our 2007 edition of the KFG Wealth Management Client Rewards booklet. Last year the usage of this booklet by clients amazed us and once again it is filled with some incredible discounts from major providers. So enjoy the benefits.
Finally, as they say in the classics, 'watch this space' (and also our website) as life is never dull at KFG, and over the next few months you will see some very exciting initiatives that we have planned for 2007!
Once again have a great start to the year and together let’s make it a year of success!
Scott Kirkwood
Managing Director
Keeping it in the family
Assisting family members purchase a new home isn’t a new phenomenon, but it’s becoming increasingly popular…according to Aussie mortgage brokers there has been a 20% increase in the number of people helping family buy their first property…read more.
Harry Baumeister, a senior financial planner with KFG, writes:
As a parent, I know I want to help our children as much as possible. And yes, it is becoming increasingly difficult for young people to afford their first home. But here is some food for thought – are we really doing the best thing for our children?
I can’t help but recall a few experiences during my 18 years with the ANZ Bank.
10-15 years ago, we encouraged young people to ‘save like crazy’ towards putting a 20% deposit on their first home. This way they had an 80% loan ratio, avoiding mortgage insurance, which can run into the thousands of dollars. We made sure that they could afford the repayments on their loan without getting into financial difficulties, also allowing for a 3% increase in interest rates.
These days, our children are now borrowing 100% (or close to) of the full cost of buying their first home (with mortgage insurance). They may also have other loans for cars, furniture, credit cards etc.
With Australians now notching up $1 trillion in debt, I wonder, “shouldn’t we be helping our kids by teaching them a bit of financial discipline and the art of saving towards their major goals?”
For my teenagers, I have over the years put money from birthdays, grandparents etc into Managed Funds, and this is building up into a nice little nest egg. It may not be quite enough but it will at least provide a start in their life in the right direction.
Of course it makes sense for family to help each other out financially, so when you read this article, I encourage you to look at some of pitfalls and questions highlighted and ask yourself, “how can I do what is best for my children?”. Read full article.
Please call your KFG financial planner on (08) 94125 2700 or contact us at infowm@bernielewis.com.au if you would like to discuss your options further.
Changes to superannuation rules (for the better…)
As you may have heard, changes to way the Australian superannuation system operates will come into play from 1 July 2007. Do you know what this involves? KFG senior financial planner, David Kayser tells you more:
As part of the May 2006 Federal Budget, the Government proposed a number of significant, and for the most part, positive, changes to the way Australia’s superannuation system will operate.
Our view is that this highlights the Federal Government’s and the Federal Opposition’s (through their stated intention of supporting the legislation) commitment to using the superannuation system as the main method for Australians to build wealth for their retirement.
As is often the case, the actual passing of legislation has been slow, and to date we still do not have confirmed rules to play by. However, what we do know is that the current Bills propose a number of key measures including the following from 1st July 2007:
- The income that you draw out of superannuation as a pension will be tax-free.
- People under 50 will be able to contribute more towards superannuation (hence being able to build up their super faster).
- ‘Self employed’ people will be able to claim a deduction for all of their contributions (subject to upper limits), rather than only 75% of all contributions over $5,000.
- You will not be forced to start to draw down on your superannuation if you do not wish to (you can leave it in the concessionally taxed superannuation environment if you choose).
- Centrelink will reduce the severity by which they assess your assets for aged pension entitlements. Therefore even if you had previously not been able to (or not been planning to) get the aged pension (including associated concessions such as cheaper pharmaceuticals), you may soon be able to (from 20 September 2007).
You can see that these are some fairly major changes, which can only help you achieve your retirement goals and objectives.
Of course, as is often said, the devil is in the detail, and there is a lot of detail in the proposed changes, so we will continue to keep an eye on the proposals as they become law over the following months, and keep you informed.
However, in the meantime, if you would like to discuss how these changes could benefit you, please don’t hesitate to call your KFG financial planner on (08) 8415 2700 or contact us at infowm@bernielewis.com.au.
Don’t worry, be happy – riding the market’s ups and downs
How often can we pick the optimum time to invest in the market? We are all aware that the market can be volatile and unsettling as it fluctuates from day to day. We also know that it is impossible to consistently guess the market to your advantage.
Dollar Cost Averaging is a simple concept which, when applied, eliminates the need to time the market. As KFG’s Harry Baumeister explains, with a disciplined and long-term approach, Dollar Cost Averaging can provide you with effective results…
Dollar Cost Averaging is a strategy we often discuss with a client, particularly when people are a bit nervous about entering into the Investment game for the first time, or may have had their fingers 'burnt' buying and selling shares themselves.
Also if a client has a large sum of money, we might place some into Managed Funds/ share markets on a monthly basis rather than all at once. This way we have spread the risk over time, rather than putting all the money in at once (i.e. if markets drop, this can minimise a major fall in capital value, which may take months/years to recover).
I have been using this approach for about eight years now, with my own children's savings plans. Each month I have put $200 into Managed Funds towards my children's education - in this case, their university fund. My wife and I were determined for our children not to have a HECS debt (a government scheme to financially assist students through University but which needs to be paid back once they enter the work force).
This strategy has certainly worked for me - so far it has paid for my son's Uni fees over the last 2 years, and I have yet to touch the original capital (i.e. taking the profit).
