You don't pay me for my time...

I recently had to go to an eye specialist. 

The guy I went to was recommended to me as the best in his field.

I showed up at the clinic on time, feeling a little nervous and unsure of what was happening next.  

One of his assistants explained the process to me step by step.  I was really grateful for that – I was getting a little freaked out, thinking about someone sticking sharp tools into my eye while I was watching!

I had to wait a little longer and then I was taken through to the surgery. The doctor’s assistants and a nurse started preparing my eye – cleaning the skin around it, putting on the protective material, adjusting the lights and laying out all the tools.  

I was laying there for about 20 minutes before the actual specialist came in.  He sat down next to me, looked into my eye and did a few tiny but precise moves with his tools.  Within a minute he was done and said, ‘There you go, all fixed.’  I thought, ‘wow, that was quick!’

As I was waiting to pay, l there was a guy in front of me who’d had the same procedure.  ‘That’s $745, sir,’ said the secretary.

He shook his head and said, ‘Wow, that a hell of an hourly rate!’  

The specialist overheard him.  He came out of his office and walked over to the guy.  He smiled and calmly said, ‘You don’t pay me for my time.’  Then he turned around and went back to his office.  He didn't need to say anything else.

I was gobsmacked!  This guy was spot on!  I immediately thought of the work I do with my clients.

Even though it takes me a little more than a few minutes to do my job, it’s not about billable hours, or the amount of time I spend in front of my client.  The value is somewhere else - It’s about the outcomes we can achieve together. The outcomes they care about.

I help them build the fundamentals which lead to the life my clients want to live.  

The value of that can rarely be expressed in numbers. 

by Michal Bodi

I thrive on a feedback, please let me know what you think, drop me a line to mbodi@sydneyfinancialplanning.com.au or simply comment on this article. I'd really love to hear from you.

Well done is always better than well said...Stop procrastinating!

Well done is always better than well said.

Procrastination is no doubt the number one reason why people don’t become successful at achieving what they dream of. 

It is caused by the change that needs to happen. And we, humans, don’t like change that much!

Why?

Well, it’s got a lot to do with our ego and the actual process of admitting that what we’ve been doing is wrong. 

It can be especially difficult when we’re surrounded by people with same views as us. Why should I stand out?

Generations Y and Z ...

When you’re young, it feels nice to have a first job, still live at home and spend the money on travelling and going out, but just think about where you are at the moment. Your whole life is only starting.

What you may not fully realise day by day (because you just don't) is that the time is on your side and you will never (ever) be in this position again. 

Use that competitive advantage! Trust me, you don’t want to end up like the vast majority of adults – looking back in ten or more years’ time, realising what a massive opportunity you had… And you blew it!

What I’m talking about is the power of ‘doing’.

You have two choices

Choice number one – do nothing and spend every cent. This is what most of you will do. Just like everyone else (I thought you wanted to be different?)

Choice number two – start implementing tiny changes into your spending habits. Time is your best mate here. It will do the rest, as long as you stay committed.

Remember, if you change nothing, nothing will change. The change doesn’t need to happen all at once, you can start with baby steps. 

One year later, you will be definitely in a better position compared to if you did nothing.

There are many ways to put money aside but here’s a fun example to start getting ahead – something that I call the reverse version of The 52 week savings challenge:

You start with $52 that you put away in the first week – that is the biggest commitment you need to make, it gets easier from here.

The next week it’s only $51. And as you continue, you decrease the money by a dollar every week, until you will end up with a dollar contribution in the last week, year later.

Over the course of the year, you will save exactly $1,378.

This can be used as a nice little deposit into an investment plan which can one day be converted into an investment property deposit. It will give you that competitive advantage.

It can be the difference between having to work every night to earn extra money for your ski trip compared to having a passive income to fund your travels so you can spend more time with your friends.

All you need to do is start. 

Anything. Just start…

by Michal Bodi

Struggling to get ahead? Start transforming your dreams into goals

Struggling to get ahead? Start transforming your dreams into goals

We all have dreams. And we love to talk about them. We know exactly what they mean to us and how they make us feel. 

Reaching these dreams and making them true means that our lives matter. But most people don’t succeed and don’t realise their dream potential. 

Why?

What successful people do differently is that they also have goals. 

And it’s having goals and a plan to reach them what separates them from the pack and helps them achieve their dreams.

How do we set goals? Here are some practical tips:

1.       Think hard about your dreams and what exactly they make you feel. Think about why you feel that and what it would mean to you to realise these dreams. Write notes.

