Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.

Your Will gives you a say in how you want your possessions and investments to be distributed. But, importantly, it should also include enduring powers of attorney and guardianship as well as an advance healthcare directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the Will is contested, so that might affect who you choose.

Around 50 per cent of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.ⁱ

The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a Will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid Will.ⁱⁱ

While that’s understandable – it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will – not having one can very problematic.

If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate will probably need to be granted. This is a process which generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

You will also definitely need probate if there is a refund on an accommodation bond from an aged care facility.

Super considerations

Another important consideration when dealing with your affairs is what will happen to your superannuation.

It is wise to complete a ‘binding death benefit nomination’ with your super fund to ensure the proceeds of your account, including any life insurance, are distributed to the beneficiaries you choose.  You can nominate one or more dependants to receive your super funds or you could choose to pay the funds to your legal representative to be distributed according to your Will.

If a death benefit is paid to a dependant, it can be paid as either a lump sum or income stream. But if it’s paid to someone who is not a dependant, it must be paid as a lump sum.

If your spouse has predeceased you and you have adult children, they will pay up to 32 per cent on the taxable component of your super death benefit unless a ‘testamentary trust’ is established by the will, naming them as beneficiaries.

A testamentary trust is established by a Will and only begins after the person’s death. It’s a way of protecting investments, cash and other valuable assets for beneficiaries.

Rights of beneficiaries

Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.

If you want to have a final say in how your estate is dealt with, then give us a call.

Unexpected outcomes

David died in his early 60s. He left his estate to his wife Sally in accordance with his Will.

It seemed sensible at the time. But after a few years, Sally remarried. Unfortunately, the marriage did not last. When Sally died some 20 years later, her estate did not just go to her and David’s children but ended up being shared with her estranged second husband.

A testamentary trust, stipulating that the beneficiaries of both David’s and Sally’s estates were to be only blood relatives, may have solved this issue.

i Success rate of contesting a will | Will & Estate Lawyers

ii If you don’t, who will? 12 million Australians have no estate plans | Finder

Welcome to spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.

It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.

A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.

While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.

The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.

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Market movements and review video – September 2024

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Holidaying off the tourist trail

When we dream of an overseas holiday, our minds often drift to iconic landmarks, bustling cities, and well-trodden tourist paths. While these destinations have their allure, travel to popular destinations is booming and comes with challenges so there are advantages to venturing off the beaten track and seeking out the hidden gems.

Travel is booming – and creating some headaches

It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.ⁱ And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ⁱⁱ

That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.

Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism. 

Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.

Supporting communities that need it

Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.

But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.

Authentic Encounters

One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town’s history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.

Unspoiled natural beauty

Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you’re seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.

Affordable adventures

Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.

Destination dupes

Doing a little homework can point you in the direction of alternatives to popular destinations.

For example, instead of Venice – which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey’s Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.

While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.

i CATO reveals new trends with Australia’s 10m international travellers – Travel Weekly

ii 2024 international travel boom predicted – VanillaPlus

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How do retirement income options compare?

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.ⁱ

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

• Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
• Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump-sum withdrawals if needed. You can also return to work and continue to receive a pension.
• Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.

Transition to Retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ⁱⁱ

Some considerations:

• Flexible work options – You can reduce your working hours and supplement your income from your super.
• Limits on pension rates – Similar to an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
• Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

• Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
• Lack of flexibility – Once you purchase an annuity, the terms are generally fixed and you cannot alter the income amount. There’s a restriction on capital withdrawals or in some instances no access to capital at all.
• Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.

Innovative Retirement Income Stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

• Age Pension benefits – Centrelink only counts 60 per cent of the pension payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
• Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial security.
• No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
• Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.

Next steps

How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.

i Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)

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Insuring against loss of income

Protecting income from unexpected illness and injury is particularly important to anyone with a mortgage to service, small business owners and self-employed people with no sick leave available.

With income protection insurance, you can be paid some 70 per cent of your income for a specified period to help when you cannot work.ⁱ

The most common claims are for illnesses such as cancer, heart attack, anxiety and depression.ⁱⁱ Payments generally last from two to five years although you can take a policy up to a certain age, such as 65, and the amount is generally based on 70 per cent of your income in the 12 months prior to the injury or illness.ⁱⁱⁱ

For some, income protection insurance may be part and parcel of your superannuation although more commonly this is limited to life insurance, and total and permanent disability cover. But, if you do have income protection insurance in your super, check the extent of the automatic cover as it can be modest.

Alternatively, you could take out a policy outside super where you will enjoy tax deductibility on the premiums. Income protection insurance is the only insurance that is tax deductible. Other life insurance products outside super such as trauma insurance are not tax deductible.^iv

Work out a budget

There are many considerations when looking at income protection insurance and the best place to start is to work out your budget, thinking about how much would you need to maintain your family’s lifestyle if you are unable to work. Then you are able to decide on the appropriate level of income protection insurance as well as other factors that affect premiums such as how quickly you might need the payments to start and how long these payments will last.

Many people think income protection insurance is expensive, but you can fine tune policies to suit your budget by changing the percentage payment amount, the length of time for which you would receive the payment and how soon you start getting a payment once you cannot work. Reducing these parameters can reduce your premiums.

Check the policy details

It is important to be mindful of a number of factors that might affect the success of any claim you might make. So, make sure you read the product disclosure statement.

Every insurer has a different definition as to what will trigger a payment, so you need to understand the difference between “own occupation” and “any occupation” for cover. For example, if you are a surgeon and lose capacity in one of your hands, you will receive a payout from your insurer if you have specified “own” occupation because you can no longer work as a surgeon. But if you opt for “any” occupation, then the insurer could argue that you could still work as a doctor just not as a surgeon and the claim may not be paid.

It is also wise to understand that if your policy does not seek your medical history, it is likely there could be limitations to what illnesses are covered.

