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Is your money personality set in stone?

Our upbringings hugely influence the attitudes we have towards money. Did you observe your parents working hard to put food on the table? Was money a cause of conflict in your household? Was it spent freely, or were budgets obeyed?

The money attitudes you were exposed to as a child aren’t necessary the ones you’ve taken on though. Some people exhibit money habits very different to the ones they grew up seeing, perhaps in a reaction to those circumstances or as a reflection of their personality. Take a look at a family of siblings and you might notice very different money personalities.

Here are four of the most common money personalities:

Avoider

As the name suggests, an avoider doesn’t want much to do with money. They don’t want to spend time thinking about it, which is why bills go unpaid and little attention is spent on investing and saving. There are many reasons why someone could be a money avoider, but two common ones are either feeling overwhelmed or confused around financial matters, or believing that money represents greed so it’s bad to focus on it.

Hoarder

This money personality type excels with saving but struggles to spend. This can lead to Scrooge-like tendencies, as the hoarder finds it difficult to part with their money. They’re anxious that money could be taken away from them and they must have substantial savings at all times. The hoarder doesn’t have fun with their money – the greatest enjoyment they get is knowing it’s untouched.

Spender

The opposite to the hoarder, the spender enjoys buying things for themselves and loved ones, making them very generous but sometimes irresponsible if they spend more than they earn. They risk falling into debt and struggle to save enough money for substantial purchases such as a house deposit. Delayed gratification is foreign to the spender, who’d rather buy on impulse.

Status seeker

Unlike the other money personality types, whose habits might go unnoticed at first, there’s no mistaking the status seeker. They’re the ones with the newest gadgets, flashiest cars, most fashionable clothes. The status seeker uses money to exalt their image. They have high standards and are deeply invested in how others see them. Like the spender, the status seeker risks going into debt if they can’t afford their lifestyle.

Perhaps you identify strongly with one of these types, or can see yourself in several. None are inherently bad, but they all represent unbalanced attitudes to money.

While many of these beliefs can be quite entrenched, it is possible to change your thinking and foster a more positive money mindset.

Here are some tips to bring these beliefs into equilibrium:

Understand the emotions that drive your decisions

The money hoarder tends to be driven by anxiety, while for the status seeker it’s insecurity. Identify your emotions – this observation will make you more aware of how you view and use money.

Create and maintain good money habits

A budget provides a clear picture of where money is going. They’re useful for everyone to have, but are especially helpful for the spender and avoider.

Stop comparing yourself to others

The status seeker is the worst offender, but many of us also buy things to impress others. Focus on what you want and don’t worry about keeping up with the Joneses.

Communicate with your partner about money matters

It’s possible you and your partner are different money personality types. Ensure you’re on the same page about shared spending, saving and long term goals.

Practice gratitude

Appreciating what you already have will cut down on any unnecessary spending and anxiety around your finances.

Get assistance

Whatever your attitude to money, it’s always worthwhile having someone in your corner to assist you to make the most of your financial situation. We are here to help.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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Raising Financially Educated Kids

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Why do many of us have such a bad relationship with money? The recent UBS white paper¹ revealed some disturbing statistics – 56% of married women leave financial decisions to their spouse and 85% of those women do so as they feel the man ‘knows more’. The scariest statistic when taking this into account is that 8 out of 10 women will at some point in their lives be left managing their money themselves. Having had a family friend recently pass away; his widow knows all too well the difficulty taking a back step with money management has caused.

Our relationship with money starts early in our lives. Now, in the digital age of money, how do we best equip our kids to grasp the value of money?

The Financial Planning Association have released their report Share the Dream – Research into raising the Invisible Money Generation² which shows up to 68% of people are reluctant to talk to their children about money, often as they are stressed about their own situation or are concerned the discussion will make their children worry about money. Is this then perpetuating the education gap?

