Innholdsfortegnelse for August 2016 i Money Magazine

‘Being good in business is the most fascinating kind of art. Making money is art and working is art and good business is the best art. ’ANDY WARHOL, ARTIST In June, prime minister Malcolm Turnbull made it very clear that the super changes were fair and locked in. But as we head to the printers it appears that not all his MPs agree with those “ironclad” budget proposals. There’s a push for exemptions from the $500,000 non-concessional lifetime cap for divorced couples, farming families and people who inherit money. Personally I’d like to see a backflip on the proposed drop in pre-tax caps. All this ruckus reinforces the fact that while the government can’t resist tinkering, so long as super remains tax effective it’s no reason for us to give…

Money is published by Bauer Media Pty Limited (ACN 053 273 546), part of the Bauer Media Group, 54-58 Park Street, Sydney NSW 2000. The trade mark Money is the property of Bauer Consumer Media Limited and is used under licence. Printed by PMP Moorebank 31 Heathcote Rd, Moorebank NSW 2170 IMPORTANT DISCLAIMER The information provided in this magazine has been obtained or derived from sources believed byMoney magazine to be reliable. However, Money does not make any representation or warranty, express or implied, as to its accuracy or completeness. We recommend persons making investment decisions contact their financial advisers. Bauer Media Limited, its related bodies corporate, and their directors and employees, do not accept any responsibility arising in any way (including negligence) for errors in, or omissions from, the…

‘The rogues have come up with new ideas to part you from your money’ Truly, at times it is pretty obvious to me why I am going grey. Age I am sure has something to do with it but after watching investors getting ripped off for decades in property schemes I really wonder when we will ever learn. I have been following property schemes for most of my 35 years as a commentator on money issues. In the 1980s and ’90s the most popular was the good old advertisement promoting seminars more or less along the lines of “get rich with $40 a week”. Victims would literally pour into these seminars, then be flown off to faraway places, be put on a bus and shown “property opportunities”. The genius back…

“I’m bored,” said my 12-year-old niece when I asked her how she was enjoying the school holidays. Using philanthropy as my theme, I challenged her to think differently about her situation, instead of focusing on how unfair it was that her friends had gone to Bali and Fiji. We talked about what it would be like to not have a warm house in which to read and watch movies. I shared with her stories of the charitable trusts I manage which fund children in state care to prepare for life as an adult and which assist the homeless through improved access to housing, education and employment. At Equity Trustees we see the value in involving the younger generation in giving through the establishment of a family charitable fund, which can…

The ATO has flagged a close interest in investment property tax claims as part of its compliance focus this year. It says it will look for excessive interest expense claims, such as where property owners have tried to claim borrowing costs on the family home as well as a rental property. It will also look at the incorrect apportionment of rental income and expenses between owners, such as where deductions on a jointly owned property are claimed by the owner with the higher taxable income rather than jointly. In addition, the tax office will look at holiday homes not genuinely available for rent. Rental property owners should claim only for the periods when the property is rented out or is genuinely available for rent. Periods of personal use can’t be…

Property remains an attractive investment, underpinned by solid macro-economic fundamentals. Lonsec Research believes that investments in traditional core sectors (retail, office and industrial property) will continue to provide stable returns. In particular, properties leased to high-quality tenants on long-term leases provide investors with a stable income stream and strong defensive characteristics. Yields (5%-8%) are attractive compared with bonds and cash. In particular, the CBD office markets in Melbourne and Sydney are expected to perform well over the medium term, due to strong white-collar employment growth and their relatively small exposure to the resource sector slowdown. While Melbourne has a limited supply of new office buildings in the near term, Sydney’s higher supply of prime office buildings is being tempered by the withdrawal of secondary stock, due to the metro rail…

Our low-interest rate environment is expected to continue. The aftermath of Britain's exit from the European Union is also still slowly being realised. Investors from around the world have already started looking for low-risk options as a safe haven and bull markets are emerging in precious metals. Gold has performed particularly well, with global investing firm Van Eck reporting the amount of gold held by global gold bullion exchange traded products has increased by almost 27% this year. It expects the bull market to continue until the end of the year but warns the sector is heading for an eventual price correction.…

