Author: James Black

You can’t go anywhere these days and not see people glued to some device. Some of us wonder what we ever did without this modern-day “must have”, but love ‘em or hate ‘em, mobile (aka smart) phones are here to stay.

With all good things, there can be a downside. The cost of mobile phones and other devices is often not in the purchase but in the upkeep, and as many teenagers are discovering (many too late), mobile phones can lose them a good credit rating even before they’ve left school.

Numerous young people (and some not so young!) get caught up in the advertising hype, and think that they must have the latest toy with all the bells and whistles only to find out that their cheap monthly rental is a cover for restrictive terms.

The result of these savvy sales deals is that many thousands of Australians are talking themselves into unnecessary debt – a high price to pay for staying in contact with friends.

However, used sensibly, mobile devices can be very cost-effective. It all comes down to making sure you’re aware of all the costs associated, and controlling your habits.

Easier said than done when peer pressure abounds, but there is a smart alternative – choose prepaid. You know how much you’re paying upfront and when you run out of credit, you simply “buy more time”… and you stay in control.

Other suggestions for managing your mobile device include:

• Be sure of what you’re signing up for… read the small print and ask questions;
• Ignore the advertising spin that tempts you to constantly upgrade to the latest model;
• Use a PIN to access your phone. This stops others using it without your consent and is particularly helpful if you lose your phone.

Help is available

If you are in the market for a new mobile device and are bamboozled by the seemingly hundreds of options, there is a plethora of comparison websites available. These compare the phones, plans and telecommunications companies. Some provide calculators – type in your current usage and you receive a comparison of the alternatives available.

If you or your children are looking to buy or upgrade a mobile phone, take the time and do your research first… before you talk to a salesperson. As always, the time spent in the short term will be well worth it in the long run.

For information about cashflow and money management please contact us on 03 9836 8399.

Important:

This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee takes any responsibility for their action or any service they provide.

Many of our best laid plans rarely follow through exactly as we might have hoped. However, it’s another story when it comes to planning for what happens after we’ve left this planet. Our ideas about who will benefit from our estate could potentially change often during our lifetime.

Estate planning ensures that when we die, our assets can be passed promptly and tax-effectively to the people we love or to the charities we support.

Just like life, an estate plan is not static. As life changes, a will should be adjusted to ensure it remains relevant. There are many events that can trigger a need to review an estate plan, for instance:

• Marriage – which revokes the wills made by the spouses when single;
• Divorce – which revokes any gifts made under a will to the ex-spouse;
• Changes in the family such as births and deaths;
• Changes in relationships such as children entering or leaving de-facto arrangements;
• Death of a person who plays a key part in the estate plan such as an executor or trustee.

Here are some examples of when a life changed and the estate plan did not keep up.

Who gets the house?

Joel was a young executive married to Jane, a corporate lawyer. They were both busy and successful in their careers and had no children. They drifted apart and Joel started a new relationship with Sophie. They rented an apartment together and six months later were delighted to discover Sophie was expecting their first child. Joel was finalising an important deal and would “get around to arranging things” as soon as the ink had dried on the contract.

That never happened because he was killed in a car accident driving home from the office. Joel and Jane were still married and as they had owned their house as joint tenants, it passed automatically to her. The trustees of Joel’s super fund split his super between Sophie and Jane. Sophie was left to raise their child on her own without the financial support Joel would have wanted.

Who controls the money?

Trevor and Jennifer had planned their retirement meticulously including an estate plan. Their wills provided for a testamentary trust to be set up when they died. Trevor’s older brother agreed to be the trustee because he knew their family and understood what Trevor and Jennifer wanted. Their intention was that the trust would support their grandchildren through their education and establishment of their lives.

A few years later, Trevor passed away after a brief illness and Jennifer followed shortly afterwards. By this time, Trevor’s brother was in a nursing home suffering dementia and therefore could not fulfil the trustee’s obligations. The family had to approach the courts to appoint a replacement which meant the trust might not have been administered in the way Trevor and Jennifer had earlier wished.

Who supports Alex?

Mandy had brought up three children on a tight budget since divorcing their father. She arranged her finances well and took out insurance to ensure her children would be supported if she died or could not work. Mandy’s will appointed her sister, Penny, as guardian of her children and executor of her estate.

Unfortunately, Penny became seriously ill and Mandy agreed to look after Penny’s son Alex, as well as her own family. When Penny unexpectedly died Alex was left some money from her estate. When Mandy was revising her financial plans to cope with these events, her financial adviser recommended she apply to become Alex’ guardian, increase her insurance cover, appoint a new guardian for the children and include Alex in her will.

