Plan 2 Prosper

Go plant your own “Tree” now

Dan Smith — Thu, 11 Mar 2010 05:37:24 +0000

No doubt for many of you the demands on your time and funds haven’t reduced since this time last year, but as the common saying goes “if we keep on doing the same things we are likely to keep getting the same results”.

Another client recently reminded me of an article I wrote in September 2008:

http://plan2prosper.com.au/articles/2008/09/wealth-creation-and-kershaw-gardens-what-is-the-link

They said despite the strong performance of equity markets since March 2009 there is still a lot of fear and uncertainty in many people’s minds. During their regular relaxing walk through Kershaw Gardens they felt comforted while reflecting on my view that the Kershaw Gardens story is very similar to what the story of wealth creation is like - if you let it be. Within the gardens, trees that were looking sickly prior to December due to environmental conditions have picked up considerably and were full of new growth with our recent rain.

It reminded me of a Chinese Proverb also about trees:

The best time to plant a tree was 20 years ago. The 2^nd best time is now.

The best approach for anyone contemplating further wealth creation will depend on his or her own personal and financial circumstances, but the key message is that you must do something! There are many strategies that wealth creators can access if they don’t have vast sums of money or other resources available to them.

It is important to regularly review your plan (equate this to planting your own tree). This helps you take advantage of any current or future opportunities created by:

Your changing life situation and goals
A changed economic or legislative environment
Emerging investment markets and new products

If you have any doubts about your ability to do this, or you would like advice and assistance to guide you through the many options, act now to get the knowledge and mentoring that you need.

Where to from here?

If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.

This information is intended to only provide you with general information and, while the sources for the material are considered reliable, no responsibility is accepted for any inaccuracies, errors or omissions. Before making a decision based on this information, you must consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain professional financial advice specific to your circumstances.

Dan Smith and Dancin Pty Ltd ABN 71 531 338 371 trading as Plan 2 Prosper are Authorised Representatives of GWM Adviser Services Limited ABN 96 002 071 749 trading as MLC Financial Planning, an Australian Financial Services Licensee, with its Registered Office at 105 - 153 Miller St, North Sydney NSW 2060

Zurich Economic Update

Dan Smith — Thu, 25 Feb 2010 22:01:42 +0000

I thought you may value viewing a short economic outlook video presented by Matthew Drennan, General Manager of Zurich Investments.

In just under six minutes, Matthew shares his views on the big questions around inflation, interest rates and the outlook for the Australian sharemarket. He also notes that whilst the world has negotiated the global financial crisis, the outlook for different economies varies quite markedly. Whilst Australia has fared well and may return to normal levels of economic activity, the USA is likely to continue with its bumpy ride as it deals with numerous deep seated issues.

To view the video, click the following link: http://www.zurich.com.au/audio/Matthew_Drennan_update_231109.wmv

Where to from here?

If you would like to discuss the topics raised in this video or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

Bond - Investment Savings Bond

Dan Smith — Tue, 02 Feb 2010 03:12:19 +0000

Saving for the future

Do you want to build your wealth and pay less tax?
Are you saving for your child or grandchild’s future?
Do you wish to retire earlier?

An investment bond can help you achieve your long-term goals tax-effectively.

Investment bonds provide you with an opportunity to build your wealth over the long term in a unique tax environment by investing in a range of investment options that are managed by professional fund managers.

Dan Smith of Plan 2 Prosper says, “The great aspect about investment bonds is they suit a range of different investors: high income earners looking to minimise income tax or fund an early retirement, parents or grandparents wanting to save money for their children, or business owners wanting ownership flexibility and protection of their assets against the risk of bankruptcy.”

Investment bonds offer significant opportunities and advantages for many people. They may also be appropriate for those wanting estate planning flexibility when nominating beneficiaries.

Pay less tax now

For those on a high marginal tax rate, investing via an investment bond may allow you to minimise your taxable income and maximise your investment earnings over the long term.

“An investment bond may be an attractive alternative if you have an investment that does not qualify for the capital gains tax discount. This is because you would only pay a maximum rate of 30% on earnings within the bond, instead of a marginal tax rate of 46.5%, which could be a significant saving,” says Dan Smith.

“And it gets better, because investment earnings don’t have to be declared in your tax return unless you make a withdrawal within the first 10 years. Since there is no increase to your assessable income, there will be no impact on your social security benefits, your tax offsets or your ability to receive the government co-contribution,” adds Dan Smith.

