Edition 3: Smart Money Newsletter 2011 Winter
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Welcome to our first edition of Smart Money for this year, it’s been a long time coming I know!  This newsletter is designed to give you updates, reminders and tips relative to the upcoming season for your finances and well being. 

This year I have added an extra section on good or free deals I have found, to provide you with more value.

In this season’s newsletter we have:

1. Tips to save more: Groceries and petrol keep going up, here’s how you can get better value.
2. Updates:  Tax and financial legislation changes: The new tax year has started and there have been several changes to tax legislation which could affect you personally.  Also we summarise the new financial services regulation and what it means to you, the customer/client.
3. Deals: Free 80 min yoga video online; Cheap dental checkups; Ohakune family accommodation: 
4. Full Balancing Coaching news: Access to the money quiz, templates and expansion to Auckland
5. Yearly Reminders:  Tax returns, kiwisaver and yearly update system
6. Newsletter ideas? Lessons learned from natural disasters and the recession, housing and mortgage tips…    

1.    Tips….

I think everyone has been feeling the pinch of increased petrol and food costs, especially those doing high km’s and feeding a family.  Here’s some easy ways to reduce costs:

Groceries

Go grocery shopping at the most once per week.  How often do you step into at a store, and buy extra treats while you are there? By only going once a week or less often you spend less on treats and once they are gone, you eat the cheaper staple foods left. 

To do this make sure you have a list to take so you don’t forget anything, and buy enough milk and bread to get you through the week. You will also save time and petrol money by doing it less often.  If you have to get extras during the week, stop at a fruit and vege shop instead where there is less temptation.

Also watch how much you spend of fancy cleaners.  A few drops of detergent in an old spray bottle lasts ages for the kitchen, or if you want to go natural use vinegar which will act as an antibacterial. http://www.vinegartips.com/Scripts/

Petrol

Check your tyres are inflated to recommended pressure (refer inside of car door) at least monthly and before long journeys.  This will reduce wear on your tyre and save about 10% on fuel, or more if your pressure is low.

Increase your following distance.  This will mean less breaking and acceleration, and is the safest thing you can do when driving.

If you want to measure your fuel efficiency of your car, next time fill to the top re zero the km’s, then next time you refill to the top record on the docket how many km’s you have travelled.  Then divide the litres of petrol used by the km’s travelled and times by 100 to give you litres/100km.  4 – 12 l/100km is average, depending on whether you have a small car or a large SUV. 

Let me know how you go, I’d love to here how everyone’s cars compare!  You can then work out whether it is worth downsizing.

2.    Updates:

Tax changes and the 2011 budget

There have been some changes in legislation over the past year, below is a summary of them and how it may affect you. 

1. Increase in GST from 12.5% to 15%, meaning an increase in prices of 2.5%.  This small percentage increase in prices was mostly noticed when buying big ticket items, rather than day to day living costs.  This was done as part of the rebalancing of the tax system to make up for the income tax reductions, and to increase tax on spending rather than savings.
2. Personal tax rate reduction.  A drop of 2.5% to 5% in tax rates depending on your tax bracket.  As it is on a percentage this meant that those earning large salaries got the greatest savings, those on moderate incomes mostly just cancelled out the GST increase.  This also bought the top marginal tax rate closer to the company tax rate of 28% to reduce tax avoidance strategies.
3. You are no longer able to claim depreciation on investment properties that have a life of 50 years or more for tax purposes.  This will mean that your tax refund will be lower (and for some may mean you need to pay more tax) but will make your tax return easier (and you may like to think of doing it yourself with the help of a financial coach to save accountancy fees) and will mean that that you won’t have to worry about depreciation claw back when you sell your property in future years.
4. LAQC companies in which a lot of people hold residential investment properties, will no longer be able to flow through losses from personal income, and a new entity called a Look Through Company (LTC) has been formed in which profit and loss can be claimed at marginal tax rates but in proportion to ownership of assets.  You have 6 months from April 2011 in which to make a decision to change from the LAQC, without any tax implications.  For most of you this will not mean much change, but it could be a good time to review whether you want to change how you own your property if you want to reduce admin costs or are going to start making a profit.  Refer to your accountant for more details.
5. The definition of family income for working for families, student allowances and community service cards has changed.  This is so income can’t be hidden to get paid more working for families, making it more of an even playing field.  Income now includes: investment losses, trustee income, PIE income, fringe benefits, pensions, passive income to children, gifts over $5000/yr to help with living costs. This will make it harder to determine your entitlement where you have extra income sources, and may reduce the amount of income coming into the household.
6. Certain students ability to borrow from student loans has reduced: those who owe overdue amounts of >$500 for longer than a year can no longer borrow any more, those over 55 can borrow for tertiary fees only; part time students can’t borrow for course related costs anymore.
7. Kiwisaver member tax credits are going to half from $1042 to $521 a year from 1^st July 2011 (this is the amount the government matched each year) and the minimum contribution rate will increase from 2% to 3% and ditto for the employer contribution from 1 April 2013.  This will mean for those that work for themselves or don’t work, the benefits of kiwisaver are greatly reduced, but for those working as an employee, especially on higher wages, will see their money grow faster.  Someone earning $52,000 at age 30 will now have nearly $300k in kiwisaver, an extra $55k at age 65.  Obviously this is going to affect your retirement savings goals, and this will need to be checked at your next follow up meeting.
8. Changes in the definition of a commercial dwelling for GST purposes and GST on land transactions.  Talk to your accountant for more info.
9. The mileage rate for claiming vehicle use has changed from 70c to 74c/km from April 2010 for those who travel less than 5000km per year, so remember to update this in your tax return if you work for yourself. 

