Consortium Private Wealth Blogs Archives

Financial Education for a Successful Future

30 August, 202329 August, 2023 Updated on29 August, 2023 Education, Finance

Think back to when you got your first job and that sweet taste of financial independence. Regardless of what age you started working, it’s unlikely you knew how to manage that first paycheck. Let’s face it; our world isn’t particularly adept at teaching financial literacy to the younger generation. I don’t know about you, but when I was in school, we learned trigonometry (SOH-CAH-TOA is still permanently etched in my brain), which has been helpful for all the times I’ve needed to solve the missing sides and angles of a right triangle, but not so much for managing my financial affairs as an adult. It’s time we change that narrative by sparking open, honest discussions about money and giving our young adults the financial tools they need to flourish. The Need for Open Discussions About Finance Money talk has often been cloaked in secrecy, even considered taboo in some households. This needs to change. Parents can play an integral role in setting their children up for financial success by fostering an environment where money conversations flow freely. Open dialogue demystifies the world of finance and empowers young adults to make informed decisions. Using Positive Language As we foster an environment of open discussions around money, it’s important to remember that the language we use significantly impacts the subconscious beliefs and attitudes our children will develop. Just as negativity can breed fear and anxiety, positive language can cultivate a healthy relationship with money. Instead of saying, “We can’t afford this,” try saying, “Let’s work out how we can save for this.” This small shift in dialogue encourages a mindset of abundance and possibility rather than scarcity. It helps young adults view financial challenges as opportunities for growth, aiding them in building a positive and proactive belief system around money. Financial Goal Setting Goals give us direction and purpose. Whether saving for a first car, paying off a student loan, or investing in their first property, encouraging young adults to set and work towards financial goals from an early age is a great way to help them build discipline and a future focussed mindset. It’s equally important to celebrate milestones, no matter how small. This positive reinforcement nurtures a sense of achievement and motivation, propelling them further on their financial journey. The Essentials of Budgeting Ever heard of the saying, “Failing to plan is planning to fail”? That’s precisely why budgeting is so important. Budgeting is not about limiting yourself; it’s about making your money work for you. The 50/30/20 rule, where 50% of your income goes towards needs, 30% towards wants, and 20% towards savings, is a great place to start for young adults because it’s simple and gets them in the habit of saving from an early age. Understanding and Practicing Responsible Spending Managing your money doesn’t mean you have to miss out on the things you enjoy. It’s all about responsible spending. Need versus want is a timeless debate, but helping young adults to understand the difference is key. Impulse spending is something that can often sabotage budgeting and saving efforts. A great tip for young adults to help them avoid impulse spending is to implement a 48-hour waiting period for non-essential spending. This allows time to consider whether the purchase is within their budget and aligned with their financial goals. We’re not just equipping our young adults with financial knowledge but empowering them to build a successful financial future. So, let’s keep the money conversations flowing and start helping our young adults build habits that will set them up for financial success. The narrative changes today!   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Estate Planning is not just for retirement

16 August, 202314 August, 2023 Updated on14 August, 2023 Finance

Many people think that Estate Planning is only for people who are close to retirement, especially if we fall into the trap of thinking that Estate Planning is just about getting a will. But did you know that Estate Planning addresses key protection strategies whilst you’re still alive? It doesn’t matter who you are, Estate Planning is for everyone. What are the key pillars of Estate Planning? Estate Planning is all about making sure that you get the choice as to what happens to you and your assets – whether that’s if you need someone to make decisions on your behalf, or you pass away and your estate needs to be divided up. 1. Advance Care Directive Should something happen to you, and you are unable to communicate decisions about your medical care and treatment, an advance care directive allows you to: As long as the directive is valid, it must be followed and cannot be overridden by medical professionals or family members. 2. Power of Attorney A Power of Attorney allows a person who you nominate to make financial and legal decisions on your behalf if you lose capacity as a result of illness, injury or disability. They can help ensure important financial and legal matters are handled without delay if you can’t manage them yourself – for example, paying your bills, managing your bank accounts, managing your investments and buying and selling property. 3. A Valid Will Whereas the first two pillars ensure that important matters are handled in accordance with your wishes if you’re incapacitated, a will ensures that those same matters are handled in accordance with your wishes after your death. A will gives you the best chance of ensuring that your assets go where you want them to. If you die without a valid will: 4. Superannuation When you pass away, your superannuation is distributed to the person(s) you have nominated in the fund’s death benefit nomination. However, this may not be binding on the super fund, and if you haven’t nominated a beneficiary this could result in a lengthy process as the super fund trustee needs to decide who gets the money. Superannuation is also not automatically included as part of your estate. The best way to ensure your super is distributed in accordance with your wishes is to nominate your legal personal representative. Your Executor will then be required to distribute your super according to your Will. An estate plan gives you choice and control Whilst growing your wealth is one part of a great financial plan, protecting your wealth in the event of your incapacity or death is just as important. Ensuring that your estate plan is in order gives you choice and control in how your affairs and assets will be handled, which in turn benefits both you and your loved ones. If you would like to explore your estate planning options, contact us to get started. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Discovering Your Financial Mindset

2 August, 20232 August, 2023 Education, Finance, Investing

In the quest for financial stability and success, we often focus on tangible elements like earning more money, saving diligently, or investing wisely. But have you ever stopped to consider the role your financial mindset plays in achieving your financial goals. Understanding financial mindset Your financial mindset is a set of beliefs and attitudes you hold about money — how you earn it, save it, spend it, and invest it. This mindset largely influences your financial behaviours, decisions and ultimately your financial success. Each mindset carries a unique perspective about money, influencing your financial decision-making process. There are four common financial mindsets: 1. The Spender enjoys the thrill of the present, often overlooking long-term financial security for immediate gratification. If you frequently find yourself making impulsive purchases, or your credit card balance perpetually outweighs your savings, you may identify with this mindset. 2. The Saver is characterised by frugality and a steady focus on long-term financial security. If you diligently maintain a budget or feel a sense of accomplishment when growing your savings, the Saver mindset most likely resonates with you. 3. The Avoider, often plagued by financial anxiety, tends to shy away from money matters. If you find bills and bank statements overwhelming, or frequently procrastinate financial planning, you likely have an Avoider mindset. 4. The Investor sees money as a tool for wealth creation. If you appreciate the potential of assets and are willing to take calculated risks for future returns, you are most likely aligned with the Investor mindset. Identifying Your Current Financial Mindset So how do you uncover your financial mindset? It begins with self-reflection – Do you often worry about money, or do you feel confident about your financial situation? Are you comfortable taking calculated financial risks, or does the thought of investing scare you? Do you view money as a tool for achieving your dreams, or a necessary evil to be managed? Examining your feelings and behaviours around money can provide valuable insights into your current financial mindset. This process is beneficial because it sets the stage for potential shifts in perspective that can improve your financial life. Once identified, you can analyse your money behaviours, uncover potential blind spots, and take action to optimise your financial decision-making. For instance – If you identify as a Spender, incorporating a budget and automating savings can provide some balance to your financial outlook. Savers could benefit by introducing an element of investment to their financial strategy, allowing their savings to work harder for them. Avoiders must confront their fears and actively engage with their finances, perhaps by seeking professional guidance. While Investors generally have a positive approach, ensuring a balanced portfolio to mitigate risks is essential. Transforming your financial mindset requires commitment, patience, and time. Take it slow and make gradual changes as you grow more comfortable with your changing perspective on money. It’s not just about money; it’s about your attitude towards it. Adjusting your financial mindset means transforming both how you see money and how you engage with it, paving the path to financial success. The information provided in this article is general in nature only and does not constitute personal financial advice.