Another consideration is whether you have stepped or level premiums. Stepped premiums start low and usually increase as you age. Level premiums begin at a higher rate but typically don’t increase until you reach 65. In the long run, level may work out cheaper for some.^v You must work at least 20 hours a week to take out income protection insurance and you can usually only buy a policy up to the age of 60. Also, if you receive a payout, you need to declare that income on your tax return.

If you want to check that you have sufficient cover to protect you and your family should you lose your income, then give us a call to discuss.

i Income protection insurance | Moneysmart ( moneysmart.gov.au)

ii The Most Common TPD Claims in Australia with Examples | Aussie Injury Lawyers

iii Income protection insurance | Moneysmart ( moneysmart.gov.au)

iv ATO Community – Stand alone Trauma Insurance and income tax | Australian Tax Office ( community.ato.gov.au)

v Income protection insurance | Moneysmart ( moneysmart.gov.au)

Welcome to Spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.

It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.

A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.

While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.

The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.

---

How do retirement income options compare?

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.ⁱ

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

• Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
• Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump-sum withdrawals if needed. You can also return to work and continue to receive a pension.
• Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.

Transition to Retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ⁱⁱ

Some considerations:

• Flexible work options – You can reduce your working hours and supplement your income from your super.
• Limits on pension rates – Similar to an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
• Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

• Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
• Lack of flexibility – Once you purchase an annuity, the terms are generally fixed and you cannot alter the income amount. There’s a restriction on capital withdrawals or in some instances no access to capital at all.
• Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.

Innovative Retirement Income Stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

• Age Pension benefits – Centrelink only counts 60 per cent of the pension payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
• Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial security.
• No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
• Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.

Next steps

How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.

i Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)

---

Insuring against loss of income

Protecting income from unexpected illness and injury is particularly important to anyone with a mortgage to service, small business owners and self-employed people with no sick leave available.

With income protection insurance, you can be paid some 70 per cent of your income for a specified period to help when you cannot work.ⁱ

The most common claims are for illnesses such as cancer, heart attack, anxiety and depression.ⁱⁱ Payments generally last from two to five years although you can take a policy up to a certain age, such as 65, and the amount is generally based on 70 per cent of your income in the 12 months prior to the injury or illness.ⁱⁱⁱ

For some, income protection insurance may be part and parcel of your superannuation although more commonly this is limited to life insurance, and total and permanent disability cover. But, if you do have income protection insurance in your super, check the extent of the automatic cover as it can be modest.

Alternatively, you could take out a policy outside super where you will enjoy tax deductibility on the premiums. Income protection insurance is the only insurance that is tax deductible. Other life insurance products outside super such as trauma insurance are not tax deductible.^iv

Work out a budget

There are many considerations when looking at income protection insurance and the best place to start is to work out your budget, thinking about how much would you need to maintain your family’s lifestyle if you are unable to work. Then you are able to decide on the appropriate level of income protection insurance as well as other factors that affect premiums such as how quickly you might need the payments to start and how long these payments will last.

Many people think income protection insurance is expensive, but you can fine tune policies to suit your budget by changing the percentage payment amount, the length of time for which you would receive the payment and how soon you start getting a payment once you cannot work. Reducing these parameters can reduce your premiums.

Check the policy details

It is important to be mindful of a number of factors that might affect the success of any claim you might make. So, make sure you read the product disclosure statement.

Every insurer has a different definition as to what will trigger a payment, so you need to understand the difference between “own occupation” and “any occupation” for cover. For example, if you are a surgeon and lose capacity in one of your hands, you will receive a payout from your insurer if you have specified “own” occupation because you can no longer work as a surgeon. But if you opt for “any” occupation, then the insurer could argue that you could still work as a doctor just not as a surgeon and the claim may not be paid.

It is also wise to understand that if your policy does not seek your medical history, it is likely there could be limitations to what illnesses are covered.

Another consideration is whether you have stepped or level premiums. Stepped premiums start low and usually increase as you age. Level premiums begin at a higher rate but typically don’t increase until you reach 65. In the long run, level may work out cheaper for some.^v You must work at least 20 hours a week to take out income protection insurance and you can usually only buy a policy up to the age of 60. Also, if you receive a payout, you need to declare that income on your tax return.

If you want to check that you have sufficient cover to protect you and your family should you lose your income, then give us a call to discuss.

i Income protection insurance | Moneysmart ( moneysmart.gov.au)

ii The Most Common TPD Claims in Australia with Examples | Aussie Injury Lawyers

iii Income protection insurance | Moneysmart ( moneysmart.gov.au)

iv ATO Community – Stand alone Trauma Insurance and income tax | Australian Tax Office ( community.ato.gov.au)

v Income protection insurance | Moneysmart ( moneysmart.gov.au)

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Holidaying off the tourist trail

When we dream of an overseas holiday, our minds often drift to iconic landmarks, bustling cities, and well-trodden tourist paths. While these destinations have their allure, travel to popular destinations is booming and comes with challenges so there are advantages to venturing off the beaten track and seeking out the hidden gems.

Travel is booming – and creating some headaches

It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.ⁱ And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ⁱⁱ

That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.

Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism. 

Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.

Supporting communities that need it

Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.

But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.

Authentic Encounters

One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town’s history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.

Unspoiled natural beauty

Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you’re seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.

Affordable adventures

Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.

Destination dupes

Doing a little homework can point you in the direction of alternatives to popular destinations.

For example, instead of Venice – which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey’s Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.

While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.

i CATO reveals new trends with Australia’s 10m international travellers – Travel Weekly

ii 2024 international travel boom predicted – VanillaPlus

Most of us have been experiencing unexpectedly cold temperatures and high rainfall lately but the good news is that spring is on the way. As the days grow longer and warmer, there can be a sense of optimism and a feeling of renewal.

