Tag: Wealth Creation

Are grandparents giving too much?

Written by Sydney Financial Planning on 28 February 2020. Posted in Financial Strategies. No Comments on Are grandparents giving too much?

Not so long ago, it was the norm for adult children to lend a financial helping hand to their ageing parents. These days, the support is more likely to flow downwards, and grandparents are increasingly likely to provide financial support to their children – and even grandchildren.

As school costs soar for instance, a growing number of grandparents are dipping into their pockets to give their grandchildren a quality education. Industry research shows almost one in four education savings plans are started by people aged 60 or older.ⁱ

In other families, time rather than money is being provided. Faced with expensive and often limited formal childcare options, many working families turn to grandparents as a source of low cost childcare. A 2014 report by AMP and the National Centre for Social and Economic Modelling (NATSEM)ⁱⁱ found that grandparents provide 23% of all childcare to children aged under 12.

Informal childcare can be taxing

Quite naturally, many grandparents relish the opportunity to spend one-on-one time with their grandkids. However, along with the physical demands of caring for a youngster, providing childcare can also be financially taxing, and it’s not just about occasional outings to the zoo or the purchase of a few age appropriate toys.

At a time when the pension eligibility age is being raised and pension rates reduced, caring for a grandchild can have a significant impact on a grandparent’s financial wellbeing.

One in five have changed jobs to offer childcare

A survey by National Seniors Australiaⁱⁱⁱ found many grandparents who provide informal childcare are ‘working around care’, and making significant adjustments to their own career as a result. Among those surveyed, 70% altered the days or shifts they worked, 55% reduced their working hours, and 18% had even changed their job because of their caring commitment.

On the plus side, the same study found grandparents reported enjoying a far better relationship with both their grandchild and adult child as a result of providing care. But it comes at a cost. Just over one-third (34%) of respondents said their childcare responsibilities had a negative impact on their incomes, household budgets and/or retirement savings.

It’s all about finding a balance

These results highlight the need for seniors to find a balance in how – and how much – they help their adult offspring and grandchildren.

We all want the best for our family but as we age we need to think about our own needs too. Increasing longevity means longer retirement periods to plan for, and giving too much today could limit your ability to remain financially independent throughout retirement.

Having open and frank discussions with your adult children about the level of support you can realistically provide – both physical and financial – is the starting point in achieving this balance. These may not be easy conversations to have but they are critical to achieve a win-win for all family members.

Speak to us about the best way to structure your finances so you can help your adult children while still achieving your retirement goals.

Need help structuring your finances so you can help your children?

Speaking with one of our financial advisors is a good place to start. Make a booking or call us on 02 9328 0876 to arrange a meeting.

i Australian Unity media release: Grandparents step in to fill the education savings gap, 31 October 2014
ii AMP.NATSEM Income and Wealth Report, Child Care Affordability in Australia, Issue 35 – June 2014.
iii National Seniors Australia, Grandparent childcare and labour market participation in Australia, September 2015

General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.

How to create realistic goals… and stick to them

Written by Sydney Financial Planning on 26 January 2020. Posted in Goal Strategies. No Comments on How to create realistic goals… and stick to them

When it comes to the big things in life we all have our goals. Getting promoted at work. Educating the kids through school. Saving for a comfortable retirement.

It’s important to aim high. But if the goals you set are overambitious, with no checkpoints along the way, you could be setting yourself up for disappointment. So it may be a good idea to make sure your goals are realistic and achievable.

One area where setting goals can be beneficial is health and fitness—whether it’s losing a few kilos at the gym or aiming for a PB at the next half-marathon.

Check out the video below, where corporate health consultant Jack Hemnani talks about how he helps his clients set realistic goals and stick to them.

Think short, medium and long term

Your finances could benefit from the same treatment as your fitness. When you’re saving and investing your money, you need to know what you’re aiming for.

Think about how much you earn and how much you spend. Are there any ways you could cut down your spending to allocate more money towards your goals?

It could also be a good idea to make your goals and timeframes realistic, and set interim targets. Let’s say you’re saving $25,000 for a new carⁱ:

You could set yourself a realistic short-term target of saving $5 a day by going without a coffee or bringing lunch to work, and set up automatic debits to a high interest savings account.
You could set a ‘trigger’ amount for the medium term—say $1,000—and when you reach it you could consider rolling your savings into something that may generate higher returns, such as a term deposit or a diversified investment option.
You could start planning your next long-term challenge once you reach the magic number of $25,000 and achieve your goal—after rewarding yourself, naturally.

And different goals could benefit from different approaches.

When you’re putting money aside for retirement, superannuation could be an effective tax-friendly option to boost your savings, depending on your circumstances.

But with super, your money is locked away until your preservation age. So if you’re looking at achieving a more short-term goal—like saving up to buy a new car—you may need to investigate other options where you could access the savings sooner.

Six steps to creating your financial goal checklist

1 Big picture.

Think about your overall long-term goal—this may not necessarily be financial but more about how you want to live or how you want your family to live.

2 Magic number

Work out how much money you’ll need to achieve your goal.

3 Small steps

Look at the incremental steps you need to take to achieve your goal—you may feel more motivated to achieve bigger goals if you set checkpoints along the way.

4 Write it down

Try this…just for a second. Close all your apps, put down your smartphone, pick up a pen and paper…and write it down. It’s amazing the effect that putting something down on paper can have on your motivation, especially in a digital age. Sure, you can then get on to your laptop to set up some useful spreadsheets and reminders. But you’ve got a written record to remind you.

5 Back on track

Here’s the thing. You might initially fail. As a wise manii once said, ‘Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.’ While there might be ways you can stop yourself going off piste—such as transferring a set amount to your savings account when your pay cheque comes in—it’s a good idea to work out how you’re going to get back on track when you (inevitably) fall over.

6 You deserve it

As humans you can say we’re hardwired to expect a reward. So you might want to treat yourself when you reach your goals—every step along the way

Is it time to get some extra help with goal planning?

