Noel News

Don’t wish it was easier; wish you were better.
JIM ROHN

Welcome to our December newsletter,
the second last one for the year…

Unfortunately, I’m a bit short of Christmas cheer as I write this. Monday last week was our 42nd wedding anniversary and we had prepared to celebrate it by having dinner at home and then by spending the rest of the week in Sydney.

It was not to be. Around lunchtime I walked into the garage and, coming out a bit too quickly, tripped over a skirting board. There was a horrible pain, and I thought I had broken my ankle in two. The family called an ambulance, which whisked me to the emergency department at the Mater Hospital in Brisbane. After an X-Ray and a CT scan, I was diagnosed with a fractured ankle and was admitted as a patient with an operation to happen as soon as possible. The operation occurred on the Tuesday, and I was back at home on the Wednesday to a totally changed life, hopefully not for too long.

My experience contains many lessons for all of us and I will reflect on them soon. Just let me say that many people I know start their day by affirming things in their life they are grateful for. I have been doing this for many years, but the affirmations tend to fall into the same grouping – good health, loving family and sufficient assets to keep us in good shape. It never occurred to me that there are other important things in life. These include the ability to walk, have a shower without assistance, go to the shops, drive a car, and play sport whenever I want to. I took them all so much for granted that I never thought to give thanks for them on a daily basis. Now, I am living between our bedroom and a wheelchair, and all those things are very much in my frame of reference.

Thoughts on living with a disability

They say you need to walk in another person’s shoes to understand what their life is like, and that is certainly the case for me right now. But even careful plans can turn out to be flawed. Early this year we decided we would stay in our home for the rest of our lives. To this end, we installed a lift with one stop at the garage, a stop at the laundry area which accessed all downstairs and a stop at the top level which is our main living area, and includes my study, main bedroom and kitchen. The lift is big enough to be wheelchair-accessible.

Before I left hospital, I was told I could not put any weight on my left leg, which meant crutches were out of the question – my efforts were hopeless. The physio told me I would need to buy a wheelchair, a walking frame and a shower/toilet chair. Luckily my daughter was around that day and went out and bought those things for me.
 
We arrived home, took the lift to the top floor and found the first problem. The lift door opens to my study but there are two steps between my study and our main bedroom. To make that work we had to install a ramp. Luckily a builder friend did, that same day. Our main TV watching area is downstairs – when we took the lift to the laundry level, we discovered the wheelchair could not get past the cupboards in the laundry so we could not access the main TV area without substantial modification to the laundry.
 
On top of that was the frustration of being totally dependent on Geraldine for everything. If I wanted a cup of tea, she had to make it; if I wanted to go to the bathroom, she had to assist. About the only thing I can do for myself is drive the wheelchair around in the upstairs area, which fortunately includes my study where I work on the computer, the kitchen and our bedroom.
 
I had never thought about the degree of difficulty using wheelchairs and walking frames. I’ve been doing weights twice a week for over 20 years and my arms are fairly strong, but I still battle to get myself from the bed to the wheelchair via a walking frame.
 
I’m not telling you this to enlist any sympathy. To me it’s a wake-up call to you all to think about your own situation and reflect on how you would cope if somebody in your family suddenly became disabled. I’m lucky because I’ve got a capable healthy partner, but I have no idea how I would cope if I was living on my own. It would mean 24/7 care at home, which would cost a fortune, or else finding some kind of accommodation where I could live and have 24-hour care.
 
It’s a big issue for anybody thinking about downsizing. Normally, you downsize because you are getting on in years, and it’s important you think seriously about whether the accommodation you’re moving to can handle the issues I’ve mentioned above. In reflecting as I write this, it does make a retirement village an attractive option for older people. If this had happened to a single person who had been living in a retirement village, the situation would have been much easier to cope with as there would be support from residents and staff.

A great travel tip

With demand for airline flights growing, the fluctuation in airline prices is really very difficult to handle. However, I’ve discovered that the day you choose to start your trip makes a big difference to how much you end up paying for that ticket. A recent report found that Saturday is the cheapest day to fly domestic, while Monday is the most expensive with the price difference up to 20%!

If you’re going overseas, the best day to leave is a Friday – an average of 10% lower than travelling on a Sunday. I did some research recently for a return business class trip from Brisbane to Los Angeles on Air New Zealand. The flight for leaving on Friday was around $10,500, and for leaving on the Sunday was about $12,500.
 
As far as domestic flight goes, I’m a committed Virgin traveller, and never fly with Qantas. However, friends who have used both airlines tell me that Virgin is normally much cheaper than Qantas.
 
It’s certainly worth checking around.

Nothing’s changed in 4000 years…

Estate planning

I was stunned to receive a bulletin from Finder this week claiming that 12 million Australians do not have a will and 60% have never given a thought to estate planning. That’s a serious state of affairs – it’s obvious that many people are unaware of the complexities that can arise if proper estate planning is not put in place.

