Monday, 9 September 2019

Footloose and Fancy Fees



Hi all

Well, this will be my last post on this blog before swapping across to the new House Of Simple blog.

We are off overseas for 5 weeks of frugal adventure, so expect the new blog to open up in about 6 weeks time. I'll post a notification here with a link as soon as it is live.

*****


The other day I was talking to a friend and the topic of fees for retirement funds came up - this got me thinking. Fees are sneaky little suckers when it comes to investment funds of any shape and size. Often you'll get told that 2 or 3 percent fees are just fine especially seeing how well the fund has done over the last 10 years.  While ever we are contributing to investment funds (including retirement funds) fees do not seem to be noticeable simply because we are seeing our contributions making the investment graph climb positively and the effect of fees are hidden.  The minute we stop contributing and start withdrawing, the fees are hideously noticeable.


Good returns come and go - fees compound forever.

Do yourself a favour - dig out your investment Product Disclosure Statement for your retirement fund or investment fund/s and go hunting for the fee structure.  Often the fees will not be all noted in one neat graph, table or sentence (sneaky much).  Rule of thumb, if total fees exceed 1% then start researching for alternatives. Remember - 1% fees over 30 years is in real terms equal to 30% of your principle taken in fees (What the ..... I know right!).

Fees are a big deal over the long term. Make it your business to do your own research on
quality investment products with fee structures that benefit the investor not the investment company. Excessive fees rob your future self of income and assets.

Take care till next time

Phil

Saturday, 25 May 2019

Papa's Pennies Finds A Home






Dear daughters and folks




Soon this blog will join it's mother blog at House Of Simple.

At House Of Simple we will cover:

Simple home.

Simple money.

Simple food.

Simple garden.

Simple holidays.


So, work is underway towards bringing House Of Simple to life on another platform.


Running both blogs (Mr Home Maker and Papa's Pennies) concurrently just is not working for me and I'm not enjoying it.  I've been around the block too many times now to spend time on things I no longer enjoy.


My daughter is finishing her media and communication degree and has agreed to help me re-start House of Simple over at WordPress. It has been a complicated relationship with Blogger and it is time to quietly part ways.  WordPress is a lovely platform where I can easily and elegantly write, produce and publish videos, publish eBooks, offer services, link multimedia with ease and have everything neatly under one roof.

When will this happen?  Sooner than later - I'll let you all know.

Phil

Monday, 14 January 2019

Give Yourself A Demotion




Daughters. Folks

Go ahead.  Give yourself a demotion. 
Have less take-home pay and yet become wealthier.  Huh? What the ... ?

OK, so sometimes we just have to outsmart the brain to get things achieved. Our minds are geared to seek comfort and normality and to avoid tension and growth. So instead of obeying those predispositions, let's leverage it.  Here's how:

Demote Yourself To Get Ahead

1. Swipe 20% off your take home salary. Boom. Demoted.
2. Have your payroll siphon off 20% of your take home pay and funnel it into an investment account
3. Whip out your pencil, budgeting tool or trusty spreadsheet and figure out how to still live well on your newly demoted income. Hint: cognitive dissonance will awaken the mind to help you figure this out.
4. Let your 20% being funneled into an investment account grow and then every three months, take the balance and invest it wisely.


Even if you have retired or hit FI (Financial Independence) this is a worthwhile exercise to snap the mind into action and force renewed flows of earnings into ever-growing investments.  The results can be overwhelmingly amazing. Even if investing scares you, then letting someone trustworthy do the investing for you can reap wonderful results too.

To help your mind document and plan how to live well on a newly demoted income - try this great budgeting tool HERE.  Unlike many budgeting tools that make you grovel around in the past, this one is fully future focused , flexible, user friendly and will forecast your entire budget three years ahead so there are zero surprises.  It comes with a phone app, lets you create multiple accounts, can be used for personal or business purposes, sends you alerts for upcoming items and it totally free for a month.  At least  try it for the month.  I love it and am totally happy to recommend it (I rarely recommend products).
For the purposes of being fully open and honest, I do get a small percentage of any fully paid account that may get created after the initial free month - obviously I ain't gonna get rich off it!

