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  1. Pay yourself firstIt is easy for us to understand that paying off debt makes sense but who would have thought that investing while paying off debt is also a great strategy?
    Let’s have a look at the reasons why saving while paying off debt makes sense:

    1.     By ‘paying yourself first’ you are paying your most important debt – an investment in yourself.  This creates a savings habit which sets you up for life.

    2.     You can start investing earlier and make the most of compound interest.  Starting earlier also means that you can take a more aggressive approach to investing as you have a longer time to accept the market dips and subsequent recoveries.

    3.     You will have money set aside for the future.  This could be for when you stop working or for any other purposes in the future. 

    4.     Money is available for emergencies.

    5.     If you decide to increase your mortgage to buy a bigger home you won’t need to worry about the ‘round to it’ problem (I’ll get round to it).  Your investments will be working for you!

    There is a common myth that you can’t start saving until you are debt-free.  After all, many people believe that you need lump sums of cash to really invest.  However, this is not the case.  Think about it like this: You don’t need to be rich to invest, but you do need to invest to be rich.

    Paying yourself first is a popular concept in Financial Planning circles.  The idea is that you have a set amount taken from your account each payday before you have the chance to use it for other purposes.  After all, you pay the power company for your electricity, the phone company for your communication services, not to mention all the other bills that you have.  Why not think about paying yourself a salary, aren’t you worth it?

    The question you may be asking yourself may be: “How can I invest when I only have a small amount?”  After all you have probably heard that you must diversify by not putting all your eggs in one basket – how is that possible with a small amount?

    And, where would you put your money to get the diversification in your investments that you need to spread your risk?  The answer to that will depend on your tolerance to risk, your time frame for investing and whether you need income from the investment.  Did you know that anyone can diversify by drip feeding investments for as little as $50 a month?

    Investing on a regular basis is a valuable way of growing investments and takes advantage of ‘Dollar Cost Averaging’.  This drip feeding strategy means that you make deposits when markets are low (gaining more for your money – effectively buying ‘on sale’) as well as when they are on the way up – making what you have already bought worth more.  And you don’t need to try timing the markets.

    When diversifying there will be times when you’ll wish that all your money was in shares or all in property or even in gold but over the long run you’ll be pleased to have it spread around – you’ll do better.
  2. Home buying is getting more difficult for many.The introduction of the new loan-to-value ratio (LVR) restrictions by the Reserve Bank of New Zealand (RBNZ) this week has received much media commentary - both for and against.

    The idea (as with other monetary policy instruments such as interest rate rises), is to limit demand for house purchase to help stop unsustainable rises in house prices. As the recent Global Financial Crisis revealed, especially in the United States, when house prices take a downward slump, people with high LVRs suffer most because their house is worth less than their mortgage. So the new LVR restrictions aim to limit demand (and unsustainable house price rises) specifically in a way that will limit the risk of new home buyers finding themselves in this vulnerable position.

    Much speculation is surrounding the new policy and whether it will work or not, in reducing the risk of a future house price bubble. There is almost no past experience to call on to answer the question of how effective we can expect the new LVR restrictions to be.

    My best guess is that the policy will affect too few people, and in a particular segment of the housing market, to have much noticeable effect. But let's hope that the officials at the RBNZ who have advocated the policy (and who have more expertise than me in this area) have convinced themselves to adopt it based on some evidence!

    But the other big question is, even if successful, will it have other side effects that are good or bad?

    Here I am more worried for three reasons.

    First, using a general rise in interest rates affects almost every borrower and in a similar way, whereas the LVR policy affects only a few, specific types of would-be borrowers. This makes it ripe for responses by borrowers that enable them to get around the policy. For example, first-time buyers who can't find a 20% deposit but who have parents who can extend their own mortgage and on-lend to their grown-up children will be in a more favourable position. Others with less fortunate family economic fortunes will, however, be cut out. But, expect credit constrained borrowers to explore plenty of ways around the new restrictions - and this could involve family personal loans at higher interest rates that make them more vulnerable to an economic downturn should it happen.

    And therein lies the second problem. The policy is intended not to discriminate against lower income borrowers but these are precisely the ones likely to be less able to get around the restrictions. So the policy also discriminates against lower income households or families in a way that interest rate policies don't. When interest rates rise, the banks can make a careful judgement on what they can afford to lend you, and what you can afford to borrow, based on your income prospects into the future, not on how much you've been able to save recently towards a deposit.

    And, thirdly, as some lenders have recently pointed out, the ability to repay a mortgage is what really matters in regards to whether a borrower will be vulnerable to an economic downturn in future, not what percent of the house price they have borrowed. So, yes, a temporary house price downturn that leaves your house worth less than your mortgage is not nice. But as long as you still have the income to repay the mortgage you don't need to sell and can wait for an upturn in house prices in future, as well as your repayments in the meantime reducing the loan value, to sort the issue out. The LVR restriction is only helpful for those who would have to sell their house in a crisis - perhaps because they become unemployed or need to move out. But these are also often the people whose borrowing would be already restricted when lending is based on their expected capacity to repay.

    So, maybe we should hope that this new policy isn't too effective - that way it will have less of these distortionary effects that seem likely to accompany it.

    “This article is reproduced with permission from financialalert.co.nz”

  3. Some time ago I read an interesting article by Michael Masterson about the various types of financial books and how to make the most from each of these books.  The article, written in 2007, was called “How to Read and Profit From Wealth-Building Books”. This is a synopsis of that article.

    Michael splits financial books into five types.  These are the categories he gives them and how you can make the most of each.

    Investment Books are usually written by share market (stock market) gurus who assume that you want to learn by investing in share markets.  The way to get the best from these books is to read until you find a strategy that you think is best for you.  Stick with this strategy as studies show that being consistent in your investing is a more important indicator of success than the strategy itself.

    Academic Studies are typically written by researchers such as Thomas Stanley's The Millionaire Next Door: The Surprising Secrets of America's Wealthy. These books describe wealthy people, what they do, and how they became wealthy. Michael’s own book, ‘Seven Years to Seven Figures: The Fast-Track Plan to Becoming a Millionaire (Agora Series)’, falls into this category.  Read these books for motivation. They remind you that to become wealthy you must do what wealthy people do which is work hard and save.