Why not book an appointment with one of our planners to help you gain momentum, contact us on 02 9328 0876.

i The case example is illustrative only and is not an estimate of the investment returns you will receive or fees and costs you will incur.
ii Irish novelist and playwright Samuel Beckett.

Article by – AMP Life Limited. First published 09 July 2019.

Super investment options – what’s right for you?

Written by Sydney Financial Planning on 26 January 2020. Posted in Superannuation. No Comments on Super investment options – what’s right for you?

If there’s one thing certain in life it’s change. And generally your attitude towards saving and investing will change as you get older.

How your super is invested when starting your first job may not be the right approach when you’re approaching retirement. Luckily you can change your investment options at any time and this could make a real difference to how much money you have when you retire.

There are usually several different investment options to choose from. If you haven’t selected an investment option, you’re probably invested in your fund’s default option, which will generally take a balanced approach to risk and return.

To get up to speed on your super investment options, we’ve answered three common questions: how your money is invested, the different options available, and how your stage of life may influence your preferences.

What do super funds do with my money?

Typically, no less than 9.5% of your before-tax salary (if you’re eligible) is paid into super, which is then taxed at a maximum of 15%. Your super fund will invest this money over the course of your working life, so you can hopefully retire comfortably.

Your super fund will let you choose from a range of investment options and generally the main difference will be the level of risk you’re willing to take to potentially generate higher returns.

If you’re not sure what you’re invested in, contact your super fund. You may also be able to see your current investment option by logging into your super fund’s online portal – this may also give you a current balance and other information such as your projected super savings over a lifetime.

What are the super investment options I can choose from?

Most super funds let you choose from a range, or mix of investment options and asset classes. These might include ‘growth’, ‘balanced’, ‘conservative’ and ‘cash’ but the terms can differ across super funds. Here’s a small sample of the typical type of investment options available:

Growth options aim for higher returns over the long term, however losses can also be notable when markets aren’t performing. They typically invest around 85% in shares or property.

Balanced options don’t tend to perform as well as growth options over the long term, but the loss is also less when there are market downturns. They typically invest around 70% in shares or property, with the rest in fixed interest and cash.

Conservative options generally aim to reduce the risk of market volatility and therefore may generate lower returns. They typically invest around 30% in shares and property, with the rest in fixed interest and cash.

Cash options aim to generate stable returns to safeguard the money you’ve accumulated. They typically invest 100% in deposits with Australian deposit-taking institutions, such as banks, building societies and credit unions.

Super funds may have different allocations, so it’s important to read your super fund’s product disclosure statement before making any decisions. It could be a good idea to consider factors such as your current stage in life, and future plans and goals before choosing the super investment option that’s right for you.

What’s the right investment option for me?

Choosing the most suitable investment option generally comes down to your goals for retirement, your attitude to risk and the time you have available to invest.

If you’re young, you may have more time to ride out market highs and lows, and therefore be willing to take on more risk in the hope of achieving higher returns.

If you’re closer to being able to access your super, you may prefer a conservative approach as a share market crash could be harder to recover from than if you’re 20 years away from retirement.

While many people put off thinking about super, being informed and engaged from a young age and throughout your career may make a big difference to the returns generated and your final super balance.

Need some help working out the best option for you?

Why not book an appointment with one of our planners to go through your individualc circumstances, contact us on 02 9328 0876.

Article by – AMP Life Limited. First published December 2019.

Economy review of 2019 and outlook for 2020

Review of 2019, outlook for 2020 – the beat goes on

Written by Sydney Financial Planning on 27 December 2019. Posted in Australian Economy. No Comments on Review of 2019, outlook for 2020 – the beat goes on

2020 is likely to see global growth pick up with monetary policy remaining easy. Expect the RBA to cut the cash rate to 0.25% and to undertake quantitative easing.

Against this backdrop, share markets are likely to see reasonable but more constrained & volatile returns, and bond yields are likely to back up resulting in good but more modest returns from a diversified mix of assets.

The main things to keep an eye on are: the trade wars; the US election; global growth; Chinese growth; and fiscal versus monetary stimulus in Australia.

2019 – growth down, returns up

Christmas 2018 was not a great one for many investors with an almost 20% slump in US shares from their high in September to their low on Christmas Eve, capping off a year of bad returns from share markets and leading to much trepidation as to what 2019 would hold. But 2019 has turned out to be a good year for investors, defying the gloom of a year ago. In fact, some might see it as perverse – given all the bad news around and the hand wringing about recession, high debt levels, inequality and the rise of populist leaders. Then again that’s often the way markets work – bottoming when everyone is gloomy then climbing a wall of worry. The big global negatives of 2019 were:

The trade war and escalating US-China tensions generally. A trade truce and talks collapsed several times leading to a new ratcheting up of tariffs before new talks into year end.
Middle East tensions flared periodically but without a lasting global impact & the Brexit saga dragged on although a near-term hard Brexit looks to have been avoided.
Slowing growth in China to 6%. This largely reflected an earlier credit tightening, but the trade war also impacted.
Slowing global growth as the trade war depressed investment & combined with an inventory downturn and tougher auto emissions to weigh on manufacturing & profits.
Recession obsession with “inverted yield curves” – many saw the growth slowdown as turning into a recession.

But it wasn’t all negative as the growth slowdown & low inflation saw central banks ease, with the Fed cutting three times and the ECB reinstating quantitative easing. This was the big difference with 2018 which saw monetary tightening.

Australia also saw growth slow – to below 2% – as the housing construction downturn, weak consumer spending and investment and the drought all weighed. This in turn saw unemployment and underemployment drift up, wages growth remain weak and inflation remain below target. As a result, the RBA was forced to change course and cut interest rates three times from June and to contemplate quantitative easing.The two big surprises in Australia were the re-election of the Coalition Government which provided policy continuity and the rebound in the housing market from mid-year.

While much of the news was bad, monetary easing and the prospect it provided for stronger growth ahead combined with the low starting point resulted in strong returns for investors.

