“Equity Mate”: Why Borrowing Against Your Home Isn’t Always a Smart Move 

“Equity Mate”: Why Borrowing Against Your Home Isn’t Always a Smart Move 

Updated on Debt, Education, Investing

Remember that old ad with the guy proudly polishing his boat while his neighbor asks, “How do you afford all this?” His response—“Equity, mate”—has stuck in the Australian psyche for decades.  It was clever marketing, no doubt, but it also captured something deeper about our relationship with debt. Borrowing against home equity has become so normalised that many Australians now treat it like a credit card. Banks, property spruikers, and even governments have encouraged this mindset. But is it really as harmless as it seems?  Why Borrowing Feels So Easy  Banks have done a brilliant job of making debt feel accessible, even casual. With features like offset accounts and redraw facilities, accessing large sums of money has never been easier:  And let’s not forget the rise of 40-year mortgages. They make repayments look smaller, but in reality, they keep you in debt much longer and result in paying far more in interest.  The Risks Behind “Equity, Mate”  Borrowing against home equity might feel like free money, but it comes with real risks:  It’s easy to overlook these risks when banks and marketers are telling you to “put your equity to work.” But the reality is, debt always comes with strings attached.  Debt Isn’t the Goal—Freedom Is  Let’s flip the script. What if the goal wasn’t to leverage every last cent of your equity but to become debt-free as quickly as possible?  Being debt-free isn’t just about the numbers. It’s about:  In the past, most Australians worked to pay off their mortgage within 15 to 25 years. Once that was done, they could focus on saving for retirement or simply enjoying life. Somewhere along the way, we lost sight of that.  How Banks Benefit From Normalised Debt  Here’s the thing: banks don’t want you to be debt-free. Debt is their business model. The longer you’re in debt, the more interest you pay—and the more profit they make.  That’s why redraw facilities, offset accounts, and longer loan terms are so heavily marketed. They make borrowing feel safe and easy, but their ultimate purpose is to keep in debt for longer.  Building Wealth Without Debt  You don’t need debt to build wealth. Consistency, patience, and smart investing can take you just as far—without the stress.  Here’s how to do it:  Debt can feel like a shortcut, but the long game—done right—is just as powerful.  Final Thoughts  “Equity, mate” might make for a catchy ad, but it’s not a philosophy to live by. Borrowing against your home is a decision that should be made carefully, not casually. The alternative? Aim for financial freedom. Work towards paying off your mortgage, building wealth sustainably, and living life on your terms—not the bank’s. Being debt-free isn’t boring. It’s empowering. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Becoming Wealthy Slowly: The Most Reliable Path to Financial Freedom 

Becoming Wealthy Slowly: The Most Reliable Path to Financial Freedom 

Updated on Investing, Retirement, Superannuation

Everyone wants to become wealthy. There’s no shortage of information on how to achieve it, but much of that information is filled with noise, distractions, and, more often than not, conflicts of interest. From crypto trading to foreign exchange schemes, negative gearing to margin lending, or software promising you’ll “trade your way to wealth”—it’s overwhelming.   In reality, becoming wealthy doesn’t need to be complicated or flashy. Most people I’ve worked with as a financial adviser have achieved financial independence in the same way: slowly, steadily, and consistently.  The Get-Rich-Quick Trap  The world today is filled with “get-rich-quick” schemes. Whether it’s betting on cryptocurrencies, banking on a TattsLotto win, or waiting for an inheritance that might not arrive until you’re well into your 60s, these approaches come with high risks and zero guarantees.  It’s easy to get distracted by the mosh pit of financial noise. The truth is this: there’s no magic bullet to wealth. If you want flexibility, financial freedom, and security for your retirement (and the years leading up to it), you need a strategy that works—and that strategy is slow and steady wealth-building.  The Key to Becoming Wealthy: Consistency and Simplicity  Building wealth over time is simple, but it’s not always easy. It’s about making smart decisions with your money on a weekly, monthly, and yearly basis. These are the cornerstones of getting wealthy slowly:  1. Spend Less Than You Earn  It all starts with Rule #1: spend less than you earn. Regardless of your income, everyone has the ability to live within their means. It might mean cutting unnecessary expenses, budgeting, or finding small ways to save—but this rule is non-negotiable.  2. Save and Invest Regularly  No matter how small you start, consistently setting aside money for long-term investments makes all the difference. Over time, this habit grows your wealth through the power of compounding. Remember, everyone starts at zero—the key is to keep going.  3. Be Smart About Tax  Tax savings are a certainty. Unlike investments, where returns can vary, using smart strategies like salary sacrificing into superannuation allows you to save tax and build wealth at the same time. It’s a simple yet powerful way to secure your future.  4. Manage Debt Carefully  Taking on too much debt is one of the biggest risks to financial success. When I talk about risk, I don’t mean the ups and downs of the share market—I mean the decisions we make about things like:  A home is important, but too much debt can rob you of the ability to save regularly, invest, and build other sources of wealth. The decisions you make about debt and capital allocation today will have a significant impact on your future.  5. Balance Today With Tomorrow  There’s no point saving every dollar if it comes at the expense of your present life. The goal is to get the balance right: enjoy today while still looking after your future self. Saving consistently doesn’t mean sacrificing everything you love; it means being intentional about where your money goes.  Avoiding Bias and Conflicts of Interest  One of the biggest challenges when building wealth is knowing where to turn for advice. Conflicts of interest are everywhere—people who benefit financially from selling you something often won’t give you the whole picture. So, how do you avoid this?  Final Thoughts: The Guaranteed Way to Wealth  Becoming wealthy doesn’t require complicated strategies, massive risks, or the latest financial fad. It’s about doing the simple things well:  If you stick to these principles throughout your working life, you’ll create financial security, freedom, and flexibility—slowly, but surely. There’s no shortcut to success, but there’s a guaranteed path if you’re willing to stay the course.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Spending a Dollar to Save 30 Cents: The Risk of Tax-Driven Investment Decisions 

