Solutions Newsletter-September 2011, Edition 89
Spring is here and in this edition we want to give some 'smart tips' to the younger subscribers of our newsletter, many of which are considering their financial future. Although time is on their side the correct set up now will prevent the wrong set back later on in life!
Last month we visited the theme, “when the going gets tough.” Thank you to all those who wrote in and shared your stories. Your enthusiasm to manage tough times while taking positive steps forward is an overwhelming statement of good thinking, which I like to call, “the right stuff.”
In this edition, property is the flavour of the month; not because it is the only investment out there, but because during changing times we notice an increase in the appetite of our clients for real estate. To that end, we are providing to those who have the “right stuff,” some meat to chew on while they consider their next investment.
Remember, the Rubicon Team can assist you in a variety of areas, with a range of investment solutions designed to help you in every area to create wealth and security.
· Financial Planning
· Interest Minimisation
· Asset Protection
· Property Investment
· Taxation Planning
· Investment Gearing
· Retirement Planning
· Superannuation Strategies
And much more...
Once again, we invite you to write to us with any questions or concerns about any of the areas above. We welcome your emails to info@rubiconsolutions.com.au
Your input is really valuable, and allows us to focus on issues that are currently of interest to you.
Quote of the Month
"There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder."
Ronald Reagan
Interest Rates UNCHANGED
At last week's meeting the RBA decided to leave the cash rate at 4.75% for the 10th consecutive month. Since the last interest rate update, there was some speculation that the RBA would reduce rates due to the global financial situation, but this pressure seems to of been stabilised over the last few weeks.
Retail spending has increased (very moderately) so it's possible the RBA has taken the view that it will not jump on any rate cut as they can afford to sit steady for the time being.
With the
Embrace Uncertainty
Warren Buffet's2001 Investment Tip
by Carla Friend (CBS Money Watch)
Buffett points out when
Buffett's advice is to look at the broad sweep of history and realise we have thrived despite those set backs.
The Five Rules of Property Investment
Senior property analyst Mike Wood explains:
To invest wisely, one must take an intelligent approach. The following five rules are those that are tried and proven to give the best results:
1. Location-Showing solid historical capital growth
2. Location- Showing sustainable population growth
3. Location-Showing historically sustained high occupancy rates
4. Moving forward rule - Invest when your budget permits you to
5. Move yourself out of your comfort zone, but not out on a limb
The first 3 are extremely important, they are the basics for investing into real estate; they are the foundations that will keep it strong.
The “moving forward rule,” - you have a budget of $400K and you are thinking of investing into a particular area. Rather than investing now, you wait and look around for a good deal, or wait for markets to change in your favour; at a minimum, the Australian average standard for capital growth in metropolitan areas is around 7% compounding per annum. If you wait for as little as six months the capital missed would be at least $14,000.00. Rather than a $400K investment, your budget has escalated. This is a trap!
Take my advice and invest within your budget and according to your budget, waiting invariably costs money! Ensure it is within your budget and keep property as a medium to long term secure investment.
To achieve your goal of creating wealth you need to move forward continually. "If it's going to be, it's up to me." These words stirred me to make my first investment and they should stir you to do the same!
The fifth rule is to purposefully move yourself out of your comfort zone. Getting into debt for an investment property may at first feel uncomfortable, however based on the correct structure an investment that costs nothing out of cash flow, yet yields strong returns is a positive step forward! Some people take investment as a tool of folly and go out on a limb where structure is second to their desire. I recommend solid advice on lending first, discover your structure, and keep within your limits!
Finally, I am asked all the time, “Will properties keep moving up in price?” The answer is, while ever we have population growth, while ever there is capitalism, while ever people want to make money, property will increase in value –happy investing!
NEW BOOK!!! EXCLUSIVE FIRST LOOK!!
The first place of negotiation is within our own minds...
“Don’t be paralyzed or intimidated by the negativity in the market during its many cycles. You may for example see fear and paranoia about a “meltdown” going on all around you, but have the inner strength to stay on course and the expectation that life as a property investor with all its ups and downs will turn out fine if you just roll with the punches.”
"Education: Put the effort into your education and you will become a better negotiator and investor. You will develop courage as an investor, courage that will not fail you under stress. And your self discipline in self educating yourself will see you through many crises with solutions that your education has brought forward.”
Ten Tips For Those in Their 20's
At this stage of life, a mortgage seems like a life sentence and retirement is for really old people. So what should you be doing with your money? Here's your "to do" list for the decade.
1. Aim to learn something
"One of the best things you can do at this stage of life is to look to improve your financial literacy," says Matthew Walker, director of Sydney's WLM Financial Services Pty Ltd. "Read books, take a course, talk to people with experience."
2. Think about tomorrow
Saving for a car or a holiday is a great way to fast-track a sense of achievement — and it sets up an invaluable habit.
3. Get a habit
Speaking of habits, saving isn't the only one you should be fostering. "Getting together a budget or money plan is the best way to get into the habit of living within your means."
4. Deal with the 'credit monster'
While it may make you feel better, binning your credit or store card statement without opening it is a recipe for disaster. "Aim to pay off the cards."
5. Try to do a lot with a little
When you're in your first job and earning what seems like peanuts, it can be hard to get excited about investing. Don't you need to be rich for that? In fact, you need less than you think to get some wealth creation strategies underway. "If you have some money saved, what you do with it depends on when and how you want to use it," says Walker. "If the goal is short-term, invest it in cash, but if it's a longer term, a managed fund or even direct shares might be an option. Whatever the case, look at the opportunities out there. If nothing else, you'll learn from your experiences (positive or negative)."
6. Work out what you want to be later in life
While there's no denying that this is the time for experimentation, it's also true that wealth is generally a long-term project. For that reason, it's good to be earning regular cash for as long as possible.