*Yr to date to Nov. Source: Thomson Reuters, Morningstar, REIA, AMP Capital

Global shares saw strong gains as markets recovered from their 2018 slump, bond yields fell making shares very cheap and monetary conditions eased. This was despite several trade related setbacks along the way. Global share returns were boosted on an unhedged basis because the $A fell.
Emerging market shares did well but lagged given their greater exposure to trade and manufacturing and a still rising $US along with political problems in some countries.
Australian share prices finally surpassed their 2007 record high thanks to the strong global lead, monetary easing and support for yield sensitive sectors from low bond yields.
Government bonds had strong returns as bond yields fell as inflation and growth slowed, central banks cut rates and quantitative easing returned.
Real estate investment trusts were strong on the back of lower bonds yields and monetary easing.
Unlisted commercial property and infrastructure continued to do well as investors sought their still relatively high yields. However, Australian retail property suffered a correction.
Commodity prices rose with oil & iron up but metals down.
Australian house prices fell further into mid-year before rebounding as the Federal election removed the threat to negative gearing & the capital gains tax discount, the RBA cut interest rates and the 7% mortgage test was relaxed.
Cash and bank term deposit returns were poor reflecting new record low RBA interest rates.
The $A fell with a lower interest rates and a strong $US.
Reflecting strong gains in most assets, balanced superannuation funds look to have seen strong returns.

2020 vision – growth up, returns still good

The global slowdown still looks like the mini slowdowns around 2012 and 2015-16. Business conditions indicators have slowed but remain far from GFC levels. See next chart.

Global manufacturing PMI vs bank policy direction

While the slowdown has persisted for longer than we expected – mostly due to President Trump’s escalating trade wars – a global recession remains unlikely, barring a major external shock. The normal excesses that precede recessions like high inflation, rapid growth in debt or excessive investment have not been present in the US and globally. While global monetary conditions tightened in 2018, they remained far from tight and the associated “inversion” in yield curves has been very shallow and brief. And monetary conditions have now turned very easy again with a significant proportion of central banks easing this year. See chart. The big global themes for 2020 are likely to be:

A pause in the trade war but geopolitical risk to remain high. The risks remain high on the trade front – with President Trump still ramping up mini tariffs on various countries to sound tough to his base and uncertainty about a deal with China, but he is likely to tone it down through much of 2020 to reduce the risk to the US economy knowing that if he lets it slide into recession and/or unemployment rise he likely won’t get re-elected. A “hard Brexit” is also unlikely albeit risks remain. That said geopolitical risks will remain high given the rise of populism and continuing tensions between the US & China. In particular, the US election will be an increasing focus if a hard-left candidate wins the Democrat nomination.
Global growth to stabilise and turn up. Global business conditions PMIs have actually increased over the last few months suggesting that monetary easing may be getting traction. Global growth is likely to average around 3.3% in 2020, up from around 3% in 2019. Overall, this should support reasonable global profit growth.
Continuing low inflation and low interest rates. While global growth is likely to pick up it won’t be overly strong and so spare capacity will remain. Which means that inflationary pressure will remain low. In turn this points to continuing easy monetary conditions globally, with some risk that the Fed may have a fourth rate cut.
The US dollar is expected to peak and head down. During times of uncertainty and slowing global growth like over the last two years the $US tends to strengthen partly reflecting the lower exposure of the US economy to cyclical sectors like manufacturing and materials. This is likely to reverse in the year ahead as cyclical sectors improve.

In Australia, strength in infrastructure spending and exports will help keep the economy growing but it’s likely to remain constrained to around 2% by the housing construction downturn, subdued consumer spending and the drought. This is likely to see unemployment drift up, wages growth remain weak and underlying inflation remain below 2%. With the economy remaining well below full employment and the inflation target, the RBA is expected to cut the official cash rate to 0.25% by March, & undertake quantitative easing by mid-year, unless the May budget sees significant fiscal stimulus. Some uptick in growth is likely later in the year as housing construction bottoms, stimulus impacts and stronger global growth helps.

Implications for investors

Improved global growth and still easy monetary conditions should drive reasonable investment returns through 2020 but they are likely to be more modest than the double-digit gains of 2019 as the starting point of higher valuations and geopolitical risks are likely to constrain gains & create some volatility:

Global shares are expected to see returns around 9.5% helped by better growth and easy monetary policy.
Cyclical, non-US and emerging market shares are likely to outperform, particularly if the US dollar declines and trade threat recedes as we expect.
Australian shares are likely to do okay but with returns also constrained to around 9% given sub-par economic & profit growth. Expect the ASX 200 to reach 7000 by end 2019.
Low starting point yields and a slight rise in yields through the year are likely to result in low returns from bonds.
Unlisted commercial property and infrastructure are likely to continue benefitting from the search for yield but the decline in retail property values will still weigh on property returns.
National capital city house prices are expected to see continued strong gains into early 2020 on the back of pent up demand, rate cuts and the fear of missing out. However, poor affordability, the weak economy and still tight lending standards are expected to see the pace of gains slow leaving property prices up 10% for the year as a whole.
Cash & bank deposits are likely to provide very poor returns.
The $A is likely to fall to around $US0.65 as the RBA eases further but then drift up a bit as global growth improves to end 2019 little changed.

What to watch?

The main things to keep an eye on in 2020 are as follows:

The US trade wars – we are assuming some sort of de-escalation in the run up to the presidential election, but Trump is Trump and often can’t help but throw grenades.
US politics: the Senate is unlikely to remove Trump from office if the House votes to impeach and another shutdown is also unlikely but both could cause volatility as could the US election if a hard-left Democrat gets up (albeit unlikely).
A hard Brexit looks like being avoided but watch UK/EU free trade negotiations through the year.
Global growth indicators – like the PMI shown in the chart above need to keep rising.
Chinese growth – a continued slowing in China would be a major concern for global growth.
Monetary v fiscal stimulus in Australia – significant fiscal stimulus could head off further RBA rate cuts and quantitative easing.
Low interest rates – look like they’re here to stay for some time yet, that means low returns for cash.
Fixed Interest and Bonds – WILL REMAIN LOW YIELDING FOR INVESTORS IN THE SHORT TO MEDIUM TERM, assets like shares and property, can and will have volatility, these assets usually increase in times of extended low interest. I call it ” There’s no Other Option Theory”, IN SHORT, if you’re only getting approx. 1.5 % on cash and can ride out volatility, there really is no other option..

