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Category: Provision Newsletter Articles

Five tips for working from home during the coronavirus pandemic

Date: Mar 22nd, 2020

As a result of the coronavirus pandemic, many Australian workers have been thrust into working from home for the first time.

By putting in place some systems and boundaries, you can help make the best of the situation, get your work done and maintain your mental wellbeing.

1. Designate a workspace or home office

If you are used to going into an office every day, then the separation between work and home is physical. You need to try and recreate this as much as possible, with a designated workspace in your home.

If you are fortunate enough to have a spare room in your house, then you could convert this room into your office temporarily. But, your workspace doesn’t have to be a separate room. It could just be a corner of your living room. The important thing is that you have a space where you can turn “on” to work. When you leave that space, you should be able to turn “off”.

2. Get dressed 

While it might be tempting to stay in pyjamas all day, getting dressed for work each day will improve your state of mind and mentally prepare you to start work.

You don’t have to dress up in your usual, formal workwear, but the simple act of getting changed will help you get into work mode. 

3. Stick to clearly defined work hours

The biggest challenge of working from home is having the discipline to set boundaries. You are in charge of your environment and have to hold yourself accountable. This discipline also extends to knowing when enough is enough when it comes to work hours.

While it may not be possible for everyone, especially for workers with kids, trying to set clearly defined work hours will help you maintain a healthy work-life balance and avoid burnout.

4. Get out and about (if you are not self-isolating)

If you are not self-isolating, you should get your shoes on, get outside and enjoy the fresh air at some point in your day. Reward yourself after a few hours of work with a 20-minute walk with your dog or get your yoga mat outside and salute the sun in the fresh air. 

When you return to your home workspace, you will likely feel more energised and be more productive for the rest of your work day.

5. Stay social (virtually)

If you are used to working in a bustling office, working from home can feel lonely.

With video conferencing tools like Zoom, Google hangouts and Skype (to name a few), you can virtually recreate those casual in-office conversations that break up your workday. 

It’s crucial during these challenging times that you stay connected and engaged with your work colleagues. 

Source: Clientcomm library

Important note:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.Any general tax information provided in this publication is intended as a guide. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Tune out the market noise

Date: Mar 17th, 2020

“Stocks at record highs despite uncertain geopolitical landscape”

“Shares plunge as coronavirus outbreak renews investor fears”

“Markets enter correction territory after worst loss since GFC”

You would have seen these headlines or similar over the last few weeks. It’s evident that investment markets are on edge. We’ve experienced an unprecedented bull run on the Australian Securities Exchange (ASX), bolstered by low interest rates and now, investors and commentators alike are naturally questioning if this rally is at an end given the emerging economic impacts of the COVID-19 virus.

The virus outbreak is certainly having a dramatic impact as it hits different regions of the world. 

So what do you do when market volatility increases, share values begin to tumble and rise, and media coverage intensifies?

Focus on what you can control. It’s natural to be nervous but it’s also crucial to tune out the noise, focus on the long term and stay the course.

The graph below shows the trajectory of a portfolio based on four different investment decisions taken at the end of December 2018 when the market experienced a downturn.

It’s an important lesson in investor behaviour.

Source: Vanguard US calculations, based on data from FactSet, as of February 28, 2019.

Although the portfolio would have lost 5.7% since 1 November 2018, by staying the course and not selling at the market low, investors who remained in their asset allocation ended up gaining back 4.2% in just two months.

If the investor cashed out in December and then reinvests just a few days later, the value of their portfolio is still not as high as if they had remained.

Cashing out in December would mean the portfolio is nearly $100,000 less than what it could have been by February 2019.

By not sticking to your financial plan and losing sight of your goals when markets are volatile and emotions begin to dominate decision-making, you are potentially forfeiting not only the opportunity to regain and increase portfolio value, but also what is likely years of hard work and patience.

Emotionally reacting to market noise might be difficult to avoid but the downsides of succumbing to it should be carefully considered before you cash out or change investment tack.

It’s also always a good idea to consult your financial adviser in times of market downturn for both reassurance and perhaps, rebalancing.

As the humble Vanguard adage goes, “stay the course” in good times and bad. It cannot insure you from adverse market movements, but by having a diversified portfolio it does position you to ride out market storms and not be blown off the course you set in your financial plan.

 

Please contact us on |PHONE| if you seek further discussion on this topic.