Today I will give you a simple checklist. But before we start, remember it is vital that relevant family members know where these important documents are kept. It’s pointless having an advance health directive or an enduring power of attorney, if nobody can lay their hands on them.

Wills

First, check that your will is up to date and reflects your wishes. If you are a pensioner couple, be aware the single aged pension asset test threshold for a single pensioner homeowner has gone up to $609,250. Many pensioner couples make the mistake of leaving all their assets to each other, which may mean that when one dies, the survivor’s assets exceed the assets test limit for a single person and the survivor loses the pension as well as their partner. A better strategy may be to leave some money directly to the children, and keep your spouse’s share under the single threshold.

Enduring Power of Attorney

This gives another person authority to make decisions about your affairs if you are incapacitated or absent. It’s particularly important if your affairs are complicated, or if you have a self-managed superannuation fund. You don’t want to be in a position where funds are needed urgently, the person who owns them has lost capacity, and no EPA is in place.
 

Advance Health Directive

This document sets out your instructions about your health care if you are not able to make decisions yourself. It is particularly relevant to the final stages of life, with little prospect of recovery. It is executed in consultation with your doctor, who will explain all the ramifications to you, and certify that they have done so.
 

Superannuation

Your superannuation is not distributed in terms of your will – the trustee of your fund has the final say on where the money goes. If you foresee challenges to your estate down the track, you can execute a Binding Death Benefit Nomination which, if properly drawn, will compel the trustee to act in accordance with your wishes. Get advice about this before you act, though – if it is not necessary in your situation, it may take away the power of the trustee to distribute your superannuation in the most tax-effective manner.
 

Death tax

There is a tax of 15% plus Medicare levy on any taxable component of your superannuation that is left to a non-dependent. This is not normally an issue when the superannuation is passing to the spouse – who is always classed as a dependent, irrespective of their financial position ­– but in all other cases you’ll need to plan for it. In a high trust situation, you might plan for the attorney to withdraw the entire superannuation balance if a member appears to be close to death, and place the proceeds in the member’s bank account. If the only account available is a joint bank account, have a clause to permit this inserted in the Power of Attorney document, otherwise it may not be possible.
 
If there is an SMSF involved there may be illiquid assets such as property syndicates, shares in unlisted companies, and managed funds that require at least 30 days’ notice to redeem. If this is the case, talk to the trustee of your fund sooner rather than later to work out a good strategy. Let’s face it, if a person is quite old, it may be simpler to take the money out of superannuation tax free sooner rather than later.

Books for Christmas

Christmas is nearly upon us, and so is your chance to give somebody a book which may change their life. I can’t think of any better present.

My new book 10 Steps to Financial Freedom is getting tremendous feedback and is the perfect gift for people aged between 14 and 30. Just this morning I received an email telling me that they bought the book for their son’s 14th birthday and he liked it so much he took it to school to finish over his lunch break. Another reader sent me a photo of her 14-year-old son, who was engrossed in the book from the moment she gave it to him. 

The aim of this book is to put young people on a good financial footing for life, and two of the ten steps are: spend less than you earn, and become a goal setter. Think about it – if a young person can spend less than they earn, and can learn to set and achieve goals, they are on the road to really making it financially. 90% of people never achieve that.

The other book for the younger folk is Beginner’s Guide to Wealth. This is not about becoming a good money manager, it’s about becoming a successful person. It was written by my son James Whittaker and myself and has had a great effect on many people who have read it. These two books make the perfect bundle for a young person for only $39.95 including postage.

Don’t forget Retirement Made Simple for people over 45. It’s well documented that the better you plan for retirement the better it is, and yet many people don’t know what they don’t know. The feedback on this book has been tremendous, and it gives people a thorough grounding in the calculators which can be found on my website.

Due to supply chain problems and the normal lethargy of the main book chains, the new book may not be available in many outlets till next year, though the warehouse had the books by the end of October. I suggest it’s much better to order through my website. We have ample stock and normally ship books within 48 hours of receiving your order.

If you have any special orders just email me at noel@noelwhittaker.com.au. The books are arranged in bundles to save you postage, but sometimes a person wants a package which is not in one of the bundles. If that’s the case, just email me and tell me what you want. I can ship it from home, and you can credit my bank account with the process.

Get your Christmas shopping sorted at my Book Shop

Are shares safe?

The latest surprise in the cryptocurrency crisis is the collapse of FTX. A reader emailed me, saying: 

‘I notice you are a strong supporter of share portfolios for self-funded retirees. In the late 2000s, Opes Prime collapsed because the directors sold client shares and absconded with their money. Now some brokerage firm – FTX – has collapsed. This could never happen with retirees who owned property.’

