Provision Newsletter

Role models are important in many stages of life. Be it school years, on the sporting field or in your career, having a positive role model, someone to compare yourself to and measure your progress against, can be a powerful and positive influence.

But what about your financial position? Do you have someone that you compare your financial well-being against?

If so, are you ahead or behind?

For people approaching retirement a sense of financial security is important not just in monetary terms but also in terms of their overall sense of happiness and well-being.

Stepping off the employment treadmill can be both liberating and a recipe for heightened levels of anxiety.

At Morningstar’s annual adviser conference in Chicago this month, Sarah Newcomb, their senior behaviour scientist, gave a presentation on what she terms “the comparison trap” and looked at research that shows where people believe they rank relative to others has a greater effect on happiness than their absolute level of income.

Interestingly, she also pointed to research that people who spend a lot of time on social media sites can have lower levels of well-being and life satisfaction.

The glib answer to this is to stop comparing ourselves to others – and perhaps cut down the social media time – but the counter to that is a body of research that identifies what Newcomb says is an innate need as humans. To assess our social and personal worth when there is no objective means to do so, we look to people similar to us to inform an assessment.

In common parlance we know that phenomenon as “keeping up with the Joneses”.

What is interesting about this discussion is that it is not simply about the dollars. There is a significant emotional component involved when we are discussing financial well-being. Newcomb says we all probably know someone who is financially well off but not as happy or content with their lot as you would expect.

Rather than saying stop to the natural human trait of comparison, what the Morningstar research has tried to do is look at ways investors – and their advisers – can reframe the mindset to make it a more positive process. Because our tendency is to compare ourselves to people who have more, in Newcomb’s words most of us appear to be actively making ourselves feel bad about our own financial circumstances by always looking up at people who have more.

While the concept of a role model/mentor is something that is positive overall, what the Morningstar research is pointing to is the need to thoughtfully pick the person you are going to measure yourself against.

As Newcomb says, by changing the target and direction of our social comparisons, we can create more positive emotions with our finances. “This might not change your economic reality, but it could improve your quality of life. And feeling more secure with your financial well-being could have beneficial long-term effects by eliminating fear-based behaviours, such as performance-chasing and panic selling, which could put you in a better position to achieve long-term investing success.”

PLease contact us on |PHONE| if you require further assistance . 

Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Source : Vanguard June 2018

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.

© 2018 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 take 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.

Are you among the investors holding a growing proportion of your investments outside super?

Changes to the super system – particularly the lowering of contribution caps and the introduction of the $1.6 million pension transfer cap* – are inevitably focusing more of investor’s attention on non-super assets.

Shortly before the arrival of the pension transfer cap in July 2017, the total value of non-super personal investments had overtaken the total value of super assets.

The Personal Investments Market Projections 2017 report, published earlier this year by consultants Rice Warner, calculates that the value of non-super personal investments overtook super assets during 2016-17.

Rice Warner expects personal non-super investments to become more important to higher-income super fund members still making contributions together with members, including retirees, who have already accumulated large super balances.

Further, the Vanguard/Investment Trends 2018 SMSF Report found that a third of SMSF trustees are making, or intending to make, investments outside super.

Yet regardless of wealth, a high proportion of investors have, of course, both super and non-super savings.

It is critical for investors to co-ordinate their super and non-super investment portfolios. This includes for their retirement and investment strategies, strategic asset allocations, periodic rebalancing of portfolios, tax planning, estate planning and their day-to-day finances.

When assessing the adequacy of your retirement savings, all of your investments, inside and outside super, should be included in your calculations.

Exchange traded funds (ETFs) are likely to receive an increasing share of the savings that would have otherwise flowed into super. This is because of their low cost, ease of trading and ability to immediately create widely-diversified portfolios. 

By contrast, low interest rates continue to discourage many investors from holding more of their non-super money in term deposits and cash.

A key difference between super and non-super investments is obviously tax treatment. Investors with more of their assets outside concessionally-taxed super have an added motivation to make their portfolios as tax efficient as possible.

*The indexed $1.6 million pension transfer cap is the maximum transferrable from an accumulation to a pension super account from July 1, 2017. Also, members with total super balances (in accumulation and pension accounts) greater or equal to the transfer cap can no longer make non-concessional (after-tax) contributions without exceeding the contributions cap. 

Please contact us on |PHONE| if we can be of assistance .

