Following their recent Business Owners Conference in Fiji, Matrix Planning Solutions managed to raise in excess of $2600 for the charity Operation Foundation from generous contributions from conference delegates as well as a car load of donated clothing which included much needed hats and towels.  After the conference had finished, a small number of Matrix people were staying on for a holiday and gave up a day to help these people in need.

“We began by going to a big warehouse to help sort a large shipment of donated goods from Australia. Once we had packed all the clothing, food, water and simple supplies into boxes we delivered it to three flood affected communities,”  says Tracy Morris (Matrix Planning Solutions).

“The extent of the devastation does not hit home until you are in the villages and see it for yourself.  The Fijian people were so humble and happy to see us, even with no food, drinking water or a warm place to sleep, these people were happy to welcome us into their communities and share their stories and a few smiles with us,” says Tracy.

Operation Foundation, which began in 2006 by helping Fijian prisoners return to the community, has grown over the past years and has become the main aid organisation to assist in this flood disaster. There is a lot more work and support needed to help these people establish just the basic foundations to get back to their normal life before the flood hit.

Peter Schultz from Operation Foundation says  “What took us by surprise was the number of Matrix people who rolled up their sleeves and helped us as we took relief aid into the affected villages and communities around Nadi. It became a wonderful shared experience, still talked about by those assisted that day. Thank you Matrix, you really helped become part of the solution. ”

Should you wish to help this worthy cause. Financial Support from Australian donors is tax-deductible. Should you wish to donate money please visit the Operation Foundation website at www.operationfoundation.org.fj for further information.

To invest successfully over a lifetime does not require a high IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.

Either way, the point is relatively clear - investing successfully, per se, is not rocket science, there are many sources you can use to develop your plan; or rather, your ‘intellectual framework for making decisions’. The difficult part is keeping your emotions in check when your investments have gone to extremes, high or low, so that you can stick to your plan. The whole reason for developing a plan in the first place is to help you to navigate the tough times.

The same goes for your overall financial goals – such as retirement plans or university savings. Developing a plan is not exactly simplicity – there are many issues to be dealt with to ensure that the plan itself is sound, including investment allocation, tax concerns, coordinating various sources like pensions etc, timing of contributions and withdrawals, and so on. These things are quantifiable, although the weaving together of these issues can be very complex.

The place where most financial and investing plans go awry is when difficulties arise, and you begin to question the plan. It’s understood, in part because you can often find yourself facing these difficulties in a vacuum, without any idea whether what you’re experiencing is common for all folks in your position or if you’re doing better, or if you’re doing worse. You may have no idea if the plan you’ve developed is appropriate for weathering the current storm, or if the reason you’re experiencing poor results is due to some problem in the plan itself.

This is where a good financial adviser can be worth her or his weight in gold. If the advisor you’ve chosen is properly qualified, he or she can draw upon voluminous knowledge and experience to help you understand what the plan needs to include to weather the storms. The second part, and according to Buffett the most important part, is staying with the plan even when things aren’t rosy all around. A good financial adviser, one who will operate as a fiduciary, undertakes the duty to maintain calm and to ensure that emotions are not driving the decisions.

Most often this ‘sticking-to-it’ part becomes the most difficult when there is great volatility on the downside in the markets. You may be aware of messages from us as your adviser repeating the mantra saying ‘stay with the plan and don’t panic’. At these times it is vital to maintain perspective and remember that your plan is for the long term.

It's important to always remember the basic rules of investing. Your investment strategy should always consider three key things: your goals, your timeframe and how you feel about risk, once these are established and a plan is in place, it’s time to trust your adviser as we will provide you with the guidance, knowledge, and discipline to help you through tough times.

If you would like to discuss your financial position or if your circumstances have changed, please contact a Matrix adviser today.

Some information has been taken from an article by Jim Blankenship.

The benefit of having a professional financial adviser overseeing your finances is shown in this true story below.

John and Jenny* were married for over 15 years.  They owned a farm in the south of Sydney and ran a small  business from their citrus orchard.

They recently decided to divorce and part ways. As the time came to split their assets they had to sell  the farm. Having owned the farm and seeing it grow in value for many years, they were advised by their accountant that once the sale went through they would have to pay $300,000 in Capital Gains Tax.