    Debt to Wealth books are often written by financial planners or advisers. These books encourage and guide those in financial trouble in the ways to control of their personal finances. Each author will have their particular way of providing this information but the books are designed to help create good habits.

    Scrimp and Save books are often written by authors who show how ordinary folk take advantage of strategies such as the "miracle of compound interest" by investing wisely over a long period of time. This particular miracle is best started when you are young.

    You Can Get Rich Too books are written by successful business people such as Donald Trump.  Don’t be disappointed to find that these books tend to have the same stuff about getting rich.  That is to say they advocate entrepreneurship and real estate.  Use these books to learn particular property and business building tips.

    Each book you read will give you something to take away.  Being a prolific reader is one key to the success many people such as Warren Buffet and Donald Trump share. We can all read books to increase our wealth knowledge base.
  4. This is a reminder for those with KiwiSaver that the minimum contribution rate for employers and employees will increase from 2% to 3% of gross salary or wages.  This is due to take effect from the first pay period starting on or after 1 April 2013.

    While the change was announced a couple of years ago you may well have forgotten that it was happening. You won't have to do anything as your employer will make any necessary adjustments.

    If the increase in contributions from your pay isn't within your means you do have the option of taking a contribution holiday.  Contribution holidays are between three months and five years and are available to those who have been in KiwiSaver 12 months or more.  Remember that your employer must also increase their payments to 3% so if you can keep it going it’s well worth it – like a salary increase!

    If you are self employed and a non salaried KiwiSaver member you can continue to contribute the same amounts as you did before.  That’s entirely up to you.
  5. Contact Lyn to learn about this offer
    For a limited time you can go in the prize draw!

    For home loans taken between 11 March 2013 and 30 April 2013, you will not only receive the fee-saving and debt-reducing potential that comes with every Sovereign Go Home Loan, but you may also qualify for a fabulous Sony Bravia 42” LED internet TV and up to $1,000 cash!

    Please contact me to get details of how you can enter the draw.
  6. Christmas Bells from http://www.squidoo.com/free-frames-borders-backgrounds
    The expense of Christmas does take a bit of the gloss off of this special time of year, doesn’t it? Let’s take a look at some ways we can reduce the costs...and hear from some experts.
    1.     Make up a gift basket.  Take a look they can make inexpensive gifts.
    2.     Give a voucher for a deed you will perform at a later date such as clean the car, cook a meal.
    3.     Use your points collected on loyalty programmes to find something special without breaking the bank.
    4.     Do your own baking such as making Christmas cookies, fudge and more.
    5.     For New Zealanders you can give a child a KiwiSaver.  See a copy of the gift certificate and contact Lyn to make a certificate up for you.
    Christmas Saving Tips from Some Classical ‘Experts’
    Santa knows what he's doing! He makes a list and knows how crucial it is at holiday shopping time to have your list with you. If you hit the shops without your Christmas list, you're sure to overspend. Wise shoppers like Santa know that using a carefully thought out list saves time and money. And by organizing your purchases, you'll reduce those multiple trips to the mall and cut costly impulse buys.
    The Grinch
    Simple pleasures mean a lot, especially during the holidays. Ask the Grinch, who watched in amazement as Christmas in Whoville "came without ribbons! It came without tags! It came without packages, boxes or bags! . . . Maybe Christmas, he thought, doesn't come from a store. Maybe Christmas, perhaps, means a little bit more!" The much changed Grinch, whose small heart grew three times that day, will confirm that you don't have to spend a lot of money to have a happy holiday.
    Ebenezer Scrooge
    Scrooge learned after a very sleepless night to keep Christmas in his heart all year round.  This can be done by giving to charities.  As the donation is normally tax deductible you can make the donation as a gift on behalf of your family member or friend and they will receive the benefit of the tax refund.

    This is my gift to you for a stress free Christmas >>>>click here 

    Merry Christmas everyone!  And all the best for 2013.
  7. When it comes to retirement planning, don’t bet the house on it.
    gingerbread house

    “You can’t eat your house” sums up an all too common quandary for a number of retired people in New Zealand.
    These folk have paid off their mortgages but at the same time are finding it tough to get by without the regular income that sustained them through their working lives. They discover they’re cash poor, though quite well off in a property owning sense. But edible dwellings, like the gingerbread house discovered by Hansel and Gretel, are indeed the foodstuff of storybooks.
    Owning one’s home is an important and worthy goal, and yes, for many of us our residence usually does end up being our largest asset. But the point here is that there are dangers in building a savings strategy solely around the family home.
    A New Zealand Treasury study, released back in 2007 prior to the launch of KiwiSaver, highlighted this situation.
    It found that the family home accounted for about 70 percent of the wealth of the average New Zealand household. Many families viewed this as a substitute for saving. Once retired, they planned to downsize their home, which they hoped would give them a lump sum they could then invest to generate extra income.
    But the study reported that the effect of doing this is “modest; it is only noticeable when households halve the size of their home." So… if this is your strategy and you live in a house worth $700,000 now, be prepared to move to a dwelling valued at $350,000 in order to free up the necessary capital.
    In fact, the study prompted the architect of KiwiSaver, former Finance Minister Michael Cullen to say: “This is a timely reminder for many New Zealanders to think beyond their investment in the family home if they are to secure their retirement dreams.” (Refer)
    Another pitfall is the lack of diversification that results in a ‘home alone’ investment approach. The first rule of Investment 101 is always: spread your risk.
    Remember, the real estate market is just another type of market. It has been subject to downturns in the past and it will be again. Have you really spread your risk if as much as 70 percent of your wealth is tied up in a single asset within a single market?
    It’s also worth remembering the costs of investing in a home. Many homeowners look at the price they get when they sell a house, subtract what they paid for it and think… “Haven’t I done well!” They forget the interest costs of a long-term mortgage, rates, insurance, maintenance, renovations… the amount paid to live in a house can sometimes outstrip the so-called profit made when the house is sold. 
    So what’s the best path to take?
    By all means, invest in your own home, but don’t let it become the only string to your retirement savings bow. Being involved in a retirement savings scheme such as KiwiSaver is an effective way to diversify your investments.

