Some investment ideas for 2010
We have discussed frequently that a major & safest objective is to reduce our debt levels. When the average mortgage debt is 367,000 then someday it is meant to be paid. The GFC reminded us all that that is a very comfortable strategy. Remember that the average means that 50% have debts greater than 367,000.
The fact that big spending governments & property spukiers haven’t yet to hede the message suggests that another reminder is around the corner. At the very least they will have to adjust to higher rates.
However our active wealth strategy has the philosophy that owning the home is not sufficient. If we need 1,000 to live on per week then we need 1 million in capital outside the house. The house & its capital does not produce an income. Hence we need to consider investing elsewhere.
We believe that your home is sufficient property to own. We only need to push the stroller around the block to recognise a rental property & how well tenants look after property. Most landlords are reluctant to raise the rental & hence they never earn the fair return. We believe that positive cashflow only occurs in property spukiers modeling.
Let’s look at some other investment themes & recall that Australia is say 2% of global economy
We hear the China story but there is the ‘other China’ i.e. the Chinese dispora be it here in Australia, Singapore and Taiwan or through Asia. We only need to return here from there to know of their industry, high tech & work ethic. Taiwan's relationship with China has significantly improved & hence great growth potential.
Another & very close to home personally is South Korea. You would struggle [in fact wont]to find a 4 bedroom unit in Brisbane but many Koreans live in such. They have more PhD per head than anywhere else on the planet. Who doesn’t have a Samsung or Hyundai product & both of these have higher ratings than Sony or Mercedes?
Even closer to home is Indonesia & a top 20 country. There have been significant government reforms & remember we only read the bad headlines in the Australian press.
Two other economies that have been getting the bad press have been Japan & the US. Japan has had deflation for a cycle of 17 years & has some great brands. It is after all the 2nd largest economy. Then the $US has fallen & is being rubbished quite reasonably. But it is the world currency & if we check out the big Mac index it is undervalued. What is down goes up sometimes?
What has also gone up of late is gold & China. Just maybe they are due for a correction.
We suggest these ideas as Australian property is not the only investment available.
The top 20 Australian shares make up 70% of the Australian index. Those SMSF & others sitting with cash can’t sit there for ever. The Accelerator Principal which we read in Samuelson in Economics 101 states that if you are standing still then you are going backwards relative to others.
We welcome you to a meal to discuss how our active wealth strategy & how to structure debt & build the portfolio.
John McAuliffe
Future Shock
Future Shock
Some thirty plus years ago in the 1970’s ‘Future Shock’ by Alvin Toffler was a very popular book. In fact we should go back & reread it to see how close he was to what is happening today. Certainly George Orwell and 1984 is very relevant in today’s big government knows better present. Animal Farm is also very close to the mark.
What could be some future shocks in 2010 & are we prepared for them. From our observation many here believe that the GFC has gone & life is good & let’s go back & buy more even if that means more debt.
There is plenty of future shock to come in 2010 & it’s all concerned with debt levels.T
The good old USA has a current account deficit of 1 TRILLION+ per year forever. So who is going to lend to the USA unless their rates go up. Of course with 35 million on food stamps in USA [1in 4 children & 1 in 8 adults line up at soup kitchens] that is not a desired outcome either. With unfunded liabilities of pension & health costs we read that there is a better standard of living In Haiti than USA. Rates going up in USA will force asset prices down. Let’s remember the GFC & US house prices down by 40+%.
We now read of the PIIGS. I.e. Portugal, Italy, Ireland, Greece, Spain who all have high deficits & hence need to borrow more. [Spain has an unemployment rate of 30% & a deficit of 10% of GNP]. So they are all caught between a rock of rising interest rates to attract savings & the rock of unemployment which needs small business & lower rates. If we are going to travel then Euro land could be good value as the Euro heads down. We will watch with interest.
Is Australia any different? Gail @ Westpac AGM warns of higher interest rates. Our client today is suggesting 10% on his mortgage. Wayne is swanning around big spending to win the headlines with no recession stories. The RBA is suggesting enough is enough & raising rates. What if the RBA rate does go higher by another 1% or 2%?
