INVESTING – THE BASICS

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Investing can sometimes seem complicated. At Tailored Lifetime Solutions, our Financial Planners talk to clients about investing every single day. Their goal is to demystify the subject and help people make some pretty big decisions about their personal goals and how they’re going to achieve them. AMP has put together an introduction video that will help you understand some basics about investing and explain who really is an investor. If you want to know more about investing or if you want help building a plan to achieve your goals, call us today on (03) 9851 0300 to arrange a meeting with one of our Financial Planners.

 

 

 

PROTECTING WHAT MATTERS MOST

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Have you ever wondered what would happen to you and your family if you became ill? Trauma insurance provides a lump sum benefit in the event of being diagnosed with a serious medical condition. It can provide financial relief and certainty at a stressful time, giving you peace of mind so you can focus on recovering. At Tailored Lifetime Solutions we specialise in helping people find the right type and amount of insurance for their individual circumstances. If you would like to discuss your personal insurance needs, call us on (03) 9851 0300 to arrange a meeting with one of our Financial Planners.

 

 

IS IT TIME TO SELL YOUR FAMILY HOME?

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With the children gone and things slowing down it may be time to downsize.

When you’ve got a family, a big house with plenty of room may make sense. But these days a smaller place may suit you better.

Dreams of a change may be beckoning… you may be yearning to wake up to the smell of eucalyptus or doze off with an evening sea breeze.

And if you have a mortgage, smaller payments—or none at all—will help free up some cash for you.

WHY SHOULD I SELL?

You may be tossing and turning over the decision to sell. Before you decide, consider the motivations of other Australians1:

  1. Financial
    Buying a less expensive place means your home’s sale proceeds can free up money to invest, travel or boost your retirement income.
  2. Health
    You may want to live somewhere warmer for health reasons. Or be close to healthcare and specialist services.
  3. Lifestyle
    Perhaps you’d like to live close to family or spend less time looking after your home. You may aim to travel without worrying about who’ll take care of the house.
  4. Opportunity
    The current property market may present a good time to sell—you may have found a house to buy. Current interest rates may be appealing if you plan to borrow.
  5. A fresh start
    Selling may give you the fresh start you’re looking for. It may be time for a change and you’re ready to go.

WHAT ARE THE COSTS?

Sometimes selling can seem like the only logical choice but often, it’s not your only option. Downsizing may bring downsides and unforeseen costs—emotional, practical and financial.

There may be a lifetime of memories in your home and belongings that you and your family have collected. Then there’s the financial side of things—the costs of selling and moving, impacts on the kids’ inheritance and your pension entitlements.

NEXT STEPS

It’s possible that things may work out better in the long term—financially and in other ways—if you stay in your home and change things to fit you. Or selling may work out to be the best option for you.

Tailored Lifetime Solutions team of financial planners are here to help you work through these questions and our dedicated mortgage broker can assist you if you have any lending needs. Call us on (03) 9851 0300 to arrange a meeting.

CHINA – THE USUAL WORRIES, BUT NO BOOM AND NO BUST

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In some ways I find analysing China amusing. First, as long as I can recall numerous commentators have been calling for a Chinese hard landing. And for as long as I can recall they have been wrong.

Read More

SEVEN STEPS TO CUTTING DEBT

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You enjoy a challenge – right? Then step towards financial fitness by cutting your debts this year.

  1. Understand and embrace your debt. Firstly, work out where and what type of debt you have and start to plan how you’re going to cut it down. For example, if you roll multiple debts into one, you may save on fees and interest rates. AMPs education module Good debt bad debt can help you figure this out.
  2. Create a budget. Work out your daily, weekly and monthly spending. There are various tools available to help you do this. Check out MoneyBrilliant to organise your finances online, try ASIC’s TrackMySPEND app or the AMP Budget Planner.
  3. Reframe your thoughts. Think about money in a new way. Tell yourself how proud you’ll be if another $500 comes off your credit card debt instead of going towards new clothes. Make your lunch: buying your lunch every day tends to cost more than making it. So try making your lunch for some extra savings that can then put toward paying off debt.
  4. Work actively with your money. Set up separate accounts for debt payments and monthly bills. Consider using cash instead of EFTPOS – this may make you realise how much money you are actually spending!
  5. Look for larger debt cuts. Can you drive a smaller car so you’re paying less in fuel? Can you use public transport instead of having a car? Can you find a cheaper place to rent? Look at ways you can cut debt in more substantial chunks, as this will mean paying less interest sooner.
  6. Earn some more cash. What about a second job on the weekends? Or, selling your unused goods on eBay or at your local markets.
  7. Reward your progress. Update your budget each week – and reward yourself with a low-cost treat.

Use these steps and you’ll be on the way to reducing your debt in no time. Review your situation in a couple of months – if you’re not progressing as quickly as you’d like, then call Tailored Lifetime Solutions on (03) 9851 0300. Our Financial Planners are specialist in budgeting and will work with you to get you back on track.