If you’d like to know more about Dollar Cost Averaging and how you can apply it to your financial circumstances, call your KFG financial planner on (08) 8415 2700 or contact us at infowm@bernielewis.com.au. Read full article.
Goodwill at Christmas…and beyond
At KFG Wealth Management we have an ongoing involvement in supporting our communities, believing that greater fulfillment comes when we consider the needs of others.
Sofie Standfort tells of a very special KFG Christmas gift…
Over the years, the KFG team has contributed to various Christmas appeals such as The Kmart Christmas Wishing Tree and Boxes with Love. This year we were introduced to a family in the Adelaide community, who had experienced some tough times over the past couple of years. Grace tragically lost her mother to cancer last year and Garry has been raising his daughter alone since.
We decided to try and give Grace and Garry a Christmas to remember. Just before Christmas, Grace and Garry were our guests for breakfast at a local café and there they received a hamper full of goodies and gifts to open on Christmas day.
However, the gift they received was greater than we will ever know. We hope the experience also gave Garry and Grace faith in the generosity and kindness of people and reminded them that they are not forgotten.
As for the team at KFG, the feeling of goodwill and contentment from getting involved in the lives of those who are in need of a helping hand, was a memorable Christmas gift in itself.
Young Grace enjoys her Christmas gifts.
Extreme Makeover
For the second year running, KFG Wealth Management has had the opportunity to be a part of the “Extreme Makeover” project, run by Edge Church Youth. KFG’s Steph Jones and Josh Pardede explain…
The Extreme Makeover is where one boy and one girl are chosen randomly from a selection of schools in Adelaide’s southern suburbs, and are taken out for a day of shopping and pampering. A new outfit is chosen, along with a new hairstyle, a session with a personal trainer and a trip to the beautician.
As well as all of this, each one receives a $500 high yield savings account from KFG to encourage them to plan for their future and manage their money responsibly. This year, we were lucky enough to be able to meet with the kids and chat to them about money, goals and budgeting – as well as having some fun along the way!
Carlien & Aaron, both 14, have had a tough time growing up. Aaron especially had done it tough recently, as only a few days earlier his mother was involved in a serious car accident -leaving her recovering in the hospital with Aaron and his brother fending for themselves at home for a few weeks.
However, we couldn’t wipe the smiles off either face during their special day.
Carlien and Aaron were also very excited about what they could save towards with their $500 kick-start, and their minds began to race with ideas when they saw the savings potential if they were to implement a regular savings plan.
We both felt honoured to have met Carlien and Aaron. Their maturity and character are well beyond their years and we feel grateful to have had the opportunity to have an impact in their lives.
Aaron and Steph have a chat about savings and budgets.
Chances are you have one, and possibly two or more mortgages! Some of you may have finished paying off your mortgage or you may be looking to buying your first home sometime in the future. But at the end of the day we usually find ourselves at the mercy of financial institutions as we go about achieving the great Aussie dream of owing our own home.
KFG’s Debt Solutions Specialist, Sofie Standfort, writes:
At KFG, we believe that the right strategic advice and blend of solutions is the answer to building, protecting and maximizing wealth, rather than simply focusing on a product, or for that matter a loan.
For the past 12 months, KFG Debt Solutions has been working with our clients across a broad range of debt management areas including:
- Helping you buy your first home or even build your own home;
- Designing the optimum strategy to paying your loan off quicker;
- Using equity in your home to build a wealth;
- Strategies to increase your investment portfolio;
- Consolidating multiple loans and credit card debt into one easy-to-manage loan;
- Comparing your current loan with other lenders to find a better solution for your needs - and even save you money;
- Unsecured personal finance.
With over 15 different lenders on our list, we take the guesswork and the hard work out of choosing the right loan for your circumstances.
Talk with your KFG financial planner today or call our qualified Debt Solutions specialist, Sofie Standfort directly on (08) 8415 2727, or contact us at infowm@bernielewis.com.au.
Falling in love with the idea of a “sea change” and actually living the dream are two different things altogether.
It is important to think through your big move early before taking the plunge and consider some of these important factors:
- Prepare your finances.
- Make sure you have access to the basics – medical, shops, good roads etc.
- Your ‘paradise’ needs to be practical– not just beautiful - in the longer term.
- Will you miss your friends? Family?
- If you intend to work, will this be possible in your new location?
Read more about one couple’s decision to move from the bustle of Brisbane to nearby Bribie Island. And don’t forget, contact us if you are thinking about that “sea change” and want to consider your financial options.
Insurance Gap calculator now available online
MLC has launched a new calculator to help you determine whether or not your personal insurance cover is adequate for your needs. You can access this calculator via our KFG website by clicking here
Called the Insurance Gap calculator, it will help you understand the adequacy of your insurance cover you have in the areas of life, income protection, critical illness and total and permanent disability policies, by answering a few online questions.
The calculator also has the ability to produce a report that individuals can take to their financial planner to resolve any underinsurance issues they may have.
Of course, if you have any questions or concerns regarding your personal insurance, contact your KFG financial adviser on (08) 8415 2700 or contact us at infowm@bernielewis.com.au
The latest quarterly economic outlook is available by clicking here.
Whether it is just for a quick chat or to make an appointment, you can contact us by telephone: (08) 8415 2700, fax: (08) 8415 2701 or on e-mail: infowm@bernielewis.com.au.
Even better, drop in and see us at Level 6, 13 Grenfell Street, Adelaide. We really do have great coffee!