Interestingly, parents with a Financial Planner are much more likely to discuss money with their children. It also starts with simple conversations. Parents who report talking to their children start with pragmatic topics such as how to spend and how to save, how do we earn money, the household budget and how much people earn when they work. More complicated topics such as in app purchases, crypto currency or Afterpay type credit purchases are less likely to be discussed, though this doesn’t make them less important.

Now in the Invisible-Money generation, how do we start teaching children about money when the majority of transactions are tap and go / online based? Pocket money is a great first step for children to practice with money. I know with my 4-year-old daughter, it is about learning simple addition and subtraction, what the numbers, colours and size of the notes and coins represent and the difference of how many ice-creams she will need to forgo to buy a teddy bear. There is a tipping point between the ages of 14-18 where buying shifts from tangible products to online purchases such as apps, games and experiences, so prior education is paramount here.

The research is clear, in order for us to prepare our kids and give them the best chance to have a great relationship with money, we need to talk to them about it early and frequently. If you would like more how to hints and tips, please speak with one of our Financial Advisers.

 

¹ https://www.ubs.com/global/en/ubs-news/r-news-display-ndp/en-20180514-ubs-reveals-top-reason.html
² https://resources.moneyandlife.com.au/hubfs/FPA%20Share%20the%20Dream%20Report%20-%20August%202018.pdf 
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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Ladies, it’s time to take control!

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

I was reading an article entitled ‘More women will end up alone and managing their own money’ by Georgina Dent in The Age¹ and was astounded at the lack of confidence women have in their abilities.

It really struck a cord with me and I was trying to work out why and I think a quote from the article summed it up quite nicely

 

“women not only underestimate their own capabilities but they overestimate what is required to be financially involved.”

 

You shouldn’t need a man or spouse to provide you with a sense of financial security, your knowledge and understanding of your finances should be all the security you need. It can be as simple as understanding where your money is going and track your expenditures, it isn’t even hard these days you can do it on an app on your phone.

It is common in a relationship for one person to take the lead with the finances, like with a lot of household tasks. However, you are a partnership and should have an understanding of what is going on and not just leave it up to the other person so there are no surprises as to your financial position.

It is interesting that this trend is not changing with millennials, with the greater focus on women’s independence there is no trend in women stepping up and taking control of the finances, they are behaving quite primitively.

My experience from growing up is that the overall finances was a team effort. My Mum did the grunt work of paying the bills and banking but both Mum and Dad together with their Financial Advisor would look at the strategic side of things.

My relationship with my Fiancé is no different. James is happy for me to look after the day to day but he wants to be involved with the long term strategic planning.

Women should be paying more attention. We live longer, tend to have more gaps in employment and average lower pay throughout our careers.

This means that at some point in time we will need to be the ones in control and making the decisions.

Don’t know where to start, book an appointment with a Financial Advisor, find someone you can trust and identify with. They should help educate you and not make you feel dumb or silly for asking questions. Worrying about how much advice will cost or thinking that you don’t have enough money shouldn’t be a barrier for booking an appointment.

 

¹ The Age 17/06/2018, More women will end up alone and managing their own money, Georgina Dent.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way
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Who is making your Financial Decisions?

In January 2018, women marched in all 50 American States, in 92 Countries, on all 7 continents in protest of the policies and positions of the Trump administration. Women worldwide are channelling their energies to articulate their right to take up equal opportunities, with respect, safety and dignity. Women worldwide are becoming outspoken and active political participants.

The #metoo movement has broadened the global dialogue on the widespread prevalence of violence and sexual assault. Women are demanding accountability and beginning provocative conversations. Women are becoming more outspoken, more educated, and the opinions of women are being represented politically and socially. Women are becoming publicly progressive in their endeavour for gender equality.

In light of the current political and social climate, I was surprised to read in an article published in the Sydney Morning Herald by Georgina Dent, where Financial Coach Julia Sotas stated that ‘56% of married women leave investment and financial decisions to their husbands…because they believe their husbands know more’.¹ In a world where women are progressive, and willing to actively participate in the global political and social dialogue of gender equality, it is interesting that women still believe that they are incapable of making investment and financial decisions.

