WealthDesign

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John Barber
WealthDesign – a life well planned

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2020 – 2021. Oh what a year it’s been! Who could have predicted any of the events that have unfolded? The virus, the forced vacations (lockdowns), the variant, the “vaccine” ….  the past 12 months have been exhausting. And now I think there’s volatility to follow.

Interest rates have been at historical lows and asset prices have risen rapidly. We have also seen the fear of missing out (FOMO) drive house prices to record levels and no one can predict what will happen next.

If I were a gambling man, I would bet on interest rates heading up. At present you can fix mortgages below 3%. If you have a $500,000 mortgage and interest rates go up to 5%, your interest rate bill just increased by $833 per month. In a world of low interest rates, borrowing makes logical sense but make sure you can afford the increased monthly mortgage bills when they arrive!

It is human nature to project more growth on the back of the past and when things are good, people naturally predict it to always be good. As we saw in March 2020, when things are bad, it is also natural to predict things to get worse. The fact is it is somewhere between.

We have seen an amazing share market recovery but now it looks like ongoing market volatility comes next. All my reading tells me that full employment, strong retail spending and inflation equals increasing interest rates. And this means economic pain – and none of us are immune to that.

My advice is to build a war chest. Start budgeting and put the credit card away. If there’s one lesson I’ve learnt, it’s that cash is king in uncertain times.

Give us a call at WealthDesign. We’re here to help you navigate the upcoming “Vs.” Yes there may be volatility ahead, but if you have a robust plan in place, you’ll be prepared to make the most of the ups and downs as they appear.

John Barber
WealthDesign – a life well planned

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Unfortunately, I don’t think many people know what financial planning is. This confusion comes as it isn’t a profession that promotes itself well. I think this is because many individuals call themselves financial advisers, but they are really insurance sales people, investment advisers or mortgage brokers. They may be great in their chosen field but they are not financial planners.

I can understand this confusion as it’s a complex and diverse topic. But basically, financial planning is a process of planning one’s finances to get to a better financial outcome. The process uses tools such as investments (including KiwiSaver), home ownership and if appropriate, residential rental properties. It also needs to incorporate insurance and estate planning.

As a financial planner I believe every individual has unique financial needs and therefore needs a specific plan designed for their individual situation.

The process is to sit down and see where you are, and more importantly where you want to be. We then put in place a plan. It may be as simple as setting up a KiwiSaver scheme or referring you to a good solicitor to sort out your Wills and Enduring Power of Attorney (EPA). It may include insurance or not, depending on your individual circumstances. It may involve helping you save for your first home or help you organise your mortgages.

I’ve been doing this for a long time now and I get the satisfaction of seeing my clients improve their financial situation over the years. Sometimes I have to highlight how far they have come. I keep copies of things like asset and liabilities, so I can highlight the upside.

People spend more time planning their vacation each year than planning their financial world. You owe it to yourself to shine a spotlight on your finances and to make a plan.

I don’t know your situation and how I can help until I can understand your circumstances. This is why I offer a free half hour initial appointment. Give me a call and let’s make a start. Let’s get a plan in place – your finances, the way you want them to be.

John Barber
WealthDesign – a life well planned

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Most of us remember the now famous “okay, boomer” comment from Chloe Swarbrick in parliament, which may have been meant as a put-down to a fellow politician who allegedly heckled her during a debate on climate change. Funnily enough, we actually use life stages as part of our financial planning framework at WealthDesign. And we’re keen to see the “boomer” segment of our population in a more than “okay” situation!

We class the 55 year olds and above as “Planners”. This broad group are the boomers and above (those in 1964 or before), along with the top end of the Gen Xs (those born from 1965 to 1975). They are now either fully focused on their next life stage or are about to be. The fact is, there is a good chance they will live as many years in retirement as years they may have worked. Their problem is that KiwiSaver hasn’t been around long enough for them to rely on their KiwiSaver balance, to comfortably retire.

Often this group have their kids off their hands, their mortgages paid down and have higher disposable incomes, however this isn’t a time to coast.

Massey University did an extensive research paper in 2017 and established that a retired couple would need between $1,399 and $1,104 per week to live in relative comfort.

The good news is the New Zealand Government Superannuation provides $652 week, but leaves about $600 per week shortfall. The problem is we are now living in a low interest environment and to generate $600 per week to cover the shortfall, you would need around $2.7 million in the bank.

The answer unfortunately, is planning and compromising. Most boomers will work until they are 70 – not through choice, but through necessity.

If you are a boomer or a Gen Xer, give me a call as it’s time to plan for your next life stage.

John Barber

WealthDesign – a life well planned

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Today the market is increasingly volatile on the back of the coronavirus crisis. Prices are down and people are talking about the losses they have made on their KiwiSaver schemes.

It is at times like these that I remember why I don’t like managed funds! I’ve been running investment portfolios for clients for many years and I’ve lived through both good and bad market cycles (yes, I deserve these wrinkles!). In 2008 we saw the world equity markets lose around 50% of their value and lots of investors had a tough year or two. In the past few years it seemed nothing could go wrong. That was until the coronavirus struck.

I like investors to know where their money is invested. Why? Because when things are tough, smart investors get out their cheque books and start buying companies from those who want out of the market. They are armed with knowledge and make the most of the timing to make the best of the circumstances.

Funnily enough, the sellers at these times are often the fund managers. In my opinion, this is because investors in managed funds (including KiwiSaver) are completely disjointed from where their money is actually invested. They don’t know if their fund manager is holding shares in great companies or if they are invested in the next get-rich-quick share. It’s not until after the event, who owns what becomes apparent.

For me, I want to invest in companies that have strong balance sheets, robust business models and conservative debts. As a by-product of this, these companies normally pay solid dividends.

A current example would be Contact Energy. Trading today at $6.02 and paying a gross dividend of 8.0%. This share is down from $7.66 on February 20.

My question is, has the Contact Energy business changed? Will the coronavirus impact on their business in the next twelve months? Will Contact Energy be around in 10 years’ time and making money?

My view is simple. As an investor, it’s your money and you should be in control. Don’t pass the responsibility and decision making to someone else. If you do, don’t be surprised if the outcome is average at best.

If you want to come and talk to me about my approach to investing for me and my clients, contact me now. I’m always happy to be helping people reach their investing goals. And your initial chat is always free of charge.

Disclaimer: The market is volatile and share prices can and do change. This is not a recommendation to buy or sell any asset as each individual should get personalised advice suitable for their circumstances.

John Barber
WealthDesign – a life well planned

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