Newsletter Summer 2014 Welcome Welcome to another edition of the Financial Spectrum quarterly newsletter. We hope you enjoy this edition! As we wrap up another year, we’d like to thank you for your support over 2013. The past year has been a great one for Financial Spectrum, and we look forward to even bigger and better things to come in 2014. Our annual Christmas email will be arriving in your inbox soon. Until then, best wishes to you and your family all the very best for a wonderful Christmas and a happy, prosperous new year.
In this issue... > Latest Australian economic update covering capital investment growth, the latest employment figures and interest rates. > Financial tips for single parents > Loans—to fix or not to fix > Christmas around the world. How different cultures around the world celebrate Christmas
The Financial Spectrum.team
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Economic Update
Housing construction on an uptrend
Interest rate outlook
Construction activity in the housing marking is increasing solidly, indicating that we are experiencing a residential construction upturn. On average, a typical residential construction upturn adds 2ppts to GDP growth over the usual 2 to 3 year cycle. And, there are big second round effects of residential construction spending. According to the Australian Bureau of Statistic, every $1 spent on residential construction generates $1.31 worth of spending elsewhere in the economy. In addition, every $1 million spent on residential construction generates 17 full time jobs.
The RBA left the cash rate unchanged earlier in November at 2.5%. Global growth is running a bit below average this year but should pick up next year. The domestic economy is growing a bit below trend and is expected to continue as is over the coming term. Inflation is expected to remain within the 2-3% target range over the next couple of years. Economists are predicting that the current 2.5% cash rate will be the low point for the cycle. The RBA’s preference is for further stimulus to come via a lower Australian dollar rather than further rate cuts.
The Australian Dollar— Dollar— 30 Years of Floating This month marks 30 years since the Australian Dollar was floated. Since then, the value of the AUD has been determined by supply and demand in international money markets. Since 1983, the Aussie dollar market has developed significantly and today is one of the most actively traded and liquid currencies in the world.
AUD outlook The Australian dollar is currently trading 7 US cents lower than it was in late October. Over the medium term, economists are predicting that we will get a lower AUD. When the inevitable process of asset purchase tapering begins in the US, the AUD should fall accordingly.
In an ever-changing and complex world, seeking professional advice can help guide you through the maze. We invite you to contact us to explore the opportunities available to you.
Call your adviser today on 02 8238 0888 Source: Commonwealth Research, Australian Economic Perspective.
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Financial Tips for Single Parents
Making ends meet as a single parent can be tough. Our experts offer their best tips. Keeping on top of the weekly expenses can be hard enough for dual income families. For single parent families, it can be even harder. There are the bills that seem to get more and more expensive, as well as the extra hidden costs of raising a family like school excursions etc. If you’re a single parent struggling to make ends meet, here are a few financial tips tailored just for you by our financial planning experts:
Our top tips for single parents > Differentiate needs from wants When money is tight, you need to make sure that you’re separating your needs from your wants. Needs are essential (e.g. housing, food, utilities etc.). Non-essential expenses such as entertainment, restaurant meals, etc. are wants. When trying to cut down on your spending, you need to ask yourself “do I really need this?” before making a purchase. This simple question can help you to sort out needs and wants and can help you keep your budgeting on track.
> Make sure you’re receiving all you’re entitled to Centrelink offers a number of benefits to single parent families. Just some of these entitlements include:
> Eating Healthy Many people think that eating healthy is more expensive than take-away options, but eating well is possible on a tight budget. Fresh fruit and vegetables are GST free. Meat is more expensive so try to eat more vegetarian meals where you can. When you do buy meat, consider using a slow cooker to help you make the most of cheaper cuts. Embrace leftovers with some clever recipe ideas that you can find online. As the old saying says “waste not, want not”!
> Entertainment on the Cheap Keeping the kids entertained doesn’t need to cost a fortune. Did you know that your local library probably offers a range of DVDs for hire, as well as toys for younger children. An outing to the beach or park is virtually free and is a great way to get the kids out and enjoying the sunshine. Check websites such as www.ellaslist.com.au for lists of free activity ideas in your area.
> Protect Your Family As the sole income provider for your family, it’s imperative that you look at insurance options for protecting your income. Life insurance, disability/trauma insurance and income protection will all offer peace of mind for you and your family. Your should also make sure that you review your estate plan and keep your will up to date.
Centrelink Benefits for Single Parents Parenting Payment
Income support for payment or guardians to help with the cost of raising children. To be eligible for this payment you need to meet an income and assets test.
Child Care Benefit
Helps with child care costs such as long, family or occasional day care, outside school care, vacation care and kindergarten. To be eligible you need to be using approved or registered care and meet an income test.
Child Care Rebate
This payment covers 50% of out of pocket child care expenses, up to a maximum amount per child each year. To be eligible you must be eligible for the Child Care Benefit , use approved care, and meet the work, training or study test. (This is NOT income tested)
Family Tax Benefit
The FTB is a 2 part payment (Part A and Part B) to help with the cost of raising children. This payment is income tested.
This card gives low income earners access to cheaper Low Income Health prescription medicines and various concessions from government Card and private organisations. This card is income tested.
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Find out more For more information about how to get ahead financially as a single parent, have a chat to one of our financial advisers. We can help you to plan a budget, consolidate your debts, identify and implement your insurance needs, and consolidate your superannuation. What’s your opinion? Click here to join the discussion on our Facebook page
Chat to one of our financial planners today to get some help in managing your single parent income and raise your family.
