Innholdsfortegnelse for February 2018 i Money Magazine

“You can be young without money, but you can’t be old without it.” – TENNESSEE WILLIAMS Challenge yourself! That’s how we want readers to start the new year. If you’ve set yourself a savings goal and just need a little nudge to help you stay on track, then I urge you to register for Money’s 8 Week Savings Challenge. Signing up is free, and the practical tips and guidance are all there for the taking. The dedication and hard work, of course, rests with you. Full details can be found on page 56. For those who have already saved, your mission would be where to invest your hard-earned cash. Last year turned out to be a good one for investors. The S&P/ASX 200 climbed about 5.7% to 6077.1 in the…

EFFIE ZAHOS Effie is Money’s editor and author of The Great $20 Adventure. Effie says: “2018 will be the year of investing for me. I plan to move some cash onto a P2P lending platform, add some more ETFs to my portfolio, reshuffle my asset allocation in my super and then explore the option of setting up my own fund with the intention of buying property.” PETER DOCKRILL Peter is Money’s tech columnist with more than a decade of experience writing about technology. Peter says: “This year I’m determined to not buy anything I don’t need. It’s so easy to get distracted by minor purchases we want but don’t actually require. For 2018, I’m committing to ignoring them – and saving that money instead.” TERRY RYDER Terry is the founder…

Self-funded retirees can be affected by a “mid-term retirement extravagance” syndrome, which can have an impact on their otherwise carefully managed finances. Sometimes, after about a decade in retirement, some retirees can be tempted to go on a spending spree. It might be buying the luxury car they have always wanted, or taking an extravagant holiday while they feel able. This is fine and indeed should be encouraged if they can easily afford it. However, they need to ensure such spending does not affect their longer term financial situation, including the quality of care they will be able to afford in their final years. It is a mistake to think they will need less income in the later years of their life, as they become less active. Quality of life…

When it comes to your finances and building wealth, often simple is best. Finance expert, Pete Wargent, says there is a way to build wealth “passively” by using time as your friend and accepting that most people won’t beat the market. The book helps you create a plan to build wealth and covers things like taking a look at your assets and liabilities, setting specific targets, deciding on your asset allocation, the nuts and bolts of what you can invest in and how. The book also looks at how you can generate income from self-employment or business. Five readers can win a copy. In 25 words or less, tell us the simplest change you can make to build wealth. Send entries to Book of the Month, Money, GPO Box 4088…

If you overindulged on your credit card during the festive season and have a debt that you can’t pay off straight away, you could be thinking about taking up a balance transfer offer. There are plenty available – some for as long as two years. You can find out what’s on offer on comparison sites such as Canstar, RateCity and Finder. When comparing offers it’s important to look beyond the balance transfer rate and period. You need to consider if there is a balance transfer fee, what the annual fee is on the credit card and what rate you’ll be charged when the promotional period ends. These can all affect the cost to repay your debt and the results may surprise you. In the table we compare three offers –…

Chinese personal shoppers, known as daigous, hit the front pages two years ago by cleaning out stocks of infant formula from Australian stores for sale in China. Some newspapers slammed the practice for being “shonky” and a “black market”. Locals fretted that their babies would go hungry. But daigous now are a legitimate and powerful way for Australian businesses to sell anything from Ugg boots to health supplements, skincare products and processed foods directly to shoppers in the world’s largest market. They have upended the traditional Western sales model where slick marketing by consumer goods companies is used to entice consumers. TV ads, social media and billboard campaigns are their tools of trade. But daigous use word of mouth, personal networks and social media to generate bulk orders from shoppers.…

This time last year I wrote: “The story in the coming year will be much less about Sydney and Melbourne and a lot more about Hobart, Canberra, Adelaide and some of our more vibrant regional cities.” CoreLogic figures in December 2017 indicated that Hobart had the highest annual house price growth, up 12%, while Sydney’s growth rate was down to 4.4%. Melbourne’s growth rate contracted also but was still a little above 10% at year’s end, while Canberra recorded a solid 7%, with some forecasters suggesting Canberra will be a market leader in 2018 and beyond. Several regional cities also had double-digit growth, led by Newcastle and Geelong. This time last year I wrote: “One research source, Simon Pressley of Propertyology, has forecast that Hobart will lead the capital cities…