2.       Write them down (include the notes from the point 1). Unless we write our dreams down, they will forever remain in our head. Prioritise them, start with the ones important enough for you to take action and do something about. It’s the very process of writing your dreams down when you start transforming them into your goals.

3.       Match them with pictures – do this for every dream you have and display them in your home. Somewhere you look every day. This might sound silly but visualising is a very powerful trick especially at times when we feel like giving up. It’s when these pictures will remind you why you are doing what you are doing.

4.       Share them -You need a commitment to make to yourself. I find social media to be a great way to do this. Once you make your dreams public, it cements them in. They are official now.

5.       You have done as much as you can on your own. The next thing to finalise your dreams into goals is to make them specific - time specific and dollar specific. 

    

    This can only be done by a third party – a quality financial planner. They specialise in goal formulation and creating the journey – financial plan - to reach your goals and dreams. They will also remind you of your goals and ensure you stick to your plan.

Visit a few firms, take your time and find the right one - someone who will ask the right questions and you will feel comfortable that they understand what is important to you and why.

You will eventually find that it’s not necessarily reaching your goal itself but the actual process of getting there, the excitement of the progress what made you feel happy. You will now also have a blueprint and know what to do in order to successfully reach your next destination. 

So, go ahead; what’s your next dream?

by Michal Bodi

How much do I need to retire comfortably?

How much do I need to retire comfortably?

Question:

What would be the super amount/balance needed for a ‘comfortable’ retirement for couples when we reach our retirement age, which I understand is $56,406 in today’s dollars? My husband and I are 56 and 50 respectively, and have an SMSF with $600,000.

My answer:

Retirement planning is an ongoing, evolving process that requires plenty of foresight and I applaud you for thinking about it now. 

This is a common question that unfortunately cannot be answered based solely on the information you have provided. The answer will depend on many variables and your own expectations in regards to longevity of your money. 

Are you happy for your capital to run out at a particular age or you would prefer a perpetual income and the ability to pass your wealth on to the next generations? When do you wish to retire and what is your own idea of a comfortable retirement? 

The figures you have quoted as a comfortable retirement income are based on averages (ASFA Retirement Standard survey, June 2013) and they very rarely reflect reality. For example they only include $2,725 per year for an overseas holiday and they don’t allow for any extra cash for gifts to your grandkids...

Once you work out your own retirement budget you end up with a retirement income figure that reflects your own financial reality and you've completed the first step of many.

It’s important to realise that the retirement planning process is not a mathematical equation. It’s not just a matter of plugging the figures into a calculator. We live in a fast pace society that suggests it should be that simple. But even a simple calculation is only as good as the figures and assumptions used.

It is absolutely critical to realise that retirement income planning is way more complex and way more important to people than a single conversation. It requires expertise and the careful consideration of many factors. It requires wisdom – we know that a tomato is a fruit but we don’t put it in a fruit salad.

The next vital detail is to remember that every date and dollar specific retirement income plan (that also addresses ‘what if’ scenarios) requires a financial coach and their ongoing assistance to ensure you to stick to your plan. This is the only way of knowing whether you are on track with your retirement plans or not. And having this certainty is priceless.

I realise that the hardest thing for most people is the first step – to recognise and overcome the fear of experience and make an appointment to consult an expert. But it will take a lot of pressure off your shoulders. It can also mean the difference between getting it right and living the retirement you always wanted … and getting it all wrong.

by Michal Bodi

As published on FPA’s Ask an Expert website dedicated to promoting the value of financial advice - ttp://askanexpert.fpadifference.com.au/

Image courtesy of Michal Marcol / freedigitalphotos.net

Not your crisis...

Not your crisis

News from Cyprus has shaken the markets...

Who would have thought an island in the Mediterranean (that most people didn't even know existed) could generate so many headlines...

What's important is to realise that the odds of this most recent 'crisis du jour' having any impact on you are slim to none (unless you’re a depositor in a Cypriot bank).

It's your financial coach's job to hold your hand and reassure you. 

Remember we talked about this in the past. We talked about we would only deal with things that:

1. are relevant to our plan

2. we can control

And another world 'crisis' doesn't fit in any of these categories. 

... So remember, 'that' crisis is very rarely your crisis.

Let the seeds grow...

Let the seeds grow...

I opened the paper today...just kidding; I tapped on my Twitter app this morning and went through the financial news section. Even though I kind of know the sort of ‘breaking news’ stories I'm going to find, I still read them. 

Dow Jones is down 12 points over night, EU political pressures on Greece continue, Facebook shares hit (apparently and surprisingly) new lows. I take another bite off my toast and smile...