Market watchers, investors and mortgage holders, who’d been anxiously awaiting the release of the latest inflation data at the end of July, could neither jump for joy nor collapse in despair.

The best that could be said about the figures was that they were not as bad as they could have been. It remains to be seen how the Reserve Bank board will view inflation’s modest increase when it meets on August 5 and whether it decides on an interest rate rise to counter it. The Australian Bureau of Statistics says prices rose 1% in the June quarter and 3.8% annually.

Retail sales continue to splutter along with the latest data showing a 0.5% increase in sales in June thanks to the sales but over the quarter, retail sales volumes fell 0.3% for the sixth time in the past seven quarters. Meanwhile, building approvals fell 6.5% in June after a 5.7% rise the previous month.

The ASX S&P 200 index finished the month strongly with an increase of around 4%, riding out a mid-month plunge. But the currency didn’t fare quite as well, falling below US65 cents for the first time in almost three months. In the US, the S&P 500 finished the month almost where it began after a big mid-month upward spike then fall but, for the year to date, it’s recorded an increase of almost 15%.

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Market movements and review video – August 2024

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When passion is the purpose of investing

Investing is often considered best undertaken with a cool head and heart. But for some investors, passion is the whole purpose of the investment.

Passion investing is what it sounds like – investing in things you love, non-traditional assets that generally allow you to enjoy ownership while hopefully watching them appreciate in value at the same time.

Most traditional investments take into consideration time horizon, risk appetite and investment capital appreciation goals. For the passion investor, while financial considerations may dictate their investments to some extent, they are strongly influenced by more than market returns and want to invest – and collect – in a way that supports their interests and passions.

The growth of passion investing

We Australians certainly love collecting and, according to the eBay State of Collectibles report, we also care about the financial implications of our collections. In fact, more than one in four Aussies collect goods such as coins, toys, sneakers and art and more than 40% of those collectors could be considered passion investors as they have a financial objective in mind.

The top 10 luxury passion investments

While buying and selling on Ebay is one end of the scale, the other end of the scale is the luxury passion investments. For those who have the cash to splash, some high-end investments can prove very lucrative.

According to Knight Frank’s Luxury Investment Index, the top 10 most successful passion investments ranked in order from those recording the highest returns are art, jewellery, watches, coins, coloured diamonds, wine, furniture, luxury handbags, classic cars and rare whisky.ⁱ While major auction houses recorded record sales last year, the Luxury Investment Index recorded a marginal decline of -1%, largely due to a drop in the rare whisky index of -9%. This overall decline was on the back of an impressive 16% increase the previous year, highlighting the volatility of the index.

Art typically records the most gains as investors pay stellar prices for museum quality works of art, with several single owner collections producing totals in excess of US$2.5 billion. It’s not just art setting records though. A US$143 million Mercedes-Benz Uhlenhaut Coupé set a new record for the most expensive car ever sold, with the most expensive watch, a 1957 Patek Philippe 2499, going for almost $10 million dollars.

Exploring other passions

Of course, passion investing is more than just the above luxury goods. If you thought Lego was just a toy that possesses enduring popularity, think again – the biggest online database for collectible Lego sets is now worth $1.2bn and it is possible for investors to realise profits in the range of 150% to 250%.ⁱⁱ

Following in Lego’s footsteps as a popular passion investment is sneakers. More than just comfy footwear to collectors, sneaker reselling has become a $6 billion industry globally, with the most sought-after limited-edition shoes commanding six-figure prices on the resale market.ⁱⁱⁱ

Things to consider

While collecting items you love may seem like an exciting way to park some extra capital, passion investing can be a risky proposition and there are a number of things to consider.

Passion investments can be extremely susceptible to fluctuations in their value and luxury niche items can be hard to sell during economic downturns.

You have to know what to look for and it can be difficult, if not impossible, to predict what will be of interest to collectors in years to come. As with more traditional investments, you usually need to hold on to passion investments for some time in order for their value to grow so they are rarely a ‘get rich quick’ scheme.

They are also called passion investments for a reason. Any investment you are strongly attached to can potentially cloud your judgment when making decisions about buying, selling, or holding onto them.

You also need to think about where and how your objects are stored so they don’t lose value and insurance is a consideration when you possess items of significant value.

If you enjoy owning things that bring you joy, by all means pursue your passions – that’s what life is all about after all. Just approach with caution when mixing passion with investing.

i https://www.knightfrank.com.au/blog/2024/04/04/art-leads-knight-franks-luxury-investment-index-with-prices-rising-11-in-2023
ii https://www.wsj.com/video/series/in-depth-features/lego-investing-is-booming-heres-how-it-works/5F2B44FE-2789-46E2-B280-9CA089EAB458
iii https://www.firstonline.info/en/sneakers-da-collezione-una-folle-ossessione-chi-ci-guadagna/

Going for Gold

Gold fever is in the air and it’s not just the prospect of medals at the upcoming Paris Olympics.

Gold prices have been climbing strongly in 2024 as investors, jittery about the effects of wars in the Middle East and Ukraine, buy up the asset because of its reputation as a safe haven. The spot price has risen more than 18 per cent since mid-February.ⁱ

Demand for the precious metal is also being driven by central banks adding to their gold reserves to hedge against currency and other market risks.

For investors, gold has been an alluring buy for centuries thanks to its association with wealth and power. As a precious metal and a physical asset, it often attracts a certain confidence, which is sometimes misplaced.

Patchy performance

Day traders might be lucky enough at times to buy or sell gold for a decent profit by correctly guessing when to get in or out but, generally speaking, gold is not an easy investment to love.

Over the longer term, it hasn’t always beaten inflation, the price can plunge at a time when market conditions suggest it should be rising and its performance against stocks and bonds has been varied.

In fact, there have been long periods of persistently low prices. It languished for around six years from 1988 before recovering and then again for the decade or so leading up to the beginning of COVID-19 in 2020. The uncertainty of the pandemic-era helped spark a rally that has increased the price by almost 38 per cent.