These are common scenarios, so if your family situation or ideas change, be sure to ask for professional guidance in updating your estate plan accordingly.

As we welcome 2018 and ponder how fast the last 12 months have come and gone, many of us find ourselves thinking about the coming year and our aspirations for the future.

Let’s face it, we worked hard last year and now is the time to reflect on what we have achieved; where we want to go; and what we need to get there. These times of reflection are critical to our lives whether we run our own business, are employed or retired.

A financial checklist is an excellent tool to see how you are progressing towards your goals and to help identify any specific areas you might need to focus on in the immediate future.

The key issues to consider are:

Home loan review

If you’re still making repayments, is it time to revisit your progress? Are you able to increase your payment amounts or frequency to save interest? With interest rates so low, should you refinance for a better deal or lock in a low fixed rate?

Other debts

Review the amount of personal loans, credit card or other debts currently being paid off. If the total of all loans exceeds 10% of household income, you need to implement a plan to reduce them as a matter of priority. Consolidating debts could help control interest costs but take steps to ensure this doesn’t become an excuse to spend more.

Savings

How much money did you save this past year? Are you spending first and saving what’s left? If your savings aren’t as healthy as you would have hoped by this time of the year, remember to pay yourself first by allocating up to 10% of your income to a regular savings plan.

Insurance

When illness or accidents strike, most people are caught insufficiently protected. It’s important to regularly review your insurance policies to ensure that you and your family have adequate cover. When was the last time you reviewed your insurance cover?

Superannuation

What is the current value of your super? If you don’t know, now is a good time to check. Is it working as hard as it should be? Are the fees reasonable? Are you on track to meeting your retirement needs or should you start making extra contributions?

Your will

Making a will itself is not particularly difficult or even terribly expensive. It is a fact of life that people get married, have children, change relationships, get divorced or establish new interests. Left unaddressed, any of these may result in a will being legally challenged. Estate planning matters such as Powers of Attorney and Medical Directives should be regularly reviewed in addition to your will.

Another year is over – how was it for you? Did you achieve everything you’d hoped?

Are you better or worse off financially than you were this time last year?

With a new year in front of you, what can you do to make the most of every moment?

We’ve put together a guide to get you started.

January to March

Make a start by turning wishes into goals. Some might be long-term like becoming debt-free, saving a home deposit, or retiring in a few years’ time. What can you do this year to support those goals? Write it all down and give it a name – something you can own.

At the same time, don’t forget living for now. Prepare a month-by-month budget that makes room for the fun times – holidays and celebrations – as well as covering the necessities.

Anticipate spikes in your spending. Do your car, home and life insurance premiums all seem to fall due at the same time? Investigate monthly premium payments, or spreading renewal dates across the year.

Use this first quarter to bed down the budgeting habit and track your actual spending against your plan.

At the end of March, do a quick review of your progress so far and make adjustments if necessary.

April to June

It’s time to prepare for the end of financial year (EOFY). By June 30 you will want to have made any intended additional superannuation contributions (make sure you stay within relevant limits) and finalised donations to your favourite charities.

Is there any other tax-deductible expenditure you can bring forward?

June is also the month for EOFY sales – an opportunity to grab some bargains on early Christmas shopping and birthday gift purchases. Don’t forget to include these in your budget.

July to September

If you’re expecting a tax refund for the financial year just finished, lodge your tax return early.

What are you going to do with the windfall? Whether you put it towards one of your goals or blow it on a big night out is up to you. Just make sure it’s part of The Plan.

With your tax return out of the way, the third quarter is a good time to start a bit of financial spring-cleaning. Review your super and savings, insurance and will, loans and credit cards, power of attorney, and overall financial strategy. Is everything up to date?

How’s your super doing? Would salary-sacrificing help?

Can you consolidate debt or refinance at a lower rate?

October to December

Into the final strait and how are you tracking? Are you ‘on plan’?

Maybe the plan you came up with back in January wasn’t realistic. It’s not too late to adjust both your strategy and your expectations.

If things are looking good, it’s important to stay focused. Christmas is looming with its temptations to over-spend.

Once the turkey and plum pudding have settled, it’s time to review the year just gone and to give yourself a pat on the back for what you’ve achieved. Then take a deep breath, check your goals, and update your plan for the coming year.

Invaluable help

Your financial adviser is an expert in working out the financial details of how you can achieve your goals. Just as important is the regular encouragement they can provide along the way.