New Financial Legislation

The two new pieces of regulation are called the Financial Services Providers Act 2008 and the Financial Advisors Act 2008.  These regulations define who is a financial advisor and what regulations they need to meet. 

Previously anyone could call themselves a financial advisor and give advice on where to invest your money, with no qualifications or training, and this has lead to the public being mislead on where is a good place to invest their money, leading to some people losing their life savings as they were not aware of the risk involved in where they invested their money.  Also as nearly 99% of advisors take commission on the advice they give, they didn’t always have the clients’ best interests at heart.

There is now going to be 3 types of advisors:

Authorised Advisors, which means the advisors need to be registered and a person of good character; meets the code of conduct which includes minimum standards of ethical behaviour, client care, levels of competency, knowledge and skills and continuing professional training.  They may also not call themselves independent if they are to receive a benefit from a person, other than the client.  An advisor must be authorised if they giving a recommendation or opinion in relation to acquiring or disposing of a financial product and/or provides an investment planning service.

Registered Financial Service Providers.  If advisors do not need to be authorised but are still providing a financial service that deals with money handling e.g. brokers, insurers, banks, money transfers, securities, superannuation, foreign currency etc, they will need to just be registered with an approved dispute resolution scheme.

Qualifying Financial Entity Advisors where instead of each individual advisor being registered, the entity takes responsibility for the conduct of its financial advisors if it has been granted QFE status.  They can only do this if they don’t provide an investment planning service and only give advice on the more basic types of products.

As you can see only Authorised Advisors really need to have any credentials for giving advice, so it pays to check what type of advisor they are. 

Full Balance welcomes these changes that most advisors now need to have minimum qualifications and competency like ourselves to give advice, and can’t call themselves independent if they are taking any commissions or bonuses.  We will continue to concentrate on providing an independent, qualified service offering practical suggestions of options available with your finances, without recommending or selling any financial products, and become fully authorised regardless, while still keeping our costs affordable for the everyday NZder.

3. Deals:

Dental

I know you guys love to avoid going to the dentist, and then wonder where you are going to pay for all the work that needs doing.  Denta Care on Maranui Rd Bayfair are doing a dental exam with X-rays for $50 with a coupon from the local paper or supermarket docket, so now there’s no excuse for not getting a check up before it gets worse!  Of course an even cheaper way to look after you teeth is to clean and floss and stop eating all that sugar ;)

Yoga

I’m a fan.  It’s a great stress relief, stretches and strengthens all those un used muscles and provides numerous health benefits.  I’ve found a NZ internet site that gives you 24/7 access to a 90 min beginner yoga session for free, grab your friends and do it together.  Visit the Yoga.org.nz site for downloadable FREE Yoga DVDS

Alternatively if you are looking for a small class to learn, go along on Tuesday nights to Arataki school hall Bayfair 6 – 7 PM with Sarah 021 0221 9892 $10 / session, or go to a yoga centre in your local area.

Mid winter break

Planning to take the family to the mountains this winter and looking for an affordable family friendly place?  Try Arawa Lodge Ohakune www.arawalodge.co.nz  You’ll get a free continental breakfast too.

4. Full Balance Financial Coaching News

Templates Available

Want to do your own update of your financial situation, the template is now available so you can track your own progress.  Just send us an email to purchase your own copy.

Free Money Personality Testing

This is a great first step for you and your friends to start their financial journey, and can also be a bit of a laugh!  Best of all it is free with no obligation.  http://www.fullbalance.co.nz/money-personality-quiz.html

Expanding

Full Balance now has offices in Auckland and Tauranga and have the EAP contract for the South Auckland area (we can also use EAP nationwide over the phone too, so if you work for a large employer who is in EAP you could get your coaching for free), so we are now able to help a wider area for face to face work. 

5. Yearly updates

Remember 7 July is the date to get your tax return in if you are doing it yourself.  If you need help determining whether you need to do one or help filling in the forms, just give us a call or check out our newsletter from last year for more info. http://www.fullbalance.co.nz/budget_advice_finance_coaching_news2.html

We have also implemented a new system where all existing clients will get yearly reminders for follow up sessions.  These refreshers are great to keep you on track, and could mean the difference between financial success or failure.  Email us for an appointment and get 20% off.

Also if you work for yourself or are on a low income, if you want to top up your kiwisaver contributions to $1040 so you get the maximum subsidy for this year, remember to do this by 30 June.

6. Next Edition

Lessons learned from the recession and natural disasters

If you haven’t been affected by the recession or a natural disaster, then count yourself lucky.  I have seen many people effected by both, in a way they never thought possible. 

However any Financial Planner will tell you that with prudent financial management you can plan in advance to lesson and possibly even avoid the impact of them.

Housing and Mortgages

A lot of people are on low floating rates now, are you better to increase your savings or increase your mortgage and pay it off quicker? When should you fix?  Are you better to sell now or wait?

The thing is we can never predict the future, but we can reduce the impact on our finances and subsequently our stress and relationships and next newsletter we will talk more about it, in the mean time send in any questions you have on any financial subjects.

It will be either the end of Winter or Spring for the next update.  In the mean time I look forward to hearing from you and keep warm and healthy till then.

Shula Newland, owner and manager
of Full Balance Financial Coaching, Auckland.