Chris Black

Monthly Commentary – JANUARY 2018

Chris Black · Feb 16, 2018 ·

Developments in the global economy

The US economy continued to show robust growth in the final quarter of 2017 while survey indicators suggest that momentum is likely to be maintained into the new-year. In Australia, consumer sentiment has shown further improvement and this is now being reflected in actual spending behaviour.

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Australia

Consumer sentiment continues to improve with the Westpac/Melbourne Institute index increasing to 105.1 in January from 103.3 a month earlier. The index is now at its highest level since late 2013. The increased confidence seen since September last year has been reflected in retail sales data. The most recent ABS data available for November showed a 1.5% increase in the month following a 0.5% rise in October. Note that the November result was impacted by the release of the iPhone X and Black Friday sales but still reflect consumer willingness to spend. Anecdotal reports also suggest that Christmas spending in December was also robust. The December CPI showed a 0.6% increase in the quarter taking inflation for the year to 1.9%. While there has been a slow rise in inflation, it is unlikely to prompt monetary tightening at this stage but does suggest that if the current trend continues a rate hike in the second half of 2018 is looking more likely. Employment increased by 34,700 in December with 15,100 new full-time positions created. However, this was insufficient to absorb the number of new people looking for work resulting in the unemployment rate increasing to 4.6% from 4.5%.

US

The advance estimates of December quarter GDP showed the economy grew by an annualised 2.6% in the quarter following the September quarter’s 3.2% increase. Consumer spending and residential investment were both robust while inventories and imports held back growth. Core consumer prices (excluding food and energy) increased 0.3% in December to be 1.8% above year ago levels. While it would be premature to suggest inflation is now trending higher, the result is likely to focus more attention on inflation indicators as a gauge to the timing of the next Fed tightening. The US ISM manufacturing survey rebounded to 59.7 in December from 58.2 a month earlier.

Europe

Survey indicators suggest both consumers and business continue to increase in confidence, in line with improving economic activity. The Eurozone consumer confidence index has steadily improved over the past 12 months, but remained in negative territory until last month. The January reading of 1.3, improved on December’s 0.4 showing and is the best result since late 2000. A similar pattern can be seen in business sentiment, although there was a slight pullback in January from the highest reading on record posted in December. Improved consumer confidence is partly driven by the fall in the unemployment rate which hit 8.7% in December. While still high compared to other developed markets, it has fallen from close to 10% a year ago.

China

Chinese GDP increased by 6.8% in the year to the December quarter, unchanged from the previous quarter, and above the Chinese Government’s 6.5% target. Despite the target, most expect growth will slow to closer to 6% over coming years. Anti-pollution measures introduced in 2017, together with a greater focus on debt levels of state-owned enterprises are expected to see an easing in growth momentum. Consumer prices increased 1.8% in December from a year earlier, largely unchanged from the trend of the second half of the year.

Japan

Japanese indicators continue to suggest economic growth can be sustained in the near term at the current rate of about 2.5%. Japan’s Leading Economic Index increased to 108.3 in November from 106.5 a month earlier. This compares to readings below 105 for most of the first half of 2017. At the same time inflation remains subdued at 1.0% in December, although it has increased from the 0.4% rate seen earlier in 2017.

Developments in financial markets

Global equities markets powered ahead in January with the major drivers being continued robust economic data and a positive response to the US tax cuts, although Australian equities failed to share in the enthusiasm. Fixed interest markets responded to the same news with yields moving higher.

Australian shares

The S&P ASX200 Accumulation Index started the year on a negative note falling by 0.4% in January following the 1.8% return in December. The Resources sector returned 0.8% while Industrials saw a negative return of 0.7%. Small caps also suffered fatigue after their strong showing in 2017 falling by 0.5%. The best performing sectors in January were Healthcare (+3.2%), Information Technology (+2.0%) and Telecommunications (+0.8%). Healthcare was boosted by a 66% jump in the Sirtex share price following a takeover proposal by Varian Medical Systems. The only other sector to post a positive return in January was the Materials sector, boosted by the Resource component. Worst performing sectors in the month were Utilities (-4.5%) which continued their recent poor showing, AREITs (-3.3%) and Industrials (-2.1%). In the ASX100, the best performing stocks were JB HiFi (+17.2%), Flight Centre (+15.4%) and Resmed (+13.5%). The worst performing stocks were GrainCorp (-9.7%), Fairfax (-9.0%) and Macquarie Atlas Roads (-8.7%).

International shares

The MSCI World ex Australia index returned 3.9% in January extending the run of positive results to start the year with the highest monthly return in more than two years. Over the past 12 months, developed market global equities have returned 22.3% before taking into effect the impact of currency. Emerging markets were even stronger, posting a 6.8% return in January and 34.5% over the past 12 months. Most major markets posted double digit returns with India the laggard with a 4.2% return.

The S&P500 increased by 5.6% in January. The introduction of the Tax Cuts and Jobs Act which will see US corporate tax rates cut to 21% from 35% together with a raft of positive earnings announcements were the main drivers of strength offsetting any negativity from the temporary government shutdown. Following a weak end to 2017, European markets rebounded in January. Italy, which was hardest hit in December, recorded a 7.6% return in January while Germany (+2.1%) and France (+3.2%) also posted solid returns.

Major Asian markets were uniformly strong benefitting from positive global sentiment and continued robust Chinese growth. The Shanghai Composite increased by 5.3% while Hong Kong’s Hang Seng powered ahead to post a 9.9% gain to follow up December’s 2.5% rise. After a lacklustre end to 2017, Singapore’s Straits Times Index bounced 5.3%. Japan’s Nikkei Index continued its modest but consistent performance increasing 1.5% in January. Over the past 12 months, the Nikkei has returned 21.3%.

Fixed Interest and Cash

Property

The S&P/ASX200 AREITs index returned -3.3% in January following December’s 0.2% increase. Higher bond yields hurt the property trusts but domestic conditions also had an impact with Australian AREITs underperforming their international counterparts.

Global REITs returned -1.2%, erasing December’s gains. Improving perceptions regarding global growth momentum partly offset the negative impact of higher bond yields.

Currency and commodities

The Australian dollar continued to rise in January and broke through the US$0.80 barrier to end the month at US$0.8057. Further gains in commodity prices were the most likely reason for the $A’s rise although iron ore prices remained largely unchanged in the month at US$73 per tonne following a strong rise late in 2017. Other major metals saw price increases in January with the exception of Copper which fell 1.8%. Nickel (+6.7%), Zinc (+7.7%) and Gold (+4.2%) ended higher. Brent Crude increased 3.4% to US$68.9 per barrel.

Key market returns at 31 January 2018

If you have any questions, please contact us on info@fortressfs.com.au

Download the January Commentary PDF here.

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This market update was compiled by BTFG Research.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 7 December 2017. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”). This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

Tightening up your household budget

Chris Black · Feb 1, 2018 ·

At Fortress we often set our clients some homework: to tighten up their household budget to see how much surplus cash they really have. Remember, it’s the money left over at the end of the month that you can use to start building your wealth.

Having surplus cash to add to your investments is not a pipe dream. But if having your money working harder for you is not motivation enough to tighten your budget, here are some handy tips.

Remember, cutting back may mean a bigger investment portfolio, being debt free sooner or even a more lavish retirement.

Food

Usually the biggest bill in any household, but luckily, it’s one of the easiest to diminish. Many families can reduce their weekly food bill by as much as 50% by menu planning. Also, look beyond the supermarket. Taking the time to shop around your local butcher and greengrocer can result in valuable savings.

Utilities

The answer to saving here is to review and compare. Do your research and check out deals from different providers. This is not the most exciting task, but one to two hours on the phone or online could save you several hundred dollars a year.

Petrol

Potentially another large household expense. The best way to cut-back on petrol is not to use it. Walk, ride or use public transport whenever possible. Car-pooling is also a great cost-saver. Make a list of your errands over a fortnight and try to get them done in the same area at once.

Entertainment

Everyone automatically reaches for their wallet here, but fun can be reasonably priced, or even free. Check out exhibitions, markets, walks and local fairs. Host a movie or games night or pack a picnic and head to the beach or a national park. See our list of fun (cost effective) activities to keep the kids busy here.

More thrifty hints…

If you’re terrible with money, downloading an app to track spending could be your salvation. At Fortress, we use & recommend the Fortress Wealth Hub. This smart tool syncs with your bank account to track where your money goes, and automatically categorises your spending for you.

Finally, if you really struggle with self-control, many banks offer accounts with online-only access, or require you to go in to make a withdrawal. This can prevent you going on mad sprees with your EFTPOS.