It’s time to switch the TV on. 'I can’t wait' for the next expert analysis of these stories in the regular money segments. My two year old son screams in my ear, he wants me to change it back to cartoons. How do I explain to him that I simply need to know what is going on in the financial world out there and what impact it has on my money? 

Sounds familiar? I know I am not the only one going through this daily morning routine. In one way or the other, we are all victims of the daily noise surrounding us from the moment we open our eyes. 

It’s the culture we live in. It’s the news, the marketing, the advertising entering our head space without our permission. They use good old fashioned fear, but more recently also frustration, desire and family values – all emotional drivers that stay stored in our memory bank. And they stay there for a long time. Until the right time comes, and a very important and emotional financial decision needs to be made, they reappear. And they subsequently drive the decision process.

In a nutshell, the most people make their important (often life changing) financial decisions based on what they see, read and hear in the media. Permit me to say, that’s why most people are not financially independent and what’s worse, a lot of people become financially destroyed.

Financial independence comes from a thoroughly planned journey, where decisions are not made based on the latest news. 

It's created by a series of sound financial decisions, which are made proactively. It utilises virtues as patience and discipline. It doesn’t chase the latest, hot trends or funds and it doesn’t chase any price movements either. It's shaped by a long term plan and strong fundamentals but it’s flexible enough to adapt to changes in personal circumstances. It's formed by a plan that never changes its course because of variables it cannot control. It only deals with variables that it has some chance of predicting and controlling.

But importantly, it's designed and regularly assessed by a financial coach. He/she  constantly makes sure you are on the right path to maximise the probability of achieving what is important in your life. However, the timing needs to be right in order to hire a financial coach. It requires an acceptance that escaping the noise means gaining focus. It’s hard to gain focus when life sort of happens every day. Without going into expertise and experience of a financial coach, the practical and emotional value added is priceless. 

Once you allow yourself overcome the fear of this new experience you’ll allow yourself plant a seed that will grow into a strong and healthy tree one day.

by Michal Bodi

 

End of the Year Myth Busting

End of the year myth busting & putting things in perspective...

We are at the finish line of 2011, a year that will be remembered as volatile, emotional and a year of change. So much has happened this year, in Australia and all over the world. So many of those changes happened because someone finally said stop and questioned the ordinary reality they have lived in. Just because things have always been a certain way doesn’t mean it is the right way. It’s good to question or compare things from time to time, it can give you a different perspective on life and it can improve your level of understanding.

Let’s take a closer look at few misconceptions and myths surrounding us every day. They are used in every day conversations so often that they are considered facts. Not many would question them and unconsciously many have their vision clouded by them. The reason why I am writing about them is that if corrected they could possibly change the perception and improve general knowledge of a few financial concepts. Ok, let’s start our myth busting exercise:

Myth no.1 – Superannuation is a risky investment

Superannuation is not an investment; it is a tax structure or a tax environment. It was designed to offer a tax favourable treatment of assets, used to provide you with benefits in retirement. Also it can considerably increase Centrelink eligibility.

The majority of people’s super money is invested in managed funds within their default employer super funds. These are generally exposed to shares and when the share market is volatile (which happened daily in the last few years) their balances would reflect that. But it has nothing to do with superannuation as the tax concept. Most assets widely held outside super such as cash saving accounts, term deposits, investment properties, direct share portfolios, art work, and commercial properties can be structured within the superannuation environment. It comes with certain restrictions, but also considerable tax and Centrelink benefits. So, next time when you hear someone saying: ‘My super lost money’, you can correct them by saying: ‘No, it can’t’. When you think of super, think of tax and Centrelink, instead of performance and investment returns.

Myth no.2 – Shares are risky investments

The only risk that applies here is the emotional risk associated with these assets. Shares generally carry a certain amount of volatility and that is very normal. The share market moves up and down and sideways on daily basis and no one really knows why, nor can they predict what will happen next. But as long as you stick to the fundamentals of buying quality companies, at good value, apply diversification and remove emotions and allow your investment enough time to perform, you are on track to achieve good growth. Unfortunately, average investors fail to stick to these rules and then subsequently blame the investments, of course! Shares generally offer good liquidity, especially if bought via managed funds. This is one of the great advantages compared to other growth asset like direct property. If you are in an emergency and need to cash in a portion of your portfolio, you can, and it is usually done within a matter of days. With property you simply can’t just sell the kitchen should you need cash quickly.  Additionally, shares can pay meaningful dividends which are often at rates higher than term deposit rates.

You are better off seeking a financial planning professional to help you make the investment decisions with you.

