Innholdsfortegnelse for May 2022 i Money Magazine

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THE BUZZ This price increase could be rather hard to swallow The temptation of a baristacrafted brew is one I give into daily. But for some, the morning coffee ritual may come with a shot of budget anxiety.  An average “cup of Joe” could cost cafe goers $7 by the end of the year, according to David Parnham, president of the Cafe Owners and Baristas Association.  As with other price-inflated goods, this sentiment has been linked to surging freight costs and supply chain issues brought on by the pandemic and amplified by conflict in eastern Europe. Devastating drought, flooding and frosts have also impacted the world’s largest coffee exporters, such as Brazil, where production has fallen by an estimated 30% over the past year.   You don’t want to picture dirt…

Alan and his young son are considering insurance bonds as an investment Greatest value is the financial skills acquired at a young age Q My teenage son has shown interest in investing some money earned from working a part-time job. We have had some discussion about options and one that we touched base on was insurance bonds. I cannot find a lot of information regarding how many companies still offer this or rates of return, etc, but I wondered what you could tell me about the pros and cons? Are they a viable option given that the returns would be tax free if held for 10 years? If they are not viable anymore, do you have any other suggestions that my son and I could consider? It is great that…

Paul, I featured in one of your issues in 2019 with my wife Melissa regarding a possible property investment in regional Western Australia. Sadly, my marriage has ended and I am back in the big city. I used the money from my divorce to pay off all my debt and am starting again. I own half an investment property, have been gifted a house from my parents and have roughly $4000 in savings, $1500 in shares and add money to these each fortnight. I earn roughly $140,000 a year and have $150,000 in super. I am 37 and have two kids, 8 and 6. What should my strategy be to ensure I can navigate the remainder of life and be in an excellent financial position at the other end? Nathan…

Key change from July 1 New arrangements are due to come into effect from July 1, 2022 that allow your credit report to be flagged to show a hardship arrangement is in place. This is when a lender has agreed to adjust or defer your repayments because of illness, a relationship breakdown or a natural disaster along the lines of the east coast flooding we’ve seen in recent months. This is a plus for consumers because at present credit reports may only show missed repayments without highlighting that this occurred with the lender’s approval. Financial hardship information will be removed from your credit file after 12 months so it won’t have a lasting impact on your credit score.…

It was a warm spring day on Shelter Island, New York, when two renowned authors, Kurt Vonnegut (Slaughterhouse-Five) and Joseph Heller (Catch-22), found themselves at a party at the palatial second home of a hedge fund billionaire. Perusing the opulent surroundings, Vonnegut mused to his friend with a hint of melancholy, “Joe, did you know our host only yesterday may have made more money than your novel has in its entire history?” Heller took a moment before replying, “Yes, but I have something that he will never have. The peace that comes with knowing I have enough.” Whether the billionaire felt he had “enough” was irrelevant. The point is that when faced with the prospect of feeling inadequate in the face of someone else’s relative success, Heller saw beyond what…

A golden rule for any sort of personal insurance is to read the fine print to understand what you will be covered for. This is especially the case if you have a family history that suggests you could be susceptible to a particular illness or medical condition. Data for claims paid by AMP Life (now Resolution Life) indicate that in 2020, breast cancer was a leading cause of claims for women across trauma, income protection and life insurance. So how the condition is defined in a policy is important. Some policies may only pay a benefit if breast cancer reaches a particular stage. Others require a major procedure such as a mastectomy to be undertaken before the full payout is made.…

Tax law is complex, so it’s always worth speaking to your accountant or registered tax agent to be clear on what your business can claim in the run-up to June 30. With this in mind, here are five ways to make the most of year-end business expenses to trim your business tax bill. 1 Pay employee super contributions before June 30 Employee contributions owed under the superannuation guarantee (SG) can be paid quarterly, though some super funds, awards and private contracts require employers to pay more frequently. As a guide, the Tax Office notes that super contributions accruing from  April 1 to June 30 don’t have to be paid until July 28. However, making payments before June 30 can supersize business tax deductions. SG payments need to be received…

Financial advice may have its primary goal as boosting your financial wellbeing, but it can deliver benefits that go beyond dollars and cents. Fidelity’s The Value of Advice report from 2019 found that among Australians who had received financial advice: • 89% say it has given them greater peace of mind financially. • 86.2% believe it has given them greater control over their financial situation. • 71% believe it has generated more value to them than it has cost. • 49.9% say their mental health has benefited.…