Across the nation something scary is happening to household savings. They’re dwindling. These days, our savings ratio has fallen to 3.2%, meaning for every $100 we pocket after tax we’re saving just $3.20. It’s not enough to fund more than a few Freddo Frogs, yet just three years ago we were saving three times this amount. In the 1970s, Australians were tucking away more than 20% of household income. The fact is we’ve lost our savings mojo. To find out why, we look at research commissioned by ING, putting Australia’s savings habits under the spotlight to see what drives us to save, what we’re doing well – and where we’re going wrong – as well as talking to experts to understand the brain barriers that hold us back from saving.…

Australians are generous when it comes to lending money. A recent study by RMIT University found that Australians hand out $1.65 billion a year in informal and unprotected loans to their family and friends. But too often you hear about loans going wrong. Misunderstandings about whether it is a gift or a loan are common. Adult children sometimes pressure their ageing parents – some already with dementia – to lend them money that they promise they will pay back. Fights over loans can often tear families apart. For this reason, before you hand over any money to your family, no matter how much you trust your relatives, think it over carefully. There is a huge risk that you won’t be repaid. While some parents don’t count on being repaid by…

WHY WOULD THEY DO THAT? The idea of replacing an irregular tax like stamp duty with a tax that automatically applies every year has long appealed to state governments. While stamp duty can be a gold mine when the housing market is running hot, this income stream shrinks dramatically during the inevitable slowdowns. A broad-based annual property tax would deliver more stable and certain revenue. There is also an economic argument that land tax is more efficient than stamp duty as it is broad based and doesn’t depend on people’s behaviour. In a 2015 report, the Grattan Institute argued that a land tax of $2 for every $1000 of capital improved land value could generate $16 billion a year for the states and territories and add up to $9 billion…

The Australian Securities and Investments Commission (ASIC) offers these tips: Always check that a financial adviser is authorised to provide advice before engaging them. Check the Financial Advisers Register and the government’s MoneySmart website (moneysmart.gov.au), for tips on choosing a financial adviser. If you are unhappy with any aspect of the service you receive, try to resolve it with the adviser. Then you should make a complaint through the adviser’s internal dispute resolution system. Their financial services guide will tell you how to do this. You should receive an acknowledgement from the adviser’s dispute resolution system within 14 days. They have 45 days to provide a final response. If you're unhappy with the response, you can contact an external dispute resolution scheme. The business must tell you which scheme it…

What’s the ideal investment option for different age groups? You need look no further than default lifestage or lifecycle products to get an idea. Rainmaker’s Alex Dunnin says the list below gives a good indication. However, there is a lot of variation in the marketplace: He says some products are overly conservative. “At retirement age, they have almost no money in equities. 20s – 90% in growth assets (all equities) 30s – 90% in growth assets (all equities) 40s – 85% in growth assets (75% equities, 10% property) 50s – 70% in growth assets (50% equities, 20% property) 60s – 50% in growth assets (30% equities, 20% property) That’s really conservative – you’re assuming I’m going to die next year. Others take the view you’ve got another 20 to 30…

Let’s kick off the new year with some good news. Recent rule changes to super make the system fairer, more flexible and easier to understand for employees wishing to make tax-deductible contributions. First, they can now contribute directly to their fund and claim a tax deduction for doing so. Second, a rort that allows employers to minimise their 9.5% super guarantee (SG) obligation faces the chop. This is long overdue. But more on that later. Previously, if you wanted to maximise your concessional contributions, capped at $25,000 this financial year, you needed to make salary sacrifice arrangements with your employer. However, not all employers facilitate it, so while it was good for some, others missed out. Such arrangements are no longer necessary. Control is now in employees’ hands. Since July…

