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FINANCIAL
A FEW WORDS FROM OUR TEAM...
CBD Level 2, 62 Pitt St Sydney
Bondi Suite 2201, Level 22 Tower 2, Westfield 101 Grafton Street Bondi Junction
Balmain Level 1, 442 Darling St Balmain
NEWS FROM THE OFFICE Welcome to the Winter edition of the Financial Spectrum newsletter. It seems we have blinked and half the year is already over! The hot topic around Australia at the moment is the booming property market. We look at what’s happening around the country and what our experts think the future holds.
THE MANAGEMENT TEAM
Brenton Tong & David Hancock
Remember that the team are always here if you have any questions or concerns. You can contact us on 1800 886 018, or via Facebook or Twitter. F: www.facebook.com/FinancialSpectrum T: @financialspectr Keep warm this Winter!
Did you
All the best,
know ?
The Financial Spectrum team.
That we have 3 offices across Sydney!
//AUSTRALIA’S PROPERTY BOOM P. 04
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Real estate is a hot topic at the moment with high prices setting new records.
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// MAKING THE MOST OF REDUNDANCY P. 06
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Psychologists compare the level of stress experienced as similar to that of a marriage breakdown.
// ECONOMIC UPDATE P. 08
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The latest news from the Australian and global economy from economic experts.
OUR TEAM JULIE HALL
MELANIE TARABORRELLI
KATHLEEN ASTOR
Julie is responsible for managing the finances of our ever growing business. You may have already heard from her, she will be your go to person should you have any queries regarding payments or your accounts. Julie comes to us from Fairfax where she was responsible for managing their Treasury division.
Melanie has been with us since 2012 having joined us from her role at NAB Financial Planning. She has a passion for numbers and heads up the Paraplanning team which is responsible for the research and analysis of our financial and investment strategies. Melanie is a whiz on the computer and has flair for patient home renovating. You’ll often find her on the other end of a phone call or email solving your problems and helping you to keep your plan on track.
Kathleen is a veteran at Financial Spectrum of which many of you will know, being part of our team since 2007. Kathleen is a highly valued member of the Paraplanning team being responsible for research, analysis and production of our financial plans. Kathleen has developed exceptional customer service skills with our clients often singling her out for Christmas presents and extra chocolate at Easter. Kathleen is a keen traveler and is always up for an adventure.
// WHEN THE KIDS WON’T LEAVE HOME P. 10
// ASK AN ADVISER! P. 12
// ENJOY THE WINTER MONTHS P. 14
COMPANY ACCOUNTANT
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With the high cost of real estate and renting, combined with the high cost of living, many young adults are continuing to stay in the family home.
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SENIOR PARAPLANNER
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Have a question that you’d like to ask one of our financial planning experts?
PARAPLANNER
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The short, cold days make it hard to get motivated to leave the house during winter.
AUSTRALIA’S PROPERTY BOOM Real estate is a hot topic at the moment with high prices setting new records. But what are the real figures and what do our financial planners think the future holds for property? The talk on everyone’s lips at the moment is the current property boom. Treasurer Joe Hockey controversially made comment to the apparent lack of housing affordability for the average Australian and added fuel to the controversy fire.
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The latest median house prices released earlier this month show the upward trend for most parts of Australia:
Median House Price Rise Jan - Mar 2015
Residential Property Prices (Mar 2014 - Mar 2015)
Australia-wide
$658,608 (+2.4%)
Sydney
$929,842 (+4.9%)
+13.1%
Melbourne
$688,000 (+3.5%)
+4.7%
Darwin
$625,000 (+6.8%)
-0.4%
Canberra
$560,000 (+0.7%)
+3.0%
Perth
$535,000 (-2.7%)
-0.3%
Brisbane
$475,000 (-1.5%)
+3.9%
Adelaide
$425,250 (+0.1%)
+2.5%
Hobart
$382,500 (+6.3%)
+1.9%
Source: Bendigo Bank-REIA Real Estate Market Facts.