‘ “I’d like to say I was sensible from the time I started earning but that’s not the truth ... I blew my first pay before I even earned it” ’ Janelle Goulding, chief executive of City West Housing, an affordable housing developer, has cleverly combined her industry experience and love for bricks and mortar to build a healthy property portfolio that has her on course to achieve financial security by retirement. Yet the 56-year-old is determined that retirement is decades away and there are still glass ceilings to shatter. Already Goulding has smashed through in the traditionally male-dominated construction and real estate industries, notably with her appointment as the first female general manager of an Australian building company, AV Jennings. Other career highlights include senior management positions at Defence…

I completely understand wanting to set up your children for the future – it’s never too early to start planning. Here are my tips: • Be careful about tax rates on unearned income for minors (under 18). They are subject to penalty rates of up to 68% on “unearned income” exceeding $416 a year – this includes income from investments (interest, dividends, rental income and capital gains) as well as most distributions from family trusts. These rules are in place to discourage adults from splitting their income and diverting it to their children. • Use a mortgage offset or redraw facility. Directing savings to an offset or redraw account will reduce the interest payable on your non-tax-deductible home loan. Over time, this should assist you to become debt free faster…

What is it? Take a walk by Melbourne’s picturesque Yarra River on August 28 to support people living with Parkinson’s disease. Starting and ending at Federation Square, walkers will follow either a 2km or 4km circuit. The event is open to all walks of life (even your four-legged friend) and is suitable for wheelchairs and prams. Registration for adults costs $45 ($55 if you pay on the day). Registration for dogs costs $10. All participants are encouraged to fundraise, whether walking alone or in a team. Where your money goes: All funds go to Parkinson’s Victoria, which provides information, education and peer support for people with Parkinson’s. The charity also supports research, hoping to advance the search for a cure. Every $25 contributed to team fundraising will go towards a…

‘To get a true picture, you may need to bring in the professionals’ You may think you know your customers pretty well and have a good sense of their satisfaction level. If you do your best to keep them happy and resolve complaints, you don’t need to get too deep about it ... or do you? Here’s a statistic that might get you reaching for the clipboard to do some research about how your customers really feel: only one in 26 unhappy customers ever complains, and 91% of the ones who don’t speak up take their business somewhere else, reports online news service The Huffington Post. This will be a real problem for those whose bread and butter is repeat business. And you don’t need me to tell you that…

There are a number of reasons you may want to cancel your credit card – you may have applied for a balance transfer or you may not need it any more – and there are a number of steps you need to take to make sure it is done properly. As the government’s MoneySmart website says, there is more to cancelling a credit card than just cutting it up. “If you don’t close your account properly, you could still be charged fees or penalties, even if you no longer use the card. You could also leave yourself open to undetected fraud if someone else uses your card without your knowledge,” MoneySmart says. One of the first things you should do is cancel any direct debit payments that are set up.…

‘Seek legal advice if you’re considering taking out a joint loan’ The housing affordability crisis for first-home buyers in Sydney and Melbourne has been a hot issue for a while now. Gone are the days when you could pick up an old home in the outskirts of Sydney for a few hundred thousand dollars. Now that the city’s overall median is around $1 million, how on earth are you going to afford a $200,000 deposit? While I’d be the first to admit that buying your first property in 2016 is not without challenges, I don’t believe it’s impossible. If you’re lucky enough to have a steady income, either from full-time work or casual work and good investments, you’re looking at some of the cheapest interest rates ever seen in this…

It should be fairly obvious by now that thinking about money the way most people do won’t make you rich, so now it’s time for me to explain the rules of money that the rich people use. Understanding and implementing these will help you get out of the rat race by taking advantage of the opportunities presented by the exciting times ahead. RULE 1 It’s your after-tax dollars that count Always think in terms of your spendable dollars, not your pre-tax income, because it’s only those dollars that you can really use to furnish your lifestyle. There are two tax systems in Australia and most countries, with business people, the wealthy and the financially intelligent paying less tax than average wage earners, who work a lot harder for their money.…

