How does David or ‘Rachael’ or ‘Jodie’ or Tanya pay down their 500,000 mortgage?
Yes this is the question we have been asking since we spoke to all four families in recent weeks? They also have families with David having 3 daughters & Tanya & ‘Rachael’ each planning to increase from one son.
Lets revisit Making your dreams come true the six secrets to Financial Freedom to help you realise there is a way out of DEBT faster.
We know that families need at least 5000 per month to live on without any extras such as following Junior Masterchef to Disneyland.
That is 60Kp.a. + after taxx just to meet reasonable basics.
A 500,000 DEBT [i.e. 4 letters] is designed to take 25 years and on a bank website that means 3,695 p.m. @7.5% on a standard variable home loan.
Total interest paid over the loan is 608,486 according to the site.
When we add the 500,000 principal that is a lotto prize 1.1m going to the bank.
Hence the advice we took 30+ years ago to buy bank shares. Profits this year for the big 4 banks have been 6.3+ Billion each. Thank you.
Remember also that DEBT might last longer than the relationship & hence there is much less time if any were to start again.
Hence David or ‘Rachael’ or ‘Jodie’ or Tanya need to earn 105,000 after taxx to survive & to pay down their DEBT in 300 months.
At the end of 300 months what will they have?
They might have paid off the house if they haven’t renovated or moved house or replaced the car several times.
Of course they will have their super. However their super won’t be much as the average retirement lump sum today is only 154K. As David & ‘Rachael’ & ‘Jodie’ & Tanya are 30 to 40 then yes they will have much more. They might even have in today’s numbers another 500K, the governments ‘benchmark’.
So they supplement the aged pension with say 25K p.a. from their super.
Are they all working so hard for only that outcome?
Let’s be very aware that big government makes the rules & super suffers from legislative risk & it is very possible it may be later changed so that it is only used as an income stream.
I.e. no lump sum to pay down the remaining DEBT.
It also has preservation rules & can only be accessed with difficulty e.g. after 26 weeks of Centrelink payments.
Hence David & ‘Rachael’ & ‘Jodie’ & Tanya need to revisit their thinking.
They could always do as Lisa our taxx agent suggests i.e. rent their best friend’s house next door.
Yes that would make their DEBT taxx deductible. However that option would be for very few.
There are others who suggest a SMSF with an investment property in it. We have heard of such in the booming mining areas but what happens when the mine, as they do by definition, is finished. Banks also require a LVR of > 50% for such loans. Remember houses are ‘like spouses they require money & makeup.’
So how do you have the taxx man subsidise your DEBT?
If David or ‘Rachael’ or ‘Jodie’ or Tanya need 104K net of taxx then they must earn a gross 145K. They must pay 34.2kp.a or 855K in Taxx to the ATO over the next 25 years.
What happens when ‘Rachael’ & Tanya take a pregnant pause. Does the bank do similar?
Yes there is a solution to their challenge & it is our PCMS or personal cashflow management system.
It isn’t suitable for many as the above numbers suggest a family income of 150K. We need some saving to capture & maximise.
We don’t like rental property with another big DEBT & do tenants pay the right rent & care for your asset?
Of course most are in this position & it is in their best interest to not leave it until it is too late as we believe this real life case is.
Why not read our ‘Making your dreams come true. The six secrets to Financial Freedom’.
Make it happen & Make a Plan & we have been suggesting this strategy PCMS for 17 years.
Welcome to call us on 07 3848 1088 or email or visit our websites
John McAuliffe
What is it that we do?
An article written by Steve Helmich that I believe is as relevant today as when I first read it in 2009.
Planning that lasts a lifetime
26 March 2009
I want to put it to you that a financial adviser is really a life coach and just like any other coach, their role is to change habits and get better outcomes for the person or people they are coaching.
The only difference is that the value a financial adviser adds can’t be witnessed in just six weeks after following a fitness regime – the rewards pay off over a number of years. It takes discipline and it takes time.
Why is it a well-kept secret that is known to those who have a relationship with an adviser but doesn’t seem to be understood by many industry commentators or critics?
