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Provision Newsletter

How to invest in property without actually buying one

Posted On:Oct 26th, 2018     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

You don’t have to be a landlord, deal with tenants or put a deposit down on a home to get your foot in the property market

While investing in property may be a dream of yours, saving for a deposit, dealing with tenants and paying off a mortgage mightn’t be.

The good news is there are opportunities where you can invest in property without

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You don’t have to be a landlord, deal with tenants or put a deposit down on a home to get your foot in the property market

While investing in property may be a dream of yours, saving for a deposit, dealing with tenants and paying off a mortgage mightn’t be.

The good news is there are opportunities where you can invest in property without actually buying one, with two options you may have heard of including real estate investment trusts (REITs) and real estate crowdfunding.

While these investment options provide different avenues to get your foot in the door (as well as pros and cons you’ll need to weigh up), both offer a piece of the pie without some of the risks that may come if you decide to buy a property yourself.

What are real estate investment trusts (REITs) and how do they work?

A REIT is a type of property fund that you can purchase units in. You can generally access REITs via managed funds, super funds, or public markets, such as the Australian Securities Exchange (ASX).

The money you invest in a REIT is pooled and usually invested in a range of properties, which can focus on a specific property type or a mix of property types. This might include commercial, retail, or industrial properties (so anything from office buildings to shopping centres).

For this reason, REITs can provide investors with exposure to the property market in a way that is more diversified, and which will generally be more cost-effective than buying a single property, as you won’t have the upfront and ongoing costs that come with buying your own home.

While you don’t have the duties you would as a landlord managing your own property, when you invest in a REIT, you also don’t have control over the assets held in the trust, as an investment manager will be making the investment decisions (and property maintenance and development decisions), with returns also dependent on property markets.

What’s real estate crowdfunding and how does it work?

Crowdfunding websites enable people to raise funds for various projects, ideas and business ventures, without necessarily the need of a lender, with real estate investment opportunities no exception.

Real estate crowdfunding, which is a newcomer to the space, is a type of direct real estate investment that allows multiple people to invest smaller amounts of capital to fund a purchase collectively.

Essentially it enables you to become a shareholder in a piece of real estate through a crowdfunding company without owning or having to maintain the actual building, with any profits that the real estate venture sees (profits that come from rental income for instance) passed on to the investor.

How crowdfunding is different to a REIT, is it provides investors with stakes in a specific property or project, while REITs give investors shares in a fund that invests across multiple properties and property sectors.

It should be noted that regulation around real estate crowdfunding is still in its infancy in Australia.

What to look out for

When deciding what’s right for you, some things to note down might include upfront costs, associated fees, minimum and maximum investment amounts, and considerations around potential returns.

Choosing the most suitable investment for you will also come down to your goals, your attitude to risk and the time you have available to invest.

Different options may suit you at different ages and will depend on what responsibilities and other financial commitments you have currently.

Other things to think about

When you’re thinking about investing, it’s important to look into any potential legal and tax implications, as these can vary depending on the type of investment you’re looking at.

You may also want to consider a mix of investments as this could reduce your risk and help smooth out short-term ups and downs when it comes to the potential returns you may be able to make.

You might want to chat to us on |PHONE| before making any decisions and like with any investment, always be sure to read and understand the fine print.

 Source : AMP October 2018 

 

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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8 money tips for when your kid lands their first full-time job

Posted On:Oct 22nd, 2018     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Your kid may not have listened to anything you’ve said over the past umpteen years, particularly when it came to their dating preferences, coming home on time and cleaning up after themselves.

However, now they’ve landed their first full-time job, there’s a possibility that could change, which might be music to your ears, particularly if you wish you’d had greater guidance

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Your kid may not have listened to anything you’ve said over the past umpteen years, particularly when it came to their dating preferences, coming home on time and cleaning up after themselves.

However, now they’ve landed their first full-time job, there’s a possibility that could change, which might be music to your ears, particularly if you wish you’d had greater guidance around what to do when you started earning a salary.

With that in mind, here are some things you may want to cover off with them (which you could also text to them using shorter bullet points, or screenshot and tag them on Insta, followed by #parentsknowbest).

Things your child needs to know

1.    Your bank account details and tax file number

Your kid will need to give their bank account details to their employer if they want to get paid, so this will no doubt be high on their list of things to do.