In your partnership is your partner taking control of your financial future?
Curious to discover what motivates financial decisions of the women around me, whether they be married, in defacto relationships or single, I decided to ask some questions. I am overwhelmed by the responses I received from these educated and determined women. There is a trend, indistinguishable from cultural traditions, that most women are influenced financially by the men in their lives.
Empowered and progressive women, I urge you to become eager for not only political but also financial freedom. I urge you to take up equal opportunities and to stop underestimating your capabilities to manage your investment and financial decisions. It is time to become financially aware, involved and secure.

 

At Income Solutions we run regular Income Solutions for Women seminars. If you would like to register for an upcoming event please contact us or go to www.incomesolutions.com.au/events for more information.

 

  1. Dent, G. (2018). More women will end up alone and managing their own money. Sydney Morning Herald. [online] Available at: https://wwwsmh.com.au/money/investing/more-women-will-end-up-along-and-managing-their-money-by-themselves-20180614-p4zlfy.html [Accessed 3 Aug. 2018]
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way
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Interviewing a New Financial Planner

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

How do you find the right financial planner?

Seeking financial advice can be a daunting task. You work hard for your money, so, in turn, you need to have faith that your financial advisor will make your money work hard for you to achieve your goals.

When you are looking for someone that you will trust it’s a good idea to start the search by asking your friends and family for recommendations. A referral from a trusted person will help you find an adviser with a good reputation, and someone you can have confidence in from the outset.

The next port of call that we suggest is the Financial Planning Association. They have a list of highly qualified professionals here: https://fpa.com.au/find-a-planner/

When you find an advisor that you are interested in meeting, have a look at their education. Look for qualifications like:

  • Bachelor of Commerce (BComm)
  • Certified Financial PlannerTM
  • Master of Financial Planning (MoFP)

Another key indicator is the business that they are working in. Have a look at their website and the offices where they work. If it is a growing, thriving business, they must be doing something right!

When you meet with your potential planner, make sure to interview them, this is your chance to ask them questions like:

  • Are they a specialist in a certain area or for a certain type of client? – for example: women, retirees, young professionals etc
  • What are their qualifications?
  • How many years have they been in the industry? (this is not necessarily the years they have been advising. Many advisors start in the industry and learn the ropes for years before becoming an advisor)
  • What is the process to become a client?
  • What can you expect from the service?
  • Are there additional services such as Accounting, Mortgage Broking & Cash Flow Management?
  • What technology is available to clients interact?

Don’t feel like you must go with the first planner you meet, if you don’t connect with them its ok to interview other planners even within the same business.

At Income Solutions, our first meeting is call The Right Fit.

It is a no obligation “getting to know you” meeting for both the client and the planner. Is it a chance for you to get to know if Income Solutions is the right fit for you and your financial needs and the planner to find out if you are the right client for Income Solutions.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way
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Have oil prices peaked?

Australian motorists are not the only ones hoping that global oil prices have peaked after reaching four-year highs in 2018. Not only do high oil prices flow through to the price of petrol at your local service station, but they also increase the cost of doing business for everyone from farmers to airlines and push up the cost of living for households.

On June 22 the Organisation of Petroleum Exporting Countries (OPEC) plus Russia agreed to increase output by one million barrels a day, or about 1 per cent of world supplies, to relieve global shortages and lower oil prices. Even so, the price of Brent Crude rose to US$75.60 a barrel immediately after the announcement amid concerns the target may not be met. As at June 29, the oil price had surged 64 per cent in 12 months, but if OPEC and Russia succeed in lifting supply prices should begin to fall.

There are several international oil prices quoted in the media, but the price of Brent Crude is considered the major global benchmark.

What’s going on?

OPEC’s latest turnaround follows four years of determined efforts to limit oil production and boost prices. The price of Brent Crude crashed from US$115 to US$30 a barrel in 2014 as cash-strapped producers including Russia and Venezuela increased supply. At the same time, the US expanded production from fracking.