Myth no.3 – I don’t need insurance, they never pay claims anyway

You don’t need insurance, you want it. Ok, this is a tricky one. Because there are so many different types of insurances out there, it is often confusing to distinguish what type of cover people mean. There is insurance for everything these days. However, generally speaking, it is sadly personal insurance (Trauma safety net, Income Protection, Life and Total and Permanent Disablement cover) people opt to ignore.

It comes down to this; when deciding what type of insurance to choose from, consider two criteria – likelihood of a potential claim and the extent of the impact the claim would have on your life. Ask yourself these questions, and be honest. When are you likely to be more affected emotionally? – A. Someone steals your car or B. You are diagnosed with cancer of the liver. What will make a bigger impact on you emotionally? – A. Your house gets flooded or B. Your spouse dies and leaves you with two young children. Which is it going to be a bigger problem going forward? – A. Someone breaks into your house and steals your jewellery or B. You have a car accident and end up in hospital with a spinal injury and you are not able to go back to work anytime soon, your income has stopped and your bills continue to appear in your mailbox (not mentioning extra medical bills).

Your lifestyle today as well as the majority of your plans for the future relies on your regular income. Do not get fooled that you can start making plans with your income without securing it first.

An enormous amount of $3.5 billion ($3,567,649,826 to be exact) was paid in Trauma, TPD, Life and Income Protection claims* just in 2010. That means an average of $14.3 million was paid to 245 Australians every working day in 2010. Yes, it pays to have an appropriate cover in place.

·         Statistics are the aggregate from the following companies – AIA, AMP, Asteron/Suncorp, AXA, BT, CommInsure, OnePath, Macquarie, MLC, Tower and Zurich.

Myth no.4 – Industry funds - all benefits to members

This will come as a surprise to a lot of you. But here’s the real deal.

Industry super funds (ISFs) fall under different legislation than retail super funds and master trusts due to their not for profit status. They don’t have to publish gross/net investment returns, but instead they use what is called a ‘crediting rate’. This  provides them with an advantage to utilise it in their huge advertising campaign.

Tax is the biggest cost in super. When an insurance premium or a management fee is paid from your super balance, these are tax deductible expenses to the fund with tax credits normally applied back to your account. But not with the industry funds, you don’t see a tax credit going back to your account. They pool these credits and include them in the crediting rate and therefore overinflate the fund’s total return. It gets better. These funds are then used for what I think is far from benefits to the members. For example, Australian Super has 1.5 million members and an estimated deductible premium of $200,000,000. At 15%, this would mean a rebate of as much as $30,000,000 that the trustee is using for what? Advertising to non-members (possible breach of the sole purpose test?), subsidizing admin fees so that they look cheaper (transparency issues?) are not my idea of benefiting to members. As far as the facts go, they only benefit to themselves.

There is a long list of issues that an average ISF TV commercial viewer doesn’t realise, and is instead misled by the marketing skills of their sales department.

Oh, and by the way, ISFs refuse to be formally rated by the research houses. Probably due to concerns this would uncover cracks in their deceptive conduct by running their campaign of ‘Industry funds are run only to benefit members’.

Compare the pair? No, thank you.

Myth no. 5 - I don’t need financial advice

Financial advice is available for everyone but not taken by everyone. There are two types of people. The first type always complains about the present and only talks about the future and then there is the other type that does something about their life and plans and controls their destiny.

If you got this far through this blog you are probably in the second group. This is a great start. An ongoing relationship with a financial planning professional will enhance the outcomes you are after. A good planner will stop the information noise around you and keep you focused on your goals. They will simplify the legislative and financial complexities and help you to understand the rules. This considerably eliminates a lot of stress and allows you to get a sense of control, helping you stay confident that you are on track to achieve what is important to you.

Financial advice can end up making a dramatic difference to people’s lives. And it often does. So remember, you always have a choice.

After these holidays, upon returning to work and receiving financial advice, would you rather:

A – Ignore the advice, have no budget, make no extra contributions to your super, pay an extra $175,000 in your mortgage interest, try to time the markets, chase investment returns, and simply miss the best days in the markets and consequently have your super last you only few years into your retirement, pay unnecessary tax after you turn 60 and be at the mercy of government support instead of enjoying your retirement?

Or

B – Implement investment recommendations from your financial planner, get on top of your expenses, pay off your mortgage 12 years earlier allowing you to buy an investment property and increase your overall super benefits in retirement, pay no tax and spend the rest of your life taking trips and enjoying the grandkids?

Would you rather:

B – Ignore the advice, watch your life partner die after not having enough liquid funds to treat his/hers stomach cancer condition, miss the precious last months of their life after having to go back to work to pay the ongoing bills and put food on the table for your children, at the same time have no other option but sell the house you lived in with your family for years and where you were looking forward to raising your grandkids, and abandon the plans to fund your kids’ university studies?

