HENRY FINANCIAL GROUP INVESTMENT UPDATE

There is a conversation you may need to have with your son or daughter. Its not about the birds and the bees, but it could be just as confronting.

If you have grandchildren chances are you play an active role in their life. You give emotionally and financially to help their development “ just as you did with your own children. But just think about something for a second. What degree of emotional and financial support would be required of you if something were to happen to your grandchilds primary care givers?

We pose this question to you because we see our role as helping you identify any issue which may potentially impact your retirement plan. Everyones situation is different and if this issue is not a concern for you, were pleased. But if it is, were here to help.

What you can do

How we can help

Important information: Any information in this article is general in nature and does not take into consideration the readers personal circumstances. To avoid making a decision not appropriate to you, the content should not be relied upon as a substitute for receiving financial advice suitable for your circumstances.

Baby Boomer John, 65, looks back on a lifetime of financial decisions to provide some valuable tips to future generations.

Remember when you spent a small fortune on that trip to Hobart after the Wrest Point Casino opened? The holiday pay lasted barely one hour on those roulette tables! Four decades on and Im pleased to report that trip didnt set you on a path to financial ruin.

Without completely giving the game away, let me share some of whats happened to our world over the past 40 years. Firstly, you survived! Those teenage years didnt cause any irreparable damage although your knees and hips are paying the price for your Kamikaze approach to footy.

Our country has flourished “ almost twice as many people call Australia home today than in 1973, most people earn in a month what you earnt in a year, and the average price of a house and land package in the early 70s (approximately $20,000) wouldnt cover the deposit of an average home loan.

Many of the headlines you read in the morning paper in 1973 are just as relevant today “ œCrisis in the Middle East, œPrime Minister Under Pressure and œPetrol Prices Soar.

Its a similar story when it comes to finances. The fundamentals of 1973 remain the same today, but as you think about the future, let me share some of the wisdom Ive gathered over the past 40 years:

Live within your means:

This seems fairly obvious but credit facilities will become easier to access as you enter your 30s. Even your grandkids have credit cards! Cleaning up the mess of easy credit debt can put your long-term plans back many years.

Minimise debt:

The loan from your father to buy that mint-condition Ford Falcon GTHO may have made sense at the time but it would drag on for years before you paid it off. And lets not even start on the financial commitment to purchase that first colour TV in 1977! Keep your debt to a minimum and make paying it off a priority.

Develop a savings plan:

Remember the old State Bank savings book for which Nanna would give you 20¢ to deposit each week? It was the one successful financial decision made for you in the first 20 years of your life. Consider the money that goes into a savings account an essential part of your budget. Therell be plenty of rainy days, and any leftover will provide a solid foundation for that retirement nest egg.

Start investing:

Dont expect me to share the previous 40 winners of the Melbourne Cup or share tips that could make you a billionaire. Start to think about how best to invest those savings “ the earlier you start, the more youll have when you retire. Dont forget to manage the risk too. Its ok to put some in shares, but also look to spread it around via term deposits, property or managed funds.

Protect whats most important:

œLife insurance? What do I need life insurance for? It may seem far-fetched now but insurance will pay for itself many times over. Hospital expenses, the odd minor car crash and a couple of ˜life episodes are sure to arise; when they do the peace of mind provided by insurance is invaluable. Speaking of health, stay out of the sun and watch that expanding waistline and try to lay off the bacon and eggs once in a while!

Establish credit:

It is vitally important to start establishing credit while in your 20s. A clean credit report will make life much easier in the future, especially when your partner starts dropping hints that shed much prefer to send Junior 1 and Junior 2 to the local Grammar School and youll need a loan to get started. And lets not even start on Junior 3, 4, 5 etc ¦ just kidding!

Choose your life partner carefully:

Yes, youll meet a nice girl or boy and settle down, but itll be touch and go there for a while. For plenty of the boys from your school years, things wont end quite as happily. While you dont have to see eye to eye on every financial issue, someone with similar goals and values as you will make life much easier. If you plan on combining your finances with your spouse, communication and honesty are especially important.

One last tip “ enjoy life!

Money is supposed to be used, in part, for your enjoyment. Travel, entertain, take some regular golf trips, splurge here and there; you can do it all. But dont wait. Life is here and now, and youll be amazed how quickly the next 40 years will fly by.

Good luck!

The desire for greater control and flexibility of ones retirement savings continues to be a major driver behind the ever-increasing number of self managed superannuation funds (SMSF) being established. According to the latest Australian Tax Office figures, the number of SMSFs has been steadily rising for the past 8 years with 478,263 SMSF funds registered as at 30 June 2012. (Source: Australian Taxation Office).

What differentiates a SMSF from public offer or corporate superannuation funds is that the owner has full control over the investments they make within the fund for their retirement. There is also greater flexibility around the investments an SMSF may hold. With the control and flexibility comes the responsibility of running the fund in accordance with the law. This includes reporting to the ATO each year on the operation of the SMSF.

The time and skills required to run an SMSF successfully means they are not for everyone. The following questions will help those considering running their own fund as well as those who have already set one up to decide whether it is for them. Due to many of the complexities involved in running an SMSF, professional advice is always recommended.

Q: How many members can I have?

A: An SMSF can have between one and four members.

Q: Does each member need to be a trustee?

A: Each member of the fund must be trustee of the fund and it is their responsibility to run the fund and make decisions that affect the retirement interests of each fund member.

