Families typically insure only the main breadwinner in their household. They often overlook the financial value that a stay at home parent adds towards raising children and maintaining a home.

In financial terms, the non-paid work of house-keeping, child rearing, cooking and all the other domestic duties required to keep a house running can be easily ignored. Furthermore, the possibility that either partner in a marriage should suddenly be unable to work due to illness or injury is seldom considered.

A report by the Australian Institute of Family Studies* found that the value of a woman, aged 25-44 years, managing housework, shopping and looking after children was $45,617 per annum.

If you calculate this over 20 years (without factoring in CPI), then it works out to be $912,340. And this does not include the cost of raising and educating children.

For couples considering wealth protection, it's important to place a value on the contribution of both partners, not just the main breadwinner. 

Case study

Gary and Sally have been married for a couple of years and have a one year old son, Jack. When Jack was born, they decided that Sally would take a career break and stay at home to raise their son and look after the family home. Gary would continue in his job as an accountant.

About a month ago, Sally was diagnosed with a terminal illness with only a few months to live. The news was just devastating. Her hospitalisation forced Gary to make major changes to their lifestyle. He had to take time off work to find a babysitter for Jack, a cleaner for the house and still pay the mortgage and bills.

Just before they married, their financial adviser recommended and implemented comprehensive insurance for Gary and Life insurance for Sally. The moment she was diagnosed with the terminal illness, their insurer paid out a lump sum benefit to the family. Although it was little consolation, the money helped Gary make immediate arrangements for the family home and Jack to be looked after. Gary could therefore focus on getting the best medical treatment for Sally. 

Did you know?

You can insure the homemaker for up to $1 million for Life, Total and Permanent Disability and Critical Illness without the need to provide financial evidence. Should you require a higher sum insured, the insurance company would be happy to consider the application.

* de Vaus, D.; Gray, M. and Stanton, D.: Measuring the value of unpaid household,caring and voluntary work of older Australians; Australian Institute of family
Studies, Research Paper No 34, October 2003. 

The above information has been sourced from Norwich Union Life Australia Limited.

If you would like to secure the financial future for you and your family, then I urge you to have your insurance cover reviewed.

Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and I recommend you seek financial advice.

Failure is not a single, cataclysmic event. We do not fail overnight. Failure is the inevitable result of an accumulation of poor thinking and poor choices. To put it more simply, failure is nothing more than a few errors in judgment repeated every day.

Now why would someone make an error in judgment and then be so foolish as to repeat it every day? The answer is because he or she does not think that it matters.

On their own, our daily acts do not seem that important. A minor oversight, a poor decision, or a wasted hour generally doesn't result in an instant and measurable impact. More often than not, we escape from any immediate consequences of our deeds.

If we have not bothered to read a single book in the past ninety days, this lack of discipline does not seem to have any immediate impact on our lives. And since nothing drastic happened to us after the first ninety days, we repeat this error in judgment for another ninety days, and on and on it goes. Why? Because it doesn't seem to matter. And herein lies the great danger. Far worse than not reading the books is not even realizing that it matters!

Those who eat too many of the wrong foods are contributing to a future health problem, but the joy of the moment overshadows the consequence of the future. It does not seem to matter. Those who smoke too much or drink too much go on making these poor choices year after year after year... because it doesn't seem to matter. But the pain and regret of these errors in judgment have only been delayed for a future time. Consequences are seldom instant; instead, they accumulate until the inevitable day of reckoning finally arrives and the price must be paid for our poor choices - choices that didn't seem to matter.

Failure's most dangerous attribute is its subtlety. In the short term those little errors don't seem to make any difference. We do not seem to be failing. In fact, sometimes these accumulated errors in judgment occur throughout a period of great joy and prosperity in our lives. Since nothing terrible happens to us, since there are no instant consequences to capture our attention, we simply drift from one day to the next, repeating the errors, thinking the wrong thoughts, listening to the wrong voices and making the wrong choices. The sky did not fall in on us yesterday; therefore the act was probably harmless. Since it seemed to have no measurable consequence, it is probably safe to repeat.

But we must become better educated than that!

If at the end of the day when we made our first error in judgment the sky had fallen in on us, we undoubtedly would have taken immediate steps to ensure that the act would never be repeated again. Like the child who places his hand on a hot burner despite his parents' warnings, we would have had an instantaneous experience accompanying our error in judgment.

Unfortunately, failure does not shout out its warnings as our parents once did. This is why it is imperative to refine our philosophy in order to be able to make better choices. With a powerful, personal philosophy guiding our every step, we become more aware of our errors in judgment and more aware that each error really does matter.