Barnaby is suggesting that even Queensland is tottering & hence the asset sales & increasing state taxes to reduce debt levels. Queensland will need to borrow & just another entity needing a ‘swag’ of money. Why should you [the government] pay for my health & education costs?
Hence the cushion for the 2010 future shock is still the same- a strategy to reduce the personal debt levels.
We only heard today of a family with 3 boys each parent just losing their job. Saving, perhaps built up as equity, helps for a period of readjustment. This can only be done with the right strategy which also requires discipline.
We also advised clients today not to be sucked in by the 50% tax break on various business deductions available from the government. They are only going to buy what they can’t afford to service. Of course these ‘assets’ say cars & computers are worth 50% or less in 2-3 years. Why buy in the first place.
Of course they will get different advice from the bank that will of course say yes & now see the loan arranger or advisers who will increase your loans. And of course servicing it & living & the stress that goes with it is your problem because the bank has made the sale. It is the wrong advice in most cases. What is good for the bank or government is generally not good for you.
We are here to provide advice & that means it what you need to hear & not what you want to hear. Our active wealth strategy may save you from future shock
Welcome to call on 07 3848 1088 or email or visit our websites.
John McAuliffe
Some thirty plus years ago in the 1970’s ‘Future Shock’ by Alvin Toffler was a very popular book. In fact we should go back & reread it to see how close he was to what is happening today. Certainly George Orwell and 1984 is very relevant in today’s big government knows better present. Animal Farm is also very close to the mark.
What could be some future shocks in 2010 & are we prepared for them. From our observation many here believe that the GFC has gone & life is good & let’s go back & buy more even if that means more debt.
There is plenty of future shock to come in 2010 & it’s all concerned with debt levels.T
The good old USA has a current account deficit of 1 TRILLION+ per year forever. So who is going to lend to the USA unless their rates go up. Of course with 35 million on food stamps in USA [1in 4 children & 1 in 8 adults line up at soup kitchens] that is not a desired outcome either. With unfunded liabilities of pension & health costs we read that there is a better standard of living In Haiti than USA. Rates going up in USA will force asset prices down. Let’s remember the GFC & US house prices down by 40+%.
We now read of the PIIGS. I.e. Portugal, Italy, Ireland, Greece, Spain who all have high deficits & hence need to borrow more. [Spain has an unemployment rate of 30% & a deficit of 10% of GNP]. So they are all caught between a rock of rising interest rates to attract savings & the rock of unemployment which needs small business & lower rates. If we are going to travel then Euro land could be good value as the Euro heads down. We will watch with interest.
Is Australia any different? Gail @ Westpac AGM warns of higher interest rates. Our client today is suggesting 10% on his mortgage. Wayne is swanning around big spending to win the headlines with no recession stories. The RBA is suggesting enough is enough & raising rates. What if the RBA rate does go higher by another 1% or 2%?
Barnaby is suggesting that even Queensland is tottering & hence the asset sales & increasing state taxes to reduce debt levels. Queensland will need to borrow & just another entity needing a ‘swag’ of money. Why should you [the government] pay for my health & education costs?
Hence the cushion for the 2010 future shock is still the same- a strategy to reduce the personal debt levels.
We only heard today of a family with 3 boys each parent just losing their job. Saving, perhaps built up as equity, helps for a period of readjustment. This can only be done with the right strategy which also requires discipline.
We also advised clients today not to be sucked in by the 50% tax break on various business deductions available from the government. They are only going to buy what they can’t afford to service. Of course these ‘assets’ say cars & computers are worth 50% or less in 2-3 years. Why buy in the first place.
Of course they will get different advice from the bank that will of course say yes & now see the loan arranger or advisers who will increase your loans. And of course servicing it & living & the stress that goes with it is your problem because the bank has made the sale. It is the wrong advice in most cases. What is good for the bank or government is generally not good for you.
We are here to provide advice & that means it what you need to hear & not what you want to hear. Our active wealth strategy may save you from future shock
Welcome to call on 07 3848 1088 or email or visit our websites.
John McAuliffe
Its New Year review time
Its New Year review time
It often time to reflect on our past progress & what do we need to change if we are to achieve our goals. These times come at some significant moment in our lives be life, death, marriage, divorce, new job, redundancy, change of government or change of season. If there is no change then we arrive at the same destination which may or may not be where we want to go.