Having heard this news, John thought it would be a good idea to run this past their Matrix financial adviser. As their adviser knew John and Jenny quite well over the years, she was aware of their  business and knew that they might be eligible for a Capital Gains Tax  Small Business Exemption.  Much to the surprise of their accountant, after some research by their Matrix adviser it was confirmed that they could receive this exemption  The new tax  bill from the sale of the farm was only $5000.00. A difference of $295,000.00!!

The capital gains tax exemption which was used was the Retirement Exemption. This exemption is available to eligible small business owners who  dispose of active assets. This true story shows the importance of having a professional financial adviser to oversee your finances as well as the importance of ensuring you keep your adviser up to date on what is happening in your life. If there are any changes – big or small -- please be sure to tell your adviser.

*names have been changed

To start the New Year, we have put together some frequently asked questions to help refresh your investment knowledge.

Investing:

How are risks and returns related?
The principle is that potential return rises with an increase in risk. Low levels of risk are associated with low potential returns, whereas high levels of risk are associated with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if it is subject to the possibility of market fluctuations which carry some risk of loss.
Because of the risk-return tradeoff, you must be aware of your personal risk tolerance when choosing investments for your portfolio. Taking on some risk is the price of achieving returns; therefore, if you want to make money, you can't cut out all risk. The goal instead is to find an appropriate balance - one that generates some profit, but still allows you to sleep at night.

What is diversification and how does it help reduce risk?
Simply put, diversification is not putting all your eggs in one basket, or not putting all your money into just one type of investment. All investments are subject to some level of risk, some more than others.
It is almost impossible to predict how the financial markets will perform - if we could predict sudden corrections in the share market or changes in the value of the Australian dollar we'd all be millionaires. But diversifying your investments can help you take advantage of the 'ups' while moderating the 'downs'.
Different types of investments perform better under different market conditions. By investing in more than one type of investment you diversify, which can help reduce the risk for your overall investment portfolio. The more you diversify the more likely you are to reduce your risk. For example, you can diversify across

• Different asset classes (cash, fixed interest, property, shares)
• More than one investment in each asset class (eg several different industries and companies when investing in shares)
• More than one type of fund and investment manager when investing in managed funds.

What is Dollar cost averaging?
Dollar cost averaging takes the form of investing equal amounts of money regularly and periodically over specific time periods (such as $100 a month) in a particular investment or portfolio. By doing so, more shares are purchased when prices are low and fewer shares are purchased when prices are high. The point of this is to lower the total average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time. Instead of trying to ‘time’ the market, you may be better off dollar cost averaging.

Example - Dollar cost averaging
You decide to purchase $100 worth of XYZ shares each month for three months. In January, XYZ is worth $33, so you buy three shares. In February, XYZ is worth $25, so you buy four shares this time. Finally, in March, XYZ is worth $20, so you buy five shares. In total, you purchased 12 shares for an average price of approximately $25 each. By making smaller, regular, investments you have purchased more shares overall for a lower price.

Insurance:

What should I do if I am unable to work and I need to make an Insurance claim?
The first thing you should do is contact your adviser as we will help you through the claim process.
There will be various application forms to complete through your insurance company and you will have to supply further information such as medical reports to support your claim. You will then usually be required to attend one or two medical assessments to determine the level of your disability. The insurer may take up to several months to make a decision. In the mean time your adviser can help you manage your budget while you are out of work.

 
Retirement

What is a Transition To Retirement strategy?
The ‘transition to retirement’ (TTR) option is available when you hit your preservation age, (the age in which you can access your superannuation). This strategy allows you to access your super benefits as an income stream prior to retirement.
By doing this, you might be able to cut your working hours, effectively going part-time, but you won’t have to cut your annual income and you do this by accessing some of your super. Of course you’re tapping into your retirement income stream, but you can keep building it up as well. Under TTR, you can only access your super benefits as a 'non-commutable' income stream. That’s ATO jargon for the fact you cannot take your benefits as a lump sum cash payment while you’re still working.
As to how much you can get, no more than 10 per cent of the account balance, as at the start of the financial year, may be paid each year. And when you go to TTR, your employer still pays the compulsory nine per cent super guarantee contributions on the relevant wages. You can also make salary sacrifice payments to help build up your super.
The TTR gives you a number of options and if it means you work less and you can keep building up your super, then it’s not a bad idea.