I will be a bit busy for the rest of the month, so will not be posting here again till early Feb 2019

Take care - and always respect your future self :-)


Phil

Thursday, 3 January 2019

Thinking Of Solutions - Labor's Proposed Stop To Franking Credit Refunds





Daughters. Folks.

Legislation changes. It always has and it always will. Get over it I say. It is time to let our inventive minds think of elegant solutions to legislation changes.

As you may or may not know, the Australian Labor Party has advised that when it next gets into power it will change the legislation on franking credit refunds. 

In its simplest form, this new legislation can be explained thus: 
Under the Labor proposal, franking credits (company tax already paid on dividends) can still be used to reduce your tax payable, but if no tax is payable, excess franking credits will not be able to be refunded to you.

Blogs, newspapers, forums and rallies have been yelling very loudly about this proposed legislation change. I personally think it is iniquitous, but that is besides the point as there are many legislation changes that I believe to be iniquitous, not just this one.

So, instead of belly-aching, perhaps think about some elegant solutions to soak up all your potentially unused franking credits. One possible solution is to buy dividend growth shares that are either not franked or only partially franked and add these to your current portfolio. 

Here is a list of companies that offer dividend growth and have either NO dividend franking or are only PARTIALLY franked. This list is only an example, there are many more companies that have good dividend growth and are not franked or are partially franked.

ARF Arena REIT 
SYD Sydney Airport
SKI Spark Infrastructure Group
GOZ Growthpoint Properties Australia
AVN Aventus Retail Property Fund
VVR Viva Energy REIT
AMC  Amcor 
BWP  BWP Trust
CMA  Centuria Metropolitan REIT
TCL Transurban Group
ORA Orora 
CTD Corporate Travel Management 
BLD Boral
AGL AGL Energy
MQG  Macquarie Group
APA APA Group
TWE Treasury Wine Estates 
MFF MFF Capital Investments 
SHL Sonic Healthcare

As I am not a financial adviser and this blog post is not advice - always do your own research :-)

Such research will create changes that will respect our future selves.


Phil
         

Monday, 31 December 2018

Short Circuiting Temptation




Daughters. Folks.

If you are anything like me, then having a tenner ($10) in my pocket is a bad thing - it just gets spent. Conversely, if I do not carry the cash then I do not even think about spending. Perverse or what?

I have been thinking about the concept of temptation lately and now realise that I have it all wrong. Instead of beating myself up about succumbing to temptation, I now realise I just need to be smarter and more inventive, not more determined or morally dogged per se.

Being Smarter With Temptation

Here is a list of practical examples to short circuit temptation.

  •   Can't save?  Organise with your pay office to deposit 10% of your pay into a completely separate savings account that is not connected to a card.
  •   Can't get up on time? Put your alarm across the other side of the room.
  •   Spend cash if you have it on you?  Don't ever carry cash (I can't and don't).
  •   Have a weakness for cream biscuits? Don't ever have them in the house.
  •   Big credit card swiper?  Don't carry the credit card, lock it in the mini safe or freezer.
  •   Loath going to the gym?  Kettle Ball at home for 10 mins daily.
  •   Too impatient and scared to invest?  Use a managed fund (e.g. Vanguard) and automate a  weekly Bpay/transfer. 

See, it is just smart planning that is required not necessarily moral fortitude. Finding inventive ways to detour temptation is the trick.  After all, temptation is only one tiny shade greyer than curiosity and curiosity is vital for learning, inventiveness and discovery - so let's not demonise temptation too much.

Letting our inventive minds find simple and elegant short circuits and detours for our ancient habits will put us light years ahead of our old selves and accordingly develop new habits, capabilities, successes and outcomes for our future selves.

Oh, and Happy New Year for midnight tonight!

