Thanks to Clime Capital for sharing this chart. This definately puts things into perspective.

Better a little caution than a great regret

I really enjoy this story, again from the richest man in babylon. There is a lot to learn from the lessons within this book.


Mathon then asks Rodan whether a loan would be well made if the borrower could not repay. "Must not the lender be wise and judge carefully whether his gold can perform a useful purpose to the borrower and return to him once more, or whether it will be wasted by one unable to use it wisely and leave him without his treasures, and leave the borrower with a debt he cannot repay?" Mathon then relates that there are three classes of borrowers, those who promise more financial security than they borrow and who are thus always safe to loan to, those who borrow based on their capacity to earn and ability to repay the loan and thus are safe to loan to, and those who have neither property nor assured earning capacity, who will likely never pay a loan back. He pulls out his box of security tokens and relates some short stories including that of a woman who borrowed money to make her son a merchant. Mathon knew that her son was not ready to be entrusted with such money but to suggest otherwise to the woman was to infuriate her. Since she offered jewels as security, Mathom could not refuse her. Mathon shows that one of the tokens of security is a simple knot tied in a piece of rope, given by a person that Mathon has long lended money to, who always promptly pays his loans back, and uses the loans wisely to become richer. Mathon has had such a good experience with this borrower that Mathon no longer requires the man to give a "real" security to borrow money. Mathon states that he does not discourage borrowing gold, he encourages it, if it be for a wise purpose. Mathon ends by telling Rodan to read what is carved beneath the lid of the token box, which saying applies equally to the borrower and the lender. "Better a little caution than a great regret."

Seven cures to a lean purse

Akrad is back again today looking at seven ways to keep your money. These are very simple concepts that we all know and few live by.

1. Start thy purse to fattening

Arkad instructs the men to begin by continuing to work hard at their current occupations, but for every ten coins placed in their purse to take out for use but nine. "Deride not what I say because of its simplicity," Arkad says, "Truth is always simple."

2. Control thy expenditures

"How," some of the men ask, "Can a man keep one-tenth of all he earns in his purse when all the coins he earns are not enough for his necessary expenditures?" "How many of you have lean purses," Arkad asks. All of the men say that they have lean purses, that they have no money. "Yet," Arkad responds, "Thou do not all earn the same. Some earn much more than others. Some have much larger families to support. Yet, all purses are equally lean. Now I will tell thee an unusual truth about men and the sons of men. It is this: That what each of us calls our necessary expenses' will always grow to equal our incomes unless we protest to the contrary." Arkad tells the men not to confuse necessary expenses with their desires, that all men are burdened with more desires than they can gratify. "Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings."

3. Make thy gold multiply

Once you've started saving at least one-tenth of what you earn, you must put that money to work earning interest. "Put each coin to laboring that it may reproduce its kind even as the flocks of the field and help bring to thee income, a stream of wealth that shall flow constantly into thy purse."

4. Guard thy treasures from loss

"Everyone is tempted," Arkad relates, "By opportunities whereby it would seem that a man could make large sums by investing his money in most plausible projects. Often friends and relatives are eagerly entering such investment and urge him to follow." The first sound principle of investment is security—what is a person who wants a loan from you offering as collateral? Arkad relates again his decision to invest his money with a brickmaker who was going to buy jewels to trade. Some Phoenicians took advantage of the brickmaker's naivety concerning jewels and sold him bits of colored glass. "Guard thy treasure from loss by investing only where thy principle is safe, where it may be reclaimed if desirable, and where thou will not fail to collect a fair rental. Consult with wise men. Secure the advice of those experienced in the profitable handling of gold. Let their wisdom protect thy treasure from unsafe investments."

5. Make of thy dwelling a profitable investment

If you pay rent to a landlord all your life, at the end of your life you'll have nothing to show for it. If you can instead pay a mortgage on a house, at the end of your life you'll have a house to show for it. "Own thy own home."

6. Insure a future income

Arkad instructs the class to prepare for retirement and to buy insurance so that their family will be provided for if they die. "No man can afford not to insure a treasure for his old age and the protection of his family, no matter how prosperous his business and his investments may be." Arkad then foretells the future creation of life insurance companies. "Provide in advance for the needs of thy growing age and the protection of thy family.

7. Increase thy ability to earn

A man must set concrete goals and work to achieve them. These goals should not only be to advance in one's career or one's position, but also to become wiser and more knowledgeable. Further, if a man respects himself, he must do the following:

• Pay his debts promptly and not stay in debt.
• Take care of his family.
• Make a will.
• Have compassion upon those who are injured and smitten by misfortune and aid them within reasonable limits; do deeds of thoughtfulness to those dear to him.

"Cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself. Thereby shalt thou acquire confidence in thyself to achieve thy carefully considered desires."


From the book The Richest Man in Babylon.

http://www.amazon.com/gp/product/0451205367?ie=UTF8&tag=lifevisions-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0451205367

This is general advice and does not take into consideration your personal circumstances.

Why do some people get wealthy?

I have spent a number of years trying to understand how some people get really rich while others don't. What I have found along my travels is that most of the reasons can be found in the book 'The Richest man in Babylon". As a tribute to what I think is an intriguingly simple presentation of financial planning concepts, I will share one concept each day.

Today's lesson deals with the principal of paying yourself first (Saving 10% of your income) and investing wisely.

A part of all you earn is yours to keep

Arkad relates that he did as advised, saving a tenth of his income for a year, then investing that money with a brickmaker who went on a journey to buy jewels to trade. He related this to Algamish, who castigated Arkad for this foolishness. "Every fool must learn," he said, "But why trust the knowledge of a brickmaker about jewels? Would you go to the breadmaker to inquire about the stars?" Algamish then said, "He who takes advice about his savings from one who is inexperienced in such matters, will pay with his savings for proving the falsity of their opinions." Arkad then saved his money for another year, and he invested it with Agger the shield maker who used it to buy materials; every fourth month Agger paid Arkad rent for the use of these funds. Arkad spent these dividends on fine clothing and regularly scheduled feasts. Algamish comments that Arkad is "eating the children of his savings" by not investing them. Arkad adjusts his behavior and when he finally meets with Algamesh two years later, Algamish is so pleased with how Arkad has taken his lessons to heart, he hires Arkad as a manager of his estate in Nippur. By continuing to save and invest wisely, Arkad relates that he became the wealthy man that he is now.



In summary do not take advice from those who are not qualified. Invest your savings along with any income that you earn in the future from these savings back into more investments.

If you are interested in buying the book click on the link below for more details.

http://www.amazon.com/gp/product/0451205367?ie=UTF8&tag=lifevisions-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0451205367




This is general advice and does not take into consideration your personal circumstances.

Should I fix my home loan?

This is a question that my client's often raise with me. The simple answer is that it depends on your personal financial situation.

The main thing that should influence your decision to fix you home loan is whether or not there is a chance you may need to break the loan before the end of the fixed period (such as selling your home). If the interest rates have gone down in the time before breaking the loan you will be required to pay a break out cost. However if the interest rates go up during that time it is unlikely your financial institution will pay you the difference which is in your favour.(Some banks actually do)

If your budget is tight and you enjoy the certainty of a fixed expense then a fixed loan will be a good option to set your budget. Also as can be seen from the graph below we are at 20 year lows in our interest rate cycle.

Nobody knows whether the rates will continue to fall but banks are predicting that they will, given that the 3 year fixed rate is lower than the current variable rate. That being said in 2008-2009 the banks had forecast a similar situation but the 3 year rate jumped considerably in a very short space of time. The cause being a rapid interest rate drop on the back of the Global Financial crisis followed by a dramatic rise in rates on the back of the governments stimulus package which improved the economy. There are too many factors to list that influence the RBA's decision to change the interest rate but generally the economic health of our economy dictates rate drops and rises. When the economy falters interest rates are typically cut and the reverse is true as our economy strengthens.

Each persons financial situation is different so no hard and fast rule applies. Typically though as interest rates continue to fall investment by companies and households grow giving rise to improvements in the economy which in turn can influence the RBA to lift rates. Some people that I see fix some of their loan while keeping the rest on variable to hedge their bets. If you are unsure about what to do with your loan speak with your financial adviser, banker or accountant to work out the best way to go.

What happens to my Insurance with QSuper when I am made redundant?

If you have recently made redundant or are in the process of being made redundant from the Queensland government some of the personal insurance you have within QSuper will end along with your employment.

Most people realise that their income protection will probably stop given their income no longer needs protecting. However it appears that life and total and permanent disability insurance within QSuper may also end at the time of redundancy. The below two paragraphs come straight from QSuper's website. http://qsuper.qld.gov.au/members/super/earlyaccess/redundancy-insurance.aspx

If you leave employment with the Queensland Government your death and total and permanent disability insurance cover will end, and premiums will cease to be deducted, four weeks after you finish employment with the Queensland Government or a related entity.

