How to avoid waste this Christmas

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Embrace the spirit of Christmas by giving back to the environment this festive season.

If ever there is a time for excess, Christmas is it. But it’s important not to forget about the waste you create amidst all the good times, feasting, gifts and celebrations.

You’ve heard of the 12 days of Christmas, but here’s 12 ways to avoid waste this Christmas.

  1. Turning your house into a light display come the festive season is a great way to spread Christmas cheer, but also to use a lot of electricity. Consider solar-powered Christmas lights instead – our long summer days are perfect to charge them so your house can shine at night.
  2. Think green when it comes to your tree. Either invest in a top-quality fake tree which will last many years, or buy a real tree. If you do opt for a real tree, make sure you recycle it properly. Small trees can be cut up and recycled in your garden waste bin, while many councils schedule a special collection for larger Christmas trees.
  3. Buying cheap gifts that only last a short time can be great for the family budget but not so good for the environment. Instead look for well-made gifts, which will last and offer good value for money. To further minimise your footprint, give experiences rather than physical gifts.
  4. In a world where time is a priceless commodity, making – rather than buying – gifts can be a whole lot more meaningful and lead to less consumption. For another spin on this, give the gift of time – offer to do some free babysitting or to mow a friend’s lawn.
  5. When buying physical gifts, many stores now offer gift receipts, which enable the recipient to exchange the present without revealing the price. Providing you don’t get offended, it’s a win-win – your gift doesn’t end up in the landfill and your loved one gets something they truly want.
  6. Remember your e-footprint and try to avoid buying gifts that need batteries. If you do buy something that’s battery-operated, consider making rechargeable batteries and a charger part of the gift. Trust us, they’ll thank you.
  7. If you receive a gift you don’t like, consider whether you can upcycle it, or use it for another purpose. If that’s not possible, donate it to charity or consider re-gifting it, rather than throwing it out. Re-gifting may have a bad reputation but you can’t argue with its environmental credentials.
  8. Instead of opting for store-bought wrapping paper, make your own, use your kids’ drawings or dress up newspaper with festive ribbon. And when you’re done, consider recycling your wrapping or consider reusing it – you can refresh it by covering with a towel and ironing out the creases on low heat.
  9. Avoid unnecessary food waste by buying your food as fresh as possible so that it lasts longer and you throw less away. You can also reduce your food miles and carbon footprint by buying it locally.
  10. Buy food you like and will eat. It may seem like simple advice but as Christmas is associated with many traditional dishes, who hasn’t served up a plum pudding when everyone would have rather had a pavlova? Or if you and your guests aren’t big turkey fans, avoid the food waste and go for chicken instead. The only rule of Christmas should be to enjoy!
  11. There are numerous blogposts and articles dedicated to creative ways to use up Christmas leftovers. And when you reach the point that you just can’t consume any more ham or turkey, instead of throwing it away, freeze the rest and use it when the memory of Christmas has faded a bit.
  12. When catering for a crowd, it can be tempting to opt for disposable plates and cutlery to save time on cleaning up. But for the environment’s sake, use crockery and get everyone to pitch in with the washing up instead. And remember to recycle your glass bottles that were once full of Christmas cheer!

Merry Christmas!

How to spend mindfully this Christmas

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Some ways to manage your money and your time this festive season.

It’s the morning after the night before.

You wake up on Boxing Day and stumble into the lounge room to face what looks like…Armageddon.

There’s wrapping paper strewn all over the floor, every surface is covered with toys and knick-knacks that seemed like a good idea at the time and the recycling bin is already choc-a-block full of packaging.

Your head a little fuzzy from the second bottle of Tassie sparkling, you stumble over to the kitchen and open the fridge. Things don’t get any better. The second pavlova with today’s use-by date has hardly been touched, the fridge shelves can barely accommodate the leftover meats and you’re not sure how you’re going to get through all that extra seafood. Half of this will have to go.

Switching on the kettle, you check your phone only to find an unwelcome automated email from the bank. Apparently all that last-minute shopping maxed out your credit card and repayments are due to start shortly.

A nice cool shower will help shake the Tassie sparkling out of your system. But you have a sinking suspicion the rest of your Christmas hangover will take a little longer to recover from.

You’re not sure that Christmas was meant to be this way…

How to cut back this Christmas and avoid a festive hangover

If this sounds familiar and your memories of last Christmas are clouded by nagging feelings of guilt over the waste and excess—not to mention the lingering credit card bill—you’re not alone.

Last Christmas Australians planned to spend an average of $955 over the festive season. We were left with an average credit card debt of $1,666. And almost one in five of us failed to pay off our Christmas debt in six months1.

So it’s not surprising that more than three out of four Australians are looking cutting costs this Christmas.