I was doing salary reviews at the end of last year. It was a good year for our clients, our newsletter, our members and ourselves. Everyone was happy, and we are casually assuming a similar backdrop next year, with similar growth. Normal stuff. But this is a cyclical business, and when the stockmarket turns down things will become harder. There will be less demand for advice, less enthusiasm for investment generally, and that will translate into less trade, fewer new clients, fewer funds under management and, if it happens, some not-so-fabulous salary reviews next year. I remember going into a morning meeting in April 2000 at Bell Securities. It was the middle of the tech boom and, as it turned out, it was the top. There were signs; there always…

Peter Koulizos  was recently elected chairman of the Property Investment Professionals of Australia (PIPA). He has been teaching in real estate and investment for almost 20 years and also personally invests in property and currently holds several properties. Koulizos is the author of The Property Professor's Top Australian Suburbs and Property vs Shares. What was your first job? Whilst I was in high school my first time job was at Woolworths. I stacked shelves, packed groceries and helped customers take their groceries to their cars. I earned $1.05 per hour. That sort of money doesn’t sound like much now but back in the 1970s that was a lot of money to a young teenager! What’s the best money advice you’ve ever received? Buy property. My dad was in real estate…

It’s amazing how many finance experts don’t know anything about energy and are paying way more than they need to because of it. If finance experts don’t know much about energy, what chance does the average consumer have? People are always looking for ways to save a bit of money, whether it’s by cutting back on takeaway coffee or shopping at a different supermarket, but electricity is often the overlooked area of opportunity. You can save a small fortune – if you know what to look for. I say this now because 2018 really needs to be the year when more consumers take the power back from the energy retailers. But many people will need a helping hand. The federal government talked tough with the big energy companies last year…

This relatively new podcast is a weekly series by NAB outlining strategies to build wealth. It features nabtrade’s director of SMSF and investor behaviour Gemma Dale who chats to various experts. At the time of writing, the episodes, which are about 20-25 minutes long, have looked at saving for kids education, super vs mortgage, saving for retirement without using super, understanding hybrids and understanding IPOs and capital raisings. Other topics Dale plans to cover this year include investing in a low yield environment, the currency outlook for 2018, the great disconnect between markets and the geopolitical environment, busting the $1m retirement myth and how much you really need for a comfortable retirement.…

Aussies are expected to donate $4.2 billion to charity this financial year, with an average contribution of $336 per person, according to research by Finder.com.au. On a world scale, Australia ranks ninth based on the percentage of the population who donated money in 2016, according to the CAF World Giving Index 2017. Of course, there are other ways to give, such as volunteering time or helping a stranger, and when you add these in, Australia moves up to sixth spot globally on the giving index. There are a number of ways you can donate money. You can elect to make a one-off contribution or arrange something ongoing with your preferred charity. Keep your receipts as you should be able to claim any donations of more than $2 at tax time.…

Elizabeth Wang, solicitor, Townsends Lawyers The recent explosion in the price of Bitcoin has everyone talking about it. Cryptocurrencies are growing in popularity, though opinions differ widely on whether they are a worthwhile investment, as opposed to a usable currency. Whether or not Bitcoin is a suitable investment for a self-managed super fund can depend on the risk appetite of the members, their age, the amount invested and the total funds of the SMSF. Issues to consider include: SOLE-PURPOSE TEST This test will be satisfied if an SMSF’s sole purpose is to provide retirement benefits for its members. However, difficulty may arise in trying to satisfy the sole-purpose test as an SMSF cannot directly or indirectly provide financial assistance or benefits to its members before their retirement, including use of,…

Investors can expect Australian equities to return 5%-7%pa over the next decade, according to Vanguard’s long-term market outlook. This is in stark contrast to the 9.4%pa return generated over the past 30 years. While sharemarket valuations look reasonable (with a price earnings multiple close to the historical average), unlike expectations for continued improvement for much of the developed world, the potential downside risks are elevated for Australia, says Vanguard. The risks of a slowdown are elevated given the fading tailwinds of a housing construction boom and higher household debt. While the labour market looks relatively tight, the demographic shift, including the ageing population, means the labour supply is leaning toward part-time workers.…

