Innholdsfortegnelse for October 2019 i Money Magazine

Over time we inevitably gather the proverbial cobwebs in our lives. A garage full of electrical items you no longer use. A closet full of clothes you no longer wear. A hobby you no longer pursue. In this issue, we ask you to dust off those cobwebs, sell or discard those long-forgotten items and revive your long-held dreams. At the very least, convert your spare time into money. Research has found that Australians can, on average, earn around $7000 through a job on the side, called a “side hustle” in modern lingo, whether it’s in pet grooming, Uber driving or making gourmet pickles. The more unusual your skill set or interest, the more dollars you could earn. Welcome to the gig economy. There’s more on this in our cover story…

I was with a few of my great mates from my university college days having a quiet beer and a chat recently. As we are all around 64, the conversation, as it often does, turned to investment. For nearly four decades this has been a regular area of discussion for me in the media and with individuals. But at our age we are now retired or partly retired, or plan to stop full-time work. So returns on our money are less of an academic subject these days and more about our lifestyle. At around this stage of the evening, a couple of the guys look pretty amused. This is because they joined the public sector as engineers back in about 1976 and are in the original Commonwealth and state defined…

In the same way you would avoid a business for its terrible customer service, Australians are prepared to move their money elsewhere when companies disrespect shareholders’ values. A KPMG survey of more than 1500 retail investors suggests they are more likely to accept lower financial returns if a company has behaved ethically towards customers, employees and the community. KPMG chair Alison Kitchen is right in saying retail investors have effectively given companies a green light to pursue more transparency and more values-driven decisions. But investors, whether institutional or retail, don’t want to see the bare minimum – such as a dip in a chief executive’s pay or a one-off goodwill donation. They want companies to take responsibility for their environmental and social licences. It’s integral that companies and investors work…

The start of October marks just 12 weekends until Christmas, and savvy shoppers know this means taking action now. Australians collectively spend about $11 billion on Christmas gifts each year, and 86% of us admit the present-buying bonanza puts a strain on our finances. Yet more than 20 million of these presents are unwanted, often being re-gifted or, worse, ending up in landfill. The Giftster app helps to solve the problem by letting you create a family gift registry for Christmas, birthdays, weddings and christenings. Invite family members to join your group, and avoid wasting money on unwanted or duplicate gifts. Or use the app to create a secret Santa draw. Gift ideas can be marked as reserved or purchased, and you can connect with other family members while they’re…

The US-China trade conflict is top of mind for online investors and concerns over interest rates are no longer at the bottom of the pile. From a survey of more than 8500 Aussie online investors and traders, researcher Investment Trends says sentiment remains on edge as people attempt to make sense of various developments in global and domestic markets. “There is growing anxiety among Australian investors as the RBA cash rate edges ever lower and negative-yielding debt in European markets swell in excess of $US15 trillion,” says Investment Trends research director Recep Peker. “While it is unclear if negative interest rates will spread to other major markets, it is evident that Australian investors are increasingly concerned with this potential development. “Looking forward, low interest rates will increasingly impact the investing…

To extend the loan term, a full assessment is required, providing all information and supporting documentation: income evidence, liabilities, signed applications, documents issued and returned along with a fee of around $250, which will take up to four weeks to finalise. Changing lenders will attract a discharge fee of $340 plus registration and release-of-mortgage fees and any loan costs to the new lender, often between $250 and $900. In Jacqueline’s situation, the cost would outweigh the benefits. With only a small amount owing on the mortgage she’s almost debt free and putting the $700 a month extra toward the home loan would clear the debt in less than five years. At a rate of 3.70%pa, the total interest paid would be about $3900. Extending the loan to 20 years, at…

Interesting question, Karina. There is a fair bit of complexity that we can mull over. Right up front let me say that from what you have told me the house goes on the backburner. People buying into small business generally terrifies me. For most people this is the great unknown. They get presented with a usually dodgy set of numbers and even if the numbers are legitimate the vendor’s effort and personal skills may be integral to the business. You say you have a large amount of experience in the industry, but I would ask you to be confident that it reflects the experience of an owner, not an employee. They are quite different things. Paul’s verdict: Property is not the cornerstone of wealth. Business is. I also am a…