  • 51% will set a spending limit
  • 17% are doing Secret Santa
  • 17% are making or baking gifts
  • 13% will regift their unwanted presents
  • And 15% say they won’t buy presents at all2!
17% are doing Kris Kringle
17% are making or baking gifts

OK, so going the full Grinch could be a little extreme. But this Christmas could be time to do things a little differently. It’s not about being a Scrooge, it’s about being more aware of the impact of your choices on the environment and your hip pocket. While giving (and receiving) gifts and enjoying a special meal with friends and family are wonderful parts of Christmas, there are ways of doing it more mindfully this year…and waking up with less of a financial hangover.

Smart budgeting tips for Christmas

  • Choose thoughtful but modest gifts such as handmade items, home-cooked meals or plants for the garden.
  • Go for experiences rather than stuff to reduce waste—massage vouchers, wine tours or a visit to the zoo. It doesn’t have to be super expensive, a picnic in the park or a family day out to the beach can provide wonderful Christmas memories without needing to break the bank.
  • Take advantage of sale periods and stockpile gifts to help your money go further and spread the cost of Christmas throughout the year.
  • Try leaving the credit card at home and only spend what you have by using cash or a debit card.

‘Tis the season to be mindful—helping others this Christmas

Being more mindful isn’t just about how you spend your money. It’s also about how you spend your time.

Now, you don’t want to feel guilty over Christmas and New Year. After all, it’s important to celebrate the year that’s gone with friends and family. But it is worth taking a moment to think about less fortunate people in your community.

Not everyone has a network of family and friends to enjoy the festive season, or the money to help things go with a swing.

So if you have time, why not think about helping others.

  • You could volunteer at a food shelter—check out Volunteering Australia, Meals on Wheels or The Smith Family.
  • You could spend time at a retirement village helping senior Australians by reading or accompanying them on walks.
  • You could donate items of food to the less fortunate—Foodbank agencies feed 652,000 Australians every month, including 216,000 children3.

And you never know, by helping others you could help yourself come closer to the true meaning of Christmas.

About Tailored Lifetime Solutions:

At Tailored Lifetime Solutions we pride ourselves on staying true to our core values of:

  • Genuine Care
  • Keeping it simple and
  • Providing Security and Peace of Mind.

Tailored Lifetime Solutions has been helping Australians secure their Financial future for over 18 years. We understand each of our clients is unique and as such require tailored financial advice to meet their needs. We work to partner our clients on their financial journey, to ensure financial fitness throughout life’s various stages and secure your future financial security.

With over 70 years of financial planning experience between us, our areas of advice include:

  • Wealth creation
  • Lending and mortgage broking
  • Superannuation advice
  • Self managed superannuation funds
  • Aged Care advice
  • Lifestyle financial planning

Providing quality financial advice in Balwyn and the Eastern Suburbs for almost 20 years.

Important information

This information is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

What lenders look for in your everyday spending

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Article by Stephanie Aikins     www.nestegg.com.au

With comprehensive credit reporting now common, tightening lending practices and open banking set to come in next year, the landscape of applying for finance is rapidly changing. Nest Egg spoke with an established mortgage broker to find out how consumers’ spending habits can impact their capacity to access finance.

Never before has the details of consumers’ spending been so accessible for lenders, as our spending habits increasingly shift towards electronic payments.

With the RBA predicting last week that cash will soon be a “niche” payment method, it seems this trajectory is only set to continue to the point that the entirety of our spending occurs via online transactions.

“You need to be aware that in this Big Brother world, everything is being recorded and we can’t not consider that,” says Nicole Cannon.

As a Sydney-based mortgage broker since 2002, she says banks and lenders are increasingly looking at every aspect of daily spending through trail left behind by online transactions.

“In this day and age where everything is just a tap, people actually do really lose their sense of value for money,” she says.

“The banks are looking at all those little transactions that go towards your entertainment, coffees, or lunches and all of that type of thing, because they want to see that after all your spending, you’ve still got surplus left over to be able to pay any mortgage.”

“They’re wanting to get quite a detailed overview of your everyday living expenses.”

While Ms Cannon acknowledges that increased discretionary spending, or spending on everyday luxuries, is often the result of circumstances, she says it is important for consumers to realise that banks may increasingly look at such expenses to determine the desirability of a loan applicant as the regulatory climate sees lending tighten.

“The banks are being overly cautious, I think, but we have to adhere to that,” she says.

With the advent of “open banking”, which will allow banks unprecedented insight into consumers’ financial data, she says this scrutiny of everyday living expenses, from your car loans to your UberEats bills, is likely to increase.

“I think there will be [increased scrutiny], as there’s just going to be more transparency with the conduct of any style of bank account,” she says.

“Our consumerism is becoming a disadvantage.”