Fund an early retirement

While superannuation funds are subject to preservation rules and are generally not accessible until you reach retirement age (between age 55 and 60), the savings in an investment bond can be accessed at any time.

Furthermore, in light of the concessional contribution caps being halved by the Federal Government, it will be harder for those with a higher income to contribute more into super via salary sacrifice. Therefore, an investment bond offers a good long-term investment alternative to accumulate wealth.

Estate planning advantages

A superannuation fund is limited to nominating ‘dependants’ as beneficiaries and may incur up to 30% tax for the release of super death benefits in certain instances. An investment bond, however, provides you with the freedom to nominate any individual, company or trust as a beneficiary in the event of your death. In addition, the investment earnings can be generally passed to a beneficiary without any further tax liability.

Save for a child’s future

Investment bonds allow parents (or grandparents) to build wealth for a child in the long term without the high penalty tax rates other types of investments may incur.

“Usually, when a parent transfers assets to a child under 18 years of age, these assets may be subject to penalty tax rates on the investment returns of up to 45% or 66%. By investing in an investment bond, tax is paid within the bond at a maximum rate of 30%,” says Dan Smith.

You can also set up a child advancement policy, which enables you to invest on behalf of a child less than 16 years of age, then transfer the ownership of the bond to the child at a nominated age without any extra tax liabilities.

Protect your assets

For those who run a small business, placing assets into an investment bond can offer protection against the risk of bankruptcy, provided you are not attempting to defeat creditors.

A financial adviser is the best person to work out if investment bonds are suitable for you.

Where to from here?

An investment bond can provide many advantages and tax concessions. To see if this strategy is suitable for you or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.

This material is current as at January 2010 but may be subject to change. This information is intended to only provide you with general information and, while the sources for the material are considered reliable, no responsibility is accepted for any inaccuracies, errors or omissions. Before making a decision based on this information, you must consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain professional financial advice specific to your circumstances.

Wealth creation - Its a mindset - How can I make it happen ??

Dan Smith — Thu, 28 Jan 2010 01:41:41 +0000

One of the greatest stresses that most of us face concerns our finances.

I have come to a realisation that many of the financial concerns people see me about are caused by the way they think, and that is what I need to work with them on reviewing. The way we, as individuals, think is something that can be controlled, as unlike the weather, the price of fuel or the short term volatility in global and domestic markets. (as an aside many an astute investor with cash available is buying back in at the moment - wish I had more available to contribute than I am currently).

The future belongs to those who are building a diversified asset base that creates passive income. Assets put more money in your pocket. Liabilities take money out of your pocket. As you’d likely know the only good debt is debt that is used to fund income generating assets (and even then its debt that we all wish we didn’t need to have).

One of the major goals we all have when creating wealth is to have your assets throwing off more money than your expenses. If the investments you have - the ones you don’t need to actively work in - are throwing off more “passive” money than your cost of living, then you are well and truly on the road to further wealth creation and real achievement of personal goals and objectives.

Part of you may well be thinking; “It’s alright for you .”, “We could never do that”, “It’s different for us because ….”.

If that’s what part of you is thinking right now, then that is the first ceiling we need to remove in order to have the right mindset. Successful people in all fields and endeavours (not that you aren’t already successful, but with some disciplined income diversification strategies you could be even more so) don’t say to themselves, “I could never do that, I could never afford that, it could never happen to me”.

Interviews with many successful people reveal they think, “How could I make this happen, in what ways could I afford this, what do I need to do today to start moving towards it?”

Hopefully the other side of your mind is saying, “Well what if this is true? What if I gave it a go?”

It’s a simple enough process requirement but human nature doesn’t allow us to make it easy to establish your budget, confirm your income and expenditure, assets and liabilitities - although these are all things you’d likely have good control of.

Then its all about implementing a smart cashflow management system to capture any spare cashflow on a regular and disciplined basis and harnessing it toward assets that will produce more passive income. Over time, the idea is that these assets will grow and produce more and more passive income so the cycle of passive wealth creation can continue evolving.

As a guide we could implement a regular investment plan in diversified managed funds with as little as an initial investment of $2000 and ongoing regular investment of $200 per month.

Please have a think about it. If you’re interested I’d be happy to set aside more time to explore in more detail the positive outcomes, potential opportunities and allay any concerns relevant to your own situation.

Where to from here?

Are you a young couple with a family?