Spending a Dollar to Save 30 Cents: The Risk of Tax-Driven Investment Decisions 

Updated on Investing, Tax

Australians love a good tax deduction. It’s almost ingrained in us—if there’s a way to pay less tax, we’re all ears. But what happens when tax savings become the main driver behind an investment decision?  As I’ve seen time and time again, people are sold on property investment strategies that prioritise negative gearing and tax outcomes over the quality of the investment itself. While these strategies may sound appealing on paper, they often result in financial stress, high debt levels, and poor long-term outcomes.  When Tax Savings Become the Selling Point  Many Australians are encouraged to invest in residential property purely because it can be negatively geared. The promise? You’ll reduce your taxable income by offsetting property losses against your earnings.  But here’s the catch: negative gearing means you’re losing money every year. You’re essentially spending a dollar to save 30 cents. That’s not a winning formula—it’s a financial drain disguised as a tax-saving opportunity.  I’ve seen clients earning well over $200,000 annually still struggle with cash flow because they’ve overcommitted to negatively geared properties. Why? Because they were sold on the idea of tax savings without fully considering the broader impact on their financial health.  Conflicted Advice: Know Who’s Selling to You  The property market is filled with salespeople whose advice is driven by commission. They’re not concerned with your long-term goals or financial well-being—they’re focused on closing the deal.  Here’s the truth:  These are not unbiased sources of advice. If the recommendation is coming from someone with something to sell, it’s worth asking: Whose best interest is this advice really serving?  The Debt Dilemma: Stress and Strain  Another troubling trend is the normalisation of taking on large amounts of debt to fund tax-driven property investments.  When property prices rise rapidly—as they have for decades in Australia—buyers feel pressured to stretch their budgets to secure a piece of the market. But debt levels have now reached a point where even high-income earners are starting to feel the pinch.  High debt tied to negatively geared properties creates:  Quality First, Tax Second  This isn’t a new problem. Twenty years ago, Australians were lured into tax-driven investments like blue gum plantations. The promise of hefty tax deductions was enough to convince many to invest, but poor investment fundamentals ultimately led to financial losses.  A good investment should stand on its own merits and fit within your overall financial strategy. Tax benefits should always be a bonus, not the driving force.  The Value of Balanced Advice  When you’re considering any investment, it’s essential to seek advice from someone who can provide a balanced perspective and not incentivised to sell one strategy over another.  A financial adviser, for example, will consider:  By working with someone who isn’t tied to a single product or strategy, you’ll gain a clearer understanding of your options and make decisions that truly align with your goals.  Final Thoughts: Buyer Beware  If you’re considering an investment property where the selling point is how much tax you’ll save, take a step back. Ask yourself:  Tax savings are great, but they should never come at the cost of quality, sustainability, or peace of mind. Remember, a good investment is one that works for you—not just for your tax return.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Numbers vs. Emotions: The Real Game of Investing   

Numbers vs. Emotions: The Real Game of Investing   

Updated on Finance, Investing

When people think about investing, they often focus on the numbers: analysing balance sheets, forecasting earnings growth, understanding sectors, and evaluating dividend yields and price-to-earnings ratios. While these elements are critical, they only make up 50% of the game.   The other 50%? It’s something far less tangible but just as important—the psychological and emotional side of investing.   The Role of Numbers in Investing   Numbers, data, and analysis are the foundation of building a solid portfolio. They help answer key questions:   This analytical side forms the basis of investment decisions—what to buy, what to avoid, and how to diversify. But understanding numbers is only half the challenge.   The Harder Half: Investor Psychology   The more difficult half of successful investing is managing emotions—what I often call “the feels.”   Here’s why: markets are inherently emotional, driven by fear and greed. With today’s technology, investors can react to news—positive or negative—within seconds, causing markets to move sharply. This high liquidity makes it easy to fall into the trap of reacting emotionally rather than rationally.   I’ve seen this firsthand with many clients, particularly retired men, who turn checking their portfolios into a daily hobby. The result? Anxiety and distress that often lead to poor decisions, such as selling in a downturn or chasing rising stocks out of fear of missing out.   When Psychology Takes Over   In times of market volatility—during corrections or crashes—the analytical side of investing takes a backseat. It’s no longer about the numbers; it becomes 100% psychological.   These are the moments when:   For those fully invested portfolios, the best decision may be to hold steady and ride out the storm. For others with cash reserves, it may be the perfect time to invest, capitalizing on undervalued opportunities.    Making the Right Decisions at the Worst Times   As a financial adviser, my role during these challenging times is to help clients make rational decisions, even when emotions are running high. Sometimes, that means encouraging them to step away:   Because when emotions dictate actions, mistakes are often made. But when fear is at its peak, it’s also the time when opportunities are greatest. As I often say: “When my clients feel this crummy, it’s probably time for me to get excited and buy.”   Competent investing requires a balance of analysis and psychology. While the numbers matter, it’s the ability to manage emotions during the tough times that separates successful investors from the rest.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