She says there are three key things consumers looking to source finance can do to ensure they are not hindered by their everyday spending:

  • Know what you’re spending

Ms Cannon says it is common for her clients, regardless of their net worth, to be unaware of the amounts they are spending on the little things.

“Whenever I sit down with customers and do a review, regardless of their level of income, most are shocked when they see what they’re spending,” she says.

“Once they have an understanding of what they’re spending, it puts it in perspective and they understand why their borrowing capacity may be significantly shorter than what they thought.”

  • Take responsibility for your repayments

As open banking comes into effect, she says it will be more important than ever for consumers seeking credit to make their repayments on time.

“If you’re late constantly, or waiting for an SMS to remind you, that will start to have a detrimental effect,” Ms Cannon says.

“People have got to start taking ownership and responsibility for their bills. Because if you’ve reached 15 days after that repayment date, there will be a mark against your name that will be in the new comprehensive credit reporting.”

“Consumers do need to be mindful of that.”

  • Find a broker that will work with you

Finally, Ms Cannon says it is important to find a mortgage broker that understands your spending can fluctuate dependent on current circumstances and will seek out a loan provider that look beyond the six-month savings statements prior to the application for the loan.

“I think there needs to be a bit of a buffer and understanding that just because they’re spending ‘x’ pre-loan, doesn’t mean it’s going to be the same post-loan,” she says.

“If the big four or your personal bank of however many years comes back and says no, there’s often another place for you. It’s just a matter of working with a broker that will find you a different lender that has a more open-minded approach.”

“Not a more relaxed approach, but a more realistic understanding of your explanation if there is a reason for high living expenses at one particular point in time.”

How do you score on money basics?

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Higher financial literacy could be your ticket to wealth.

by Renu Prasad  (www.yourmoney.com.au/wealth/personal-finance/how-do-you-score-on-money-basics)

 

Your Money contributor

Welcome to our new quiz show, where everyday Australians have a chance to pit their wits against the average American.

Today’s topic is money management, and you’re in the hot seat.

Here’s your first question:

You have $100 in your savings account. This money is earning 2 per cent interest.

How much will you have after five years? Exactly $110, more than $110 or less than $110?

Tick tock.

Now here’s your second question:

Imagine that the interest rate on your savings account was 1 per cent per year and inflation was 2 per cent per year.

After one year, would you be able to buy more, exactly the same, or less than what you can today with the money in this account?

Lock it in, Eddie.

These are real questions posed in a survey of consumers aged over 50 years in the United States, conducted by researchers at the University of Michigan.

The study highlighted an alarming gap between the level of financial education which we should all possess and that which we actually possess.

In fact, less than 50 per cent of respondents were able to answer both of these questions correctly.

It’s called “financial literacy”, which is a fancy term describing how savvy we are about money.

Financial literacy is about understanding the optimum way to save money, the smartest way to invest money and the best way to get value from your hard-earned dollars.

And, most importantly, it’s about managing your finances in a way that doesn’t end in a whopping debt, financial stress and threatening letters in your mailbox from collection agencies.

According to a study by research house Standard & Poor’s, Australians rank ninth globally for financial literacy, ahead of the United States at 14th.

However, the financial literacy gap between the richest and poorest Australians is the largest of its kind in the world and only half of our poorest households were classified as financially literate.

But why does it matter?

A University of Melbourne study recently found that people with lower levels of financial literacy are less likely to put money into savings, less likely to pay off their credit card debt and less likely to be able to cover an emergency cost.

Lack of financial literacy also leads to more workplace stress, which in turn can lead to poor morale and absenteeism.

In short, a lack of financial literacy means that you are less likely to save and more likely to make purchases on credit. And when you do buy on credit or borrow money, you’re more likely to choose a product which charges more interest than what you need to.

Result: you get into debt and you stay there longer.

To help understand the problem, it’s worth considering practical examples of financial literacy in action.

Imagine you have borrowed $2,000 from the bank. Would you prefer to pay $900 interest on that loan, or $3,000 interest?

It may seem like a no-brainer, but many Australians unwittingly end up opting for the higher amount because they’ve chosen to make the minimum repayments.

Paying the minimum may seem like an attractive short-term option, but a little financial literacy shows us that it’s a very bad deal in the long run – in fact, many people end up repaying a small loan over 25 years.

The same principle applies to all of your financial decisions.

Would you pay up to $1,500 for the privilege of applying for a home loan, when you could apply for an alternative product which didn’t require this fee?

Would you pay an account keeping fee of $100 a year or up to $1,000 a year for a credit card when there are alternative products which do not charge these fees?

These are all common money management mistakes in Australia and they are all entirely avoidable if we understand the perils of minimum monthly credit card repayments and shopped around for the best possible deal.

Improving our financial literacy means fewer and lower bank fees and more cash to spend on yourself and your family.

By reading this article and spending time on this website, you’re already well on your way to enhancing your financial literacy.