The good thing about super funds is that there’s something for everyone. For those looking for control, choice and flexibility there are self-managed funds (SMSFs) and for those who are cost conscious and want simplicity and low fees and want to support their industry, there are industry funds. Let me just say from the outset that returns should not be a consideration in choosing a super fund because they will vary from fund to fund and year to year. That said, there are ways to increase returns using gearing (in an SMSF) but that may also magnify the risk. So you need to understand what you’re getting into before you leap one way or another. Industry super funds appear to be cheap but there are plenty of retail funds, from…

An area that displays interesting growth prospects is obstructive sleep apnea and oxygen therapy. Fisher & Paykel Healthcare is a market leader in the humidification of gases for patients requiring respiratory support and may offer just the right combination of returns and value. Humidification is critical for patients requiring invasive ventilation, as the gases directly enter their lungs, bypassing the body’s natural respiratory system. Historically, ventilator manufacturers provided their own humidification devices with machines, yet the wide variety of patient needs made standardisation difficult. With an exclusive focus on humidification, Fisher & Paykel’s device is superior at delivering gases at optimal humidity. As it was embraced by hospitals, ventilator manufacturers opted to partner with Fisher & Paykel rather than directly compete, meaning it became the dominant humidifier in hospitals. This…

‘We expect shares to be higher in six to 12 months, not lower’ About this time of the year I usually feel a bit nervous about the sharemarket as it’s well known that the best time for shares is November to May and that the worst time is May to November – think the 1929 crash, the 1987 crash, the Lehman Brothers collapse, etc. Right now we are in the middle of the latter period. From its high point in April last year to its low in February this year, the Australian sharemarket had a 20% fall, taking it into bear territory. Since then we have had a decent recovery but it has failed to make new highs. So as we go through what has historically been a rough part…

EDITORIAL Chairman & chief commentator Paul Clitheroe Editor Effie Zahos Deputy Editor Maria Bekiaris Art Director Ann Loveday Deputy Art Director Tim Verrender Senior Sub-editors Bob Christensen, Lindsey Leathart Senior Writers Susan Hely, Pam Walkley Online Content Producer/Writer Steph Nash CONTRIBUTING WRITERS Chris Batchelor, Nicola Field, Ben Graham, Ross Greenwood, Sam Henderson, Greg Hoffman, Bryce Holdaway, Rod Horin, Anne Lampe, Roger Montgomery, Anthony O’Brien, Shane Oliver, Marcus Padley, Vita Palestrant, John Rawling, Terry Ryder, Annette Sampson, Michael Yardney CONTRIBUTING ARTISTS Yianni Aspradakis, Phillip Castleton, Christopher Crerar, Reg Lynch, Jim Tsinganos, John Tiedemann, Richard Whitfield PHOTOGRAPHS Getty Images ADVERTISING NSW & Vic Peter Balinski (02) 9282 8075 Queensland Nikkola Hogan (07) 3101 6636 South Australia Nabula El Mourid (08) 8267 5032 Western Australia Vikki Stacy (08) 9449 9908 PRODUCTION Controller Ian…

In the latest scandal to taint our big banks, the Australian Securities and Investments Commission (ASIC) is taking legal action against ANZ, NAB and Westpac for allegedly trying to profit by manipulating the bank bill swap rate. The swap rate is a key interest rate at which banks lend to each other for short periods, and is a benchmark for financial products such as currency derivatives, floating rate bonds and business loan rates. ASIC is suing ANZ, NAB and Westpac for unconscionable conduct and market manipulation. The banks allegedly manipulated trading to create an artificial price for bank bills and maximise their profits. The case is expected to come to court in the second half of 2017 and, if the ruling favours ASIC, ANZ could face a fine of $44…

The way you speak might be able to change your life. If things aren’t going quite the way you want them to, author Bob Selden says you should look beyond the typical excuses and instead question your attitude. Sometimes the words you use can be all it takes to boost (or reduce) your confidence. That might mean the difference between identifying and seizing opportunities, and ignoring a real chance at success. The power of your words can make a lot of difference and Selden’s Don’t can help you recognise which words and phrases are letting you down. STEPH NASH Ten readers can win a copy. In 25 words or less, tell us your favourite rags-to-riches story and why you like it? Send entries to Book of the Month, Money, GPO…