NAME: Jennifer and Toby STATUS: 32-year-old married couple with a two-year-old daughter, Emily. QUESTIONS: How do we accelerate our wealth? Should we continue to build our savings in our 100% mortgage offset account or should we invest in a portfolio of listed shares, ETFs and bonds? What is the outlook for our two Perth properties? ANSWERS: Pay down your property debt and diversify your wealth into other investments. Don’t sell your Perth properties and consider buying a place in Hobart. With so many investment experts giving different advice on what financial path to take, Jennifer and her husband are stumped about which way to go. “We work hard and hence feel we have a lot to lose if we make the wrong decision at this point in our lives,” she…

I have big questions. I am 38 years old and I live with my partner, who is 26. We have recently combined all of our assets and finances. We have a two-year-old daughter and I have two children from previous relationships. I am about to inherit $600,000 plus the home we live in, which is worth $350,000. I have never had much of a clue about investing and creating wealth. We have a combined income of $80,000. I have $25,000 in super and my partner has $16,000 in super. We have combined debts of $45,000. I am currently salary sacrificing and pay 15% of my income towards super. I would like my partner to do the same. What would be the best way to really make this inheritance change the…

Sometimes all you need to get saving is a little push and, of course, some great tips and information. Money’s 8WKSAVER challenge gives you just that! Simply register at 8WKSAVER.COM.AU for your free weekly savings program. Over the next eight Fridays you’ll receive an email. Each email will give you specific instructions on what you need to do over the following week. You can choose to follow the instructions to a T or take what you like from the information and then customise it to fit your personal situation. Either way, this challenge is designed to help you kickstart your very own savings program. How much will you save in eight weeks? Week 1 of the program kicks off on February 16, so register early. If you can’t register by…

As households gear up for the peak spending season, retailers will be jostling to capture every dollar. But this year eye-catching displays and discount stickers may not be enough to tempt consumers to buy from your store. A growing number of Australians are embracing digital “buy-now, pay-later” options such as Afterpay, PayItLater, Openpay and zipPay, and it’s worth considering whether your business should join the trend. Deferred payment options are a form of de facto lay-by with a twist. The purchase is paid off gradually. However, unlike traditional lay-by, the customer takes the goods home immediately – there’s no need to wait until the purchase is fully paid off. And instead of the merchant receiving the payment directly, the customer makes payment to the deferred payment service. For the retailer…

Companies or governments issue bonds to raise funds, borrowing from investors. When you buy a bond, the issuer is legally obliged to pay you regular interest (referred to as coupons), and at the bond’s maturity the face value of the bond (which is the price the bond was issued at – usually $100) must be returned to you. Fixed-rate bonds pay the same interest throughout their life. When interest rates are low or falling, these give you better income certainty. As rates fall, fixed-rate bond prices will rise in the secondary market. The reverse is true: when interest rates rise, fixed-rate bond prices will fall. Most bonds are issued as fixed rate, because governments, which are the biggest issuers, prefer them. Floating-rate bonds pay a variable income based on the…

Here is a checklist for all investors who seek advice: • Don’t let your planner move you from a low-fee, solidly performing superannuation fund into a self-managed fund that has no APRA governance. • Never go into an SMSF unless you understand it and can run the investments and administration. • Be wary of any extravagant schmoozing by a financial planner, such as expensive restaurants meals or invitations to boxes at sports events. • Don’t let your planner or anyone at their firm have the authority to sign your investment and banking documents. • Don’t allow them to transfer funds between accounts because they can move money to their own accounts. • Always be vigilant about your financial planner’s actions because the more you trust them, the more vulnerable you…

Make sure it’s better Switching investment options is easy. Find the form on your fund’s website, fill it in and send it back. You may also be able to do it online. You don’t have to switch 100% of your existing option; you can nominate a percentage or dollar amount. Consider what impact switching will have: is it in line with your investment goals; have you looked into it carefully enough; how comfortable are you with the investment risk; and how long until retirement? There is an upfront cost to switching. Kirby Rappell, CEO of SuperRatings, says the average super fund allows one free switch a year. Beyond that there’s a charge of $30 per switch. It’s not the only cost. There’s also a hidden transaction fee called the buy/sell…