Concluding comment

Over time and studying economics for over 120 years, we’ve seen times like this before and what usually happens; is the rich get richer and the poor get poorer.

The reason why? the rich can borrow money cheaply and can afford to borrow at low cost. Sadly the poor cannot and are forced to sell assets cheaply. Unfair as this is, it’s our job to use this knowledge to help our clients build wealth.

Now more than ever it’s important to have an ongoing advice relationship with an experienced Financial Planner. Make sure you’re having your regular review with one of our experienced planners and start taking advantage of the knowledge we have to help build wealth.

Happy New Year to all our clients and hang onto your hats for yet another interesting investment year.

Bill Bracey and the SFP team.

Have you set things up to weather this trend?

If you need your personal situation reviewed by your SFP Planner or you don’t have a planner yet, get in contact with us on 02 9328 0876.

Bill Bracey – Principal & Senior Financial Planner | Sydney Financial Planning

Original article prepared by Dr Shane Oliver. Dr Shane Oliver who provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided.

7 tips to improve your financial wellness

Written by Sydney Financial Planning on 27 December 2019. Posted in Financial Behaviour. No Comments on 7 tips to improve your financial wellness

This can be measured by the financial wellness index, which measures a person’s satisfaction with their current and future financial situation.

Some days you might feel confident you can meet your needs within the boundaries of your current income, whereas other days you may feel like you don’t have nearly enough funds in order to do so.

The truth is, you’re not alone. Nearly 2.5 million Aussies say they feel moderately to severely financially stressed, even though financial stress has been decreasing year-on-year in Australia.ⁱ

Improving your financial wellbeing

On a positive note, research identified that those who have been financially stressed in the past were often able to recover through changes to their behaviour and mindset.ⁱⁱ

Here are some suggestions of things you could do (if you aren’t already) which may help you to improve how you feel financially.

1. Create a budget that works for you

When it comes to creating a budget, try jotting down into three categories – what money is coming in, what cash is required for the mandatory stuff (such as bills), and what dough might be left over (which you may want to put toward existing debts, savings or your social life).

Writing up a budget may take an afternoon out of your diary, but it will help you to more easily identify where there’s room for movement. For instance, could you reduce what you’re spending on luxury items, subscription or streaming services, eating out or clothing?

2. Consider rolling your debts into one

If all the small debts you once had, have multiplied and grown into bigger debts – you could look to roll them into a single loan, and reduce what you pay in fees and interest.

This could help you to save a significant amount of money (depending on what you owe) and make it easier to manage your repayments, as you’ll potentially only need to make one monthly repayment rather than having to juggle several.

The main thing to ensure is you are paying less than what you are currently when it comes to interest rates, fees and charges, and that you’re disciplined about making your repayments.

3. Try to save a bit of money regularly

Even a small amount of cash deposited on a frequent basis could go a long way toward your savings goals, with a separate research report indicating the average savings target for Aussies is a bit over $11,000.ⁱⁱⁱ

Some tips people said helped them along the way was transferring spare funds into an actual savings account, setting up automatic transfers to their savings account (so they didn’t have to move money manually) and putting funds into an account which they couldn’t touch.iv

4. Set aside some emergency cash

With research showing that an emergency fund of between $4,000 and $5,000 is generally enough to cushion most working Aussies when it comes to unexpected expenses, it’s probably worth some thought.^v

An emergency stash of cash could give you peace of mind and reduce the need to apply for high-interest borrowing options should you be faced with a busted phone, car tyre, or bad landlord.

5. Be open to talking money with your partner

One in two Aussie couples admit to arguing about money,^vi so if you haven’t already, it might be worth sitting down to ensure you’re on the same page and that both parties’ goals are being considered.

6. See if you can get a better deal with your providers

You more than likely have several product and service providers, and figures show you could save more than a grand annually on energy alone just by switching from the highest priced plan to the most competitive on the market.^vii

Again, this may take a couple of hours out of your day, but the savings you could potentially make may make a real difference to what you cough up throughout the year.

7. Don’t be afraid to seek financial assistance

If you are struggling to make repayments, you may be able to seek assistance from your providers by claiming financial hardship.

All providers must consider reasonable requests to change their terms in instances where you may be suffering genuine financial difficulties and feel help would enable you to meet your repayments, possibly over a longer period.

Of course it also helps to have an expert on your side and we are here to support you to achieve and maintain financial wellness.

Need a hand with your financial wellness?

For more help and strategies on identifying your feelings on financial wellness, speak to your financial planner at SFP. Or if you don’t have a planner yet let us arrange an appointment, contact us on 02 9328 0876.

i, ii, v AMP’s 2018 Financial Wellness in the Australian Workplace Report, pages 7, 8, 14

iii, iv MoneySmart – How Australians save money infographic

vi Finder – Heated conversations: 1 in 2 Aussie couples argue about finances paragraph 1

vii Mozo – Sick of high energy bills? Aussies willing to change providers could be saving over $1,000 a year paragraph 2

Article by © AMP Life Limited. First published October 2019

Reboot retirement - consider what makes you happy

Rebooting for retirement

Written by Sydney Financial Planning on 27 December 2019. Posted in Financial Behaviour. No Comments on Rebooting for retirement

1. Think mind and body

Without a clear idea of how you’ll spend your time, the initial euphoria of the untouched morning alarm can give way to anything from boredom to panic. Most of your 24 hours may be unstructured, so figure out how you’ll spend it wisely.

You might try something new. Perhaps now is the time to keep bees, join a choir or learn archery. If you have a partner, remember to involve them in the planning. Even if they don’t fancy joining you on a skydive, they may see a chance to learn how to take better action pictures.

Travel is near the top of many wish lists in retirement. If you don’t have the funds for a Caribbean cruise, there are a host of cheaper options around Australia and even beyond. And now you’ll have more time to spend, without worrying about annual leave quotas, or who’ll look after your business while you’re away.