Then early this year the freezing northern hemisphere winter pushed up the price of oil as demand spiralled. Brent Crude was trading at a sustained high of around US$80 a barrel until May, when US President Donald Trump withdrew from the Iran nuclear deal.

Under the 2015 deal, nations including the US, France, Britain, Russia, Germany and China agreed to lift international sanctions on Iran’s oil exports in return for OPEC’s third largest producer winding back its nuclear capability.

The first sign that oil prices may have peaked came on news that Saudi Arabia and Russia were discussing a possible increase in oil production. In late May the price of Brent crude eased back to levels around US$76 a barrel before settling at US$77 after the June 22 meeting sealed the deal.

Who’s affected?

Holidaymakers may feel the pinch after Qantas chief executive, Alan Joyce warned airfares could rise in response to this year’s oil price hikes. Jet fuel costs have climbed 50 per cent in the past 12 months which will eat into airline profits, depending on how much of the cost they are prepared to absorb before lifting fares.¹

Rising oil prices also erode profits of transport companies and businesses that rely on the movement of goods or the use of heavy machinery. Australian farmers face the double-whammy of rising fuel costs on top of the effects of drought.

Consumers ultimately pay for higher oil prices as they flow through to the cost of food and other goods.

There are some winners from constrained oil exports though. Australian gas producers stand to gain from increasing demand and high prices as they ramp up production and exports.

Relief ahead for motorists

Rising oil prices have inevitably been passed on to local motorists, although there is relief in sight. The national average price of unleaded petrol rose by 14.7 per cent in the three months to June to a four-year high of 153.3c a litre. Prices edged lower towards the end of June in response to the downward trend in crude oil prices.²

Rising oil prices have been exacerbated by the weaker Aussie dollar which has fallen from US81c earlier this year to recent levels below US74c.

Petrol prices vary enormously between regions, cities and even within suburbs. Australian Competition and Consumer Commission chairman, Rod Sims has urged motorists to use fuel price websites and apps to shop around (you could try MotorMouth or Compare the Market.)³

 

¹ IATA, http://www.iata.org/publications/economics/fuel-monitor/Pages/index.aspx

² Australian Institute of Petroleum as at June 24, 2018, https://aip.com.au/pricing/pump-prices

³ ‘Petrol prices stable to March but now hitting four year highs’, ACCC, 5 June 2018, href=”https://www.accc.gov.au/media-release/petrol-prices-stable-to-march-but-now-hitting-four-year-highs

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way
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Managing Family and Finances

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Everyone leads a busy life, but it’s important to take time out to think about your current finances and your financial future.

When you are planning or have a young family, there are a lot of important tasks that are on your mind. It is easy to let every day things like managing your finances fall to the wayside.

Paying the bills is quick and easy, but thinking about the big picture in 10, 20 or 30 years down the track can feel like a daunting task. Many people think retirement is so far away and that they have plenty of time before they need to start looking at planning for that phase of their lives. There is also the belief that it will just work itself out.

But you are reading this, so take the time now to think about your life in 30 years’ time.

You don’t want to regret not planning for your future.

By engaging an advisor, it forces you to take time out once or twice a year to chat about your goals and strategy and make adjustment where needed. This helps you to not only be aware but also re-evaluate what’s important to you and what your goals are year to year.

Research shows that by writing down your goals, you are more likely to plan and work towards achieving them.

By having a trusted financial advisor to look at your goals and create a tailored strategy, you will have to spend less time thinking about your financial future, and you will be in a much better position in the future.

At Income Solutions, we place a lot of time educating our clients on our investment philosophy so that they walk out of their meetings with complete understanding of what their strategy will be and how it will help them reach their financial goals.

It’s never too late to re-assess your financial position and change your strategy, and it’s never too early for your teenage children to start understanding their finances.