Craig Sankey, head of technical services and advice enablement at Industry Fund Services, says people tend to have what is called a “present bias”. That is, they would rather settle for a smaller present reward than wait for a larger future reward – unless, of course, you can demonstrate otherwise. “This is widely known in economics and has real-world implications,” he says. “Take saving for retirement. Small contributions to your super now can mean a much larger pay-off down the track.” Sankey says this is primarily because of the following benefits: Compounding interest – the sooner you start the better, as compounding returns can result in an exponential growth in your balance. Income tax savings – if you contribute to super before tax, say through salary sacrifice, you do not…

The takeover deal-making for undervalued Australian companies has been in full swing this year. But if interest rates rise later in the year, it may be harder to make the takeover arithmetic work. Cashed-up companies, private equity firms and some large superannuation funds are combing through listed and unlisted businesses, looking for opportunities to acquire. “Money is everywhere,” says Simon James, a partner at HLB Mann Judd’s advisory and audit business. Competition is intense, with bidders lamenting the lack of good investment prospects and having to pay premium prices. Even Warren Buffett, with a war chest of billions, has struggled to find something to buy. It has taken the investment maverick and founder of Berkshire Hathaway six years to make a move. He has picked up Alleghany, the holding company…

Pros • You benefit financially if the company performs well. • It could motivate you to stay longer with the company. • You may be able to buy shares at a discount on the current market price. • You may not have to pay a brokerage  fee when you buy or sell shares. • You could get tax benefits, depending on the features of the share scheme and your financial situation. Cons • There are likely to be limitations on when you can buy or sell shares. • If you’re paying for a share package over time, you might have to pay it off before you can sell the shares. • You may have to give back or sell your shares when you leave the company. • Your share package could…

It’s a brave person who bets against Macquarie. The “millionaire’s factory” has a wonderful track record and aligned management and staff. Insurers have a lot of ground to make up to convince me they’re ahead of the curve on premium pricing. Our banks face an uncertain future, with risks and rewards reasonably finely balanced. Given the attractiveness of funds management (growing savings and super, plus a high probability of long term-market value growth), this should be a fertile, though not risk-free, hunting ground. Given that potential, the diversified “house of funds”, Pinnacle Investment Management, has the right combination of upside and diversification to be this year’s Best in Breed in financials.…

Our eight-year-old asks lots of questions about time travel. Would I rather travel to the future or the past? And why? Of course, that was the set-up so he could say what he would do, and why. He’d travel back in time to the original Christmas Eve and give his (limited) savings to Mary and Joseph so they could get a hotel for the night. Nice, although that would have changed the future narrative a little. Many of us (or our children) will be asking similar questions if there is a major equities correction in the future, particularly if we are nearing or actually in retirement. If we could travel back in time, would we implement a hedge against such an event? The answer to that question is that we…

I have to respectfully disagree with Phil Slade’s article, “Why nice people often finish last” (March 2022). Phil needs to check his male privilege when highlighting his own experiences with negotiating. Research consistently demonstrates that women are penalised for initiating negotiations, as women are more likely to be deemed competent based on their likeability more so than their work output or skills. Implicit gender bias more likely helped Phil’s negotiations rather than any actual skills in that area. The more accurate title would have been “Women always finish last”. Pretty disappointing to see this rhetoric in The Women’s Issue”.…

OLIVIA GEE Senior journalist “Journalism requires constant human interaction, so I’d want a side gig outside that interpersonal maelstrom. And after two years of intermittent lockdowns, I’d like to be outdoors. Dog-walking is a natural fit. It can be done during lunch or after hours, and your clients will only demand pats and the occasional treat. Groups like Mad Paws and Pawshake can match you with local canines and their humans for regular paid strolls.” TOM WATSON Senior journalist “My first ever job as a teenager was refereeing football matches on weekends. Now while the prospect of dealing with the occasional passionate sideline commentator (think vocal parent) doesn’t thrill me, I’ve always loved the idea of dusting off my whistle and getting paid to run around outside again. After all,…

BOOK OF THE MONTH FIND, BUILD, SELL: HOW I TURNED A $100 BACKYARD BAR INTO A $100 MILLION PUB EMPIRE Stephen J. Hunt (Wiley, RRP $29.95) In this inspiring dishwasher-to-pub-mogul story, author Stephen Hunt passes on his wisdom on how to develop your brand with a good dose of humour. Clearly the best man for the job (he’s won awards for Outstanding Business Leader and Most Innovative Businesses in Australia and New Zealand), Hunt sets out a roadmap to help you turn passion into profit, unlock the value of your business, build your resilience and sell your vision. Along the way you’ll find out how to build a loyal team and why you should hire slow and fire fast. DEBBIE DUNCAN Five readers can win a copy. In 25 words…