2. Have a purpose

A rest is as good as a change. Although it’s great to have unstructured time to think and dream, boredom can be a damaging state of mind, particularly if it’s prolonged.

If you’re already physically active, this can be a great time to extend yourself, embrace something new like yoga, or aqua aerobics. If you’re healthy but know you could improve, you might sign up for a sponsored cycle ride or walk to help a cause you care about.

3. Catch up on what you’ve missed

Many of us put off expanding our passions while we’re working because we don’t have time.

If you’ve always wanted to read the classics, now might be your chance to explore the jewels of world literature. Reading is brain expanding and inexpensive. Books older than 70 years from the death of the author are out of copyright and therefore cheap in print or even free on your Kindle.

4. Follow your heart, not the herd

Many people downsize coming up to retirement. A smaller property usually means lower utility bills and maintenance.

But it’s not for everyone. If your spare bedroom has the right natural light for your artist’s studio or you just love your lemon trees, you might be better off staying where you are and saving yourself the real estate fees and hassles.

You’re facing a change in life, but you don’t have to change for change’s sake. Put yourself and your loved ones first.

5. Listen to the voice of experience

As with so many things in life, you can learn from experts. Talk to people you know who have already retired, and see what worked for them, and what they wish they’d put in place before they took the plunge.

Consider what will make you happy in the years beyond work, so you can live the life you want. Finally,if you haven’t yet given these things serious thought yet, don’t panic. You’ve dealt with other changes in your life, this is just another one.

Think of it as a new adventure. Let’s face it, you’ve earned it.

Do you have a new adventure in mind?

For more help and strategies on identifying what your retirement plans look like, speak to your financial planner at SFP. Call us to arrange an appointment, contact us on 02 9328 0876.

Article by © AMP Life Limited. First published 10 October 2019

Everything you need to know about salary sacrificing

Written by Sydney Financial Planning on 28 November 2019. Posted in Financial Advice. No Comments on Everything you need to know about salary sacrificing

“What is salary sacrificing?”

“Salary sacrificing (also known as salary packaging) is an arrangement between you and your employer, where you can use your pre-tax income to purchase some items or services. Your taxable income is therefore reduced and as a result, so is your tax bill. For many, it’s a win/win situation.¹

There are a lot of rules.

But there are two key points to remember.

Salary sacrificing depends on your employer and you both must agree on the arrangement.
Arrangements must be made in advance – you cannot sacrifice money that you’ve already been paid.

What to salary sacrifice for?

The most common way to use a salary sacrifice arrangement is to boost your superannuation, buy electronics such as laptops and devices, purchase cars and even buy a new home.

Superannuation – the contributed portion of your income will be taxed at a much lower rate (15% as opposed to 32.5% for an average weekly Australian wage of $1,238.30).²

Buying a house – salary sacrificing through super is especially beneficial for first-home buyers who are now able to withdraw up to $30,000 plus earnings to purchase their first home. If you don’t use this towards your first home, any salary sacrificed contributions will have to stay in your super until you retire, or you can pay a special tax to access it sooner.3″

“Purchasing a new car – the most popular way is a novated lease. Your employer takes the repayments and running costs out of your pre-tax income and you get to enjoy the car. Just make sure you’re buying a car within your means.³

Purchasing devices – there are some rules to keep in mind, including the device must be portable and used primarily for work.⁴

Is it worth it?

Salary sacrificing is a useful tool that can help you achieve your financial goals, as long as you’re smart about it. Don’t purchase something you don’t necessarily need just because of the possible tax breaks. Making these decisions alone can be confusing, which is why it’s always a smart move to discuss your options with the experts: us.

If you would like more information on salary sacrificing, feel free to get in touch with us anytime.”

Interested in finding out your options?

Speaking with one of our financial advisors would be a good place to start. Make a booking or call us on 02 9328 0876 to arrange a meeting.

1: Australian Government Australian Securities & Investments Commission (2019). Available at: www.moneysmart.gov.au/managing-your-money/income-tax/salary-packaging [Accessed 28 Oct. 2019].
2. Australian Government, Australian Taxation Office (2019). Salary sacrificing super. Available at: www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-your-super/Salary-sacrificing-super [Accessed 28 Oct. 2019].
3. Wright, P. (2019). A beginner’s guide to salary sacrificing your house, superannuation and car – ABC Life 3 Mar. Available at: www.abc.net.au/life/what-salary-packaging-is-and-how-it-works/10830070 [Accessed 28 Oct. 2019].
4: Chapman, M. (2016). Five things you didn’t know you could salary sacrifice. Available at: https://www.moneymag.com.au/salary-sacrifice [Accessed 28 Oct. 2019].

Making the most of record-low interest rates

Written by Britt Ambrose on 25 September 2019. Posted in Property. No Comments on Making the most of record-low interest rates

However, the low cash rate also means your money in the bank could be earning less interest.

Why did the RBA cut rates?

Rate cuts are a way for the RBA to help stimulate the economy. The idea is, when the RBA lowers the official cash rate, banks may follow suit and lower interest rates on the loans they provide. When rates are lower, you pay less interest on your debt, freeing up money for you to spend elsewhere. You may also be more likely to borrow more money. This increased spending has a ripple effect through the economy, giving it a boost.

The RBA’s recent rate cut was due to concerns about the way the economy has been slowing down. In Australia, the downturn in the housing market as well as the drought have both played a role in the slowdown. Globally, fears about the US trade wars has led investors around the world to be more cautious.

It’s important to note that when the RBA cuts the official rate, there’s no guarantee that the banks will do the same. For example, in recent times, some banks have only passed on part of the rate cut.

Will interest rates stay low?

Head of Investment Strategy and Economics and Chief Economist of AMP Capital Dr Shane Oliver says rate cuts are “…a bit like cockroaches”, adding, “If you see one there is normally another nearby.”¹ He believes further rate cuts are on the cards for this year and next, which could see this low interest-rate environment lingering for some time.