  8. BuildingThose New Zealanders who have long held property investment near and dear to their hearts (and there are many of them) will be interested to know that property has been behind a stellar showing over recent times.
    But before you start thinking it might be time to buy that house for sale across the street and play landlord, you need to read on. We’re not talking about ‘direct’ property investment here, but the listed property sector – a cluster of entities known as listed property trusts (LPTs) that are listed on the New Zealand Stock Exchange.

    By way of quick explanation: an LPT is a company that buys, owns and manages real estate properties and loans. As they are listed on the share market, investing in them is achieved by buying their shares.

    Over the past year, the LPT sector has delivered impressive performance. The sector generated a gross return with imputation credits of 17.3% for the year to the end of April 2012; not half bad, considering the broader share market (as measured by the NZX index) clocked in at just 2.6% over the same period.

    “That performance has been driven by retail investors looking for safe yields,” explains OnePath Investment Manager Craig Tyson. “The broader equity market has struggled, finance companies are no longer in the picture of course, and bank deposit rates are at low levels. For people wanting a return on capital, it has been a sound option.”

    Tyson points to building occupancy rates hovering around 97% and weighted average lease terms of just over five years as underlying strengths of the sector. “Those fundamentals are strong – they deliver security of cash flow.”

    What many investors like about LPTs is that they can have a piece of a tangible asset they know and understand, without the hassle of direct ownership. Because, for all their potential to offer steady returns and solid capital growth, properties can be unwieldy things to acquire, manage and when the time comes, unload. Through LPTs, investors can enjoy the benefits and leave those tricky bits to the experts. What’s more, the investment can be made for a very small outlay with the exposure spread over a broad range of properties.

    There are a number of LPTs on the NZX. They all differ slightly in approach, although none of them invests in residential property. Their portfolios are typically made up of retail, industrial, healthcare or office buildings – sometimes diversified across those sectors, sometimes specialising in one of them.

    OnePath investors have benefitted from this LPT surge. All their balanced funds (including KiwiSaver funds) have an allocation to property. And there are a range of 
    single sector funds that invest predominantly in the sector.

    “While the recent results have been very strong, the sector has performed steadily over the past decade,” adds Tyson. “The 10-year return for the NZX Property Index (gross with imputation credits) to 31 March 2012 is 9.4% per year. It’s very encouraging that in these volatile times, one sector has performed in line with people’s expectations.”

  9. February earthquakeAlways be prepared -- the old mantra of the guides and scouts.  And it's never been more important than in today's world of natural disasters!

    I have written an article on surviving an eathquake or other natural disaster for that matter and you can find it here at Earthquake Susrvial List of Five.

    It has been two years since the 4 September earthquake and this month on the 26th at 9.26 am there will be a National Earthquake Drill in New Zealand.  For more details you can visit the official Civil Defence website here>>>

    It doesn't matter if you live in New Zealand, the USA, the UK, Africa or anywhere else.  We all need to be aware of what we need to survive a natural disaster.  I urge you to take the time to take a look at the article I have written. And I'd love to hear you comments and feedback too!
  10. Market Summary: July

    Global equity markets rallied in July with positive sentiment arising from what was perceived as a successful summit of European leaders in late June. Comments from European Central Bank (ECB) President Draghi were also taken as a sign that the ECB was preparing to act in order to bring bond yields down in Italy and Spain. Earnings season in the US saw companies slightly ahead of expectations, generating a similar level of earnings to the same period 12 months ago. Economic data continued to be mixed leading to expectations that the US Federal Reserve will provide additional unconventional stimulus later this year.

    In local currency terms, the MSCI All-Country World Index gained 1.4%. The advance was limited to 0.3% for unhedged NZ-based investors, with the NZ dollar gaining 1.1% against the MSCI-weighted basket of currencies.

    The Australian ASX 200 index gained 4.3%, despite the underperformance of the metals and mining sector. Banks had a strong month, with their relatively high dividend yield proving to be attractive in the current low yield environment. NZ stocks matched their Australian counterparts, with the NZX50 also moving 4.3% higher.
    Global listed property had another strong month, with the UBS Global Investors ex Au/NZ Index advancing 3.1%. The NZ Listed Property Index was up 2.4% compared to a 5.6% gain in the Australian listed property sector.

    US Treasury yields moved lower over the month with the UST 10-year yield below 1.5% at month end. With yields on European sovereign bonds also moving lower, the JP Morgan Global Government Bond Index rose 1.2%. NZ bonds lagged global bonds, with the NZ Government Stock Index up 0.1%.

    “whatever it takes…”

    Volatility remained one of the constant themes of capital markets over July with the euro zone sovereign debt crisis never far from investors’ minds. Spain was the focal point with a number of regional governments requesting aid from the central government. Spanish Government 10-year yields touched 7.5%, while the yield on the same bonds of the larger ‘core’ European nations reached record lows. Shorter-term bond yields moved below zero in a number of countries, meaning investors were prepared to pay governments they are lending money to!

    At the end of July, ECB President Draghai announced, “Within our mandate, the ECB is ready to do whatever it takes to preserve the Euro.  And believe me, it will be enough”.

    This led to a sharp rally in equity markets and a decline in Spanish and Italian bond yields on the expectation the ECB was about to expand its balance sheet to assist specific European countries as they make painful, long term structural adjustments.  As is often the case with Europe, there is a limited amount of detail around the future plans of the ECB. Various policy makers from several northern countries expressed concern with the path the ECB is going down.

    Global growth concerns remain

    Economic data for the US and China did little to alleviate fears that these two powerhouses of global growth are slowing. In the US, the Institute for Supply Management’s Manufacturing survey for June fell below 50 for the first time since mid-2009, and other regional manufacturing surveys were weak.