You may be able to maintain your current level of cover if, when you cease employment with the Queensland Government or a related entity, you apply to have a non-Queensland Government employer contribute to your QSuper account. This must be elected within 90 days of ceasing employment and an employer contribution must be received by QSuper into your account within 120 days of ceasing employment with the Queensland Government or a related entity.

So it would seem that if you become gainfully employed within a very short space of time you can elect for your new employer to make contributions to your superannuation account which will preserve your current insurance arrangements. I was incredibly surprised to find this out when reading through the QSuper website as most other industry funds allow insurance to be retained without the requirement for ongoing employer super contributions.

So what are the other options:

• You could rollover your QSuper benefits to another Industry style superannuation fund and take advantage of the automatic acceptance levels on the fund that will given you a certain amount of life and total and permanent disability cover. You should read the insurance guide and product disclosure statement of the fund and seek financial advice.

• You could roll it over to a public offer fund such as AMP, Colonial Fist State, MLC etc and take out insurance through them. However you will not be given an automatic acceptance of a certain level of cover and will need go through the full underwriting process. True life companies such a these generally have features that industry superannuation fund generally do not, such as terminal illness benefit on life cover. You will however need to use a financial planner to use these styles of funds.

• The third option is establish your own Self Managed Superannuation Fund and have the insurance owned by your own fund. One advantage to this scenario is that the premiums paid by your Superfund are tax deductible to your Superfund giving the fund a deduction that would otherwise go to an industry fund or public offer fund. You should speak to a financial planner about how to carry out this strategy as this is a complicated area.

• Take out life and total and permanent disability insurance outside of the superannuation environment and pay for the premiums from savings. This will very likely be the least affordable method given cash flow could be tight with the redundancy.

• Take the risk of not having insurance. Personally I think this is the least preferable option given that the time people require insurance the most is usually when they can afford it the least.

This is a brief summary of the options available. Changing your financial situation should not be taken lightly given the numerous rules and regulations that govern the financial industry. You should always read the product disclosure statements before making a financial decision and I encourage you to seek out financial advice from a fee for service style financial planning business that is not tied to a financial institution.

The information in this summary is general in nature and should not be taken as personal financial advice.

Should I stay or should I go?

If you are one of the 15,000 losing their Queensland Government job you may find the following information useful.

The employee is given two weeks to decide between two courses of action#:

• Accept a voluntary redundancy
• or
• Pursue transfer (and/or re‐deployment) opportunities (which will either result in placement or retrenchment)

#Commission Chief Executive Directive No. 06/12: Employees Requiring Placement

Note: Where the employee does not advise of their decision, in writing, within the two week period, the employee will be considered to have elected to pursue transfer (and/or re‐deployment) opportunities.

Those opting to pursue a transfer will be registered on a central placement register for up to 4 months. Employees must actively look during this time for placements including applying for suitable advertised vacancies within and external to their department. During this time you will be offered 2 positions, one of which you can decline without providing a reason the other you must demonstrate grounds for refusal. If, however, an employee refuses a second transfer and cannot demonstrate reasonable grounds their employment maybe terminated by written notice.

Redundancy vs Retrenchment

Redundancy Package	Retrenchment Package
Accrued recreation leave	Accrued recreation leave
Accrued long service leave for employees who have worked for at least one year	Accrued long service leave for employees who have worked for at least one year
A severance payment of two weeks' full-time pay per full-time equivalent year of service and a proportionate amount for an incomplete year of service paid at the employee's substantive appointed level. The minimum payment is four weeks' pay, and the maximum is 52 weeks *	A severance payment of two weeks' full-time pay per full-time equivalent year of service and a proportionate amount for an incomplete year of service paid at the employee's substantive appointed level. The minimum payment is four weeks' pay, and the maximum is 52 weeks *
A redundancy package may comprise an incentive payment	A retrenchment package does not comprise an incentive payment

* provided that no employee will receive less than the severance payment under the Termination, Change and Redundancy Statement of Policy issued by the Queensland Industrial Relations Commission

Incentive payment

• In addition to the severance payment, an incentive payment may be offered once only to encourage employees to exit the department on or by a specified date. The payment will be $6,500 or 12 weeks' pay at the employee's substantive level, whichever is the greater.
  • Tenured part-time employees who are offered an incentive payment will be entitled to a portion of the incentive payment, which will be adjusted to reflect the proportion of full-time hours worked by the employee.
• The incentive payment reduces by the equivalent of one week's pay for each week the employee delays leaving the department after the specified date.

• The incentive payment includes payment in lieu of notice.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

 

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.