The Regret of Over-Saving: How to Balance Financial Goals and Family Moments

The Regret of Over-Saving: How to Balance Financial Goals and Family Moments

Updated on Investing, Retirement, Superannuation

A client once shared a poignant regret: “When I was working and the kids were young, I saved too much. It restricted what we did when the family was together.” This simple reflection struck a chord with me. It got me thinking about the delicate balance between saving for the future and living fully in the present. While we all know the importance of financial security, is it possible to save too much—at the expense of the moments that matter most? The Common Paradox of Life We’ve all heard the saying: It’s a cruel irony, isn’t it? In an ideal world, we’d flip the script, having the means to enjoy life when we’re young and energetic while still securing a comfortable retirement. But life rarely works that way. Many people save diligently during their working years, focused on paying off their home, raising their children, and building a retirement nest egg. Yet, some arrive at retirement with a bittersweet realisation: “We saved too much. We missed the chance to create memories when we had the time, energy, and our family around us.” Building Memories to Reduce Regrets For me, financial planning is about more than just numbers; it’s about reducing regret. In retirement, your job is to build memories and enjoy the life you’ve worked so hard for—not just watch your portfolio grow. And this begins long before you retire. Ask yourself: It’s important to recognise that once your children are grown, they’ll have their own lives, responsibilities, and families. The time to connect, travel, and create lasting memories is when they’re still with you. How Do You Know If You’re Saving Too Much? Finding the right balance between saving and spending isn’t easy. It’s why I often turn to one of my most valuable financial planning tools: long-term projections. This approach gives clients a clearer picture of their financial future, helping them make informed decisions about spending today versus saving for tomorrow. The Empty-Nester Advantage One key insight from decades of financial advising is that there’s often a natural progression in savings capacity: This shift often happens in the last 10-15 years before retirement, providing a window to accelerate savings without compromising your quality of life earlier. A Call for Balance This isn’t a green light to spend recklessly or ignore the importance of saving for retirement. Rather, it’s a reminder to strive for balance: Because once retirement and old age set in, the regret of missed opportunities is something no amount of money can fix. Final Thoughts Finding the balance between saving and living is one of the most challenging aspects of financial planning. But with the right tools and mindset, it’s possible to enjoy the best of both worlds: a secure future and a present filled with memories you’ll cherish forever. As always, this is general advice. For tailored financial planning, I recommend speaking with a qualified adviser who can help guide your unique journey. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Why You Don’t Need Debt to Build Wealth for Retirement

Why You Don’t Need Debt to Build Wealth for Retirement

Updated on Budgeting, Investing, Retirement

The question I’m often asked is whether it’s still possible to accumulate enough wealth for retirement without taking on debt. And the answer is simple: yes, it is. While leveraging debt can speed up wealth creation, it’s not the only path. In fact, avoiding debt is a strategy that’s worked for countless clients who have achieved financial independence through consistency, discipline, and time. The Role of Debt in Wealth Creation Debt, when used responsibly, can accelerate your financial goals. But here’s the reality: with debt comes risk. If investments don’t perform as expected, debt can amplify losses. That’s why it’s worth asking, “Can I build wealth without the stress and risk of debt?” The Path to Wealth Without Debt The answer lies in time, consistency, and compounding interest. When you start early and save regularly, your money grows—not just from the returns you earn but from the returns on those returns. This is the power of compounding. I’ve worked with clients who avoided debt entirely, choosing to focus on saving, investing, and living within their means. They’ve built substantial wealth without ever owing the bank a cent. The secret? What About Returns Without Leverage? While it’s true that debt can boost returns in the short term, high-quality investments can deliver excellent growth over time—without borrowing. How to Plan for a Debt-Free Retirement To make debt-free retirement a reality, you need a plan. Here’s how: Is It Really Boring? Or Is It Rewarding? Some people might call this approach boring. But personally, I don’t think it is. Following high-quality businesses, watching them grow, and seeing the compounding effect play out is far from dull. What’s even more exciting is reaching retirement with financial independence, knowing you avoided unnecessary risk. Final Thoughts Debt can be a useful tool, but it’s not the only path to retirement wealth. A debt-free journey takes time, discipline, and the right investments—but it’s absolutely achievable. If you’re not sure where to start, run the numbers or work with someone who can. Projections and a clear savings plan are vital to staying on track. Retirement isn’t about having the biggest portfolio; it’s about having the freedom to live on your terms—and you don’t need debt to make that happen. The information provided in this article is general in nature only and does not constitute personal financial advice.  

The Big Money is in the Waiting: Lessons from Charlie Munger 

The Big Money is in the Waiting: Lessons from Charlie Munger 

Updated on Investing

As a financial adviser, I often find inspiration in the words of seasoned investors who have spent decades mastering their craft. While Warren Buffett tends to grab the spotlight, his longtime business partner at Berkshire Hathaway, Charlie Munger, is a treasure trove of wisdom in his own right. Among his many memorable quotes, one stands out as my all-time favorite:  “The big money is not in the buying and selling, but in the waiting.”  At first glance, it might seem overly simple. But when you unpack it, this quote captures the essence of successful investing. Let’s break it down and explore what makes it so powerful.  1. Waiting for Opportunities  The first lesson from Munger’s quote is about timing your entry into the market. Markets naturally cycle between periods of greed and fear, and it’s during these fluctuations that opportunities arise for those who are patient. Crashes and corrections, though unsettling, present chances to buy high-quality businesses at discounted prices.  Warren Buffett echoes this sentiment with his famous advice:  “Be fearful when others are greedy, and be greedy when others are fearful.”  During moments of peak pessimism, when markets may drop 50% or more, those with the courage to invest often see the greatest rewards over time. It’s not about chasing daily fluctuations—it’s about waiting for the right moments when the market presents a bargain.  2. Waiting While You Hold  The second layer of Munger’s wisdom is about the patience required after you’ve invested. This is where long-term thinking becomes crucial. Once you’ve purchased shares in a high-quality business, the real value comes from holding on and allowing the people running that business to do what they do best: innovate, grow, and improve.  Businesses are driven by human endeavor—the passion and purpose of the people behind them to make things better. No one starts a company with the intention of running it into the ground. Over the years and decades, this relentless drive to improve translates into better products, increased revenue, and rising profitability.  3. The Power of Compounding  The third, and arguably most important, component of waiting is time itself—and the magic of compounding.  Compounding interest occurs when your earnings generate earnings of their own. Over decades, this creates exponential growth, not just in your investments but also within the businesses you own. High-growth companies often reinvest a significant portion of their profits—sometimes more than 40%—to fuel future growth. This reinvestment supercharges the compounding effect, driving long-term value for shareholders.  Think about it this way: as these companies reinvest profits into areas like innovation, technology, or artificial intelligence, they’re setting the stage for even greater returns in the future. For patient investors, the rewards of compounding over time can be truly transformative.  A Lesson in Investor Psychology  At its core, Munger’s quote is about investor psychology. Successful investing requires:  It’s not about reacting to every market headline or trading frenzy. Instead, it’s about understanding when to be greedy and when to be fearful—and having the resolve to act accordingly.  Final Thoughts  Charlie Munger’s insight that “the big money is not in the buying and selling, but in the waiting” is a timeless reminder of what it takes to succeed as an investor. It’s about more than strategy or analysis; it’s about the psychology of patience and the discipline to stay the course.  So next time you feel the urge to check your portfolio for the 10th time in a week, take a moment to reflect on Munger’s wisdom. Remember, the real gains aren’t made in the buying or the selling—they’re made in the waiting.  As always, this is general advice only. For personalised guidance, speak to a qualified financial adviser who can help tailor strategies to your goals and circumstances.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: October-December 2024