On top of that, they’ll need to provide their tax file number as well, because if they don’t, they may end up paying a lot more tax on the income they earn1.

If your child needs a tax file number, they can contact the Australian Taxation Office (ATO) about applying for one.

2.    Whether you can choose your super fund

Super is money set aside during your kid’s working life to support them in retirement. It’s deposited into a fund, where it’s invested to potentially earn interest and grow over time.

Most employees can choose their own super fund but your kid will need to check with their employer or the ATO. If they can choose their fund, they’ll typically have a choice between their employer’s fund or a fund they select themselves.

There are things they’ll need to consider though, such as any fees they might pay, how the fund performs and their super investment preferences. 

In addition, super funds generally offer a few types of insurance cover as well, which your kid can pay for using their super money, so it’s worth them looking into whether it’s something they want.

3.    What tax you’re going to pay on the income you earn

Your kid may not be pleased, but they’ll have to pay income tax on every dollar over $18,200 that they earn. And, on top of that, many taxpayers are also charged a Medicare levy of 2%.

The amount of tax they pay will depend on how much they earn. If they’re not sure how much they’ll fork out, the below table includes income tax rates for the 2018/19 financial year2.

Taxable income

Tax they’ll pay on this income

0 – $18,200

No tax

$18,201 – $37,000

19c for each $1 over $18,200

$37,001 – $90,000

$3,572 plus 32.5c for each $1 over $37,000

$90,001 – $180,000

$20,797 plus 37c for each $1 over $90,000

$180,001 and over

$54,097 plus 45c for each $1 over $180,000

You might also want to point out that if they’re lucky enough to receive an annual bonus, they’ll also pay tax on this (yes, we know, life isn’t fair).

4.    What tax you can claim back when tax time rolls around

If your kid spends some of their own money on work-related expenses (work uniforms, safety equipment, or travel costs to attend training for instance), there is some good news. At the end of the financial year, they may be able to claim some of this money back when they do their tax return.

Remind them that they’ll need to have a record of these expenses, such as receipts, but in some instances if the total amount they’re claiming is $300 or less, they may not need receipts.

Meanwhile, if their expenses are for both work and personal use, they’ll only be able to claim a deduction for the work-related portion. Perhaps point your kid to the myDeductions tool in the ATO app to save records throughout the year, so they don’t have a bag full of receipts to go through.

Meanwhile, tell them if they’re lodging their own tax return, that they have until 31 October to lodge it each year, or maybe longer if they would prefer to use a tax agent.

5.    What’s in your contract and what you’re entitled to

An employment contract (which can be in writing or verbal) is an agreement between your kid and their employer which sets out the terms and conditions of their employment. It’s a good idea to know what’s in their contract should questions ever arise around what they’re actually entitled to.

Regardless of whether your kid signs something or not, their contract cannot provide for less than the legal minimum, set out in Australia’s National Employment Standards, which covers things such as3:

  • Maximum weekly hours of work

  • Requests for flexible working arrangements

  • Parental leave and related entitlements

  • Annual leave

  • Personal/carer’s leave and compassionate leave

  • Community service leave

  • Long service leave

  • Public holidays

  • Notice of termination and redundancy pay.

While National Employment Standards apply to all employees covered by the national workplace relations system, only certain entitlements will apply to casual employees. For more information, check out the Australian Government Fair Work Ombudsman website.

6.    How to read your payslip so you’re across potential errors

Pay slips have to cover details of an employee’s pay for each pay period. Below is a list of what a pay slip typically includes:

  • Your kid’s before-tax pay (also known as gross pay)

  • Your kid’s after-tax or take-home pay (also known as net pay)

  • What amount of money your kid has paid in tax

  • The amount of super their employer has taken out of their pay and put into their super fund

  • HELP/HECS debt repayments (if they have an education loan).

Meanwhile, mistakes can happen, so if anything doesn’t look right, tell them to chat to their employer and if your kid has raised an issue they’re not satisfied with, they can also contact the Fair Work Ombudsman.

7.    How much super is coming out of your pay and if it’s correct

If your kid is earning over $450 (before tax) a month, no less than 9.5% of their before-tax salary should generally be going into their super under the Superannuation Guarantee scheme.