Over the holiday season I was lucky if I escaped a social function without someone buttonholing me about lithium stocks, cannabis stocks or, of course, Bitcoin. I believe these are all potentially powerful illustrations of something that investors should be keenly aware of. That is, how financial bubbles form and grow, and the aftermath of their bursting. The first key point is that almost every bubble is built on a kernel, if not a bedrock, of truth and logic. Take the British railway mania of the 1840s. The world’s first modern inter-city railway was opened between Liverpool and Manchester in 1830. Apart from the death of parliamentary member William Huskisson, who was accidentally hit by the line’s locomotive during the opening ceremony, it was a tremendous success. The railway was…

The next stage will be the rise of the premium online retailer and the eselling of perishables To better understand retailing’s future it is important to examine its development to date and to look at countries where its future is already being embraced, such as South Korea and China. The rate of growth of online retail is well above that of offline retailing and the result is a loss of market share for those brick-and-mortar retailers not online. The end result is a loss of revenue and profit, which caused many retailers to collapse in 2017. The online growth, of course, is not being entirely driven by retailers themselves. One example of the changes being faced by retailers is the ability of mobile technology to remove borders for consumers. Another…

Susan Hely’s article (“Hard job choosing a career”, October) struck a chord for me. I think back to the time I was 14 or 15 and being nudged toward choosing a career. I was pretty sure it was the IT industry at the time. Two years later I was not so sure. Instead I took a fairly windy road that, at this point, has me working as a hearing clinician. Fortunately, my parents taught me to work hard and save money so I find myself in my mid 30s with a good base. Many 15-year-olds are simply not able to identify a career path. I do not believe it is fair to make them choose. The end result is often many wasted years at university before they discover what they…

Last year was one the banks probably would prefer to forget. A relentless series of scandals and fines kept them on front pages and at the forefront of the political agenda. But the banks are approaching 2018 as a fresh start, using the upcoming royal commission as a way to clear the air. In a bid to get in ahead of the game, they have released a new voluntary code of conduct to try to win back consumer confidence. The Australian Bankers’ Association’s new industry code aims to make products fairer for consumers and has made a commitment to more ethical behaviour. Key changes include: • Telling customers before they are about to be charged a fee, giving them time to pay off their credit card or top up their…

Vanguard launched four new diversified ETFs and you can choose based on your risk profile. The options are conservative (VDCO), balanced (VDBA), growth (VDGR) and high growth (VDHG) and each has a fee of 0.27%pa. Each Diversified Index ETF is a share class of an existing Vanguard Diversified Index Fund. Mastercard introduced a rewards program for Debit Mastercard holders. Rewards will include discounts for travel, two-for-one offers, and food upgrades at popular establishments. You can see the offers and sign up at debit.mastercard.com.au. BetaShares launched an ethical ETF. The BetaShares Australian Sustainability Leaders ETF (ASX: FAIR) “provides exposure to a diversified portfolio of Australian companies that have been screened to preference companies engaged in sustainable business activities and to avoid companies engaged in activities deemed inconsistent with responsible investment considerations”.…

The tax office keeps a close eye on artificial tax schemes. It has highlighted a trio of arrangements aimed at those who are nearing retirement and have a self-managed super fund. They should avoid the following: • Artificial arrangements involving SMSFs and property development ventures, involving the creation of complex structures, often including a chain of interposed unit trusts, which result in the income from the property development being distributed to an SMSF, rather than to the individual, and hence subject to a lower rate of tax. • Arrangements where SMSF members deliberately contribute an amount beyond their non-concessional contributions cap in order to manipulate the taxable and non-taxable components of their balance when they withdraw the excess. • Arrangements where an individual or related entity grants a legal life…