Building a Strong Foundation: Avoiding Mortgage Default

19 July, 202320 July, 2023 Updated on20 July, 2023 Budgeting, Economy, Finance

When building a home, it’s often said that the foundations are the most important part. Their primary purpose is to hold your house up – supporting the structure and preventing it from being affected by uneven ground. Similarly, when purchasing a home and financing it with a mortgage, your financial foundation is just as crucial. A solid financial foundation can help you avoid mortgage stress, loan default, or even eviction. Unfortunately, economic factors such as higher living expenses, interest rate hikes, or job loss can jeopardise your financial foundation. What is mortgage stress? Mortgage stress occurs when homeowners face difficulty meeting their mortgage repayments and their living expenses. The Australian Bureau of Statistics has developed a “Mortgage Affordability Indicator”, which applies a 30% mortgage repayment threshold based on a household’s income. Mortgage stress can cause immense strain on individuals and families and increase the risk of mortgage default. Defaulting on a home loan happens when borrowers cannot make repayments as per the agreed terms and conditions of the loan agreement. This situation may result in serious consequences, including eviction and mortgagee possession of the property by the lender. How to avoid mortgage stress and loan default 1. Know Your Financial Situation One of the most crucial steps to avoid mortgage default is having a clear understanding of your financial situation. By evaluating your income, expenses, and overall financial position, you can identify potential risks and understand what options are available to you. Tracking your income and expenses will help you to analyse your spending habits and identify areas where you can cut back or make adjustments to free up cash flow. This is also a great time to review your expenses and renegotiate with service providers. Reviewing your financial position may help you identify available options to assist in financial hardship. 2. Seek Professional Guidance A mortgage broker can help you assess your current loan terms and explore options for refinancing or loan modifications that better align with your financial circumstances. They can provide valuable advice and assist in negotiating more favourable terms with your lender. 3. Communicate with Your Lender If you anticipate difficulties in making your mortgage repayments, it is best to communicate proactively with your lender in advance. Most lenders have teams dedicated to supporting customers experiencing financial hardship. They may be able to offer temporary payment arrangements or alternative solutions to help you through a difficult period. Case Study: Consider the case of John and Sarah, a couple facing the risk of defaulting on their mortgage due to a sudden but temporary loss of income. To avoid this outcome, they took several steps: Reviewed their financial situation – John and Sarah underwent a complete review of their financial situation. They reviewed their expenses, paused or cut back on discretionary spending, and renegotiated with all of their utility and service providers. This freed up cash flow to allocate towards their home loan. They also identified that they were slightly ahead with their home loan repayments. Communicated with their lender – John and Sarah reached out to their lender to explore their loan repayment choices. Since they had made some progress in their payments, they were eligible for a repayment holiday. This option would allow them to pay less towards their home loan for the next six months. They had examined their financial situation and were confident that they could manage these reduced repayments, and this would give them six months to replace the lost income and get back on their feet. To prevent mortgage stress and default, it’s important to actively manage your finances and have a clear understanding of your financial situation. Though it can be tough, taking early action and being transparent with your lender can help you work together to overcome financial challenges and ensure the safety of your home. If you are facing any difficulties in making your mortgage payments, you can find helpful resources on the MoneySmart website: https://moneysmart.gov.au/. The information provided in this article is general in nature only and does not constitute personal financial advice.

The impact of natural disaster on property values and insurance

4 July, 20235 July, 2023 Updated on5 July, 2023 Finance

Australia’s vast expanses and varied climates make us prone to natural disasters. In recent years alone, we’ve experienced the devastating impacts of bushfires in the southern parts of the country, flooding along the Eastern Coast, as well as significant storm events and cyclones. As you can imagine, the aftermath of a natural disaster typically involves a lot of clean-up and rebuilding for those affected. However, there are also a number of flow-on effects from these events for those not directly affected that are of particular importance to homeowners and first home buyers. Impact on Home Values A natural disaster can drastically reduce the market value of affected properties, as property buyers become deterred by the high risk factor associated with the property or area. This can also make it difficult for owners to sell their homes or vacant land, as the buyer pool willing to take on that risk reduces. In some cases, properties in high-risk areas may become uninsurable, which can further impact value, sometimes causing these properties to become unsellable as purchasers are deterred by the inability to insure the property. Impact on Insurance Following a natural disaster, insurance companies are inundated with claims for damages, which can take months, or even years, to process. Property owners in affected areas may face increased premiums, regardless of whether or not the event directly impacted them, due to insurance companies requiring their underwriters to assess potential future risks to ensure a balanced risk portfolio across their entire insurance pool. For example, in its ‘Report on Home and Contents Insurance Prices in North Queensland’, the AGA reported that North Queensland’s home and contents insurance premium rates had increased by around 80 per cent over the period of its investigation. Throughout that time, North Queensland experienced Cyclone Larry, Cyclone Yasi, and the Mackay Storms. By comparison, premium rates across Australia increased by around 25 per cent for the same period. Underinsurance or uninsurance is often the outcome, with homeowners either unable to afford the cover or justify the cost, presenting a substantial financial risk to homeowners if a natural disaster occurs. Tips for Property Buyers It is crucial to conduct thorough research, especially when considering buying a property in an area prone to disasters. Know the Property History Research the history of the property, including the surrounding area, to understand the risk for natural disasters: Research historical records of property damage in the area. Check with the local council for any risks in the area and any tools they might offer. Be familiar with the environmental factors that create risk for the area. Read the Fine Print Not all insurance policies are created equal, so it’s essential to understand the terms and policy definitions of any insurance contracts, particularly for disaster prone areas: Discuss the appropriate levels of insurance coverage with an insurance agent, Research insurance providers and consider their options. Also, by researching insurance coverage and obtaining quotes during your property due diligence, you can factor the actual cost into your budget to ensure you can afford cover and not be forced into uninsurance or underinsurance. Risk Mitigation & Disaster Management If you’re looking to purchase a property in a high risk area, be aware of risk mitigation strategies to assist with reducing risk. Understanding your property’s building materials and construction methods may help to protect your property. Understanding risk mitigation activities you could take to reduce your exposure. For example, in bushfire prone areas, being aware of hazard reduction activities such as fuel-reduction burning, removal of vegetation and maintaining fire lines. Without appropriate insurance cover or a streamlined disaster management plan, the financial implications of natural disasters can have dire consequences. If you’d like further advice in relation to ensuring you are adequately protected, or if you require assistance with purchasing a home, please reach out to discuss how we might be able to assist. The information provided in this article is general in nature only and does not constitute personal financial advice.

4 Time-Tested Investment Strategies for Young Investors

21 June, 202315 June, 2023 Updated on15 June, 2023 Education, Finance, Investing

The newest generation of young investors were raised during the Age of Information. Growing up alongside the internet, this generation has been exposed to more information and technological advancement than any generation before them. Young investors have greater access to education around investing, more diverse opportunities for investing, as well as a rise in social media content creators creating communities around building wealth – making this topic much more popular among younger generations. However, the world of investing can still seem intimidating, especially for young adults who are just starting out. While investing does involve risk, there are some time-tested investing strategies that all young investors should adopt to set themselves up for success: 1. Know your financial goals Before investing, it’s essential to know what you’re working towards. Are you saving for a house deposit? Or are you building wealth so that you can retire early? You may want to launch a business. Or start a family? Knowing your financial goals can help determine the best investment strategy for you. Once you have set your goals, you can develop a financial plan for achieving these through investing. 2. Start small and grow your portfolio over time When starting, you might think you don’t have “enough” to begin investing. Starting small and gradually increasing your portfolio over time is a great way to begin. It allows you to “learn the ropes” and build your knowledge and confidence over time, without feeling like you have too much at stake. Getting started sooner rather than later also means you’re taking advantage of the power of compounding returns. Compounding returns happen when you reinvest your investment earnings, allowing your investments to grow over time. The earlier you start investing, the more time your investments have to compound, leading to significant long-term growth. 3. Diversify your investments You might have heard the term ‘Don’t put all your eggs in one basket’, which, in the world of investing, translates to ‘Don’t put all your money in one investment’. Diversifying your investments across different asset types is a key strategy that can be used to lower portfolio risk and provide more stable investment returns. 4. Keep calm… and remember your investment plan Investing should generally be viewed as a long-term strategy, as markets are cyclical and typically go through periods of growth, decline and stagnancy. This means that you will likely experience a market crash at some point in your investing journey, which can be a scary time for investors. It’s important to stay calm and avoid making impulsive investment decisions. In many cases, the best strategy during a market crash is to stay the course and stick to your investment plan. Further, market corrections can often present a great opportunity to invest as markets sell off and asset prices reduce. As Warren Buffet said: “Be fearful when others are greedy and greedy when others are fearful”. While investing may seem daunting at first, incorporating these fundamental strategies will pave the way for success. And a final tip… Seek expert guidance! A financial adviser can help you set achievable financial goals, plan ahead, and making informed investment decisions that will keep you on track towards building lasting wealth. Don’t navigate the financial world alone – let us be your partner in success! The information provided in this article is general in nature only and does not constitute personal financial advice.