    Non-farm payrolls rose a less-than-expected 80,000 in June, meaning the unemployment rate remained above 8%. The bright spot for the US was that some of the housing data gave cause for optimism in this key sector. New house starts, in particular, were strong and the Case-Shiller home price index continued to edge higher.
    The People’s Bank of China responded to recent weak data, with cuts to commercial banks’ interest rate less than a month after the previous cut. China’s official PMI (Purchasing Managers Index) remained just above 50 and China’s GDP growth for the second quarter came in at 7.6% year on year. This is close to the rate of growth that Chinese policy makers set out in their five-year plan as they attempt to move the drivers of economic growth from public and private expenditure on infrastructure projects and real estate to more sustainable consumer demand led growth.

    Corporates managing the low growth environment well…

    Earnings season for the second quarter kicked off in July led by US companies who for the most part posted figures ahead of expectations. It is important to note that analysts had already downgraded their forecasts in the months prior to results being released. Analysts now only expect S&P500 companies to report FY2012 earnings around US$103 per share, having been as high as $114 a year ago.

    Companies have continued to manage their businesses very conservatively with careful balance sheet management. This has resulted in profit margins remaining at historically elevated levels and has kept shareholder earnings high.

    Many analysts remain optimistic that corporate America is one of the few sectors of the economy with sufficient capacity to maintain aggregate growth rates. However, few CEOs have the confidence to commit to long-term future investments. The prospect of a fiscal overhang in the US, ongoing instability in Europe, and significant uncertainty over taxes, regulation and commodity prices mean this uncertain environment is likely to remain for some time.
  11. The Budget Puzzle is about spending less and living well. It looks at how, why and when to budget.
    After you have the essentials of why you need to budget
    When asked to review my book before it was published it this is what Ken had to say: “Hi Lyn. I have read your proposed document. I found it spoke in plain understandable language. The step by step format was easily followed and made for a good practical approach to Budgeting. Kind Regards Ken Snelson”
    At the time of writinmg this post there are two reviews on Amazon

  12. Global equity markets took a turn for the worse in May when support for anti-austerity political parties in Greece again jeopardised the nation’s membership in the euro zone. Generally disappointing economic dataflow in developed markets added to investor woes, particularly in Europe but also in the US. There was also further evidence that China’s economic slowdown may be more pronounced than many economists were forecasting, putting pressure on related stock and commodity prices. 
    In local currency terms, the MSCI All-Country World Index lost -6.8%. The decline was limited to -0.9% for unhedged NZ-based investors, with the NZ dollar dropping -5.9% against the MSCI-weighted basket of currencies. 
    The Australian ASX 200 index shed -6.6%, consistent with the decline in global markets and reflecting the region’s exposure to the resource sector. NZ stocks proved their defensive worth, with the NZX50 declining just -1.9%. 
    Global listed property was less affected by macroeconomic concerns but still declined -3.9%. The NZ Listed Property Index lost -1.8% compared to a -1.3% decline in the Australian listed property sector. 
    The adverse macro-economic environment was positive for bond markets with US Treasury yields plumbing the lowest levels since the Great Depression. The JP Morgan Global Government Bond Index rose 1.5%, with an index yield below 1.8%. The NZ Government Stock Index rallied 2.7%, with sovereign investors attracted to the positive real yields still on offer and relative safety of NZ Government bonds.
    Euro zone on the rocks…
    Macroeconomic concerns plagued equity markets as political wrangling in the euro zone continued to hit investor confidence. 
    Greek elections held in May failed to deliver an election majority to any party or, subsequently, form a viable coalition. This raised concerns about a potential Greek exit from the euro zone. A fresh election is to be held on 17 June and fortunately, recent opinion polls place the pro-bailout centre right New-Democratic party ahead of the radical leftist party Syriza.
  13. Good news for borrowers but those looking to invest will be disappointed that the Official Cash Rate (OCR) remains at 2.5%.  That brings some thoughts of whether to fix interest rates or remain floating.  This newsletter put out by Sovereign may be helpful...Interest Rate Update.

  14. At one time, health insurance was only for those who preferred to use the private health system...but times have changed.

    With the cost of medical treatments and the availability of new procedures and drugs increasing, more and more New Zealanders are going private.

    While urgent treatment is always available through the public system, people can find themselves in a slow-moving queue for those ailments that aren’t immediately life threatening.

    Health insurance gets rid of having to wait on public waiting lists, and gets you treated so that you can start living normally again as soon as possible.  That is its main benefit for most people, and why it is worth considering.
    There are other benefits from private health insurance including allowing overseas treatment, accessing different treatments, treatments not available in the public system and assisting with family support in time of crisis or rehabilitation.
    To help you decide whether you should think about health insurance, ask yourself:
    • Is it likely that I would require medical treatment sometime in my life? 
    • Can I afford to cover it myself if I don’t want to wait six months or more?

    Surgery is expensive and it is an unfortunate fact that most of us do not get through life unscathed. Health insurance provides peace of mind that, if the unforeseen does happen and the public health system cannot help you, you can afford to get expert medical treatment when you really need it.
  15. Another big quake interrupted my opportunity to wish you all well...can't stop Mother Nature, can you!
    Whether you spent Christmas at the beach or in the snow I hope your day was happy.  If you don't celebrate Christmas I hope you have enjoyed the break.
    My wish for all of you is for a brighter year ahead. And may 2012 hold all you would wish for yourself, may your dreams come true and your goals be achieved.
    Talk to you in the New Year!
  16. More and more these days we hear of, or experience a disaster of some kind -- and it seems to be almost weekly.  There were the Australian floods, the Christchurch earthquakes, the Japan earthquake and tsunami, the various North African uprisings, Libya’s dictator and now the large Turkey earthquake.  

    No doubt, many investors will be asking themselves what they should do with their investments.

    The answer is simple: stick to your long-term plan. For most investors, this will mean sitting tight and doing nothing.

    In times of upheavals and uncertainty, there is always a temptation to do something hasty, but it should be resisted. Unless you actually need your money now, withdrawing is a kneejerk reaction, rather than a rational response.