We run 4 events each month that will help you start making a plan, no matter what stage you are in for planning your finances:

Common Sense Investing

Common Sense Estate Planning

Kickstart: Your Financial Future

Pivot: Choose Your Financial Direction

We urge you to have a look at our website – www.incomesolutions.com.au/events or have a chat to one of our financial advisors to see which event would help you to achieve your goals, for you and your family.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way
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Cultivating a growth mindset

Ever had a plant die on you, and wonder where you went wrong? “But I watered it every day!” “There’s plenty of sun in that bit of the yard!” The simple truth is that there are lots of different elements that need to come together for plants to thrive. Even the hardiest species will struggle if something’s missing.

You can apply the same thinking to your personal growth. To learn and develop, you need opportunity and motivation. Depending on what you’re aiming for, you might also need specific resources. If you feel like you have access to the elements that support growth but you’re still stuck in a bit of a rut, there’s one vital thing you might be forgetting – the right mindset.

Two mindsets, two very different outcomes…

When it comes to self-esteem and self-improvement, there are two ways to look at yourself: with a fixed mindset, or with a growth mindset. It’s a psychological theory developed by Stanford psychologist Carol Dweck, over 20 plus years of research.i

People with a fixed mindset believe that intelligence and talent are pre-determined. They believe that they’re gifts you’re born with and can’t be changed. On the other hand, people with a growth mindset believe that abilities can be developed, changed and improved upon over time.

When someone has a fixed mindset, they’re more likely to avoid challenges, give up easily, and ignore constructive criticism. They’d rather shape the world around them than try to change themselves. For example, someone who doesn’t think they’re good at sports might decline an invite or opportunity to get active, because their mindset says they’re more of a ‘sitting at home with a good book’ type of person. As though the two are mutually exclusive.

Successful people, on the other hand, embrace challenge. They don’t see failure as the end – instead, they see effort (no matter the result) as part of the pathway to improving. And they find inspiration in others’ success – so they seek out people who challenge them, rather than just those who make them feel comfortable. It’s a pattern of behaviour you can see in all kinds of successful people, from famous entrepreneurs who’ve built their businesses from the ground up, to ordinary Aussies who’ve changed their diet and exercise habits mid-life (and kept it up).

Changing your path

One way you can start cultivating a growth mindset is to think of a time you tried to do something new and it didn’t work out. Ask yourself what really stopped you from trying again, and try to think of the lessons you learned from your experience. What are the elements of growth that you were missing? This will help you reframe it as a stepping stone, not a failure. For example, if you’ve tried to pick up a new language but dropped out after a few lessons. Did you really make time in your schedule for practice? Did you work on forming social bonds with your class mates?

The other trick is to try naming something you’ve always done the same way. Ask yourself why you do it that way, and whether there could be a better way. Don’t worry if what you’ve got in mind seems a long way off. Focus on cultivating the skill or ability and your triumphs along the way, instead of fixating on an outcome.

Think of it this way; you wouldn’t be disappointed with a sunflower seed for failing to sprout and grow into a six foot sunflower overnight. Enjoy each little stage of the growth process. Find quiet satisfaction in ‘getting it right’ – no matter how marginal the progress. Who knows; you might surprise yourself. And the people who matter most to you.

i https://profiles.stanford.edu/carol-dweck?tab=publications

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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Peace of Mind is King

We have all heard both sides of the argument between owning a home and renting a home. You would have all experienced loyalists to both sides of the argument passionately lecturing you about why their side is superior to the other. It all comes down to what it is you want to achieve, and above all else, peace of mind.

It is an interesting phrase, peace of mind, often referred to as a sleep at night factor. The Collins Dictionary defines it to mean ‘the absence of worry’.¹ Whenever making a decision in life – financial or not – I believe the criterion we should give the most weighting to is whichever option gives you the best sleep at night. There is no point making a decision and lying in bed at 2am every night worrying if you made the right one or not. That is not what life is about.