TEN TIPS FOR BUYING YOUR FIRST HOME

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Property prices may go up, but there are ways to get onto the property ladder.

We love property in Australia―it’s part of the Australian dream1. About 70% of us live in our own homes. But owning property can seem an impossible dream for first homebuyers with research revealing they hold less than 12% of all home loans2.

Don’t lose heart. Our tips for home ownership may help.

  1. Build your plan – The earlier you start planning, researching and saving, the better off you’ll be.
  2. Work out what’s most important for you in a property – Shortlist suburbs and properties that meet your needs.
  3. Can you take advantage of potentially undervalued suburbs? You may be better off with a more affordable house in a different location that may prove a good investment over time.
  4. Work out costs – Make sure you understand the upfront costs of buying property—for example, stamp duty and lenders mortgage insurance (if it applies). Consider the ongoing costs like loan-interest charges and any relevant strata fees. Our cost of home loan calculator can provide information about other costs.
  5. Gather your deposit – When it comes to saving, work out your income and how much you can save while meeting day-to-day needs—use our budget planner. Then how long it will take you to save your deposit—consider AMP’s savings accounts for competitive interest and ready access to your money.
  6. Work out how much you’re likely to borrow and how you’ll repay the home loan – Use our loan repayments calculator.
  7. Some states may still provide first home buyer grants – Contact your state revenue office.
  8. Choose your lender – Visit several lenders and when you’ve found the right one, arrange financial pre-approval. With a pre-approved home loan from AMP you can benefit from competitive interest rates and terms, and be ready to bid or buy when you find the right property.
  9. Find out more at Q&AMP where we cover all things property.
  10. Consider seeking financial advice. Tailored Lifetime Solutions team of Financial Planners and our dedicated Mortgage Broker are here to help. Contact our office on (03) 9851 0300 to arrange a meeting.

THE AUSTRALIAN ECONOMY STILL IN THE DOLDRUMS

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Through 2013-14 it seemed the Australian economy was starting to transition away from a reliance on mining investment to more broad based growth.Unfortunately this transition has wavered a bit recently and growth has remained below trend. Fortunately, the RBA has recognised the problem and resumed cutting interest rates. This note looks at the outlook for growth and rates and what it means for profits and investors.

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SMSF MISTAKES TO AVOID

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It pays to avoid making mistakes when running your own superannuation fund. The government imposes severe penalties on self-managed super funds (SMSFs) that breach the strict legislation governing SMSFs.

The Australian Taxation Office (ATO) has identified the four most common breaches made by SMSFs and they’re outlined in the table below.

One of the most common breaches relates to in-house assets and the sole purpose test. Every SMSF must comply with the sole purpose test. That means the fund must be run for the sole purpose of providing superannuation benefits for members in retirement (or for member’s dependants if the member dies before retirement).

That means, any asset—for example, artwork or an investment property—purchased by an SMSF cannot be used by any member or his/her family in any way before retirement.

Who can help me meet my SMSF obligations?

It can be challenging to ensure that every aspect relating to the running of your SMSF complies with superannuation law.

If you’d like to speak with us about the ways we can help you manage your fund’s administration and compliance obligations, call (03) 9851 0300 to speak to one of our SMSF specialists.

Article originally published by AMP Ltd.

SOCIALLY RESPONSIBLE INVESTING

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You can invest your super in an ethical way without affecting your bottom line.

Socially responsible investing has come a long way over the past 15 years or so. It used to be a marginal activity, confined to government agencies and activists, and focused more on ‘negative screening’ by excluding companies that take part in activities like arms, tobacco, pornography, alcohol and gambling. There was also the perception that it could negatively affect your bottom line.

Now socially responsible investing is increasingly common as ordinary investors realise the power they hold to influence companies for the better. As such, it’s moving towards ‘positive screening’ with investment in companies whose products and services have a positive and sustainable effect on society and the environment. What’s more, investors are realising that socially responsible investments can perform just as well as other types of investment. As Peter Shergold, AMP Limited Director, asserts “[i]f you look at most socially responsible funds through the Global Financial Crisis and beyond, they’ve actually done pretty well compared to other funds.”

So you may be able to more closely align your investment strategy with your ethical beliefs without affecting the performance of your super. In addition, there are links between an organisation’s environmental and social impact, the quality of its corporate governance, and its long-term business success.

What is socially responsible investing today?

Socially responsible investing takes environmental, social, ethical or governance considerations into account. It can involve investing in businesses and funds engaged in solving challenges such as:

  • helping the working poor buy a home through microlending
  • developing sustainable agriculture in developing countries
  • building energy-efficient infrastructure like wind farms.

AMP Capital—making a difference

At AMP we like to talk about Environmental, Social and Corporate Governance (ESG) investing. And the issues are as important to us as they are to you.