Oh, and if you were wondering about our examples at the start of this article, 2 per cent interest on $100 over five years will result in more than $110 and 2 per cent inflation will decrease your spending power.

Rocket science? Probably not.

But it’s the simple lessons of financial literacy that usually get overlooked and, collectively, they’re one of the biggest contributing factors to successful wealth management (especially if maths wasn’t your favourite subject at school).

Now, where’s that calculator?

About Tailored Lifetime Solutions:

At Tailored Lifetime Solutions we pride ourselves on staying true to our core values of:

  • Genuine Care
  • Keeping it simple and
  • Providing Security and Peace of Mind.

Tailored Lifetime Solutions has been helping Australians secure their Financial future for over 18 years. We understand each of our clients is unique and as such require tailored financial advice to meet their needs. We work to partner our clients on their financial journey, to ensure financial fitness throughout life’s various stages and secure your future financial security.

With over 70 years of financial planning experience between us, our areas of advice include:

  • Wealth creation
  • Lending and mortgage broking
  • Superannuation advice
  • Self managed superannuation funds
  • Aged Care advice
  • Lifestyle financial planning

Providing quality financial advice in Balwyn and the Eastern Suburbs for almost 20 years.

Important information

This information is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Protect yourself from identity theft on social media.

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Social media platforms allow us to stay connected to family and friends that we don’t get to see every day, but they also allow hackers and identity thieves to gain access to our personal information. In the last few years, there has been a rise in identity theft cases that started from social media platforms.

It’s critical that individuals practice safe and smart social media use to protect not just themselves, but also their businesses and their customers. Beware of these three common mistakes that can lead to your personal information being compromised, and learn ways to proactively protect your identity from being stolen:

Avoid oversharing.

When people start sharing information with the public, it can open up doors for the information to be used against them. Details like full name, date of birth, hometown and even school locations and dates of graduation can become dangerous in the wrong hands. Social media platforms typically require your name and your date of birth, but most platforms will give you the option to not make the information shareable.

Beyond basic information, be careful about what you post. Of course, you should not share your debit/credit card and social security numbers with people online, but images can be dangerous, too. A few examples would be things like posting a picture of your new car and not covering your license plate number or sharing event details that contain your home address. If these get in the hands of someone you don’t know, that person could use the information to steal your identity.

Restrict application permissions to your social media accounts.

When you download a new application that gives you the option to log in with a social media platform instead of using an email address, you are giving the app the rights to your information that has been collected on the platform. You might not think anything of it or that it would impact you in a negative way, but as we saw with the Cambridge Analytica data scandal, third parties have been able to gain access to information on social media users without their knowledge.

Use careful consideration when granting access to any application, regardless of its stated intent. Even if the app itself is benign, a hack or data breach could leave your personal information out in the open. And the more applications your social channels are linked to, the more vulnerable your information is to being hacked and used inappropriately. Make sure to review the settings on your social media accounts, including the permissions for apps, and delete applications that you no longer use.

Update security functions regularly.

Changes to websites and applications happen often, and it is never a bad idea to monitor the security functions on different platforms to ensure that your information is protected. You should have a clear understanding of what the default security settings are and how to change them so that information is only shared with the audience you choose. Many people are surprised when they learn how broadly visible their information is by default on social media; you don’t want to be caught unaware when your personal information is at stake.

In addition to security functions, you should consider changing your password frequently and avoid using the same password across different accounts. A rogue hacker tweeting from your profile might not make you sweat, but what if that person then also had access to your bank accounts and healthcare data? If someone was able to gain access to an account with a shared password, they will have a lot of information about you that they can use to steal your identity.

How can you protect your information?

Before you start shutting down all social media platforms because of fear of identity theft, there are a few more things that you can start doing now to protect yourself. Only follow or friend people that you know, and be mindful of what you post and share. When accessing accounts in public spaces, make sure to log out when finished and delete any browsing history. Lastly, never give out your social security or credit card number to any person or business unless it is legally mandatory (as with an employer for tax purposes or when applying for certain federal benefits).

Identity theft is something that individuals should be vigilant about, but it doesn’t need to be a burden. Keep best practices in mind so you can still enjoy the positive benefits of social media and protect your information from the bad guys.

At Tailored Lifetime Solutions we pride ourselves on staying true to our core values of:

  • Genuine Care
  • Keeping it simple and
  • Providing Security and Peace of Mind.

Tailored Lifetime Solutions has been helping Australians secure their Financial future for over 18 years. We understand each of our clients is unique and as such require tailored financial advice to meet their needs. We work to partner our clients on their financial journey, to ensure financial fitness throughout life’s various stages and secure your future financial security.