If you’re planning ahead, one of the expenses you may be thinking about is your funeral. One option to consider is a funeral bond, sometimes called a funeral investment. It is a managed investment that generates interest, which is then added to the investment to help pay for your funeral. The total amount is paid on death to your estate or nominated funeral director to cover funeral expenses. A funeral bond can offer peace of mind as you can assign the bond to a preferred funeral home or to your estate, and you will know exactly where you will be buried and what funeral services you will receive. At an emotional time, your family will not have deal with a financial burden as well. If a couple purchase two separate…

With the soaring costs of property in Sydney, Melbourne and Brisbane, real estate agency commissions have been growing fatter and fatter. To reduce the costs of selling prime real estate, there are now online options for consumers. Vendorable, launched in May last year, aims to give the power of negotiation back to the consumer by increasing competition among agents. Property sellers can post their listings to an online community of real estate agents who can then publicly barter with the seller for the best deal. OpenAgent works in the same way. These services haven’t proven to be quite the ground-shattering disruptors that they had hoped to be, which may be due to the reluctant participation of agents.…

Investors looking to buy into one of the year’s most hyped investment theme are not too late. Here are four shares geared to China’s growing consumer base that could do well: • Capilano Honey is an iconic brand with strong representation in the Australian grocery channel. A push into more value-added honeys such as manuka and other floral honeys provides a long-term growth opportunity leveraging Australia’s reputation for high-quality product. The launch of a new “honey-based” therapeutic product in the second half of the year, combined with a growing export business, underpins our confidence in the long-term potential for the business. • Freedom Foods has made significant investment in recent years to increase capacity to supply the market with a range of allergen-free cereals and snacks, muesli and a range…

NAME: Shannon and Glen Handley STATUS: Mid-30s with two young children, aged one and three QUESTIONS: What is the best way to make a big dent in our mortgage? How do we most effectively budget? What is the best way to set up our two young kids for the future? We are thinking of buying an investment property to help our kids – how do we go about this? ANSWERS: Rev up your mortgage repayments while interest rates are low and save a potential $190,000. Also pay fortnightly instead of monthly to save interest. Diversify away from property rather than buy an investment property. Exchange traded funds are diversified, low-cost funds that give you exposure to lots of companies. Take out life and TPD insurance. Use a mortgage offset account…

Q I am 45 and my wife is 41. We have four children under 13. I earn $125,000pa. My wife hasn’t worked for about 10 years while raising the kids. She is just starting to join the workforce again but it is on a casual basis and not very dependable at this stage. I have super of $625,000 (defined benefit scheme) and my wife has $95,000. We have a mortgage of $250,000 (the house is valued at $625,000). For some time we have been paying interest only on this loan, with the view of paying principal and interest when my wife goes back to work. Our credit card balance is $1900. We also have personal loan of $8600. Seven years ago we purchased an investment property for $435,000. As we…

QI am 42, a single mother, with two children aged 11 and 13. Child support is $90 a week. I earn $139,050pa (pre-tax including super). Two years ago I got divorced, had to sell my house and lost $500,000, which I couldn’t recover from and had to declare bankruptcy. Since then I have gone back to work, hired a nanny, paid off my required bankruptcy payments and tried to plan for the end of my bankruptcy. I have one year to go. How do I save for retirement from nothing? What do you suggest is my best way forward? I live in a house owned by my mother and pay her rent. You have been in the wars, Sarah. Divorce is stressful enough; add bankruptcy and it must have been…

I am 44 and my husband is 51. We are both teachers. I work part time earning $50,000 and my husband earns $80,000. We have three kids aged 14, 12 and 10. We owe $45,000 on our residence ($450,000 value) and currently pay $2000 a month towards it. We have an investment property with an interest-only mortgage of $160,000. It is valued at $230,000 and earning $280 a week rent (positively geared but as it is in a regional town we don’t expect much in the way of capital growth). To help our super along I am salary sacrificing $300 a fortnight (I have $50,000 in super) and my husband $600 a fortnight (he has $60,000). How can we set ourselves up for the future and retirement? Miranda Hi Miranda.…