The important thing is to take the first step. Aim as big or small as you like. Cancel your newspaper subscription. Take your own lunch to work. Or think big by downsizing to a smaller (cheaper) home next time your lease is up. Any saving is a good saving.

We’d love to hear from you! To book a free consultation, please book online or contact us on info@fortressfs.com.au

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This market update was compiled by BTFG Research.

Get the fundamentals right

Chris Black · Jan 23, 2018 ·

A financial plan is a set of strategies that help you achieve your goals. Not sure what your long-term financial goals are? One of the easiest places to start is to focus on getting the fundamentals right so that when your goals become clearer, you are in a great position to hit the ground running.

Step one really is to know where your money goes. To get ahead, you need your outgoings to be less than your income. Once you have that nailed, focus on getting the below fundamentals right and you’ll be well on your way to wealth accumulation and financial freedom.

1. Setup a budget.

Simple is best. We suggest you start with four categories – your savings (aim for 10% of your pay), your bills (rent, insurance, car), your living costs (groceries, mobile phone, fuel) and your fun money. If you want some software that can help you, talk to us about the Fortress Wealth Hub.

2. Setup an emergency fund.

This emergency fund should be three months’ worth of your take-home salary. I know what you are thinking: that will take me years to save! Yes, it might… but so what? The golden rule of personal finance is always save first. Set up an automatic transfer so that every time you get paid, money goes into the account. Trust us, the peace of mind you will feel once you’ve saved that magical number will be worth it. This fund will allow you to deal with any financial disasters swiftly and easily, without having to resort to using a credit card or going into debt. Which leads us to…

3. Stay out of debt.

Use your emergency fund for unexpected expenses, not your credit card. Better yet, don’t have a credit card! Save up for what you want to spend money on. It’s easier to save if you have a clear idea of what you are saving for, so set some goals.

4. Protect your wealth.

Get some insurance to cover unforeseen health issues or loss of income. Remember, your grand plans of holidaying owning homes and building investment portfolios all come crashing down without your income.

5. Learn how to invest.

Ask an expert (hello!) or read, read, read. There are endless books and websites available, so self-education has never been easier. As a starting point, aim to understand how your superannuation is invested and whether it is going to meet your retirement goals. If the answer is no, do something about it!

If you get the fundamentals right, you are on the track to financial freedom. You are also developing an awareness of saving, budgeting and investing, so when the day comes that you have a lot of money, you will know what to do with it!

We’d love to hear from you! To book a free consultation, please book online or contact us on info@fortressfs.com.au

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This market update was compiled by BTFG Research.

a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Monthly Commentary – DECEMBER 2017

Chris Black · Jan 17, 2018 ·

Developments in the global economy

The US Federal Reserve increased official interest rates by 25 basis points to 1.25%-1.50% in December – the third rate rise this year. Expectations are for three more hikes in 2018. Economic data globally continues to be robust, although some signs are appearing that momentum may be slowing.

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Australia

Real GDP increased by 0.6% in the September quarter to be 2.8% above year ago levels. Household consumption spending increased by only 0.1% in the quarter. However, the surge in private non-dwelling construction which increased 18.4% in the quarter provided a welcome source of growth in the absence of consumption spending and dwelling construction. With respect to consumption, more recent data may be suggesting the worst is behind us. The Westpac/Melbourne Institute consumer sentiment index increased by 3.6% to 103.3 – the highest level in four years. The improvement was likely prompted by the belief that Australian interest rates would stay low and comments by the Prime Minister on the possibility of tax cuts. Whether improved confidence can be sustained in the absence of wage rises remains to be seen. Employment increased by 61,100 people in November with 41,900 new full-time positions filled. However, the unemployment rate remains stuck at 4.5%.

US

As expected, the Federal Open Market Committee (FOMC) increased the fed funds target rate by 25 bps to 1.25%-1.50%. Two members opposed the change, although the incoming Chair, Jerome Powell, voted in favour of tightening monetary policy. The FOMC cited continued improvement in labour markets and robust economic activity as the catalyst for the change. This was borne out by incoming data with non-farm payrolls increasing by 228,000 in November, building on October’s 244,000 rise. The ISM manufacturing survey also rebounded to 59.7 in December after dipping slightly to 58.2 in November. The FOMC also noted inflation remains subdued with actual core inflation data showing a 1.7% rise over the past 12 months. Nevertheless, FOMC members are forecasting three increases in the fed funds rate in 2018 if current trends continue.

Europe

Initial estimates of third quarter GDP showed the European economy growing by 0.6% following 0.7% growth in the previous quarter. Consistent growth at this rate has seen real GDP increase by 2.6% in the four quarters to the September quarter. More importantly, recent surveys show business maintaining a high level of confidence despite continuing political uncertainty. The Markit manufacturing PMI increased to 60.6 in December from 60.1 a month earlier while the equivalent services measure increased to 56.5 from 56.2. While the economy is growing at a decent pace, inflation at 1.5% remains below the European Central Bank’s (ECB) target of 2.0% and is likely to forestall any interest rate increases in the immediate future.

China

The official NBS manufacturing survey which is skewed to larger, state-owned businesses declined slightly to 51.6 in December from 51.8 a month earlier. In contrast, the Caixin Purchasing Managers Index (PMI) which surveys private companies increased to 51.5 from 50.8. Despite the differences in these results, there is little in these figures to suggest any significant shift in growth trends. Chinese consumer prices were unchanged in November leading to prices being 1.7% above year ago levels.

Japan

The final reading for the September quarter showed a 0.6% increase in real GDP compared to the previous estimate of 0.3%. This takes Japanese growth to 2.5% over the past four quarters. Further good news came in the form of the Bank of Japan’s Tankan survey of large manufacturing companies showing an increase to 25 in the final quarter of the year, a level not seen for more than a decade.

Developments in financial markets

A positive end to 2017 with major indices posting robust returns in December, with China and Europe the main exceptions. The US Fed tightening failed to dampen spirits with most investors expecting that tax cuts and positive economic momentum will offset the negative impact of higher interest rates.

Australian shares

The S&P ASX200 Accumulation Index increased by 1.8% in December following the 1.6% return in November. For 2017, the Australian share market returned 11.8%, comprising a dividend yield of 4.7% and capital appreciation of 7.1%. The Resources sector continued to barrel ahead, returning 7.2% in December and a hefty 25.9% for the year. The Industrials sector was robust but looks lacklustre compared to the Resources sector, returning 0.6% in December and 9.0% for the year. A similar pattern was seen in the small cap component of the market with resources stocks boosting returns. Overall, small caps returned 3.2% in the month and 20.0% for the year.

The best performing sectors in December were Energy (+6.4%), Materials (+6.2%) and Telecommunications (+5.5%), finally reversing its recent run of poor results. Worst performing sectors in the month were Utilities (-4.5% and Industrial (-1.2%). For the year, Consumer Staples, Healthcare, Information Technology and Materials all posted returns above 20%. However, the overall market was held back by the poor performance of Telecommunications (-21.3%) and the lacklustre performance of Financials (+5.0%).

International shares

The MSCI World ex Australia index returned 1.1% in December following November’s 1.6% increase. Over the past 12 months, developed market global equities have returned 19.4% before taking into effect the impact of currency. Emerging markets posted a strong 2.6% in December and returned 31.0% in 2017. This strength largely reflected share market performance in Brazil (+26.8%) and India (+30%) while Russia returned a scant 1% for the year.

The S&P500 increased by 1.1% in December, with positive momentum continuing despite the US Federal Reserve increasing the fed funds rate at its December meeting. The US market returned a stellar 21.8% in 2017. European markets again faltered in December, falling 1.0% after November’s 2% decline. All major markets posted negative returns with Italy (-2.3%) hardest hit due to renewed election speculation and. Germany (-0.8%) and France (-1.1%) also suffering declines. The weak end to the year meant that 2017 returns were pared back but still managed a robust 13.4% return.

Asian markets continued their recent trend of mixed results with the Shanghai Composite down 0.3% in December while Hong Kong’s Hang Seng (+2.5%) again posted a robust result. However, Singapore’s Straits Times Index (-0.9%) was unable to match Hong Kong’s positive tone. Japan’s Nikkei Index increased 0.2% in the month and 19.1% in 2017 due largely to a surge late in the year following the re-election of the Abe government.

Fixed Interest and Cash

A more balanced view of the likelihood of monetary policy changes saw Australian bond yields retrace some of the fall seen in November. Australian 10-year government bond yields increased to 2.63% at the end of December from 2.5% a month earlier. As a result, the Bloomberg Composite Bond Index returned -0.5% in December. US yields were largely unchanged with few surprised by the Fed’s decision to increase official interest rates. Barclay’s Global Aggregate hedged in $A returned 0.2% in the month. Both Australian and global fixed interest markets returned 3.7% in 2017.

