Innholdsfortegnelse for August 2022 i Money Magazine

FROM THE EDITOR EDITOR’S DESK If I could swap places with someone for a quick second, it would be with Tom Cruise. No one else could fly in the face of the pandemic the way he did last month with a movie that pulled a record $1 billion in box office tickets. His financial pay-off from Top Gun: Maverick was obscene - $US67 million ($98 million) and counting. While not all of us can be Hollywood stars, there are still ways to make hay even in the most uncertain of times. In our cover story, “Build your defences” this month (page 32), we go through your pressing concerns (inflation, falling property prices and low super returns, to name just a few!) and show you how to shift gears. We’re also giving…

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COST OF LIVING Treats are off the menu In these inflationary times, NAB research reveals how Australians are making their money go further - and one of the first things to be cut is nonessential spending. NAB found one in two of us is switching to cheaper brands and 44% are skipping or cutting back on “micro” treats such as takeaway coffees, snacks and lunches. Three in 10 have cancelled major purchases, such as a TV, fridge or washing machine, and many have cancelled, delayed or adjusted their travel plans. On the plus side, the study shows close to half of us (43%) have started using a budget and are keeping better track of spending. “We know many Australian households are already feeling cost-of-living pressures,” says Rachel Slade, NAB group…

Fact file George Peppou Co-founder and CEO of tech start-up Vow Food, which is making cultured meat in the laboratory. Age 31; lives in the inner Sydney suburb of Redfern. Peppou’s first invention as a kid was an expanding measuring stick so that his grandfather could gauge the distance between town bowling balls. His attitude to life is to be curious and pathologically optimistic. He cured his fear of heights by taking a mountaineering holiday in France. He would like to learn welding. His best advice came from a mentor, Sarah, who said he either had to become a business founder or shut up rather than be indecisive. Describes his work life balance as poor, being at work most days. Shiny stainless-steel vats and pipes are busily being installed alongside…

PAUL’S VERDICT I am always delighted to get questions about investing for our kids and grandkids, Jolie. This is not a technical discussion for me. My dad and mum did this for my sister and me. They put a few dollars into shares for each of us in most years, starting when I was born in 1955. As it turned out, in later years they were able to fund our school education out of their earnings. Then Gough Whitlam came along and, bless him, university fees were basically zero. Because Dad and Mum held the shares as trustees for me and my sister, they were also able to deter us from using the money to pay for cars or a holiday. In my early 20s I do recall seeing this…

CAREERS We were streaming a TV show the other night that was set in '70s corporate life - no computers, no mobiles, no internet, just lots of paper notes and meetings. It is striking how difficult it must have been to navigate some of the political and business realities of governments and global corporations of the day. What also struck me was how important HR was to help create the structure for the human side of the workplace. The '70s and ’80s saw the dramatic rise of HR management, settling disputes and advocating for greater fairness for people at work. As HR departments grew and became more bureaucratised, however, processes and procedures at times became more important and less complicated than people. As the HR beast grew bigger through the…

MY MONEY BUDGETING I want you to start by really focusing on that word for a moment: MONEY. Say it out loud with me: MONEY. Or, if you’re in a public place (and you haven’t already embarrassed yourself), just really stare at that word on the page for a moment: MONEY. What emotion do you feel in your body when you see that word or hear it spoken? Don’t worry. If you’re anything like I was, you may struggle with this exercise. Truth is, unless you’ve been taught how, it can be difficult to recognise what emotion, or what combination of emotions (there can be many!), you are feeling at any point in time. Yet it is so very important. Because emotions drive our behaviours and it’s our behaviours that produce…

MIND GAMES When an intimate relationship breaks down, the temptation to jump straight into another one to account for the pain of the loss is very strong. This results in us considering partners who we may never have considered before. They are often less compatible, less stable and much riskier, but we jump in anyway because the pain of even more loss doesn’t seem like such a gamble against the potential to make up for lost love. Sadly, though, these relationships often don’t work out and can sometimes leave you in a worse state. So predictable is this phenomenon that we even have a term for it - the rebound relationship. It turns out we do exactly the same thing when we lose on our investments. When we lose a…