If they’re under 18 and work a minimum of 30 hours per week, they may still be owed super. For this reason, it’s important that they check their payslip and if something doesn’t look right, that they speak to their boss or contact the ATO.

Another thing to note, is if your kid does change jobs, this is when super accounts can start to multiply. It might not sound like a big deal, but multiple accounts can often mean multiple sets of fees, so they may want to ensure that they only have one account rather than many.

8.    How to budget and save so you can get what you want in life

Budgeting may be another point that makes your kid’s eyes glaze over but jotting down into three categories – what money is coming in, what cash is required for the mandatory stuff and what dough might be left over for their social life (or saving for their future), could really go a long way.

If they’re paying off debts, or on a more exciting note, want to buy a car or go on a holiday, getting a grip on their money habits early on could see them get a lot more out of life.

Please contact us on |PHONE| if we can be of further assistance .

Source : AMP October 2018 

Money Smart – Starting work (Get a tax file number)
Australian Taxation Office – Individual income tax rates
Australian Government Fair Work Ombudsman – Introduction to the National Employment Standards

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

 

 

 

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Reverse mortgages: Short-term gain, long-term pain

Posted On:Oct 10th, 2018     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Residential property has long been a major store of wealth for average Australians.

The home remains the primary assets for the majority of people and the property market – particularly in major cities – has generally been kind for those who were in the market over the past decade or so.

But with the ageing of the population, the percentage of wealth

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Residential property has long been a major store of wealth for average Australians.

The home remains the primary assets for the majority of people and the property market – particularly in major cities – has generally been kind for those who were in the market over the past decade or so.

But with the ageing of the population, the percentage of wealth locked up in residential property ($500 billion in home equity is held by people over 65) is both a blessing and a challenge.

According to the last Intergenerational Report in 2015, the number of people in Australia aged between 65 and 84 is forecast to double by 2054 to around 7 million, while the number of people over 85 is expected to more than quadruple.

There is no disputing that owning your own home is a foundational step on the pathway to providing for a comfortable retirement. But the problem is perfectly captured for older Australians with the expression “asset rich but income poor”.

The challenge for many in the post-war, baby boomer generation, is that while the house value may have risen well beyond their expectations, you can’t use it to pay for the groceries, house repairs or a car that needs replacing.

Downsizing has its advocates but comes with lifestyle challenges such as forming new friends and community contacts. So it is no surprise that there is considerable interest in developing a viable suite of products to release the equity locked up in the family home.

While the need is obvious, the solution less so, and products like reverse mortgages do not enjoy good reputations. A recent review by ASIC of reverse mortgage products acknowledged that a common view amongst retirees, and even among finance brokers and lenders, tends to be that equity release products take advantage of vulnerable elderly people.

That certainly accords with a personal experience of reverse mortgages courtesy of a family friend who, with her husband, took out a small ($50,000) reverse mortgage against the equity of their mortgage-free home.

It certainly helped provide some short-term cash and lifestyle enjoyment, but after the husband developed cancer and passed away, an early exit condition was triggered resulting in a massive bill that wiped out almost all their household savings, and left the wife wholly dependent on the age pension to live.

The ASIC review of the reverse mortgage market came after government changes in 2012 to strengthen consumer protections, including the provision of a no negative equity guarantee – that is the borrower cannot be required to repay more than the value of the secured property at the end of the loan.

The ASIC report is interesting in that it found reverse mortgages were satisfying the immediate or short-term needs of borrowers, as did the case study above, and often provided for an improved standard of living while letting people “age in place”.

Where ASIC found challenges in the market was with the long-term impacts on the borrower’s asset position and, in particular, the impact of the cost of the reverse mortgage products that only became fully understood when potentially the home needed to be sold to provide a bond for entry into an aged care facility.

That was highlighted by many of the borrowers surveyed for the ASIC report who indicated that they had not seriously considered their possible future needs.

Reverse mortgages are complex and expensive products for both the borrower and the product provider, and the ASIC report does a good job at explaining the short-term benefits and the long-term risks and lifestyle implications that comes with it.

The ASIC study tested the impact on the remaining home equity by the age of 84 (the average age of entering into aged care) if interest rates on the loan rises and if property prices grew more slowly than expected.

What the ASIC modelling showed was that 63 per cent of borrowers may end up with less equity than the average upfront cost of aged care ($380,000) for one person by the time they reach 84.