    These are emotional responses…

     Emotion causes investors to panic during market dips or local economy shocks, become greedy when markets rise, follow herd behaviour, become irrationally attached to their investments, switch too often between funds and take on too much or too little risk. This behaviour has the ability to have a significantly negative impact on investment returns…


    Understanding and acknowledging your emotions and the influence they have on your investment behaviour is the first step to controlling them. Investors with certain personality types, such as confident alpha males, are often more prone to making emotional investment decisions. Unfortunately, these are often the very people who are least likely to acknowledge that that they are predisposed to doing so.


    The destructive power of emotional investing when disaster strikes by Rob MacDonald.

    Let’s take a look at what’s happening. There has been loss of life (which is absolutely tragic), there has been economic disruption and massive disruption of property. Oil prices have risen, currencies have become more volatile and share markets have reacted nervously and in many instances taken a tumble.

    The natural emotional reaction for many of you is probably to withdraw your money from various investments and head for the bank.  However, this could potentially be the wrong move.

    History shows there is every indication the markets will rebound – and even go on to reach new highs. However, by selling now, the most likely result is that you will take an immediate loss, at the same time creating buying opportunities for others.

    Sharemarkets by their very nature are volatile, and they can and do react swiftly to events – but that doesn’t mean investors should follow suit.

    It’s at times like this, investors need to keep their eyes firmly on their long-term strategies. As terrible as recent events are, retreating from the markets won’t help anyone – yourself included.

    During the next few days or weeks while there is uncertainty and confusion in the financial markets, the best response for investors is to stay focused and ride out the volatility.  If you are invested in good quality actively managed funds, then your fund manager is probably closely monitoring the situation and taking advantage of the opportunities that volatility creates. The manager will be looking at what stocks are likely to show significant growth  as and when the rebuilding phase commences and will have made a decision to purchase these stocks at a discounted rate. As always, talk to your financial adviser for specific advice relating to your personal situation or contact Lyn.

  17. As a Result of the Canterbury Earthquake more and more people have been dealing with stress both of a financial nature and in the anxiety stakes.  In April Janine Starks put together ten helpful tips on coping and I thought it an appropriate time to remind all those affected of things they can do to relieve the stress factor.

    Whether you’ve lost a home, have damage, lost your job, or are now worried about job security, thinking too far ahead makes the problem seem insurmountable. Instead, refocus yourself on the very short term – just the next month or two. Getting back that feeling of control, in some small fashion has a calming effect.

    I’m a great believer that collecting information, record keeping and being pro-active goes a long way in regaining control. An organised person conquers a problem with far less stress than those who ‘wing-it’

    1. Start a folder: a ring-binder with dividers. If you home is your financial problem, type up a summary page – your address and contact details; EQC claim number; your insurers details and policy number; bank account details; a full list of contact details for your assessor, claims handler, engineer, builder, moving company, storage unit. Have it all in one place so you are not scrambling.

    2. File your paperwork: policy document, latest insurance schedule, any letters or emails from EQC, the title to your property, floor plans of your property if you have them. Start a section for photos of property damage, contents claim, correspondence with your insurer and assessor. Have a notes page for writing down the date of phone calls and what was said. Print off all emails and file them. Confirm any verbal conversations on email to your claims handler or assessor.

    3. Don’t bother ringing EQC incessantly: you’ll get more and more wound up. But if you send them anything, call and make sure it’s on your file.

    4. Talk to friends affected by the last earthquake: find out their tips – we are our own experts.

    5. Start collecting information. When EQC arrive on your doorstep for a full visit, you should be fully armed. Have copies ready of any building report, building quotes, engineers report, floor plans etc. What a waste of their time, if they need to explain how a contents claim works. Every broken item should be photographed and numbered, written up on a schedule, with a quote for replacement. This is a laborious task, but the internet is a wonderful tool. Prices of TVs and crockery can all be printed off. If you can’t find the exact model, something close is fine. If the shop you purchased it from is no longer, retailers in other cities can be helpful.

    6. Read your policy document: dull as it sounds, check the definition of your ‘home’. Ring your insurer and check to see whether items like your ‘deck’ are covered. I was told ours wasn’t as we hadn’t declared its size, but we managed to over-turn that.

    7. Find out what EQC don’t cover: with fences, patios, paths, pools, driveways you won’t need to deal with EQC. Go straight to your insurer to have them repaired.

    8. ‘Other people’ don’t have priority: its negative thinking and total rubbish. Those who appear to be making more progress are usually being pro-active and spending some of their own money to get early answers so they can push their insurer into action.

    9. Get pro-active: don’t sit around and assume your damage is under $100,000. The 15 minute EQC visit was not carried out by engineers or builders. My own home in Redcliffs was given category 4 (minor damage, 9 month wait). Our private engineer confirmed there is easily more than $100,000 of damage. Carrying out your own engineers report can cost $900. Anyone living on a hill should seriously consider it. Alternatively go for a builder's report as they can help identify hidden damage. Don’t assume every builder is busy as specialist companies spend all day doing reports. Expect a 3-4 week wait (no biggie).

    10. Stay proactive with your insurance assessor: they will take photos and have a good eye, but they are not a builder or an engineer. View them as a ‘go-between’. Keep asking what the next step is and what they need from you. They will bring in a proper building assessor who will price up the damage. Then they’ll hand over to project managers who organise the repairs, once EQC have paid out. In the case of a total rebuild, you may be allowed to opt for a full service architect who will project manage as well as provide new plans


    The full article can be found at http://www.interest.co.nz/insurance/53091/financial-columnist-janine-starks-prescribes-10-steps-deal-financial-stress-after-ch  Janine Starks writes a regular column in The Press and is Co-Managing Director of Liontamer Investments.

  18. As New Zealanders we are constantly being told we don’t save enough.

    From International Rating Agencies that downgrade us, to politicians and to the Reserve Bank Governor, the message is: we are spending too much on living for today and not enough on providing for our tomorrows.