Financial Success: More Than Just Money

7 June, 202314 June, 2023 Updated on14 June, 2023 Finance

When discussing financial success, many people tend to use the terms “rich” and “wealthy” interchangeably. While being rich is often associated with having a lot of money or material possessions, being wealthy is about having financial abundance that is sustainable over the long term. Being Rich Being rich is often associated with having a high net worth, a large income, or significant assets. It’s a term used to describe people who have accumulated substantial money or wealth. However, being rich does not necessarily guarantee financial success. Someone who is rich may have a lot of money, but they may not have the financial stability or security that comes with being wealthy. Being Wealthy On the other hand, being wealthy is a more sustainable form of financial success. Wealth is often created through long-term investments, passive income streams, and wise financial planning. A wealthy person has accumulated enough assets and income-generating investments to provide a steady income stream, allowing them to live comfortably without relying on external factors. Financial success requires more than just having a lot of money… it is about having financial security AND freedom: Financial security means having enough money to cover your basic needs and some comforts. Financial freedom is the ability to make choices based on what you truly want rather than being constrained by financial limitations. The path to financial success requires a good understanding of financial literacy, clearly defined personal values, a long-term perspective, and the ability to establish, and stick to, a strategic plan. Financial Literacy Understanding how money works, including managing, investing, and saving it, is critical to achieving financial success. This knowledge will help you make informed decisions about your finances and enable you to take control of your financial future. Personal Values Successful people achieving financial freedom often clearly understand what is most important to them. They know their values and use them as a guide when making financial decisions. This approach helps them focus on their priorities and avoid impulsive purchases that jeopardise their long-term financial security. Long Term Perspective True financial success and wealth isn’t built on the back of “get rich quick” philosophies. There is no “magic pill” for financial success; it’s a lifestyle, not an overnight fix. Building wealth takes time. It requires focus, discipline, patience, and long-term commitment. Strategic Planning Achieving financial success requires strategies such as creating a budget, investing wisely, and building passive income streams. Again, these are all strategies that require patience and commitment. It is essential to stay focused on your goals and take the necessary steps to achieve them. While the above factors each play a critical role in your journey to financial success, the secret ingredient lies in defining what financial success and wealth mean to you personally, as someone else’s definition of financial success may look very different to yours. Some ways to achieve this are to: Assess your lifestyle – Consider what your ideal lifestyle looks like; where are you, who are you with, what are you doing? Define your values – Figure out what is important to you and define your values based on this. Your values can then provide a framework to make decisions based on what is important. Set Financial Goals – Be clear on what you want to achieve in life. You can then define your vision further by setting specific financial goals. If you are ready to start your journey towards achieving financial success, a financial adviser can help. They will assess your financial situation, identify your goals, and create a long-term financial plan tailored to your individual needs. With their guidance and support, you can take control of your financial future and achieve the financial security AND freedom you deserve. The information provided in this article is general in nature only and does not constitute personal financial advice.

Federal Budget 2023-24 Summary

24 May, 202318 May, 2023 Updated on18 May, 2023 Centrelink, Economy, Superannuation, Tax

Lady Luck has once again looked down fondly upon Australia, creating the first Federal Budget surplus in 15 years, through a higher tax take on record export earnings and increasing income tax receipts from higher job numbers. But how long will the good times last? Domestic economic growth is expected to buckle under the weight of higher interest rates. As a result, annual gross domestic product is expected to fall to just 1.5 per cent in 2023 -2024, recovering slightly to just 2.25 per cent the following year. This low growth forecast, down from 3.25 per cent currently, comes despite an expected surge in immigration numbers to 300,000, while inflation is forecast to stay stubbornly close to the 6 per cent mark for 2022-2023. The Budget papers suggest inflation will eventually fall within the Reserve Bank‘s guidelines, but not for some time, raising the possibility of stagflation engulfing economic growth. At the same time, unemployment is expected to rise from its record low level of 3.5 per cent to 4.5 per cent the following year and remain at this level for the foreseeable future. Nonetheless, this is a true Labor Budget. The Federal Government will boost Job Seeker payments by $40 a fortnight, provide greater rent assistance and energy subsidies to low-income households, as well as lower medicine costs and provide cheaper doctor visits for all Australians. Increased wage payments for those working in the aged care sector and increased childcare subsidies should also help to reduce the pressure on working families struggling to deal with the recent uptick in cost-of-living pressures. An estimated 60,000 single parents will also be able to claim the Single Parent welfare payment benefit from September 1, with the Government lifting the eligibility age for the youngest child in a family from 8 to 14 years. The Government insists these measured spending increases are targeted and restrained and will work to reduce the rate of inflation. However, only time will tell if the Reserve Bank agrees that a lift in overall government spending via the Budget will work to bring down prices. The Government hopes to reduce housing pressures by encouraging investment in rental housing by lowering the annual profit on build-to-rent projects from 30 to 15 per cent. But beyond this, this Budget has very little to help struggling businesses. It does, though, include some $4 billion to encourage new green energy programs, including $2 billion to support large-scale hydrogen production and $1.3 billion to help households upgrade their existing homes through the Household Energy Upgrades Fund. At the same time, big-ticket items within the Budget just get bigger. There is a brave estimate that spending within the NDIS will be restrained, yet there is no actual strategy for achieving this other than to reduce waste. The cost of providing health services has never been higher, while defence spending is expected to surge to $20 billion over the next four years, including some $9 billion to be spent on the new AUKUS nuclear-powered submarines. Little has been done to boost Government revenue beyond more fairly taxing windfall profits in the gas industry and increasing the tax bill for super accounts with more than $3 million in assets. Beyond this, nothing has been done to address the structural challenges within the Budget. Meanwhile, there is already unrest that the Job Seeker allowance is not being increased sufficiently to pull recipients out of poverty, with cost of living pressures at record highs for Australia’s most vulnerable people. All at a time when the Budget is in surplus. The information provided in this article is general in nature only and does not constitute personal financial advice.

Fixed rate mortgage expiring… Now what?

10 May, 20234 May, 2023 Updated on4 May, 2023 Budgeting, Economy, Finance

If your fixed interest rate expiry is coming up, you might have started to think about what happens next and what action you need to take. Or you might be sticking your head in the sand and avoiding the topic entirely. Be warned! The worst thing you can do is take no action at all. If your fixed interest period is due to expire, then it’s time for a review of your finances – Revisit your budget A fixed rate expiry will mean a change to what is often one of our biggest expenses – the home loan repayment. In a rising interest rate environment, this likely means a bigger expense you will need to allow for. By revisiting your budget, you can make sure you can afford the new home loan repayment amount, or adjust your spending where needed. Know your financial situation Your financial situation is going to impact what options are available to you and what options might be best for you. If there’s been recent changes to your income position such as job loss, income reduction or maternity leave, for example, this may impact your ability to refinance your loan. As a result, you may have to stick with your current lender on terms you may not be happy with. If you have surplus cash flow that you want to use to reduce debt, a variable rate loan might be more appropriate so that you’re not as limited with the ability to make repayments. Alternatively, if cash flow is tight, you might appreciate the stability of a fixed rate loan, and knowing your repayment amounts won’t increase during the fixed rate period. By having a good understanding of your current financial position and future goals, you can determine what your needs are and what the best strategy is for you moving forward. Look at what the market is doing One of the main factors to consider when deciding between a fixed and variable interest rate is the current market. While no one has a crystal ball, it’s important to consider what is happening with the economy, housing markets and interest rates. Are interest rates trending up or down? And what might this mean for both fixed and variable interest rate loans? Get clear on your options When your fixed interest term expires, you will need to choose between either re-fixing your loan for a period or switching to a variable interest rate loan. This is also a good opportunity to review your existing loan provider against other loan providers, to ensure you are being offered a competitive rate. With your market research in hand, it’s time to call your existing lender to request a rate review. You can let them know you are considering refinancing your loan and want to know what the best they could offer is. It might be time to switch lenders if they’re not prepared to offer you a competitive rate. The information provided in this article is general in nature only and does not constitute personal financial advice.