Now here is the great news. Just like the formula for failure, the formula for success is easy to follow: It's a few simple disciplines practiced every day.

Now here is an interesting question worth pondering: How can we change the errors in the formula for failure into the disciplines required in the formula for success? The answer is by making the future an important part of our current philosophy.

Both success and failure involve future consequences, namely the inevitable rewards or unavoidable regrets resulting from past activities. If this is true, why don't more people take time to ponder the future? The answer is simple: They are so caught up in the current moment that it doesn't seem to matter. The problems and the rewards of today are so absorbing to some human beings that they never pause long enough to think about tomorrow.

But what if we did develop a new discipline to take just a few minutes every day to look a little further down the road? We would then be able to foresee the impending consequences of our current conduct. Armed with that valuable information, we would be able to take the necessary action to change our errors into new success- oriented disciplines. In other words, by disciplining ourselves to see the future in advance, we would be able to change our thinking, amend our errors and develop new habits to replace the old.

One of the exciting things about the formula for success - A few simple disciplines practiced every day - is that the results are almost immediate. As we voluntarily change daily errors into daily disciplines, we experience positive results in a very short period of time. When we change our diet, our health improves noticeably in just a few weeks. When we start exercising, we feel a new vitality almost immediately. When we begin reading, we experience a growing awareness and a new level of self-confidence. Whatever new discipline we begin to practice daily will produce exciting results that will drive us to become even better at developing new disciplines.

The real magic of new disciplines is that they will cause us to amend our thinking. If we were to start today to read the books, keep a journal, attend the classes, listen more and observe more, then today would be the first day of a new life leading to a better future. If we were to start today to try harder, and in every way make a conscious and consistent effort to change subtle and deadly errors into constructive and rewarding disciplines, we would never again settle for a life of existence - not once we have tasted the fruits of a life of substance!

The above article has been sourced from Jim Rohn - American Business Philosopher.

When you take up insurance, there are generally three ways you can pay the insurance premiums:

1. Level premiums are based on age when cover commences.

2. Stepped premiums increase as the age of the insured increases.

3. A combination of the two. 

The third option could be especially attractive for people who take up bundled insurance that may include Life, TPD and Critical Illness insurance in the one policy contract. Why? For Life and TPD insurance, stepped premiums tend to increase at a lower rate as the insured ages so it is a more affordable option. Whereas stepped premiums for Critical Illness increase quite substantially with age. So placing a Critical Illness policy on a level premium rate could really improve affordability for you in the long-term. 

Over time, you can reduce the stepped premium cover as you build up more assets and potentially need less insurance. As a result, you could end up paying level premiums on most (if not all) of your insurance in the later years, and benefit from the lower premium costs associated with level premiums at that time. 

Did you know?

Most claims occur in later years of life, but many policies lapse at this time due to the higher stepped premiums. By combining stepped with level premiums, you can make the cover more affordable in the later years so you can keep the cover going at a time when you need it most.  

Case study

Steve is a 35 year old white collar professional. After discussing his insurance needs with his adviser, Steve decided to take out Life, TPD insurance on stepped rates and Critical Illness insurance on level rates to age 60.

The adviser provided Steve with comparative insurance premium quotations for stepped and hybrid premiums (stepped and level) over the life of the policies to show Steve how much he could save.  

By combining stepped premiums for Life and TPD, and level premiums for Critical Illness (hybrid premiums), Steve saved $47,422 over the term of the cover. 

The above information has been sourced from Norwich Union Life Australia Limited.

If you would like to secure the financial future for you and your family, then I urge you to have your insurance cover reviewed.

Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and I recommend you seek financial advice.

Editors Note

This edition includes an inspirational quote, a funny picture, a market commentary with the main index returns during June 2010 and Financial Planning Q&A. I encourage you to make comments.

It was another challenging month for sharemarkets around the world as the sovereign debt and financial sector issues in Europe continue.  

Inspirational Quote

We are what we repeatedly do.

Aristotle (Greek Philosopher, Physician and Scientist)

Funny Picture

Remember the old wives tale of "Don't Walk Under The Ladder". Well it may well be true when you look at this Blooper which was snapped at just the right moment!

Market Commentary

It was another challenging month for sharemarkets around the world as the sovereign debt and financial sector issues in Europe continue. Sharemarkets and bond yields have fallen due to the increased uncertainty surrounding the world growth outlook. In Australia, it was a dramatic month in politics with the Labor Party replacing Kevin Rudd with Julia Gillard as prime minister. 