Property

The S&P/ASX200 AREITs index returned 0.2% in December and 5.7% in 2017. AREITs have been buffeted by changing market conditions as investors assess the impact of Amazon’s entry into Australia and lacklustre retail spending.

Global REITs continued recent strong performance, posting a 1.2% return following November’s 2.3% rise. Over the past 12 months, global REITs (hedged) have returned 9.5%, outperforming their Australian counterparts.

Currency and commodities

The Australian dollar rose sharply in December to end the year at US$0.7804. The dollar’s recent rollercoaster has been largely due to commodity price volatility. Most major metals increased in price in December with Nickel (+15.0%), Copper (+7.0%) and Zinc (+5.0%) posting increases. Iron ore prices increased a further 8% to US$74 per tonne – a likely driver of the stronger $A. Oil prices also increased again with Brent Crude ending the year at US$66.6 per barrel.

Key market returns at 31 December 2017

Download the December Commentary PDF here.

We’d love to hear from you! To book a free consultation, please book online or contact us on info@fortressfs.com.au

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This market update was compiled by BTFG Research.

constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

How to start saving for next Christmas

Chris Black · Jan 16, 2018 ·

Now that Christmas is done and dusted, we all should start planning ahead for next year. Imagine getting to December knowing that you have a few thousand dollars in the bank, ready to buy gifts, pay for your holiday and stock your pantry full of delicious Christmas treats!

Here are some ideas to make sure you are set up for next Christmas:

Start saving now. Open a high interest savings account in January and contribute a small amount to it every payday. Saving $25 per week will add up to over $1,300 by December. It is difficult to pay for Christmas out of December’s pay alone, so it makes sense to save up as much as you can beforehand.
Make a list. Start thinking now about potential presents for your loved ones. Were there any ideas from last Christmas that you could use for this year? Keep the list handy, in your purse or diary, and when someone you know mentions a favourite treat or store, write it down. That way you can…
Shop the sales. Use your handy list to shop for presents throughout the year, especially during sales. This will spread your costs and make them more manageable. Just make sure to be disciplined enough to pack them away – don’t be tempted to use them for birthdays or “just because” gifts.
Remember your pantry. In the last few months before Christmas, don’t forget to start stocking up on non-perishables for all those holiday parties. See a brand of pretzel that you love on sale? Buy a few extra packets and stow them away. That way, when December arrives, you won’t find your grocery bill suddenly jumping sky high!
Shop after Christmas. It may seem crazy to buy decorations 12 months in advance, but the markdowns on holiday items after Christmas can be more than 50%! Save some of your budget and shop for next year’s Christmas tree, decorations, wrapping and cards after the holiday season is over.By adopting even just one or two of these tips, you will be on your way to a very Merry Christmas… without all the budgeting and financial stress that usually comes with it.

Written by Emma Linton Doig, Practice Manager

We’d love to hear from you! To book a free consultation to impove your budgeting, or to get your Christmas debt under control, please book online or contact us on info@fortressfs.com.au

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

How to save money this school holidays

Chris Black · Dec 21, 2017 ·

School holidays can be an expensive time for your family. Most people acknowledge they spend more money during school holidays than at other times of the year. Here are some ideas for cheap or free activities you could try with your kids during the school holidays.

Smart tip

Make a list of all the possible activities you could do with your kids in the school holidays and put it on a fridge as a quick reference. Then you can slowly work through it and tick it off as you go

Before you start planning for your school holiday activities, get the kids to help you work out your budget. This is a great excuse to discuss what budgeting is and get your kids involved in working out how much activities will cost. You could set a daily or weekly spending limit and then ask your children to work out a budget for activities that are priced within that limit.

School holiday activities at home

With some planning, a modest budget and a bit of creative thinking, there are plenty of free or cheap activities you can do at home with your kids. Here are some ideas to get you started.

Plant a vegetable garden. Even if you only have a small outdoor area you can create a simple vegetable patch with your kids. If you don’t have a yard, you could plant seeds in pots and even decorate the pots. It is a good idea to choose fast growing plants so the kids can see the results quickly.
Camp out. Who says you need to leave the house to go camping? Why not set up a tent in the backyard and have a night out camping. If the weather is bad you could set up your tent inside the house instead.
Cooking. Plan a day of cooking or baking with your kids – you could even have a cooking competition with members of the family. This is usually a popular activity because you get to eat the results.
Movie night. Borrow some movies from your local library, pop some popcorn and you’ll have an authentic cinema experience in your home. You could even move your TV outside for the night and create an outdoor cinema under the stars.
Arts and crafts. Try face painting, papier-mâché, building a collage, painting or making masks or beaded jewellery. Use craft materials from around your home rather than going out to buy special items. It’s amazing what you can create from buttons and odds and sods from your kitchen drawers. Options are only limited by your creativity and imagination.
Build a cubby. Who doesn’t love a pillow fort? Try building a cubby out of boxes, sheets or other things around the house. Putting sheets or blankets over a washing line or kitchen table can be a quick, fun way to make a hideout for your kids.
Treasure hunt. Hide some things around the house or yard and write some clues or create a treasure map to lead your kids on an exhilarating adventure with a prize at the end.
Dress ups. Let your kids lose in your cupboard and see what costumes they can come up with. It’s amazing what they can do with a few scarves, hats and coats.
Playdate. Invite one or two of your child’s friends over to play for a low cost day at home. Provide paint and paper, bats and balls or dress up gear and the kids should be able to keep each other entertained.

School holiday activities at out and about

Depending on your budget and transport options, there are plenty of low cost school holiday activities away from home.

Libraries. Visit your local library and attend their free story time. Libraries also run other school holiday activities like arts and craft and computer and simple electronics courses for older kids. Keep in mind you might need to reserve a space for some courses.
Museums and galleries. Many local museums and galleries have free entry and offer creative and interesting school holiday programs, sometimes free or for a small fee. These programs are perfect for budding artists, archaeologists and scientists.
The beach. Going to the beach, national park or river during the warmer months is a fun and free activity the whole family can enjoy. Build sandcastles, go for a swim or a bush walk – but remember the sunscreen.
Go to the park. Take your kids to the local park. You can pack a picnic, walk the dog or fly a kite on a windy day. A lot of parks have playgrounds and climbing equipment as well as bike trails, cricket nets or basketball hoops you can use for free.
Shopping centres. Shopping centres often host free school holiday activities that your children might enjoy, including live entertainment, plays, music or art and craft activities.

To book a free consultation to improve your budgeting, or to get your Christmas debt under control, please book online or contact us on info@fortressfs.com.au

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

Parts of this post were compiled from ASIC MoneySmart.

How to save on Christmas gifts

Chris Black · Dec 14, 2017 ·

Here are some ways you can show you care, while keeping a lid on your spending:

Agree on a spending limit – Suggest to your loved ones that you set a limit on how much to spend to keep your budgets under control
Kids only – Talk to the other adults in your extended family about only buying presents for the kids this year, rather than for the adults
DIY vouchers – We often remember the things people do for us rather than the presents they give us. Consider giving redeemable vouchers for tasks like babysitting, massages, picnics, homemade dinners or even housework.
Savvy sales – Take advantage of sales throughout the year to nab some bargains and store them away for Christmas. But, even in December there are bargains to be had. You can also check out any clearance outlets near you, or sign up to their newsletters so that you’ll be in the know when they have a sale.
Compare offers – Some stores match or beat competitors’ deals, so compare their offers and take all the details with you when you go into the store. Don’t be afraid to ask for a discount, after all, people feel generous at Christmas!
Second-hand bargains – Op shops, antique stores and second-hand bookshops can be a treasure trove for the thrifty Christmas shopper. If you’re prepared to spend the time looking through their stock, you can often find good quality items at a fraction of the price you’d pay at big name stores.

Play, Wear, Read, Share

Have you heard of ‘the four-gift rule’? It is a simple idea that helps make shopping for kids’ presents a little less overwhelming. Basically, if you follow the four-gift rule you buy four presents for your child at Christmas:

Something they want,
Something they need,
Something to wear,
Something to read.

Want. Need. Wear. Read. And it rhymes (bonus).

Want

This is the BIG gift. The one that they really would like to have. It is typically a toy, but if your kids are older, electronics could make the list.

Need

Kids need a lot of things. You can take this seriously or play with it.