The steep rise in housing prices in Sydney is of particular concern to RBA governor Glenn Stevens who described pockets of the market earlier this month as “crazy”. Treasury secretary John Fraser shares similar views, stating that he believes the city is “unequivocally” in a house price bubble. Fears of further stoking house price inflation in Australia’s big cities has made the RBA reluctant to further cut the cash rate again, despite persistent sluggishness in the Australian economy. But are we in fact in the midst of a price bubble? And if so, what impact should we expect this to have in the coming few years for the property market? Some leading experts believe that we are in a bubble and heading toward a correction in the next two to three years. Our team believe that housing is showing some bubble-like features but it is lacking a trigger to cause it to burst. The most likely scenario is that Sydney and Melbourne prices will see a price correction in 2016/2017. We don’t foresee a dramatic decrease in property prices over that time, but rather a stagnation in the market with a slight easing in prices due to slowing migration, weaker investment returns, a significant increase in supply and worsening affordability. With the increasing amount of uncertainty in the market, it’s wise to have a chat to one of our financial planners before you decide to buy or sell. Give us a call on 1800 886 018.
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MAKING THE MOST OF REDUNDANCY Being made redundant can come as a shock. Psychologists compare the level of stress experienced as similar to that of a marriage breakdown. But for many people, redundancy can be a positive. Depending on what point you’re at in your career and life, redundancy will have a different impact. If you’re close to retirement, the added lump sum can be the extra sweetener when heading into retirement, or can give you an extra few years of retirement. For younger workers, redundancy can be more of a challenge however it can be a prompter for assessing your career with many taking the opportunity to retrain or take a different path. So, you’ve been made redundant. What now?
1. CHECK YOUR PAYOUT
3. CHECK YOUR ENTITLEMENTS Contact Centrelink to see if you are eligible for income support or help with finding a job. Centrelink offer employment services to help you get back in to the workforce as soon as possible. While you’re looking for work, (or studying or training), there are a number of income support payments available which may suit your situation such as the Newstart Allowance. It’s important to note however, that if you have taken a termination payment, you may be subject to a waiting period before you can receive payments from Centrelink.
The first thing you should do is to check the redundancy payout figures with an accountant or one of our financial planners. The way that redundancies are taxed changed a couple of years ago and some smaller employers may not have kept up with the changes.
4. HAVE A DAILY ROUTINE AND STRUCTURE
2. BUDGET AND CUT BACK
If you’ve recently been made redundant, it’s a great time to reassess your financial future. Get in touch with one of our financial planners so we can help you to get a clear map for your future.
You should also draw up a budget and identify where you can cut back on expenses. While it’s possible that you may find a new job soon, you should prepare for several weeks and possibly months without new income. Use your redundancy payout wisely.
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If you’re towards the end of your working life and are considering taking an early retirement instead of looking for another job it is extremely important that you seek some expert financial advice to help you map out the coming years.
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Update your CV, get active on social media such as LinkedIn, and check employment websites. Keeping busy will help you stay in a positive frame of mind.
ECONOMIC UPDATE THE LATEST IN AUSTRALIAN ECONOMIC NEWS....
THE LATEST The latest in the Australian economy. Source: Australian Economic Perspectives, CBA. The Greece Saga It has been a ‘roller-coaster’ ride in the global markets over the past week as the Greek debt saga has impacted on markets’ nerves. Greek government debt is currently equivalent to $330.8 billion USD (or 174% of GDP). The political uncertainty in Greece will likely continue to undermine the EUR and keep global markets jittery in the coming few weeks. At the time of writing the AUD has eased by 1.2% to 0.758 USD. The Greek economy has limited economic ties with Australia, accounting for 0.26% of global GDP. From a relative perspective, Greek GDP (at $246bn USD) is equivalent to around 16% of Australian GDP. The major concern with Greece’s economic problems has been the potential for contagion to other larger economies such as Italy, Ireland, Portugal and Spain. 8
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These economies account for 3.9% of world GDP and have a two-way trade with Australia worth $12bn. The considerable economic reforms in these economies however, leave them much less exposed to Greece than in 2010. IMF spill over research shows that Australia is less exposed than other countries to Eurozone problems, partly because of our Asian focus. The analysis shows that a 1% shock to Eurozone/UK GDP has a negligible impact on Australian GDP growth.
Did you know
Australia was the 2nd country in the world to give women the vote (NZ was the first)
$AUD $1AUD = $0.77 USD
CURRENT CASH RATE 2.00%
Current as of 25th June 2015.