The Wealth of Gold: Investing in a timeless asset

26 April, 202323 April, 2023 Updated on23 April, 2023 Economy, Investing

As investors navigate through unpredictable and volatile economic times, it is essential to consider asset classes that can provide a level of stability and protection against market fluctuations. One such asset that has stood the test of time is gold. For centuries, gold has been a symbol of wealth and has played an essential role in the global economy. Why Investors Turn to Gold During Volatile Times Gold has long been considered a safe haven asset, as it has maintained its value throughout history. When the stock market experiences downturns or geopolitical tensions escalate, investors often flock to gold as a way to protect their portfolios against market fluctuations. The price of gold typically moves in the opposite direction of the stock market, making it a valuable hedge against economic uncertainty. Moreover, gold is not subject to the same risks as other investments such as bonds or stocks, making it a reliable store of value. Benefits and Consequences of Investing in Gold The primary benefit of investing in gold is its ability to provide a level of diversification to an investment portfolio. By including gold in a portfolio, investors can reduce their exposure to other assets, thus lowering overall risk. Additionally, gold is a tangible asset that investors can physically hold, making it an appealing option for those who prefer assets they can see and touch. However, investing in gold also comes with some drawbacks. The most significant risk associated with investing in gold is its volatility. While gold has maintained its value over time, its price can still fluctuate significantly over shorter periods. Furthermore, investing in gold does not provide a source of income, as it does not pay dividends or interest. Investors looking for regular income streams should consider other investments, such as bonds or stocks that offer dividend payouts. Interesting Facts About Gold Gold has been used as a form of currency for thousands of years. In ancient times, individuals and countries stockpiled gold as a way to preserve their wealth. For instance, during the California Gold Rush in the mid-1800s, the US government established the first national gold reserve to help stabilize the economy. Similarly, during World War II, countries like the US and the UK stockpiled gold to finance their war efforts. Getting Exposure to Gold Investors have several options to get exposure to gold. The most common way is to invest in physical gold, such as gold coins or bars. However, buying physical gold can be expensive, and investors also need to pay for storage and insurance costs. An alternative option is to invest in gold exchange-traded funds (ETFs), which track the price of gold and offer investors an easy way to invest in gold without the hassle of buying physical gold. Finally, investors can also invest in gold mining stocks, which provide exposure to the gold industry and can potentially offer higher returns than investing in physical gold or gold ETFs. While investing in gold can offer protection against market fluctuations and diversify an investment portfolio, it is crucial for investors to carefully consider the risks and benefits associated with this asset class. By weighing the pros and cons and assessing how gold aligns with their investment objectives, investors can make informed decisions about whether to include this timeless asset in their investment strategy. The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: January-March 2023

12 April, 202312 April, 2023 Economy, Investing

The Reserve Bank of Australia has decided to pause its cycle of interest rate hikes, keeping the cash rate target unchanged at 3.6 percent due to softening inflation data, a flat unemployment rate, and the need to assess the impact of previous rate hikes on the economy. The Consumer Price Index slowed from 7.4 per cent to 6.8 per cent for the year to February with prices increasing by just 0.2 per cent for the month of February itself, raising hopes the Reserve Bank might halt any further interest rate increases. Economists though remain divided on the outlook for interest rates. Some point to the low inflation rate recorded for the month of February and say the back has been broken regarding the recent price hikes of the past year. That any further rate rises will risk tipping the domestic economy into recession with local activity already stalling in key industries such as the housing construction industry, local tourism and other recreational industries. Some economists though point to the fact inflation remains doggedly above the Reserve Bank’s preferred inflation range of between 2 and 3 per cent and that consumer spending remains doggedly high despite recent rate hikes. Recession fears are also growing, given the ACTU’s push this year for a 7 per cent increase in the minimum wage from $21.38 an hour to $22.88, taking the minimum wage to $45,337 a year for some 2.4 million workers – a pay rise of some $3,000 a year. This comes hard on the heels of last year’s minimum wage rise of 5.2 per cent. More, the ACTU is pushing for this increase to flow to a range of other award rates, prompting concerns any such move could spark a wage rise – price hike spiral, reminiscent of the 1970’s. However, the ACTU argues the cost-of-living pressures are now so high that this increase is needed just to stop workers falling in poverty. That low-income workers typically spend every cent they earn, and this is exactly what is needed to keep the local economy growing. It also points to continued record high levels of corporate profits in recent years and argues Australian employers can easily afford to pay their workers more without it placing further pressure on prices. Not surprisingly business groups point to Australia’s low level of productivity gains, another increase in the Employers Superannuation Guarantee contribution, to which is set to rise to 11 per cent next financial year and higher funding costs, to argue against any pay increases. Meanwhile, the Federal Government is set to release its first full year budget this quarter. The overriding concern is whether the Government will take this opportunity to deal with the significant structural funding issues within the budget and so start to haul in the Federal deficit. While Government revenues continued to be bolstered by strong international trading conditions for Australia’s key exports of iron ore, coal and wheat, it remains a simple fact that the Federal Government spends more on goods and services than it receives by way of taxes. This situation will only be made worse by the recent decision to acquire a new fleet of state-of-the-art submarines and other military equipment that is expected to add billions of dollars to Government spending over the next few decades. All at a time, when the Government is equally committed to spending billions helping the domestic economy transition away from fossil fuel energy sources and embark on building a new low carbon economy. Meanwhile, a growing number of economists believe the US economy will most certainly fall into recession sometime this year, as its central bank also deals with a blow-out in domestic inflation by increasing local interest rates. While US employment figures remain strong, the recent US rate hikes have put undue pressure on a number of US and international banks, causing the collapse of two high profile banks in recent months. Although the US banking system remains strong, there are fears that these failures will cause a retraction in lending to businesses and so will further increase the likelihood and depth of any pending recession. The information provided in this article is general in nature only and does not constitute personal financial advice.

How to create a Debt Repayment Plan

29 March, 202329 March, 2023 Budgeting, Finance, Superannuation

Debt can be overwhelming and stressful, but creating a plan to pay it off can help ease that burden. In Australia, household debt is on the rise, with the average household owing over $260,000 in 2021, according to the Australian Bureau of Statistics. If you’re struggling with debt, here are some tips and strategies for creating a debt repayment plan. Create a Budget The first step in creating a debt repayment plan is to create a budget. This will help you understand where your money is going and where you can cut back on expenses. List all of your income and expenses, including bills, rent or mortgage payments, groceries, and any other expenses. Once you have a clear picture of your finances, you can start to identify areas where you can save money. Prioritise High-Interest Debt If you have multiple debts, it’s important to prioritise the ones with the highest interest rates. These debts are costing you the most money in interest charges, so paying them off first will save you money in the long run. Make minimum payments on all of your debts, and put any extra money towards the one with the highest interest rate. Automate Payments Automating your debt payments can help ensure that you don’t miss any payments and incur late fees. Set up automatic payments for the minimum payments on all of your debts, and then add extra payments as you can afford them. This will also help you stay on track with your debt repayment plan. Choose a Repayment Strategy There are different methods of debt repayment, such as the snowball and avalanche methods. The snowball method involves paying off the smallest debt first, while the avalanche method involves paying off the debt with the highest interest rate first. Choose the method that works best for your situation, and stick to it. Case Study Let’s compare two scenarios to see how creating a debt repayment plan can make a difference. Scenario 1: Sarah has $10,000 in credit card debt, with an interest rate of 20%. She is making minimum payments of $200 per month, but is struggling to make progress on paying off the debt. Scenario 2: John has the same amount of credit card debt, but has created a debt repayment plan. He is making minimum payments of $200 per month, but has also cut back on expenses and is putting an extra $200 per month towards the debt. He is using the avalanche method, and has prioritised the credit card with the highest interest rate of 25%. After one year, Sarah will still have $8,360 in credit card debt, and will have paid $1,440 in interest charges. In contrast, John will have paid off $4,800 of his debt, and will have saved $1,200 in interest charges. Creating a debt repayment plan can make a big difference in your financial situation. By creating a budget, prioritising high-interest debt, automating payments, and choosing a repayment strategy, you can take control of your debt and work towards becoming debt-free. If you need help creating a debt repayment plan, speak with our advisers who can provide guidance and support. The information provided in this article is general in nature only and does not constitute personal financial advice.