Sports equipment: soccer ball, new bike, volleyball, gymnastics leotard, balance beam
Camping equipment: sleeping bag, hammock, flashlight
Bedroom Ideas: down comforter, fun flannel sheets, wall decorations
School supplies

Wear

This one is self-explanatory: anything that can be worn! New shoes, especially more expensive speciality shoes like sport shoes, could fit in this category.

Read

You can interpret this one as anything you can read, even the directions to a new board or card game.

Favourite book series: Hunger Games, Harry Potter, Divergent
Magazine subscription
Board games
Card games
Book store gift card

Good luck! Remember, exercising some restraint at Christmas time will stop you starting the New Year with stressful debt.

To book a free consultation to improve your budgeting, or to get your Christmas debt under control, please book online or contact us on info@fortressfs.com.au

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

Parts of this post were compiled from ASIC MoneySmart.

Monthly Commentary – NOVEMBER 2017

Chris Black · Dec 13, 2017 ·

Developments in the global economy

Continued robust US economic data has reinforced expectations the US Federal Reserve will increase the fed funds rate by 25 basis points at its December meeting. In contrast, expectations of an Australian rate hike have been wound back as domestic economic data remains relatively lacklustre and price and wage pressures are largely non-existent.

000

Australia

Retail sales were unchanged in September following a 0.5% fall in August. Falls in spending for household goods and eating out were the main detractors. This is consistent with weakness in consumer sentiment in August and September, but it should be noted that sentiment has improved since then.

The Westpac/Melbourne Institute Consumer Sentiment was at 99.7 in November, a slight fall from 101.4 in October. However, both are improvements to the sub-98 readings seen in the previous five months. Continued growth in full-time employment may be boosting consumer confidence with 24,300 full-time workers added in October. However, it should be noted that wages growth remains subdued with the September quarter Wage Price Index again showing wages growth stuck at 2% over the past year. Private capital expenditure for the September quarter continued this year’s run of lacklustre results increasing by only 1% in the quarter to be 2.3% above year ago levels.

US

US non-farm payrolls increased by 261,000 in October following September’s hurricane impacted 18,000 rise (revised up from an initial estimate of a 33,000 fall). The unemployment rate fell to 4.1% from 4.2% a month earlier. Improvements in the US labour market are beginning to show in wages growth which accelerated to 3.2% in September from 2.8% a month earlier. However, goods inflation remains relatively subdued with core producer prices positing 0.4% rise in October to be 2.8% above year ago levels while core consumer prices increased by only 0.2% and are 1.8% above year ago levels.

Despite subdued inflation, most expect the US Federal Reserve to increase the fed funds rate by 25 basis points to 1.25-1.50% at the December meeting. This would be the third rate hike this year, following on from March and June increases.

Europe

The European unemployment rate continues to trend lower falling to 8.9% in September. While significantly above the unemployment rate in the US and Australia, it has fallen from close to 10% a year ago to the current level. Initial estimates of inflation showed a further decline to 1.4% in November – discouraging news for the European Central Bank which would like to see inflation closer to 2%. In the UK, the Bank of England increased official interest rates by 25bps to 0.5% on 2 November. In contrast to Europe, UK inflation has been above 2% through much of 2017, partly in response to the weaker currency following the Brexit vote.

China

Chinese inflation increased by 0.1% in October following a 0.5% increase a month earlier. Over the past 12 months, consumer prices have increased by 1.9% which is unlikely to be ringing any alarm bells. However, in contrast to consumer prices, producer prices have increased by 6.9% over the past 12 months and have been at this elevated level for most of 2017. This is worrying to the extent that the last time Chinese inflation rose significantly was in 2010 and into 2011 following a significant spike in producer prices.

Japan

Japanese consumer sentiment improved further in November to 44.9 compared to 44.5 a month earlier, possibly as a further endorsement of the re-election of Shinzo Abe as Prime Minister. Consumer sentiment is at its highest for four years. The result came after initial GDP figures showing the economy grew 0.3% in the September quarter after posting a 0.6% rise in the June quarter.

Developments in financial markets

Developed markets performed strongly in November although this was largely due to strong US returns, whereas European markets were almost uniformly weak. Australian shares also posted solid returns with resource stocks dominating. Chinese equities remain erratic.

Australian shares

The S&P ASX200 Accumulation Index increased by 1.6% in November following the 4.0% return in October. The Resources sector again performed strongly, returning 3.1% in the month but performance was erratic. A strong showing at the start of the month was followed by a sharp retracement with the subsequent rebound petering out as November came to a close. Industrials returned 1.4% in the month.

The best performing sectors in November were A-REITS (+5.3%), Information Technology (+4.5%) and Energy (+4.1%). Both IT and Energy were also strong performers in October. Laggards included Telecoms (-1.6%) which is the only sector showing negative returns in the month, quarter and year. Financials (0.0%) also performed poorly with Commonwealth Bank the only major bank posting a positive return in the month.

Best performing stocks in the top 100 were Santos (+12.9%), Origin Energy (+12.5%) and Northern Star (+11.7%). Worst performing stocks were Orica (-17.2%), ALS (-12.6%) and Graincorp (-8.7%).

International shares

The MSCI World ex Australia index returned 1.6% in November following October’s 2.5% increase. Over the past 12 months, developed market global equities have returned 21.3% before taking into effect the impact of currency. Over the month, Emerging markets were not as successful due in large part to weaker Chinese stocks. However, over the past 12 months, they have outperformed developed markets returning 27.9%.

The S&P500 increased by 3.1% in November, as expectations built that US corporate tax cuts are drawing closer. Over the past 12 months, the S&P500 has returned 23.6%. In contrast, European markets faltered in November with the Euro STOXX index falling 2.0%. Germany (-1.6%), France (-2.4%) and Italy (-1.9%) all posted losses in the month. Despite the fall in the month, the Euro STOXX index has returned more than 20% over the past 12 months.

Asian markets were mixed with the Shanghai Composite down 2.2% in November while Hong Kong’s Hang Seng (+3.3%) and Singapore’s Straits Times Index (+1.8%) escaped the negative sentiment. Japan’s Nikkei Index increased 3.2% on continued positive sentiment following the return of the Abe government.

Fixed Interest and Cash

Australian 10 year government bond yields fell to 2.5% at the end of November as domestic rate hike expectations continued to be wound back. Shorter-term yields also moved lower. As a result, the Bloomberg Composite Bond Index returned 0.9% in November and 4.0% over the past 12 months. In contrast, US yields moved slightly higher, particularly the 2 year government bond which increased to 1.78% from 1.60% over the course of the month as the expected December fed funds increase approached.

Property

Lower Australian bond yields and expectations the Reserve Bank will keep official rates on hold for longer than previously expected helped boost the Australian property trusts sector. The S&P/ASX200 AREITs index returned 5.3% in November but has slightly underperformed the broader Australian sharemarket over the past 12 months.

Global REITs were not as strong, but were still able to post a 2.3% return in the month despite slightly higher bond yields. Over the past 12 months, global REITs (hedged) have returned 12.0%, slightly behind the 12.9% returns seen in the Australian property trusts sector.

Currency and commodities

The Australian dollar continued its recent downtrend, falling to US$0.7565 compared to US$0.7656 at the end of October. Commodity prices were mixed with copper, nickel and zinc ending the month lower, while gold, lead and tin prices moved higher. Iron ore prices jumped more than 8% to US$67.5 per tonne but this had little impact on the Australian dollar. Oil prices also increased with Brent Crude ending the month at US$62.8 per barrel.

Key market returns at 30 November 2017

If you have any questions, please contact us on info@fortressfs.com.au

Download the November Commentary PDF here.

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate in light of your objectives, financial situation and needs.

This market update was compiled by BTFG Research.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 7 December 2017. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”). This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Spending wisely at Christmas

Chris Black · Dec 7, 2017 ·

If you’d rather not start the New Year with a new debt, here’s a Christmas spending survival guide to help you smarten up your holiday habits.

Christmas is a great time of year in Australia! It’s summer, the cricket is on and there are plenty of public holidays on the horizon – people are more likely to be in a good mood. Perhaps the only cloud attached to the season is that it is an expensive time of year, and many of us will stack up debt over the summer break.

If the silly season usually leaves you out of pocket, why not simplify things this year? Here are some tips to help you enjoy the holiday season without breaking the bank.

Make a list and check it twice

Make lists of the gifts & food you need to buy for Christmas. Having lists will help you plan your spending and keep you on track.