If you have any questions regarding  your finances, investment portfolio or just general financial questions, please do not hesitate to contact a Matrix adviser in your area– we are always here to help.

Click here to find an adviser near you.

1. Start talking about money around your children when they are young, it’s no secret.

2. Let them  use money early so they enjoy the "adult" experience of handling money.

3. Helping around the house is simply the price of family life; consider only givingpocket money if they go beyond their daily chores.

4. Spending money only happens after you earn it.

5. Set limits.  Give them enough money to learn important financial principles, but not so much that they think money is unlimited. Let them learn to make choices based on financial limits.

6. Provide structure.  Help them establish a consistent saving and spending plan so they will have some type of structure to work within as you let them learn financial principles.

7. As a guide - only 50% of the money put into a piggy bank can be taken out to buy something. At least half must remain as savings.

8. Let your children make financial mistakes so that they learn from them.

9. While 16 is generally the legal age for employment, encourage kids starting around age 13 to think of ways they can earn some pocket money.

10. Guide and advise your kids about money, but don’t dictate. Let them learn from experience

11. In their early 20’s, allow your kids to have a little fun – juggle spending money with savings; it’s important not to live in a state of deprivation, just ensure they know their priorities.

12. Tell them to  ‘invest in your main asset: You’!
Investing in yourself- your skills, your experience, your education is crucial. Your job and future career is the most important aspect of financial independence and security. So tell them to set themselves up well for the next 40 years by investing in their main asset now!

13. Don’t Just Save, Plan. Research shows that people who are goal-oriented and have time-specific plans achieve more wealth than those who don’t. Saving some of their pay cheque every week is fabulous, but they need to have an action plan for what they are saving for and how to manage these savings.

14. Make sure they understand the Short-Term. You can’t foresee what is going to happen. And while we can make great decisions, we can’t control what is going to happen either. So tell them to control the short-term and manage their spending, keep saving, keep paying off debt. Know what you need to do this week to set yourself up properly for the future, and to achieve your goals. But don’t get tethered to a long-term inflexible plan, with no ability to change should things pan out different.

15. Keep retirement at the back of your mind, not the front. They are young, and if they are doing things the right way now, they’re on a good track. Suggest they could think about setting up automatic deductions into a retirement fund, advise them to certainly keep an eye on their super, but don’t get too paranoid. Good financial actions now pan out into good financial futures.

16. Spend Less Than You Earn.  It’s the simplest way to keep financially secure. It seems obvious, but can often be harder than it looks. Yet it is the only way to have a good financial future. If they do nothing else from this article, tell them to do this one.

17. Get Literate. As they are now older, your children might think they already know how to manage their money, but there’s always something more to be learned. Keeping up-to-date on financial management skills, talking to experts, continually appraising your own systems, is a great way to ensure long-term financial security.

18. It never comes easy. Ensure they learn to live with life’s rubs. The older car. The worn jeans, nothing is for free. You need to work hard and save hard to achieve some rewards in life, as we have all heard...money doesn’t grow on trees!

Will you be debt free?  Will you have seen a certain part of the world? Will you have a more relaxed lifestyle?  If you are looking for a special goal-setting tool , MiGoalsDiary is a multi-functional daily organiser,goal keeper and motivational speaker (www.migoals.com) to remind you to achieve small steps each day.

It has been proven that people who set goals and make a key plan to achieve them are more successful than people who do not. As part of your new year resolutions why not put together your five year Financial Plan?

You might be thinking: I have no idea where I’ll be working or living five years from now. That’s okay. You can set financial goals that are independent of your career or lifestyle goals. Whether you plan to earn an MBA and climb the corporate ladder, get married and start a family, retire, or bounce between  half a dozen cities and jobs in the next five years, a five-year financial plan will help.