Pros and cons

So, is gold worth considering as part of a portfolio? As with any investment, there are pros and cons.

Like many other asset classes, gold can help to diversify a portfolio and reduce certain risks. During stock market downturns, gold prices often (but not always) begin to rise. Some investors like the idea that it is a scarce, physical asset and, despite its ups and downs, gold has tended to hold its value over time.

At times gold has provided a good hedge against inflation. For example, in the US between 1974 and 2008, there were eight years when inflation was high and during those times, gold prices rose by an average of 14.9 per cent annually.ⁱⁱ But different periods give different results. While US CPI growth was around 6.8 per cent in 2021 and 2022, gold prices were achieving an annual increase of just over 1 per cent.

How to invest

You don’t need to lug home gold bars and hide them under the bed to have a stake in a gold investment.

Of course, it is possible to own gold bullion by buying online or in person from one of a number of registered dealers in Australia. The actual gold can be delivered to you or held in storage for a fee. You could also own physical gold by buying jewellery although there are high mark ups and resale value isn’t assured.

The ASX provides the avenue to buy shares in one or more of the many gold mining companies. You’ll need to do your homework carefully to consider the credentials of the companies. Some are riskier than others depending on the countries in which they operate and their size.

You could also consider exchange traded funds (ETFs) that are linked to or track the gold price. One advantage is provided by funds that hedge currency risk so that your returns won’t be affected by differences in the US dollar. Although with any fund, you’ll need to factor in an annual management fee, which will reduce your ultimate return.

If you’re interested in achieving a balanced portfolio, we’d be happy to help you.i Gold – Price – Chart – Historical Data – News (tradingeconomics.com)
ii Is Gold An Inflation Hedge? – Forbes Advisor

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To sell or not to sell is the question for moving into aged care

Moving into residential aged care can trigger a range of emotions, particularly if it involves the sale of the family home.

What is often a major financial asset, is also one that many people believe should be either kept in the family or its value preserved for future generations.

Whether or not the home has to be sold to pay for aged care depends on a number of factors, including who is living in it and what other financial resources or options are available to cover the potential cost of care.

It also makes a difference if the person moving into care receives Centrelink or Department of Veterans Affairs payments.

Cost of care

Centrelink determines the cost of aged care based on a person’s income and assets.ⁱ

For aged care cost purposes, the home is exempt from the cost of care calculation if a “protected person” is living in it when you move into care.

A protected person could be a spouse (including de facto); a dependent child or student; a close relative who has lived with the aged care resident for at least five years and who is entitled to Centrelink income support; or a residential carer who has lived with the aged care resident for at least two years and is eligible for Centrelink income support.ⁱⁱ

Capped home value

If the home is not exempt, the value of the home is capped at the current indexed rate of $201,231.ⁱⁱⁱ

If you have assets above $201,231 – outside of the family home – then Centrelink would determine you pay the advertised Refundable Accommodation Deposit (RAD) or equivalent daily interest rate known as the Daily Accommodation Payment (DAP), or a combination of both.

The average RAD is about $450,000. Based on the current interest rate of 8.36% [note – this is the rate from July 1] the equivalent DAP would be $103.07 a day.

Depending on your total income and assets, you may also be required to pay a daily means tested care fee. This fee has an indexed annual cap of $33,309 and lifetime cap of $79,942.

This is in addition to the basic daily fee of $61.96 and potentially an additional or extra service fee.

There is no requirement to sell the home to pay these potentially substantial costs, but if it is a major asset that is going to be left empty, it may make sense.

Other options to cover the costs may include using income or assets such as superannuation, renting the home (although this pushes up the means tested care fee and can reduce the age pension) or asking family to cover the costs.

Centrelink rules

For someone receiving Centrelink or DVA benefits, there is an important two-year rule.

The home is exempt for pension purposes if occupied by a spouse, otherwise it is exempt for up to two years or until sold.

If you are the last person living in the house and you move into aged care and still have your home after two years, its full value will be counted towards the age pension calculation. It can mean the loss of the pension.

Importantly, money paid towards the RAD, including the proceeds from a house, is exempt for age pension purposes.

Refundable Deposit

As the name suggests, the RAD is fully refundable when a person leaves aged care. If a house is sold to pay a RAD, then the full amount will ultimately be paid to the estate and distributed according to the person’s Will.

The decisions around whether to sell a home to pay for aged care are financial and emotional.

It’s important to understand all the implications before you make a decision.

Please call us to explore your options.

i https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs
ii https://www.myagedcare.gov.au/income-and-means-assessments
iii https://www.myagedcare.gov.au/income-and-means-assessments

When it comes to investing in shares, it’s often said that time is your friend.

The data shows that investing small amounts consistently over time and riding out the ups and downs of the market by holding onto your investments for the long term can produce a healthy return.

Over the past two decades, the top 500 US companies averaged a 10 per cent annual return and Australia’s S&P ASX All Ordinaries Index recorded an average annual return of 9.2 per cent.ⁱ

Those returns have been delivered despite some catastrophic events that sent the markets plummeting including the dot-com bubble crash, the Global Financial Crisis, and the effects of Covid-19.

It takes grit to hold on as the markets plummet, but the best way might be to avoid the hype and tune out the ‘noise’. It can be a trap checking prices every day and week, causing heightened stress and anxiety about your portfolio, a recent example being the mid-2024 Microsoft outage which briefly impacted investor confidence. We can help you maintain a longer-term view, so it you have any concerns give us a call.

The seasonal cycle of markets

The cycle of endless phases of good and bad times are a constant for markets, says AMP’s Chief Economist and Head of Investment Strategy Dr Shane Oliver.ⁱⁱ

“Some relate to the three-to-five-year business cycle, and many of these are related to the crises … that come roughly every three years. Some cycles are longer, with secular swings over 10 to 20 years in shares,” he says.