Circling back to the argument of renting a house versus buying a house. Each side has its own logic and merit, there is no doubt about that. A house is a lifestyle asset so we need to be prudent in ensuring the costs associated with owning or renting one does not adversely affect our lifestyle too much. Let’s break down some advantages and disadvantages of the two, and I will focus on living in the Geelong area as a reference point.

When you own your home, the first thing people realise is a sense of stability. The home is now yours, and provided you have no issues repaying the mortgage, it is very difficult for anybody to take it off you. Although, it can be done², think ‘The Castle’.

What’s more than the sense of stability is the emotional attachment you have with your home. This is often deemed priceless. Most people would have memories of their family home growing up. Because you own it, you can do what you like, such as drawing a height chart on the wall that you add to on your children’s birthdays, renovating, putting picture frames wherever you like, and if you’re lucky, you could even put a pool in.

Arguably, the most valuable aspect of home ownership is the opportunity to use the equity you potentially own to invest for the future. For this opportunity to become beneficial, you have either got to paydown the principal of your mortgage significantly, or are lucky enough to own a home in an area that has experienced large capital growth. The lifestyle on offer in the Geelong area is envied all around the world, which has lead to capital growth in recent years. So much so, they have developed a new estate in Armstrong Creek. The demand for homes in this area is so strong, that the average time a home listed by local agent, Armstrong Real Estate, spends advertised on the market is just 16 days. This estate is situated only 10-15 minutes from the Geelong CBD and numerous coastal beaches, what a great lifestyle that would be? If owning a home and having this sort of lifestyle sounds decent, at Income Solutions, we can help assist implementing the strategies necessary to ensure you can lead your desired lifestyle and still get a sound nights sleep without any worries.

Of course, as Gary Ablett now knows, the value of your house can just as easily drop³. There are risks. They do not always go up in value, and, as the owner of a mortgage, you are a slave to interest rates. Interest rates are an obvious issue and can affect your peace of mind. They’re currently quite low, however, they are on the increase. This can cause severe financial stress (4) and is something you’re unlikely to experience whilst renting. On top of rising interest rates are the costs of owning a home. Rates, insurances, maintenance, stamp duty when buying etc. These all add up and it is mandatory to allow for these kinds of costs in your annual budget before making the decision to buy a home. Remember, planning for these can still give you great peace of mind.

Alternatively, there is the option of renting. Viewed with a lot of unfair stigma in this country, renting can be seen as ‘dead money’. I agree, to an extent. In most cases, it can be cheaper to rent a house than it is to buy it. You can live in an area that best suits your lifestyle at a cheaper price. The demand for rentals in the Geelong area is also booming due to the lifestyle on offer; the supply of homes cannot keep up with the demand. Armstrong Real Estate lease out advertised homes in an average of 7 days, such is the popularity of this area.

A prudent renter should use the cash they save on their dwelling and invest this for their future. It is when this cash saving is simply squandered on lifestyle that rent does become dead money. Everybody’s favourite finance commentator, The Barefoot Investor, says in his book that if a person rented the same house their friend had bought, invested the difference in their associated costs, the renter would be in a better financial position in 20-30 years time. True, for the most part.

Another aspect of renting is the flexibility. This can also be seen as uncertainty. If the freezing winter’s of Geelong become too much to handle, it is very easy to simply sign a new lease and move to a place like the Whitsunday’s, not needing to worry about the extremely lengthy time it can take to sell your home. The other side of the same coin is also very real. A family of 5 receiving a letter from their property manager telling them they have 30 days to vacate the premises is surely going to cause a few sleepless nights. If the potential of this happening to you as a renter causes you severe angst and little-to-no peace of mind, then renting is probably not for you.

Personally, I understand that owning a home will cost me more money than renting one. Unfortunately, this country does not offer 10-20 years leases like other countries of the world(5). Therefore, I currently rent, with the goal to own a home in the near future for two reasons. Primarily, I would like to buy a nice little acreage around Geelong. These types of properties are hard to come by as rentals, and I would like to have full control over it. I am aware of the opportunity cost and it is a risk I am willing to take. Secondly, I plan to use the equity I build in my house to invest in my capital base. I will turn my bricks and mortar into an asset, and have it earn me some cash, rather than force me to spend cash on it.