The Financial Planning Association’s Sarah Abood recommends you check that your financial planner has the right qualifications and experience. “The lead professional designation for financial planners is the CFP (certified financial planner). This designation is recognised globally as the gold standard for advisers. Those with this qualification have completed extensive additional education and training and commit to the highest ethical standards. “Look for someone you’re comfortable with and can work with over the long term. It’s best to meet with them first - many financial planners offer a free initial meeting, it’s an opportunity to ask questions, and a good planner will listen carefully, answer your questions clearly and explain what kind of advice they can offer you. There are a variety of ways planners structure their fees. “The cost…

The Keating Labor government had legislated to give employees 15% super contributions by 2002. In the 1995 Budget it said its previously announced tax cuts would be delivered as a 3% compulsory contribution with a matching contribution from the government as a tax cut. The Coalition ditched these measures when it won government and the super rate stayed at its existing 9% until 2014. BEST-CASE SCENARIO With 12% contributions locked in, it is likely attention will now focus on improving outcomes for those who don’t do as well from the current system, such as women and people with broken work lives or contract arrangements. An increase to 15% would improve the retirement outcomes for everyone, but it is a long way off. WORST-CASE SCENARIO Super has been something of a…

Xavier O’Halloran, director of Super Consumers, an advocacy organisation, says the industry has been focused on building up people’s nest egg for retirement, but hasn’t been doing enough to help them make the most of this money as an income for retirement. “The Retirement Income Covenant is a good thing, as it will make super funds think about how best to serve their members in retirement. Funds will be required to collect data on their members’ needs and draw on this information to design more appropriate products and develop strategies to help people maximise their retirement income.” However, super funds don’t have a good track record in making simple, high-quality products that are easy for people to understand, he says. “Currently, there are tens of thousands of products in the…

BEST IN BREED This time last year, the word fintech would have conjured up thoughts of successful buy now, pay later businesses and the so-called neobanks - banking disruptors set to take on the big four. One year later, the finance scene looks very different - but very similar. If anything, buy now, pay later is even more entrenched than it was, with the big banks, and even Apple, taking an “if you can’t beat ’em, join ’em” approach. While the new banks are struggling to get a decent foothold as a group, one or two, mostly notably Judo Bank, have made decent strides. It is a reminder, perhaps, that innovation isn’t enough. And that in many sectors, the leading edge quickly becomes the bleeding edge and the real money…

OUTLOOK When capital markets the world over are correcting, it leaves investors confused about what they can or should do to protect their portfolio. Showing how wild the ride is becoming, Australian shares are down 5% through the financial year. Compared with the 28% the Aussie sharemarket delivered in 2020-21, this is a 33% turnaround. The story is just as intense with overseas shares. In 2020-21 they delivered a 29% return, but in the just-gone financial year that has contracted down to -4%. In the US, the sharemarkets have been so jolted that in the six months from January to June the S&P 500 lost 14% of its value. The technology-heavy Nasdaq Composite Index fared even worse, down 23%. But the kicker is what’s going on in the bond markets.…

Letter of the month Simple, sensible advice for acquiring wealth Just make an effort! Marcus Padley, you nailed it! Your column “Make an effort to acquire wealth” (July) outlined seven principles for acquiring wealth - none of it was rocket science but it was refreshing, very simple and relevant for all. You also highlighted the importance of constant effort, something that is sadly underrated in today’s world but still so essential for all ages. Thoroughly enjoyed this article - sensible and logical - but maybe that’s just the old-fashioned “boomer” in me! Danielle Low-income earners need to pump up super too Your July cover story (“Why you only need $250k in super to retire”), including ways to pump up your super, is great for high-income earners, but missed a little…

I come from a simple working-class background, but with the benefit of two very savvy role models in my parents. Dad was an early adopter into super before it was compulsory, and I saw what senior years could be like when money was not a stress, compared to relatives who got poorer and more stressed about money as they aged. I also saw what good decisions and good advice combined can do - my dear mum turned her modest net worth into a substantial sum after dad’s passing, which would have made him chuffed. As he would have said, “That’s the way…” So, superannuation has always been a focus, starting by putting in a little extra in my 30s and maxing the pre-tax limit once my mortgage was paid. I…