Performance scorecard to 30 June 2010 

Index	1 Month (%)	3 Months (%)	1 Year (%)
Australian shares	-2.6	-11.2	13.1
Australian real estate investment trusts	-1.0	-1.5	20.3
International shares (AUD)	-4.1	-4.8	5.2
International shares (hedged)	-3.9	-10.9	14.1
Australian fixed interest	1.4	3.6	7.9
International fixed interest (hedged)	1.1	3.5	9.3
Cash	0.4	1.1	3.9
AUD/USD	0.7	-8.0	4.5

Indexes used: Australian shares: S&P/ASX 300 Index, Australian listed property: S&P/ASX 300 A-REIT Index, International shares: MSCI World ex-Australia Index (net dividends reinvested), Australian fixed interest: UBS Australian Composite Bond Index, International fixed interest: Barclays Capital Global Treasury Index (hedged into Australian dollars), Cash: UBS Australian Bank Bill Index. 

Financial year sharemarket performance could best be described as a story of two halves. While the year started off on a positive note with optimism returning to markets, rising sovereign debt concerns in Europe rattled markets over the second half of the year. Overall, the Australian sharemarket delivered a positive return with the S&P/ASX 300 Accumulation Index returning 13.1 per cent over the full financial year.

While the global economy has been expanding at around trend levels, growth levels are patchy with growth strong in Asia and more subdued in the more advanced economies. Chinese economic growth looks like it is moderating to more sustainable levels, while US growth has strengthened despite continued low employment levels.   

The Australian Government's proposed Resource Super Profits Tax caused additional volatility in the Australian sharemarket over the June quarter with investors concerned about the impact it would have on the thriving resources sector. Concerns proved to be short-lived when Julia Gillard negotiated a more palatable arrangement with the large mining companies in the form of a scaled down Mining Resources Rent Tax.

While Australian Real Estate Investment Trusts delivered negative performance over the month and quarter to 30 June, the sector outperformed the broader sharemarket.      

The Reserve Bank of Australia left interest rates on hold at their June meeting with interest rates for borrowers now sitting at more average levels. Both international and local bond yields fell over the month as the risk of lower than expected world growth increased and investors flocked to safe-haven assets.

Looking forward while the global economy is expected to continue its recovery, growth is likely to be subdued in some areas. Financial risks in the global economy remain and investors remain cautious as they wait for optimism to return to markets.  

The Market Commentary has been sourced from Vanguard Investments Australia Ltd. 

Financial Planning Q&A

Financial Planning Q&A includes the best question from the public each month and my answer, to give readers an introduction into the benefits of financial planning advice. If you would like a question about your financial situation answered, click Financial Planning Q&A. The best question will also receive a MOVIE TICKET.

Question

I'm inquiring about life insurance for my husband who is the sole provider of the family. The issue is that he has had cancer in the past (approximately 4 1/2 years ago) and I know it's probably impossible for him to get insurance cover. So my query is, do you think he can get insurance cover? He's 28 years old.

Answer

This is a common issue for people who have had health issues in the past.

It's possible your husband may have some life insurance cover within his superannuation fund.

The process of underwriting someone for insurance cover is complicated and takes into account a lot of factors. What an insurer is checking for is the risk of claim in the future. In the circumstances you have described, an insurer would contact your husband's doctor to fully understand the cancer he had, the treatment provided and the chance of the cancer returning. They will then make a decision if they wish to offer insurance cover. If they do, they may charge extra or exclude certain claims. As the time since the cancer occured increases, the chance of insurance cover being offered also increases.

I recommend you seek financial advice and review the insurance cover for your whole family.

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Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and I recommend you seek financial advice.

The Westpac ASFA Retirement Standard measures the annual income Australians need to fund their retirement. The standard has recently been revised to reflect changes in living standards, retirees expectations and spending patterns such as increased expenditure on internet and electronic communications.

Data for the March 2010 quarter shows that a couple seeking a comfortable retirement lifestyle would need to spend $53,565 a year, while those seeking a modest retirement lifestyle would need to spend $30,399 a year. 

A single person looking to achieve a comfortable retirement lifestyle would need to spend $39,159 a year or $20,981 a year for a modest retirement lifestyle.

A comfortable retirement standard includes a broader range of leisure and recreational activities and items like private health insurance, a reasonable car, good clothes, electronic equipment and domestic or occasional overseas travel. A retiree on a modest retirement standard would only be able to afford more basic activities. 