What could low interest rates mean for me?

When it comes to interest rate cuts, there is good news and bad news, depending on your financial goals. With that in mind, it’s worth thinking about whether you need to make any changes to stay on track. Find out what low rates could mean for four common financial goals:

1. Paying off debt

If you have a variable rate loan, a rate cut can work in your favour, provided your lender passes on the cut.

The major banks lowered their interest rates on variable loans, either partially or in full, following the June 2019 rate cut. That means those with variable loans may now enjoy lower interest repayments. Fixed-rate loans won’t change, as the rate has been locked in for an agreed time period.

If you have a variable rate loan, the low interest-rate environment can provide a good opportunity to start clearing debt. One strategy to consider is to keep your loan repayments the same despite the rate cut, so that you pay off more of your loan, faster. Or, you may consider using the money that you save on repayments to invest elsewhere to help grow your wealth.

It generally makes sense to pay off bad debt first (ie debt used to pay for day-to-day expenses like credit card debt that you do not get a tax deduction for in your tax return, rather than debt used to pay for an income-generating asset like an investment property). It also is usually a good idea to start with the debt with the highest interest rate first.

If you have a fixed-rate loan, it may be a good time to crunch the numbers to see if refinancing is worthwhile to take advantage of the lower rates on offer. In addition to calculating how much money you could save on repayments, it’s important to factor in the break costs associated with the current loan, as well as any set-up fees associated with the new loan. It’s important to consider your particular circumstances and goals before deciding what’s right for you, so financial advice may help.

2. Buying a property

If you’re in the market to buy a property, a reduction in interest will probably be welcome news. That’s because lower rates will influence how much you can borrow and how much you can afford to repay on your loan.

While it may be tempting to borrow more, keep in mind that interest rates will eventually increase and so will your repayments. It’s a good idea to check whether you can afford the home loan if rates were to go up.

3. Increasing your savings

A low-rate environment is generally bad news for savers with cash in the bank. With interest rates at record lows, the rates earned by some bank deposits are at their lowest level since the mid-1950s, prompting some investors to consider whether their money could be working harder for them elsewhere.

With little interest to be earned by keeping money in the bank, alternative options such as income-generating shares that pay attractive dividends may be worth a look.

Before making any changes, it’s important to understand the risks involved. Shares, for example, are much riskier than keeping money in the bank. But they do offer the potential for much higher returns than a cash deposit.

Other options which may help your money to work harder for you include managed funds or property. Again, these investments carry more risk and can tie-up your cash for a period of time. Also be sure to understand any fees involved.

We can help you find suitable options.

4. Growing your super

The recent interest rate cut is a timely reminder to review how your superannuation is invested. With earnings from cash deposits at record lows, it’s a good idea to check what portion of your super is invested in cash. Consider whether the amount of super you have in cash is still appropriate given the level of risk you’re comfortable with and the time you have left until you retire.

Ultimately it comes down to what’s important to you, what stage you’re at in life and how much risk you’re willing to take on for potentially higher returns. If retirement is still a while away, you may consider taking on riskier, higher growth investment options like shares or property that have the potential to help grow your super balance over time. However, if you’re retiring soon, you may not be as willing to take on too much risk, as preserving your super balance may be a higher priority. Regular reviews of your super investments can help you to make sure you’re still on track to a comfortable retirement.

We can help you make the most of this low interest-rate environment and stay on target to reach your goals.

Did you know about SFP’s new Finance service?

Why not arrange to meet with Leigh Morris our Senior Credit Advisor to review your current situation. Make a booking or call us on 02 9328 0876 to arrange a meeting.

Aricle by – AMP Life Limited.

The wisdom of ‘no change’ recommendation in investing

Written by on 21 June 2019. Posted in Investing. No Comments on The wisdom of ‘no change’ recommendation in investing

This may sound pessimistic but unfortunately, it’s not an incorrect statement. It refers to our human behaviour when it comes to investing – the investor behaviour.

The investor behaviour needs to be managed via the disciplined but simple recommendation of ‘no change’ which most of our clients have experienced for years. It’s simple but effective. It may sound repetitive and even boring, but without it we would all end up chasing the annual ‘The top 5 stocks to invest in 2019’ type of headlines (and end up broke).

As huan beings, we are bound by a number of complex but natural preconceptions which literally stop us from acting rationally while investing throughout our lifetime. This set of biases basically prevents us from processing reality in a rational way and makes us incapable of executing and sustaining a successful investment strategy that can last a lifetime.

The next thing that’s important to acknowledge is that these matters are cognitive in nature and therefore can’t be ‘fixed’ by investor education, as is so often suggested by media and Barefoot Investor type literature. We can’t overcome human nature by learning, just as we can’t change left-handed writing with psychotherapy. Understanding is an intellectual issue, and we’re all capable of that. However, processing it correctly and accepting it is an emotional issue which requires close partnership with an empathetic but tough loving, third party investment adviser.

There are four main reasons for our inability sustain a successful investment strategy on our own:

Physiological reason

Fear is by far the biggest inhibitor of wealth building. We are all equipped with a processing centre of fear in our brain – the right amygdala. This fantastic piece of hardware used to help us process fear and anxiety when running away from a lion in the savannahs of Africa over 40,000 years ago. It instinctively guided us to stick together with our herd or to run away and save our skin. It was essential for our survival back then but it’s not doing us any favours now when facing the fear of capital markets. Whether it’s fear of loss when seeing our investments (temporarily) reducing in price or fear of missing out when seeing others making money (incorrectly branded as greed by media), it’s always fear. How we naturally respond to it contributes to our inability to deal with it the right way.

Psychological reason

Human beings all suffer from what’s called an asymmetric loss aversion, which simply means that losing money feels twice as bad as making money feels good. This, combined with our difficulty in distinguishing between a temporary market decline and a permanent loss, ensures casualties in every market correction. Together with the media fed thesis of ‘This time it’s different’, it enables the investor’s tortured psyche to escape not only from the pain of ‘loss’ but also from any obligation to continue investing rationally.

