March 10, 2016

How to make friends with your credit card

The Thailand package was only $500, but Simon, having just paid his car rego was broke so he decided to pay for it using his credit card. However, after adding airfares and travel insurance his credit was maxed out before the plane left the ground! Simon’s situation is common. We easily justify using credit for things we know we shouldn’t, but temptation is cruel, often irresistible. According to “Using credit cards allows you to do things and see things and experience things that you really have no right to be able to.” Once in Thailand, Simon had to pay […]
March 10, 2016

Sequencing risk: the order of things

As financial advisers, we talk a lot about risk, so what is sequencing risk? Let’s begin with an example… Jennifer and Sue each contribute $20,000 per year to their superannuation funds for 10 years. They both earn an average return of 5% per annum, after tax and fees, and from Years Two to Nine they earn identical returns each year. The only difference is that Jennifer’s portfolio returns 8% in the first year and -8% in the last year; whereas Sue’s returns are -8% in Year One, and 8% in Year Ten. This doesn’t seem like much of a change, […]
February 25, 2016

Mortgages, personal debt and retirement

Ideally, we would enter retirement with our home mortgages paid off and completely free of any other kind of debt. That would give us the capability to use our retirement savings to finance (or help) finance our standard of living in retirement. Yet many retirees are, of course, reaching traditional retirement ages with outstanding mortgages and other debts. And often these retirees may decide to use at least part of their super to fully pay off their debts, reduce debt or to direct part of their super pensions to keep making repayments. Other debt-reduction options include remaining in the workforce […]