Quarterly Economic Update: October-December 2024

Updated on Economy, Finance, Investing

The final quarter of 2024 reflected a mixed economic landscape. While consumer spending and equity markets showed resilience, persistent inflation, cost-of-living pressures and a cooling housing market have tempered optimism. Interest Rates – Will They Rise or Fall? Inflation in Australia showed signs of easing during the final months of 2024, with the trimmed mean inflation rate falling to 3.2% in November, down from 3.5% in October. The RBA held the cash rate steady at 4.35% during its December meeting, emphasising the need to maintain current policy settings to bring inflation back within the target range over time. Monthly consumer price index (CPI) data for November indicated a 2.3% rise in the 12 months to November 2024, up from a 2.1% rise in October, according to the Australian Bureau of Statistics. Economists remain divided on whether further rate hikes will be necessary in 2025, with some predicting a rate cut as early as February. Cost of Living Pressures Continue Total spending across the Australian economy increased by 1.5% in the September quarter of 2024 compared to the 2.2% in same period of 2023. Essential spending has decreased in the same period due to a decline in petrol prices and various energy relief programs. Discretionary spending increased by 0.8% compared to the same period in 2023, indicating potential signs of recovery. However, data shows that young Australians cut back spending 2% over the past year, while those aged over 60 increased their spending by 3.9% and those over age 70 increased their spending by 7.7%. Black Friday Means Big Spending Australians spent approximately $7 billion in November’s Black Friday and Cyber Monday sales – a 4% increase compared to the same period in 2023. This rise was driven by strong demand for electronics, apparel, and household goods. In-store shopping experienced a notable resurgence, with physical stores accounting for a significant portion of the sales growth. Is the Housing Market Finally Slowing? Australia’s housing market experienced a slight downturn, with national home values recording their first decline in nearly two years. CoreLogic data for December shows a 0.1% decrease in dwelling values, driven by higher interest rates, reduced borrowing capacity, and increasing cost-of-living pressures. The supply of new housing remains constrained, exacerbating affordability challenges. Global Outlook for 2025 Globally, the economic outlook remains resilient, despite significant risks. According to the OECD, global growth is expected to stabilise at around 3% in 2025 and 2026, underpinned by robust performance in emerging economies and gradual recovery in advanced economies. Geopolitical tensions, including conflicts in Ukraine and the Middle East, continue to pose challenges to supply chains and energy markets. Persistent inflation in key regions and the potential for monetary tightening remain areas of concern. For Australia, economic ties with China and commodity exports are key factors influencing the outlook, especially as China’s economic activity shows signs of stabilising. Trump’s Inauguration Looms The inauguration of the Trump administration on January 20th has prompted considerable speculation about potential economic implications. Key areas of focus include trade policy shifts, tax reforms, and geopolitical stability. Early indications suggest a renewed focus on protectionist policies, including higher tariffs on imports from key trading partners. For Australia, this could mean increased challenges in sectors like agriculture and mining, where access to the US market is critical. Stock Market Outlook Australian equities ended the year on a positive note, buoyed by easing inflationary concerns in the US and hopes of a soft landing for the global economy. The ASX200 recorded modest gains in December, aligning with broader global trends. However, analysts caution that 2025 may bring volatility, driven by geopolitical risks, fluctuating commodity prices, and uncertainty in monetary policies. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Investing for income 

Investing for income 

Updated on Education, Investing

Share markets are renowned for taking unexpected downturns and while history shows that markets eventually recover, this rebound in value can occasionally take time. Investors concerned about this risk might consider a stronger focus on income-generating investments. These can range from those that have no potential to lose capital value to ones with a higher risk of capital loss. Outlined below are some options.  Investments with no ‘growth’ component   The following will give you back what you put in plus interest:  Online savings accounts pay a higher rate of interest because there is less cost involved in managing these accounts. The customer “does all the work” meaning the bank doesn’t need to allocate staffing resources. Interest on these accounts can vary substantially between providers and there can be enticing offers of extra or bonus interest for new customers or if you maintain a certain balance. The best advantage of these accounts is that you have access 24/7 to your funds.  Cash management trusts are investment products which pool the deposits of other unit holders for investment in cash securities. Interest is calculated daily. There are no entry fees but most charge management fees. They frequently have minimum withdrawal amounts and may require notice to withdraw funds, however the trustee can decide to restrict withdrawals if it deems this is necessary in the best interests of the trust investors. CMTs are good for holding cash that is not needed for everyday living but offer easier access than term deposits.  Term deposits can pay a higher interest rate than cash management trusts, although in more recent years, rates on term deposits are close to those offered for online savings accounts. The downside is that your funds are unavailable for the deposit term and penalties apply if you withdraw your money before the term expires. Terms range from three months to several years so you can choose the timing to suit your needs. Income can be paid regularly or at the end of the term.   Investments that adjust in value to interest rates in the market:  Fixed interest managed funds invest in bonds and bank bills, known as debt securities. Like cash management trusts, they pool investors’ funds to provide access to investments at the big end of the market. These are often used as the fixed interest component in a portfolio. They can have a wide range of fees depending on the underlying investments and may have a small growth component.  Convertible notes are offered by companies and unit trusts. They can offer a good interest rate and at the end of the specified term the investor can choose to convert the notes to shares in the company or get their cash back. These are frequently traded on the stock exchange. The sale price depends on the market interest rates and market attitude to the company.   Hybrid securities are investments that combine the elements of debt and equity. They are offered by companies that borrow from their investors and pay back the interest. However, if the company disappoints the market the underlying value can reduce. These securities generally have long terms (eg. 50 years) and can only be sold on the stock exchange if there is demand.  Investments that have a growth component plus good income potential:  Some Australian shares regularly offer fully franked dividends and also give you access to the tax benefits of imputation credits. To get the most from shares they should be held for the long term.  Listed and unlisted property trusts are investments that pool investors’ funds to purchase real estate, usually commercial property. Depending on the types of property investments held, they can provide a higher level of income, some of which may be tax-free or tax-deferred. Listed property trusts are traded on the Australia Stock Exchange and provide more liquidity than unlisted trusts.  The answer – a balanced portfolio  For most investors the best solution is to have a ‘balanced’ portfolio – that is, a selection from each of the different market sectors. This should be tailored to the individual’s needs, providing the level of income required at an appropriate level of risk.  To determine what suits your circumstances and needs best, consult with a licensed financial adviser.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Stop resting on your (high income earner) laurels!

