Some need to know, with a bit of WealthDesign nice to know thrown in.

Thinking of starting a business?

Going into business is like a marriage – sunshine, lollipops and roses …. at the start. But as we know, humans are all weird, strange and difficult characters – just ask anyone who’s been married for a while! There is always some level of conflict and business is no different, hence the need for rules – I’m talking about ‘shareholder and partnership agreements’. These agreements need to set out the rules of engagement. They need to cover the rules around set up, effective running and how to blow the business to bits (if things go pear-shaped).

The agreement should cover:

  • How the business was funded and how much each shareholder’s capital is at risk
  • The number of shares held
  • How shares are valued, transferred or sold
  • The rules around the board meetings
  • How directors are appointed and removed
  • What decisions the directors can make and what needs shareholders’ sign off
  • How profits are distributed
  • How disputes are resolved
  • What happens if someone becomes disabled or dies.

Lots of people go into business with only stars in their eyes – life often throws a curve ball and things don’t always go according to plan. Being in love is great, but getting divorce sucks, and business is no different. Having spent the time getting the rules set in stone, is prudent. It will make a bust up so much easier and cheaper – expect the best, and plan for the worst!

A good legal firm will have a standard framework to follow and you can then personalise this document to suit your individual circumstances.

As a side thought, even if you work for your own company, have a job description and employment contract. If you have an income insurance claim, it just makes things so much easier!

My advice is, get advice! Ideally, have a financial round table, with you at the top of the table, and your advisers around the table. Think lawyer, accountant and financial planner (someone who actually runs a real business and who has been around a while); they are handling these situations all the time.

And I know it’s tempting, but don’t write your own agreement – an unfortunate problem we see far too often, which can end in tears.

I’m only a phone call away, and am happy to help – don’t hesitate to reach out.

Remember if it isn’t written down – it doesn’t exist.

John Barber
WealthDesign – a life well planned

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KiwiSaver – income for your future self

Maximising the income that will provide the lifestyle for your future self, is how to approach your KiwiSaver. And you may be surprised to learn that if you don’t have your finger on the pulse of your KiwiSaver scheme, your future self may be a little short-changed.

The KiwiSaver initiative is not a set and forget sort of deal, with a ‘bells and whistles’ app on your phone that gives you your balance instantly (can you tell I think the sales pitch for this gimmick is utter BS? But that subject can wait for another day!). It needs managing as it’s an investment like any other long term investment.

An example arose recently when a client’s tax rate was 28%, rather than 10.5% At 6% return on his money, he had paid $1050 more than he needed to. Unfortunately the app on the phone doesn’t prompt you to manage your KiwiSaver scheme balance wisely, it just tells you what’s in the account at any given time.

When was the last time there was a rendezvous between you and your KiwiSaver scheme balance? If you have over $50,000 in yours, recent research (by Westpac) reveals you are in the top 13% of men and the top 4% for women in New Zealand. And if your balance is over $30,000, you are in the top 27% for men and the top 15% for women in New Zealand.

These are scary statistics when you consider a 65 year old male will need enough money to live on for another 19 years from his 65th birthday. It is even worse for women, as they tend to out-live the guys, yet their KiwiSaver scheme balances are on average, much lower than males.

Here’s what’s important.

Join KiwiSaver as soon as possible. When is the right time to join? Yesterday. When is the next best right time? Right now.

If you know you are in KiwiSaver and you’re not sure where yours is at, contact IRD and they will give you the relevant details. Or click here to find out more.

Secondly, ensure you’re in the right fund for you, plus you have the right tax rate for you. How do you know? Give me a call – I’m here to help.

It really makes my day when I ensure people are optimising their KiwiSaver investment.  So come and talk to me about your KiwiSaver scheme – your future self will thank you!

 

John Barber
WealthDesign – a life well planned

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Considering signing up to Airbnb?

The Airbnb ethos resonates with New Zealanders – real people, real experiences – it’s just how we roll. I stay often at Airbnb places and think it’s an awesome addition to the accommodation industry.

More and more people are signing up to Airbnb, seeing it as a way to share their little corner of paradise, whilst earning a bit of spare cash.

There are some important things to know though, if you would like to become part of the Airbnb world.

  1. The revenue is income and subject to tax. Don’t think you can do a ‘cashie’ or you could run foul of the IRD. Consider running your Airbnb like a little side business. Keep records and claim whatever expenses you are legally allowed to claim. This way, you only pay tax on the profits.
  2. Make sure your insurance company knows you are listed on Airbnb. The last thing you would want is someone burning your house down and the insurer walking away on this technicality. Most insurers don’t cover intentional damage, however theft is covered. Ask your insurer about their policy around illegal drugs. You don’t want to become ‘cook-a-batch’ (as opposed to book-a-batch!), and find you’re up for expensive clean up costs, due to contamination.
  3. Check out the automatic insurance covers offered by Airbnb, as it may pay to carry these additional covers.
  4. Be careful who you invite into your home. This way you can mitigate many of the risks. I believe people are generally reliable and caring when they use Airbnb, but not all people, unfortunately!