So that is the first reflection i.e. goals & they always need a time frame & need to be achievable. Are they written down as that alone means they will probably be achieved.
Let’s make some suggestions;
Have you made a SWOT analysis of your personal finances i.e. strengths, weaknesses, opportunities, threats?
Have you financially progressed over the year? I.e. Has your net wealth [assets minus liabilities] improved?
Is your net income greater than your gross expenses? Do you have credit card debt as this will be a great indicator of all of these questions?
These are questions that all governments are not asking & hence we have downgrading in Dubai, Greece, Spain & UK & USA pushing their luck. Interest rates are only going up as savers always want security or a higher return on their funds.
What do you want your net position to be in 3 years time? How are you going to achieve it?
Let’s look at a family’s expenses. We note that our average client family after their mortgage needs 4000pm+ as a reasonable lifestyle. Any more than that means a longer working life & this is your choice. It is no use having that 2nd income if it is for the outlandish pool [as next door to us] or the status car when the two sensible alternatives are reducing debt or building investments.
Have you reviewed the mortgage? The big Four hold 70% of all mortgages & 90% of new mortgages & are charging more. Hence a review as there is competition around is always smart. But that isn’t sufficient as the key to reducing the debt is the strategy of paying the debt first & then yourselves second.
Have you worked out the impact of future interest rate rises?
Will you have that 1 million we all need on retirement & remember that doesn’t include the home as that doesn’t produce an income?
Do you have the right or taxx efficient structure for your investments? Do you have the right people advising you on these?
What advice is your industry super fund giving?
Do you have the rental property structured correctly or does the accountant ‘guess’ how much interest you paid on your rental property?
Could you manage on one income?
Do you have a handy sheet with all family contact details?
If the bus hits you today & it does each day in each state hit someone then will the mortgage be paid off & will the family have the same lifestyle.
If the forest fire hits will you be like the 25% of affected Victorians who had no house or car insurance. Is the chook raffle sufficient to help the helpless?
Have you and the partner updated or even made the will as it will be needed one day.Do you have an exit strategy from the business?
Do you know when you will retire & how much will you need.
If you had that heart attack today do you have enough money to recovery from it & take time off work? Are you doing everything to prevent the heart attack?
Have you maximised your super as it is a 15% taxx haven at present.
If you are 55 have you taken a ‘transition to retirement’ as then the taxx within is Zero?
We easily could make another 50 suggestions.
One would be to call on 3848 1088 or email on info@wealthcoach.net.au or book on our websites www.wealthcoach.net.au or www.wecoachwealth.com.au
We meet energy with energy & here to help you help yourselves.
John McAuliffe
It often time to reflect on our past progress & what do we need to change if we are to achieve our goals. These times come at some significant moment in our lives be life, death, marriage, divorce, new job, redundancy, change of government or change of season. If there is no change then we arrive at the same destination which may or may not be where we want to go.
So that is the first reflection i.e. goals & they always need a time frame & need to be achievable. Are they written down as that alone means they will probably be achieved.
Let’s make some suggestions;
Have you made a SWOT analysis of your personal finances i.e. strengths, weaknesses, opportunities, threats?
Have you financially progressed over the year? I.e. Has your net wealth [assets minus liabilities] improved?
Is your net income greater than your gross expenses? Do you have credit card debt as this will be a great indicator of all of these questions?
These are questions that all governments are not asking & hence we have downgrading in Dubai, Greece, Spain & UK & USA pushing their luck. Interest rates are only going up as savers always want security or a higher return on their funds.
What do you want your net position to be in 3 years time? How are you going to achieve it?
Let’s look at a family’s expenses. We note that our average client family after their mortgage needs 4000pm+ as a reasonable lifestyle. Any more than that means a longer working life & this is your choice. It is no use having that 2nd income if it is for the outlandish pool [as next door to us] or the status car when the two sensible alternatives are reducing debt or building investments.
Have you reviewed the mortgage? The big Four hold 70% of all mortgages & 90% of new mortgages & are charging more. Hence a review as there is competition around is always smart. But that isn’t sufficient as the key to reducing the debt is the strategy of paying the debt first & then yourselves second.