Halloween was not something that meant a lot to me as a child growing up in Australia – it was seen as an American tradition. It always seemed a little odd to me that people celebrated fear and horror for fun. My mother would scoff at any mention of Halloween, claiming it was just another marketing ploy by companies designed to make them more money. She would call days like Valentine’s Day and Halloween “spendi-days”, because there was “nothing holy about these holi-days”. So it seemed ironic when I discovered October 31 is also World Savings Day, which has been celebrated around the world since 1924. Ironic because the very fears that are celebrated on Halloween and psychologically drive our spending behaviours on this day are the same fears that…

Industrial property is hot, providing a bonanza for some investors in the sector. It’s not traditional sheds that’s driving the sector, but huge, sleek and super-efficient logistic centres and warehouses. We may no longer manufacture much in this country, but we have embraced online shopping with enthusiasm, sparking demand for facilities such as Amazon’s 43,000sqm centre at Moorebank, Sydney. “The industrial market is booming – it is arguably the best-performing property sector currently,” says the winter 2019 Australian Industrial Report from m3property Insight. “Nationally over the past year prime net face rents [before any incentives] increased 3.8%, land values rose by a whopping 21.6% and prime yields firmed by 26 basis points to a new record low.” Industrial property returned a total of 13% in the year to June 2019,…

• iShares Edge MSCI Australia Minimum Volatility exchange traded fund holds 115 companies that have lower volatility characteristics than the broader Australian equity market. It tracks the MSCI Australia IMI Select Minimum Volatility (AUD) Index with about 28% of the portfolio in financial companies, 13% each in real estate and materials, 11% in industrials, 8% in consumer discretionary, 7% in consumer staples and 6% each in healthcare and utilities. • iShares Edge MSCI World Minimum Volatility ETF holds 489 stocks spread across financials (15.5%), consumer staples (13%), information technology (11%), materials (10%) and utilities and real estate (8% each). It tracks the MSCI World Minimum Volatility (AUD) Index and holds stocks in the US (58%), Japan (9%), Canada and Australia (7% each) and Switzerland and Hong Kong (3% each). •…

Between 2012 and 2016, mortgage lending standards were relaxed, fuelling a boom in domestic property investing. Together with a surge in offshore buying interest, the boom led to oversupply and frequent warnings from your columnist. The oversupply is now hitting the property market at the same time that bank lending standards have been tightened, property prices are falling, quality has been found wanting and building approvals have plunged. While it’s true that auction clearance rates are rising, the fact remains that the economy needs more residential construction, not the sale of established dwellings. More importantly, national new “for sale” listings for the 28 days ended September 1 were down 16.8%. The sharp decline in building approvals will be followed by a sharp decline in construction activity as builders complete homes…

Used incorrectly, ETFs – the progeny of the index fund, invented by US investment legend Jack Bogle in the 1970s – are just another way to lose money (and make money for fund managers). But they can be a wonderful addition to almost every portfolio when used well. For most people the aim should be diversification and access. For those reasons – and given the small tech sector here in Australia (plus the calibre of the companies within it) – my preferred ETF for Australian investors is the BetaShares Nasdaq 100 ETF (ASX: NDQ), offering currency, geographical and industry diversification, and housing the likes of Apple, Google, Amazon, Netflix, Tesla and many more.…

Knowledge gained over the years pays off I’d like to say thank you for the knowledge I’ve learnt over the years of reading Money magazine. Could you also say a big thank you to Paul Clitheroe, and let him know I have read both his books. I took a lot of guidance from these books and read them while in a dump truck out at Cloncurry, as well as buying Money magazines regularly. In 1999 I took the plunge to see a mortgage broker in Cairns, who put me on the right track. After approval I bought my first home for $160,000. I remember the feeling of seeing it being built and moving in with my girlfriend. I sold it six years later for $325,000 before designing and building my…