Dan Smith — Wed, 06 Jan 2010 00:35:16 +0000

In this chapter of your life you may have taken on more responsibilities and begun to use debt to buy your first home.

Some significant events may have already taken place, so you’ll need to reappraise your insurance needs. These could be:

Getting married or committing to a long term relationship
Having children or trying to grow your family
If you have children one member of the couple might have chosen to stay at home to help raise the children
You have mortgage repayments to meet or are madly saving to buy a house
You have car repayments and running costs
There are credit cards to repay
You likely have mobile phone and internet service costs
There may be important social and professional clubs memberships
You may be saving and/or paying for your children’s education

And the list goes on.

Did you know?

According to the Australian Institute of Health and Welfare, “Australia’s Health, 2008′, an average of 2,650 Australians, aged 30-39 die each year from:

Motor vehicle accidents,
Cancer for females
Heart diseases for males
Intentional Self-harm.

The top 3 causes of disability in the same age group are:

Injuries from road accidents,
Self-inflicted injuries, or
Anxiety and depression.

From a NATSEM study of Australian child costs in 2007, the total cost to raise two children from birth to age 21 is $537,000. Worryingly, 60% of those with dependent children haven’t got enough insurance to look after their loved ones for more than a year if they were to die.

What have you got to lose?

A lot … your family, home and way of life could be at serious risk if you’re underinsured or uninsured. Your partner may have to give up work to care for you if you’re sick or disabled as well as look after the children. As a result, your income could shrink to next to nothing, because you can’t afford to repay the mortgage.

IFSA Research shows that only 4% of families with dependent children have life insurance to levels in line with accepted industry norms. What have you got to lose when for a little more than the cost of a daily coffee you can protect yourself and the lifestyle you would like to lead now and in the future?

Insurance products that could suit your needs are:

Income Protection - If you were on an annual salary of $60,000 and have another 35 years of work, you have a future lifetime earning capacity of over $3.6 Million. Isn’t that an amount worth insuring?
Critical Illness - If you suffer a critical illness such as cancer, this pays you a lump sum so you have choices. Choices to reduce any personal debt have an extended holiday to aid your recovery or fund things such as modifying your home.
Total and Permanent Disability - This also pays a lump sum to provide you choices in modifying your home or paying for special medical needs.
Life Cover (possibly) - This pays your family or a beneficiary a lump sum if you die so they can pay off any of your outstanding debts or provide whomever you bequeath the proceeds choice to do things which you may have done together if still alive.

We have commented upon this topic before:

And we’ll comment on it again because protecting yourself and your future earning potential is one of the most important things that can affect our families.

Money, as we all know, seems to slip through our hands in the shortest possible time, no matter how good our intentions to save. Somehow, the dream of the long awaited holiday, or new car, or paying off the mortgage, seems as far away as ever. The reason is often painfully obvious - people work hard for their money and then ignore the essential step of applying sound financial planning to those hard earned dollars.

Financial planning sounds simple - and to a large degree it is. But too many people ignore it. Most Australian households have no financial plan. A sustainable wealth protection strategy is the very foundation of any long term financial plan.

Where to from here?

Are you young and independent?

Dan Smith — Mon, 21 Dec 2009 05:42:33 +0000

You may think you don’t need to think about insurance at your age, but I’d urge you to think again.

Consider your lifestyle and what you could lose if something were to happen to you.

You regularly go out with friends.
You have started a career.
Perhaps you are paying off the education expenses of previous years investment in your future earning.
Maybe you are running a credit card and may have some debt on that.
Maybe you are renting your first property or even buying your first home with a mortgage.
Maybe you are saving for a deposit on a flat or a house.
Perhaps you are saving for travel abroad or paying off debts from previous travel you just completed.

Did you know?

According to the Australian Institute of Health and Welfare, “Australia’s Health, 2008′, an average of 1,800 Australians, aged 20-29 die each year from:

Motor vehicle accidents,
Accidental poisoning,
Intentional Self-harm.

The top causes of disability in the same age group are:

Injuries from road accidents,
Self-inflicted injuries, or
Anxiety and depression.

What have you got to lose?

A lot … but for a little more than the cost of a daily coffee you can protect yourself and the lifestyle you would like to lead now and in the future.