NEED PAUL’S HELP? Send your questions to: Ask Paul, Money magazine, GPO Box 4088, Sydney NSW 2001 or money@bauer-media.com.au. Sorry, but Paul can’t personally answer your questions other than in the Q&A column. By submitting your question to Money, you consent to having your question and the response you receive from Paul published in the print and digital edition of Money. With a $100,000 inheritance, Marion’s dilemma is a ... Classic case of risk v return Q In December we paid off the mortgage on our apartment in a very nice north-eastern suburb of Melbourne. My husband has his own business and, unfortunately, no super. I have super of between $65,000 and $70,000. Recently we came into a small inheritance. Not life-changing but not to be sneezed at either –…

“Sometimes the figures show it’s just not affordable and families have to alter their plans” No matter whether you’re sending your child to an elite private school or the local government school, you’re going to need to dig deep into your pocket. And for an education likely to span 13 years from kindergarten to Year 12, it’s worth putting plans in place at an early stage to cover the costs. As Andrew Dunbar, director and senior financial planner at Apt Wealth Partners, points out: “Schooling always costs more than you expect – parents need to plan for much more than tuition fees.” In fact, the key to managing the cost of education is planning. Tim Howard, technical consultant at BT Advice & Private Wealth, says parents should take a three-pronged…

It’s hard to believe but, at one stage, some lenders would direct any additional repayments made on your home loan to pay off your accrued interest first rather than use it to knock down your balance. It may seem like a minor detail but because the interest is calculated on your daily balance and charged monthly in arrears, this sneaky process clearly favoured the lender. Thankfully, as Canstar’s Steve Mickenbecker says, “most interest rate quirks have largely been eliminated”. Still, the latest reform proposed by the Australian Bankers’ Association highlights the need to understand how interest is calculated, especially on credit cards. The ABA has made a number of proposals toward better banking (see The Buzz, page 12). For credit cards, the one that stuck out for me was the…

“If you don’t want to live in a building with pets, don’t buy into a building that allows them” As more Australians take up strata living and move into apartments and townhouses, there is one group that is having an awkward time adjusting to community living. They are the downsizing baby boomers who are selling up their big homes and moving into expensive apartments. Owners who are used to complete control over their home can find community living a challenge, particularly if there are noisy neighbours and a dictatorial owners corporation running its own agenda, not to mention surprise special levies. “Before you buy into a strata apartment from a house, you need to ask yourself if you are suited to living in a strata unit,” says Suzie Broome, a…

Do you want to buy an investment property in 2018 but are scared off by the $1 million-plus price tags in our major capitals. Believe it or not, $100,000 can still go a long way. Here are three ways to invest on a limited budget: 1 Go for a granny flat You could use $100,000 or less to build a granny flat on your existing property and rake in the rental income. Of course, your land has to be big enough. For example, in NSW, where the approval process can be as quick as two weeks, you need at least 450 sq m and the maximum size of your second dwelling is 60 sq m plus verandas. In Victoria, granny flats can only be used by dependants, such as teenagers…

Stop for a moment. Think, watch, then think again. The world is changing; faster than you might imagine. In our often hectic times, we don’t take the time to appreciate the change and how it is interwoven into our everyday lives. Think how easily people in cities will grab an Uber, order groceries or a takeaway meal, and organise travel online. Our banking now is almost done exclusively on a smartphone that has only been in existence for a little over a decade. It doesn’t stop there. Soon a significant proportion of our energy will be generated by wind and solar; small surgery might be done remotely via new telephone technology and robotics; driverless vehicles are closer to becoming a reality; and people who suffer certain medical conditions can now…

February! It gives us Valentine’s Day, it sends the kids back to school and it delivers the latest news on company profits. But wait, there’s more. This year, February also brings us a new leader at the US Federal Reserve. These are exciting times for investors! Well, almost. Whether you’re a set-and-forget investor, a day trader or somewhere in between, the month ahead will provide plenty of food for thought. Reporting season will tell you if your income from shares is surging, falling or, as is most likely, fairly steady. Even with rising share prices, dividend yields, excluding franking credits, have been in the 4%-5% range for the past 10 years. Given low inflation, this suggests that Australian companies continue to provide a good stream of income. Barring individual corporate…