A little extra effort to shop around for the best rates and fees when transferring money overseas could save you hundreds of dollars. Instead of relying on your usual bank, it pays to consider other foreign exchange services. The Australian Competition and Consumer Commission (ACCC) says that in 2018 consumers who used the big four banks to send international money transfers (IMTs) in US dollars and British pounds could have collectively saved about $150 million by using a lower-priced supplier. The ACCC’s latest inquiry found foreign cash is more expensive at airports. For example, when buying $US200 in February 2019, you could have saved up to $A40 by purchasing from the cheapest supplier outside an airport. If a customer of the big four banks used a debit or credit card…

Small Business and Family Enterprise Ombudsman Kate Carnell is urging prospective franchisees to do their homework before investing, after the ACCC found some franchisors were failing to provide adequate information to buyers. The regulator found one in three franchisors in the food services sector had failed to disclose useful contact details of former franchisees to allow prospective buyers to conduct due diligence. Australia’s newest bank, 86 400, has launched with two account offerings (Pay and Save) with no monthly fees and a 2.5% interest rate, plus a string of smartphone features. Customers don’t have to switch bank accounts to use the 86 400 app, with technology allowing users to connect with and view their existing bank accounts, plus credit cards and home loans, all within the app.  The Real Estate…

Since the recent banking royal commission, there has been a spike in compensation payments paid to investors by financial institutions. But did you know that these payments could be taxable? The way tax law applies to such payments is complicated because different treatments apply to different types of compensation. For example, compensation for lost interest will be taxable (on the basis that the interest – if you’d received it – would have been taxable). Compensation for fees paid to advisers who gave dodgy advice would be taxable if you claimed a tax deduction for the original fees. Compensation for an investment that you have since sold will need to be added to the sale proceeds, which could involve extra capital gains tax and amending a previously lodged tax return. The…

Jacqueline, you and your partner are well on track to putting yourselves into a comfortable financial position. The most difficult financial stage to get through is the home mortgage period. Often we spend most of our working lives repaying the mortgage, which does not leave much time to build wealth outside the home. You are now at the stage where you can concentrate on building investment wealth. In fact, given you already have a large share portfolio, you’re off to a good start. I would not extend the home loan. However, if you’re looking to be more aggressive with building investment wealth and with interest rates at a record low, you could consider using the equity in the home to borrow and purchase more shares. I would do this in…

Paul needs a safe, tax-effective plan to ... Make the most of a $500k inheritance from his dad Q I am a 48-year-old relief teacher who works only one or two days a week, and I’m on Centrelink benefits. I own my own home outright and have only about $85,000 super in a growth fund and little in savings. My father recently passed away and I estimate he has left each of his four children (including me) about $500,000. I am thinking about investing yearly in my super in a tax-effective way, and investing the rest in a managed investment fund on a growth setting to help supplement my income. My short-term money goals are renovating the house to the tune of $25,000, doing a bit of travel and maybe…

My husband and I (in our early 30s) have recently moved from the NSW central west to the mid north coast after deciding that we did not want to purchase a house and commit to living in Dubbo for the long term. We currently have $50,000 in the bank, $5000 in shares and six months of prepaid rent ($10,000). I have taken a considerable pay cut, from $83,000 to $60,000 a year, and my husband is employed casually. I am keen to purchase a business for $280,000 via seller financing. It is turning a profit in excess of $100,000 a year after a $70,000 director’s fee. My intention is to work there full time (the owner works part time). I have a large amount of experience in the particular industry.…

Antonia, a single mother with twins, was dreading the day they turned 18. That was when child support from her ex husband, Peter, stopped. Her twins were still at school so she had to apply for assistance from Peter until the boys finished school. But on the day they left school, Peter stopped paying any support and she had to shoulder all the living costs for them. Child support cuts out when kids turn 18 and if you want your ex-partner to help fund them while they go on to study at a tertiary institution you have to negotiate. About three-quarters (74%) of 18-year-olds and 43% of 20- to 24-year-olds live at home, according to the 2016 census. The government helps out if they go to university or vocational education…