Co-founder of ebike pioneer Zoomo. Devotes considerable time to developing and expanding the business. Aged 33; lives in south Sydney. First job was as a waiter in a seafood restaurant. Believes in trusting his gut instinct when it comes to recruiting, relationships and people. “If you have a really good feeling about someone, I think that is something you can’t ignore.” Personal pursuits include weightlifting and CrossFit; spends a lot of time with friends, family and a new dog.…

Picture this: you earn a decent income, you’ve saved hard, and now you’re ready to apply for a home loan. But the lender knocks you back. The reason? You have a poor credit score Whenever you apply for credit – be it a home loan, credit card, a new mobile phone account or even a new energy plan, the provider will likely check your credit score. It’s a number – either out of 1000 or 1200 – which offers an at-a-glance indication of how well you’ve handled debt and credit in the past. Clearly, there’s a lot riding on your score, so it pays to keep it in great shape. Yet Credit Simple, a credit reporting agency, found a whopping 65% of Australians don’t know their credit score. Even more…

Small businesses in the dark A healthy credit score can be just as critical for small businesses looking for competitively priced finance as it is for individuals. But research by small business lender OnDeck Australia shows more than half of small business owners (53%) are unaware that a credit scoring system applies to the business community. There is a way to check business credit scores. In 2016, OnDeck launched a free Know Your Score online business credit score calculator. It’s powered by Equifax and so far more than 20,000 businesses have used the calculator. “In the past two years, the number of scores delivered to small businesses has risen by 60%,” says Cameron Poolman, CEO of OnDeck Australia. “This suggests increased awareness among small business owners that their enterprise has…

Financial hardship can happen to anyone. You can have a great job one day but personal circumstances, such as an illness or an accident, can take it away in an instant. A small business that was once thriving could feel the pinch in an event of a natural disaster. Even milestones that are worth celebrating, such as the impending birth of a child, can also cause financial strain. But as a wise friend once said, there is a season for everything. Financial hardships can simply be seen as temporary setbacks in life that can be averted if handled correctly. Mortgage stress We all suffer from financial stress at one point or another, but for banks and lenders the alarm bells ring when you only have 5% or less of your…

why do we undervalue opportunity? The answer is simple. What we can do about it, however, is a little more complex. W undervalue opportunity because our basic survival instinct is biased toward avoiding negative outcomes. In the early 1970s, two psychologists, Daniel Kahneman and Amos Tversky, observed something peculiar while investigating people’s gambling behaviour. They were interested in gambling because it seemed to fly in the face of the popular economic theory that we are all rational actors doing things primarily to advance our own self-interest. What they found is that we tend to only take a gamble when the reward on offer is at least twice as large as the potential loss. People will risk $50 on the toss of a coin if the potential win is at least…

T ash, a friend, had no intention of sending her three kids to a private school for a whole host of reasons. First, there was the cost. But then there was the ideological issue of private versus public. She hadn’t gone to a private school and had done well. Tash argued that she lived in a good area with plenty of aspiring residents who cared passionately about their kids’ education. Her son, Finn, was a high achiever: sporty, academic and school captain in his last year at his public primary school. Finn didn’t have special needs or any considerations that would change her mind about public schooling for her son, but the public high school didn’t work out. After a problematic and unhappy first year, she switched him to a…

Australians love property, and not just their homes. Many also see investing in property as a great way to build wealth. If you’re a landlord, the yearly tax claim is a way of maximising returns. It’s important to claim all you are entitled to, but it’s equally important to get it right. Property investors are always on the radar of the tax office because we’re talking big bikkies – more than 1.8 million Australians owning rental properties claimed $38 billion in deductions in the 2019-20 financial year. With the clock ticking down to the end of 2021-22, property investors still have time to make sure they score the maximum deduction possible: 1 Consider prepaying interest and other expenses before June 30 to claim the deduction in the 2021-22 year. This…

Deeply embedded in Australians’ psyche is the annual scramble to maximise tax deductions before June 30. Yet super’s more generous tax breaks are ignored. A likely explanation is that retirement seems a long way off, so why bother now? Independent financial adviser Nick Bruining, a director of Bruining Partners, says people fail to understand just how advantageous the tax breaks are. “I don’t think people grasp it. You often see their jaw drop to the floor when they realise they get a tax break just for putting money into super,” he says. “You can load up as much as you can, within the rules, and know that once you ultimately get to retirement, it’s all tax free. Every dollar that comes out of super is tax-exempt income, and you don’t…