With over 70 years of financial planning experience between us, our areas of advice include:

  • Wealth creation
  • Lending and mortgage broking
  • Superannuation advice
  • Self managed superannuation funds
  • Aged Care advice
  • Lifestyle financial planning

Providing quality financial advice in Balwyn and the Eastern Suburbs for almost 20 years.

 

Important information

This information is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

 

How Improving Your Posture Can Positively Affect Your Entire Well-Being

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Posture affects our mood, how we react to pain, the condition of our muscles, joints and ligaments, and even how well our organs work. Unfortunately, with the time that we spend in front of computers and phones, many people’s posture keeps getting worse. This helpful video describes what good posture is and how we can attain it. If people nag you to stand up straight, they’re right.

 Important information

This information is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

What to do when you’ve been a victim of credit card fraud

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Credit card fraud on the rise

Card fraud has been on the increase, more than doubling to $2.1 billion during 2014-15 from $1 billion in 2010-11, according to Australian Bureau of Statistics (ABS) figures.

Credit cards are targeted more than debit cards.

The good news is that in most cases you won’t be liable for unauthorised transactions and will probably get your money back.

ASIC’s MoneySmart website says you won’t get your money back if you acted fraudulently; didn’t keep your PIN or password secret; unreasonably delayed telling your account institution that your card was lost or stolen or that someone else may know your PIN or code or; accidentally left your card in an ATM.

Even then though your liability will be limited to certain caps.

Contact your bank about fraud

So what should you do if you spot a transaction you don’t recognise on your debit or credit card?

The simple answer is to contact your financial institution as soon as possible.

This will hopefully prevent any more unauthorised transactions.

When you report a mistake on your account, make sure you get a reference number to verify that you made the report, says MoneySmart.

Sometimes, though, there might be an explanation and it is not actually a fraudulent transaction. For example, maybe the additional cardholder made a purchase and you weren’t aware.

Or sometimes you might not recognise the merchant because their banking information is different from their trading name. A quick internet search might help.

The financial institution will more than likely place a stop on your card and issue a new one. It may take up to a week to replace the card, so in that time you’ll be left without a card.

Chances are that will be fine if it’s a credit card but it will pose more of a problem if it’s your everyday account and you need to access money. Talk to your financial institution about options for accessing money while you’re waiting.

If you have any automatic payments coming out of your account, make sure you contact the service providers to give them the new card number.

Follow up

The investigation process will vary between institutions and so will the time it takes to be resolved. It could be anywhere from 21 days to 90 days.

If your financial institution finds that you’re liable but you don’t agree, then you should complain to it in writing, outlining why the transaction was unauthorised and why you should not be held liable, says the Financial Rights Legal Centre.

Keep a copy of your letter. If it does not resolve your complaint within a reasonable time (for example 30 days), you should make a complaint to an external dispute resolution scheme such as the Australian Financial Complaints Authority.

 

Article sourced from https://moneymag.com.au/how-to-deal-with-credit-card-fraud

by Maria Bekiaris 

Important information

This information is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

13 common sense tips to help manage your finances

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Introduction

A few months ago Reserve Bank Governor Phillip Lowe provided four common sense points we should all keep in mind regarding borrowing to finance a home. (The Governor’s speech can be found here). I thought they made sense and so summarised them in a tweet to which someone replied that every checkout operator knows them. Which got me thinking that maybe many do know them, but a lot don’t, otherwise Australians would never have trouble with their finances. So I thought it would be useful to expand Governor Lowe’s list to cover broader financing and investment decisions we make. I have deliberately kept it simple and in many cases this draws on personal experience. I won’t tell you to have a budget though because that’s like telling you to suck eggs.

1. Shop around

We often shop around to get the best deal when it comes to consumer items but the same should apply to financial services. As Governor Lowe points out “don’t be shy to ask for a better deal whether for your mortgage, your electricity contract or your phone plan”. The same applies to your insurance, banking, superannuation, etc. It’s a highly-competitive world out there and financial companies want to get and keep your business. So when getting a new financial service it makes sense to look around. And when it comes time to renew a service – say your home and contents insurance – and you find that the annual charge has gone up way in excess of inflation (which is currently around 2%) it makes sense to call your provider to ask what gives. I have often done this to then be offered a better deal on the grounds that I am a long-term loyal customer.

2. Don’t take on too much debt

Debt is great, up too a point. It helps you have today what you would otherwise have to wait till tomorrow for. It enables you to spread the costs associated with long term “assets” like a home over the years you get the benefit of it and it enables you to enhance your underlying investment returns. But as with everything you can have too much of it. Someone wise once said “it’s not what you own that will send you bust but what you owe.” So always make sure that you don’t take on so much debt that it may force you to sell all your investments just at the time you should be adding to them or worse still potentially send you bust. Or to sell your house when it has fallen in value. A rough guide may be that when debt servicing costs exceed 30% of your income then maybe you have too much debt – but it depends on your income and expenses. A higher income person could manage a higher debt servicing to income ratio simply because living expenses take up less of their income.