1. Open an account titled “presents and gifts” and put a small percentage of your income into this account each week or fortnight. This simple method creates an easy way to guardrail the amount you spend on each event. The trick then becomes staying within these guardrails. 2. Keep a yearly event diary. Planning ahead often means we buy more thoughtful and meaningful gifts and make fewer reactive decisions and purchase fewer reactive gifts. Science shows that when we are in a more reactive state (like searching for a present at the last minute), we are more likely to justify a larger expense for a less meaningful gift. 3. Start considering time and effort as valuable commodities and think about cost- effective and meaningful ways to spend them. Strength of…

The Barn (Heathcote, Victoria) In 2016, Jacob and Brad travelled from their St Kilda East rental to see a 2.5-hectare property with nothing but a barn on it. They were looking for a place with potential rental income and within a couple of hours’ drive from Melbourne. The barn had four walls and a roof, and its floor was a patch of dirt. It had a mezzanine in place, but it was untouched; and there was exposed insulation. It was generally unfit for human habitation. The asking price was $220,000. Jacob and Brad had some funds, but even if they managed to get a hold of the place, more money would be needed for a “barnyard blitz”. Getting a loan was always going to be a challenge. Jacob owned a…

HAPPY DAYS (FOR OWNERS) There are already signs of a recovery. House prices rose nationally by 0.8% in August, according to the researcher Core-Logic. In Sydney, Melbourne and Hobart it was the third successive month of price increases, and the second month in Brisbane. Nationally, prices rose by 0.6% over the quarter with Sydney leading the charge with an increase of 1.9%. Of course, these are baby steps and there is still some way to go before prices get back to their previous highs. Over the 12 months to August, CoreLogic says prices are still down by 5.2% nationally and more than 6% in Sydney and Melbourne. But with auction clearance rates up, albeit on low volumes over winter, many are predicting the bad times are over. LOW INTEREST RATES…

Retirees and others living off their investments are having a tough time of it right now in our historically low interest rate world. Most term deposits pay less than 2%, barely keeping pace with inflation, while many savings accounts now pay virtually no interest. Much better returns are available from equities, but investors have to be prepared to live with volatility if they invest in this asset class. And there’s always a risk the sharemarket will fall off the cliff – not many retirees can afford to see 25%-30% of their capital wiped out, especially those with limited opportunities to rebuild it. Regardless of your risk appetite, some of your assets should be in fixed income. And the good news is you can invest in this sector through the ASX,…

With interest rates going ever lower, let’s consider what retirement might look like in the not-too-distant future. In this example, our baseline retirees are an 80-year-old couple with $1 million to live off in a mortgage-free house in a zero-tax environment. They hold the classic Australian equities portfolio that averages out to a yield of about 4.5%, with average market franking (about 72%) taking it up to 5.89%. They have mostly banks, Telstra and hybrids. They hope the bank sector will recover and they will “be all right in the end”. They have instructed all the companies they own to pay dividends into a specific bank account, which collects about $45,000 a year plus an annual tax cheque for somewhere between $10,000 to $15,000 depending on the franking. They also…

The June quarter national accounts painted a concerning picture of the state of the Australian economy. Private sector demand – from consumers and businesses – was flat and it was only net exports and government spending that kept us in the black. Consumers, who account for almost 60% of economic activity, have faced consistently slow real wages growth, which takes account of inflation, for six years. When prices were rising we were happy to dip into our savings or increase our debt to supplement our spending. But the boom came to a rapid halt in 2018 and household savings have fallen to critically low levels. So we’re giving up the smashed avo on toast, along with much other discretionary spending. Car sales in August were down 10% compared to the…