Ready to start planning?

Give your adviser a call and make a date to nut out your plan for the coming year.

Please contact us on 9836 8399 to discuss.

Australians are living longer. According to the World Health Organization, we enjoy the fourth best life expectancy in the world behind Japan, Switzerland and Singapore.

Great news for Millennials! Your life expectancy has been tabled at 74 for men and 80 for women. Astounding advances in medical technology could mean you will live much longer! With all that living to be done, how on earth will you fund it?

Well there’s always the Bank of Mum and Dad, right?

Doubtful, you see, according to a 2017 joint survey by National Seniors Australia and Challenger, the main issue concerning older people is ensuring they have regular and sufficient income.

This is because they are also living longer and are structuring their affairs to ensure they don’t outlive their savings. Your parents are healthier and more financially savvy than their own parents were and they’re considering their options.

It might seem like an historical event now, but self-funded retirees took an unexpected hit during the Global Financial Crisis (GFC). Ten years on, and investments have still not recovered. A recent report by the SuperGuide announced the top-performing super fund for the last ten years to June 2017 earned an average of 6.1%. That’s not much.

It’s probably not a good idea to rely on an inheritance either. From the survey mentioned above, only 3 percent of respondents planned to leave their savings to their children.

A combination of longer life expectancy and sluggish investment growth has seen many retirees opting for strategies like downsizing their homes to supplement retirement income.

It’s common to live with Mum and Dad to save a healthy home deposit. Sometimes parents even offer financial assistance to give their children a leg-up into their first home. As a result, it’s quite reasonable to assume there’ll be further help later on.

These days, it’s increasingly likely that you’ll find your parents are simply not in the position to give further help, much as they’d like to.

But independence is empowering! It means taking control.

Borrowing from family can be awkward; they may want a say in how you spend the money, or it can leave you feeling you must consult them before making decisions.

Controlling your own destiny might be challenging, but financial self-reliance is rewarding. You just need to know where to start.

Financial advisers consider your income, expenses and financial goals. They work with you to tailor a plan to manage debt and develop a good savings habit to put you on track to getting what you want.

Contribute even the smallest regular amount and you’ll be amazed at what you can achieve.

This is because interest is calculated on your savings balance. Regularly topping-up your balance – even once a month – really boosts your savings as the interest combined with your contributions compound one on top of the other, over and over. It’s like free money!

What could be better? Only the fact that professional advice costs less than you might expect.

Please contact us on 9836 8399  if we can assist you .

Important

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

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

Incredibly, Australians are now literally throwing away coins rather than using or saving them. This article highlights this issue and recommends some ideas to reduce wasting money; whether it is as coins or other expensive habits. It provides a simple example of how much a small amount can grow into a substantial figure.

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy have improved over 2017. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy continues to be supported by increased spending on infrastructure and property construction, although financial conditions have tightened somewhat as the authorities address the medium-term risks from high debt levels. Australia’s terms of trade are expected to decline in the period ahead but remain at relatively high levels.

Wage growth remains low in most countries, as does core inflation. In a number of economies there has been some withdrawal of monetary stimulus, although financial conditions remain quite expansionary. Equity markets have been strong, credit spreads have narrowed over the course of the year and volatility in financial markets is low. Long-term bond yields remain low, notwithstanding the improvement in the global economy.

Recent data suggest that the Australian economy grew at around its trend rate over the year to the September quarter. The central forecast is for GDP growth to average around 3 per cent over the next few years. Business conditions are positive and capacity utilisation has increased. The outlook for non-mining business investment has improved further, with the forward-looking indicators being more positive than they have been for some time. Increased public infrastructure investment is also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.

Employment growth has been strong over 2017 and the unemployment rate has declined. Employment has been rising in all states and has been accompanied by a rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead. There are reports that some employers are finding it more difficult to hire workers with the necessary skills. However, wage growth remains low. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time.

Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. The Bank’s central forecast remains for inflation to pick up gradually as the economy strengthens.

The Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.

Growth in housing debt has been outpacing the slow growth in household income for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Credit standards have been tightened in a way that has reduced the risk profile of borrowers. Nationwide measures of housing prices are little changed over the past six months, with conditions having eased in Sydney. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities.

The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Source: Reserve Bank of Australia, December 5th, 2017

Enquiries

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Reserve Bank of Australia
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Phone: +61 2 9551 9720
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No matter our age, most of us would probably look back on some aspects of our lives and say to ourselves: “If only I could do that again; if only I had a second chance”.