Stop resting on your (high income earner) laurels!

Updated on Education, Investing, Superannuation

Achieving a high income is a significant accomplishment. You’ve put in the hard yards, climbed the ladder, and now you’re pulling in the big bucks!  But don’t be mistaken; a high income does not automatically equate to financial security. Just because the money is rolling in today doesn’t mean you’re protected from tomorrow’s uncertainties. Resting on your high-income earner laurels, assuming that a large salary guarantees long-term security without considering long-term financial planning, can be downright risky. So, before you get too comfortable, it’s time for a reality check. When “More” Becomes the Norm Earning more often leads to spending more, a phenomenon known as lifestyle inflation. As your income grows, so does your desire for bigger and better things—a nicer house, a new car, dinners at fine restaurants. This lifestyle upgrade can feel deserved, but without careful planning, it can leave you no better off financially than when you earned less. For instance, imagine a couple earning a combined $350,000 a year. On paper, that sounds like a strong financial position. But between a large mortgage, car loans, private school fees, and regular international holidays, their expenses could easily absorb most of their income. If an unexpected event like a job loss or economic downturn were to happen, they’d find themselves in a precarious situation, with little financial buffer. This is the danger of lifestyle inflation: it’s subtle and easy to justify, but it can undermine your ability to build real wealth. High Income ≠ Financial Security A high income can create the illusion of financial security. It’s easy to assume that as long as the money is coming in, you’re set for life. But without the right safeguards in place, a high income can actually mask financial vulnerabilities. Take Liam, for example. Liam, a 34-year-old marketing executive in Sydney, was earning $250,000 a year and living a pretty comfortable lifestyle. He assumed his high income meant he was financially secure. But when the pandemic hit, his job was made redundant, and without an emergency fund or sufficient savings, Liam found himself in financial distress within months. Liam’s story illustrates a key point: a high income is not a substitute for financial planning. If your finances aren’t structured to handle changes, even a hefty salary won’t protect you from financial uncertainty. How to Future-Proof Your Finances So, how do you make sure you’re not resting on your laurels, assuming that your high income will take care of everything? Here are some strategies to ensure you’re future proofing your finances, no matter how much you earn. 1. Create a Budget and Stick to It A budget is just as important for high earners as it is for those with more modest incomes. Avoid the temptation to spend simply because you can. Instead, allocate funds towards savings, investments, and building an emergency fund. 2. Build an Emergency Fund Even high earners need a safety net. A good place to start is having 3-6 months of living expenses in an emergency fund. This ensures that if something unexpected happens you’ll have the financial resources to cover your expenses without going into debt. 3. Invest Wisely Don’t rely solely on your salary—make your money work for you by building a diversified investment portfolio. The earlier you start, the better, as even small investments can grow significantly over time thanks to compound growth. Don’t wait—time is your biggest asset when investing! 4. Plan for the Long Term Even if retirement seems far away, it’s never too early to start planning. Superannuation is a tax effective structure for building wealth and making contributions to super can be a tax effective strategy for high income earners! 5. Don’t Overlook Insurance Insurance might not be the most exciting part of financial planning, but it’s essential. Income protection, life insurance, and health insurance are vital tools to safeguard your financial future. Take Control Before Life Happens While earning a high salary certainly opens doors to a more comfortable lifestyle, it also comes with the risk of complacency. The belief that you’re financially set simply because you’re earning more is dangerous. Lifestyle inflation, lack of an emergency plan, and failure to invest wisely can all leave you vulnerable when life throws a curveball. It’s not about depriving yourself of the things you enjoy—it’s about ensuring that your financial future is secure, so you can continue enjoying them for years to come. So, don’t rest on your laurels. Take proactive steps now to secure your financial future. You’ve worked hard for that high income. Now its time for that income to work for you!   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Inflation vs. Your Savings

Inflation vs. Your Savings

Updated on Economy, Finance, Investing

Inflation is a slow force working against your financial goals. It can quietly erode the purchasing power of your money over time. While it’s tempting to see cash as a safe haven, failing to factor in inflation could mean your savings are worth less when you need them most. So, let’s dive into the showdown between inflation and your savings, and explore strategies to fight back! Inflation’s Erosion of Cash Returns The Reserve Bank of Australia (RBA) defines inflation as “an increase in the level of prices of the goods and services that households typically buy”. When inflation goes up, the value of each dollar you own decreases, meaning you can buy less with the same amount of money. This becomes a real concern for investors who rely on cash or low-risk investments like term deposits, where returns may not keep up with inflation. For instance, if you’ve placed your money in a term deposit earning 5% interest, but inflation is running at 6%, you’re effectively losing 1% of purchasing power. This is what’s known as the real return – the return on your investment after adjusting for inflation. A return of 5% may look good on paper, but in real terms it means you’re going backwards. Long-Term Investment Strategies So, how can you prevent inflation from chipping away at your savings? One effective approach is to adopt a diversified investment strategy. Diversification involves spreading your investments across various asset classes such as shares, property, bonds, and international assets, rather than keeping all your money in cash or low-risk products. Equities, for example, have historically outpaced inflation over the long term. While shares can be volatile in the short run, their potential for higher returns helps them beat inflation over time. Property investments also have a history of delivering inflation-beating returns, as the value of real estate typically rises along with inflation. Exchange Traded Funds (ETF) may be a useful way to diversify your investments that are both simple and low-cost. A well-diversified portfolio ensures that you’re not overexposed to any one asset class. Instead, you benefit from the potential growth of various sectors, reducing your overall risk and improving your chances of keeping pace with or even outpacing inflation. Practical Advice for Investors Investing during inflationary times can feel overwhelming, but there are several steps you can take to safeguard your wealth: The Bottom Line Inflation can have a serious impact on the value of your savings, particularly if you rely on cash or low-risk investments. Over time, even a modest inflation rate can significantly reduce your purchasing power. By diversifying your investments, staying informed, and seeking professional advice, you can set yourself up to win in the showdown between inflation and your money. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: July-September 2024 