    Saving for retirement and other future needs will without doubt mean we will better off in the long run. But these savings also benefit the country – particularly if we invest them productively.

    For New Zealand to achieve prosperity and additional job creation, significant investment is required. Every factory, plantation/forest, shopping mall or engineering project needs investment capital to turn it from a bright idea into reality. That capital can come from two places: New Zealand or overseas (borrowing).

    The more we as New Zealanders’ save, the greater the pool of investment resources to draw from. Of course, not all of our savings should be invested locally – remember that one of the golden rules of investment is diversification – but certainly a reasonable proportion invested at home makes good sense.

    As a country our past savings record has been dismal. For a start, we don’t save enough and, when we do save some money, many of us tend to put it in the bank rather than where it can work more productively – for example, investing in the sharemarket.

    That’s why around two-thirds of the New Zealand sharemarket and many of our former state assets are now owned by offshore investors – investors who were willing to invest where we either didn’t want to or weren’t able to due to a lack of savings!

    As I said before, there are two places to get capital – New Zealand and overseas.  And borrowing from overseas has effectively seen our country being downgraded!

    The recent earthquakes in Christchurch are going to cost the country a considerable sum of money. One of the many ways the Government will be looking to raise the necessary money to kick start the infrastructure rebuild will be the issuing of bonds. These bonds will be critical for the economy and could possibly be a prudent portion of a diversified portfolio. Details on these bonds will probably be available in coming months.

    Having healthy savings levels means a country can call on domestic capital for important projects and investment. As a result, individuals end up better off through better returns on their money – and we also benefit as a nation.

    Whichever way you look at it, saving money makes sense – for us and for the country!

  19. There is no doubt that Steve Jobs, co-founder of Apple, has made a massive impact on the world as we know it.  Now that he has gone we are finding out more and more about the man who was really a rather private person. 

    He was a charismatic leader that's for sure.  Here is an excerpt from an article by John Markoff published in the New York Times:

    Mr. Jobs was neither a hardware engineer nor a software programmer, nor did he think of himself as a manager. He considered himself a technology leader, choosing the best people possible, encouraging and prodding them, and making the final call on product design.

    It was an executive style that had evolved. In his early years at Apple, his meddling in tiny details maddened colleagues, and his criticism could be caustic and even humiliating. But he grew to elicit extraordinary loyalty.

    “He was the most passionate leader one could hope for, a motivating force without parallel,” wrote Steven Levy, author of the 1994 book “Insanely Great,” which chronicles the creation of the Mac. “Tom Sawyer could have picked up tricks from Steve Jobs.”

    You can read the full article here: http://www.nytimes.com/2011/10/06/business/steve-jobs-of-apple-dies-at-56.html?pagewanted=1&_r=1

    And will Apple suffer without Steve Jobs at the helm? Here is view of Brad Stone and Ashlee Vance in an article in the Bloomberg Businessweek.

    Jobs was a total original. He was somehow able to blend iconoclasm, rock-and-roll, and chic industrial design with the nerd sciences, as well as the unseemly profit motive of the corporation. He made that contrary combination seem totally legitimate. His iconic products—iMac, iPod, iPhone, and iPad—literally changed the world, making people more connected in the virtual world and less so in the physical one. He had a knack for whipping customers and the media into frenzies of anticipation and adulation, and he often elevated the business of Apple with a touch of the poetic. “If the hardware is the brain and the sinew of our products, the software is their soul,” was one of the last things he said publicly, at an Apple event on June 6.

    Apple will undoubtedly suffer without him. All the various aspects of his contribution have been chronicled since his resignation on Aug. 24, ad nauseam. Jobs harangued his employees into meeting the standards of his own lofty perfectionism, over and over. He canceled as many projects and prototypes as he approved, which ended up focusing Apple’s attention and resources on just a few game-changing products. He was relentless at manipulating the media, by alternately withholding access and then granting it, and with theatrical product reveals and occasionally belligerent interviews. He could turn a routine press conference to introduce a new gadget into something as anticipated as the Super Bowl.

    At Apple’s presentation of the new iPhone on Oct. 5, Jobs’s absence was gnawingly felt. Apple’s new chief executive, Tim Cook, and his fellow execs exuded confidence and used a lot of the same intonations as Jobs. But they did not come near to expressing his vivacious spirit or his deepness of feeling about Apple and its future. It felt, in a way, like they were auditioning for something. Cook himself repeatedly used the word “momentum” to express the company’s progress. Apple surely has that—shares of its stock are up 4,000 percent over the last 10 years. But Steve Jobs never had to repeat a word like that.

    Jobs believed the best-looking, easiest-to-use computers and devices were seamlessly integrated products where both the hardware and software were created by the same company. That conviction was wildly out of fashion in the 1990s, when Microsoft ruled the land and companies like Dell  and Hewlett-Packard packaged computers around Bill Gates’s operating system and Intel’s microchips. Jobs tenaciously stuck to his principles and his revival of Apple—beginning in 1997 but really gathering steam with the 2001 release of the iPod—was not only a triumph of his vision, but a wholesale rejection of the previous decade’s conventional wisdom. “Steve was among the greatest of American innovators—brave enough to think differently, bold enough to believe he could change the world, and talented enough to do it,” said President Barack Obama in a statement.

    Silicon Valley will now be a different place. 

    Read to article at http://www.businessweek.com/magazine/steve-jobs-departs-a-world-he-helped-transform-10052011.html

    Questions are undoubtedly going to be asked on the future of Apple and we can only trust that Steve Jobs made the best of his time left by placing the best people in charge of his legacy. He will be missed.

  20. Two ratings agencies, Standard & Poor’s and Fitch, have downgraded New Zealand’s credit rating during the week.   And we are warned that this could have the effect of increasing our mortgage rates.  This should not be immediate as the major banks do not need to raise funds from overseas at present.

    The article follows and can be found in the NZ Herald

    Downgrade could hit mortgage rates

    By Christopher Adams

    5:30 AM Saturday Oct 1, 2011

    The downgrade of New Zealand's economy by two ratings agencies could result in mortgage rate rises, Finance Minister Bill English said yesterday.