Insurance products that could suit your needs are:

Income Protection - If you were on an annual salary of $35,000 and you spent the same amount of time in the workforce as the average male Australian, you have a lifetime earning capacity of $3 million (around 43 years based on Australian Government Productivity Commission report Jan 2007 and assuming your salary increases by 3% due to CPI and other increases)

Isn’t that an amount worth insuring?

Critical Illness - If you suffer a critical illness such as cancer, this pays you a lump sum so you have choices. Choices to reduce any personal debt have an extended holiday to aid your recovery or fund things such as modifying your home.
Total and Permanent Disability - This also pays a lump sum to provide you choices in modifying your home or paying for special medical needs.
Life Cover (possibly) - This pays your family or a beneficiary a lump sum if you die so they can pay off any of your outstanding debts or provide whomever you bequeath the proceeds choice to do things which you may have done together if still alive.

We have commented upon this topic before:

http://plan2prosper.com.au/articles/2007/10/protecting-whats-important-to-you/

http://plan2prosper.com.au/articles/2008/07/is-insurance-an-expense-or-an-investment/

http://plan2prosper.com.au/articles/2006/11/life-insurance-and-the-financial-planner/

http://plan2prosper.com.au/articles/2009/03/maximise-opportunities-from-personal-events-to-further-protect-whats-important-to-you/

And we’ll comment on it again because protecting yourself and your future earning potential is one of the most important things that can affect our families.

Money, as we all know, seems to slip through our hands in the shortest possible time, no matter how good our intentions to save or to do the right thing. Somehow, the dream of the long awaited holiday, or new car, or paying off the mortgage, seems as far away as ever. The reason is often painfully obvious - people work hard for their money and then ignore the essential step of applying sound financial planning to those hard earned dollars.

Where to from here?

You can’t regulate against greed

Dan Smith — Mon, 14 Dec 2009 02:45:31 +0000

Mention the name George Lucas and most may think of the STARWARS saga and the epic fight between good and evil … use the force Luke, the republic, the rebellion and much much more … sorry I digressed to childhood memories … on this occasion though I would like to draw your attention to a recent opinion piece published in the Money Management Magazine by another George Lucas. The point of view offered by George Lucas - Managing Director of a boutique asset manager was well put and can be read at the following link: You can’t regulate against Greed.

Where to from here?

Easing the Financial pain of Critical Illness

Dan Smith — Wed, 25 Nov 2009 06:28:09 +0000

Taking time to talk

It seems like there’s always time to talk about the little things in life, but discussing the big issues is never as easy.

If you think about what’s really important to you -family, security and your way of life - you realise the need to keep them safe.

Illness isn’t a subject anyone likes to dwell on but the unfortunate reality is you or someone close to you will be critically ill at some stage.

The financial cost of this is something you can avoid. Research shows living expenses during a time of critical illness can be about $80,000 a year, not including the cost of medical treatment and rehabilitation.

For many people, the scenario gets worse as their illness prevents them from working and they lose their income, then their savings and investments. But it doesn’t have to be this way.

Did you know?

Did you know that for around $3 a day, you could cover the premium for Critical Illness insurance and rest assured your family is protected?

As an added benefit, one Austalian insurance product provider now also gives you and your immediate family exclusive access to the unique medical advice service by Best Doctors, at no additional cost.

Easing the financial pain

Many people aren’t aware you can insure yourself against critical illness.

Critical Illness (CI) insurance provides a lump sum if you become critically ill so you can pay your mortgage or anything else that needs funding. It takes away the financial pressure so you can concentrate on getting better.

But CI insurance isn’t just about financial protection, some policies now include access to Best Doctors, a worldwide network of medical experts that consult with you and your doctor on your diagnosis and treatment.

What is Best Doctors?

Best Doctors was established to achieve one specific goal; to connect ill people to a network of

peer-nominated, leading specialists from around the world. They can provide confidence, clarity and certainty in diagnosis and treatment plans.

With such a Critical Illness solution, you know you and your family will not only be financially secure but, through Best Doctors, you’ll have access to some of the best medical knowledge.

Elizabeth’s story

Elizabeth Gould knows the value of critical illness cover.

The mother of two children was diagnosed with breast cancer in her late thirties and had a double mastectomy.

Dealing with this illness was emotionally and physically tough for Elizabeth, but given she had CI insurance, the financial strain was significantly lessened.

“I think one of the first times I got upset was when I received the bill for my mastectomy,” Elizabeth said.

“It was an operation that costs thousands and the Medicare component was hundreds. I was such a long way out of pocket but I had great cover. I remember thinking, I never wanted to have cancer and now I’ve paid so much money to fight it.”