Cultural reason

This refers to our inability to distinguish between currency (medium of exchange for products and services) and money (stockpile of purchasing power). It’s culturally unavailable to our human mind that at just average inflation of 3% pa (the average rise in cost of living), what costs us $1 today will cost us $2.44 in 30 years’ time. The erosion of purchasing power will devalue every dollar we own by almost 60%. No one is paying attention to it on a daily basis (because we can’t) but it makes all the difference in the long run. It wisely forms the reasonable basis to invest our savings but our human mind just gets distracted.

Perceptual reason

What we perceive to be a good investment and the way we define risk and safety are fundamentally flawed. Our mind works completely fine when it comes to making every day financial decisions, but when it comes to investing (in shares) it never does. In all economic decisions we make regularly, when the price of something reduces (everything else being equal), we’re naturally drawn to it. Discounted prices offer good opportunities to get more value for money. The converse is also true – when the price of say business suits increases, we stop buying them and wait until the mid-year year sale. You know what I’m talking about when I say I feel extremely proud, I bought two suits and a shirt for a price of just one suit. It brings us pride and joy, and rightly so.

In relation to investments, when the price of an investment is rising, all the fundamentals tell us its value is reducing and the risk of investing in that asset is now higher so we should be more cautious. Conversely, when the investment prices temporarily fall (typically because of some imaginative doom and gloom prognosis), economic fundamentals tell us that the value of investing in those assets increases, the risk is reducing, and we should increase our appetite to buy more. Tragically, human nature makes us do exactly the opposite. We step up our purchases when markets rise (pretty close to the top) and we sell what we own when markets fall (pretty close to the bottom) and we keep doing it until we go broke. Our perception stands in the way of making the rational investment decisions.

As I already mentioned at the start, this is a normal, human reaction and it has nothing to do with what we know. It has everything to do with what we feel and that’s why we all need a helping hand to stop us. Our human nature needs someone to stop it from essentially destroying us.

Only your financial planner can do that for you and discourage you from making a wrong decision by so often saying, don’t make any changes or don’t react. In its pure essence, it’s the most important recommendation we make. Even if it means no change. It’s about the ability to stay patient and disciplined when others lose faith in what they’re doing. We call it the ‘Zen of Investing’ and it’s the only way to enjoy the benefits of the compound interest we all strive for.

Does your investing behaviour need some professional support?

Speaking with one of our financial planners could make all the difference. Make a booking or call us on 02 9328 0876 to arrange a meeting.

Aricle by Michal Bodi

General Disclaimer: Originally published by The Sydney Morning Herald on 13 October 2018. This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.

Photo by Tyler Miligan on Unsplash

Things to avoid as a newbie investor

Written by on 24 April 2019. Posted in Investing. No Comments on Things to avoid as a newbie investor

1. Failing to plan

When looking to invest, it’s generally wise to think about:

your current position and how much you can realistically afford to invest (consider what other financial priorities you have or existing debts you may be paying off?)
your goals and when you want to achieve them
implications for the short/medium and long term
whether you understand what you’re actually investing in
whether you know how to track performance and make adjustments
if you want to invest yourself, or with the help of a broker or adviser.

2. Not knowing your risk tolerance

As a general rule, investments that carry more risk are better suited to long-term timeframes, as investment performance can change rapidly and unpredictably. However, being too conservative with your investments may make it harder for you to reach your financial goals. Low-risk (or conservative) investment options tend to have lower returns over the long term but can be less likely to lose you money if markets perform badly. Medium-risk (or balanced) investment options tend to contain a mix of both low and high-risk assets. These options could be suitable for someone who wants to see their investments grow over time but is still wary of risk. High-growth (or aggressive) investment options tend to provide higher returns over the long term but can experience significant losses during market downturns. These types of investments are generally better suited to investors with longer term horizons who can wait out volatile economic cycles.

3. Thinking investment returns are always guaranteed

The idea of guaranteed returns sounds wonderful, but the truth when it comes to investing is returns are generally not guaranteed. There are risks attached to investing, which means while you could make money, you might break even, or lose money should your investments decrease in value. On top of that, liquidity, which refers to how quickly your assets can be converted into cash, may be an issue. Depending on what type of investment you hold or what may happen in markets at any point in time, you mightn’t be able to cash in certain investments when you need to.

4. Putting all your eggs in one basket

Investment diversification can be achieved by investing in a mix of:

asset classes (cash, fixed interest, bonds, property and shares)
industries (e.g. finance, mining, health care)
markets (e.g. Australia, Asia, the United States).

The reason diversifying may be a good thing is it could help you to level out volatility and risk, as you may be less exposed to a single financial event.

5. Believing the opinions of every Tom, Dick and Harry

Changing your strategy on the basis of market news may or may not be a good idea. After all, people have made all sorts of market predictions over the years, all of which haven’t necessarily come true. On top of that, we all have that one friend that likes to pretend they’re a property, share or general investment guru, who while may come across as persuasive in their market commentary, does not have the qualifications to be giving people advice. With that in mind, if you’re looking for guidance, you’re probably better off consulting your financial adviser who may be able to give you a more well-rounded picture of the current climate and the potential advantages and disadvantages you should be across.

6. Making rash decisions based on fear or excitement

Many investors get caught up in media hype and or fear and buy or sell investments at the top and bottom of the market. Like with anything in life, it is easy to get stressed and concerned about the future and act impulsively but like with other things this may not be a smart thing to do. While there may be times when active and emotional investing could be profitable, generally a solid strategy and staying on course through market peaks and troughs will result in more positive returns. We can help you make investment choices that are right for you. Get in touch today.

Need help with starting in investing?

We can help you decide what is the best strategy according to your goals. Make a booking or call us on 02 9328 0876 to arrange a meeting.

Fussy buyers snub houses that don’t present well

Written by on 20 March 2019. Posted in Property. No Comments on Fussy buyers snub houses that don’t present well

When property prices boomed, buyers would look past the 1970s bathroom and the untidy garden, but with prices coming down, those looking to sell need to go the extra mile if they are to maximise the sale price.