Source : Vanguard

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2020 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Mortgage versus super – a common dilemma

Date: Feb 26th, 2020

Conventional wisdom used to dictate Australians were better paying off their home loans and once debt free turning their attention to building up their super. But with interest rates at record lows and many super funds potentially offering a higher rate of return, what’s the right strategy in the current market? AMP’s Technical Strategy Manager John Perri investigates.

It’s one of the most common questions financial advisers get. Are clients better off putting extra money into superannuation or the mortgage? Which strategy will leave them better off over time? In the super versus mortgage debate, no two people will get the same answer – but there are some rules of thumb you can follow to work out what’s right for you.

One thing to consider is the interest rate on your home loan in comparison to the rate of return on your super fund. As banks follow the RBA’s lead in reducing interest rates, you may find the returns you get in your super fund are potentially higher.

Super is also built on compounding interest. A dollar invested in super today may significantly grow over time. Keep in mind that the return you receive from your super fund in the current market may be different to returns you receive in the future. Markets go up and down and without a crystal ball, it’s impossible to accurately predict how much money you’ll make on your investment.

Each dollar going into the mortgage is from ‘after-tax’ dollars, whereas contributions into super can be made in ‘pre-tax’ dollars. For the majority of Australians saving into super will reduce their overall tax bill – remembering that pre-tax contributions are capped at $25,000 annually and taxed at 15% by the government (30% if you earn over $250,000) when they enter the fund.

So, with all that in mind, how does it stack up against paying off your home loan? There are a couple of things you need to weigh up.

Consider the size of your loan and how long you have left to pay it off

A dollar saved into your mortgage right at the beginning of a 30-year loan will have a much greater impact than a dollar saved right at the end.

The interest on a home loan is calculated daily

The more you pay off early, the less interest you pay over time. In a low interest rate environment many homeowners, particularly those who bought a home some time ago on a variable rate, will now be paying much less each month for their home.

Offset or redraw facility

If you have an offset or redraw facility attached to your mortgage you can also access extra savings at call if you need them. This is different to super where you can’t touch your earnings until preservation age or certain conditions of release are met.

Don’t discount the ‘emotional’ aspect here as well. Many individuals may prefer paying off their home sooner rather than later and welcome the peace of mind that comes with clearing this debt. Only then will they feel comfortable in adding to their super.

Before making a decision, it’s also important to weigh up your stage in life, particularly your age and your appetite for risk.

Whatever strategy you choose you’ll need to regularly review your options if you’re making regular voluntary super contributions or extra mortgage repayments. As bank interest rates move and markets fluctuate, the strategy you choose today may be different from the one that is right for you in the future.

Case study where investing in super may be the best strategy

Barry is 55, single and earns $90,000 pa. He currently has a mortgage of $200,000, which he wants to pay off before he retires in 10 years’ time at age 65.

His current mortgage is as follows:

 Mortgage

 $200,000

Interest rate

3.50% pa

Term of home loan remaining

20 years

 Monthly repayment (post tax)

 $1,160 per month


Barry has spare net income and is considering whether to:

  • make additional / extra repayments to his home mortgage (in post-tax dollars) to repay his mortgage in 10 years, or

  • invest the pre-tax equivalent into superannuation as salary sacrifice and use the super proceeds at retirement to pay off the mortgage.

Assuming the loan interest rate remains the same for the 10-year period, Barry will need to pay an extra $820 per month post tax to clear the mortgage at age 65.

Alternatively, Barry can invest the pre-tax equivalent of $820 per month as a salary sacrifice contribution into super. As he earns $90,000 pa, his marginal tax rate is 34.5% (including the 2% Medicare levy), so the pre-tax equivalent is $1,252 per month. This equals to $15,024 pa, and after allowing for the 15% contributions tax, he’ll have 85% of the contribution or $12,770 working for his super in a tax concessional environment.

To work out how much he’ll have in super in 10 years, we’re using the following super assumptions:

  • The salary sacrifice contributions, when added to his employer SG contributions, remain within the $25,000 pa concessional cap.

  • His super is invested in 70% growth/30% defensive assets, returning a gross return of 3.07% pa income (50% franked) and 2.37% pa growth.

  • A representative fee of 0.50% pa of assets has been used.

Assuming the assumptions remain the same over the 10-year period, Barry will have an extra $154,458 in super. His outstanding mortgage at that time is $117,299, and after he repays this balance from his super (tax free as he is over 60), he will be $37,159 in front.

Of course, the outcome may be different if there are changes in interest rates and super returns in that period.

Case study where paying off the mortgage may be the best strategy

32 year old Duy and 30 year old Emma are a young professional couple who have recently purchased their first home.