While it’s not something anyone wants to think about, Elizabeth’s grateful she took the time and initiative to plan for the unexpected.

“You don’t see cancer coming. There was no medical history in my family and I was only 38 when I was diagnosed,” she said.

“If you think there’s always time to take out insurance later on, then it’s already too late.

“Imagine never being able to work again because of illness or accident and then ask how you would support your family. If you can, then you have enough insurance.”

Finding out how to protect your family’s future with insurance doesn’t have to be difficult or expensive.

Having the right insurance cover can be simple and cost-effective, allowing you to get on with enjoying life, because you no longer have to worry about what might happen tomorrow.

Talk to your financial planner for more information on CI insurance and how it can help you.

Where to from here?

The year ending September

Dan Smith — Wed, 11 Nov 2009 04:52:33 +0000

After enduring almost 2 years of relentless declines in asset values, it’s wonderful to see some tangible evidence that the world is not about to end and a sustained recovery has commenced. It’s amazing what a difference 6 months can make.

The extreme market environment of 2007 - 2009 has highlighted the importance of understanding the risk and return characteristics of different assets under multiple scenarios.

During adverse environments, often only “risk free” assets such as cash and government guaranteed bonds deliver positive returns. Every other major asset class may fall in value. This is what occurred in 2008. In contrast in 2009, so called “risky” assets such as shares, company issued bonds and listed property recovered significantly. Cash and government guaranteed bonds are shaping to be the laggards of this year.

As of the 13th October, the Australian share market was up more than 50% from its March 2009 low, the Australian dollar ($AUD) had rallied strongly, corporate bonds yields had declined sharply, and the listed property market had begun its structural recovery. Positive returns were recorded for virtually all risk assets over the year, and the quarter to 30 September 2009.

The last 6 months are testament to the benefits of maintaining your strategy, particularly if your investment timeframe is long term (>5 years). There is no doubt that the length and severity of the downturn tested the resolve of all investors, irrespective of individual risk appetites. But the enduring lesson is that markets can turn quickly and unexpectedly. Waiting for news of improvements means that you can miss out on some great returns.

Maintaining your exposure to assets such as shares that contribute to economic growth will provide you with premium returns often in short periods of time, as the last 6 months have amply demonstrated.

Congratulations to all investors who held their nerve while their resolve was being tested. I take this opportunity to remind you all of an earlier posting ”Why wealth creation is like our Rockhampton Region’s own Kershaw Gardens.”

Where to from here?

If you aren’t there in the future, how will your children be raised?

Dan Smith — Sun, 01 Nov 2009 23:19:11 +0000

Have you as parents ever considered what would happen if you weren’t there to make important decisions about your childrens welfare, upbringing, lifestyle? Would your childrens guardians (assuming you have thought about this also) know what you wanted for them?

You may have provided for your children’s needs financially through an estate planning process including such solutions as life insurance and preparation of wills. Whilst I applaud you for having done that much, there is much more to your children’s welfare than just the $$$.

During a recent visit to my own solicitor I collected a brochure with information for parents about a “Guideline for the Guardians of your Children” document. This document contains a set of guidelines or instructions for those whom you as parents - or as sole single parent - appoint as guardians of your children. It ensures that those who have responsibility for the care and nurturing of your children to adulthood will know what you want for your children - if you are not there for them yourself. Such a document can cover a full range of life and lifestyle issues ranging from naming those people you want to be involved in their lives through to their living environment, their schooling, their upbringing generally and all other matters important to you as a parent.

Heres my admission … I haven’t done one yet but I know I should. Just think about these benefits:

you will be taking the time to thoughtfully consider those issues that most relate to your children’s well being and ongoing development.
a “Guideline for the Guardians of your Children” document gives you greater comfort in knowing that you have done everything possible to ensure that your children will be raised the way that you would want - if you were not there for them in the future.
whilst the document itself is not legally binding, a Court deciding issues concerning a child makes its decision based on “what is in the best interest of the child concerned”. If parents have taken the time and effort to prepare detailed instructions concerning the childs welfare, then generally those instructions would be followed.

Once completed, it will give you many benefits, whatever your circumstances.

Most of all, going through such a process will give you greater piece of mind. A process and potential state of mind achievement, very similar to that of developing and maintaining your own financial plan. Both can be journeys of real personal discovery.

Where to from here?