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WHEN THE KIDS WON’T LEAVE HOME With the high cost of real estate and renting, combined with the high cost of living, many young adults are continuing to stay in the family home. The latest figures show that over 29% of young adults aged 18-34 continue to live at home with their parents. According to Curtin University’s latest study, this is costing parents around $30,000 each year or around $600 per week. The high numbers of children staying at home, or who leave home and come back, have coined the term “boomerang children”. The main culprits are mounting debt (credit card and student loans), as well as the high cost of living and real estate. There is a large generational change from the baby boomer era of the 1950s and 60s. Adult children tended to get married at a younger age and lived with family and saved money for their own home. Though it may not be easy with adult children in your home, with clear boundaries in place, it can be a positive situation from both sides. With so many parents footing the cost of their stay at home adult
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children, their own retirement plans are being jeopardised. Here are some of our top tips for living with boomerang kids:
1. SET THE GROUND RULES BEFORE THE MOVE Before the move back into the family home (or when your child reaches adulthood if they’ve never left home) it’s important to set some ground rules and expectations. These will be different for each family and household so tailor them to suit you and your situation. Some things you might want to consider are setting clear rules and expectations on contributions to the household by your child - both monetary and behaviours such as chores around the house etc. Setting clear rules will prevent a lot of heartache in the future.
2. AVOID ENABLING It’s all well and good to help your children out financially, but you need to be careful that you’re not enabling your child to remain irresponsible and stifling their own launch into adult life. A recent study indicates that almost 70% of baby boomer parents have helped an adult child
with student loans, and more than 50% have helped with a car loan or allowing them to live at home rent-free. If you have decided to help your adult child out financially, you need to ensure that they are looking for a job, or making an effort to further their career prospects. Helping them out financially if they’re not trying to help themselves can exacerbate their “failure to launch”.
3. ENCOURAGE THEM TO SAVE Consolidating expenses through living at home can really help adult children get on their feet. For this to be successful though, they should be encouraged to use this time to save as much as they can.
ASK AN ADVISER! ASK ANY QUESTIONS, WE WILL ANSWER...
Q
My husband and I are retired and living off our Super which was converted to an income stream and a partial pension from Centrelink. How do we now deal with an inheritance of $130,000? - May, Drummoyne -
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Thanks for your question May. Ideally the best thing for you to do would be to take this opportunity to review your overall position and get some specific financial advice which is appropriate for your personal situation. In general terms though, I would be considering your future expenditure, your appetite for risk, and your goals to work towards a plan for how to manage this injection of funds. In Australia, superannuation is one of the best vehicles to accumulate and hold wealth with the generous tax concessions but it would all depend on the other areas I have mentioned.
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Have your own question? Ask our experts! Tweet us @financialspectr
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As a young, newly married couple, what could a financial planner offer us? My parents are trying to encourage us to see one but it’s my impression that financial planning is all about retirement. - Sam, Earlwood -
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Thanks for your question Sam. There are lots of ways that a financial planner can help young couples by improving their savings and their financial security for the future. We have lots of young clients in their 20s and early 30s who are in a similar position to you. Some things we like to assist our younger clients with are helping them get a competitive mortgage, budgeting for a family, setting a plan for investing, ensuring they have suitable income protection etc. There are a huge amount of options available to younger people that can have a material impact on your financial prosperity that you may not be currently aware of. The earlier you see a professional financial planner the better. Being young means that decisions now will have a greater impact on your finances when you’re older. I’d encourage you to come and meet with one of our planners.
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ENJOY THE WINTER MONTHS The short, cold days make it hard to get motivated to leave the house during winter. But why waste 3 months of the year waiting for the weather to improve?
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Here’s some inspiration of great things to do during the winter months:
1. GIVE YOUR BRAIN A WORKOUT Watching TV is a favourite winter past time, but did you know that your brain is less active while watching television than whilst asleep?! Crossword puzzles or sudoku are a good alternative to sitting in front of the TV for too long. You might also want to consider taking a short course at your local community college or TAFE and learn some new skills.
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2. KEEP MOVING
3. EMBRACE THE COLD
With the cooler months comes the tendency to be less active. With less exercise this has a range of effects including weight gain. Did you know that moderate exercise actually boosts your immune system? Keep moving and keep your health! If you can’t get outdoors, try some great workouts indoors. There are free workouts available on YouTube, or try a cost effective membership to a website such as DailyBurn.
One thing winter is good for is the snow season. If you enjoy skiing, take a trip down to the ski fields and embrace the cold! If the snow isn’t your thing, you might also like to consider a trip to the Blue Mountains which is famous for its Christmas in July festival. Otherwise, avoid the cold all together with a trip to North Queensland or the Northern Territory where it’s warm all year round!
F I NA NCIAL S P E CTRUM CBD Level 2, 62 Pitt St Sydney P. 02 8238 0888 Balmain Level 1, 442 Darling St Balmain P. 02 8238 0888 Bondi Suite 2201, Level 22 Tower 2, Westfield 101 Grafton Street Bondi Junction P. 02 8238 0888