Why Five Years?
Five years is barely “long-term”. If you are younger, we are not talking about paying for your kids’ education or planning your retirement just yet. We’re talking about setting goals over a period of time that’s brief enough to feel tangible but long enough to allow you to accomplish a few things. If you put your mind to it, you can accomplish a lot in five years, such as:

• Save up a deposit for a home
• Eliminate most, if not all, of your debt
• Save an emergency fund of over $25,000 with just over $400 a month
• Build excellent credit

Writing your goals points you in the right direction and reduce overwhelm. If you keep your goal in your head, five years can pass you by and you may find your financial situation unchanged. That’s why creating, re-reading, and occasionally revising your financial plan can make such a difference.

How to Create Your Plan
There’s no right or wrong way to set a long-term goal, although self-help gurus tend to emphasize that the most effective goals are specific, achievable, and in writing.

Make Goals Specific: It’s impossible to predict exactly what job you’ll hold, where you’ll live, or what your savings account balance will be in five years. But the more specific you can be about what you’d like your financial situation to look like down the road, the better. Instead of simply saying that you’d like to have an emergency fund in five years, write down the dollar amount of an emergency fund you’d like. Want to purchase your first home in the next five years? Write down how much the house will cost, how much you’ll put down, and what your mortgage payment will be.

Make Goals Achievable:. It is important that you set goals which are realistic and are challenging enough to make you grow. Banking $1 million is a nice goal, but unless you earn more than $200k a year or hope to sell or expand your own business, it’s probably out of reach in the next five years. Figure out how much you can save and/or how much more you can earn in the next five years, and set savings goals based upon those realities. By getting a result each day, the cumulative effect will be substantial after five years.

Put Goals in Writing: Goals differ from dreams, especially when goals are in writing. Writing  your goals  reinforce your desire to achieve and get you out of your comfort zone.

What to Include
Your five-year financial plan is yours alone. What will it include? Debt reduction and savings goals are obvious starting points, but they’re only the starting points. Perhaps you want to have multiple income streams in five years (e.g. your salary, a side business, and rental income). Maybe you want to be your own boss, or be able to work part time. Perhaps you want to go back to school or start retirement. All of these possibilities have financial implications - and require financial resources. Ask yourself what you want to accomplish in life in the next five years (and beyond), and then ask yourself what you need to do s in the next five years to be in a position to realize your vision.

If you would like to discuss how we can help you put your 5 year plan into action, please make an appointment with one of our Matrix advisers today.

What about the partner at home?
If something were to happen to a stay at home spouse, it would be emotionally devastating for the surviving partner and children. There are, of course, many emotional repercussions of such a tragic loss to a family. But there could also be a tremendous financial impact, as well.

The value of services performed by the stay at home spouse, including carpooling, laundry, grocery shopping, cooking, and taking children to appointments, can add up to a surprisingly hefty cost. For the initial time period, relatives may be able to lend a hand with household and family tasks, but at some point the surviving spouse may need to hire professional support. Surprisingly, paying for outside services to replace these household tasks could cost even more than an annual salary earned by the employed spouse.

If it is the breadwinner who dies, the partner who previously provided all these vital services may need or choose to go to work, in which case these duties may still need to be covered under the breadwinner’s insurance.

These are important considerations when deciding how much cover is needed and whether to cover both partners.

When deciding on the amount of coverage required for the homemaker’s insurance, here are some important factors to be considered:

Covering childcare expenses
If you have young children, think about how much you will end up spending on childcare. Even if they are of school age, you may have to consider after school care or other extracurricular activities. If the wage earner of the family works a five day week at work and spends a significant amount of time commuting to and from work, you will need to factor in all these details to reach a realistic number to spend on the amount of day care hours needed and how much it would cost. Take all these expenses into consideration when deciding on the amount of coverage you require.

Maintaining a lifestyle
Managing a host of daily chores and duties, you may find that expenses rise due to the need to outsource certain services such as laundry, cleaning, etc.  A life insurance policy could help cover these added costs.   Or it can give the surviving partner the freedom to spend quality time with the family while someone else handles the chores.

Looking after the children’s education
A life insurance policy is the perfect vehicle to ensure the costs of children’s education is covered in the event of the death of either partner.  With the ever-increasing growth rate of tuition fees over the years, life insurance might be the best way to ensure that your children go to college and at least some part of the expenses (if not all) may be covered by your foresight in purchasing a life insurance policy.