Perhaps the best place to start is by blowing some of the misconceptions out of the water.
The greatest of these misconceptions is that a financial adviser’s main task is to beat the market or to select the next best share to invest in.
This leads many to the question of why people should pay money to advisers in the current environment when asset values are falling.
In reality, I do not know of any adviser who guarantees they can beat the market, and if a adviser promotes that as their value proposition, they are setting themselves up for a fall.
The value and strength of the relationship between a financial adviser and a client is somewhat intangible, but by seeking and taking an adviser’s advice, a family can be set up for life.
The Australians out there who have a close relationship with their financial adviser know exactly what I’m talking about.
For my wife and I, the strength of the relationship with our financial adviser was recently put into perspective when we finished a review of our strategy and despite the fact that our asset values had decreased, my wife turned to me and said, “I always feel good after visiting that office”.
This is exactly what you want from your adviser: peace of mind and confidence in your future strategy.
It is the intimacy of the relationship between clients and advisers that offers great value to clients. Over a period of time, a financial adviser will achieve more for a family than any other professional – the value of their work will span generations.
What does a planner actually do to add value?
Very early in the process an adviser will sit with a client to work out what goals or dreams they want to achieve in life.
Now for many this can be a challenge, especially in a situation where a husband and wife can’t reach an agreement on what the future looks like.
Quite often, the adviser will take on the guise of a counselor or mediator in situations such as this. How do you put a value on this? I can’t think of another profession that actually asks you to think ahead about your life and plan your goals.
After identifying the goals and reviewing the clients’ current financial circumstances, the adviser will set a path to achieve those goals while articulating the risks involved in such a plan, including making sure contingencies are in place. The adviser will also help manage cash flow, minimise tax and facilitate the correct asset ownership for their clients.
It is true that for many, visiting an adviser can be a very emotional and confronting experience.
Imagine being told you have to curb your spending and work to a budget – this isn’t always a message a mature adult likes or needs to hear.
It is this financial discipline that is missing in the lives of many Australians and it often takes hearing the harsh reality of the situation to make people realise the trouble they are in or what they need to do to achieve their dreams. How can you put a value on this?
We often hear about fees, charges and investment returns as being the key inhibitors for people who retire with too few dollars – the truth is that Australians need to contribute more than the compulsory employer superannuation contribution of 9 per cent for a comfortable retirement.
But they often take action in this area too late in life and the compound effect of time cannot make up the shortfall.
A financial adviser helps people plan for their retirement by forecasting exactly how much they will need to achieve a comfortable lifestyle in retirement.
They will then help a client change their ways.
The value of peace of mind
The world we live in is full of instant gratification (mostly on credit) and the value of using a financial adviser has limited appeal instantly.
But in the long run it is the most valuable professional relationship someone can have – it’s life changing.
Despite this, people do not flock to the offices of financial advisers to seek their professional and valuable advice.
Many of the new clients who walk through the doors of our financial advisory practices are referrals from existing clients who have witnessed firsthand the value of advice.
Often people seek the advice of a financial adviser much later in life, but it pays in the long run to benefit from advice early in order to achieve goals and dreams.
Why do only 17 per cent of Australians seek financial advice when there is so much value in it?
Is it the fear of the unknown? Is it the fear of being told things you don’t like to hear? Or is it just the uncertainty attached to the advice process and how much it might cost?
It is probably all these reasons, but the sad fact is that those who don’t enjoy the benefit of having a close relationship with a professional financial adviser during their life will be worse off.
They will most likely never achieve their financial and lifestyle dreams and goals, and in a country like Australia, that should be a crime.
An article we concur with.
Welcome to call on 07 3848 1088 or email info@wealthcoach.net.au
or visit our websites www.wecoachwealth.com.au
John McAuliffe
Planning that lasts a lifetime
26 March 2009
I want to put it to you that a financial adviser is really a life coach and just like any other coach, their role is to change habits and get better outcomes for the person or people they are coaching.