Quarterly Economic Update: July-September 2024 

Economy, Finance, Investing

The Australian economy is still growing, but things are moving slower than usual, and the Reserve Bank of Australia (RBA) is being cautious with any changes to interest rates. They’re waiting for inflation to settle before taking further action.  GDP Growth: Slowly But Surely  While the economy is growing, it’s not as fast as we might like. Over the June quarter, the economy expanded by just 0.2%, with a 1.5% growth over the financial year. While these numbers sound positive, when you factor in Australia’s growing population, the story changes. For the sixth quarter in a row, GDP per capita (which looks at economic growth per person) has actually fallen. This shows that while Australia as a whole is growing, individuals may not feel that impact, especially with rising costs of living.  Interest Rates: Holding Steady  In September, the RBA decided to keep interest rates on hold at 4.35%, with the next decision due in November. While the US recently cut rates, Australia hasn’t followed suit, and it’s unlikely we’ll see any rate cuts before Christmas. The RBA is holding off to ensure inflation is well under control, despite it being much lower than the peak in 2022.  Inflation: Better But Still Stubborn  Annual inflation hit 3.8% in the June quarter, slightly up from March. However, there’s good news: underlying inflation (which strips out the more volatile price changes) has been falling for six straight quarters, down from its peak of 6.8% in late 2022. That said, prices for everyday goods remain high, and the overall cost of living is still squeezing households.  Households Are Tightening Their Belts  With cost-of-living pressures building, many Australians are cutting back on things like travel and entertainment. Even grocery spending is down, with households trimming their food budgets by 1%. However, spending on household goods, like furniture and appliances, increased by 4%, which propped up discretionary spending overall.  Housing Market: Prices Still Going Up  The property market remains strong, with housing values continuing to rise across Australia, although at a slower pace than before. CoreLogic reports that the national Home Value Index rose by 0.5% in August and a further 0.4% in September. Despite the cost of living, demand for property remains high, which is keeping prices elevated.  Jobs Market: Still Tight, But Productivity Is Falling  Australia’s unemployment rate remains low, sitting at 4.1% as of June, which is historically strong. However, total hours worked rose only slightly, and productivity—measured by GDP per hour worked—fell by 0.8%. While jobs remain secure for many Australians, people are working more for less output, and this could become a concern for long-term economic stability.  Global Outlook: Uncertainty Ahead  Globally, central banks are starting to look at easing monetary policies, but it’s still unclear how much they’ll ease up. Ongoing conflicts in the Middle East, Ukraine, and northern Africa are causing further instability. Meanwhile, Asia’s economy, a key trading partner for Australia, is expected to slow in 2024, which could have a knock-on effect on our own economic growth.  What It All Means for You  For everyday Australians, the combination of high interest rates, sticky inflation, and rising living costs means it’s more important than ever to manage your finances carefully. Mortgage holders won’t see relief from rate cuts soon, and households should continue to be mindful of their budgets, especially with the cost of essentials like groceries and petrol still fluctuating.  If you’re feeling the pinch, now is a good time to seek professional advice and ensure you have a financial plan in place that helps you navigate these uncertain times.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: April – June 2024

Quarterly Economic Update: April – June 2024

Updated on Economy, Finance, Investing

The economy continues to slow, with inflation remaining sticky, the new federal budget making waves, and global events that may have a significant impact. Uncertainty at home and abroad The current outlook indicates uncertainty both domestically and internationally, making it unlikely that inflation will reach the target range of 2-3 per cent in the near future. May forecasts suggested that inflation would return to the target range by the second half of 2025 and reach the midpoint by 2026. However, recent indicators point to weak economic activity, such as slow GDP growth, an increase in the unemployment rate, sluggish wage growth, and uncertain consumption growth. Advanced economies are experiencing a slowdown in growth, although there are signs of improvement in the Chinese and US economies, along with increased commodity prices. Nevertheless, geopolitical uncertainties remain high, which could potentially disrupt supply chains. The Federal Budget focuses on social matters Treasurer Jim Chalmers presented the 2024-2025 Federal Budget on May 14, 2024. The government aimed to alleviate the cost of living without worsening inflation. Key announcements included: Interest rates remain steady, but the pain may not be over The Reserve Bank of Australia (RBA) kept interest rates on hold and the cash rate steady at 4.35 per cent throughout the quarter. At the June RBA board meeting, Governor Michele Bullock stated that the board has not dismissed the possibility of further rate hikes. Interest rates will stay at this level until the RBA’s next board meeting in early August. Inflation persists, despite slowing Inflation remains persistent, with the RBA predicting that it will take some time to consistently stay within the target range of 2-3 per cent. Although inflation has decreased significantly since its peak in 2022, the rate of decline has slowed. At the same time, economic growth has been limited as households cut back on non-essential spending due to income constraints. What are we spending on? Households are continuing to limit their spending on non-essential items. Spending on discretionary goods has shown a slow increase, rising by only 0.6 per cent over the year. On the other hand, spending on non-discretionary goods and services has risen by 5.8 per cent, mainly due to higher fuel and food costs. Household spending on health has significantly increased, showing a 15.7 per cent rise compared to this time last year. Health spending made the largest contribution to the overall 3.4 per cent rise in household spending in April. China lifts Aussie beef bans China has lifted bans on most beef and other exporters. The bans began in 2020 when China suspended beef exports from eight processors and imposed official and unofficial trade barriers on barley, coal, lobster, wood, and wine, costing exporters $20 billion Australian dollars ($13 billion) a year. These measures were viewed as politically motivated actions to penalise Australia, although China claimed they were related to trade issues. With the lifting of these bans, less than $1 billion worth of Australian exports are still being impeded. This marks a significant reduction from the previous $13 billion impact on Australian exporters. Trump down but not out Donald Trump’s conviction on 34 felony counts of falsifying business records has not stopped his campaign for President. As the November election looms closer, economists have expressed concerns about Trump’s campaign promise to impose a 10 per cent tariff on all US imports. If implemented, this and other trade policies could trigger another round of trade wars, disrupt international trade, and impact global growth. The information provided in this article is general in nature only and does not constitute personal financial advice.