How to help your adult child buy their first home

23 March, 20235 April, 2023 Updated on5 April, 2023 Budgeting, Finance, Superannuation

By Robert Goudie This savings strategy is about building a healthy deposit and allowing kids to learn about consistent, regular saving. The strategy will require patience to build a substantial deposit over several years. I also acknowledge that not all parents are able to help their children buy their first home. In my professional life as a personal financial adviser, I have seen many parents assist their children in purchasing their first home. This has often been done with a lump sum. But, unfortunately, this doesn’t have the bonus of any tax efficiency or teaching children a regular savings habit to give them a sense of achievement. Purchasing a home can be difficult, especially as property prices have increased significantly in recent years. For many people, the high cost of housing (and living) has made it difficult to save a deposit for their first home, and even if they can do so, they may not be able to afford the monthly mortgage payments on a home that is within their budget. Building a larger deposit can reduce the debt levels needed to buy their first home or even help them to buy in their preferred area. For parents with the financial capacity and want to help their children save for their first home without handing over a large lump sum, this strategy, combined with some patience, provides an effective way to build the deposit faster. (Please note: I would only recommend parents to do so that have met their own retirement financial goals and have the extra capacity to help out) By subsiding your children’s income regularly, it can allow your child to start salary-sacrificing pre-tax dollars into superannuation – something that they normally couldn’t do without your help. Superannuation salary sacrifice Salary sacrificing is a way for employees in Australia to contribute part of their pre-tax salary into their superannuation account. This can be a tax-effective way to save for retirement because the contributions are taxed at a lower rate than your marginal tax rate. In Australia, the tax rate on contributions made through salary sacrifice is 15%. Contributions are made from your pre-tax salary, which means they are not taxed at the same rate as your income tax. This can be a significant saving if you are on a high marginal tax rate. For example, suppose you are on a marginal tax rate of 45% and were to salary sacrifice $10,000 into your superannuation account. In that case, you will pay $1,500 tax on those contributions (15% of $10,000). However, if you received that $10,000 as salary instead and then contributed it to your superannuation account after tax, you would pay $4,500 in tax (45% of $10,000). In this example, salary sacrificing would save you $3,000 in tax ($4,500 – $1,500). This can be a significant saving, especially over the long term. However, it is important to note that there are limits on the amount you can salary sacrifice into your superannuation account each year. FHSSS In recent years, the Australian Government has implemented the First Home Superannuation Saver Scheme (FHSSS), allowing individuals to save for their first home inside their superannuation account. The policy was designed to help first-time home buyers save for a deposit more quickly by allowing them to make voluntary contributions to their superannuation account, which can then be withdrawn for a home deposit once certain conditions have been met. Under the FHSSS, individuals can apply to withdraw voluntary contributions of up to $15,000 from any one financial year from 2017 onwards, up to a total of $50,000 across all years. If you are in a couple, this is a combined $100,000. Again, these contributions are taxed at a rate of 15%, which is generally lower than an individual’s marginal tax rate. The money saved through the FHSSS can be withdrawn (less the 15% tax) for a home deposit once the individual has held their superannuation account for at least 12 months and met other specific eligibility requirements. Note that superannuation contributions, including contributions made under the FHSSS, must still be within the standard annual caps for concessional super contributions. The FHSSS is one of several government initiatives aimed at helping Australians save for their first home and addresses housing affordability issues in the country. It is available to Australian citizens and permanent residents aged 18 and older who have not previously owned property in Australia and meet additional eligibility requirements. Let’s crunch the numbers Let’s assume a couple make a $14,705 contribution each into superannuation, earning $80,000 each per year, and continue this strategy for a full four years. We will first look at the amount saved in superannuation that can be used for a first home deposit and compare this saving with after-tax dollars outside the superannuation system. After four years of salary sacrificing into superannuation and assuming no investment returns, you would have accumulated a combined $99,994. Compare this to saving after-tax dollars; you would have accumulated $77,054 in comparison. If a couple is lucky enough to have the ability to achieve the above, they would have saved $102,000, which is an extra $23,400 when compared to saving in after-tax dollars. Now let’s look at the amount of income that would need to be provided by those generous parents or grandparents to ensure that the household cash flow remains the same: $15,000 less the marginal tax rate of 34.5% is $9,825 per person or $19,650 for a couple. Other thoughts Of course, many individuals and couples may already be actively saving for their first home deposit. Therefore, they may not need their generous relatives’ full support to achieve the above. Grandparents and parents can also choose to add a lump sum to help them at the time of purchase. It is worth noting that I have seen many clients take significant pleasure in helping their children and seeing the benefit of this assistance whilst they are still alive. However, as mentioned above, any gifting needs to ensure that generous relatives do not compromise…

Why millennials should be mapping their retirement today

14 March, 202314 March, 2023 Education, Retirement, Superannuation

While millennials have for decades been treated like ‘the children of Neverland, who never grew up’, reality is fast catching up with this generation, who are now young adults between the ages of 24 and 40. Like generations before them, they are now buying, or at least trying to buy, homes and starting families of their own. And with this, the stark reality is that their retirement is looming just around the corner in the early years of 2050. For all too many, planning for their retirement is just something they don’t want to face. But the reality is that the sooner they start ‘mapping’ or preparing for their retirement, the better off they will be. According to Investopedia, if you are a 26-year-old millennial, you should aim over the next four years to have at least one year’s worth of income in your superannuation fund. If you are a 40-year-old millennial, you should already have three times your annual income in super. They suggest millennials should contribute at least 15 per cent of their gross salary, including the 10 per cent compulsory super guarantee contribution, to superannuation each year if they have any chance of achieving a secure retirement. This seems a pipe dream for Marion, who is 29 and earns $95,000 a year as a successful professional accountant. While her employer contributes 10.5 per cent of her income to super, she has less than $100,000 in super, and is more focused on boosting her non-super savings of $75,000, so she can buy a small apartment. She is not alone. Most millennials, burdened by HECS debts and increasingly casual employment arrangements, will find the need to boost their super contributions a challenge, especially as most millennials, like Marion, are also struggling to save a deposit for an ever more expensive home of their own. They know they will live longer than previous generations and that health and living costs will be much greater for them in retirement, while social security entitlements will be much less than what their grandparents received. Nonetheless, when asked, millennials want to retire earlier than previous generations and are looking for a different type of retirement. One where they can travel more while still enjoying doing so and keep working on a casual part-time basis, but only if they enjoy the work. All of this means that amongst all the competing demands on their time and money, superannuation has to become part of the landscape of Neverland. For Marion, it has meant searching for a better superannuation fund with lower fees and better investment options while scaling back her plans to buy an apartment and perhaps relying more on the Bank of Mum and Dad to help her do so. As previous generations have done, millennials need to take control of their superannuation, and the sooner, the better. The first step is to consolidate any multiple super accounts into one and then, wherever possible, boost their contributions to the magic 15 per cent mark. Happily, most millennials, including those who are self-employed, will have a super fund and will only need to add an extra 5 per cent to take their total contributions to 15 per cent of their prevailing salary. Then they can leave compound interest to work its magic and, like a snowball rolling down a hillside, build the balance within their super. It’s then a matter of working closely with our advisers who can ensure your superannuation stays on track and help you to achieve the best possible outcomes when you do start thinking seriously about retiring. The information provided in this article is general in nature only and does not constitute personal financial advice.