3. Allow that interest rates can go up as well as down

Yeah, I know that it’s a long time since offical interest rates were last raised in Australia – in fact it was way back in 2010. So as Governor Lowe observes “many borrowers have never experienced a rise in official interest rates”. But don’t be fooled by the recent history of falling or low rates. My view is that an increase in rates is still a long way off (and they may even fall further first) – but that’s just a view and views can be wrong. History tells us that eventually the interest rate cycle will turn up. Just look at the US where after six years of near zero interest rates, official US interest rates have risen 2% over the last three years. So, the key is to make sure you can afford higher interest payments at some point. And when official rates move up the moves tend to be a lot larger than the small out of cycle moves from banks that have caused much angst lately.

4. Allow for rainy days

This is another one raised by Governor Lowe who said: “things don’t always turn out as we expect. So for most of us having a buffer against the unexpected makes a lot of sense.” The rainy day could come as a result of higher interest rates, job loss or an unexpected expense. This basically means not taking all the debt offered to you, trying to stay ahead of your payments and making sure that when you draw down your loan you can withstand at least a 2% rise in interest rates.

5. Credit cards are great, but they deserve respect

I love my credit cards. They provide me with free credit for up to around 6-7 weeks and they attract points that can really mount up (just convert the points into gift cards and they make optimal Christmas presents!). So, it makes sense to put as much of my expenses as I can on them. But they charge usurious interest rates of around 20-21% if I get a cash advance or don’t pay the full balance by the due date. So never get a cash advance unless it’s an absolute emergency and always pay by the due date. Sure the 20-21% rate sounds a rip-off but don’t forget that credit card debt is not secured by your house and at least the high rate provides that extra incentive to pay by the due date.

6. Use your mortgage for longer term debt

Credit cards are not for long term debt, but your mortgage is. And partly because it’s secured by your house, mortgage rates are low compared to other borrowing rates – at around 4-5% for most. So if you have any debt that may take longer than the due date on your credit card to pay off then it should be on your mortgage if you have one.

7. Start saving and investing early

If you want to build your wealth to get a deposit for a house or save for retirement the best way to do that is to take advantage of compound interest – where returns build on returns. Obviously, this works best with assets that provide high returns on average over long periods. But to make the most of it you have to start as early as possible. Which is why those piggy banks that banks periodically hand out to children have such merit in getting us into the habit of saving early.

Of course, this gives me an opportunity to again show my favourite chart on investing which tracks the value of $1 invested in Australian shares, bonds and cash since 1900 with dividends and interest reinvested along the way. Cash is safe but has low returns and that $1 will have only grown to $237 today. Shares are volatile (& so have rough periods highlighted by arrows) but if you can look through that they will grow your wealth and that $1 will have grown to $526,399 by today.

Source: Global Financial Data, AMP Capital
Source: Global Financial Data, AMP Capital

8. Allow that asset prices go up and down

It’s well known that the share market goes through rough patches. The volatility seen in the share market is the price we pay for higher returns than most other asset classes over the long term. But when it comes to property there seems to be an urban myth that it never goes down in value. Of course property prices will always be smoother than share prices because it’s not traded daily and so is not subject to daily swings in sentiment. But history tells home prices do go down as well as up. Japanese property prices fell for almost two decades after the 1980s bubble years, US and some European countries’ property values fell sharply in the GFC and the Australian residential property market has seen several episodes of falls over the years and of course we are going through one right now. So the key is to allow that asset prices don’t always go up – even when the population and the economy are growing.

9. Try and see big financial events in their long-term context

Hearing that $50bn was wiped off the share market in one day sounda scary – but it tells you little about how much the market actually fell and you have only lost something if you actually sell out after the fall. Scarier was the roughly 20% fall in share markets through 2015-16 and worse still the GFC that saw roughly 50% falls. But such events happen every so often in share markets – the 1987 crash saw a 50% in a few months & Australian shares fell 59% over 1973-74. And after each the market has gone back up. So, we have seen it all before even though the details may differ. The trick is to allow for periodic sharp falls in your investment strategy and when they do happen remind yourself that we have seen it all before and the market will find a base and resume its long-term rising trend.

10. Know your risk tolerance

When embarking on investing it’s worth thinking about how you might respond if you found out that market movements had just wiped 20% off the value of your investments. If your response is likely to be: “I don’t like it, but this sometimes happens in markets and history tells me that if I stick to my strategy I will see a recovery in time” then no problem. But if your response might be: “I can’t sleep at night because of this, get me out of here” then maybe you should rethink your strategy as you will just end up selling at market bottoms and buying tops. So try and match your investment strategy to your risk tolerance.