Achieving financial freedom 

Achieving financial freedom 

Updated on Investing

What does financial freedom mean to you? The ability to travel the world and build a dream home? Or to be able to enjoy a simple but active retirement, and support some good causes?   We all have different desires and goals in life, but most of us share the dream that one day we would like to achieve our particular version of ‘financial freedom’. The challenge is that most of us don’t really know what it takes to turn our goals, be they vague wishes or burning desires, into reality.   However, with just a little bit of forethought, some expert advice, and by acting on that advice, we are much more likely to reach that goal of financial freedom.  Making the list  Your key ally in achieving financial freedom is your financial adviser, and amongst the most important things your adviser will need to know is what your goals are. So make a list and prioritise it. Which of your goals are essential, and which ones are you willing to compromise on?  Reality check   Just as we have different goals, so do we have different financial resources. One of the first things your adviser will do is run a reality check. Given your income and expenditure, job outlook, health and family situation, are your goals realistic and achievable?   Your adviser will also check if key goals are missing. For example, life insurance can be an essential tool for protecting your family’s future financial freedom, yet many people overlook it.  With the big picture now clear, your adviser can develop strategies that will bring that goal of financial freedom closer to fruition.   Perfect timing  When’s the perfect time to start your journey to financial freedom?  Today.   Because the sooner you get started, the sooner your goals will be achieved.   So think about your goals and desires. Importantly, write them down. Then make an appointment to sit down with your financial adviser, and take those critical first steps towards achieving your financial freedom.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Building financial resilience 

Building financial resilience 

Updated on Budgeting, Education, Finance, Investing

Resilience is the ability to quickly recover from setbacks, and while setbacks can come in many forms most of them will have a financial component. So what can you do to build financial resilience?  Expect the unexpected  Rarely do we get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is now. And while we don’t know the specifics, we can anticipate events that would throw our finances into disarray. A house burning down or a car being stolen. Not being able to work due to illness or injury. The death of a breadwinner or caregiver.   With some idea of the type of threat we face we may be able to insure against some of them. If you have taken out any type of insurance policy you’ve already made a start on your resilience plan.  Create buffers  You can’t insure against every possibility, but you can build financial buffers. This might simply be a savings account that you earmark as your emergency fund that you contribute to each payday. If your home loan offers a redraw facility you can also create a buffer by getting ahead on your mortgage repayments.   Buffers can be particularly important for retirees drawing a pension from their super fund. Redeeming growth assets for cash in order to make pension payments during a market downturn can lead to a depletion of capital and reduction in how long the money will last. By maintaining a cash buffer of, say, two year’s worth of pension payments, redemptions of growth assets can be deferred, giving time for the market to recover.  Cut costs  The Internet abounds with tips on how to cut costs and save money. In difficult economic times cost cutting can help you maintain your financial buffers and important insurances.   Key to cost cutting is tracking your income and expenditure and yes, that means doing a budget. Find the right budgeting app for you and this chore could actually be fun.  Invest in quality  There are many companies out there that have long track records of consistently pumping out profits and dividends. They may not be as exciting (i.e. volatile) as the latest techno fad stocks but when markets get the jitters these blue chip companies are more likely to maintain their value than the newcomers.  This is important. The more volatile a portfolio the more likely an investor is to sell down into a declining market. This turns paper losses into real ones, depriving the investor the opportunity to ride the market back up again.  The other key tool in creating resilient portfolios is diversification. Buying a range of investments both within and across the major asset classes is a fundamental strategy for managing portfolio volatility.  With a well-diversified portfolio of quality assets there is less need to regularly buy and sell individual investments. Unnecessary trading can create ‘tax drag’ where the realisation of even a marginal   capital gain triggers a capital gains tax event and consequent reduction in portfolio value.  Take advice  Building financial resilience can be a complicated process requiring an understanding of a range of issues that need to be balanced against one another and prioritised. Your financial planner is ideally placed to assist you in developing your own, personalised plan for financial resilience.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Active or Index Funds: What’s Your Best Bet? 

Active or Index Funds: What’s Your Best Bet? 

Updated on Investing

Ever glanced at a list of different managed funds and wondered why some have remarkably low fees compared to others? Chances are, the ones with lower fees are index funds, also known as passive funds.   Over the last couple of decades, index investing has become increasingly popular, with big players like Vanguard and Blackrock managing trillions of dollars in assets (as of 2022).  Before we dive into the reasons and consequences of this trend, let’s break down the two main investment styles:  Active Investing:  Index Investing:  So, why has index investing gained so much ground?  1. Lower Fees: 2. Performance Challenges:  For instance, at the end of 2022, 58% of Australian General Equity funds returned below the index. Over 5-, 10-, and 15-year horizons, the underperformance proportions were 81%, 78%, and 83%, respectively. Similar trends are observed in international equity markets.  While choosing index funds may seem logical, it’s essential to consider their underlying premise. Returns come from income (like dividends) and changes in capital value over time. However, for the latter to happen, there must be market activity—investors trading securities. If everyone exclusively invested in indexes, the market would cease to exist.  Index investing doesn’t screen shares, meaning investors get exposure to both ‘good’ and ‘bad’ companies. Also, there are no exclusions based on environmental, social, or governance (ESG) criteria, which some investors prioritise.  In the active versus index debate, there’s no clear right or wrong. Many investor portfolios combine both approaches. Index funds or ETFs are often used for broad exposure, while active investment may be reserved for specialised exposure, such as smaller companies, property, or infrastructure.  Regardless of your choice—active, index, or a mix—the fundamental principles of investing still apply: diversification and time in the market are key to building long-term wealth.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: Oct – Dec 2023

