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New Zealand; a land of opportunity but not without risk.

01
No matter what background we have or what country we or our forebears come from, there is no doubt New Zealand offers opportunities to those prepared to work for them. This pioneering spirit in a modern world has become more often referred to as our entrepreneurial spirit…where grit and determination meets execution! We can spend time working for ‘the man', building our know-how and experience or we are already experienced business people from other places, and one day we think, ‘I could do this myself. Take my dream, start a business, (or start again), employ some help. I don't want an empire, I just want to work for myself and get a lifestyle out of it for me and my family.'

This attitude is so common that small to medium sized enterprises (SMEs) in New Zealand employing five or fewer people now number over 430,000, employing more than 560,000 people representing immeasurable worth to the national economy (GDP). But there's a threat lurking beneath these impressive statistics: research tells us that New Zealanders are underinsured compared with other countries, with only about a third of the investment other OECD nations put into protecting the livelihoods of the people producing this GDP. At GFS there is too often evidence that business owners, many of whom are the key person in the business, frequently lack some or all of the cover they need.

This is in part because many see insurance as expenditure rather than protecting their dream. One role of GFS is to show people than insurance is not a cost, but on the contrary a vital element of financial wellbeing. A second role is to provide products and services that facilitate that wellbeing.


The diagram shows all the parties at risk in ‘The Circle of Life'. The business is underpinned by its key people, who are subject to general life risks - accident or illness that could leave them temporarily or permanently unable to contribute to the business.

That financial impact flows on to the owner/s of the business (often also a key person), who is responsible for the debt, both visible and invisible. Some owners think they don't need business or key person cover because they don't see any outstanding debt - they wholly own the business and the business assets such as vehicles and so on.

However, that's just the visible debt. The cost of exiting is invisible - if you suddenly had to close the business, what would it cost you to pay all current utility bills, rates, holiday pay and other entitlements? What about your lease commitments too? Too often these issues can be overlooked.

Then there are the families; the people supported by the business. What does the owner's lifestyle cost? What about their staff's lifestyles? Who and what is dependent on the business, and what happens if that revenue stream drops or stops? But of course, ‘the circle of life' only completes because the business also is dependent on the very people needed to drive revenue.


The advice GFS offer their clients looks to deal with this value chain. Certainly, it is the responsibility of business owners and key people to seek advice to get the cover they need. But GFS bear equal responsibility, in that they must help to simplify this process and support their clients transfer of any financial liability they are uncomfortable with should a life risk event strike. Getting the insurance you need should not be complicated or expensive relative to the risks you face – Talk to GFS today about how they can help you.

Call 09 2555500 email insurance@globalfinance.co.nz

 

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Take charge of your mortgage (and save interest on it)

Written by David Chaston on June 24th, 2016.      0 comments

Save Interest on Your MortgageSometimes the best home loan choice is not what you might expect. You may seek out a good broker because you want the ‘best interest rate’ on your loan. 

But surprisingly, the ‘best’ may not be the ‘lowest’. In fact, it might be one of the higher rates, a floating rate.

The key is to shift your focus; it is not the interest rate you pay that you may want to concentrate on, but the rate (speed) you pay your loan off.

The faster you pay your mortgage down, the lower the interest you will pay.

The benefits of a faster pay-down will far out-weigh the benefits of a lower interest rate.

You can achieve this by signing up to a revolving credit account. These combine your home loan and everyday banking in one account. When your salary is paid into your account it reduces what you owe on your loan – which means you pay less interest. If you have a credit card, you could put all your month’s purchases on the credit card and then pay it off automatically up to 55 days later, interest free.

That’s the idea. Here is a graphic that shows the principle:
 
Benefits of Revolving Credit for Home Loan

(This hypothetical example also shows how a lump-sum bonus can boost the benefits too, and allows a slower pay-down over the last four years.)

But there is a big ‘but’ – you need to be disciplined over a long period.

If you don’t use it as intended you could easily end up paying more interest, even getting trapped in an out-of-limit situation you can’t easily get out of.

The same bank that was happy to see you sign-up to the revolving credit facility will love to point out that the more you use that credit card ‘interest free’ the bigger the savings – ignoring you need to pay in full, on time.

The same bank that was happy to see you sign-up to their revolving credit facility will readily let you draw it back up to its limit for that latest ‘must-have’ purchase – perhaps a new car, perhaps that special trip away with the All Blacks, the latest smart phone. If you run a revolving credit facility at its limit you will have wasted the benefits and the reason for signing up in the first place.

The goal is to save interest - by spending less on an interest incurring account. Every action that doesn’t save is a backward step.

Which is why you need long-term personal discipline.

And a good broker, (such as Global Financial Services), can provide that moral support to stay on the plan. An outside professional can be the counter-influence when you are tempted. And you will be tempted often because this strategy only works over a long time period.

However, the effort is well worth it.

You could pay off your loan years earlier saving tens of thousands in unnecessary interest. All from a disciplined plan, one where you actually paid a higher interest rate.

Your broker or mortgage manager can show you how it will work for you, using the detail of your personal circumstances.

Note from GFS - Global Financial Services Ltd (GFS) are providing such consulting services over the last 17 years and are capable of providing you a tailor made written plan as well. We thank David Chaston, (publisher of interest.co.nz) for writing this article for the benefit of consumers. 

Disclaimer: Please do not take any decision on the basis of the information contained in this article as each person has unique or different circumstances. These are the views of the author expressed to illustrate a specific situation and not necessarily views of Global Financial Services Ltd or its associate companies and Directors. Neither the writer nor GFS nor its employees are responsible in any way for any losses or omissions incurred due to the information contained in it.


 

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