What was your first job? It was making milkshakes in a milk bar behind the surf club at Kingscliff. It was a tiny store called Abundant Health and I’d work on Saturdays making milkshakes and sandwiches and I loved it because it was a health food shop. What’s the best money advice you’ve received? It came from the book The Wealthy Barber, and it was about paying yourself first and paying yourself 10% first. It doesn’t matter how much you earn, if you’re investing your money it will grow. Have your money make money for you with a passive income. I wish I had this advice a lot earlier. What’s the best investment decision you’ve made? I’ve made some strategic decisions in real estate that have done really well. We’re…

Rhiannon is an award-winning high-performance coach and best-selling author. Through her business, the Conscious Coaching Collective, Rhiannon has worked with celebrity clients such as members of The X-Files, Grey’s Anatomy, the Spice Girls and the Sydney Roosters, as well as Aussie farmers fighting drought and several small businesses. With a 30% gratuitous client base, Rhiannon focuses on single parents who could never afford coaching. She is the author of How to Climb Mount Everest in Sandals – The Courage to Live an Ordinary Life, and Life is a Choice and the Choice is Yours. She is about to feature in the upcoming film The Richness of the Journey.…

GREG HOFFMAN Greg is an independent financial educator, commentator and investor. He says: “Travel! Our family has big plans for the year ahead, before our son heads to school in 2021. Japan, America, France, Germany and England are all on the cards. It’s been a long-term goal and I can hardly wait.” ALEXANDRA CAIN Alexandra is an experienced business journalist and contributing writer for Money. Alexandra says: “I put any extra funds straight on the mortgage because that’s my major goal at the moment. Once I have done that, anything remaining will go into my super fund so I can also get a tax benefit.” MARK CHAPMAN Mark Chapman is director of tax communications at H&R Block. Mark says: “We’ve recently done some renovations to our house, paid for on…

The sharemarket has been bouncing around a bit lately, so you may want to prepare a few ideas on how to stay the course through the next share slide, no matter when it comes. The first step is to design a diversified, low-cost portfolio that aligns with your goals, time frame and risk tolerance. Sticking with your plan regardless of financial market weather gives you the best chance for investment success. Ignore the daily ups and downs because over the long run staying the course leads to significant gains. No one likes to see the value of their super or other investment fall. For that reason, some experts advise that you avoid checking your portfolio’s value frequently, whether it is up or down. Consider saving more because it provides a…

Allan Fels’ memoir reflects on his 50 years dedicated to the public service, largely spent advocating for the consumer. He has gone head to head with the country’s largest banks, airlines, supermarkets and telcos to make certain Aussies get a fair deal. Now he details how his long career has impacted the way we live and work. Throughout the book he explains how he had to manage the balancing act of finding solutions in the public’s best interest as well as negotiating the political and business environment. He also considers how things have changed over this time and how past decisions stack up against a different world. Five readers can win a copy. In 25 words or less, tell us about a time you fought for your consumer rights and…

Kym Huynh A lawyer who turned to business to advance learning in the community. Age 35; lives in Melbourne’s Southbank. Started his first online business in high school, but had volunteers create the content to free his time; describes self-employment as a no-brainer. Now spends half the year in Australia and the other half in Europe. Sporting interests are tennis and springboard diving; favourite pastime is having long conversations with friends. Money tip is to pay off credit cards every month.…

Jacqueline’s group of blue-chip stocks is the backbone of most Australian portfolios. They’re mostly high-dividend-paying stocks and as a group should grow earnings slowly over time. There are some short-term headwinds, though. Iron ore stocks are paying large dividends currently, but the iron ore price is currently falling and likely to settle at a lower price in a year or two. Bank profit margins are also under pressure from low interest rates, which are expected to fall further, and valuations for each stock are at or near the highest they’ve ever been. That means you can’t expect them to keep performing as well as they have done over the past decade, as capital gains will be more limited. My guess is that this group will produce an average return of…