The long-term risk for borrowers is that, because of the impact of compound interest, they may seriously compromise their future retirement lifestyle and ability to afford future expenses such as aged care accommodation, medical treatment and day to day living expenses.

To illustrate the costs over the long-term ASIC says the interest charges on an average loan ($118,000) came with an interest bill of $100,963 over 10 years and $180,269 over 15 years.

One of the major warnings ASIC has for borrowers is the focus on short-term objectives with “limited or no attention” being paid to their possible future needs. The review of loan files ASIC did as part of the report found “approximately 92 per cent of the loan files we reviewed did not record the possible future needs of the borrower in sufficient detail and contained no evidence that the broker or lender had discussed how a loan may affect the borrower’s ability to afford future needs”.

The bottom line is that there are no silver bullets that can magically solve the income in retirement question but a clear message from the ASIC report is that you need to carefully balance both today’s needs and your likely future requirements.

The ASIC Moneysmart website provides a comprehensive guide to the risks of reverse mortgages.

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Source : Vanguard September 2018 

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2018 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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A dynamic approach to retiree spending and drawdowns

Posted On:Oct 10th, 2018     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Here’s a critical question for retirees and those nearing retirement: How much are you intending to drawdown and spend each year from your retirement savings?

Historically-low yields, expected muted portfolio returns and growing life expectancies can make this a particularly challenging question.

Many retirees try to balance the competing priorities of maintaining a relatively consistent level of annual spending while increasing or

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Here’s a critical question for retirees and those nearing retirement: How much are you intending to drawdown and spend each year from your retirement savings?

Historically-low yields, expected muted portfolio returns and growing life expectancies can make this a particularly challenging question.

Many retirees try to balance the competing priorities of maintaining a relatively consistent level of annual spending while increasing or preserving value of their portfolios to finance future income and perhaps other goals such as bequests.

The recently-published Vanguard research paper, From assets to income: A goals-based approach to retirement spending, proposes that retirees consider a dynamic approach to retirement spending and drawdowns.

This is a hybrid of two popular rules-of-thumb – the dollar-plus-inflation rule and the percentage-of-portfolio rule – designed to allow retirees to spend a higher portion of their returns after good market performance while weathering poor markets without significantly cutting spending.

In summary, this dynamic strategy provides for retirees to set flexible ceilings and floors on withdrawals for their annual spending that reflects the performance of the markets and their unique goals.

Popular rules-of-thumb

It’s worth briefly discussing the most popular withdrawal and spending rules and their potential drawbacks:

  • The dollar-plus-inflation rule. This involves setting a dollar amount to withdraw and spend in the first year of retirement and then increasing that amount annually by the rate of inflation.

  • The percentage-of-portfolio rule. This involves withdrawing and spending a set percentage of a portfolio’s value each year.

Both rules provide options for retirees to withdraw set percentages or set dollar amounts each year, regardless of how markets are performing.

When markets are poorly performing, retirees using the dollar-plus-inflation rule face a higher risk of spending more than they can afford and depleting their savings. And when markets are performed strongly, these retirees may spend less than they can afford.

With the percentage-of-portfolio rule, a retiree’s spending may significantly fluctuate depending on the changing value of a portfolio. This can make budgeting hard, especially for retirees who spend a high proportion of their income on non-discretionary spending such as food and housing.

Floors and ceilings

With the dynamic spending strategy, annual spending is allowed to fluctuate based on market performance. This involves annually calculating a ceiling (a maximum amount) and a floor (a minimum amount) that spending can fluctuate.

For instance, a retiree might set a ceiling of a 5 per cent increase and a floor of a 2.5 per cent decrease in spending from the previous year.

The ceiling is the maximum amount that you are willing to spend while the floor is minimum amount you can tolerate spending.

Of course, many retirees receive a superannuation pension with a mandatory, aged-based minimum withdrawal rate. A dynamic approach will help such retirees calculate how much to reinvest, if any, each year.

Please contact us on |PHONE| if you seek further assistance 

Source : Vanguard September 2018 

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2018 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page

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Dealing with the ‘housing wealth effect’ – to your advantage

Posted On:Oct 10th, 2018     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Are you feeling wealthier, less wealthy or somewhere in between? You may be experiencing what is sometimes called “the housing wealth effect”.

