October 2012 DUX Financial Services Newsletter

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Welcome to the October issue of the DUX Financial newsletter. In this issue we are looking at contents insurance and Part 1 of a series of articles looking at clearing debt.

DUX staff

Dayna Berghan-Whyman started at DUX Financial earlier this year as the Practice Manager. She is in charge of making sure Alan knows where he is meant to be, our records management and our compliance. Dayna is also learning the ropes of the Fire and General Insurance side of the business and will become the key person in this area.

Interest Rates

Interest Rates are all over the place at the moment, but mostly they are down. The floating rate is no longer the lowest rate, its typically sitting between the 2 and 3 year fixed. Lenders are offering good discounts for good equity, and freebies are now starting to pop up to sweeten the deals. If you are looking at re-fixing, don’t hesitate to get in touch with us for advice and we can take care of it for you.

Getting contents right

Recently, a friend of mine mentioned that they had lost one of the stones out of his wife’s engagement ring. Oh well, time for an insurance claim was the general response from everyone. No, it’s not insured was the answer.

This was very surprising, who doesn’t insure their valuables? After some more discussion, it turns out that they have contents cover, but the engagement ring was not listed as a specified item, so they are limited to the general maximum of the policy.

What this means is that if you don’t specify valuable items, the insurer has a maximum they will pay out for one item and sometimes a maximum for a collection. So, for jewellery it might be $2,500 for one item, and $10 000 for a collection. If the ring in the example had been lost and was worth $10,000, they would only get $2,500. As the ring is only missing a part, it’s possibly covered (if the stone is less than the $2,500 limit).

There are three categories of items when it comes to your contents cover.

General Items

This is the majority of what you own, your clothes, TV etc. The key here is to make sure you have enough to cover for all of what you own. Too many people randomly pick a number they think is the value of their belongings and don’t actually sit down and work it out. DUX Financial has a contents inventory form that can help you with working out the value of your belongings.

Specified items

These are individual high value items over the limits of the insurer (e.g. $2,500 for a piece of jewellery) or a collection of items over a certain value. For these items we need to let the insurer know the item exists, and what it’s worth, either by getting a valuation (jewellery) or getting the replacement value from the supplier. If an item is specified, then it is insured over the general limits. Specified items do attract an increase in premium due to the increased risk of the item, and maybe some conditions (jewellery over $20,000 in value might have storage requirements for example), but it’s worth it to make sure you get a valuable item replaced.

Noted Items

Noted items are odd belongings or valuable collections that do not come under a specified limit. In this case we let the insurer know they exist, usually with a list of the items and their values, so that it’s easier in the event of a claim. If the items are worth enough, they may get escalated to specified items, so it’s worth checking. Examples over the years of noted items are sets of sports gear (usually kite surfers), war gaming/toy soldier collections, comic book collections, some stamp collections (some become specified) etc.

Most people treat their contents cover as an afterthought, and do the minimum amount of work to get the cover in place. This can come back to bite you if you have a loss. With a little bit of effort, and a yearly review, you can ensure that when it comes to claim time it’s simple to make a claim for all your belongings.

In future newsletters we will look at ways to store the information on your belongings and how to make a claim easier.

Clearing Debt or Saving For a Goal

Step 1 – Get the Facts

As I spend time with clients giving advice on how to get out of debt or save for a goal (like a house deposit), I find myself going over the same strategies each time (though tailored to the individual). I decided it would be a good idea to put down the steps I use with clients for everyone to use.

The real first step is to make the decision to change, you have either decided you want to reduce debt better than you are, or make a concerted effort to achieve a goal. This decision is made with both partners on the same page.

I am going to assume that the goal has been set, and look at the Step 1 of the actions to take.

Before you can look at strategies or make changes you have to know the facts.

You need to get written down (on paper or spread sheet, whichever you prefer) the following:

Your incomes

  • If your income is varied or you get commission or bonuses you need to break it down into base income and extras, so you can get down to the minimum you will get each pay.
  • If you and your partner get paid on different cycles (weekly vs. monthly for example), record it the way you get paid.

Expenses

  • Write it all down, go through bank statements and check for spending.
  • Don’t forget the car warrant, or the dog registration, or other expenses that happen infrequently.
  • Be honest, try not to guess, but don’t ignore stuff. Get it all down
  • Write it down the way you pay it, so have a column for weekly, 1 for monthly, etc.

Assets and Debts

  • Track your financial position, by seeing what your net worth is.
  • For the debts, get the current balance and the repayment figure (if it’s different), the term remaining and the original term, the day it started, the interest rate and the payments (minimum and what you are paying).
  • For the assets, if they have a debt against them, note it (i.e. which debt is the car security for etc.)

Once you get all this down, we can start to look at patterns, and you will probably see changes you make already.

Next time we will look at step 2.

2012 October Newsletter Winners

Congratulations to Ashley Woofe and Rory Bell the lucky winner of this month’s DUX newsletter and Facebook draw.

Each month DUX Financial picks a lucky subscriber to win vouchers for Uncle Mike’s BBQ Restaurant in Petone.

To enter our draw simply “like” us on Facebook or subscribe to our newsletters via our website.

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