A growing number of Australians are losing money to credit and debit card fraud, with the Bureau of Statistics estimating that 1.4 million of us fell victim to card fraud in the 12 months to June 2021. But could the answer to stymieing fraudsters lie in an ever-changing version of the three- or four-digit code on the back of your card? Westpac seems to think so - at least for digital card users. Since it first rolled out a “dynamic” card verification code (CVC) feature in its banking app in 2020, Westpac says fraud has plummeted by 80%. Unlike the static CVC on the back of a physical card, the dynamic CVC for digital card customers changes every 24 hours which, according to Westpac’s head of fraud, Ben Young, stops…

If you’re thinking of making a personal contribution to super this year, it’s time to start saving. The regulator APRA says Australians have significantly ramped up personal super contributions during the pandemic. In the year ended March 2022, personal super contributions totalled a whopping $34.9 billion - a 61.7% jump on the previous year. The beauty of making personal super contributions is that you may be able to claim a tax deduction for contributions worth up to $27,500, though this figure includes employer contributions. The 2020-21 financial year saw a record performance by super funds, with a 19% return. While performance has fallen in recent months, the industry has netted a healthy $460 billion in returns over the past two years. Over the past 35 years, the average default super…

ASK PAUL Despite having a profitable business, Lachlan has been knocked back for refinancing There’s a way to beat the banks’ cookie-cutter process Q My wife and I have been subscribers to Money magazine for over a decade. In that time I have read many letters and articles where you and your writers have encouraged people to shop around for a better deal on their home loans and generally try to avoid paying more than you have to. We own our own business, which in 2020-21 generated more than $667,000 in revenue. This has risen steadily year on year from $383,000 in 2016-17. Earnings before interest and taxes (EBIT) has grown from $148,000 to $326,000 in the same time. We have always engaged our (fairly expensive) accountant and have managed…

We are at an incredible time in history when our digital capabilities can enable new ways to approach our working lives. In terms of managing different levels of flexible work arrangements, one idea I think has merit is to create multiple types of employment packages that unlock different rewards and expectations. You may have the complete work from home, the always in the office, the four-day week, the three days at home and two days in the office mix, the five days in the office over a fortnight, or any other combination that suits the work that needs to be done. For those working more in the office there could be travel allowances and per diems to cover incidental expenses. There could be different expectations in terms of responding to…

SMALL BUSINESS Owning a small business gives us control over the products or services we sell, who we recruit, what we earn and, if we’re lucky, even when we take holidays. Having the power to make decisions over our commercial life is one of the primary reasons many small business owners, me included, run our own show rather than working for the man. However, this control still doesn’t give small business owners the power over external, unforeseen events. Natural disasters, pandemics, financial crises, cyber attacks and other troubles, from the death of a partner, a marriage bustup to the collapse of a significant client, do happen. Anne Nalder, founder and CEO of the Small Business Association of Australia, says preparing for unanticipated events is more complex than saving some spare…

With prices starting to stabilise or even fall from their recent peaks, plenty of sellers will be wondering about the best time to put their home on the market - or whether they’ve missed the boat. While it’s ultimately up to the individual, Rebecca Mitchell, from Raine & Home, has a few pieces of advice. First of all, timing the market is near impossible. Mitchell says that you can never truly be sure what the property market will do, with the significant demand and price rises during the pandemic being a good example. She says people shouldn’t feel as if they have to sell during spring. Buyers are looking year-round, even in summer and winter, though it’s worth avoiding school holidays or long weekends. PThe final and most important point,…

The broad legal definitions used by the regulator ASIC and the industry are: • Education - helping consumers understand topics (for example, what is an equity or what taxes apply to superannuation?) • Information - providing facts about products or services (such as setting out the fees on a product). Any provision of information should not offer any recommendation or statement of opinion intended to influence the client. • Financial product advice - this is what is regulated by legislation and regulation, and it’s advice that evaluates, compares or makes recommendations about one or more financial products. • Financial products - these are financial instruments or services defined as such in the legislation. Not ail financial instruments are financial products - for example, mortgages are not. • General advice -…