Gifts – Make a list of who you’re buying for, what you want to get them, and how much money you’re prepared to spend on each person.
Entertainment supplies – List the food and drinks you’ll need, and how much you can spend. Buy in advance to take advantage of specials, especially if items can be frozen or have a long shelf life.
Travel plans – List all your costs like flights, accommodation, travel insurance, airport transfers and petrol. Shop around for deals as early as you can, to avoid paying a premium for last-minute bookings or peak season increases. If you’re going on a driving holiday, work out which day is cheapest to fill up on petrol, and do it the week before Christmas.

Be a scrooge online

If you’re Christmas shopping online, do a web search for discount or coupon codes that you can use at the checkout. Look in the sales sections of retailers’ websites to see what’s on offer.

If you know what items you are looking for, search for them online instead of just going to one retailer’s website. You might find it much cheaper somewhere else.

Make sure you include any shipping costs when you are comparing prices. The cost of some items can blow out once you add shipping, meaning it might be better to simply go to a store to get the item. Or look for items or retailers that have free shipping. Better yet, check if there’s an option to pick up in-store. You’ll save on freight, skip any lines, and there will be less temptation to buy more.

Don’t forget to take extra precautions when shopping online.

Re-gift your gift cards

Check the expiry date on any gift cards you still have credit on, and consider putting this money towards your Christmas costs. Every dollar of gift card credit you use means you’re spending one less dollar of your own money. Every little bit helps!

Here are some things to be aware of when using or buying gift cards.

Track your spending

Keeping track of your festive spending is the best way to avoid going over your budget this Christmas.

Use our Fortress Wealth Hub to keep an eye on your Christmas expenses and track your progress while you shop.

Ease up on Christmas entertaining

The costs of entertaining can skyrocket at this time of year. Here are some ways to lighten the Christmas load:

Share the catering – Even if you’re hosting Christmas Day lunch or dinner, there’s no need to shoulder all the work yourself. Ask others to bring nibblies, drinks, salads or desserts.
Buy only what you need – Try not to overestimate how much food you’ll need at Christmas, or you’ll end up throwing some away or eating leftovers for days.
Switch supermarkets – Make a list of the groceries you need for Christmas, then take advantage of the competition between supermarkets by checking out the advertised specials and stocking up. Don’t buy everything at the same shop if you can get it cheaper elsewhere. You might even get better deals at your local butcher or fruit shop.
Use loyalty credits – If you belong to a supermarket loyalty scheme that builds up credit after you’ve spent a certain amount, check if you can use the credit to get a discount on your Christmas grocery shop.

We hope this list helps make your Christmas free from money-related stress. Good luck, and happy holidays!

To book a free consultation to improve your budgeting, or get your Christmas debt under control, please book online or contact us on info@fortressfs.com.au

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This article first appeared on ASIC MoneySmart.

What’s all the fuss about Bitcoin?

Chris Black · Nov 24, 2017 ·

Many virtual currencies, such as Bitcoin, have emerged over the last 10 years but are they safe to invest in? We examine the risks to be aware of if you are considering buying, trading or investing in them.

What are virtual currencies?

Virtual currencies are digital currency or electronic money. They do not physically exist as coins or notes. Many digital currencies (also called crypto currencies) started in online gaming communities or on social media.

Although they can be used as a form of payment if another person is willing to accept them, they are not legal tender. The value of virtual currency can fluctuate significantly, they may not be accepted in many places and they are not guaranteed by any bank or government.

Is Bitcoin money?

The price of a single Bitcoin has gone up at a faster pace than any other speculative vehicle in market history. However, it seems unlikely it could ever be adopted as a global currency, partly for regulatory reasons and partly because creating a world currency from scratch isn’t easy (especially given the mandatory limitations on Bitcoin creation).

There have been only three reserve currencies in the history of the Western World: the British pound, the French franc (however briefly) and the U.S. dollar. Today, the dollar accounts for roughly two-thirds of all financial and economic transactions globally. The daily value of foreign exchange trading tops $5 trillion, while Bitcoin does a mere fraction of that¹.

Bitcoin also fails as a currency in several ways. Money is defined by three characteristics:

A storehouse of value. It’s hard to determine if Bitcoin is a storehouse of value. Daily volatility tops 5-10% while its ‘value’ has skyrocketed. If it crashes, it will fail to meet this criterion.
A unit of account. It is a unit of account, but for whom?
A medium of exchange. It may be a medium of exchange, but for now it has very few users. There is some confusions as to how to use Bitcoin to exchange, as some nations have banned Bitcoin exchanges.

What are the risks?

If you want to buy, trade or invest in virtual currencies the risks include:

Virtual currencies have less safeguards
The exchange platforms on which you buy and sell virtual currencies are generally not regulated, which means that if the platform fails or is hacked, you are not protected and have no statutory recourse. Virtual currency failures in the past have made investors lose significant amounts of real money. Some countries are moving towards regulating virtual currencies, however virtual currencies are not recognised as legal tender.

Values fluctuate
The value of a virtual currency can fluctuate wildly. The value is largely based on its popularity at a given time which will be influenced by factors such as the number of people using the currency and the ease with which it can be traded or used.

Your money could be stolen
Just as your real wallet can be stolen by a thief, the contents of your digital wallet can be stolen by a computer hacker.

Your digital wallet has a public key and a private key, like a password or a PIN number. However, virtual currency systems allow users to remain relatively anonymous and there is no central data bank. If hackers steal your digital currency you have little hope of getting it back.

You also have no protection against unauthorised or incorrect debits from your digital wallet.

Popular with criminals
The relatively anonymous nature of virtual currencies makes them attractive to criminals who may use them for money laundering and other illegal activities.

What do the experts say?

In November 2017, Forbes reported that hockey stick-shaped price action is one of the telltale signs of a bubble² (see the ‘hockey stick-shape’ of the graph below). Bitcoin’s sevenfold rally this year fits the bill. It started the year at $973 and rocketed north of $7,245 as of Friday 3^rd, up 644% in 10 months. In Zimbabwe (the currency crisis mecca) the cryptocurrency blasted to $12,400 on Halloween (31 Oct).

Bitcoin chart

Chart retrieved from https://coinmarketcap.com/currencies/Bitcoin/#charts

Since debuting nine years ago, Bitcoin has graduated from the wild west of fintech to the mainstream. The crowd is piling in. CME Group the past week announced it will create futures products based Bitcoin. New companies are popping up everywhere selling you on buying Bitcoin for your retirement. Newsletters tout their Bitcoin trading strategy could make $1.64 million in 72 hours. Stories of overnight cryptocurrency millionaires abound.

The brightest minds in business and economics are shouting from rooftops that Bitcoin is in a bubble: Mark Cuban, Warren Buffett, Robert Shiller, Jamie Dimon.

These respected investment strategists and financial advisers are warning that Bitcoin is another bubble akin to the tech boom of the late 1990s to early 2000s, the housing crash of 2006-2007 and the commodities bust of 2008-2009. They suggest investing in the Bitcoin bubble will only benefit those who got in on the action early (say 2013) and, more importantly, get out before the bubble bursts.

The important thing to remember is that if you decide to trade or use virtual currencies you may be taking on a lot of risk with no recourse if things go wrong.

Does Fortress recommend Bitcoin?

Absolutely not. We don’t recommend anything that is highly speculative with limited investment fundamentals and is highly unregulated. Whilst it may still run hard, the risks are too great for us to recommend Bitcoin.

People investing in Bitcoin must understand and feel comfortable that whilst there is a chance of huge gains, there is also a significant chance of complete capital loss.

Want more information?

A Senate Committee has completed an inquiry into digital currencies. The inquiry report, Digital currency – game changer or bit player, highlights the opportunities that these new technologies and payment methods are providing, but also acknowledges the risks.

If you have investment questions and would like to speak to a financial adviser, pleasebook online or contact us on info@fortressfs.com.au

Complied by Emma Linton Doig, Practice Manager at Fortress Financial Solutions.

¹ https://www.cnbc.com/2017/09/13/Bitcoin-is-in-a-bubble-and-heres-how-its-going-to-crash-ron-insana.html
² https://www.forbes.com/sites/trangho/2017/11/04/beware-of-the-Bitcoin-bubble-investment-and-financial-advisors-warn/#640d333d3f8d

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

Topics within this article first appeared on MoneySmart and Forbes Online.

How much is enough to retire?

Chris Black · Nov 22, 2017 ·

Most of us daydream about the day we finally finish work and retire. Whether you dream of cruising around the world, or just pottering about in the garden, the magic question is: how much do you need to make your retirement dreams a reality?

One of the most important steps in planning to save for your retirement is figuring how much you will need to spend each year to live a comfortable lifestyle. However, many people struggle when it comes to developing a budget for their future needs, particularly when their retirement is many years away.