Most cycles follow a pattern of early upswing, after the market has bottomed out followed by the bull market, when investor confidence is strong and prices are rising faster than average. Then the market hits its peak as prices level out before negative investor sentiment drives a bear market. Finally, the bottom of the cycle is reached as prices are at their lowest.

There are also certain seasonal market cycles that may be helpful in buying and selling decisions. Note, though, that there are always exceptions. The much-quoted rule, “past performance is not an indication of future performance” is always important to keep in mind.

As the graph shows, April, July and December have tended to be the strongest months of the year.

Since 1985, the ASX All Ordinaries Index has seen gains in April averaging 2.4 per cent, with July averaging 2 per cent and December 1.9 per cent, which compares to an average monthly gain for all months of 0.62 per cent. But these patterns have weakened a little over time, with lower average gains in April, July, and December more recently.ⁱⁱⁱ

The seasonal pattern in shares

Source: Bloomberg, AMP
Note: Data is based on the ASX All Ordinaries Index, which includes about 500 of the largest listed companies.

By contrast, S&P ASX 200 monthly returns from 1993 to 2020 found April, October, and December to be the strongest months, according to 2021 UBS research.^iv The research from both indices shows June to be the worst month for performance, often because investors sell before the end of the financial year to reduce their tax bill – a strategy known as tax-loss selling. Investments that have incurred capital losses are sold to offset any capital gains to potentially reduce taxable income.

In the United States, the markets have usually been relatively weak in the September quarter, strengthened into the New Year and remained solid to around May or July, says Oliver.

November and April have been the strongest months for US shares for the past 30 years, with average monthly gains of 1.9 per cent and 1.6 per cent respectively.

The Magnificent Seven

Despite the rise and rise of seven US technology stocks in the past 18 months, known as The Magnificent 7, their price pattern has, more or less, followed these seasonal cycles.

The seven stocks – Nvidia, Alphabet, Microsoft, Apple, Meta, Amazon, and Tesla – returned more than 106 per cent in 2023 alone.^v

In the first half of 2024, their prices rose around 33 per cent on the US S&P 500 index while the rest of the index increased by only 5 per cent. Last year’s numbers were even more stark: the Magnificent 7 rose 76 per cent while the rest of the index increased just 8 per cent.^vi

During this period the S&P ASX 200 has risen by about 2 per cent.

But another story has been emerging in recent months. The Magnificent 7 has now become the Magnificent 3, thanks to intense excitement around artificial intelligence (AI). Nvidia, Alphabet and Microsoft leapt into the lead on the index, doubling the performance of the other four.^vii

Of the seven stellar performers, Nvidia has been the market darling, with its price almost tripling in 12 months. But as is often the way with rapid stock price movements, a correction followed, which has seen Nvidia’s value plunge $646 billion. It has since managed to claw back some of the lost territory and is still worth more than US$3 trillion. This correction knocked the company from the biggest in the world, a title it held briefly before the plunge, to number three after Microsoft and Apple.

The performance of Nvidia and the Magnificent 7 is a real-time lesson in market dynamics and cycles.

Some describe the activity as a bubble that is due to burst at some time in the future. Others say the Magnificent 7 stocks are undervalued and have further to go.

Keep it simple, focus on the long-term outlook to minimise the anxiety associated with the constant ‘noise’ surrounding market movements, we can help ensure you aren’t too inappropriately geared based on your goals.

Be clear-headed about the potential risks and be wary about getting caught up in the hype that surrounds rapidly rising prices.

Get in touch if you’d like to discuss your investment portfolio and to review in the context of your long-term investment goals.

i 2023 Vanguard Index Chart: The real value of time – Vanguard
ii The 9 most important things I have learned about investing over 40 years – AMP
iii The ’best’ and the ‘worst’ months for shares – asx.com.au
iv CHART: The months of the year when the ASX performs best – and why – Stockhead
v The magnificent 7: A cautionary investment tale – Vanguard
vi Guide to the Markets – J.P. Morgan Asset Management
vii The Kohler Report – ABC News

With the shortest day behind us, the longer days ahead will give us a chance to enjoy the outdoors, even if there’s still a need to rug up.

Technology stocks have driven Australian shares, and global markets, to new highs in the last 12 months. The S&P/ASX 200 finished the financial year 7.8% higher, slightly less than the previous year. Technology stocks gained 28% during the year.

In the US, the S&P 500 index rose 14% in the first six months of 2024 in one of the strongest performances since the dotcom bubble of the 1990s. Tech stocks were behind much of the gain, in particular AI chipmaker Nvidia, which overtook Microsoft and Apple as the world’s most valuable public company last month.

An interest rate cut is widely expected in September in the US but in Australia, many commentators predict another rate increase before the end of the year to help tame inflation. The RBA left interest rates unchanged at 4.35% at its June meeting but news that annual CPI was up by 4.0% in May compared with 3.6% in April will give the Bank cause for concern.

The Australian dollar ended the financial year almost where it began at just under US67 cents, after 12 months of volatility with highs of almost US69 cents and lows under US63 cents.

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Market movements and review video – July 2024

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To sell or not to sell is the question for moving into aged care

Moving into residential aged care can trigger a range of emotions, particularly if it involves the sale of the family home.

What is often a major financial asset, is also one that many people believe should be either kept in the family or its value preserved for future generations.

Whether or not the home has to be sold to pay for aged care depends on a number of factors, including who is living in it and what other financial resources or options are available to cover the potential cost of care.

It also makes a difference if the person moving into care receives Centrelink or Department of Veterans Affairs payments.

Cost of care

Centrelink determines the cost of aged care based on a person’s income and assets.ⁱ

For aged care cost purposes, the home is exempt from the cost of care calculation if a “protected person” is living in it when you move into care.