Once your relationship is over, probably the last thing on your mind is sorting out the finances. But understanding how your money is managed and how your finances are arranged is vital. Ideally you want to be on friendly terms with your partner and be able to sit down to work out the finances. Being reasonable and collaborative is going to be much better in the long run than being acrimonious. Sometimes this means compromising. It can help speed up a property settlement rather than letting it drag on. The quicker it settles, the earlier you can start a new life. In the meantime, as soon as the relationship ends, follow these steps: • Close joint bank accounts. You need to separate your money so your partner can’t access it.…

Investors thinking of buying a Melbourne, Brisbane or Sydney apartment should be very cautious. And those considering buying off the plan should delay plans for at least a year. A glut of new high-rise apartments plus a drop-off in foreign buyers means prices are under pressure and are expected to fall further. And our apartment building boom is not even over yet, with real estate analyst CoreLogic predicting completions will peak next year. Over the next two years, about 231,000 apartments will be completed, compared with average annual sales of 108,000 a year over the past five years. This could lead to a spate of bargain-price apartments if investors walk away from settling on units that are worth less at completion than their contract prices. The inner-city areas of Melbourne…

Invest in the world’s most liveable city, Melbourne (or Sydney, Brisbane or Perth), and earn Qantas points, the ad screams. Use tax rules to your advantage. Come to our seminar and we’ll show you how. It’s so easy. All residential property is a good investment, right? You’d think so hearing property spruikers ad nauseam warn that you will miss out if you fail to act now. We’ll start you on your first investment property, they promise, and build a portfolio for you over the next three or five years. Soon you will be the owner of multiple properties and never look back. The property investment seminars are “obligation free” and the spruikers jump out of their skins with enthusiasm. It all sounds so easy. Just come to the seminar, listen…

There is an investment mantra that has been doing the rounds since 2009. It goes like this: Markets are unpredictable and unusual. The best way for investment managers to respond is to be unconstrained by frameworks such as strategic asset allocation. Instead they need to invest flexibly across the various asset classes in pursuit of returns, guided loosely by investment objectives. A number of investment managers have set up funds that they call “objectives based”, claiming they are doing something radical and new, though this style of investing has been around for many years. These funds are the opposite of multi-sector managed funds that have fixed asset allocations to shares, bonds, property and cash. Investors, particularly retirees or those close to retirement, lost faith in multi-sector managed funds after the…

‘The golden rule is to have a binding death nomination’ Sometimes the simplest question makes you sit up. A reader wanted to know how to claim her spouse’s super death benefit. It sounds uncomplicated until you drill down and discover how many things can go wrong. Fortunately for her, her claim was straightforward because her spouse had done all the right things. The super death benefit is made up of the member’s account balance and the insured amount. What, then, is involved in making a claim? Paul Schroder, AustralianSuper group executive for membership, says 69% of claims are paid within four months of initially lodging the forms. “For a claim where a spouse is the only claimant, payment could be made within a couple of weeks. For claims where there…

ROBO CHRIS BRYCKI Founder and CEO of Stockspot, an automated investment adviser and fund manager Robo advice, or automated investing, uses algorithms to automate the manual tasks a human adviser or a broker would do. Processes such as regular portfolio top-ups and rebalancing, risk management and tax reporting can be done automatically by a robo-adviser without added costs and the hassle of travelling to a physical location for an appointment. One of the main problems with traditional financial advice is the humans behind it and the structure of the industry they work in. Remuneration is a huge problem, as we have seen repeatedly from the recent bank scandals. Advisers or their employers get paid from the financial product they’re selling; as a result, the products many advisers recommend are not…

Cochlear (COH). Although trading on a high valuation, the company has been successfully launching new products such as the Cochlear Baha 5 SuperPower Sound Processor, which is due to be launched in its major market, the US, shortly, providing a tailwind for earnings growth. CSL (CSL). CSL has delivered strong earnings growth from its pharmaceutical business although the short-term outlook is clouded with challenges. Overall CSL is well placed with a strong product pipeline, large scale of operations and investments in large clinical studies, which support its positive longer-term outlook. A solid exposure for investors seeking the strength of a blue chip and a stable biotech player. Ramsay Health Care (RHC). This global hospital operator goes from strength to strength. With plans to expand into Asia, this represents the next…