Enjoy the Airbnb experience, yet be prudent about how you do it!

 

John Barber
WealthDesign – a life well planned

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The investing ‘selfie’

In Australia, self managed superannuation (the selfie) is huge; with investments of over 30% of all superannuation assets managed by the individuals themselves. These assets add up to close to A $700 billion compared to the NZ $42 billion in KiwiSaver schemes in New Zealand. In fact, the average balance in these accounts is much higher than the average balances invested by individuals in managed funds, such as the New Zealand KiwiSaver schemes.  They are very popular as the individual investors have control of what investment strategies/ investments they employ.

For over 20 years I have helped our clients manage and grow their wealth in New Zealand. These portfolios are very much like the selfies of Australia. I am a firm believer in having investors actively engaged in where their money is invested.  I like direct Australasian shares and this strategy has been extremely profitable. Unlike many financial planners, I like direct property and I’m not a fan of managed funds.

It might be 10 years since the Global Financial Crisis, but I still haven’t forgiven a number of managers who miss led the market and who still bounce around telling everyone how great they are!

For almost 10 years we have been in a market recovery/bull market, as the world has recovered from the worst equity disaster of all time.

Whilst investing in good times is great, the real advantage of buying and owning your own shares/assets comes into play in the tough times. You aren’t exposed to silly selling by uninformed investors. You get to choose if you hold or sell an individual investment or change your investment strategy – you are in charge.  In fact you are often on the other side of the table buying when every one else seems to be selling. This is when you really make a dollar or two.

In March 2008 I clearly remember an astute client ringing and requesting we buy Australasian banking shares (ANZ, CBA, NAB and Westpac).  These shares had fallen sharply and whilst investors in managed funds seemed to be pulling out and going to cash, my elderly client rang and said “they just don’t seem to understand, I’m happy with the strong dividend payments these banking stocks are providing and no government is ever  going to let the major banks fail, let’s make money out of the silly sellers.” History showed she was 100% right and she pocketed a pile of tax free capital gain.

Buying direct shares isn’t difficult and once you are set up, the system works really well. Information today is only a click away and if you understand and apply a solid investment strategy, it can be very profitable.

We have a number of investors that are regularly buying Australasian shares. These portfolios are performing extremely well but we are looking forward and watching to see what happens next. As I say sometimes investors make more money in the tough times than in the good. Simply, we aim to buy when others are keenest to sell.

If you’d like to talk about investing, please give me a call. There is no charge for the first appointment, plus there is no time like the present to take the first step towards owning a successful investment portfolio.

 

John Barber
WealthDesign – a life well planned

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KiwiSaver is ten years old now. There is more than $43.2 billion invested collectively. Of that figure, do you know the details of your slice of that pie?

Even today, 20% of members still have their funds invested in a conservative default scheme. These investors are missing out on potential returns as the average default scheme returned 4.1% for the rolling 12 months, compared to 7.8% for the average balanced fund. If you do the numbers, that means that if you have a balance of $30,000 in your KiwiSaver fund, and it’s in a default fund, you have lost out on $1110 in just this year alone! When you compound that up (over however many decades until you turn 65) it could make you weep!

We have been doing some research and we are finding that:

15% of people don’t know who their investment is managed by.

62% of the members don’t know if their fund is doing okay compared to the market.

43% don’t know if their PIR rate is correct.

53% of members have never had any KiwiSaver advice.

Of the 47% who have had advice, 13% of members got it from a qualified adviser and 19% got advice from a bank employee (who can only give information about their bank’s products).

The trends are interesting. Those who got advice, seemed to understand and have invested in the right fund for their age and stage of life, and they tend to have an understanding of the tax implications. They also understand market volatility and how it will impact on their individual KiwiSaver.

It is nine years since the global financial crisis smashed the global equity markets. For those investors who don’t understand risk (the chance their balances could fall), a market correction could cause a lot of sleepless nights when they see thousands wiped off their KiwiSaver balance.

If you are one of the 53% that has never had KiwiSaver advice, or one of the 47% who wants to ensure management of your KiwiSaver fund is optimised, give me a call and come and have a coffee. I don’t charge for the first appointment. Let’s first see if we are a good match, and then we can go about optimising your investment plan for you and your circumstances.

John Barber
WealthDesign – a life well planned

 

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