A protected person could be a spouse (including de facto); a dependent child or student; a close relative who has lived with the aged care resident for at least five years and who is entitled to Centrelink income support; or a residential carer who has lived with the aged care resident for at least two years and is eligible for Centrelink income support.ⁱⁱ

Capped home value

If the home is not exempt, the value of the home is capped at the current indexed rate of $201,231.ⁱⁱⁱ

If you have assets above $201,231 – outside of the family home – then Centrelink would determine you pay the advertised Refundable Accommodation Deposit (RAD) or equivalent daily interest rate known as the Daily Accommodation Payment (DAP), or a combination of both.

The average RAD is about $450,000. Based on the current interest rate of 8.36% [note – this is the rate from July 1] the equivalent DAP would be $103.07 a day.

Depending on your total income and assets, you may also be required to pay a daily means tested care fee. This fee has an indexed annual cap of $33,309 and lifetime cap of $79,942.

This is in addition to the basic daily fee of $61.96 and potentially an additional or extra service fee.

There is no requirement to sell the home to pay these potentially substantial costs, but if it is a major asset that is going to be left empty, it may make sense.

Other options to cover the costs may include using income or assets such as superannuation, renting the home (although this pushes up the means tested care fee and can reduce the age pension) or asking family to cover the costs.

Centrelink rules

For someone receiving Centrelink or DVA benefits, there is an important two-year rule.

The home is exempt for pension purposes if occupied by a spouse, otherwise it is exempt for up to two years or until sold.

If you are the last person living in the house and you move into aged care and still have your home after two years, its full value will be counted towards the age pension calculation. It can mean the loss of the pension.

Importantly, money paid towards the RAD, including the proceeds from a house, is exempt for age pension purposes.

Refundable Deposit

As the name suggests, the RAD is fully refundable when a person leaves aged care. If a house is sold to pay a RAD, then the full amount will ultimately be paid to the estate and distributed according to the person’s Will.

The decisions around whether to sell a home to pay for aged care are financial and emotional.

It’s important to understand all the implications before you make a decision.

Please call us to explore your options.

i https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs
ii https://www.myagedcare.gov.au/income-and-means-assessments
iii https://www.myagedcare.gov.au/income-and-means-assessments

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When DIY does not pay off

“If you want something done right, you’ve got to do it yourself”

Not necessarily! The appeal of doing it yourself is understandable. There is a great feeling that comes with doing something that challenges you and with being resourceful and learning a new skill. However, there can be pitfalls to DIY and there are benefits from getting an expert involved sometimes.

We tend to be proud of what we create and place greater value on things we have made ourselves. There is a statistical difference between the dollar value someone places on something that they have built, compared to what another person would pay for it (this is for good reason known as the “Ikea effect” as it even applies to putting together flat-pack furniture).

Making DIY look easy

With all the information we have at our fingertips, encouraged by the appeal of learning a new skill and guided by the power of Google and YouTube videos, we are emboldened to give things a go. Whether it’s fixing that dripping tap, troubleshooting the laptop that’s playing up or even investing your hard-earned dollars, DIY has never looked so easy.

The growth in DIY

The DIY mindset seems to be one that is on the increase. When we think of DIY we tend to think of home improvement and fixing things around the home. This market has increased by almost 10 million dollars in the last ten years.ⁱ The statistics reveal more than half of us are taking up the tools, with 55 per cent of homeowners deciding to take on home improvement and repair jobs rather than seek professional help.ⁱⁱ

DIY can be a lot more than just picking up a hammer though, and our love of DIY also extends to our financials. The search for additional income in an inflationary environment has seen an increase in traders keen to take the reins and invest for themselves. Over the past decade there has been a steady increase in the share of retail investors, with equity trades by a retail investor nearly doubling in volume from a decade ago.ⁱⁱⁱ Equally, when it comes to getting ready for retirement the number of people setting up self-managed super funds (SMSFs) continues to rise, increasing by around 9 per cent over the past 5 years.^iv

Reasons to be careful

There is a lot more to lose if there is a problem with your financial situation than a tap that’s leaking though, so it’s important to think about what is at stake when you manage any aspect of your own financials.

The bottom line is you want to be getting the best outcomes and that does not always happen if you are taking a DIY approach. For example, when it comes to investing, a number of academic studies have shown that DIY investors tend to underperform the market and that underperformance ranges between 1% to 10% per year.^v

Getting an expert involved

The trick with any form of DIY is to do your research, understand the task and what’s involved, and acknowledge when you might benefit from a helping hand. There are times when it’s OK to have a go yourself and times when it makes more sense to get advice and support. You can still learn and gain skills that you can apply to future situations but it can make sense to maximise your efforts, while leveraging the skills of the experts.

When it comes to your financial life, whether it’s investing and growing your wealth, protecting your wealth, retirement planning or estate planning, there is a lot to know and consider, and consulting with an expert can really add value and help you avoid potential pitfalls.

Getting help does not mean being passive and not engaged, however. The best outcomes are achieved when we actively work together in partnership to achieve your desired outcomes.

There is a world of difference between totally going it alone and maybe floundering a little, and getting advice and guidance to reach the best outcome. So, if you want something done right, sometimes it is best to call in the experts! We are here to help.

i https://www.mordorintelligence.com/industry-reports/diy-home-improvement-market/market-size
ii https://blog.idashboard.com.au/2022/05/13/understanding-the-home-improvement-and-diy-market/
iii https://public.com/documents/2023-the-retail-investor-report
iv https://www.morningstar.com.au/insights/retirement/246207/smsfs-continue-to-thrive
v https://occaminvesting.co.uk/do-diy-investors-underperform/

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Enjoy the now and secure your future

Managing your financial situation always involves tension between how you live your life now and preparing for your future – whatever that looks like.