This, of course, tends to occur quite frequently in regards to our investing and saving.

Often, we regret not giving enough attention in the past to our personal financial planning, not beginning to invest regularly from early in our working lives and not adequately diversifying our portfolios.

And most of us probably have made investments that we wouldn’t have touched in hindsight.

Just think about what you may have done differently with your investing and your financial planning if you had a second chance. This may help guide what you do in future.

A Vanguard study published earlier this year included a survey of more than 700 Australians aged 55-75 who had retired within the past 10 years, asking what they would have done differently with preparing for their retirement.

Perhaps unsurprisingly, many of these recent retirees strongly believe that they should have saved more (45 per cent of survey respondents), begun planning earlier for retirement (36 per cent) and spent more time on retirement planning (28 per cent).

In line with this what-would-I-do differently theme, online investment newsletter Cuffelinks published an excellent looking-back article a few months ago for its 200th issue.

Cuffelinks asked 37 well-known investment and economic specialists: “What investment insights would you give your 20-year-old self if you could go back in time?”

Their responses included: keep a budget, make the most of compounding returns, start saving and investing early, understand the relationship between risk and return (the higher the potential return, the higher the potential risk), hold a diversified portfolio, set an appropriate strategic asset allocation and understand that investment markets move in cycles.

And other responses included: avoid emotional-investment decisions, avoid chasing the investment herd, block out dist

racting market “noise” and don’t pay excessive fund management fees. Another twist on looking back for investors comes from US personal finance author Paul Brown. It’s been 30 years since Brown, who is over 60, wrote his first book on saving for retirement.

As he enters the popular age group for retirement, Brown asked himself in a New York Times article if his advice may have changed over the past three decades given his real-world experience.

“No, I wouldn’t change any of the advice,” Brown writes. “I told people to start saving aggressively while they’re still young and to diversify their holdings. It was good counsel then and it is good counsel today.

“I also remain a steadfast believer in index funds and in keeping investment costs as low as possible,” he adds. “That’s how I have invested just about all of my retirement savings.”

Yet based on his experiences, Brown says he would have added “not only more empathy but more real-world advice”.

Two of his additional suggestions are to extend your working life, if possible, past conventional retirement ages and save more than you think you need because life doesn’t always go according to plan.

It can be a valuable exercise to think about what we would have done differently as investors if given a second chance.

When looking back, however, watch out for the trap of becoming overly focussed on a past investment loss; it could impede your willingness to take appropriate risks in the future, as behavioural economists warn us.

Please contact us on 9836 8399 if you seek further assitance .

 Source : Vanguard 10 November 2017 

Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

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

© 2017 Vanguard Investments Australia Ltd. All rights reserved.

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

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

We probably all remember during those long difficult car trips as children repeatedly saying such irritating things to our parents as: “When do we get there?”. Perhaps adding to reinforce the point, “I knew we would never get there”.

And then pleading whenever a fast-food joint appears on the horizon: “I NEED an ice cream”.

Fast forward to today and think how we broadly face similar fundamental, yet much more complex, issues regarding our retirement savings.

Astute investors set their long-term goals – the parallel being the destination of those seemingly-endless childhood road trips – and then work out how to get there.

And a critical challenge for investors is to make the often-overlooked distinction between the required returns from their portfolios to reach their intended investment destinations against their desired returns. (This equates to separating between NEEDING that ice cream as a child or merely just wanting one.)

The separation of desired and required returns, ideally at the beginning of the financial planning process, is truly an investment fundamental. Distinguishing between desired and required returns should help guide investors to selecting appropriate asset allocations for their portfolios given their personal circumstances including their unique goals and tolerance to risk.

In other words, the process of separating between returns in this way should assist investors narrow the range of asset allocation choices suitable for them.

An updated Vanguard research paper* – Required or desired returns? That is the question – suggests that many investors will find that the return required to achieve their long-term goals is “meaningfully less” than their desired return.

And, of course, higher returns are associated with higher risks.

The research paper ends with a twist: “Ironically, for many investors the means to a better investment outcome and greater wealth may be a more balanced portfolio with lower expected returns, rather than one focused on higher returns.”

Please contact us on 9836 8399 if you seek further discussion .

*Required or desired returns? That is the question by Vanguard investment analysts Donald Bennyhoff and Colleen Jaconetti.

Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Source : Vanguard 20 November 2017 

Reproduced with permission of Vanguard Investments Australia Ltd

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

© 2017 Vanguard Investments Australia Ltd. All rights reserved.

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

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