Thriving in the ‘Gig Economy’

1 March, 202323 March, 2023 Updated on23 March, 2023 Budgeting, Education, Tax

If you’re a freelancer or contractor or maybe even a consultant then you’re part of the “gig economy”. Gone is the job for life, or even a job in the normal, employed meaning of the word. For you, work consists of short-term contracts or a series of one-off jobs. “Gigs” as the band down at the pub might put it. For some, gig work is a liberating choice that allows them to work their own hours, holiday when they like and work wherever they wish. For others it’s a necessity in a weak job market where under-employment and age discrimination is rife, and more companies choose to outsource specific tasks. Key to the gig economy is technology, be it an Uber app, Skype, crowdsourcing sites or just email and the Web. A study found that 4.1 million Australians had freelanced in 2014/15, and it’s a trend more likely to grow than diminish. So if you’re a “gig worker” what can you do to make the most of your situation? It’s business If you’re happy picking up the odd jobs that fall into your lap for a little extra money, that’s fine. But if you are looking to earn a full-time income then you’re in business and need to operate accordingly. To begin with, you need to know: Who your potential clients are; How to reach out to them; How to gain referrals; The processes you have to put into place to track your work, issue invoices, and make sure you get paid on time; How to meet your tax obligations. Protect yourself Depending on the work you do and the requirements of your clients you may need a range of insurances: Professional indemnity insurance – if there’s any chance a client could sue you in relation to the work you are engaged to complete. Public liability insurance – in case your work activities cause injury to a member of the public. Income protection insurance – you may be eligible for workers’ compensation insurance, but the rules vary from state to state, depend on your business structure, and only cover work-related injuries. Income protection insurance will also cover you against illness and non-work-related injuries. Life insurance – if you have dependents but little in the way of net assets. Think long term Can you build your business into something you can sell? If not, how will you fund your retirement? As a gig worker you’re unlikely to receive compulsory superannuation contributions, but you can (and should) make your own contributions. Personal contributions are tax deductible up to the annual concessional cap of $27,500. Get advice All state and territory governments have departments of business that offer a wealth of information and support for small businesses. Check out the help available in your state. And talk to your financial adviser. Aside from being able to look at your insurance, savings and super needs, your adviser may be an experienced small business operator, a potential mentor, and a valuable member of your network. Contact us today! The information provided in this article is general in nature only and does not constitute personal financial advice.

The difference between a savings account and a term deposit

15 February, 20239 February, 2023 Updated on9 February, 2023 Education, Investing

Depositing cash in a savings account or a term deposit are the most common ways to invest your money. But, how do you know which is right for you? First, let us explain their main differences and impact on your money. What is a savings account? A savings account is a deposit account held at a bank or other financial institution that earns interest. Benefits Easy access to your money at any time, while the remaining balance earns interest. You can save more by depositing more at any time. Savings accounts are eligible for the Australian Government’s Financial Claims Scheme, which protects against the failure of an authorised deposit-taking institution (ADI) (such as banks or credit unions). The government guarantees deposits of up to $250,000 per account-holder per ADI. Downsides You may need to link your high-interest saving account with a transaction account to meet certain conditions, such as depositing a minimum amount every month or limiting your withdrawal frequency. As interest rates can vary, your earnings will also fluctuate. You may be tempted to spend more given the easy accessibility of funds. Fees Most banks do not charge a savings account fee; however, some may charge an account keeping fee. Possible Tax outcome Interest earned is treated as investment income and taxed at your marginal tax rate. What is a term deposit? A term deposit is also a type of deposit account held at a bank or financial institution, with money kept for a set period of time at a fixed interest rate. Benefits The interest rate is guaranteed and does not fluctuate. You can invest in multiple term deposits of different terms and interest rates. For example, you can invest $15,000 in a 6-month term deposit earning 1% p.a. and $5,000 in a 12-month term deposit earning 1.50% p.a. They too are eligible for the Australian Government’s Financial Claims Scheme. Downsides If you want to access your money before the term finishes, you may be required to notify your bank at least 31 days prior, except under special circumstances. If interest rates increase, you cannot benefit as your money is already locked away at a fixed rate. Banks usually have a minimum balance requirement for a term deposit of approximately $1,000 to $5,000. It may be a considerable risk if you do not want to lock away that much of your savings or have just commenced your savings journey. Fees Banks usually do not charge any fee on a term deposit. However, if you want early access to your money, there may be an early withdrawal fee and loss of interest for the remaining term. Possible Tax outcome Interest earned is treated as investment income and taxed at your marginal tax rate. Which is better for your needs? Interest rates, accessibility of funds, and fees are key factors to consider. If you want a guaranteed income, term deposits are the way to go. However, if you want easy access to your money, use a savings account. Alternatively, you may keep some funds in a savings account for daily expenses or an emergency and invest the rest in a term deposit. Ultimately, the right decision for you will depend on your budget and financial requirements. The information provided in this article is general in nature only and does not constitute personal financial advice.

Economic Update: October-December 2022

1 February, 202325 January, 2023 Updated on25 January, 2023 Economy, Investing

According to the Reserve Bank of Australia, domestic headline inflation is expected to reach 8% in the final month of 2022 as consumers continue to spend despite higher interest rates. Retail spending saw a significant increase of 6.4% during November, with Black Friday sales pushing the number even higher at 8% during the last week of the month. The surge in spending during this time is relatively new in Australia, with the event being similar to the Black Friday sales that occurred in 2021 but lower than the two previous years. This suggests that the trend may be a short-lived fad in the country. Low unemployment levels and expectations of continued labour shortages throughout the economy appear to be creating newfound confidence among consumers, despite continued increases in interest rates. The Reserve Bank appears determine to halt further price rises by pushing interest rates even higher through 2023, which will inevitably flow through to higher home loan rates and further falls in property prices. This is despite its own figures suggesting that if cash rates reach 3.6 per cent next year, some 15 per cent of Australian homebuyers will be experiencing negative cash flow, where their mortgage repayments exceed their net earnings. Few analysts though are expecting widespread defaults, pointing to the build-up of large financial buffers through the pandemic, continued strong labour markets and earlier house price gains, all acting to help homeowners get through the coming year. Nonetheless, the expectation is for further downward pressure on property prices through 2023, with most analysts predicting a 15 to 20 per cent fall in national house prices from peak to trough with impaired or unrenovated properties experiencing even greater price falls. Company profits are expected to remain strong through 2023, driven mostly by strong export prices, despite efforts to speed up the decarbonisation of the economy and move to more renewable sources of energy creation. Industries are expected to benefit from embracing public-private partnerships with the newly elected Federal Government in policy priority areas such as energy, defence, education, health, and security. The continued strength of the domestic labour market and the strong international demand for Australia’s mining exports should also protect the domestic economy from the cold winds that are currently blowing through the international economy. The United States economy, typically the powerhouse of the world economy, is almost certainly expected to fall into recession later in 2023, with domestic economic growth there expected to fall to a lacklustre 0.5 to 1 per cent for the calendar year of 2023. The Chinese economy is still held moribund by the continuing impact of the pandemic with reported cases of Covid 19 soaring as winter takes its grip on the country, causing factory shutdowns and with that, a fall in exports. In the United Kingdom, inflation peaked at 11.8 per cent in October 2022 and is expected to remain in double digits for some time as higher energy prices, interest rates and general cost of living increases cause widespread price hikes around that nation. While the Bank of England is doing its best to bring inflation under control, there is widespread resentment that it is the poorest and most vulnerable in the community that are paying the highest price for the nation’s economic woes. A situation made worse by the slowdown in economic activity in Europe generally, as the ongoing war in the Ukraine continues to take its toll, driving energy prices higher and causing massive economic dislocation. The information provided in this article is general in nature only and does not constitute personal financial advice.