7. Read the fine print
Mobile phones can be a particular problem. Always check the fine print before entering into a contract and be sure you can sustain it financially.
8. Make time work for you
The beauty of being in your 20s is that time is on your side. And the same goes for superannuation — that $10 a week you put in now could make for a very comfortable (or even early!) retirement.
9. Understand your money
Your finances are your responsibility "Focus on learning the true value of money and how to be responsible for your own," says Walker.
10. Stay at home
If it's at all possible (and pleasurable), consider staying at home with the parents. You won't be alone heaps of 20-somethings make the financial decision to stay home and get some savings together.
by Allison Tait, ninemsn Money
And The Winner Is...
Congratulations to Melissa Wilson, QLD whose 25 word or less entry earned her two tickets to the movies!Her winning reply, and the single best bit of financial advice she ever received was:
"The best way to double your money is to fold it in half and put it back in your pocket!"
Carbon Tax and the Proposed Tax Changes
Without getting into a debate as to the pro’s and con’s of this tax, we thought a good starter by way of introducing an understanding, would be to give a comparison of tax rates. We hope in coming editions to give a broader and more complete assessment as changes continue to be made.
| Rates and tax payable: 2011-12 (ie current rates) | |
| Taxable income ($) | Tax payable ($) |
| 0 - 6,000 | Nil |
| 6,001 - 37,000 | Nil + 15% of excess over 6,000 |
| 37,001 - 80,000 | 4,650 + 30% of excess over 37,000 |
| 80,001 - 180,000 | 17,550 + 37% of excess over 80,000 |
| 180,001 + | 54,550 + 45% of excess over 180,000 |
| Notes: | |
| Proposed rates and tax payable: 2012-13, 2013-14 and 2014-15 | |
| Taxable income ($) | Tax payable ($) |
| 0 - 18,200 | Nil |
| 18,201 - 37,000 | Nil + 19% of excess over 18,200 |
| 37,001 - 80,000 | 3,572 + 32.5% of excess over 37,000 |
| 80,001 - 180,000 | 17,547 + 37% of excess over 80,000 |
| 180,001 + | 54,547 + 45% of excess over 180,000 |
| Notes: | |
| Proposed rates and tax payable: 2015-16 and following years | |
| Taxable income ($) | Tax payable ($) |
| 0 - 19,400 | Nil |
| 19,401 - 37,000 | Nil + 19% of excess over 19,400 |
| 37,001 - 80,000 | 3,344 + 33% of excess over 37,000 |
| 80,001 - 180,000 | 17,534 + 37% of excess over 80,000 |
| 180,001 + | 54,534 + 45% of excess over 180,000 |
| Notes: | |
Brian Madigan – Aitken Private and Business
Individual Tax rates on taxable income between $18,201 and $80,000 are to increase as a result of the tax changes following introduction of the Carbon Tax
http://www.aitken.com.au/news-blog/news/income-tax-rates-post-carbon-tax
Letter of the Month
To the Editor,
We are worried! Not a great way to start our question, but we listen to the news about people losing money and although we have ten years till retirement, still working, we can’t afford to waste this time. Our superannuation looks healthy for now, we have one investment property and dabbled in shares but we are reluctant to risk what we have and do anything more.
Here’s our question; should we sell our investment property, get out of debt and pay out our home loan? At least then, we can go to work and perhaps increase our super contributions. We are worried about debt and your guidance would be appreciated.
P & MGill
Thank you for your letter. You know, it’s amazing how many letters we receive with similar questions. People are nervous and your questions hit the spot for this months Letter of the Month.
Firstly, you need to look at the structure of your investment property. The type of loan it is, the age of the property and discover if you are receiving the maximum tax deductions allowable, ie depreciation and deductions on the interest payments.
If it is in a high capital growth location, I would suggest you keep it and then concentrate your disposable income into paying down your home mortgage. This has to do with good debt and bad debt. Your investment property, provided it is structured properly for tax purposes, is good debt, while your home loan, is bad debt.
If you do choose to sell, don't forget to take capital gains tax into consideration (it would be wise to have professional advice on this also). I would not be concerned about your investment property debt at all. By the sound of it, you have enough equity to invest again and this, rather than selling, is what I would suggest!
In summary, do all you can to pay down that home mortgage, keep your investment property and utilise the equity to invest again. It is important for you to consider the structure so please feel free to contact us direct and we will assess this for you at no cost. Information is power and this, by the sound of it, is what you need! Your last ten working years are often the most profitable, so I encourage you to do all you can while you can!
Happy New Clients
We’d like to send out a big welcome to our newest clients who are receiving this newsletter for the first time. We look forward to many years of working with you to reach your financial goals.
We love receiving mail of this kind, particularly when you can read the smile behind every word.
You little ripper Rubicon! We had a fellow come to see us in our own home, he put us on the right track and we’re saving about $3000 a year, not bad for a 20 minute visit!
C White
We’ve got it all under control now,the best thing is peace of mind! You all spent the time we needed and not one of you seemed pushy at all! Thank you.
G & D Parkinson
Well I took some convincing but my wife told me to call you and I’m glad we did! Tax is no longer a four letter word!
D
On a personal note to our readers, I am reminded of a quote once told to me, “life is not about how long you breathe, but it is about the moments that take your breath away! Remember to smell the roses, celebrate small victories and like many have said, if at first you don’t succeed, try again, it’s what you learn that helps you earn!
Until Next Time...
Spring has sprung and I hope that this edition encourages you all to keep moving forward. Seasons come and go and those that hold their nerve through changing times are normally the ones smiling!
Call us today on 1300 135 942 for an obligation free chat or to arrange a personal visit. Or email info@rubiconsolutions.com.au
Here’s to your investment future!