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard 

Source : Vanguard July 2018 

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.

© 2018 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 take 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

By Laurentine Ten Bosch, Food Matters

Keeping connected is paramount in today’s digital society, but is our inconsumable obsession with our smartphones taking a toll on our inner health? Over the past 10 years we have seen a paradigm shift in the way we use technology, specifically with the rise of the smartphones that spawned from the release of Apple’s iconic iPhone. Marketed as technology to make our lives easier, more organized and convenient, it’s almost ironic that people are now feeling more time poor and stressed than ever before. 

In this article we will take a look at the side effects of smartphones, what it takes to digitally detox, and tips and tricks to distance yourself from distracting notifications.

What’s The Relationship You Have With Your Phone?

Understanding the relationship with your phone is key to kicking the addiction with your so-called smartphone. Looking at how we use it, why we use it, when we use it and what we’re using it for is a great way to start evaluating how much time we spend looking at the black mirror. By evaluating the who, what, when, where and why, you can begin to understand what emotions you are hoping to experience or avoid. 

MIT professor Sherry Turkle discusses the many negative effects of our over-reliance on technology, arguing that it’s changing not just what we do but who we are and adversely creating more lonely, isolated people. This discovery is not alone with social psychologist Adam Alter juxtaposing substance addiction with behavioral addictions. He noted that in the past we have mostly associated addiction to chemical substances, whereas now we have a phenomenon of people spending nearly three hours a day tethered to their cell phones – this is what we now know to be a behavioral addiction.  

Behavioral addictions are fast becoming social norms with a 2011 study suggesting that 41% of us have at least one. This increasingly high number is vastly due to the rise of social media platforms and the inevitable integration between the digital world and the ‘real world’.

How Is My Smartphone Affecting My Health?

As we’ve discovered, smartphones have the capacity to develop addictive behaviors similar to that of gambling, which can interfere with our everyday lives. Notable scientific studies demonstrate how classic addiction symptomology is intrinsically linked between smartphone overuse, which includes loss of control (e.g. distortion of time spent on the phone), preoccupation with the smartphone and withdrawal symptoms. Perhaps this suggests why we coined the appropriate term ‘Crackberry’?

These addictive tendencies can wreak havoc on our productivity, brain function, wellbeing, work-life balance and even our personal lives with quantifiable evidence suggesting social anxiety and loneliness is intrinsically linked to smartphone use. While the primary function of a smartphone is to communicate more effectively with one another, it’s also important to remember to disconnect in order to really communicate with people.

Our ‘technostress’ (originally conceptualized as the negative influence of technology and social media) is directly associated with the round-the-clock accessibility afforded by mobile phones, creating a feeling of never being free and guilt at the inability to respond to notifications, calls and text messages. These feelings are now developing into mental health issues, with overuse symptoms severely increasing our risk of social isolation.

  

The Benefits of a Digital Detox:

1. More peace and less anxiety

2. Clearer thinking and less distraction

3. More focus and less multitasking

4. More creative and less reactive

5. More empowered and less guilt

6. Better sleep

7. More personable with stronger relationships

8. More conscious eating and drinking

How Do I Kick My Smartphone Addiction Without Dropping Off The Face of The Planet? 

We know smartphones are incredibly useful and we don’t think you should, or expect you to, give them up completely. However, there are some things you can do to maintain a more healthy relationship with technology. We’ve researched some key tips and tricks to keep your technostress at bay, ensuring you’re using your smartphone the smart way. 

1. Get An Alarm Clock

It’s a trap to think you’ll just set your alarm on your phone and go to sleep. What really happens is you see a new notification and all of a sudden you’ve spent an hour mindlessly scrolling through an infinite Instagram feed of holiday pictures and click-bait videos. A great way to kick your social media craving is by taking away the temptation of checking your phone before bed – so pop it on charge in a different room and instead get a real alarm clock on your bedside table (not an app!). Not only will you get a better sleep, you’ll get more of it! 

2. Set Up Some Smartphone Hacks

Organize and categorize your applications into pertinent and non-pertinent folders. By doing this you will reduce the temptation to open social media applications for the sake of opening them. Another great way to reduce your screen time is by setting your phone to ‘grayscale’ – bolstering your battery life and your need to check the ‘gram’.

3. Set Up Some Phone-Free Zones

Make certain rooms in the house phone free. The bedroom, living room and dining room are great places to start. Setting boundaries like this for yourself and your family can go a long way to improve connection and relationship satisfaction.