The worry about not getting the balance right and making unnecessary sacrifices now – or not having enough money for the things you want to do in the future is a common and valid concern we hear when we talk to clients. You want to be living your best life now which means not living too frugally or worrying about your future. At the same time, you don’t want the choices you are making now in how you live your life to impact or make impossible the wonderful life you envision for yourself down the track.

Balance whatever your stage of life

We all have financial goals – whether you are saving for your children’s education, working towards that once in a lifetime round the world trip, freeing up finances for a gap year, or setting yourself up for a wonderful retirement. It’s important to balance your ‘now’ with your ‘future’ when it comes to spending, saving, and investing to make sure you can achieve those goals. You don’t want to regret your spending – or on the other hand live a frugal life and look back on opportunities you missed while you were squirrelling it away.

The tension between the ‘now’ and your ‘future’ with respect to your finances can be even more heightened when you have retired. It can be a strange adjustment suddenly not having a wage coming in and living off your savings, super and investments. It’s common, and quite understandable, to worry about not having enough to last the distance, particularly given that a 65-year-old today may live well into their 90’s and could spend up to three decades in retirement.ⁱ No one wants to outlive their savings.

However, many retirees live unnecessarily frugal lives as evidenced by a 2020 Retirement Income Review which found that most people die with the bulk of their retirement wealth intact.ⁱⁱ Those that live frugally do so often not from necessity but because they don’t have an understanding of their financial needs, including how these will change over time, and how much they can afford to spend.

How the balance changes over time

That balance is hard to hit. It is different for different people, and your approach to saving and spending will change at various stages of your life. 

If you are paying off a difficult to maintain level of debt or in the final stages of scraping together a deposit for a home, making sacrifices now in the way you live life your life might feel OK. Equally if you have spent much of your life building wealth, letting loose the reins a little and going on that cruise might be something you are extremely comfortable with. 

Certainty now and confidence in the future

Whatever your stage of life, achieving the right balance comes from having an in-depth understanding of your financial situation now, and establishing and maintaining a personalised plan that takes into account all aspects of your financials – your earning capacity, level of debt, assets and very importantly, the life you want to live today and your goals for the future.

The importance of receiving support with financial planning is reinforced in a recent report which indicated advised Australians are significantly more likely to say they feel confident in achieving their financial goals (71 per cent) compared with those who are not receiving support (55 per cent).ⁱⁱⁱ

The same proportion said that they were living well now, stating their finances allow them to “do the things I want and enjoy in life.” And those receiving advice are also balancing the “now” with their future needs. Those accessing financial advice also indicated they were more likely to be financially prepared for retirement and have a higher savings balance.

This confidence that comes from receiving personalised advice also means being more prepared when people leave the workforce (and a wage) behind. Advised Australians are significantly more likely to feel very or reasonably prepared for retirement (76 per cent), than those without advice (45 per cent).^iv

The key to achieving a balance between living your best life now and being financially secure in the future is knowledge. If we know that tomorrow is shaping up well for us, we may worry a little less today, feel a little less guilty when we spend today and be less likely to have regrets about spending – or about missing out – further down the track.

i https://www.aihw.gov.au/reports/life-expectancy-deaths/deaths-in-australia/contents/life-expectancy
ii https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-ud00b_key_obs.pdf
iii https://www.netwealth.com.au/web/insights/the-advisable-australian/understanding-australian-advice-clients-better/#download
iv https://www.netwealth.com.au/web/insights/the-advisable-australian/understanding-australian-advice-clients-better

Gold fever is in the air and it’s not just the prospect of medals at the upcoming Paris Olympics.

Gold prices have been climbing strongly in 2024 as investors, jittery about the effects of wars in the Middle East and Ukraine, buy up the asset because of its reputation as a safe haven. The spot price has risen more than 18 per cent since mid-February.ⁱ

Demand for the precious metal is also being driven by central banks adding to their gold reserves to hedge against currency and other market risks.

Turkey, China and India were the biggest buyers of gold in the first half of 2024, aiming to reduce exposure to US dollar movements and to further diversify their reserve funds.ⁱⁱ The United States remains the largest gold depository in the world by far, holding two-and-a-half times more than Germany, the next on the list.ⁱⁱⁱ

For investors, gold has been an alluring buy for centuries thanks to its association with wealth and power. As a precious metal and a physical asset, it often attracts a certain confidence, which is sometimes misplaced.

Controversial history

Gold has always played an important and, at times, controversial role in the global monetary system.

For example, during the Great Depression in the 1930s, the US government forced its citizens to sell their gold at well below market rates to help stabilise the economy. Then a new official rate was set at a higher price. It was the beginning of the end for the gold standard worldwide, the monetary system that pegs a currency’s value to gold.

After World War Two, a new international monetary order was negotiated that saw the US dollar pegged to gold with other currencies linked to the dollar’s value. The USD was convertible to gold bullion at a fixed rate of US$35 per troy ounce.^iv

But increasing global financial instability and criticism from European nations eventually led to the system being abandoned by the 1970s when floating exchange rates were introduced.

Patchy performance

Day traders might be lucky enough at times to buy or sell gold for a decent profit by correctly guessing when to get in or out but, generally speaking, gold is not an easy investment to love.

Over the longer term, it hasn’t always beaten inflation, the price can plunge at a time when market conditions suggest it should be rising and its performance against stocks and bonds has been varied.

In fact, there have been long periods of persistently low prices. It languished for around six years from 1988 before recovering and then again for the decade or so leading up to the beginning of COVID-19 in 2020. The uncertainty of the pandemic-era helped spark a rally that has increased the price by almost 38 per cent.

Gold Prices (1970’s – today)

Source: tradingeconomics.com

Pros and cons

So, is gold worth considering as part of a portfolio? As with any investment, there are pros and cons.

Like many other asset classes, gold can help to diversify a portfolio and reduce certain risks. During stock market downturns, gold prices often (but not always) begin to rise. Some investors like the idea that it is a scarce, physical asset and, despite its ups and downs, gold has tended to hold its value over time.