Leaving behind an inheritance
As a parent, there is nothing that you wouldn’t do for your children. You always want them to have the best and hope that you can save enough for them along the way.  Buying an insurance policy is a way to build up a nest egg for your children.

Looking after funeral expenses
The price of funerals nowadays is very high. Without the buffer of an insurance policy that is paid out at the time of death, many families would not be able to afford a funeral at all.
There is no need to be conditioned into believing that the worth of an individual is measured by the income he or she generates. In a family, the homemaker is as much a contributor as the wage earner and the financial losses suffered in his or her absence indicate just this. Therefore for a little extra money each month, both members of the family should be adequately insured to give you both peace of mind for your future.

Your Insurance Choices
There are a range of insurance choices available. We recommend you meet with us to ensure you receive the most appropriate cover to suit your circumstances. Make an appointment with a Matrix adviser to discuss these options today!

The importance of insurance
Jason had no other insurance except for the very basic default cover held within his employer’s superannuation fund set up when he was an apprentice many years ago.

The costs of rehabilitation and setting up his home with ramps and lifts, modifying his car and supporting his young family piled up. Jason is grateful that family, friends and community groups helped with fundraising and services to help him rebuild his home.

The hardest thing to replace was his income, but due to his positive attitude and a very supportive employer, Jason was able to return to work as a Golf Club Superintendent after 4 months. Ironically, his sick leave entitlements covered his income with one day to spare. This recovery time could have been much more had his fund offered automatic salary continuance.

Making a claim
Jason had contacted his super fund to see if he could make a claim following his accident. As his cover was very basic, the Total and Permanent Disability (TPD) payout would be $148,850. This amount was nowhere near enough to cover all costs but would definitely help. Upon asking for a claim application, he was told that because he was back at work within 6 months of the accident, he was not eligible to make a claim for Total and Permanent Disability through his industry super fund.

It might have ended there. Jason did not have an adviser and thought he had reached a dead end with his claim, when by a complete coincidence he was approached by a Matrix adviser who had heard about Jason through a golfing association. Upon meeting Jason, the adviser decided to challenge the super fund over Jason’s TPD entitlements and there may yet be some good news. Although his fund was adamant he could not claim, the adviser approached the underwriter of the fund directly.

While we hope for the best outcome, and indications are very positive, we wish that things had been different. Good insurance advice from a professional might well have included:

• Checking whether insurance in addition to the employer cover was needed, and how much;
• Making sure Jason’s income was insured, so he could continue to support the family if not able to work (whether for a short period or to age 65);
• Assessing whether all cover should be held inside superannuation, or with some outside it;
• Providing a lump sum where a trauma or critical illness is suffered to help with things like renovations and rehabilitation.

Please learn by this unfortunate example and make sure you have the appropriate cover in place for you and your family. We also encourage you to tell your friends and family. Please make an appointment with us today to discuss your insurance needs.

We believe in the importance of work/ life balance and know it’s not all about your finances, and have taken great pride in showing our support by giving back to our community and sponsoring the Future2 Foundation Wheel Classic for the second year in a row.

What is Future2?
Future2 is a charity that exists to support the financially underprivileged and to enable the financial planning profession, and others linked to it, to give back to the community from which they draw their livelihoods.

The Wheel Classic is a 1250km bike ride from Bourke to Sydney from 7-16 September 2011. Former Chair of the FPA Ray Griffin, and financial services lawyer Peter Bobbin, will brave the elements for the 10 day ride in the hope of reaching their target of $100,000 – all funds go towards giving a second chance to some of Australia’s most disadvantaged young people.

Last year the charity raised an amazing $88,000 through a combination of sponsorship, fundraising events and individual donations.

Where do the funds go?
All funds raised will go to Future2, the foundation of the Australian financial planning profession, whose grants program has gifted over $150,000 to charities and not-for-profit bodies working at the grassroots to transform young lives at risk through social exclusion and financial disadvantage.

The Australian Children’s Music Foundation's Jennie Jones reports:
"Future2 is making a real difference in helping angry, disadvantaged kids who have come from shocking backgrounds of abuse and poverty. They find joy and purpose in their lives and build on the skills and attitudes learnt through these programs to become responsible and productive members of our community."