They’re both on a marginal tax rate of 39% (including the 2% Medicare levy), and they have the capacity to direct an extra $1,000 per month into their mortgage, or alternatively, use the pre-tax equivalent to make salary sacrifice contributions to super.

Given their marginal tax rates, it would make sense mathematically to build up their super.

However, they’re planning to have their first child within the next five years, and Emma will only return to work part-time. They will need savings to cover this period, as well as assist with private school fees.

Given their need to access some savings for this event, it would be preferable to direct the extra savings towards their mortgage, and redraw it as required, rather than place it into super where access is restricted to at least age 60.

Pleae contact us on |PHONE| if you seek further discussion on this topic. 

Source : AMP January 2020 

Important:
This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling |PHONE|, before deciding what’s right for you.

All information in this article is subject to change without notice. Although the information is from sources considered reliable, AMP and our company do not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP and our company do not accept any liability for any resulting loss or damage of the reader or any other person.

Money challenges women face

Date: Feb 26th, 2020

Knowledge is power. Financial knowledge is particularly powerful when it comes to securing your future. Women and men alike can benefit from acquiring financial knowledge and skills. But when it comes to money, women face unique challenges.

The last few years have seen the spotlight shining brightly on women’s issues globally with calls for political and social change, and exciting progress has been made to close the gender gap. However, there are still a number of problem areas. It may come as a surprise that one of these areas is financial literacy.

What is financial literacy?

Financial literacy is not simply numeracy. The OECD International Network on Financial Education defines financial literacy as a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve financial wellbeing.

Being financially literate is essential when it comes to retirement planning, wealthaccumulation and economic empowerment.

The financial literacy gap

One of the most striking findings from the latest Household, Income and Labour Dynamics in Australia (HILDA) report1 is there is a clear gender divide in financial literacy. The data revealed that women exhibit much lower levels of financial literacy than men. The HILDA survey measures basic financial literacy by asking 5 key questions and only 35 % of women answered all five questions correctly, compared with 50 % of men.

Ultimately, for women to be truly empowered, it’s essential to be financially literate and plan for the long term. Here’s why:

Lower lifetime earnings

Women are more likely to have taken time out from work to care for children or parents and are more likely to have earned less than men. Also, factors such as divorce, the loss of a partner, an illness or even financial abuse can leave women in a precarious financial position, particularly later in life.

Lower super balances

Data from the Australian Bureau of Statistics2 released in November 2019 revealed the median superannuation balance remains lower for women than men. In 2017–18, the median superannuation balance at, or approaching, preservation age (55-60 years) was $119,000 for women and $183,000 for men. While these figures are well up on the equivalent figures from 2015/2016, ($158,700 for men and $105,400 for women) a significant gap between men and women still exists.

Longer life expectancy

Lower lifetime earnings need to stretch for longer, as women tend to live longer than men (80.7 years for men and 84.9 years for women)3. That’s an extra 4.2 years to plan for living and medical expenses.

Closing the gap

Thinking about the long term when it comes to money can help make sure women are prepared for retirement, protected during emergencies and are making the most of their money.

The good news is, there are many resources available to women to help close the gap. Added to that, data tells us women are generally more likely to want to learn about managing money better. . ASIC’s MoneySmart website is another free resource with tools and information that offer guidance and support.

Set up the next generation for success

To help close the gap for the next generation, it’s particularly important to raise financially literate children. The first place kids learn about money is in the home from their family. It’s where their financial habits are formed at a young age, and where they develop their attitudes and beliefs about money that they carry into adulthood. Parents and grandparents can have a powerful, positive impact on their children’s wellbeing in the future by helping them form good money habits for life.

Tap into our resources

Financial literacy is essential for women and men to feel secure about their financial future and be truly empowered. Please contact us on |PHONE| if you seek further discussion on this topic.

1 HILDA report: https://melbourneinstitute.unimelb.edu.au/__data/assets/
pdf_file/0009/2874177/HILDA-report_Low-Res_10.10.18.pdf
2 ABS: https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/
4125.0~Nov%202019~Main%20Features~Economic%20Security~4
3 ABS: https://www.abs.gov.au/ausstats/abs@.nsf/mf/3302.0.55.001


Source : AMP February 2020 
 

Important:
This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling |PHONE|, before deciding what’s right for you.

All information in this article is subject to change without notice. Although the information is from sources considered reliable, AMP and our company do not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP and our company do not accept any liability for any resulting loss or damage of the reader or any other person.

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