Most people will probably not have enough funds to support a comfortable retirement lifestyle. If this sounds like you, it's not too late to start planning for a secure financial future, as there are a number of strategies to potentially boost your retirement income.

If you would like to secure the financial future for you and your family, then I urge you to have your wealth creation plan reviewed.

Important Information

The information provided is general in nature and does not constitute financial advice. While we have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and we recommend you seek financial advice.

While it's been a volatile couple of months for investors, the Australian sharemarket delivered its first positive financial year return since 2006-2007 with the S&P/ASX 200 Index returning 8.8%. 

Balanced funds are also on track to deliver positive returns with SuperRatings estimating that the median balanced investment option will return 9.6%. While the return is more moderate than the double digit returns achieved between 2004 and 2007, it sits above the median annual return of 6.8% snce the Super Guarantee was introduced in 1992.  

While many balanced investors would have been tempted to switch to cash options during the extreme volatility of the GFC, history has proved that staying exposed to growth assets is a more durable strategy. 

SuperRatings managing director Jeff Bresnahan said: "It would be good if most people with super, particularly those under 50 years of age, could simply stick their head in the sand and pull it out about 5 years away from retirement. Market volatility is an ongoing reality, but growth style assets will continue to outperform cash investments over the medium to long term." 

Diversification has proved to be a saving grace for many investors. SuperRatings data shows that a $100,000 investment in an international share option on 1 January 2000 would have fallen to $76,606 while the same amount invested in Australian shares would have grown to $220,516 by 30 June 2010. By contrast, investing the same amount over the same timeframe in a balanced investment option would have grown to $164,461 while a cash option would have yielded $156,855.   

While sharemarkets are likely to remain volatile in the near term, super fund members will be able to console themselves with a return to black rather than red.  

The above article has been sourced from Vanguard Investments Australia Ltd.

Important Information

The information provided is general in nature and does not constitute financial advice. While we have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and we recommend you seek financial advice.

Many people wouldn't think twice about insuring the full value of their car or home. But when it comes to life insurance, 60% of families with dependant children do not have enough insurance to cover household expenses for a year if the family breadwinner was to die. See Note 1

Even today with an over-abundance of information available, people are still relatively uneducated on the topic of insurance. They believe they have enough insurance in their super, they don't need insurance or think it's just too expensive. Isn't it time to debunk some of these common myths?

Despite the fact that almost every working Australian has some life insurance within their superannuation, Australia has proved to be one of the most underinsured nations in the developed world. See Note 1

Take a look at these statistics:

• 50% of individuals are underinsured by $100,000 for life insurance. See Note 2

• 74% of individuals are underinsured by $100,000 for Total and Permanent Disability (TPD) insurance. See Note 2

• 45% of individuals are underinsured by $1,000 per month for income protection insurance. See Note 2

• Australian families with dependant children need life insurance between the value of 10 to 13 times the combined annual income. See Note 3

• Only 4% of Australian families with dependant children have adequate levels of insurance cover. See Note 3

• The default amount of life insurance in super is on average only 20% of what is actually needed. See Note 3

It's quite a serious situation considering:

• 81% say life insurance is too expensive, however 61% overestimate the cost. See Note 4

• 41% say life insurance is too complicated and 1 in 4 don't know where to start. See Note 4

• More than 50,000 people were hospitalised due to transport accidents with over five days in hospital (81% of these were of working age). See Note 5

• Over 1,400 people die on Australian roads every year. See Note 6

• More than 3 in 4 Australians will be diagnosed with a serious illness in their working life. See Note 7

• 1 in 3 women and 1 in 4 men will suffer cancer at some stage in their lives - over 1/2 of whom will live for longer than 5 years after diagnosis. See Note 8

When you consider these sobering statistics, there's really no excuse to not put protection first.

Did you know?

Wealth protection is an integral part of any wealth creation strategy. Because no two people are the same, there are a selection of protection products that can be tailored to suit your individual needs. 

Note 1 IFSA/TNS Protection Gap research, 2005
Note 2 AIST Media Release, Tuesday 3rd June 2008
Note 3 Analysis of Insurance needs - Rice Warner Actuaries, May 2005
Note 4 ING Australia's Attitudes Towards Life Insurance, December 2008
Note 5 AIHW Injury Research and Statistics Series No. 42, 2005-06
Note 6 Australian Government, Road Deaths Australia 2008
Note 7 ABS Statistics, 2007
Note 8 Cancer Council: (www.cancer.org.au), Cancer in Australia: an overview, 2008 Australian Institute of Health and Welfare (published December 2008)

The above information has been sourced from Norwich Union Life Australia Limited.