At times gold has provided a good hedge against inflation. For example, in the US between 1974 and 2008, there were eight years when inflation was high and during those times, gold prices rose by an average of 14.9 per cent annually.^v But different periods give different results. While US CPI growth was around 6.8 per cent in 2021 and 2022, gold prices were achieving an annual increase of just over 1 per cent.

How to invest

You don’t need to lug home gold bars and hide them under the bed to have a stake in a gold investment.

Of course, it is possible to own gold bullion by buying online or in person from one of a number of registered dealers in Australia. The actual gold can be delivered to you or held in storage for a fee. You could also own physical gold by buying jewellery although there are high mark ups and resale value isn’t assured.

The ASX provides the avenue to buy shares in one or more of the many gold mining companies. You’ll need to do your homework carefully to consider the credentials of the companies. Some are riskier than others depending on the countries in which they operate and their size.

You could also consider exchange traded funds (ETFs) that are linked to or track the gold price. One advantage is provided by the funds that hedge currency risk so that your returns won’t be affected by differences in the US dollar. Although with any fund, you’ll need to factor in an annual management fee, which will reduce your ultimate return. If you’re interested in achieving a balanced portfolio, we’d be happy to help you.

i Gold – Price – Chart – Historical Data – News (tradingeconomics.com)
ii https://www.statista.com/statistics/1465127/gold-demand-central-banks-by-country/
iii https://www.nasdaq.com/articles/top-10-central-bank-gold-reserves-updated-2024
iv How the Bretton Woods System Changed the World (investopedia.com)
v Is Gold An Inflation Hedge? – Forbes Advisor

As the financial year draws to a close, it’s the perfect time to review your financial affairs and set the stage for a successful new financial year. By taking care of essential tasks and implementing strategic planning, you can position yourself for a smooth transition and a strong start for the year to come.

Topping up super

One important item for the To Do list is to top up your super with either concessional (pre-tax) or non-concessional (post-tax) contributions. For example, you could make a voluntary concessional contribution up to the limit allowed and then claim a tax deduction on your personal assessable income for it. Consider making additional contributions to your own super account or your spouse’s account, to take advantage of tax concessions.

If you have unused concessional cap amounts from the previous five years and a super balance less than $500,000 on June 30 the previous year, you may be eligible to make a catch-up (or carry-forward) contribution greater than the annual limit.

Maximising contributions not only helps you build your retirement savings but can also provide valuable tax benefits. But it’s critical to be mindful of your caps and to ensure that you make any super contributions before the end of the financial year to meet the deadline.

Reviewing investments

Reviewing your investment portfolio is a valuable task at any time but particularly now.

For example, you could take a look for any capital gains or losses that could be used strategically to manage your tax liability.

Also, it is worth considering how your portfolio performed over the past 12 months against your goal of capital growth, income, or balance.

You may decide to readjust your goals or your investments to help steer performance in the right direction for the next 12 months.

Of course, if you’re planning any changes, it’s important to check in with us to ensure you’re making informed decisions about your investments.

Paying expenses early

Another useful strategy at tax time can be to bring forward any deductible expenses or interest payments before 30 June to reduce your taxable income.

That could include incurring expenses on an investment property, prepaying interest on investment loans, making charitable donations, or claiming eligible work-related expenses.

Make sure you keep detailed records and receipts to support your deductions.

The ATO’s myDeductions app is a great place to start for free record keeping and to assist you to be ready for tax time.

Setting up salary sacrifice

As you look ahead to the new financial year, consider whether a salary sacrifice arrangement might be right for you.

Salary sacrifice allows you to divert a portion of your pre-tax salary directly into your superannuation, which effectively reduces your taxable income and boosts your retirement savings.

You will need to think carefully about your living expenses to work out the amount you can afford to contribute to your super, and ensure you do not exceed your concessional (before-tax) contributions cap of $27,500, which will increase to $30,000 from July 1 2024 to avoid paying any extra tax.

Your employer or payroll department can help you set up a salary sacrifice arrangement.

Checking your budget

This is a good time to revisit your financial goals and how you’re tracking, and then put together a strong budget for the new financial year that will help get you further along the track.

Take the time to review your income and expenses and identify any areas where you can cut back spending or improve your income.

This exercise not only helps you understand your financial habits but also allows you to reallocate funds towards your goals, such as paying down debt, building an emergency fund, or increasing your investment contributions.

Consult with professionals

Don’t forget to check in with your trusted advisers – financial advisers, accountants, or tax professionals – to make sure you are making the most of any opportunities for financial growth and maximising tax savings.

Taking advantage of our expert advice to review your current financial situation and goals, and checking that you are making the best decisions for you can make a difference. It provides peace of mind, ensures that you are complying with any obligations and, importantly, puts you in the best position to achieve your financial goals.

Your financial To Do list

Being a good manager of your own financial life means being organised and keeping your eye on the ball.

Here are some tips to help you finish this financial year on top and prepare to take on the next one:

• Create a checklist: Write down all the financial tasks that need to be completed before year-end along with practical steps to make sure that nothing falls through the cracks.
• Set deadlines: Identify when each task needs to be completed so that you stay on track and avoid last-minute stress. Prioritise tasks based on their urgency and importance.
• Use online tools and apps Check out some of the financial management tools and apps that make it easy to visualise your cashflow, store your records and receipts, and help track your progress.
• Track progress regularly Keep tabs on your progress, tick off your completed tasks and regularly review your checklist to address any issues or challenges promptly.

By addressing these essential tasks, you’ll be well on your way to starting the new financial year in a strong and organised position. Remember, the key is to take the initiative, seek professional advice when needed, and stay disciplined in your financial management. With a solid plan in place, you can confidently navigate the year ahead and work towards achieving your financial objectives.