4. Know When to Turn Off

For many of us, work doesn’t end when the clock strikes five – and we mostly have our smartphones to blame for that. But by allowing yourself some screen-free time at the end of the day you can really evaluate whether you need to ‘drop everything’ to answer an after-hours work request or email. You can also turn off notifications for certain apps or snooze group conversations for a certain amount of time to give yourself some peace and quiet. 

5. Make Time to Actually ‘See’ Your Friends and Family

We’re social creatures by nature, so putting in effort to make some ‘face-to-face time’ for your friends and family will go a long way not only for your inner wellbeing but also for your friends! By the way, your mum and dad will thank you for this! And your kids also deserve to see the ‘real you’ rather than you glued to your phone. It’s really hard to tell your kids not to spend too much time on screens and devices if all they see is you scrolling your social feeds.

6. Set Some Social Etiquette Phone Rules

When you’re with people, be with those people. It seems simple enough, but so often many of us get distracted by notifications and may unintentionally be rudely ignoring the ‘real’ people in front of us. Set and stick to some rules like ‘no phones at dinner’, ‘no social media when socializing’ (or maybe one quick selfie and then put the phone away!) and make conscious decisions on whether an email, text or phone call has to be addressed immediately or if it can wait. You can feel more empowered by your decision to control your phone use, and the people around you should feel more valued when you prioritize them. 

 Source : Foodmatters June 2018 

 

Reproduced with the permission of the Food Matters team. This article by LAURENTINE TEN BOSCH  was originally published at https://www.foodmatters.com/article/are-you-addicted-to-your-smartphone

Important:
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. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take 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.

Ever since the Global Financial Crisis (GFC) there has been an obsession with looking for the next recession. In this regard, over the last year or so there has been increasing concern that a flattening yield curve in the US – ie the gap between long-term bond yields and short-term borrowing rates has been declining – is signalling a downturn and, if it goes negative, a recession in the US. This concern naturally takes on added currency given that the current US bull market and economic expansion are approaching record territory in terms of duration and given the trade war threat.

The increased volatility in shares seen this year, including a 10% or so pull back in global shares earlier this year, adds to these fears. Whether the US is about to enter recession is critical to whether the US (and hence global) bull market in shares is about to end. Looking at all 10% or greater falls in US shares since the 1970s (see the table in Correction time for shares?), US share market falls associated with a US recession are longer lasting and deeper with an average duration of 16 months and an average fall of 36% compared to a duration of 5 months and an average fall of 14% when there is no recession. Similarly, Australian share market falls are more severe when there is a US recession. So, whether a recession is imminent or not in the US is critically important in terms of whether a major bear market is imminent. This note assesses the risks.

The long US economic expansion and bull market

The cyclical bull market in US shares is now over nine years old. This makes it the second longest since WW2 and the second strongest in terms of percentage gain. And according to the US National Bureau of Economic Research the current US economic expansion is now 109 months old and compares to an average expansion of 58 months since 1945. See the next two tables. So, with the bull market and the economic expansion getting long in the tooth it’s natural to ask whether it will all soon come to an end with a major bear market.

The yield curve flattens – but it’s complicated

The yield curve is watched for two reasons. First, it’s a good guide to the stance of monetary policy. When short-term interest rates are low relative to long-term rates it indicates businesses can borrow short and lend (or invest) long & this grows the economy. But it’s not so good when short rates are above long rates – or the curve is inverted. And secondly an inverted US yield curve has preceded US recessions. So, when it’s heading in this direction some start to worry. However, there are several complications.

First, which yield curve? Much focus has been on the gap between 10-year bond yields and 2-year bond yields which has flattened to just 0.3%, but the Fed has concluded that the traditional yield curve based on the gap between 10-year bond yields and the Fed Funds rate is a better predictor of the economy and it has flattened but only to 1%. Moreover, a shorter yield curve based on the gap between 2-year bond yields and the Fed Funds rate predicted past recessions like the longer yield curves but has actually been steepening in recent years which is positive.

Second, the yield curve can give false signals – the traditional version flattened or went negative in 1986, 1995 and 1998 before rebounding – and the lags from an inverted curve to a recession can be long at around 15 months. So even if it went negative now recession may not occur until late 2020.