I replied that FTX was a cryptocurrency exchange service; I could never see that happening with investments in companies like BHP, CBA and Woolworths. And I pointed out that property has never-ending expenses, such as rates, insurance, land tax, and repairs. He replied, ‘I take your point, but what happens if an unscrupulous broker runs off with my shares?’

Given the Opes Prime crisis happened 14 years ago, it may be useful to refresh your memories. Opes was a margin lender. A normal margin loan contract is similar to the loan contract you sign when you buy a house. You put up a deposit and the lender takes security over the asset you buy, but at all times you retain ownership of the property or shares that you have bought with the borrowed money. Provided you can keep up your payments, you can sleep securely in the knowledge that you will not lose your house.

But Opes was not a normal margin lender. Their clients had to agree to use an Australian Master Securities Lending Agreement (AMSLA), which works quite differently: the lender takes title to the shares, which means the broker owns them for the period of the loan. Of course, all of this is written into the loan document, but who ever reads the fine print? Apparently, the Opes purchase confirmation letters to their clients simply read, ‘We have bought for you …’

It turned out that Opes either lent the client shares out to traders, for a fee, or bundled them together to use as security to borrow over a billion dollars from ANZ and Merrill Lynch, which Opes used to fund their margin lending business. It was a great source of capital for Opes: the banks lent Opes, say, up to 80% of the value of the shares, but Opes itself did not lend more than, say, 70% of the value to its own clients. On a billion dollars of debt this meant that Opes could pick up $800 million of financing, yet use only $700 million dollars on behalf of clients. This strategy gave them over $100 million to play with, and all the indications are that they played with it so badly that they lost it.

It’s important to learn from crises, but not to see more in the lesson than it has to give. Most people buy shares in their own name, or that of their superannuation fund. The shares are listed on CHESS (the Clearing House Electronic Sub-register System – the computer system used by the ASX to manage settlement of share transactions and record holdings). Full details of the holdings are also listed on the websites of companies like Computershare and Link Market Services. CHESS registration is secure, efficient, and highly regulated, whereas a major risk in dealing with cryptocurrency brokers is that there is little or no regulation in cryptocurrency.

I continue to maintain that smart investors hold a mixture of cash, property and shares, choosing assets that will hold their value over the long haul. Chasing the next big thing is often a recipe for disaster. And neglecting to read the fine print can be an expensive mistake. Stick with boring investments that have intrinsic value, and you are likely to have an uneventful, profitable journey to financial independence.

From the mailbox

Question

I bank with the CBA which prior to 2 years ago had an ATM and branch in the local shopping centre. The shopping centre has a Coles and numerous other shops and previously had other banks and ATMs – all gone.

Further from home, Newcastle West has a large shopping centre, Officeworks, Coles, Big W, a Woolworths supermarket and dozens of other shops. The CBA had a branch and ATM at Newcastle West but shut the branch and ATM. The nearest CBA ATM to me is in an obscure location in Newcastle East with only paid-on-street parking. Slightly further away in the Hamilton shopping strip with no major retail outlets, the CBA has a branch and ATM, and parking is not too difficult for the obvious reason that there isn’t much available.

Answer

I suggest you do what I do. Get yourself an ING debit card which has no fees, provided you deposit at least $1000 every month and make five transactions a month of any size – it could be five cups of coffee. ING refund commissions at every ATM in the world. This would give you fee-free access to every ATM in the country. Many of them are now in service stations, which means easy parking.
 
The machine will ask you to accept the $2.50 ATM fee, but within one minute of accepting and making the transaction your ING app will show you both the withdrawal and the refunded fee. My normal withdrawal is $400. The app will show two transactions: a withdrawal of $402.50 and a refund of $2.50. It’s instant and it’s visible.

And Finally 

Today’s word is APHORISM
 
Aphorism is a statement of truth or opinion expressed in a concise and witty manner.

I read that 4,153,237 people were married last year.  Not to cause any trouble, but shouldn’t that be an even number? 
 
I find it ironic that the colours red, white and blue stand for freedom until they are flashing behind you.

Relationships are a lot like algebra. Have you ever looked at your X and wondered Y?

You know that tingly little feeling you get when you love someone?  That’s common sense leaving your body.

My therapist says I have a preoccupation with vengeance.  We’ll see about that.
  
I think my neighbour is stalking me as she’s been googling my name on her computer.  I saw it through my telescope last night.
 
Money talks but all mine ever says is goodbye.
  
You’re not fat, you’re just easier to see.
 
If you think nobody cares whether you’re alive, try missing a couple of payments.  
  
The location of your mailbox shows you how far away from your house you can go in a robe before you start looking like a mental patient.
 
Money can’t buy happiness, but it keeps the kids in touch.

I hope you have enjoyed the latest edition of Noel News.

Thanks for all your kind comments. Please continue to send feedback through; it’s always appreciated and helps us to improve the newsletter.

And don’t forget you’ll get much more regular communications from me if you follow me on twitter – @NoelWhittaker.

Noel Whittaker