    But economists say the move should not cause a big rise in borrowing costs immediately because local banks do not need to raise much money.

    Standard & Poor's (S&P) lowered its long-term foreign currency rating on New Zealand from AA+ to AA and its long-term local currency rating from AAA to AA+, following a move made by Fitch earlier in the day.

    Fitch and S&P are two of the three major credit ratings agencies in the world. Moody's, the third, has held firm its AAA rating on New Zealand with a stable outlook.

    S&P said this country's strengths - including economic resilience and a sound financial sector - were offset by high foreign, household and agriculture sector debt, a dependence on the commodity sector and fiscal pressures associated with an ageing population.

    "The blowtorch is very much on the Government to really start acting on some of the policy options they've been canvassing with the many working groups and task forces [set up to address economic problems]," said Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research.

    BNZ senior economist Craig Ebert said little had changed in New Zealand's economic situation, and the downgrades were probably linked to continuing global uncertainty.

    The downgrades would contribute to a rise in funding costs for banks, which would be transmitted into the interest rates consumers paid on fixed-term mortgages, said Westpac senior market strategist Imre Speizer.

    He said most banks were well-funded, so they would not be going out into the market to borrow for some time.

    "Over the longer term eventually [the downgrade] should hit term mortgage rates," Mr Speizer said. "Bear in mind also that most borrowers are on floating rates and those will be much less affected."

    In a press conference yesterday afternoon Mr English conceded that interest rates could rise.

    "A downgrade, in conventional wisdom, would tend to lift your [interest] rates a bit."

    Labour finance spokesman David Cunliffe said the Government's reputation was "in tatters" and New Zealanders could expect to pay more for their mortgages as a result of the ratings cut.

    "[Prime Minister] John Key said at the time of the last Budget that if we got a credit rating downgrade that would add 1 to 2 per cent on everybody's mortgages ... and that avoiding a downgrade was their top priority," he said.

    "Well, whatever they thought they were doing hasn't worked because they've had two downgrades in one day and New Zealand has a crisis of confidence."

    The New Zealand dollar fell from above US78c to US76.92c against the US dollar yesterday morning after news of the Fitch downgrade hit markets at 5.30am.

    The S&P ratings cut had little impact on the kiwi, which was trading at US76.71c at 6pm yesterday.

    Mr Speizer said the two downgrades supported Westpac's expectation that the New Zealand dollar would move towards around US72c over the coming weeks.

    The New Zealand stock market held strong with the benchmark NZX-50 index finishing the day up 1.31 per cent.

    It is likely that the rating downgrade is related to the uncertainty that is affecting global markets but the announcement has most certainly affected the New Zealand dollar this week.

    To understand how credit ratings work the Reserve Bank of New Zealand has put out this handy guide

  21. The extended deadline to become an Authorised Financial Adviser (AFA) has meant that there are now 173 Canterbury advisers with the required designation.  There has been a rigorous process to go through and with all of the disruptions over the past year the Financial Markets Authority has called this achievement ‘impressive’.

    It has been recommended that people in the Earthquake Red Zone ensure that they deal with an Authorised Financial Adviser when making important decisions going forward.  The quoted article that follows is from the FMA website. 

    Canterbury advisers rise to the challenge

    30 September 2011

    76 Canterbury financial advisers have met an extended regulatory deadline to become Authorised Financial Advisers (AFAs).

    Due to the disruption caused by earthquakes, Canterbury advisers were given until 1 October to be authorised to advise on investment products and offer services such as financial planning.

    Elsewhere in New Zealand, advisers had a 1 July deadline. 97 Canterbury advisers met the July deadline.

    FMA Head of Primary Regulatory Operations Sue Brown said the commitment that many advisers have shown to achieving authorisation has been impressive.

    "We spoke to advisers shortly after the February earthquake who had suffered considerable personal loss, but what they were still anxious about was being able to help their clients. Their professionalism and commitment to client care define the spirit of the new regulatory era," Ms Brown said.

    FMA recently ran an advertising campaign targeted at residential Red Zone homeowners recommending that they seek the right type of professional advice.

    "Seeing a professional financial adviser will be very helpful to many Canterbury residents right now, but people need to check they're dealing with someone who is following the new rules. They've been put in place to help protect investors," said Ms Brown.

    A full list of AFAs is available on FMA's website www.fma.govt.nz.

    Special Red Zone website pages also have information about other types of financial advisers who can help with mortgages and insurance, and about how to check you're dealing with the right type of adviser.
    FMA's consumer help line is 0800 434 566

    I’m pleased to say that I was one of the 97 advisers who made the July deadline to register as an AFA  

  22. In an article (Publisher's Perspective: Separation of Church 16 June 2011) by Graham Rich of FinancialAlert he describes the global finance crisis in term of the Christchurch earthquake.  I thought this was a very appropriate description and include it here.

    “The GFC was akin to a series of Christchurch earthquakes and aftershocks unpredictably hitting the global financial markets, and the NZ financial markets, financial services industry and financial adviser industry. Just like the Christchurch earthquakes, no one was really prepared for the GFC (no matter what they may now say), no one expected it, no one wanted it, no one liked it and many were seriously hurt by it. And, just like the Christchurch earthquakes, no one party was to blame for all the loss.”

  23. There are three main changes to KiwiSaver to be implemented progressively:

    1. The maximum Member Tax Credit (MTC) will be halved from $1 to 50c for every dollar a member contributes, up to a maximum of $521 per annum. To be eligible to receive the maximum MTC ($521.43 per annum) you still need to contribute $1,042.86 per annum.

    This change will relate to your contributions made from 30 June 2011 onwards, but because the MTC is paid annually in arrears, you will not receive the new MTC amount until after 30 June 2012.

    1. Currently, contributions up to 2% from employers are exempt from Employer Superannuation Contribution Tax (ESCT). From 1 April 2012, all contributions from your employer will be subject to ESCT at your marginal tax rate.
    2. From 1 April 2013, it is proposed that the minimum employee and employer contributions will rise from 2% to 3%.