Third, various factors may be flattening the yield curve unrelated to cyclical economic growth expectations including still falling long-term inflation and real rate expectations, low German and Japanese bond yields holding down US yields and higher levels of investor demand for bonds post the GFC as they have proven to be a good diversifier to shares in times of crisis.

Fourth, a flattening yield curve caused by rising short term ratesand falling long term rates is arguably more negative than aflattening when both short and long term rates go up like recently.

Finally, a range of other indicators which we will now look at are not pointing to an imminent US recession.

Watch for exhaustion, not old age

A key lesson of past economic expansions is that “they do not die of old age, but of exhaustion”. The length of economic expansions depends on how quickly recovery proceeds, excess builds up, inflation rises and the central bank tightens. The US economic recovery may be long, but it has been very slow such that average economic and employment growth has been around half that seen in post WW2 expansions. So as a result it has taken longer than normal for excesses to build up. Apart from flattening yield curves one area where the US is flashing warning signs is in relation to the labour market where unemployment and underemployment have fallen about as low as they ever go warning of a wages breakout and inflation pressure.

However, there is still arguably spare capacity in the US labour market (the participation rate has yet to see a normal cyclical rise) and wages growth at 2.7% remains very low. The last three recessions were preceded by wages growth above 4%. Secondly, while US GDP is now back in line with estimates of “potential”, what is “potential” can get revised so it’s a bit dodgy and more fundamentally, industrial capacity utilisation at 78% is still below normal of 80% and well below levels that in the past have shown excess and preceded recessions.

Thirdly, cyclical spending in the US as a share of GDP remain slow. For example, business and housing investment are around long term average levels as a share of GDP in contrast to the high levels in one or both seen prior to the tech wreck and GFC.

Finally, while the rising Fed Funds rate and flattening traditional yield curve is consistent with tightening US monetary policy, it’s a long way from tight. Past US recessions have been preceded by the Fed Funds rates being well above inflation and nominal economic growth whereas it’s still a long way from either now. See the next chart.

US likely to see overheating before recession

Apart from the amber lights flashing from the flattening yield curve and very low unemployment our assessment is that a US recession is still some time away as it will take time for excesses to become extreme and US monetary policy to become tight. Looked at another way, the US is still more likely to overheat before it goes into recession. We have been thinking recession is a 2020 risk. The end of the current fiscal stimulus around then would also be consistent with this. However, given the current slow pace in terms of building excess, that 2020 is a presidential election year – do you really think Trump will allow the US to go off a fiscal cliff then? – and with 2020 being the consensus pick for a downturn, the risk is that it comes later. Of course, an escalating trade war could mess things up earlier, although we still see a negotiated solution. The rising US budget deficit is a concern but it’s more of an issue for when the economy turns down as this is when investors will start to worry about its sustainability. And of course a 1987 style share market crash cannot be ruled out but probably requires a share market blow off before hand. In the meantime, the Fed has more tightening to do and while sharemarket volatility is likely to remain high as US inflation and short rates rise, excesses gradually build and given risks around Trump and trade, with recession still a way off the US and global share bull market likely still has some way to go.

Source: AMP Capital 19 July 2018

Important notes
While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

The happiest day of your life doesn’t need to be the most expensive. 

For some couples, the most expensive day of their life will be when they tie the knot, with around 35%¹ of newlyweds blowing their wedding budget before they even walk down the aisle.

With the average Aussie wedding costing $36,200, and more than half of that money going toward food, drinks and the venue², we check out some ways you could potentially minimise your spend.

Tips to avoid a wedding budget blowout

1. Talk about money early with your partner and families (that is, if they’re going to be involved).  Decide what you’ll be able to pay for, and if your family is helping with expenses, to what extent. 

2. Start saving early. Make a list of what you want, put a limit on what you hope to spend and try to find a balance in between. Remember, on top of the venue, you may be looking to put money toward things such as wedding attire, photography, decorations and entertainment.

3. Book in advance.  Try to book the venue for your ceremony, reception and honeymoon well in advance to potentially avoid disappointment, or being forced into a last-minute, more expensive option.

4. Grab a bargain. Search eBay or Gumtree, or hunt down end-of-stock bargains, such as DIY wedding stationery, pre-loved decorations or even a wedding dress.

5. Have an out-of-season wedding. Be different! Have a July wedding to cut costs without sacrificing your precious memories. Many venues and suppliers have lower-priced deals during the winter.