Quarterly Economic Update: Oct – Dec 2023

Economy, Finance, Investing

Global growth is forecast to slow and remain below its historical average in 2024, reflective of tighter monetary policy in advanced economies, as well as a soft outlook for China. Australians can expect higher prices, higher interest rates and higher population growth, with economic growth and unemployment decreasing. Inflation continues to bite With a new Governor at the helm of the RBA, and inflation tracking down since its peak in the December quarter 2022, public sentiment hoped that rate rises would be paused. However, the RBA delivered another rate hike at the November 2023 meeting, bringing the official interest rate to 4.35% – the highest level since 2011. It is likely that an increase in the monthly CPI indicator was a key trigger for the RBA to raise rates, as the monthly indicator rose to 5.2 per cent in August, and then rose again to 5.6 per cent in the September data. However, the next monthly data point, for October (which came out after the November rate rise) had inflation decreasing to 4.9 per cent. Services inflation remains high and was the primary driver of stronger-than-expected underlying inflation in the September quarter. Interest rates – will they or won’t they? The RBA continues to be cautious about the inflation outlook for Australia for several reasons: high and sticky inflation in the services market, house prices recovering sooner than anticipated, a tight labour market and increasing population growth due to migration. A survey of 40 economists by the Australian Financial Review shows that the median forecast is that the RBA will start cutting rates in September 2024, whilst the bond market is projecting an easing of rates by mid-2024. The RBA will meet only eight times in 2024, reduced from 11, beginning in February – following an independent review ordered by the Treasury. Coupled with the RBA governor’s commitment to return inflation to the target range of 2-3%, more rate hikes may be on the cards. Holiday spending to remain flat A survey by Roy Morgan forecast shoppers to spend $66.8 billion during the pre-Christmas sales period, only up 0.1% from the same period in 2022, likely as a result of cost of living impacts. Sales spending for the Boxing Day period to December 31 was expected to be about $9 billion, including $3 billion on Boxing Day itself, as retailers prepared larger discounts than usual after a slow year. Hot Property House and unit prices grew steadily in 2023, with a national annual growth rate of 5.42% (6.54% in capital cities). The main drivers include the highest net overseas migration levels ever recorded, few vacant properties and stronger demand for established homes due to the construction industry facing capacity and cost issues. This growth forecast is expected to continue as most experts believe demand for housing will continue to outstrip supply. However, Australia’s cost of living increases and interest rate uncertainty will keep biting—leading to weaker price growth than previous years. The rental market remains in a critical shortage of available dwellings according to SQM Research. Due to the ongoing supply and demand imbalance, the market is expecting capital city rental increases of 7-10% for 2024, on top of an average 10% market increase in 2023. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Quarterly Economic Update: Jul – Sep 2023 

Quarterly Economic Update: Jul – Sep 2023 

Updated on Economy, Finance, Investing

Australia’s annual inflation rate has taken an unexpected step up, increasing pressure on the Reserve Bank to push interest rates higher and once again raising the prospect that Australia will fall into recession sometime over the next few months.  The annual inflation rate for the year to August reached 5.2 per cent, up from 4.9 per cent recorded for the year to July, spurred by higher prices for petrol, financial services, and labour costs, following the 5.75 per cent wage rise for 2.4 million Australian workers in July.  Some analysts believe recent wage increases and the Federal Government’s drive to reduce unemployment levels below their current historic low levels and provide more union friendly workplace regulations, will combine to push wages even higher.  The prospect of further wage hikes, low productive improvements combined with continued high levels of inflation, threatens to return the Australian economy to the dismal economic days of the seventies and with it, stagflation.  Of all the domestic price hikes though, higher petrol prices are seen as the most troubling as they have such significant flow through effects, making everything in the country more expensive to produce and so lifting the cost of living for all Australians.  The prospect of higher oil prices internationally, following a decision by Russia and Saudi Arabia to restrict production to boost prices, has cast gloom across the global economy, putting economies everywhere under pressure of higher energy costs.   Globally, US Treasury 10-year bond yields rose to above 4.5 per cent during the past month, taking them to their highest level since the global crisis started in 2007, as fears mount that climbing inflation will persist for years to come.   This, and the generally accept downturn in growth in the massive Chinese economy, is prompting fears overseas that the US economy will certainly fall into recession next year, with developed countries around the world certain to follow.  While there was hope the Reserve Bank was succeeding in driving down inflation, this latest uptick in prices and overseas interest rates, will put the Reserve Bank under renewed pressure to lift domestic rates yet again.  Although the much talked about fixed-rate mortgage cliff seems to have been averted, where homeowners have faced the end of super low fixed rate loans and been forced to move to higher variable rate loans, pressure is emerging in the housing market.  According to figures from the research house, Core Logic, the number of homes that have been sold at a nominal loss, and which have only been owned for two years or less, has increased from just 2.7% to 9.7% during the June quarter.   Pressure is building most clearly in the sale of home units with 14.4 per cent of all unit sales across Australia selling at a loss during the June quarter, compared to just 3.8 per cent of all homes sold during the same time.  There also seems to be a trend where people who moved to the regions during the pandemic are starting to sell up and drift back to the cities.  Resales within two years of purchase, made up 11.1% of all regional resales, compared to a decade average of 7.2% per year.  A rare bright spot for investors remains the hefty returns to shareholders with Australia’s largest listed companies paying out some $21.7 billion during the last week in September, by way of improved dividend payments.   BHP paid out $6.34 billion to their shareholders via a $1.25 per share dividend, Fortesque Metal paid out $3 billion via a $1 a share dividend and after posting a record-breaking profit, the Commonwealth Bank of Australia paid out $4 billion by way of a $2.40 a share dividend.   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Discovering Your Financial Mindset

Discovering Your Financial Mindset

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.

4 Time-Tested Investment Strategies for Young Investors

4 Time-Tested Investment Strategies for Young Investors

Updated on 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.

The Wealth of Gold: Investing in a timeless asset

The Wealth of Gold: Investing in a timeless asset

Updated on 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

Quarterly Economic Update: January-March 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.

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