As Australia’s largest responsible investment manager, our AMP Capital investment experts have over a decade of experience integrating ESG factors into investment decisions. A deeper understanding of ESG factors provides greater insight into areas of potential risk and opportunity that can impact the value, performance and reputation of the investments we make on your behalf.

Back in 2007 we were among the first companies to sign on to the Principles for Responsible Investment. We are committed to extending ESG integration across our mainstream investment activities.

So you can rest assured we are working to hold the companies in which your money is invested to account.

Take control of your super

If you want to make sure your money is invested in a way you are comfortable with, you should ask the hard questions. Remember, it’s your money. So you get to decide how it’s invested. And at Tailored Lifetime Solutions we can help you take control of your super and own your tomorrow.

If you’d like to know more, call us on (03) 9851 0300 to talk to one of our financial planners.

Article originally published by AMP Ltd

 

OFF-THE-PLAN PROPERTY ON THE MONEY?

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In this article, reader Melissa Huang asks Dr Shane Oliver about the pros and cons of buying off-the-plan property.

As house prices continue to rise, is it a good idea to buy an off-the-plan property for capital growth?

When it comes to investing in property or any investment for that matter, there’s no such thing as a free lunch. So the key is to go in with your eyes wide open.

Three reasons to buy off the plan…

There can be benefits in buying off-the-plan property if you do your homework and you’re not buying at the top of the market. If you’re a first-home buyer it’s not a bad way to get into the market. And if you’re an investor it’s not a bad way to start building a portfolio, particularly if you can pick up the property at a discount.

1. You may pick up a bargain

In order to get a loan from the bank, developers often have to show there is interest in the property. And they also like to get a degree of certainty before they start putting the development up. So they will try to sell a certain number of properties off the plan.

This means you may be able to get a good price and you usually only need to pay a small deposit, like 10% or so.1 And depending on your lender, you may not need to pay a deposit if you agree to guarantee the property against other assets.

2. You may benefit from being a first-home buyer

The benefits of buying off the plan vary state by state and can depend on whether you’re a first-home buyer or not.
For example, there are stamp duty concessions in most states and if you’re a first-home buyer, you may also get a grant because it’s a new development.

3. You may get other incentives

Some developers may provide short-term rental guarantees to attract buyers. And you may be able to customise the property to your needs by choosing:

colour schemes
fixtures and fittings
new appliances like dryers, stove tops and ovens.
…and three reasons to think again

When you buy off the plan, you are taking on more risk than if you buy an established or completed building.

1. You may get an unpleasant surprise

You can’t inspect an off-the-plan property… and things can change.

If something goes wrong while the building is going up—like interest rates rising or banks cutting back on financing—it can create financial problems. It’s not unheard of for developers to fall over when the market crashes. The building may eventually be completed many years later or it may never get off the ground.

So you should make sure the developer:

has sound financing
doesn’t have too much short-term debt
has a good track record.
But there are no guarantees. Developers have gone bust in the past and people have lost their deposits with no building to show for it.

And even assuming the development is completed, the property:

may not be quite what you think it was going to be—and it could be hard to get the developer to fix any defects
may be harder to rent than you think, despite seemingly attractive short-term rental guarantees.

2. You may be able to get a better return elsewhere

When you buy an established dwelling, you may pay more up front but you’re potentially earning rent from day one.
But when you buy off the plan, your deposit usually won’t earn any rental income for the construction period.
Even when you’re earning rent, the net rental yield can be less than you might imagine once you factor in your costs. Right now, the typical net rental yield is around 1–2% (Source: Real Estate Institute of Australia and AMP Capital).

And don’t forget that, like other investments (aside from holding cash in the bank), you’re likely to be liable for capital gains tax when you sell the investment property, assuming you’re making a profit.

3. You may see your property fall in value

If you’re buying off the plan now and the building isn’t completed until a few years later, there’s a risk the property will be worth less than you agreed to pay for it.

Home prices are rising now, as can be seen in the chart below, for many reasons including low interest rates and greater buyer confidence, as well as high demand relative to supply.

While they are likely to continue to rise for the next six to nine months, there will come a time (probably next year) when the Reserve Bank will start to raise interest rates. If that happens, it will act as a dampener on the property market.

Over the past few years there have been two significant downturns when home prices fell on average between 5% and 10%—just after the GFC and through 2011–2012 (Source: Real Estate Institute of Australia and AMP Capital ). And more risky developments would have experienced greater falls.

Get advice

It’s important to get advice before buying off the plan. Tailored Lifetime Solutions dedicated Lending Specialist and our team of financial planners are here to help. Call our office on (03) 9851 0300 to arrange a meeting.

1 A 10% deposit is usually required to secure the property in the development before it is completed, and the balance or at least 20% of the property’s value as equity is required at completion, as lenders’ mortgage insurance will usually apply to loans with a loan to value (LVR) ratio of greater than 80%.

Article originally published by AMP Ltd.