6. Be realistic with your guest list. If you haven’t been in contact with friends in the last 12 months, why do it now? And, remember to lay down the law with the family, so you don’t end up with tables full of relatives you’ve never met!

7. Explore your network. Call on talented friends who can swap a service for a gift, such as a photographer, a hair stylist or make-up artist. Maybe someone knows a band that can play at the reception too.

8. Cut the ties. Times are changing and so are weddings. It’s ok to shed some traditions. Be practical about whether you need all the trimmings, like a videographer, bonbonnieres, gifts for parents or even the bridal party, if you need to cut costs.

9. Adopt informality. Swap a formal sit-down dinner for a cocktail party and save on room hire and catering costs. Or, if the venue allows it, organise the drinks yourself.

10. Pay attention to the fine print. Read your suppliers’ contracts, even if they are long and complicated. Don’t get caught out by any extra charges which are sometimes in the fine print.

11. Wishing well. If you’re already living together, chances are that you have most of what you need, with a wishing well often providing a polite way to ask for money. You can then use this to pay for the honeymoon or pay off some of the wedding expenses.

Start planning now

If you haven’t already, review your finances and make sure you give yourself enough time to save for the wedding you want.

If you need help with your savings goals, please contact us on |PHONE| we can assist you on staying on track financially so you can relax and enjoy the celebrations, knowing that declaring your love doesn’t have to come at a price you cannot afford. 

1, 2 MoneySmart – How much can a wedding cost

Source : AMP 10 July 2018  

There’s a lot to consider when buying an investment property or home, especially for the first time.

Have you been saving for a long time and feel ready to get into the property market? Maybe you’re considering buying a home to live in or investing in a property you can rent out to somebody else.

Either way, it’s worth knowing some more about both options to ensure you’re making a well-informed decision, noting that regardless of what you choose to do, property prices can go through major swings that can occur with little warning.

Buying your first property to live in

• First home owner grants. Depending on which state or territory you live in, a first home owners grant could help you to finance your first home purchase. This doesn’t apply to investment properties, and in some states you’ll lose your right to this grant if you buy an investment property first.

• Security and stability. You can stay in your home as long as you like, as long as you’re making your home loan repayments.

• Exempt from capital gains tax (CGT). Any home that is classified as your main residence, whether it’s your first place or not, is free from CGT when you go to sell it. 

• Expenses stack up and aren’t tax deductible. There will be initial costs, such as stamp duty and legal fees, as well as ongoing costs, such as water rates, building insurance and repairs. When buying an investment property, you’ll also be hit with these costs, but depending on your situation some of the costs attached to your investment property may be tax deductible.

• You may have to make some sacrifices. Where you really want to live may not be where you can actually afford to buy. So, whether it means choosing a place that’s smaller, further out from the city, or looking for a job closer to your new home, you may have to make some trade-offs.

Buying your first property as an investment

• You may get a cheaper place. An investment property doesn’t need to tick all the boxes of your ‘dream home’, which means you could potentially buy something at a cheaper price.

• It’s not an emotional decision. Your purchase should be based on investment potential, including forecast rental return and capital growth. So, instead of walking into a place and having to love the look of it, you can walk in with your investor’s hat on.

• Earn rental income. If you’re renting out your investment property, you’ll be getting money from someone else to contribute to your mortgage, which means you could pay off your loan sooner. Bear in mind however that the rent you receive may not completely cover your home loan repayments and additional costs.

• Tax advantages and disadvantages. Many of the costs associated with an investment property are often tax deductible. For instance, the interest and fees you pay on your loan, advertising for tenants, as well as cleaning, gardening, maintenance and pest control. Also, if your property is negatively geared—which simply means the interest, and other costs you incur are more than the income your investment property produces—the loss can reduce the amount of tax you pay on your earnings at tax time. On the flip side, if you sell your investment property down the track and make a profit, capital gains tax may be payable.

• Management and obligations. If you’re time poor or located a long distance from your investment property, another thing you’ll need to think about is appointing a property manager to take care of certain duties. On top of that, there are various responsibilities that apply to landlords before, during and when ending a tenancy and these can differ depending on which state in Australia the investment property is located.

 Whatever you decide to do, please contact us on |PHONE| we can assist you to make sure your strategy suits your lifestyle, circumstances and financial goals. 

Source : AMP 16 July 2018