  24. In a pre-budget speech the Prime Minister, John Key, spoke of reducing the KiwiSaver Member Tax Credits but retaining the $1,000 Kick Start.  KiwiSaver members and employees would be expected to contribute more rather than relying on the Member Tax Credits which are up to $1042.86 ($20 a week) each year.  These are paid by the Government to the individual’s scheme.

     “None of the changes we will be making will affect people before the election so New Zealanders will be voting with all the information they need and can make their own choices”.

    The Working for Families programme and the student loan scheme are all set for a trim in the May 19 Budget.  The Budget would contain “significant savings, but will by no means be a slash and burn Budget.”

    The student loan scheme would also be in for adjustment but would remain interest-free.

    "The changes we are making in the budget will make all of these programmes more affordable and ensure they survive into the future," Mr Key stated. 

  25. The IFA have put together a guide to help answer questions relating to advice on financial matters for those affected by the Canterbury earthquake.  The guide answers questions such as:

    • What you may need advice or help with
    • Making a claim under a house or contents policy
    • Making a claim under a life insurance or income protection policy
    • Managing your budget and cashflow
    • What to do with any investments you have
    • What options you have for reducing your commitments to KiwiSaver or insurance premiums

    You can view the IFA guide here and not only that, by presenting a copy of the flyer you will be elligible for three hours worth of free advice.  This offer is only available from approved advisers who are participating in the scheme.  

    If you would like to arrange an appointment please contact me and take advantage of this offer!

  26. Having two major catastrophes in Christchurch has meant that the home based insurance company AMI has been found short on its own insurance strategies.  Last year no one would have thought that Christchurch would have even had one earthquake never mind two and over 6000 aftershocks!

    It just goes to show that although we don't like insurance -- it is a must.  It is there to protect against the unexpected and this was unexpected...so what of AMI?  Did they cater for the unexpected?  AMI covers 30% of the Christchurch insurance market and that's a large portion of any business' portfolio in one section.

  27. The earthquake in Japan brings so much more heartache, disaster and despair than we can imagine.  The nuclear threat seems more horrifying than the earthquake and the  tsunami even. While I can understand the fear and horror of experiencing the shakes I cannot imagine the horror those poor people are now living through.  The aftershocks will continue to come, adding to their stress.

    My sympathies to everyone living in the zone.

    The tsunami was witnessed as far away as New Zealand.  A friend was in the Bay of Islands and this is his description of the tsunami in the North Island:

    "I saw what at tsunami can be like today, I have never seen water mass move so fast like I saw today. I was at a property right on the edge of the water, demonstrating machines, when the first, second,and 3 more hit over a nearly 6hr period, the noise of the water coming in and the speed it came on and out, along with the silt that came with it, amazing, when I came back on the ferry the colour of the water is something I have not seen before, it was a darker brown than when we get floods and run off, wish I had a video camera, as it is hard to describe. Those poor buggers in Japan would have had no show with those big waves, such is the power of nature."

  28. My first post has absolutely nothing to do with finance. I just need to relay my day of terror.

    On the 22 February 2011 Christchurch experienced the most devastating earthquake for eighty years. This is despite the fact that until 4 September 2010 Christchurch wasn't even aware there was a fault running through the city. This quake was smaller than the 7.1 in September but so much more catastrophic. The 6.3 quake was shallow (at least half as deep as the big one) and also so close to the city. It affected a wider area than the previous quake and many who had little or no damage in September found a different story this time round.

    It's the loss of life that is so very sad. Yes, we have lost many beautiful buildings and Cantabrians will grieve for that aspect for many years. But that cannot be compared to the lives lost and the injuries suffered. Lives will be different from now on.

    I had been on the phone so was eating a late lunch otherwise I would have been under the bookcase in the office! I was in the kitchen making a cup of tea to take back to the office when it struck. Jamie, our miniature dachshund had just darted through to the lounge at a great rate...I expect he sensed something. But my first thought was that he was under the bookcase now blocking the kitchen and lounge area. Fortunately he was safe shivering in the lounge when I managed to get to him by accessing through the bedroom door and then into the lounge.

    I really didn't want to go back inside with all the personal items, broken glass and drawers flung open as every time I stepped inside there was another aftershock. Armed with my mobile I tried desperately to call Kevin and other people in Christchurch but was unable to get through. Messages came through three days later that Kevin had been trying to leave for me. I phoned my poor brother and sister-in-law in South Africa oblivious to any time difference...it was 2.00am in the morning! Heaven knows if they got back to sleep after me screeching down the phone as another aftershock rocked through.

    Encouraged by my sister-in-law Sue I ventured out of the garden to find someone else on their own or any other company. The builder that was doing work on a nearly-completed home a couple of doors down checked that Trish and I were safe before rushing off to see his elderly mother. The house he was working on apparently is a gonner.

    Trish lives in a house a few doors away and she was on her own. We spent the rest of the day trying to get hold of people and looking after the dogs that had got through broken gates etc. At one stage we had five dogs in tow. We knocked on doors to make sure no one was trapped. Trish wouldn't go into her house for her cigarette papers as she rolls her own so ended up using ordinary paper! Desperate times call for desperate measures!

    We had no power or water for three days but are okay now. Power is sporadic and water pressure goes up and down but there are still people without one or the other or even both so we are very lucky. Our home is safe and secure and we are safe also. We have some lovely neigbours and we all know each other much better than we did before. Must go now, Jamie wants a walk...talk soon.


As an Authorised Financial Adviser in Christchurch Lyn Bell has passed the requirements of the Financial Markets Authority and is legally qualified to provide financial services to her clients throughout New Zealand.  

Lyn’s registration can be viewed at www.fspr.govt.nz. Lyn can also be found at the Financial Markets Authority website.

A disclosure statement is available free on request



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While every care has been taken to supply accurate information, errors and omissions may occur. Accordingly, Lyn Bell & Associates accepts no responsibility for any loss caused as a result of any person relying on the information supplied.