The Association of Superannuation Funds of Australia (ASFA) has developed a Retirement Standard that outlines the annual budget needed by the average Australian to fund a comfortable or modest standard of living in retirement. The Standard is updated four times a year to take into consideration the rising price of items like food and utility bills, as well as changing lifestyle expectations and spending habits.

Do you want a MODEST or COMFORTABLE retirement?

A modest retirement lifestyle is considered better than living off just the Age Pension, but still only able to afford basic activities.

The superannuation balance needed for a modest lifestyle are:

For singles: $35,000
For couples: $50,000

These amounts are low because the base rate of the Age Pension (plus various pension supplements) is sufficient to meet needs at this budget level.

A comfortable retirement lifestyle enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.

The superannuation balance required for a comfortable retirement are:

For singles: $545,000
For couples: $640,000

These amounts assume that the retiree/s will draw down all their capital, and receive a part Age Pension.

Both budgets assume that the retirees own their own home outright and are relatively healthy.

Table taken from ASFA Retirement Standard.

How much will I spend in retirement?

As people age, their spending requirements change as they are often unable to engage in the same types of activities and require a higher level of care and support. This has an impact on their budget and what they spend.

Retirees spend more on: assistance in the home, including for cleaning services and meals, as well as contributions towards home and community care services. They also tend to have increased out-of-pocket expenses for major medical procedures and ongoing chemist and other medical expenses.
Retirees spend less on: holidays and other leisure activities outside the home, most likely reflecting their reduced capacity for activity.

Think about life expectancy

You might need a lot more money for your retirement than you think.

Many of us will spend more than a quarter of our life retired, as people are now living until an average age of 86 years (if you’re male) and 89 years (if you’re female). Life expectancy is expected to rise to 91 for males and 93 for females by 2050. Unless you’re counting on a lotto win or growing your own personal money tree, super can help you enjoy your retired days by allowing you to maintain a good standard of living, which isn’t achievable by receiving just the Age Pension.

Get financial advice

Planning for retirement is complex and it’s important to get advice from people with specialist knowledge. For financial advice on how you can maximise your money or to discuss your retirement planning, please book online or contact us on info@fortressfs.com.au

It’s never too early to start thinking about how to maximise your income in retirement. Take steps now to get the best chance at the lifestyle you want.

Complied by Emma Linton Doig, Practice Manager at Fortress Financial Solutions.

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

When can I retire?

Chris Black · Nov 20, 2017 ·

With no definitive retirement age in Australia, the date you exit the workforce will probably come down to personal circumstances and whether you can afford it.

The age you retire in Australia isn’t set in stone. You can really retire whenever you want to, but health, financial commitments and your ability to fund the lifestyle you want will play a big part.

For this reason, you may want to consider the age you’ll be able to access your superannuation and age you can access the government’s Age Pension, which typically are not at the same time. Or, if you’re nearing retirement age but aren’t quite ready to leave the workforce yet, you may wish to look at transitioning to retirement.

when can i retire

When can I access my super?

Generally, you can access your super when¹:

You reach preservation age and you retire
You cease an employment arrangement after age 60
You reach preservation age and implement a transition to retirement strategy
You turn 65, whether you remain in the workforce or not.

What is my preservation age?

Your preservation age is the age at which you can start to access your super. It will be between 55 and 60 depending on when you were born.

Date of birth	Preservation age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
From 1 July 1964	60

When you reach preservation age, you have a few options.

If you decide to retire, you can either take your super as a lump sum or use your super to set up an account-based pension (or allocated pension). An account-based pension provides you with a regular income stream in retirement and you’re not limited to how much you can withdraw.

Alternatively, when you reach your preservation age, you can access a portion of your super under a transition to retirement strategy. This will allow you to access up to 10% of your super through periodic payments while continuing to work full time, part-time or casually.

What about the Age Pension?

Currently, to be eligible for the Age Pension you must be 65 or older².

On 1 July 2017, the qualifying age increased to 65 and 6 months, and it will continue to increase by 6 months every two years until 1 July 2023 when it will the qualifying age will be 67. You can check out your Age Pension eligibility age below.

Date of birth	Age Pension eligibility age
Before 1 July 1952	65
1 July 1952 – 31 December 1953	65 & 6 months
1 January 1954 – 30 June 1955	66
1 July 1955 – 31 December 1956	66 & 6 months
From 1 January 1957	67

One of the reasons for the increase in the Age Pension age is Australia’s ageing population. The government’s 2015 Intergenerational Report projects that in 2054-55 there will be more than double the number of people aged 65 or over in comparison to today, which will create much greater fiscal pressure.³

Meanwhile, it’s important to remember that what you do, and at what time you do it, could have tax implications and may impact social security entitlements. For that reason, it’s good to do your research and explore the alternatives with your adviser. Make an appointment by calling 07 4646 4970, email us at info@fortressfs.com.au or book online.

Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Complied by Emma Linton Doig, Practice Manager

1 https://www.ato.gov.au/Individuals/Super/Accessing-your-super/
2 https://www.humanservices.gov.au/customer/services/centrelink/age-pension
3 http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This article was first published by AMP Life Limited.
AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Chris named as one of the Financial Standard’s Power50 2017

Chris Black · Nov 17, 2017 ·

Fortress founder Chris Black has been named one of the Top 50 Most Influential Financial Advisers in Australia by the Financial Standard. Congratulations Chris!

What is the FS Power50?

The FS Power50 are financial advisers who have made an enormous impact in the industry. They have demonstrated their commitment and intention to usher the financial planning industry into the consumer age. Enduring influence cannot be created overnight. It is cultivated through years of hard work. And sometimes, you don’t realise the impact of an influencer until years later.

Those who made it into the FS Power50 list have their roots in community building. They volunteer their time and skills either through local community works and charities or as active members of their industry associations.

That the FS Power50 run successful advice businesses is a given. Many have won peer-based industry awards or business awards. That they are natural leaders is also a given. They head local or regional chapters of their industry association, spearhead charity projects, or are active members of sports and community groups.

Finally, most are early adopters of social media, which only serves to expand their spheres of influence beyond their immediate networks.

2017 Top 50: Chris Black

When he’s not racing cars with his brother, you’ll often find Chris doing a very different kind of driving: steering his clients’ finances. He’s committed to long-term relationships with his clients – young professionals, families, tradespeople, farmers, business owners – and helping them to protect their families and businesses.

After an eight-year stint with Bendigo Bank and Suncorp, he decided to go out on his own and found Fortress Financial Solutions in 2013.

Memberships/awards

Mentor, Toowoomba Chamber of Commerce Mentor Program (2017)
Committee member, Toowoomba Chamber of Commerce Future Leaders Committee (2016-current)
Rising Star Award, Suncorp self-employed advisers (2015)
Player’s Player, Suncorp Bank (2009)

Read the full Top 50 list here.

Congratulations Chris! To book a free consultation with Chris, please book online or contact us on info@fortressfs.com.au

Wording taken from the FS Power 50 e-book (November 2017), available via the link above.

Monthly Commentary – OCTOBER 2017

Chris Black · Nov 10, 2017 ·

Developments in the global economy

Inflation remains low through most of the world, although the weaker Pound has seen UK inflation move above 2%. As a result, the Bank of England increased official rates at its November meeting. Politics dominated Asia with the Chinese National Congress and Japanese elections.

Australia

The Consumer Price Index increased by 0.6% in the September quarter to be 1.8% above year ago level. The largest increase occurred in Alcohol and Tobacco which increased by 2.2% in the quarter and 7% over the past year.

In contrast, Communications prices fell 1.4% in the quarter and are 2.9% lower than a year ago. Inflation remains just below the Reserve Bank’s 2-3% target range. While this is likely to make it a focus of monetary policy discussions, there appears to be little in recent Reserve Bank statements to suggest they are concerned about inflation trends.

Labour force data showed a fall in the unemployment rate to 5.5% in September from 5.6% a month earlier. Full-time employment increased by 6,100 while part-time employment jumped by 13,700.

Consumer confidence spiked in September to 101.4 with a result above 100 suggesting more optimists than pessimists.

Consumer sentiment has been subdued for some time with September’s result being the first time this year that optimists outnumbered pessimists.

US

Initial estimates show the US economy grew at an annualised rate of 3% in the September quarter largely matching June quarter’s growth despite the impact of Hurricanes Maria, Harvey and Irma.

Growth was broad-based with exports, business investment and consumption all contributing to growth. However, consumption spending slowed to 2.4% from 3.3% in the June quarter, mostly likely reflecting hurricane disruption. More recent consumer data in the form of consumer sentiment surveys suggests the momentum of this part of the economy remains positive. Employment may also have been impacted by the hurricanes with non-farm payrolls falling 33,000 in September following an increase of 169,000 a month earlier.