Matrix advisers and staff look forward to helping Future2 reach this year’s target. For more information on this great cause please visit www.future2foundation.org.au

Make a budget

It may seem a daunting task, but having a well-planned budget for the year can be the key to good financial health. Those with a budget, no matter how basic, will have a more disciplined approach to spending and will be less likely to avoid wasting money.

Work out what you spend on a daily, weekly and monthly basis and make sure you include absolutely every expense. It's an idea to take a notebook wherever you go to record all your expenses - you'll be amazed to see where your money goes.  Even easier, keep your receipts for a month, including all credit card and cash transactions, and then tally up at the end of the month.  The numbers don’t lie!

Cut spending & Increase savings
When you've worked out where your money goes, you can start cutting out unnecessary expenses. Things like takeaway coffees, lottery tickets and buying your lunch (rather than home-made lunches) can add up to thousands of dollars each year.

When you've worked out where you can save money, put this money aside in a bank account or a term deposit. You'll be amazed how much you can save by doing this - if you can save $10 a day, you'll save $3650 dollars a year. Do this for ten years and you would have saved $36,500 - and that's not even taking into account compound interest!

Review your structure & Set Investment goals
It’s a good idea to regularly review the structure of your investment assets to ensure they are in line with your personal goals. Contact our office to make an appointment to review your portfolio. 
Set new goals - Think about what you really want in life and make these wishes your investment goals. For example, let's say you want to own your own home. This is a great long-term investment goal. Then think short-term about how you will reach this goal. You'll need to work out how much money you will need to put aside to meet this goal on, say, a monthly basis. Then work out how many years you'll need to save until you've got the deposit for your home.

Review debt
Consider whether your personal debt is ‘good’ or ‘bad’ debt and if bad, take steps to eliminate it. Bad debt is any debt that continually finances lifestyle or consumables and is not repaid promptly, particularly if the interest rate is in double figures such as for credit cards.  The interest cost on bad debt is also generally not tax deductible.

Good debt is used to produce income or to accumulate income producing investment assets quicker. Usually such debt has the added benefit of the interest being tax deductible.
A good New Year’s resolution is to get rid of bad credit card debt, ideally by budgeting to repay it as soon as possible.

Planning and monitoring super contributions
Individuals should be planning to maximise the annual concessional (tax deductible) and non-concessional (undeducted or after-tax) contributions to superannuation for the year ending 30 June 2011.

In addition to planning to maximise super contributions, you should also be reviewing and monitoring superannuation contributions made personally or made by your employer (eg. as salary sacrifice) on an on-going basis to ensure that you do not exceed the relevant contributions cap, as your adviser cannot do this for you.  This is important as excess contributions are a major focal point of ATO compliance and you do not want to be hit with a tax bill.

Note that employer super guarantee contributions are included in the concessional contributions cap. The maximum (‘capped’) amount that can be contributed to superannuation for a person is summarised in the table below. (Valid until June 2012)

* $450,000 may be contributed over a rolling three-year period for persons aged under 65.

Revisit personal insurance
Make sure you have appropriate life insurance, income protection insurance, and trauma or disability insurance in order to protect your loved ones if anything happens. It is worthwhile reviewing your insurance arrangements every few years to take account of changed circumstances.

Update or Make a will
With Australians having more savings in superannuation and owning other assets, an up-to-date will is increasingly important. As well, a will should be updated when there is a change in personal circumstances (for example, the birth of a child or entering into a new relationship).

Contact your adviser today if you wish to discuss the details of your financial resolutions, and we hope you have a very happy new year!

Need financial assistance? Find a Matrix adviser here.

Disclaimer: This article contains general information only. It is provided by Matrix Planning Solutions Limited (ABN 45 087 470 200. AFSL & ACL No. 238256).

As the particular circumstances and needs of individual investors may vary greatly, the information herein should not be used as a substitute for personalised professional advice.

Whilst every effort has been made to ensure the information is correct, its accuracy and completeness cannot be guaranteed, thus Matrix Planning Solutions Limited cannot be held responsible for any loss suffered by any party due to their reliance on the information or arising from any error or omission.