Phil


Thursday, 27 December 2018

Coffee Poor





Who would pay half a million dollars for a latte?  Well, as it turns out, many people do - they just don't realise that they are.

Many management colleagues I've worked with buy a large coffee every single day, sometimes two or three depending on the day's stress levels. Not only that, I see whole cross-sections of the community walking around the streets and shops with coffees in hand - everyone from students to retirees. Oh, and there are also baby-chinos too, just to make sure kids are socialised into the coffee community from very young (I'm guessing).  


Now, don't get me wrong because I love a coffee as much as the next person, however when I do the math, those coffees simply do not taste as good. 

So, I did some math for you and here it is:

$5 per day on coffee = $35 per week
$35 per week invested for 45 years of a person's working life would have returned  ..... drum roll ..... a whopping $575,210.  Yep, well over half a million dollars right there.

(That's using a basic 7% return rate and assuming reinvestment of all returns)

How does our latte taste now?

Trendy, tasty, hip - but hardly respectful of our future selves.



Spare it a thought at least.


Take care folks

Phil


P.S.  Oh, if you're feeling smug that coffee if not your thing, then just replace the word coffee in this post for whatever your 'thing' is  :-)

Wednesday, 5 December 2018

The New Fad of Golden Goose Killing




Daughters. Folks.

Modern wisdom dictates that killing off your successes is a good thing when timed correctly.  I read about it all the time now - it is rife in advice being dolled out by all and sundry in the finance world.

Examples of killing off the golden goose: 

  • Selling property for profit instead of holding for its steady rental income
  • Selling shares for their growth instead of holding for their steady dividend income
  • Cashing in term deposits and bonds instead of holding for their steady flow of paid interest 
  • Selling off a profitable business instead of growing it for its steady flow of cash and favourable tax teatments
  • Taking lump sums out of retirement funds instead of drawing down slowly off its earnings
More often than not, cashing in or selling off income producing assets will trigger taxes, stamp duties and fees not to mention the darn obvious ..... instantly stopping the flow of  income. All for the sake of a short-lived profit. Meh.

So many modern investment approaches now have moved away from the wisdom of quiet steady income generation to a fast paced and speculative growth race complete with nail-biting stress and sleepless nights over every tiny shift in the financial landscape of the globe.


Shift the paradigm. Like so.

  • Don't buy an investment property for its potential capital gains - rather, buy it for its long-term rental income. Hold it forever and pass it on.
  • Don't buy shares awaiting their growth and eventual sale - rather, buy into wise steady dividend paying companies producing quality consumer products and enjoy the decades of dividends that drop into your bank account twice a year. Hold them forever and pass them on.
  • Organise your term deposits into 12 equal lots so they attract the highest interest and the pay-outs of this interest is dispersed every month on the knocker. Reinvest the interest if you don't need it that month and only use what you need. Let these term deposits chug along forever. These term deposits will tide you over when rents and dividends go through the odd gloomy patch (perfectly normal ebb and flow BTW).
  • Don't sell that lucrative business - in doing so you throw away a steady stream of post tax income and a wonderful vehicle for genuinely reducing your tax. Build it up so it can be managed with your wise general direction only, rather than your direct daily involvement.
  • Don't cash in that superannuation to pay for a caravan or a new car - just leave it be and roll it into a pension mode that minimises tax. Set it to its minimum allowable draw-down amount. Superannuation (even with all its faults) should be played at its own game and kept alive as long as possible.  The earlier you dip into it, the quicker it will evaporate.

None of these concepts are exciting, sexy or snappy - rather the opposite in fact.  When it comes to money and investing I prefer to tread the old paths. The old paths mean I sleep well at night and watch the financial news with arms length interest.

Go tend those golden geese - their entire singular purpose is to respect your future self. 

Over time, we'll have bred a paddock full of golden geese all faithfully laying their golden eggs every day. We'll  have more golden eggs than we know what to do with.


Phil