Three-Minute Financial Check-up

11 January, 202321 December, 2022 Updated on21 December, 2022 Budgeting

While the standard of living is constantly improving in Australia, economic disruptions, stagnant wage growth and continually increasing house prices are putting more and more people under financial stress. A recent report by the social research group, the Melbourne Institute, ‘Taking the Pulse of the Nation’, found one in three Australians reported being under financial stress. It found that those on fixed-term contracts and anyone self-employed were particularly vulnerable to feeling financial stress, as were people employed in the hospitality and IT sectors. There is nothing worse than that niggling feeling that you’re not in control of your financial situation or worse, the dread that you may not be able to meet your next home loan repayments or that you’ve maxed out your credit cards. For many people, it is simply that their lives are so busy they never have the time to focus on their financial position and so the constant pressure of earning money and paying bills can easily spin out of control. Just as all financial situations can be improved, so all financial problems can be resolved and the earlier you act, the better. Just the simple step of reaching out for help will make you feel better about your financial situation. So, it may be as simple as being unsure whether you will have sufficient savings in super to retire in the way you were hoping to, or it might be that you have created a debt mountain that you feel helpless to reduce. If you find yourself spending a large part of the day worrying about your finances, if you have trouble sleeping at night or if your financial position is causing repeated arguments between you and the people you care most about, it is important that you reach out for help. A good place to start is completing this Three-Minute Financial Check-Up. If you answer no to any of the questions on this list, you should make time to discuss your financial situation with a qualified financial adviser. They will be able to tell you just how serious your situation is and more, how you can take steps immediately to improve your financial position and help you get you back on track, so you do feel in control. Your Three Minute Financial Check-Up Action YES NO Do you pay all your credit cards off in full by their due date? Do you sleep easy knowing all your bills will be paid when they fall due? Do you have a budget, and do you stick to it? Are you making all your loan repayments on time? Do you know exactly how much your home loan is today? Do you know what you would do if you lost your job tomorrow? Are you confident about your children’s financial future? Do you have life and total and permanent disability insurance in place? Do you have income protection in place? Do you know how much you have in super? Are you and your partner in agreement about your finances? Do you feel confident about your overall financial position? The information provided in this article is general in nature only and does not constitute personal financial advice.

6 steps to a sustainable Christmas

21 December, 202221 December, 2022 Budgeting

Just as the Grinch stole Christmas, excess spending can rob us all of yuletide happiness. Seasonal credit card splurges can create ballooning long term debt, while unnecessary consumption inevitably leads to a blow-out in rubbish bin waste. The Commonwealth Bank of Australia estimates $11 billion is spent on presents each year, including some 20 million unwanted gifts. At the same time, seasonal celebrations boost landfill rubbish by a massive 30 per cent. So, if you want to max out the ho, ho, ho in Christmas this year, think of applying more whoa, whoa, whoa to your spending and consumption ideas. Here are six simple tips Ebenezer Scrooge would be proud of: Ninety per cent of Australians claim to recycle something, sometimes. What better way to do this than to shop for presents in one of Australia’s 2,500 opportunity shops? Forget the old days of chipped crockery and stained used clothing. Op shops are full of trendy, mint condition items and are the perfect place to find something slightly offbeat or unusual for your loved one. Save on postage and reduce needless paper usage by sending clever and original e-Christmas cards. Head online to create your seasonal messages to email to friends and family. Many websites provide free cards, while others offer designer animated versions. Instead of giving a physical gift, give an experience such as tickets to a concert or a voucher to use at a favourite restaurant. Better still, why not gift something special of yourself by offering to cook a meal or provide free babysitting for a family member. Giving an experience rather than a physical gift also means you don’t need to waste precious paper by wrapping the present or spend money on postage getting it to that special someone. If you do give a physical present, think of some clever ways to wrap it, so you’re not adding to the 150,000 km of wrapping paper Australians needlessly use each year – that’s enough paper to circle the equator 4 times. Wrap your gift in a re-usable patterned tea towel or scarf, or better still, invest in some brightly patterned boxes to hold your present that can be recycled from one Christmas to the next. Stop for a moment and look around your home to see what you can re-use and turn into a gift. A great place to start is the garden. Many plants can be easily divided and, in doing so, will create new plants you can pot up in a re-usable pot to give away. Take time to plan your meals this season and, wherever possible, cut down on buying heavily packaged or processed foods. Instead, buy fresh foods that can be eaten without much cooking, re-used as leftovers, or frozen for later consumption. It’s estimated that ninety per cent of Australians discard some 25 per cent of all the food they buy during December – that’s food that has been needlessly produced only to end up in Australia’s landfills. What really matters is remembering how blessed we are to be enjoying the festive season in whatever way we can and being with the people we care about most. The information provided in this article is general in nature only and does not constitute personal financial advice.

Being sensible with Buy Now Pay Later this silly season

7 December, 20221 December, 2022 Updated on1 December, 2022 Budgeting

Move over debit and credit cards; consumers are flocking to Buy Now Pay Later (BNPL) services. Afterpay, Zip Pay and several similar payment solutions allow shoppers to take home their goodies now while paying them off via a few weekly, fortnightly or monthly payments. There’s no interest payable as such, although fees are charged for late payments. A survey by Mozo reveals that 30% of Australian adults have one or more BNPL accounts and we’re not afraid to use them. Afterpay, our most popular BNPL service, achieved sales of $4.3 billion across Australia and New Zealand in the 2019 financial year, nearly double its sales of the previous year. With the nation set to splurge around $27 billion on Christmas, it’s a safe bet that plenty of that spend will be by BNPL. But with 60% of those surveyed by Mozo admitting that BNPL lead them to buy things that they wouldn’t have otherwise, it begs the question: how to use this payment option sensibly during the silly season? 1. Set your limits Make sure you have a budget for your Christmas spend, and use it to help resist the temptation of impulse purchases. 2. Track your spending Don’t just track your BNPL spending. Make sure you review credit and debit card purchases, too. Are you staying within budget across all your spending methods? 3. Avoid fees Around one third of BNPL users have missed at least one payment. While late fees may seem modest, they can add up. 4. Don’t repay BNPL loans with a credit card If you don’t pay off your entire credit card bill within the interest-free period, adding your BNPL repayments to the card may see you paying a high rate of interest on your purchases. Better to use a debit card or direct debit from your bank account, and making sure there’s enough money in the account to meet payments. 5. Avoid BNPL if you’re saving for a home loan Lenders may look at your use of BNPL as a sign that you don’t have significant savings and are living from payday to payday. The lower your debt, of all types, the easier it will be to get a mortgage. 6. Have a happy festive season Used wisely, BNPL can help you jingle your bells and put the merry in your Christmas. Just make sure you know what you’re signing up for and that you can meet all of the regular payments. Take care, and you’ll be able to enjoy the start of the New Year without a financial hangover. For further budgeting tips and financial advice, talk to us. We’re here to help. The information provided in this article is general in nature only and does not constitute personal financial advice.

A helping hand for the holidays

23 November, 202216 November, 2022 Updated on16 November, 2022 Education

Summer and the festive season are times we all look forward to, balmy evenings, relaxing holidays and social get-togethers. Like a beacon on the horizon, it provides something to aim for as we work, play and navigate our way through twelve, long months. Our modern world is busier and more stressful than ever, and for many, the holidays also represent a time when feelings of isolation, worries over work, finances and family conflicts, seem intensified. A time when more families than ever seek the assistance of charities. Tin-rattling events and fundraising campaigns don’t happen as often over the Christmas period. Charity chocolate boxes – always popular in the office – are ineffective if most people are on leave. So how can you help? People are traditionally very generous around Christmas-time, but for some organisations, it’s not always about cash; there are ways to contribute that don’t involve donating money. For example, the needs of disadvantaged children are foremost for organisations such as The Smith Family. This organisation focuses on enabling children to build better futures for themselves; aiming to break the poverty-cycle through education. Regardless of your education, skill set or background, if you want to make a difference to the lives of children, see www.thesmithfamily.com.au for further information. During times of crisis, not everyone has a shoulder to lean on, yet a caring ear is close by thanks to organisations like Lifeline. Lifeline provides emotional support 24/7, existing, “…so that no person in Australia has to face their darkest moments alone.” Lifeline has a volunteer program where you can be trained to support people in need via phone or web chat. Alternatively, Lifeline can assist you to set up your own personalised fundraising page so instead of receiving gifts for your wedding, anniversary, birthday (whatever occasion you choose), friends and family can donate to Lifeline instead. For further details, go to www.lifeline.org.au. During the holiday season, with all the associated excitement and frenetic activity, it’s easy to forget the voiceless, those unable to speak for, and support, themselves. This time of year, wildlife charities struggle through lack of funding, and an inundation of animals injured or left homeless after bushfires, habitat loss or road accidents. While cash donations are needed to buy food and medicine, if you’re unable to help financially, donations of bedding, old towels, blankets and food are equally important. You can also organise your own fundraising event. Alternatively, if you’re a knitter you can make possum-pouches, or those handy on the tools, can assist wildlife carers in building pens, fences and enclosures for animals. Each state has administrative wildlife centres that distribute aid and workers where they’re most needed, in Victoria contact Wildlife Victoria www.wildlifevictoria.org.au. As we face the end of the year our focus is naturally on summer holidays and festive celebrations but remember that if you or your family are experiencing difficulty, these charities exist for you too. So now we turn to a new year. We draw a line beneath the last one and look forward to twelve months of renewal and possibility. The information provided in this article is general in nature only and does not constitute personal financial advice.