Or

A – Implement lifestyle protection strategies with your financial planner, receive a lump sum when your partner is diagnosed with the disease, allowing you to contact the experts and treat the condition immediately, replace his/her income, take your time off work and spend it by their side and speed up their recovery, maintain all your future plans and together attend your kids’ doctorate graduation?

Merry Christmas and Happy New Year 2012, may it be filled only with the good decisions.

Michal Bodi, Financial Coach

Clarity the key to your success

Clarity the key to your success

Perception really is reality. Someone important once said: Give me the power to control the media and I will take over the world. It is fascinating to watch how the media and our politicians mastered their selling process and how successful they are in altering the reality of every day Australians.

Instant access to information of any kind makes it already more difficult and confusing to make any kind of decision. Therefore it is natural that we automatically delay decision making and throw it in the ‘too hard basket’.

Then, due to relentless lobbying via the media or the next door neighbour, we tend to go back and (without much consideration) opt for the imposed option. Without considering the consequences we then quite happily close the subject. There, the case is closed and filed.

If ever questioned about the decision in the future we often get somewhat defensive. It was us who made it in the first place and therefore we protectively don’t want to re-open the subject and potentially change the outcome. The power of our ego usually works its magic from there.

In various degrees I am confronted with this human behaviour on almost daily basis. I don’t blame anyone for behaving in such way. It doesn’t happen consciously. But let’s think about it. Is an access to information and a little knowledge enough to make a good decision? The difference between knowledge and wisdom is realising that a tomato is a fruit but we cannot add it to a fruit salad. Therefore, we need something else, something or rather someone  that will guide us how to use that knowledge.

The point I am making here is that it is up to a financial professional, to clear the fog. To clear client’s mind from the heavy clouds of too much information noise, advertising and confusion. An experienced adviser can provide CLARITY, look at the bare facts and make a rational decision for our client.

In the past we spent a lot of time on basic client education as the effective tool to raise our client’s awareness, it is no longer necessary. There is plenty of information out there and it is not hard to access it. What is important though is to choose the right information and match it with a quality expertise. Only financial wisdom can provide the right direction, take the burden off client’s shoulders and give them a solution that is right and unique to their situation. Once this happens, the reaction we get is usually quite amazing. Once the client realises that we want what they want and that we are going to make it happen for them and that they don’t have to worry about it anymore...it feels great on both sides.

And that is what I believe the financial planning profession should be about. To be there for our clients, to provide them with leadership and clarity they need, so they can rely on us with any important lifestyle decision. It is a noble profession that deserves this recognition.


by Michal Bodi

The value of financial advice

How can we add value? Why pay for financial advice?

How can you help me? Often I get asked by people enquiring about my role. The answer is always, I don’t know, but if you allow me to find out more about you and your life goals, I will be in a better position to develop life plan guiding you to achieve what is important to you. So... how can I help you?

I take pride in my ability to get the best for our clients.  I am personally confident that I can add value to every single person walking down the street. Of course, not everybody wants to receive advice and that also works for me. It gives me a great deal of satisfaction and a sense of accomplishment to deal with clients who perceive the benefits of quality financial advice. I take pride in my down to earth approach; ability to connect with my clients and years of experience and ongoing personal development and training. Often, after meeting new clients, they comment on how they now actually understand the complex and oftentimes daunting financial issues and jargon.

Our initial meeting is all about getting to know you and seeing how we can add value to your financial position and your life in general.  As a rule, we will only go ahead and formulate a plan if it is clear that we can add value to your life and you clearly understand it and instruct us to do so. This way we are both certain that you will be better off. Then we will agree on flat dollar based, initial and ongoing fee and your preferred method of billing.  I will never receive commissions from your investments.

Everyone has a different reason for coming to see a financial planner, and so success means something different to each client.  But, from my experience, in most cases we add value in these four areas:

Practical Value

My advice will save you time. Recommended strategies will give you a structure to go by and confidence and discipline to succeed.  I will streamline, simplify and manage your finances, and help you to make the right decisions.

Intrinsic Value

My qualifications and ongoing professional development mean that I understand the latest rules and how they work.  My years of experience and expertise mean that I know how to explain all this to you in plain English.

Financial Value

This is the most obvious are where I will save you tax, protect your assets, manage and reduce your debts, help you accumulate wealth and make your money work harder for you.

Emotional Value

Our ongoing relationship means that there will be someone there to take care of it all.  This means less stress, more peace of mind and the knowledge that everything is taken care of. The relief you have taken an action to secure your financial future - priceless.