Zero interest rates is perhaps the most important issue that faces us. In the past month, 10-year bond yields in Germany, the UK, Switzerland, France, Denmark and Sweden have fallen to historic lows. The US 10-year treasury note has fallen to a new all-time low yield below 1.4%. Japan’s 20-year bond yield has fallen below zero for the first time. There is now $US11 trillion ($14 trillion) invested globally at negative returns. Low or no interest rates threaten to become one of the biggest investment issues we will have to handle over the next decade, an issue that is being largely ignored because it will only manifest slowly. In Australia we are somewhat nonchalant about the issue because our rates are still high by global standards. The Reserve Bank left…

It has been 25 years since Australia last experienced a recession. Only the Netherlands has eclipsed that record – it went 26 years from 1982 to 2008. But we are on track to take the crown and our winning streak has made us a prosperous nation. Given such a track record, why would a local investor move some investment dollars offshore? The reasons come down to managing risk and seeking opportunity. The local sharemarket is highly concentrated in resources and financial services. Outside these sectors an investor’s opportunities are limited. On the risk side, our good economic fortune is unlikely to last forever. It makes sense to hedge that risk by buying high-quality businesses in other markets. Does the success of our economy translate into the equivalent success for our…

MARCUS PADLEY Marcus is a stockbroker with MTIS Pty Ltd and the author of the daily share market newsletter Marcus Today. Marcus says: “The obvious comment is to say do something sensible like invest it. But if it’s unexpected it’s a bonus we don’t need. Time to live a little. A holiday with the family. Thanks tax man!” MICHAEL YARDNEY Michael Yardney is a property commentator, CEO of Metropole Property Strategists. Michael says: “I would use my refund to pay down any bad debt such as credit or store card debt, or to pay down my non-tax-deductible home loan debt.” ANNETTE SAMPSON Annette has written extensively on personal finance and she has written several books. Annette says: “It’s really easy to fritter away a windfall like a tax refund so…

In my many conversations with self-managed super fund (SMSF) specialists and trustees since the election, one strong message keeps coming through: leave the system alone. Specialists base client advice on the rules of the day, and trustees make their decisions accordingly, so there is increasing frustration when politicians tinker with the system. Although no super system can or should be set in stone, enshrining its underlying principles in legislation would help remove uncertainty. This has been the SMSF Association’s long-held policy position, so we were greatly encouraged when the Murray inquiry recommended this policy and the government and opposition concurred. What’s needed now is a bipartisan approach to ensure this legislation is enacted soon. Removing superannuation from the budgetary cycle would be another positive way to encourage public support for…

Keeping up with your bills can be a major headache. In the digital age, your mobile and internet bills are just the start of your expenses. On top, you’ve got all of your subscription services: music, television and movies as well any cloud sharing or storage services you’ve signed up for. It can be hard to keep track of small bills, and it’s surprising how much extra you can spend in a year if you’re constantly paying late fees. Avoid bill shock by downloading the Bobby app, an easy-to-use bill tracker. Spotify, Apple Music, Vodafone, Netflix and Dropbox are all on there for you to fill in how much you owe and how often you’re billed. For any services you can’t find, you can create a customised bill. You can…

Your mobile phone is your essential travel buddy. You need Google Maps to navigate, social media to check in with friends and family and a browser to learn everything you need to know about the country you’re visiting. Trouble is, using data while you’re overseas can be very expensive, so it’s important to conserve data when you can. • Turn off notifications and background data. When you’ve finished using an app, close it immediately to avoid creating a backlog. You should also turn off your social media notifications to save data. • Pause your synchronising services. When you’re not using hotel wi-fi, turn off the instant synchronisation of your storage cloud and your emails. It’s also smart to switch off any auto updates for your apps or software. • Use…

While we focus on building up our super while working, wealth creation is not over as soon as we retire. There are many steps we can take after we start drawing down our pensions to maximise our retirement income and keep that money working long after we have hung up our working shoes. Here are some tips: • Make the most of your tax advantage. Currently pension phase super is tax free and receives a full refund of franking credits attached to Australian dividends. Make sure you maximise the value of franking credits, including taking advantage of tax-effective buybacks such as the recent Caltex buyback. If you invest via a managed fund, make sure the fund is managed from your tax perspective. And don’t be afraid of realising capital gains,…