Director Identification Numbers – time is ticking!

16 November, 202216 November, 2022 Regulatory

Do you have an SMSF with a corporate trustee or are you a director of a company? Do you know you have to register for a director identification number (director ID) by 30 November 2022? Legislation was previously introduced resulting in new obligations for company directors requiring them to obtain a personal director identification number (‘Director ID’) before 30 November 2022. As a company director, you are required to personally apply for a Director ID. Note this also includes where you are a director of a company acting as a trustee (such as the corporate trustee of your SMSF or family trust). While our office can help you in understanding your new Director ID obligations, unfortunately we cannot make the application on your behalf (although we are happy to assist if and when required). Please see below for the registration process to follow. Once you have successfully applied for, or if you have previously obtained, your Director ID, please supply a copy to our office. How do I apply for a Director Identification Number? You can apply by calling 13 62 50 or online. To apply by calling 13 62 50: Call 13 62 50 (may be a wait time of around 5 mins) The overall process should not take more than 5 minutes, once your call is answered. You will need to have your personal TFN and ID ready. ID will need to be 1 Primary & 1 Secondary document (You will be asked for details on documents ie. Document numbers, expiry dates etc) Primary documents can be: • Australian full birth certificate (extracts and commemorative certificates are not acceptable) • Australian passport (including passports that have expired in the past two years) • Australian citizenship certificate or extract from a Register of Citizenship by Descent • ImmiCard • Visa (if you are using a foreign passport but you are still in Australia) Secondary documents can be: • Medicare card • Australian driver’s licence or learner’s permit. This must show your photo and signature, and the address on the card must match your details on the form. You will then be asked answer a couple of questions, such as; • The name of the bank where you hold an account that earned interest in the last 2 years • Your mobile phone number • The name of your Accountant This should then complete the process and you will be given your Director ID number. To apply online: There are 3 key steps to apply for your director ID online. Step 1: Set up myGovID If you do not already have a myGovID you will need to set this up before you can apply for your director ID online. You can find information on how to setup your myGovID by downloading the app at: https://www.mygovid.gov.au/set-up Step 2: Gather your documents You will need to gather some information that the ATO already knows about you to verify your identity. You will need your tax file number, your residential address held by the ATO, and information from two of the following documents: • Bank account details • ATO notice of assessment • Super account details • Dividend statement • Centrelink payment summary • PAYG payment summary Most of this information can be downloaded from your myGov account so it may be worthwhile linking to this service ahead of applying for your director ID. Note, myGovID is different to your myGov account. Your myGov account allows you to link to and access online services provided by the ATO, Centrelink, Medicare and more, while myGovID is an app that enables you to prove who you are and to log in to a range of government online services, including myGov. Step 3: Complete your application Once you have a myGovID and information to verify your identity, you are ready to apply for your director ID. You can click on the following link to start the application process. The application process is quick and should take you less than 5 minutes. https://abrs.gov.au/persons/ui/secure/start/applyForDirectorID?action=applyfordirectorid Further information about the application process, and step-by-step instructions, can be found via this link: https://www.abrs.gov.au/director-identification-number/apply-director-identification-number The information provided in this article is general in nature only and does not constitute personal financial advice.

Federal Government’s October 2022 Budget

9 November, 20229 November, 2022 Economy

A sudden uptick in the unemployment rate and slower economic growth combined with continued strong inflationary pressures are set to test the Australian economy during the next two years, according to the Federal Government’s 2022 October Budget. While record commodity prices and higher Government revenues have provided some relief reducing the annual budget deficit from $78 billion to $36.9 billion, the economic outlook remains uncertain. Government spending will continue to outpace revenue with Canberra doing little to address the long-term structural difficulties contained within the budget, despite trying to restrain spending in order to limit inflationary pressures within the economy. Perhaps more importantly is the very real possibility that the Australian economy could tip into recession next year with unemployment set to spike at 5.5 per cent while economic growth is expected to slow to just 1.5 per cent. Global political and economic uncertainty cast a long shadow over this budget, with the Government allocating some $1.4 billion in aid to Pacific nations during coming years – one of the few areas of higher Government spending. Despite keeping a tight hold on outlays, the budget centrepiece is a pledge to build 1 million new houses across the nation during the next five years, in an attempt to alleviate the country’s chronic housing and rental shortages. Nonetheless, households will continue to face their own tough budgetary realities with energy prices tipped to explode by more than 56 per cent in the two years ahead and real wages expected to continue to fall. Fearful of pushing domestic inflation even higher, the Budget contains no cash relief or direct subsidies for households facing increasing cost of living pressures from higher energy costs, higher fuel prices and higher interest rates. Medicines will become cheaper with the maximum general co-payment for medicines on the Pharmaceutical Benefits Scheme cut from $42.50 to $30 while an additional 17 million scripts will now receive Government subsidies to reduce their cost to patients. In the meantime, the Government has left the door open to review the much-debated 2024 income tax cuts, which are focused on providing tax relief for high income earners, particularly wage earners who have been adversely impacted by ‘bracket-creep”. The former Government’s much talked about commuter car park programs have been axed along with $1.7 billion slashed from various Government regional dams’ projects over the next four years and $4.6 billion over the next twelve years. While the Government has promised to spend $1 billion to create 180,000 additional fee-free TAFE and vocational training places, little has been done to support small business, emerging from two years of pandemic created restrictions and tough trading conditions. Nonetheless, the whole country will benefit from the Government’s commitment to move to a low carbon economy and its “Rewiring the Nation” program is set to improve energy transmission and connect new renewable energy projects to the nation’s electricity grid. $800 million has been set aside for Powering Australia, which plans to cut taxes on electric vehicles, invest in a national EV charging network and provide solar battery storage for up to 100,000 Australian homes. The information provided in this article is general in nature only and does not constitute personal financial advice.

Why the share market is not the same as the economy

26 October, 202219 October, 2022 Updated on19 October, 2022 Economy, Finance

At the beginning of 2022 the Australian economy appeared to be sliding into recession, dragged down by higher interest rates and even higher inflation levels. As a result, it was tempting to believe the share market was also set to tumble. And while that’s not impossible, the local market traded higher during each of Australia’s last nine recessions, with some of the strongest trading on the Australian share market occurring when the economy was contracting. For example, 1983 was the best year ever on the Australian share market, climbing 60 per cent higher, while the economy was stuck hard in the 1981-1983 recession. So, while it is tempting to think poor economic times mean a dismal outlook for the market, there are four key reasons why that is usually not the case. Firstly, the market is driven by expectations. There is an old saying; investors buy on the rumour and sell on the facts. Big share market falls occur suddenly, well before the economy officially moves into recession, as investors promptly react to bad news. Once the economy is in recession, investors look to the future and how companies can take advantage of emerging opportunities in an improving economy. Improvements that can take time to show up in economic data. Secondly, the share market reflects investor sentiment, while consumer concerns and beliefs dominate the economy. Consumers might cut back on buying clothes or going out in preference to boosting savings when they fear bad times. In contrast, professional investors are constantly looking for opportunities, and economic downturns where small businesses go bust and consumer sentiment changes, usually create them. Thirdly, the share market comprises large successful companies. In contrast, economic statistics are dominated by what is happening to individuals and small businesses. Two groups that can respond very differently to world events. For example, the war in Ukraine prompted a rise in energy prices, particularly for oil. Most individuals and small businesses responded by cutting back on their petrol consumption, while large oil companies are cranking up production to take advantage of these higher prices. Finally, the share market has a much smaller universe than the economy. The market is made up of large companies entirely focused on getting larger and more profitable and, in doing so, attracting more investors to support their efforts. The economy is made up of Governments, individuals, and small businesses, all making a wide range of decisions about how they will live and operate in an ever-changing world and are basing those decisions on a raft of factors. So, while the share market and economy are connected, they are influenced by widely different variants that often see them heading in different directions. The information provided in this article is general in nature only and does not constitute personal financial advice.

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