Movements in house prices, up and down, can affect how we feel about the state of our wealth and our willingness to spend, suggests a Reserve Bank paper* published several years ago.

Under this theory, if house prices are up,

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Are you feeling wealthier, less wealthy or somewhere in between? You may be experiencing what is sometimes called “the housing wealth effect”.

Movements in house prices, up and down, can affect how we feel about the state of our wealth and our willingness to spend, suggests a Reserve Bank paper* published several years ago.

Under this theory, if house prices are up, we may tend to feel wealthier and willing to spend more on consumer goods including new cars. And when house prices are weakening, we may tend to feel less wealthy and less willing to spend as freely.

As housing prices have continued to weaken in most Australian states, led by Sydney and Melbourne, you may decide to reduce your consumer spending due to the housing wealth effect. And you may be more inclined to save more in such ways as accelerating your mortgage repayments.

While overall new car sales have eased over the year to August, sales of luxury cars are at their lowest for more than two years, according to an update of the CommSec Luxury Vehicle Index. This index is based on the Australian sales of 17 upmarket models.

Historically-low interest had been, of course, a major driver of the last rapid rise in housing prices. (The Reserve Bank this month held the official cash rate at the record low of 1.5 per cent – a level held for almost two years.)

Yet continuing low rates provide an opportunity for many homebuyers, depending upon their circumstances, to build a mortgage buffer or cushion using mortgage offset accounts and redraw facilities.

By putting aside more than the required mortgage payment, homebuyers create protection to help deal with financial setbacks, such as illness or job loss, and future rate rises.

When interest rates fell over the past decade, many homebuyers chose to keep their monthly repayments at the same dollar amount while many developed a habit of making higher repayments whenever possible.

The Reserve Bank reports that homebuyers early this year held a total in mortgage offset accounts and redraw facilities equal to two and a half years of scheduled repayments.

Particularly given Australia’s record household debt, it makes much sense for homebuyers to try to use the “housing wealth effect” to their advantage by building a bigger mortgage buffer – a task made more achievable by low interest rates.

In a speech this month, the Reserve Bank continued to highlight the rise in household debt – up from 70 per cent of household income in the early 1990s to 190 per cent today. Australia’s total household debt-to-income ratio has been rising in recent years more sharply than in other advanced economies.

The rise in household debt is “largely due” to a rise in mortgage debt, the Reserve Bank notes. Low interest rates have enabled homebuyers to borrow more – a key influence in a country of enthusiastic homeowners.

* Housing wealth effects: Evidence from new vehicle registrations, Reserve Bank Bulletin, September 2015.

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Please contact us on |PHONE| if you seek further assistance on this topic.

Source : Vanguard September 2018

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2018 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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One memorable way to remember stuff

Posted On:Oct 10th, 2018     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

By Flying Solo contributor Lucinda Lions

Have you ever said to yourself, “That’s a great idea, I don’t need to write it down,” only to regret your decision within 17.7 seconds? Here’s a quick, easy way to remember names, numbers and everyday information.

Is this you?

Have you ever been driving along and tried to memorise a website or business name, to no, frustrating,

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By Flying Solo contributor Lucinda Lions

Have you ever said to yourself, “That’s a great idea, I don’t need to write it down,” only to regret your decision within 17.7 seconds? Here’s a quick, easy way to remember names, numbers and everyday information.

Is this you?

Have you ever been driving along and tried to memorise a website or business name, to no, frustrating, avail?

Have you ever spell-checked a word online so many times that Google voluntarily and independently shows you memory loss ads, abandoning its algorithm in order to salvage yours?

Have you ever been introduced to someone, instantly forgetting their name while secretly grasping for your own?

If you answered ‘yes’ to any of these questions, you may find this article memorable, for all the right reasons.

To be clear, I’m no expert in memory. Heck, if I remember my age, it’s a good day. But an event happened recently that prompted me to take a hard look at why I should attempt to improve my memory skills.

“These numbers became seared into my memory within minutes, and now I literally can’t forget them. Yet, I had been struggling to memorise them for months.”

I should have remembered this

I had been struggling to remember the last three digits of my son’s mobile phone number for ages, which became an issue one day when my phone battery died and I had to call him using someone else’s phone.