If you would like to secure the financial future for you and your family, then I urge you to have your insurance cover reviewed.

Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and I recommend you seek financial advice.

Each of us has two distinct choices to make about what we will do with our lives. The first choice we can make is to be less than we have the capacity to be. To earn less. To have less. To read less and think less. To try less and discipline ourselves less. These are the choices that lead to an empty life. These are the choices that, once made, lead to a life of constant apprehension instead of a life of wondrous anticipation.

And the second choice? To do it all! To become all that we can possibly be. To read every book that we possibly can. To earn as much as we possibly can. To give and share as much as we possibly can. To strive and produce and accomplish as much as we possibly can. All of us have the choice.

To do or not to do. To be or not to be. To be all or to be less or to be nothing at all.

Like the tree, it would be a worthy challenge for us all to stretch upward and outward to the full measure of our capabilities. Why not do all that we can, every moment that we can, the best that we can, for as long as we can?

Our ultimate life objective should be to create as much as our talent and ability and desire will permit. To settle for doing less than we could do is to fail in this worthiest of undertakings.

Results are the best measurement of human progress. Not conversation. Not explanation. Not justification. Results! And if our results are less than our potential suggests that they should be, then we must strive to become more today than we were the day before. The greatest rewards are always reserved for those who bring great value to themselves and the world around them as a result of who and what they have become. 

The above article has been sourced from Jim Rohn - American Business Philosopher.

Last year at Zurich, 32% of all death claims and 26% of all trauma claims were as a direct result of cardiovascular disease.

Do you want better heart health?

The Heart Foundation recommends the following 5 steps for better heart health:

Step 1 Achieve and maintain a healthy weight - check your body mass index (BMI) with your doctor.

Step 2 Be physically active - the Heart Foundation recommends at least 30 minutes of moderate activity on most, if not all days of the week.

Step 3 Enjoy healthy eating - including a variety of foods from the different food groups.

Step 4 Maintain healthy blood cholesterol and blood pressure levels - speak with your doctor about getting these assessed.

Step 5 Be smoke free - quit smoking and avoid smoke from other people's cigarettes or cigars.

The above information has been sourced from Zurich Financial Services Australia Ltd.

While we can't always prevent illnesses such as cardiovascular disease, using insurance we can protect you, your lifestyle and your loved ones from the financial impact that such events bring.

If you would like to secure the financial future for you and your family, then I urge you to have your insurance cover reviewed.

Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and I recommend you seek financial advice.

For direct share investing, I use an investment method similar to that used by Warren Buffet.

For the first step, I use a software program that scans the entire market, to find the small number of companies that meet my stringent "Warren Buffett" criteria. The second step is to perform more detailed analysis on the companies that passed through the first scan. The third step is calculating the right price to pay. It's not a question of whether a company is undervalued or overvalued according to some theoretical model but to calculate what return can I expect under my own margin of safety.

So who is Warren Buffet?

He is one of the most successful investors in the world. He is the Chairman and CEO of Berkshire Hathaway, a diversified investment company valued at over US$192 billion (as at June 2010). Before that Buffett ran private investment partnerships.

Suppose someone had the good sense to invest US$10,000 in one of Buffett's original partnerships back in 1956 when they first started. And suppose that when the partnerships terminated in 1969, that person reinvested the proceeds in Berkshire Hathaway. Today that person would be worth over US$280 million - after all taxes and expenses.

To understand the Warren Buffett Investment Method, we need to recognise that he does not think about the stockmarket. "We look at individual businesses," he once said. "And we don't think of stocks as little items that wiggle around in the paper. We think of them as parts of businesses."

One of the best quotes that describes the Warren Buffett Investment Method is the following: 

"Your goal as an investor should be simply to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher 5, 10 and 20 years from now."

Suppose we used the Warren Buffet Investment Method to invest in Australian companies between Jan 2001 and Dec 2009. The growth returns* (dividends not included) using this method are shown below as the CMP Portfolio and are compared to the growth returns from the All Ordinaries index.

Chart 1 - Calender Year Returns

Chart 2 - Performance Over 9 Years - Starting With $100,000

* Past performance is not indicative of future performance. The future value of investments may rise and fall with changes in the market.

The growth returns above show there is a strong case for using the Warren Buffet Investment Method to invest in Australian companies.

 
To learn more about direct share investing and Warren Buffet Investment Method for your investment portfolio or self managed super fund, call me on 03 9372 7955.

Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and I recommend you seek financial advice.