MANAGED FUNDS The past six months have been torturous for investment portfolios, with no place to hide. Bonds and equities are in the negative, while holding cash in the bank would have dented your purchasing power. We all know that inflation is the clear culprit behind the current economic malaise. Now the real fear is that, since general prices have been rising for the past 12 months, higher inflation may have become malignant and entrenched in the economy. By raising interest rates in quick succession, central banks seem to be exercising an unflinching resolve to fight surging inflation. The market in general appears to be accepting the narrative that central banks may just succeed in capping inflation and bring it back down to the modest level of 2%-3% a year.…

The tables on these pages contain data and information to help you compare managed funds, which are pooled funds managed professionally by investment experts. Managed funds displayed in these tables are multi-sector or asset class specific. Multi-sector managed funds invest across a diversified mix of asset types spanning equities, property, bonds, cash, infrastructure, private equity and alternatives. Managed funds are normally set up as unit trusts. You may be able to invest in them directly or through a platform. Source: Rainmaker Information. Data sourced as at April 30, 2022. *Numbers stated here depict averages, other than the Rank column, which is the total number of funds in the category. For any queries on these tables, please contact info@rainmaker.com.au. These products may be recommended to you by a financial adviser. The…

THE HOT SEAT How would you define your investing style - fast and fearless or conservative and safe - and why? I would say reasonably conservative. I’m used to taking risks. I don’t think I’m particularly “fearless”, but I’m willing to have a go and put myself out there if I believe it’s a calculated risk worth taking. As an Extreme E champion, are you now able to make a good living from rallying? There are rarely constants or a high level of job security in motorsport. There is a saying that you are only as good as your last result, and you are usually working year to year with no guarantees of the future. Certainly, winning a world championship increases your opportunities, but nothing is ever given in motorsport.…

PAM WALKLEY Senior writer As a self-funded retiree - who also does some paid work - rising interest rates are generally good news for me. For example, I have some money invested with Plenti, an online lender, and when I reinvested some of my funds earlier this week, I got a rate of 4.6% for five-year lending. As a mum, though, I worry about my kids’ ability to service their mortgages if interest rates go anywhere near the 17% I paid in the late ’80s. JAMIE WILLIAMSON Editor, Financial Standard At this point, the rate rises haven’t had a financial impact - we were fortunate to lock in a very low fixed rate of 1.89% in early 2021. But the increases are causing some anxiety as we need to refinance…

THE BUZZ Check for asbestos: it’s a small price to pay IN THE renovation boom sparked by the pandemic two years ago, it’s easy to forget about some of the dangers of DIY fixes. One that comes to mind is the risk of asbestos exposure. Asbestos was a popular building product used in most houses between the 1940s and the late 1980s. Little did we know then that it can cause cancer, and so many lives have been cut short because those who were exposed to it labourers, subcontractors, homeowners - didn’t know the price they were paying for building a dream home or fixing up an old one. We do now, but some people still skip getting professionals in to remove asbestos from their homes when they are renovating.…

COVER STORY The cost of living is going up and investment returns are going down, so now is the time to make sure our finances are strong enough to withstand any shocks Rising interest rates. Inflation. Recession. Stagflation. It’s a nasty list of potential challenges for our finances. From the post-Covid boom that no one expected us to have, the economic situation seems to have gone pear-shaped fast Just last year, the Reserve Bank was telling us there would be no need for interest rate rises until at least 2023. High inflation was something we hadn’t dealt with in decades, and the economy was bubbling along. Now we have inflation set to rise to around 7% by year’s end, interest rates are on the way up and there are concerns…

BANKING The flipside of rising home loan repayments is better rates on savings accounts and term deposits. For example, at the time of our 2022 Best of the Best awards issue, one of our leading savings accounts for self-managed superannuation funds offered an interest rate of 0.8% a year. That has now jumped to 1.4%pa in less than a year. That’s why it pays to shop around for the best savings rate. As at July, interest rates on savings accounts and term deposits ranged between 0.6% and 3.15%. If you are generally happy with your bank but it only offers rates at the lower end of this range, you might want to consider opening a separate savings or term deposit account. The good news is that most banks no longer…