Recent market volatility doesn’t seem to have hurt Australia’s share-clearing monopoly (the government plans to open it to competition). The average value of shares traded on the ASX was up 5% in June compared with last year, and 8% in the 2016 financial year. Derivative volumes were up 17% in June and 8% for the year. Since our original upgrade in 2012, ASX’s share price is up 61%. Including dividends, total returns are over 80%. ASX is now past our $45 “buy” price, trading on a price-earnings ratio of 21.5 and a fully franked yield of 4.2%, based on the $2.18 earnings per share expected for 2016 and an anticipated payout of $1.96. That’s attractive, but we’d like to see it a bit cheaper before upgrading this quality business once…

By buying a home at a level where repayments should be well within their budget, Shannon and Glen have made a good start on reducing mortgage stress. And as long as they have a clearly defined budget and stick to it, setting themselves and their children up for the long term is quite achievable. A key objective is to optimise home loan repayments, particularly while rates are low. It’s important to weigh up how much extra they can allocate while ensuring they still “live”. Often people become obsessed with paying down their home loan at the expense of enjoying life (in a reasonable manner). If minimum home loan repayments are maintained at current rates, over 30 years interest payable is $353,000. By changing payments from $2400 monthly to $1200 fortnightly,…

Q With the end of my marriage and all finances sorted, I’m left with military super of $60,000 and $10,000 in my current employment. I salary sacrifice 10%, which is about $213 a fortnight. I’m 53 with a shared mortgage. If I leave things as they are, will my savings grow enough for me to be comfortable by 65 or should I increase deposits in super and go for an interest-only loan? Well, Peter, at a 53 you have many years of investing ahead. I like what you are doing now. I imagine that the shared mortgage will be well under control by the time you hit 65. The salary sacrifice of a bit over $100 a week is critical. I had a play with the super calculator on the…

OUR EXPERT PANEL Should I pay off my mortgage or invest? It’s a question Money is commonly asked and right now, with rates at rock bottom and rental and dividend yields on the slide, you may think it’s a no-brainer – put everything in the mortgage to have a guaranteed rate of return of around 4% versus an unknown rate for shares, property or super. But as our three experts show, that’s not entirely correct. In fact, you could be as much as $2.5 million better off over 30 years with another strategy. Each expert focuses on a different approach – Bryce Holdaway, from Empower Wealth, looks at buying an investment property; Sam Henderson, from Henderson Maxwell, explores putting it in super; while Ben Graham, from Graham Financial, tackles investing…

Investing instead of paying off debt is, in effect, a decision to have more debt than would otherwise be the case. The more debt you have, the riskier your situation is. So the first question you really need to answer is: what’s an appropriate level of debt for your personal situation? Unfortunately, Australian households are the most indebted in the world and this has led to a pretty casual approach when it comes to assessing what is a reasonable amount of debt to be carrying. Variables that will determine appropriate debt levels include age, current and future income, health, current and future tax situation, retirement goals, job security and, of course, tolerance of risk. These factors can be difficult to quantify but there are some basic rules of thumb we…

In the US you can lock in your mortgage for 30 years at 3.29%. Here we’re a little more reluctant to fix our home loans beyond five years (10 years is the maximum a lender would offer). You could argue that we are a nation of risk takers, preferring to be carried by the market, but I say it’s got more to do with the fact that we’re just plain scared of committing. And rightly so! RateCity research shows that over the past 20 years variable rate borrowers were better off than those who opted for a fixed rate 63% of the time. If it weren’t for interest rates on investment loans increasing because of APRA’s crackdown, then I too would have been caught out on locking in my investment…

SHOULD I PANIC YET? A week is a long time in politics and there are still plenty of them between now and November when the US election will be held. But with Trump looking set to secure the Republican nomination (Money’s deadline just missed the vote at the convention) it’s probably time to give the possibility, as unlikely as it may still seem, some thought. BUT SURELY HE CAN’T WIN? To most of us outside the US (and to many Americans) a Trump victory seems inconceivable. And at last count he was still trailing Democrat Hillary Clinton by a substantial margin in most polls, though one – by Rasmussen Reports – had Trump ahead by two points. But, as with the Australian election, there was still a substantial core of…