In contrast, the unemployment rate fell to 4.2% – its lowest rate since early 2001.

Europe

European economic data took a back seat to the Catalan succession debate in October. Developments in Spain are being closely watched, not least within the European Union (EU), as it again calls into question the long-term viability of the EU. With European core inflation having hit a ceiling of 1.2% a few months ago and recent readings below 1.0%, there is little discussion of the European Central Bank increasing interest rates anytime soon. In contrast, UK inflation has been above 2% for much of the year, prompting the Bank of England to increase official rates by 25 basis points to 0.5% at its November meeting.

China

The 19th National Congress of the Communist Party of China took centre stage in October. Xi Jinping asserted his authority at the Congress by having his political thought included as part of the Party’s constitution. Furthermore, the absence of younger officials elected to the Politburo Standing Committee was seen as a potential strategic move by Xi to secure his position as General Secretary beyond the next five years. The major economic news was the release of the September quarter GDP. As usual, there was little surprise that annual growth was 6.8%, little changed from the pace of growth seen over the past two years.

Japan

Japan’s inflation rate increased to 0.7% in August from the 0.4% rate it had been stuck at since the start of the year and the highest inflation since March 2015. In political news, Prime Minister Shinzo Abe and his Liberal Democratic Party were returned to power, ensuring continuity of the “three arrows” strategy of monetary stimulus, government spending and structural reform to boost growth and avoid deflation.

Developments in financial markets

Australian shares performed strongly in October, after lagging for some months. Nevertheless, international markets still posted robust returns on continued positive economic news and despite the distractions of Japanese elections, the Chinese National Congress and European separatist concerns.

Australian shares

The S&P ASX200 Accumulation Index increased by 4.0% in October. This was its largest monthly gain since December 2016 and follows five months of lacklustre returns driven in part by concerns following the Commonwealth Budget. The strong showing in October means that over the past 12 months the market has returned 16.1%. Resources performed strongly, returning 4.6%, but the rest of the market was not far behind with Industrials posting a 3.9% return. Small cap stocks again outperformed, returning 6.0% in October.

Returns were robust across all sectors although Telecoms (+2.4%) and A-REITs (+2.3%) were laggards. The best performing sector in October was Information Technology (+8.8%) which benefitted from positive sentiment towards the sector as US tech stocks soared to new highs. The other strong performer was the Energy sector (+6.5%) which may have been helped by announcement of the Government’s energy policy and a rise in oil prices.

Best performing stocks in the top 100 were Vocus (+20.5%) and Healthscope (+17.4%). Worst performing stocks were Fortescue (-9.7%), Lend Lease (-9.5%) and Perpetual (-6.5%).

International shares

The MSCI World ex Australia index returned 2.5% in October, slightly bettering September’s return. The fall in the A$ over the past few months has meant that over the past three months international equities have returned close to 10% for unhedged Australian investors.

The S&P500 continued its strong performance returning 2.3% in October following September’s 2.1% result. Consistently strong economic data and the better than expected October earnings reporting season have been supportive of equities despite concerns about valuations. Over the past 12 months, the S&P500 has returned 23.6%.

European markets matched the US with the Euro STOXX index also returning 2.3% in the month and 24.6% over the past year. The German DAX index added a further 1.7% in October following September’s 6.4% rise while France’s CAC was up 2.0%. Italy’s MIB30 index was the laggard increasing by only 0.7%. UK’s FTSE increased 1.6% reversing the previous month’s losses.

Asian markets also participated in the positive equities sentiment. Hong Kong’s Hang Seng Index increased 2.5% and Singapore’s Straits Times Index was 4.8% higher. The Shanghai Composite posted a 1.3% return with attention focussed on the National Congress of the Communist Party. Japan’s Nikkei was the strongest performer, increasing by more than 8% on positive sentiment following Prime Minister Shinzo Abe’s re-election.

Fixed Interest and Cash

Australian and global fixed interest indices were in positive territory in October, following September’s decline. The Bloomberg Composite Bond Index returned 1.1% in October and 1.6% over the past 12 months. The Barclay Global Aggregate (Hedged) provided a lower return of 0.5% in the month but the 12-month return was slightly higher at 1.9%. Australian 10-year government bond yields ended the month lower at 2.67% as expectations of Reserve Bank tightening were wound back. In contrast, US bond yields were slightly higher at 2.37% in response to better-than-expected GDP figures and a significant increase in consumer sentiment.

Property

Australian property trusts underperformed the broader Australian sharemarket but posted a gain of 2.3% in October following the previous month’s 0.5% return. Over the past 12 months, A-REITs have returned 7.9%, lagging the overall market.

Global real estate again struggled in October managing to just spill over into positive territory, following September’s price fall. However, over the past 12 months, global REIT returns have been in line with Australian property trusts.

Currency and commodities

The Australian dollar weakened further in October to end the month at US$0.7656. The major driver of the fall was increased expectations the US Federal Reserve will raise rates in December, with lower iron ore prices also playing a part.

Gold, lead and tin also ended the month lower. In contrast, zinc and nickel prices rose and oil prices hit a two year high with Brent Crude moving above US$60 per barrel.

Key market returns at 31 October 2017

To book a free consultation, please book online or contact us on info@fortressfs.com.au

Download the October Commentary PDF here.

How do I transition to retirement?

Chris Black · Nov 2, 2017 ·

Transition to retirement income streams allow you to withdraw up to 10% of your superannuation savings in the form of a pension without needing to stop work.

Even if you’re nearing retirement age you mightn’t be looking to leave the workforce just yet. Maybe you want to save more money, or perhaps you enjoy the mental stimulation and interaction.

Whatever the reason, having access to a transition to retirement (TTR) income stream could provide greater financial flexibility, as you can periodically withdraw money from your super while continuing to work full-time, part-time or casually.

We answer some of the commonly asked questions, including how the tax treatment of TTR income streams changed on 1 July 2017.

What is a TTR income stream?

It’s a type of pension that enables you to access some of your super via periodic payments, even if you’re still working and receiving an income from your employer or business.

To access your super this way, you must have reached your preservation age, which will be between 55 and 60, depending on when you were born.

Date of Birth	Preservation age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
From 1 July 1964	60

Are there withdrawal limits?

You can only withdraw between 4% and 10% of your super savings each financial year. And, you can’t make lump sum withdrawals unless you meet certain conditions of release, such as retirement.

It’s also worth noting the income you receive is based on the amount you have in your super, so you won’t be guaranteed an income for life.

If you’d like an idea of how much you’ll have in retirement and how long your retirement savings might last, there are some great tools online.

What about tax?

Up to age 60, the income from a TTR pension is taxed at your personal income tax rate, less a 15% tax offset. Then, once you turn 60, the income you receive from your TTR pension is completely tax-free.

While the tax treatment of income you receive from a TTR pension has not changed, the tax treatment of investment earnings on super fund assets that support TTR pensions changed on 1 July 2017. Earnings on fund assets supporting a TTR income stream are now subject to the same maximum 15% tax rate that applies to super accumulation funds.

What other things should I consider?

The ability to commence a TTR income stream may present you with some useful opportunities.

For example, you could either work less, or work the same hours while sacrificing some of your salary into super. In both cases, you can use your TTR income stream to supplement any reduction in your take-home pay.

There are however numerous things to consider, particularly when it comes to weighing up your circumstances and properly assessing any potential tax implications.

What if I choose to retire?

If, after you reach your preservation age, you decide you’d rather retire from the workforce, you will have other options when it comes to your super.

You could:

Take some or all of it as a lump sum – while this may be tempting, it won’t be the best option for everyone and there may be tax implications to consider, particularly if you’re under age 60.
Move it into an account-based pension – this will give you a regular income in retirement and you won’t be limited to what you can withdraw.
Purchase an annuity – these generally pay a guaranteed series of payments over an agreed period. You will however be sacrificing some flexibility as you can’t easily make lump sum withdrawals and life expectancy is also a consideration.

TTR 4

Where to go for more information?

For further assistance around whether a TTR income stream may be right for you, it is best to speak to a financial planner. Make an appointment by calling 07 4646 4970 or book online.

Complied by Emma Linton Doig, Practice Manager

Can I choose who receives my superannuation when I die?

Chris Black · Nov 1, 2017 ·

The short answer is yes, but the legal answer is ‘it depends’. Superannuation can’t be included in your Will unless you’ve given your super fund specific instructions first. To ensure your super will be included in your estate, you must nominate a beneficiary directly with your fund.