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Loans: To fix or not to fix? How to decide whether to fix your home loan
With the official Reserve Bank interest rates at their lowest in decades, many people are questioning whether now is the time to fix their loan. In truth, no one really knows (not even the experts!) what the Reserve Bank of Australia (RBA) will do with interest rates each month. Regardless of whether rates are going to go up or down from where they are now, before you make a decision, you should carefully consider the advantages and disadvantages of fixing your interest rate.
Advantages of fixing your interest rate If you pick the right time to fix, the obvious advantage to fixing your interest rate is that you get to lock in an interest rate despite rising interest rates. In addition, you will know what your repayments will be for the fixed period (you can usually choose fixed rate periods of between one and five years). If you manage to time it right, you can make big savings on your loan by locking in a lower interest rate over the long term.
Disadvantages of fixing your interest rate Of course, as with all financial decisions we need to make there are disadvantages to consider as well. Clearly the largest disadvantage is during an economic downturn—borrowers who have a fixed loan continue having to make repayments at the fixed rate even if the variable rate drops to lower levels. During an economic downtown, interest rate changes give borrowers some breathing space by reducing the cost of their repayments. If you have fixed at a higher rate you won’t have that luxury. Generally, the fixed rate is higher than the standard variable rate. In addition, establishment fees are often charged. You need to weigh up whether the potential gains to be had by making savings if interest rates rise might be enough to offset the additional fees that might be payable. Another point to consider is that when you fix your loan, you are locked in for a set period of time (the length depends on the term and will effect the interest rate). If you need to break the loan before the fixed rate term expires you could face some hefty penalties and charges.
How to choose whether it’s the right time to fix A lot of borrowers think that it’s better to pay a higher interest rate and fix than to stick with variable and risk potential rate rises. But you should never just compare fixed and variable rates when trying to make a decision. The average variable rate over the coming 3 years (or whatever rate term you’re considering fixing for) is the best indicator of whether fixing could be the right decision for you. Unfortunately, no one has a crystal ball to foresee what variable rates will be over any large amount of time. On past results however, there have only been 3 periods since 2000 when choosing to fix for a term longer than 2 years was a good move. These occurred at the end of 2001 (following September 11), in 2006 and in early 2009 due to the drastic reduction in interest rates following the Global Financial Crisis (GFC). With rates currently at their lowest level in many years, now could be another one of those occasions but only time will tell.
So… what now If you’re considering changing to a fixed rate, you need to think carefully and do your homework. Life is all about the decisions we make and no one can make the decision for you. Of course, we’re always here to help guide your decision making process. Our in-house expert mortgage broker James is only too happy to discuss the options for you so please feel free to give him a call to discuss your situation on 02 8238 0888.
What’s your opinion? Click here to join the discussion on our Facebook page
Need help deciding whether to fix your home loan?
Give our in-house mortgage broker James a call today on 02 8238 0888
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Christmas Around the World How the world celebrates the festive season
Beyond the annual Christmas silly season of shopping, parties, and the anticipation of holidays, Christmas still has the power to bring people together in the spirit of goodwill. The practice of exchanging gifts has become a large tradition around the world and one of the essential parts of Christmas. It’s hard to trace the origins of this tradition but gift giving may have originated with the Three Wise Men who brought gifts of gold, frankincense and myrrh to baby Jesus. It can also be attributed to St Nicholas who evolved in many European countries into the modern day idea of Santa Claus.
Of course, in Christian countries around the world, each culture as adapted its’ own special traditions to celebrate Christmas. Here are a few examples from some different nations around the world:
UK In Britain, groups of serenaders called “waits” travelled from house to house singling Christmas carols on Christmas Eve. These 19th Century “songs of joy” are still some of the most beloved Christmas songs.
Greece In Greece, forty days of fasting precedes a Christmas feast which always features a “christopsomo” or Christ Bread. These large, sweet loaves are shaped and engraved with images that reflect the family’s profession.
China In China, paper lanterns decorate a “Tree of Light” while children wait for a visit from Dun Che Lao Ren—the Christmas Old Man. India In India, mango and banana trees are decorated and small oil-burning lamps light the edges of rooftops as special Christmas time decorations.
Despite the differences in traditions from nation to nation, they all have one thing in common—they bring families and friends together. However you celebrate this time of year, whether you believe in Christmas or not, we all wish you and your family a wonderful holiday season. We hope you enjoy this special time with your loved ones. Copyright © 2009 Financial Spectrum Pty Ltd
Iraq In Iraq, families gather around lighted candles as children read the Christmas story. Afterwards, a bonfire made of thorn bushes is lit. If the thorns burn to ashes, good luck will follow in the coming New Year. When the fire goes out, each person jumps over the ashes three times and makes a wish.
Important Information: Information This document has been prepared by Financial Spectrum Pty Ltd (ABN: 30 149 141 971) as is current as of November 2013 but may change without notice. The information contained in this newsletter is of a general nature and does not take into account your personal needs and financial circumstances. Before making any decisions based on the advice contained in this booklet you should consider whether it is appropriate for your circumstances.
Spectrum Wealth Advisers is the holder of an Australian Financial Services Licence (AFSL 334400).
Copyright © 2013 Financial Spectrum Pty Ltd
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