While many of us prioritise staying on top of mortgage payments – for a home or investment property, sometimes smaller debts really sneak up on us. Australia’s credit card debt sits at a staggering $32 billion. For a cardholder, that means more than $4000 in debt on average and interest payments of $700 a year. Needless to say, many are looking for smarter ways to borrow. Some personal loans offer similar features to credit cards, such as a debit card facility and redraw flexibility. But unlike a credit card, a personal loan has a fixed term, so the debt must be cleared in that period. And the interest rates on personal loans are typically lower – some have an 8.26% comparison rate. Those under credit card strain should investigate their…

Pros • This is an opportunity to get some facts and figures (but treat them with suspicion) and learn about possible investment strategies. Also you can meet other people who are in your position and swap ideas. Cons • High-pressure sales tactics can mean you end up with an overpriced property that is hard to rent out and, if things go badly wrong you could lose a lot of money. My call • Always inspect the property yourself before buying and research its local market. If it is in another city, you are better off paying the travel costs to make your own assessment rather than taking the spruiker’s word for it. For example, if the property is in Perth and you are on the east coast, ask yourself why…

How do you boost the income on share investments for retirees? One way is to take advantage of the highest-yielding dividend system in the world. Australian shares enjoy credits for the tax already paid by the company – a flat rate of 30%. If you are on a personal rate of 15% – as with superannuation funds – or if you are over 60 and in the pension phase and pay no tax, you can claim a refund. Yields on the S&P/ASX 200 companies are in the 4.5%-5% range and most of them tend to generate franking credits of 1.5%, says Morningstar’s Tim Murphy. This means that the grossed-up yield for an investor getting a pension from their super is more than 6%. One way to turbocharge your dividends is…

There is nothing left to buy. That’s got to be a worrying sign. Blue chips aren’t blue any more; chasing dividends is a mug's game; interest rates are too low to make a difference; property is apparently poised to fall. And mining –well, let’s not talk about mining. Where the hell do we put our money? After all, we’re told to save more and to try to make the money grow. But how do you build your wealth when wages growth is close to a record low and prices are merely crawling along. You might not like this idea – and you have to be a very careful about slavishly believing the numbers – but my thought is to follow the footsteps. By this I mean watch where population is…

The stockmarket is a “chaotic hive of millions of people who overpay for hope and underpay for value”, according to author Jason Zweig. And if that somewhat tongue-in-cheek definition is true anywhere, it’s in the market for floats. These are companies that investors are buying directly from their previous owners rather than from other sharemarket investors (sometimes boringly but descriptively called “initial public offerings” or IPOs). Happily, there are a couple of rules of thumb that will steer you in the right direction when you are considering such an investment: Rule 1: Always consider investing in floats resulting from a government asset being sold. It matters a lot who the seller is. In fact, it’s probably the most important factor. And history has shown that businesses moving from government hands…

In past columns we have investigated businesses that come from the same sector or industry. But we don’t all classify businesses the same way. It’s hard, for example, not to get a little frustrated shopping in a supermarket. The Vegemite and jam are nowhere near the butter and milk, or anything else that you might usually have with breakfast. Part of the reason, of course, is that the supermarket wants you to travel the longest possible route, because you will inevitably put additional items into your basket that you weren’t planning to buy. The other reason is that we all file and categorise items differently anyway. While I might think it is logical to put the bread next to the spreads, someone else might think it should be near the…

Ross Greenwood Ross has covered finance and business topics in Australia and overseas for more than 30 years. He is Channel 9’s business and finance editor, appearing daily on Today, and host of Money News on 2GB. In London Ross was editor-in-chief of the British weekly magazine Shares and a regular commentator on BBC television, CNN, Sky News and Bloomberg. Ross, who loves travelling and golf, lives in Sydney. What was your first job? I was a chemist shop delivery boy. It was a great job. Far better than my next job as a newspaper delivery boy. The lesson from this job is that you must invest in your equipment. My bike let me down terribly. My poor father, having to collect his son from the other side of town…