This month I want to address a common question being asked by investors – how long could high and higher prices last? The short answer is potentially a very long time. Over the past 30 years, the world economic system has experienced an unprecedented positive shock to the supply of global labour. The effective labour supply for the world’s advanced economy trading system more than doubled over the 27 years from 1991 to 2018. The future is unlikely to be the same! So why did the labour pool double and what impact did it have? First, the rise of China meant it more than doubled the labour supply for the production of tradable products among advanced economies. Supply and demand economics suggest that when supply doubles, price is the adjusting…

If you ignore a takeover, you may ultimately get swept up by compulsory acquisition once the bidder gets beyond 90% ownership. If you don’t respond, you’ll have to wait longer for your money. It is best to pay attention to what is happening and accept the offer. Not all takeovers are welcomed by the board, particularly if they are considered “low ball”. Boards often reject takeover bids, which are called hostile offers. A hostile takeover is an offer from a group that your company’s management rejects. It recommends that shareholders don’t accept this first offer. Some companies have shunned bids and their share prices have fallen sharply. Corrs estimates around 15% of takeovers were hostile in 2020 and 2021. To avoid a hostile takeover, the targeted company will take defensive…

Unlisted start-ups are able to compete with listed ASX companies and overseas companies by offering their non-executive employees (referred to as non-C-suite) bigger incentives, bonuses and more equity in the business. Start-ups will be able to offer an unlimited number of shares of unlimited value as long as the employee is not charged more than $30,000 for them, up from the previous cap of $5000. Employees can accrue unexercised options over five years, up to a maximum of $150,000. By removing these regulatory barriers, it will be easier for a viable but cash-poor business to hire employees with ESS offers, in addition to wages.…

It was a decidedly downbeat mood at this year’s Roth Capital Partners conference in California in March. With the sun shining and with meetings scheduled in person for the first time in three years, you might have expected smiles and laughter. But for most CEOs in attendance, a bit of sunshine and socialising did little to offset the declines in their companies’ share prices over the past year. After all, it’s been a brutal year for many of Roth’s clients – typically smaller, rapidly growing companies for whom it’s not uncommon to be down 70% or more from their 52-week highs.  When a colleague asked one business’s CEO what he thought about an acquisition that his company made this time last year, he responded: “I paid $200 million for it…

Performance after investment fees. Investment returns after investment fees annualised to describe each fund’s returns per annum. But if your managed fund achieves a high return and charges you an extra “performance fee”, Rainmaker has not taken this into account. Past performance is not an indicator of future performance. Rank. Funds are ranked against all managed funds in each segment, not just those included in each table. Indices and averages. Arithmetic average investment returns or average fees for all fund investment options within each category, that is, not fund size weighted.…

You’ve made a lot of money. Why are you still working?  A lot of people think that when you have your own business, that’s when the work stops, but sometimes that’s when the work begins. I don’t think I’d like to retire. That is something that’s a fair way off for me. Hospitality is an important part of my life and, by the way, loving your job is crucial to success.  What was your first job?  Working for my parents. I did a lot of gardening, washing and cleaning up at home. I saved a few grand after a couple of years despite the fact that they weren’t good payers – but that’s what every family does.  At least you knew they wouldn’t fire you Well, I didn’t know. Sometimes,…

One of the most intense times in a game of tennis is the match point. This is when a player only needs one more point to win the match. Conversely, it is also the time when one false move can be costly.  In applying for a home loan, that “match point moment” is when the lender looks at your credit score. You can have a huge cash deposit in your bank account and a well-paid job, but a patchy payment history can come back to bite you. In our cover story this month (page 32), we show you how to make sure your credit score is in top shape.  Meanwhile, we understand that with the cost of living going up, any tips on how to increase your income or reduce…

I distinctly remember the first issue of Money magazine hitting the newsstands back in 1999. At the time I was almost done with my four years of study to become a certified financial planner and was working for a large bank. That same year, my husband and I bought our first home and it looked like we were on a path to wealth creation. Career path in a growth industry … tick. Double income, no kids … tick. Lives full of possibility … tick. Fast-forward 22 years and I am still an avid Money reader. Looking back on all the experiences I’ve had in personal finance and investing, here are my five lessons. 1. Wealth is more than the money we possess This year marks my 23rd year as…

Thanks for getting back in touch, but that is not news I am happy to hear, Nathan. I hope that the divorce was as amicable as possible and that things are going well with your two children. This will not have been an easy period for either of you, or the kids, so good on you for taking stock and looking forwards. At 37, even starting with absolutely nothing is quite okay. The two keys to success with money are time and a good job. You have both of these. Even better, you have a very solid base to grow from. Half an investment property and the gift of a house from your parents puts you in an excellent position to build a plan for financial independence. You were well…