11. Make the most of the Mum and Dad bank

The housing boom in Australia that got underway in the mid-1990s and reached fever pitch in Sydney & Melbourne last year has left housing very unaffordable for many. This contributed to a huge wealth transfer from Millennials to Baby Boomers and some Gen Xers. Hopefully the current home price correction underway will help in starting to correct that. But for Millennials in the meantime, if you can it makes sense to make the most of the “Mum and Dad bank”. There are two ways to do this. First stay at home with Mum and Dad as long as you can and use the cheap rent to get a foot hold in the property market via a property investment and then using the benefits of being able to deduct interest costs from your income to reduce your tax bill to pay down your debt as quickly as you can so that you may be able to ultimately buy something you really want. (Of course, changes to negative gearing if there is a change to a Labor Government could affect this.) Second consider leaning on your parents for help with a deposit. Just don’t tell my kids this!

12. Be wary of what you hear at parties

A year ago Bitcoin was all the rage. Even my dog was asking about it – but piling in at around $US19,000 a coin just when everyone was talking about it back then would not have been wise (its now below $US6500) even though many saw it as the best thing since sliced bread. Often when the crowd is dead set on some investment it’s best to do the opposite.

13. There is no free lunch

When it comes to borrowing & investing there is no free lunch – if something looks too good to be true (whether it’s ultra-low fees or interest rates or investment products claiming ultra-high returns & low risk) then it probably is and it’s best to stay away.

Concluding comment

I have focussed here mainly on personal finance and investing at a very high level, as opposed to drilling into things like diversification and taking a long-term view to your investments. An earlier note entitled “Nine keys to successful investing” focussed in more detail on investing and can be found here.

Would you like to retire by 40?

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Many younger Australians are joining the Financial Independence, Retire Early (FIRE) movement. Is it right for you?

When you’re starting out in the workforce and building your career, retirement can seem like a long way away.

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

The stats don’t lie—Australians are staying in the workforce for longer and any thoughts of retiring early are becoming a distant dream for many of us1.

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

Popularised by US-based blogger Peter Adeney, better known as Mr Money Mustache2, the Financial Independence, Retire Early movement looks more closely at what makes us happy.

Changing your spending and saving habits

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

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

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

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

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

When it comes to saving, every little bit counts

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

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

But if this sounds too much like hard work, don’t worry. You don’t have to be quite so committed.

You could consider making some simple changes to your daily habits to reduce your spending and boost your savings.

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

How to light your FIRE and retire on your terms

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

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

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

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

1 Australian Bureau of Statistics – Retirement and Retirement Intentions, Australia

2 https://www.mrmoneymustache.com/about/

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Where the smart money is buying as property prices fall

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The next ‘it’ suburbs are often those where renovators are hunting for bargains.

Falling property prices are creating more opportunities for investors, first-home buyers and growing families considering whether to buy, renovate or detonate the dwelling in their dream postcode.

Analysis of the nation’s capitals shows pockets of value in prestigious postcodes, the next generation of inner suburbs ready for gentrification and outer-ring addresses offering good-sized land blocks and amenities.

Buyers previously squeezed out of the market by record high clearance rates and rising prices are being attracted back by lower prices, less pressure to make a decision and historically low interest rates, despite the recent round of increases.

Herron Todd White, one of Australia’s largest property surveyors, has surveyed streets and suburbs for early tell-tale signs of rejuvenation signalling bigger changes.

“It’s an excellent frieze of neighbourhoods on the grow – one weatherboard, brick or lightweight composite clad panel at a time,” says Shaun Thomas, HTW residential director. “A rising tide floats all boats, so as the housing quality elevates in your street, so too does your home’s underlying appeal and flow of equity growth.”

Renovate, relocate or rebuild decisions should be based on an assessment on the value of the existing property and what it will cost to transform into what is wanted, according to HTW director Chris Hincliffe. Then add on stamp duty, legal and marketing fees, moving costs and the personal effort involved to decide whether it stacks up.

Sydney

A well-renovated terrace in Thomson Street, Darlinghurst, recently sold for nearly $3 million about two years after being bought in its original condition for less than half the price.

Cheaper ways to add value to high-priced inner-city property is to utilise rear lane access for parking or add an attic-level bedroom or ensuite, says Thomas.

Duplex developments are increasingly popular along the south-eastern suburbs of Little Bay, Chifley, Malabar and Matraville because of close proximity to the city, surf, schools and shopping centres, he says.

The original houses, built between the 1940s and 1970s, are built on land blocks between 550 to 650 square metres and are good duplex sites.

Land and development costs typically range from about $1.6 million to $2.4 million.

Curl Curl, on the Northern Beaches, is also popular for high-quality renovations and knock-down rebuilds.

Blocks are 400 to 500 square metres and cost about $1.8 million to $2 million with rebuilds taking the final spend to about $4 million.