The basic thing is I have a plan. This plan is what gives me peace of mind. At Income Solutions, we can help you create your plan, and, with a bit of luck and forethought, some decent peace of mind as well.

 

1 https://www.collinsdictionary.com/dictionary/english/peace-of-mind
2 https://www.afr.com/real-estate/residential/cancelled-east-west-link-houses-are-being-sold-to-the-public-with-conditions-20150416-1mmedq
3 https://www.news.com.au/finance/real-estate/melbourne-vic/geelong-star-gary-ablett-caps-off-homecoming-with-sale-of-gold-coast-home/news-story/017f13105e10ae150a73b0b8215497a0
4  https://www.yourmortgage.com.au/mortgage-news/nearly-one-million-households-are-in-mortgage-stress/248566/
5 https://www.smh.com.au/business/companies/renting-property-dont-hold-your-breath-for-a-long-lease-20141104-11eftx.html
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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Do you want it? Or do you need it?

Even those of us who have been paragons of responsibility for 51 weeks of the year can be tempted to take a budgeting holiday when holidays roll around. Unlike overindulging at the Christmas lunch, this has more than short-term consequences.

Last December, Australians spent $25.6 billion in retail stores. A survey conducted at the time by peer-to-peer lender SocietyOne found shoppers planned to put over half the cost of the presents they bought on credit or store cards. SocietyOne’s research also found that while shoppers believed they’d pay off their festive splurge by April, most actually wouldn’t.

If you don’t want a painful debt hangover, it’s worth taking a moment to sort your needs from your wants. Separating wants from needs can be one of the toughest aspects of budgeting, particularly around the festive season.

Needs are not the same as wants

The line between needs and wants can be a little blurry but a good rule is to ask yourself ‘Do I absolutely need to have this?’ If the answer is no you’ve probably identified a want.

You may want to serve French Champagne at your Christmas lunch but you don’t need to. Nobody’s suggesting you shouldn’t splash out, but your lunch guests are likely to be more than satisfied with a sparkling wine. You don’t need to spend money you don’t have on extravagant gifts and entertaining to express your love for, or try to impress, friends and family.

This is no time to take a budgeting holiday

Your wants are very much driven by emotion. We all want to shower the people we love with gifts, an abundance of food and other treats. However this can lead to impulse spending we did not originally plan for. Focus on the essentials and plan how much you’re going to spend before you head to the shosps then stick to that budget once you get there.

Avoid buying now, paying much more later

Just because you want something but don’t need it doesn’t mean you shouldn’t buy it. Make sure you’ve got enough to cover your needs or basic day to day expenses, then with what’s left over, prioritise your wants.

It’s also important to consider how you are paying for the little luxuries. Watch out for the temptation to put them on credit. The average credit card balance is $3,130 with interest being paid on $1936 of that amount. The amount of interest varies, but at a time when interest rates are at unprecedented lows, Australian credit card users typically pay 10-15 per cent interest. The interest rate for most store cards hovers around 20 per cent.

Credit cards are not even necessarily the most expensive form of retail debt. If you enter into one of those ‘pay nothing for 6, 12, 18 or 36 months’ deals you’ll be looking at a much higher interest rate once the interest-free period ends.

A more recent market entrant called Afterpay – a type of reverse layby where you get the product now and pay it off afterward – has rapidly gained traction in Australia. A big part of Afterpay’s appeal is that no interest is charged on the amount owed. But fees are levied if repayments aren’t made so it’s possible to end up paying $68 in fees on a $100 purchase.

Avoiding debt

The simplest way to avoid pricey debt is to avoid spending money you don’t have. Wherever possible, limit yourself to using lay-by, cash or a debit card to cover holiday expenses.

With a bit of planning you can manage to take care of your day to day needs and still afford some luxuries – without copping the credit card hangover.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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