Have you worked out the impact of future interest rate rises?
Will you have that 1 million we all need on retirement & remember that doesn’t include the home as that doesn’t produce an income?
Do you have the right or taxx efficient structure for your investments? Do you have the right people advising you on these?
What advice is your industry super fund giving?
Do you have the rental property structured correctly or does the accountant ‘guess’ how much interest you paid on your rental property?
Could you manage on one income?
Do you have a handy sheet with all family contact details?
If the bus hits you today & it does each day in each state hit someone then will the mortgage be paid off & will the family have the same lifestyle.
If the forest fire hits will you be like the 25% of affected Victorians who had no house or car insurance. Is the chook raffle sufficient to help the helpless?
Have you and the partner updated or even made the will as it will be needed one day.Do you have an exit strategy from the business?
Do you know when you will retire & how much will you need.
If you had that heart attack today do you have enough money to recovery from it & take time off work? Are you doing everything to prevent the heart attack?
Have you maximised your super as it is a 15% taxx haven at present.
If you are 55 have you taken a ‘transition to retirement’ as then the taxx within is Zero?
We easily could make another 50 suggestions.
One would be to call on 3848 1088 or email on info@wealthcoach.net.au or book on our websites www.wealthcoach.net.au or www.wecoachwealth.com.au
We meet energy with energy & here to help you help yourselves.
John McAuliffe
An invitation to you to meet over lunch
Let’s remind you what we offer. We offer the opportunity to discuss here over lunch or some other suitable time your personal financial position. Let’s face it, it just might need a financial tune-up & you have wondered where to turn. If the car has a regular tune up & the dentist suggests every 6 months then it also makes sense with your finances.
Yes it is possible that the super fund you are in is the cheapest with the best performance ever but that is only part of your financial challenge. You get what you pay for & you are not paying for advice. Then there is always your mortgage & are you paying that first before you pay yourself as that debt word is a four letter word. Your mortgage debt should be your first priority. What happens when rates increase or when the employer makes you redundant or when there is one income as family is expected? What happens as we often see that you will retire & your super is required to pay out the mortgage.
Then there is the taxx man. There is a discussion to raise the super contributions from 9% to 12%. Surely that is another taxx as it is your income which you can’t spend or invest. You only need to look at your net or take home pay after all the deductions & mortgage interest to be well aware that it is a struggle to survive. We only a fortnight ago explained to a young cop with 2 children that many were like him – they couldn’t afford the fine as they were surviving only to the next pay. We did point out we had no sympathy for the idiot on the road & should be treated as an idiot. A fine is another taxx & yes the state government needs the cash.
We have recently helped a couple aged 48 with a $340,000 mortgage which means unless they are disciplined they will certainly need his super to pay down his debt. However with our active wealth strategy it is projected to be paid out in 9.4 years & to later retire on 67,000p.a.
We have seen at least two others our age & who should be retired who have said they are willing to work to age 70 because their position means they can’t do otherwise. They will need also our wholestic health story.
We have seen those with rental property where there was a $9000 dollar p.a. shortfall between income & expenses. That makes living & explaining to the spouse a challenge & a hope that property markets will always go up.
We have seen a lady who has 2 million in assets but property & super aren’t very liquid should a major trauma or illness occur.
We saw on Saturday another lady who has just separated & although better than most with own house & useful super it will need care & attention if she is to retire on what she currently earns.
We have others wanting us to be the ‘go to’ man as a call centre isn’t good enough.
Every person has their own challenges & as an ex math’s teacher we do like to have a solution to each problem.
As our 7 year old daughter is on camp today we have had the opportunity to spring clean the house. What a difference & so much more space. We all need to spring clean our finances occasionally.
We do have many other ideas as many haven’t considered estate planning or spouses super or looking after the small shareholder in a business. Every one needs a non aligned approach which is what we offer.
Of course there is our active wealth strategy which looks at your overall financial position & helps you to achieve your goals. We provide 24 / 6 support for your benefit.
Welcome to email or book via our website www.wealthcoach.net.au or www.wecoachwealth.com or call on 07 3848 1088 for that opportunity to discuss & financially progress. After 25 years in financial service we care if you care enough to call or email us.
John McAuliffe