Having just one job is so yesterday. More than two million Australians have multiple jobs; one in four of us runs a small business on the side – and it’s putting valuable extra cash in our pockets. How much extra? Research by Finder shows that side hustlers are earning an average of $7300 a year from their side income. According to Finder, putting your car to work with a ride-sharing service like Uber can see you earn $10,490 a year. Renting out a spare room on online platforms such as Airbnb could put an average of $8140 in your pockets. Have a go at both and it can be possible to earn an extra $20,000 in 12 months. Andrew Morris, director of specialist recruitment firm Robert Half, says new technology…

• Contributions Have your personal contributions been credited to your account? Has your employer paid the correct contributions (the super guarantee is 9.5% of your salary)? Employers are required to transfer the money quarterly, though many do it more regularly. If you are concerned your employer’s payments are not correct, contact them or visit the section on unpaid super on the tax office’s website. It has information and useful tools to help estimate what your employer should be paying and to report unpaid super. • Personal details. Are they still current? • The broad numbers The statement will set out what you started with, the contributions and investment earnings added to your account, and the tax and expenses deducted. If something doesn’t look right, contact your fund to ask why.…

We received a complaint last month from a regular reader for taking them down the merry road of recommending kids’ savings accounts that turned out to be inappropriate for them. The reader did their additional homework, calling three of the financial institutions that made it to the top of the league tables in our 2019 Best of the Best Awards for best kids’ savings accounts. The main issue was this: said financial institutions had limited branches and all of them required a prospective account holder to apply in person. I can see why our reader was frustrated. There are several factors that go into choosing which kids’ savings accounts go into the Best of the Best shortlist. They include the range of options from the financial institution, penalty rates when…

The share economy is booming, with one in 10 Australians earning about $1100 every month, according to the researcher YouGov, in a study commissioned by The Sharing Hub. This extra income is generated by sharing anything from caravans and cars to hammers and unused space. Now fashionistas can make some additional dollars by way of The Volte, a clothing rental marketplace. Founded in 2017, The Volte allows users to borrow cocktail dresses, jumpsuits, skirts, jackets and much more. The platform has a retail value of more than $10 million with lenders located all over Australia. Moreover, in a recent media release The Volte claimed to have grown at 400% in 2018 and now has more than 100,000 monthly active users. How does it work? Fashionistas list their garments on the…

INTERIOR 1. Know where your shut-off valves are for the main water supply in case of an emergency, and consider shutting off the water supply if you will be away from home for a week or more. 2. Flexi hoses pose a serious risk of bursting. Inspect appliances that use flexi hoses, such as icemakers, washing machines and dishwashers, and replace the flexi hose every 10 years. 3. Inspect your water and waste lines for leaks, damage or corrosion. 4. Hot water systems have a lifespan of seven to 10 years, so keep an eye out for puddles and be ready to replace the system. 5. Check air-conditioning units and keep drip trays clean and drain lines unobstructed. 6. Ensure the watertight seal in baths and shower recesses is maintained.…

YES STEPHEN BOURKE The main advantage to including your children in a self-managed superannuation fund (SMSF) is that it can be a focal point for planning. Your SMSF is, of course, subject to the limitation that there be fewer than five members. The transition of intergenerational wealth needs to be carefully planned. Involving your children in your SMSF will give them an understanding of trusteeship and fiduciary responsibilities. As you age your children may well become your financial managers and the earlier they are involved in the SMSF the stronger the family relationships and the better the understanding they have of financial matters. The other advantage is that your children gain important skills in financial goal setting for themselves. It involves them in a meaningful way in the financial side…

In what seems like the blink of an eye, exchange traded funds (ETFs) have taken the world’s stockmarkets by storm. Not lithium stocks and not the gravity-defying WAAAX tech stocks. What’s even more impressive is that many of these market changers are just about the most boring investments you could make. Globally, ETFs are worth $6.3 trillion – larger than the actively managed fund sector. To invoke an old oil ad – ETFs ain’t ETFs, Sol. These days anyone can start an ETF. It can have any investment strategy and charge whatever fees the manager decides. In the US there are high-fee hyper-leveraged ETFs that make money for the holder if the market caves, for example. Other ETFs focus on particular themes (say tech or gold) or on certain geographies…