If you have a solid debt sitting on your credit card, a balance transfer deal can sound tempting. And there are plenty up for grabs, often with 0% interest on the sum transferred for up to three years. But sweet card deals can leave a sour taste, and balance transfer offers have the potential to damage your credit score in two ways. First, each time you apply for a new credit card the lender can make an enquiry with a credit reporting agency. This leaves a footprint on your credit file that can stay there for five years. So if you switch cards every year, you could easily end up with five enquiries on file, and that’s going to lower your score. The real danger zone can lie in the…

It’s bad enough that women face a gender pay gap approaching 14%. But the $255 average weekly pay difference between women and men can be eaten up by the so-called pink tax. It refers to the higher prices women can pay for some products and services, especially personal care items. However, gender-based price discrepancy isn’t limited to toiletries. When it comes to insurance, women can face higher premiums. But on some types of cover, it is women who pocket the savings rather than men. Life cover Life insurance is one area where women can pay lower premiums. And there’s a simple reason: women generally live longer. According to the Australian Bureau of Statistics, women have a life expectancy of 85.3 years, while the average for men is 81.2. A difference…

1. Visualise the loss. What is the worst that can happen? If you play this through in your mind and you realise you’ll be okay, then it takes the sting out of loss. This allows for a more emotionally balanced space in which to judge whether the opportunity is worthy of investment. 2. Learn to recognise and control your emotions. Fear, anxiety, anger, love and excitement are strong drivers of decisions. Try to recognise what is going on and keep your emotions at a manageable level. You can’t get rid of emotion, but you can reduce its intensity. 3. Always have an exit plan. If you accept the opportunity, always have a clear exit strategy if things don’t work out as planned. If you’ve jumped onto a sinking ship, always…

One way to save some serious money is to live in the right catchment area for a good, highly ranked public school. Schooling can often dictate where families buy or rent property. This means that if you plan to move into the school zone, you need to buy or rent a property within the boundary and have proof you have been living in the catchment area for a certain period before the school year begins. The most straightforward way to enrol your child in a good public school is to buy a home in the catchment zone. But there’s a catch: often good schools are in well-established suburbs with high property prices and a higher sociodemographic population. This means that properties are well out of most people’s price range and…

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If you and your spouse or partner are with different super funds, there is the possibility that speaking to your respective funds as individuals could result in conflicting advice, creating unnecessary confusion. The solution, says the FPA’s Marisa Broome, is to seek advice together, as a couple, that covers your whole circumstances. “It’s not just about your super,” she says. “You may have other investments, and in the de-accumulation phase you need to get advice together if you’re going to share your money in retirement.”…

1 Pendal Focus Australian Share Fund This actively managed portfolio of Australian shares exhibits high-conviction ideas (15 to 30 stocks) to deliver higher alpha. It aims to outperform the S&P/ASX 300 Accumulation Index over five years or more. In our view, the team can undertake in-depth research across the market capitalisation spectrum to uncover an informational advantage relative to other market participants. 2 Fidelity Australian Equities Fund Invests in a diversified selection of around 30 to 50 Australian companies, using a bottom-up stock selection approach that focuses on undiscovered earnings potential, value and growth and is designed to be a core holding. It aims to achieve returns in excess of the S&P/ASX 200 Accumulation Index over the suggested minimum investment time period of five to seven years. 3…

If the 2008-09 GFC and the 2017 banking royal commission taught us anything, it’s how vital and impactful the financial sector is. And, in Australia at least, if the aftermath of both has taught us anything, it’s how bulletproof the sector has been, so far at least. Which is one version of the story. The other, of course, is to look at the trouble that some of the international banks got themselves into: crumbling, being acquired, quasi-nationalised and/or still carrying the scars of GFC. That, and the weight of the resultant tightening of regulations, including the need to hold more capital – which lowers the potential return to be made by shareholders, but hopefully also makes collapses less likely – have meant many international investors continue to think twice before…

Performance after fees: When calculating fees, Rainmaker assumes a member has $50,000 in their account. Strategy: Some MySuper products invest your superannuation based on age and are known as lifecycle funds (marked LC). The table includes the LC option for 40-year-old members. Non lifecycle funds are known as single strategy (S). Rank: Funds are ranked against all MySuper investment options available in Australia. Indices and averages: To produce these indices, Rainmaker analyses the results of more than 3300 investment options.…