“Existing houses built in the 1950s and 1960s are generally less challenging to reconfigure than Federation properties,” he says.

Home extensions and granny flats are popular in the western suburbs, particularly as prices continue to slide. Popular suburbs include Lismore, Casino and Kyogle.

Melbourne

Buyers in the eastern suburbs are regularly demolishing post-war brick veneer family homes and replacing them with four- to five-bedroom houses with ensuite bathrooms and walk-in robes.

But falling markets mean there is a risk of over-capitalising, says Perron King, HTW director in Melbourne.

For example, a house bought in 2012 for about $760,000 in Balwyn, about nine kilometres east of Melbourne, was knocked down and replaced with a five-bedroom, three-bathroom mansion with a swimming pool and tennis court that sold for more than $3.4 million in 2018. But repeating the strategy in current markets in nearby Blackburn (where the average price is about $1.9 million) might be harder.

Inner-city Richmond, Brunswick, Collingwood, Abbotsford and Preston continue to be popular with renovators, investors and first-time buyers.

“The number of renovations is increasing as single and family homeowners do not want to move further north,” says King.

Semi-detached townhouses are popular around inner and outer south-east suburbs, such as Bentleigh East, for buyers seeking low-maintenance properties within commuting distance of the city.

The inner west, which includes Essendon and Moonee Ponds, are popular with renovators wanting to retain Victorian and Federation period features but ready to spend between $70,000 and $200,000 on upgrades, with an estimated one-third on new kitchens, according to the Housing Industry Association.

Geelong, about 65 kilometres south-west of Melbourne, has a varied stock of suburban housing and is becoming increasingly popular with commuters. Its suburbs, such as Geelong West, Drumcondra and East Geelong, are among the nation’s top-performing regional postcodes.

Brisbane

An influx of families from southern states seeking lower property prices and higher temperatures is boosting demand, particularly for the inner-ring suburbs of Annerley, Greenslopes and Holland Park, says David Notey, HTW Queensland director.

Annerley, about 5km south of the central business district, has plenty of detached houses suitable for young families that are “due some love”, Notey says. “The retail strip has a modicum of undiscovered cool and there are easy road connections through to the freeway and city,” he adds. Detached older properties selling around the $600,000-$700,000 mark offer a “chance to create a dream abode”.

Greenslopes, a similar distance from the city, has quality housing on generous suburban blocks, good shopping and reasonable transport.

There’s value around inner-city Paddington and Bardon “where you can usually get a bit more land for your dollar”.

Chapel Hill, about 7km west of the CBD, hosts an eclectic mix of housing that “provides interesting opportunities for those looking to upgrade as homeowners or investors”.

Perth

“There’s a good case for renovating in Perth as the four-year depression of prices is making properties significantly more affordable, especially for dual-income households,” says HTW’s Hincliffe.

Inner suburbs with median house prices of more than $650,000 for family homes are popular, he adds. These include Mount Hawthorn, North Perth, Wembley, Nedlands and Mount Lawley.

Sub-division of large lots and new builds is increasing.

Adelaide

Strong inner-ring performers include Norwood, Payneham and St Peters, says Natalie Patterson, HTW’s Adelaide residential valuations manager.

Dilapidated properties within easy commuting distance of the city can be bought from $500,000, renovated range from $700,000 to $900,000 while new builds typically range from $500,000 to $600,000, she says.

“There is plenty of upside available in a rising market for those looking to pick and flick,” says Patterson. “These properties are typically overlooked by developers because of heritage and planning restrictions and avoided by first-time home buyers who require some creature comforts,” she says.

Canberra

A buyback scheme of houses contaminated by asbestos has created opportunities for building in established suburbs.

Dozens were demolished, and the land is being resold to the market with scope for multiple dwellings.

Established areas such as Belconnen, Woden Valley and Tuggeranong, where the original homes were constructed between 1960 and 1980, are popular with renovators, according to Angus Howell, associate director in Canberra.

Blocks range from $350,000 to $1.5 million depending on size and location, says Howell. Unrenovated properties range from about $450,000 to $1.6 million.

Hobart

Rising property values are attracting many investors and renovators, says Andrew Peck, HTW Tasmanian director.

Unrenovated three-bedroom houses in northern suburbs such as Montrose are selling for about $325,000 and going back on to the market with new kitchens for more than $400,000, Peck says. “That’s worth the trip to Bunnings and some weekends with the drop saw,” he adds.

Darwin

Northern suburbs are a “hot spot” for mum-and-dad investors and first-time home buyers, says Darwin director Will Johnson.

Johnson claims prices have bottomed out and that there are opportunities to buy at “much more affordable” levels.

 

This article was originally published by The Australian Financial Review on 28 September 2018. It represents the views of the author only and does not necessarily reflect the views of AMP.