A trustee can also be a company or a corporate trustee. Under a corporate trustee structure, each member of the fund is appointed as a director of the corporate trustee.

Q: What is the benefit of a corporate trustee?

A: A corporate trustee can be a good option if there is only one fund member; if the fund members change or die or there is a chance the fund will outlast its original members.

Q: What is the trust deed?

A: A trust deed is a legal document that sets out the rules for establishing and operating an SMSF including things like the funds objectives, who can be a member and how benefits are paid.

Q: What can I invest in?

A: The super laws dont tell trustees what they can and cant invest in but there are certain investment restrictions they need to comply with. Investments must be made on a commercial, ˜arms length basis and generally assets cannot be bought from fund members or lent to fund members to buy assets.

In addition to cash, fixed and investment property, a SMSF can invest in collectibles provided that the investment is for the sole purpose of each members benefit. This ˜sole purpose test restricts members from having use of or access to the assets of the SMSF. Extreme caution should be used when evaluating non-mainstream investments such as collectibles, and professional advice should always be sought.

Q: Can an employer and employee be members of the same SMSF?

A: No they cant, however an exception to this rule is if they are related.

Q: Can I transfer my existing residential investment property into my SMSF?

A: No. You cannot transfer a residential investment into your SMSF.

Q: Can I transfer a business premises I own into my SMSF?

A: There are many factors that need to be considered for this to occur. The only real estate you can transfer into your SMSF is business real property. Business real property is defined in the super laws as: any freehold or leasehold interest in real property where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not).

Q: Can I buy a new investment property through my SMSF?

A: An SMSF can buy an investment property provided the trust deed allows for property to be purchased and the property forms part of the funds investment strategy. Any property purchase must be at an arms length basis. Fund members and their related parties cant use the property.

Q: Can I use borrowed funds to buy an investment property through my SMSF?

A: Yes, but there are strict rules governing how the loan and subsequent property purchase is structured. Borrowing through an SMSF to buy an investment property must be done under a limited recourse borrowing arrangement that keeps the property separate from the funds other assets. This ensures that if the fund cant make its loan repayments, the bank and any interested parties will only have recourse over the property, not other fund assets.

Running an SMSF even with professional help shouldnt be taken lightly. The flexibility appeals to many people, but the additional responsibility is also a serious consideration. You should always seek professional tax advice before acting.

It can all seem a little overwhelming and its no wonder that people stress over money.

The good news is that if you are willing to plan for your future, invest in yourself and work towards your goals, then your financial situation and lifestyle may look very different. This is where a financial adviser or financial coach can help. It will take time and effort; however, if you are committed to a long-term plan your financial future can be more secure and prepared for.

Heres our 10 reasons why you need a financial adviser:

1. You are going to live longer

Lets face it life expectancy has increased. Due to significant improvements in healthcare today. Based on the latest statistics, a baby born in 2009 is expected to have a life expectancy of 79.3 years and a girl, 83.9 years or higher. (Australian Bureau of Statistics, Australian Social Trends, March 2011).

2. Get What You Want & Achieve Your Goals

If you dont have a destination, how will you know when you have arrived and more importantly how you are tracking along the way. Having financial goals provides a roadmap “ it lets you know where you are today, where you would like to get to and the steps required to get there. Along the way there may be reasons why your roadmap needs to be adjusted due to a change in circumstances; however, regularly monitoring your roadmap will ensure that you remain on track to achieve your goals and the lifestyle that you want.

3. High Cost of raising Children

The cost of raising children is significant. These costs can include clothing, food, health and medical care, school, education and tuition fees and much more. Additionally, young adults are generally staying home longer and living with parents which is another cost that impacts the family budget.

4. High Cost of University & Higher Education Fees

More and more children and young adults are enrolling in higher education programs and university than ever before. Investing in your childrens future by supporting and assisting the cost of their education. The cost of university fees alone today is a considerable sum for parents and requires pre planning.

5. Being Prepared

Being prepared means that you feel confident and secure about where you are financially. Being prepared for emergencies and other life events ie; children, education, health care, redundancy, illness, separation, divorce, death or receiving an inheritance means that you can more effectively deal with the issues rather than worrying about your financial situation. Getting your financial life in order removes the unnecessary stress.

6. To Manage Cash Flow

Most of us do not have a saving problem but rather a spending problem. If you find that you are running out of money before your next pay “ it may be useful to track where and what you are spending your money on. You will then be able to design a plan to adjust your spending habits to eliminate bad debt and create good financial habits.

7. So You Can Afford To Be Spontaneous

Financial planning is something that seems so boring, however, it can provide you with an opportunity to have some wiggle room in your life for those spontaneous moments to enjoy life. Have you ever just wondered œHey, we should go on a trip¦ lets go today, right now and organise it. If you have, then your next thought is something like this œUm¦ work, the mortgage, bills, kids school fee. Your new found perspective on money can provide you with some moments when you can be spontaneous.

8. To enjoy Retirement

We will experience longer retirement and some may spend nearly as much time in retirement as in their careers. If a longer, more active retirement is in your future, it is likely you will need significant financial resources and a plan to enjoy a comfortable retirement.

9. To leave a Legacy

You want to protect what you have built over a generation and pass wealth onto the next generation. What will your legacy look like?. Do you want to be able to provide your family with a healthy legacy or have nothing to leave your children?

10. Empowerment

Money doesnt buy you happiness but it does empower you. By taking responsibility for your financial wellbeing “ you put money to work for you.

Whats you reason for needing to see a financial adviser?