The only difference is that the value a financial adviser adds can’t be witnessed in just six weeks after following a fitness regime – the rewards pay off over a number of years. It takes discipline and it takes time.
Why is it a well-kept secret that is known to those who have a relationship with an adviser but doesn’t seem to be understood by many industry commentators or critics?
Perhaps the best place to start is by blowing some of the misconceptions out of the water.
The greatest of these misconceptions is that a financial adviser’s main task is to beat the market or to select the next best share to invest in.
This leads many to the question of why people should pay money to advisers in the current environment when asset values are falling.
In reality, I do not know of any adviser who guarantees they can beat the market, and if a adviser promotes that as their value proposition, they are setting themselves up for a fall.
The value and strength of the relationship between a financial adviser and a client is somewhat intangible, but by seeking and taking an adviser’s advice, a family can be set up for life.
The Australians out there who have a close relationship with their financial adviser know exactly what I’m talking about.
For my wife and I, the strength of the relationship with our financial adviser was recently put into perspective when we finished a review of our strategy and despite the fact that our asset values had decreased, my wife turned to me and said, “I always feel good after visiting that office”.
This is exactly what you want from your adviser: peace of mind and confidence in your future strategy.
It is the intimacy of the relationship between clients and advisers that offers great value to clients. Over a period of time, a financial adviser will achieve more for a family than any other professional – the value of their work will span generations.
What does a planner actually do to add value?
Very early in the process an adviser will sit with a client to work out what goals or dreams they want to achieve in life.
Now for many this can be a challenge, especially in a situation where a husband and wife can’t reach an agreement on what the future looks like.
Quite often, the adviser will take on the guise of a counselor or mediator in situations such as this. How do you put a value on this? I can’t think of another profession that actually asks you to think ahead about your life and plan your goals.
After identifying the goals and reviewing the clients’ current financial circumstances, the adviser will set a path to achieve those goals while articulating the risks involved in such a plan, including making sure contingencies are in place. The adviser will also help manage cash flow, minimise tax and facilitate the correct asset ownership for their clients.
It is true that for many, visiting an adviser can be a very emotional and confronting experience.
Imagine being told you have to curb your spending and work to a budget – this isn’t always a message a mature adult likes or needs to hear.
It is this financial discipline that is missing in the lives of many Australians and it often takes hearing the harsh reality of the situation to make people realise the trouble they are in or what they need to do to achieve their dreams. How can you put a value on this?
We often hear about fees, charges and investment returns as being the key inhibitors for people who retire with too few dollars – the truth is that Australians need to contribute more than the compulsory employer superannuation contribution of 9 per cent for a comfortable retirement.
But they often take action in this area too late in life and the compound effect of time cannot make up the shortfall.
A financial adviser helps people plan for their retirement by forecasting exactly how much they will need to achieve a comfortable lifestyle in retirement.
They will then help a client change their ways.
The value of peace of mind
The world we live in is full of instant gratification (mostly on credit) and the value of using a financial adviser has limited appeal instantly.
But in the long run it is the most valuable professional relationship someone can have – it’s life changing.
Despite this, people do not flock to the offices of financial advisers to seek their professional and valuable advice.
Many of the new clients who walk through the doors of our financial advisory practices are referrals from existing clients who have witnessed firsthand the value of advice.
Often people seek the advice of a financial adviser much later in life, but it pays in the long run to benefit from advice early in order to achieve goals and dreams.
Why do only 17 per cent of Australians seek financial advice when there is so much value in it?
Is it the fear of the unknown? Is it the fear of being told things you don’t like to hear? Or is it just the uncertainty attached to the advice process and how much it might cost?
It is probably all these reasons, but the sad fact is that those who don’t enjoy the benefit of having a close relationship with a professional financial adviser during their life will be worse off.
They will most likely never achieve their financial and lifestyle dreams and goals, and in a country like Australia, that should be a crime.
An article we concur with.
Welcome to call on 07 3848 1088 or email info@wealthcoach.net.au
or visit our websites www.wecoachwealth.com.au
John McAuliffe