As prices move down and buyers become more fussy, real estate agents and buyers’ advocates say vendors risk not getting the price they want by not putting in the effort to present their property well. Scrimping on fixing-up the front fence or giving the property a lick of paint can mean the property is passed by.

“Buyers are very fussy at the moment. I’ve seen buyers not want to buy a property over the smallest things like a feature wall that you could paint over a weekend,” says Peggy Willcox, the founder of Mooney Real Estate in Penrith in Sydney’s west.

Bradley Willmott, the founder of Pursuit Property Advisory in South Melbourne, says the market has changed.

Willmott, who represents both vendors and buyers, but never on the same property, says: “If a [property] is not spot-on, buyers will keep looking because there are more out there.”

Looking for something bigger

Nolan Singh, 36, a finance director and his wife Mandy Singh, 37, who works in human resources are selling their four-bedroom house in Jordan Springs, north of Penrith in Sydney’s west by private treaty, through Mooney Real Estate in Penrith.

They are looking to buy a larger house in the same area, not only because of their growing family of three boys – Tristan, 13, Ethan, 11, Jaiden, 9, but because the family hosts a lot of visitors from overseas.

“The house is big enough, but we would like to have something even bigger and we would like to have a swimming pool,” Nolan Singh says.

The house is only a few years old and the couple has not had to do that much to prepare it for sale. Singh repaired the post box, re-stained the deck, cut the grass and hedges and fertilised the lawn.

The couple took the opportunity to throw away things they didn’t need to declutter the main rooms, such as lounge room, and store everything else into the garage.

Spruce-up to get an edge in “lumpy” market

Christine Roughead, who is semi-retired and works in human services policy, is selling her terrace in Richmond in inner Melbourne where she has lived in for 27 years.

“I bought it as an unrenovated terrace and had it renovated in 2000,” she says.

“The kitchen and bathroom are in really good shape; I had to update the appliances within the last 18 months anyway with a new oven and dishwasher.” She describes the property market as “lumpy”.

Roughhead is selling her house by private treaty. “It could take longer to sell or it could be quicker,” she says. Roughhead is working with vendors’ advocate Bradley Willmott who gave her some tips on how to present the house, which is being sold by agency Whitefox.

“I have only had to make some cosmetic changes like having the inside and outside painted,” she says.

Roughhead is moving to another terrace in inner Melbourne with a little bit more land as she intends to spend more time in the garden as she transitions to full retirement.

Willmott says it is important to make the house appeal to as broad a market as possible. Almost every house needs a coat of paint on the inside and outside, he says.

“[Inside] it’s important for colours to be neutral so that potential buyers can more easily imagine putting their stamp on the property with their own furnishings,” he says. The focus should be on decluttering of the key interior spaces, like the living room, he says.

Alan Yeung, a property consultant at Location Property Group in Sydney’s St Leonards, says making a house feel like a home is very important. “This might include having some bread toasting or coffee brewing when potential buyers come to view a property.

If you are considering selling your property, give us a call to see how it could impact your finances.

Speaking with one of our financial planners could make all the difference. Make a booking or call us on 02 9328 0876 to arrange a meeting.

Aricle by John Collett

Would you like to retire by 40?

Written by on 28 December 2018. Posted in Retirement Strategies. No Comments on Would you like to retire by 40?

And with the age at which you can access your super and age pension creeping up—not to mention the increasing cost of living—you might be steeling yourself for a longer working life.

The stats don’t lie—Australians are staying in the workforce for longer and any thoughts of retiring early are becoming a distant dream for many of us.ⁱ

But there’s a growing movement of younger Australians who believe that by following the right set of rules, it’s possible to achieve early retirement.

Popularised by US-based blogger Peter Adeney, better known as Mr Money Mustache, the Financial Independence, Retire Early movement looks more closely at what makes us happy.^_ii

Changing your spending and saving habits

FIRE is all about following an extremely frugal lifestyle with the aim of retiring as early as your 40s…or even your 30s!

At the core of the FIRE philosophy is changing your attitude towards spending and saving.

But FIRE is more than just following a budget. It’s a whole-of-life movement that inspires fervent belief in its followers.

The FIRE movement encourages its followers to build up seven levels of financial safety by:

investing in property
investing in dividend-yielding assets
building tax-effective super
working part-time
taking full advantage of social security
looking for entrepreneurial work opportunities
adjusting their lifestyle to live a simpler life.

When it comes to saving, every little bit counts

Like any movement, FIRE inspires some committed followers and some of the lifestyle advice can seem a little extreme—churning credit cards to access freebies, living in a truck to avoid rent and even sifting through bins outside restaurants for free food.

Now, if the thought of going without your daily latte…not to mention movie outings, fine dining and regular holidays…sounds like a living nightmare, then perhaps FIRE isn’t for you.

But if this sounds too much like hard work, don’t worry. You don’t have to be quite so committed. You could consider making some simple changes to your daily habits to reduce your spending and boost your savings.

Understand your money habits.
Make a list of where you could cut back to reduce your waste.
Cycle all or part of the way to work and save on transport costs.
Shop around for the best deal on utilities like gas, electricity and water.
Entertain at home—a monthly Netflix subscription costs less than a single movie ticket.

How to light your FIRE and retire on your terms

Once you’ve ramped up your savings, you could think about being a little more savvy with your money.

Bring your super together into one account to avoid paying more than one set of fees.
Look at ways to save and invest your money to increase your potential returns.
Consider investing in property…but watch out for aggressive gearing, especially if interest rates change.

You may not retire quite as early as the more committed FIRE followers. But you may just put yourself in the box seat to retire on your own terms.

And along the way, you might find yourself reappraising your attitude towards money and happiness.

Need help starting your FIRE?

For more help and to take a fresh look at the way your managing your money, speak to your financial adviser at SFP, or contact us on 02 9328 0876.

i Australian Bureau of Statistics – Retirement and Retirement Intentions, Australia
ii https://www.mrmoneymustache.com/about/

Article by AMP Life Limited

Photo by Mohamed Nohassi on Unsplash