 

But I couldn’t remember his full number, only the first seven digits.  I couldn’t call him. Yikes!

Thankfully everything worked out, but it so easily may not have. The incident pushed me to learn more about my memory, or lack thereof, as well as the best techniques to help me remember stuff.

This is what I found out.

Baker versus baker

I watched an excellent Ted Talk by Joshua Foer on memory.  In it, Foer explains that all memory techniques come down to ‘elaborate encoding’, which involves trying to remember abstract information (such as the numbers 417) by making them relatable and meaningful, therefore memorable. Elaborate encoding is illustrated perfectly by the Baker/baker Paradox.

The paradox goes like this.

If I said to you, “Remember that there’s a guy who is a baker”, and I said to your friend, “Remember that there’s a guy by the name of Baker”, YOU are more likely to remember the word ‘baker’ than your friend.

The reason? The name Baker probably doesn’t actually mean anything to your friend. As Foer explains, the word Baker is ‘untethered to all the other memories floating around’ in his skull. But a baker, on the other hand, triggers visual images of people in white hats with floury hands. So when you hear about a baker, your brain starts sinking ‘associational hooks’ into the word, making it easier to fish out later.

When it comes down to it, Foer says that the art of trying to remember information well, is about figuring out how to change capital case Bakers into lower case bakers. In other words, turning all abstract information into interesting, relatable, memorable information.

Foer also describes our minds as being a palace: “As bad as we are at remembering names and numbers and word-for-word instructions from our colleagues, we have really exceptional visual and spatial memories… The idea behind the memory palace is to create this imagined edifice in your mind’s eye and populate it with images that you want to remember. The crazier, weirder, more bizarre, funnier, raunchier, stinkier the image is, the more unforgettable it’s likely to be.”

I put it into practice

Straight after watching the Ted Talk, I created the below image in my head of the last three digits of my son’s phone number.  I turned the abstract, impersonal numbers into a visual, memorable cartoon.

I imagined that the number four was climbing up a long rope that looked like the number one, and the number seven was a platform, just above the rope.

These numbers became seared into my memory within minutes, and now, I literally can’t forget them. Yet, I had been struggling to memorise them for months.

 

You’ve probably been doing this all your life

Like me, you’ve probably been using Mnemonics for ages. (Oh yeah, now’s a good time to explain this funny word.  Mnemonics is pronounced ‘ne-monics’, we have to remember that the ‘m’ is silent – cruel!  Mnemonics are creative memory techniques that help us retain and retrieve information; techniques such as songs, rhymes, poems, acronyms, images and more.)

What Foer’s Ted Talk did, was jog my memory and remind me to continue using these mnemonics, rather than falling into the nasty habit of wrongly assuming I can’t remember stuff.

This is what I mean.

Yesterday when I automatically Googled whether to use ‘bare’ instead of ‘bear’ (in relation to ‘bearing’ a burden), as I’ve done several times before; I stopped and took the time to create a memory hook instead, so I’d never have to look up the word again. I imagined a bear carrying a cumbersome cross, which now reminds me that a bear must bear the heavy burdens. And as for ‘bare’ meaning naked, I now imagine that the letters ‘b’ and ‘a’ look like breasts. (I’ll spare you the cartoon of that visual image!)

Time and practise

I think a lot of this memory work comes down to time, inclination, practise and habit.

Am I willing to invest the time to remember something, even if it takes just a few seconds? Am I actually interested in retaining a piece of information? Will I make it a habit? Am I going to regularly practise until I get better at it? (I recently tried to remember a lovely lady’s name using a memory hook, and I stuffed it up remarkably. The lady’s unusual and beautiful name was Kofee, and I said, “Bye Cocoa”. I felt terrible!)

To be honest, I’m not sure if I’ll get into the daily memory-practicing habit, though Kofee probably thinks I should! At least I know there are techniques out there for all ‘417’ situations.

There’s no such thing as a brilliant memory

The good news is, there’s no such thing as a God-given brilliant memory, just brilliant ways to remember information. And the great news is that these memory techniques are accessible to all of us. Now, that’s good to remember!

Source : FlyingSolo September 2018 

 

This article by Lucinda Lions is reproduced with the permission of Flying Solo – Australia’s micro business community. Find out more and join over 100K others

 

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