HECS-HELP is a loan scheme for eligible students enrolled in Commonwealth-supported places to pay for the cost of your course. It doesn’t extend to additional costs such as accommodation or textbooks. It is both a loan and a student discount. Let’s say you’re an eligible student - the Australian government (through the HECS-HELP scheme) will pay the amount of your course fees directly to your education institution. Once your income reaches a certain threshold, you then need to start repaying the loan through the tax system. If you wanted to pay off your debt faster, you can make voluntary repayments, regardless of how much you earn. A HECS-HELP debt kicks off immediately after the elected “census” date for any university course for which you’ve nominated to receive HELP assistance. Am…

FAMILY MONEY Katherine and Guy have always worried about how their son, Roman, would manage without them. Roman, who is 18 years old, lives with a severe disability and his parents manage most of his needs. A perplexing issue for Katherine and Guy is who to appoint as Roman’s trustee, because managing his care can be fullon. They put off drawing up an ongoing care plan in their will, but when Katherine found out she had breast cancer, they decided they had to act. Instead of leaving Roman a lump sum or the house in their will, they need to protect the funds to provide an income to support Roman as he ages. He has severe spina bifida and an intellectual disability and is incontinent. He uses a wheelchair. The…

REAL ESTATE Housing affordability has become a huge issue in Australia. Prices have soared, especially during the pandemic, with median price rises across the nation peaking at 21.3% in the 12 months to January 2022, according to CoreLogic. Despite rising interest rates and prices now trending down in the two biggest markets of Melbourne and Sydney, median prices still rose 11.7% over the combined capitals in the year to May 2022, meaning a property is still beyond the reach of many. Since the early 1990s, median housing prices have increased from four times median incomes to more than eight times today (10 times in Sydney), Grattan Institute figures show. It now takes 12 years on average to save a 20% deposit for a typical dwelling, up from seven in the…

WHAT IF? IS THAT ON THE CARDS? Don’t hold your breath, but extending compulsory super to 15% has long been a Labor ambition and is part of its policy platform. After the election, the financial services minister, Stephen Jones, indicated this was still on the longerterm agenda, though in its first term the government will be more concerned with bedding down the legislated increase to 12% by 2025. Under this timeline, employer super contributions are rising by half a percentage point annually, with the latest increase - from 10% to 10.5% - coming in on July 1 this year. Jones told ABC Radio National that the government’s key priority for the immediate future was providing certainty that the increase to 12% was locked in and would not change. But he…

Equipsuper has taken an innovative approach to its MyRension retirement product. It aims to take the guesswork out of retirement and allow members to plan ahead with confidence. The fund helps members figure out how much income they’ll have in retirement and how long it might last. MyPension provides retirees with a regular income, while simultaneously looking after their investments and helping them make their savings last longer. Based on a three-bucket strategy commonly used by financial planners, MyPension automatically rebalances these investments each year, allowing members to “set and forget” their retirement income. Their super is separated into three investment buckets: Cash (21%) - for regular payments, usually comprising three years of income. Conservative (39.5%) - investments in low-risk categories, including cash and bonds. Growth (39.5%) - investments that…

1 ETFS Physical Gold The ETF (ASX: GOLD) offers investors low-cost access to physical gold through the stock exchange and avoids the need for them to personally store their own bullion. GOLD is backed by physically allocated gold bullion held by JPMorgan Chase Bank (the custodian) in London. Each physical bar is segregated, individually identified and allocated, which means there is no credit risk. Investors can choose to redeem units for the physical holdings. 2 VanEck Gold Miners Investors can get exposure to a diversified portfolio of large to mid-sized global companies involved in the gold mining industry. The ETF (GDX) aims to provide investment returns before fees and other costs that track the performance of the Index. 3 Perth Mint Gold This ETF (PMGOLD) provides investors an efficient and…

THIS MONTH No doubt a lot of you were scarred by the GFC, scarred by the 2020 pandemic-inspired drop in the market, and are once again worried about a significant market correction. It’s no fun investing in “fear”, and if that’s you, then let me tell you about fear. There is always, always, always something to fear when it comes to the stockmarket. But if “greed is good”, then let me tell you “fear is good” too, because it is in the grip of stockmarket fear that the most money is made in the shortest timeframe. Fear creates the best stockmarket opportunities. You should also understand that when fear starts, we, the industry that is supposed to advise you, will perpetuate it. Fear is great for us, for the financial…