Your super is not typically covered by your Will because it only covers assets you own – things like your house, car, investments, savings and personal items. Your super is held for you in a trust by the trustee of your super fund and governed by superannuation law, which is why different rules apply.

Who can I leave my super money to?

In the event of your death, your super fund must pay your super funds to people in your life who are eligible. This may include:

Your spouse or partner
Your children
Anybody financially dependent on you when you die
Your estate or personal legal representative.

One reason you might nominate your estate or personal legal representative is you can then specify in your will how you want to distribute your super money to, which can include eligible beneficiaries, as well as other people in your life.

It’s important however that you ensure the information stated in your will is up to date so your personal legal representative pays out your super money as per your instructions.

It is also important to consider tax consequences which are discussed below.

How do I nominate beneficiaries?

When it comes to specifying your beneficiaries, most super funds will give you several options.

These options are important to understand, particularly given that the type of nomination you choose could give you greater control over how your super benefits are distributed.

1. Binding nomination

If you make a binding nomination that satisfies all legal requirements, the trustee of the super fund is legally bound to pay your super to the person/s you have nominated and in the proportions specified.

There are lapsing and non-lapsing binding nominations.

Lapsing nominations typically expire every three years – so you must fill out a new beneficiary nomination form every three years (annoying!) If you have chosen to set a lapsing binding nomination, then you must ensure your superfund has your correct contact details so they can let you know when it is going to expire.

Non-lapsing nominations never expire, so you do not have to keep filling out forms every few years. Most Fortress clients chose to nominate non-lapsing, binding beneficiaries. That way, there is nothing further to do unless they change their mind about who to leave their super to in future. If that happens, they simply fill out a new non-lapsing, binding beneficiary nomination form.

2. Non-binding nomination

A non-binding nomination is more like a suggestion… the trustee is not legally bound to give your money to the person you have nominated. The trustee will decide which beneficiaries receive your super and in what proportions, but your nominations will be considered. This is better than nothing, but certainly not preferred.

3. No nomination

Depending on the product, if you don’t make a nomination the trustee will pay your death benefit to your estate, or use its “discretion” to determine which beneficiaries the money should go to.

So, the question becomes, would you rather a stranger decides who your super goes to, or you? Remember that superannuation is usually one of a person’s largest assets, so you may be talking about hundreds of thousands, or millions of dollars (if you included insurance).

Will my beneficiaries be taxed if I leave them my super?

Different tax treatments apply depending on whether your super is paid as a lump sum, income stream or mixture of both, and if your beneficiaries are classified as ‘tax dependants’ or ‘non-tax dependents’.

A tax dependant includes:

current and former spouses and de-factos
any children of the deceased who are under the age of 18
any other financial dependants.

We typically prefer our clients to leave super to these people as it creates a better tax outcome, however you must consider if those people (e.g. children under 18) have the capability to handle that money wisely.

1. Paying super as a lump sum

Lump sum super benefits, paid upon your death to tax dependants directly (or via your personal legal representative) are usually not taxed, whereas super benefits paid to non-tax dependants may be.

For non-tax dependants, tax will only be payable on any taxable component of the lump sum. The taxed element is subject to a maximum tax rate of 15% plus the Medicare levy. The untaxed element is subject to a maximum tax rate of 30% plus the Medicare levy.

Note, an untaxed element will typically only arise where the death benefit includes proceeds from a life insurance policy held by the fund, or where the death benefit is being paid from an untaxed super fund, for example certain government sector super funds.

2. Paying super as an income stream

Where the death benefit is paid in the form of an income stream (this is common for pension accounts), the tax treatment depends on the age of the deceased and or the age of the beneficiary.

If super is paid from a taxed super fund—and you & the beneficiary is aged 60 or over at the time of your death—it’ll be tax free.5

If you’re both under age 60 at the time of your death, the taxable portion of income stream payments will be counted as assessable income for your beneficiary, but they’ll be entitled to a tax offset equal to 15% of this amount. When they turn 60, the income stream will become tax free.6

If the death benefit pension however is paid from an untaxed fund, the taxable portion of pension payments received by a beneficiary under age 60 (where you’re also under age 60 at the time of your death) will be taxed at the beneficiary’s maximum tax rate, with no tax offset.

If you or your beneficiary are over age 60 at the time of death, the taxable portion of pension payments will be eligible for a 10% tax offset.

What do I do now?

A financial adviser can assist you with all the aspects of your superannuation. At Fortress, we regularly help clients review their superannuation. A big part of that process is to assist our clients to complete a non-lapsing, binding beneficiary nomination so they do not have to worry about what happens to their super when they die. We also work with your lawyer to ensure our plans match your estate plan.

If do not wish to engage the help of a financial planner, you may need to ring your super fund or download the necessary forms from their website. To ensure you have binding nomination arrangements in place for your super money:

Check your super fund allows binding nominations
Check the beneficiaries you wish to nominate are eligible
If you plan to nominate your estate, make sure your Will is up to date
Complete and sign a non-lapsing binding nomination form— usually in the presence of two witnesses who are over 18 and not beneficiaries—and send the form to your fund
If you wish to make a lapsing nomination, make sure your contact details are up-to-date so your fund can contact you to renew your nomination before it expires.

When choosing witnesses, ensure:

They are over the age of 18;
They are not beneficiaries (e.g. if John is nominating his wife Jane to be the beneficiary of his super, Jane cannot witness John’s nomination form); and
They must witness you signing (the super fund will check to ensure both you & your witnesses signed the form on the same date).

When you’re considering who you’re going to leave your super to, it’s important to think about the people who matter most and how tax implications may affect the amount they could receive.

To review your superannuation, or for assistance with nominating a beneficiary, please book online or contact us at info@fortressfs.com.au

Complied by Emma Linton Doig, Practice Manager

1-7 https://www.ato.gov.au/Super/APRA-regulated-funds/Paying-benefits/Paying-superannuation-death-benefits/

What is salary sacrifice?

Chris Black · Oct 29, 2017 ·

When you make a sacrifice, you’re usually giving up something now to gain something later. Salary sacrificing into your super fund is no different—you’re giving up money that would otherwise be in your take-home pay. But in return, you’re boosting the amount you have in retirement and saving (a lot!) on tax.

Under the current rules, you can arrange to put extra cash into your super from your before-tax salary and it will only be taxed at 15% (or 30% if you earn $250,000 a year or more) which is a considerable tax saving for most people on their usual marginal tax rate.

What do we mean by before-tax salary? As an employee, your gross salary is not the amount you take home each pay period. Income tax, superannuation, HECS-HELP and other deductions are made before you get your take-home pay. Your before-tax salary is what you earn before all the relevant taxes and deductions are paid.

The benefits of salary sacrifice

Let’s say you earn $90,000 per year (before tax). Your taxable income plus the Medicare levy would work out to be around $66,953 per year or $2,575 fortnight.

As part of a salary packaging scheme with your employer, you sacrifice around $60 a fortnight or around $1,500 per annum from your take home pay (after tax) as an extra contribution to your super. This yearly salary sacrifice before tax would be around $2,097. Paying the concessional tax rate of 15%, an extra $1,782 would be paid into your superannuation.

Ultimately, the $60 that you decide you don’t need for your living expenses could either amount to a $1,782 boost to your superannuation.

(Note that the above figures don’t consider the deficit levy, HECS/HELP debt that you may have or any tax offsets you may be eligible for).

Making the Most of Your Money

Chris Black · Oct 28, 2017 ·

“My partner and I are in a blended family and have four children between us. We have just moved in together and do attempt to share living expenses equally. We are both incredibly busy in our professions, so making the most of our money and establishing a budget has not been a priority.”

“After gentle prompting from Chris to utilise the Fortress Wealth Hub budgeting tool, we finally sat down one evening and started looking at our expenses. Shockingly, during the month of February, we spent an average of $650.00/week on groceries, take away coffee and Friday night pizza! I was shocked! This is clearly not managing our money well and not conducive to financial success.” Kathryn, Fortress client

Developing a realistic budget requires effort and active involvement in order to assess your financial position properly. If you need to find that extra money to reach your financial goals, then budgeting is essential to develop a realistic spending and saving plan.

A helpful tool that we can offer our Fortress clients is online access to the Fortress Wealth Hub. The Fortress Wealth Hub is an easy to use, software tool that helps our members manage and make the most of their money. With no lock-in contracts and from only $40 per month, the software allows you to manage and track all of your finances in one fully automated, online solution. If you are still not convinced, there is a free lie version available that allows you to trial and understand the software before you sign up.

Our client Kathryn said “the best part of the software is that your transactions are automatically categorised to allow you to see where you are spending your money. Instant budgets are then created around your spending, though you are still in control as you can set limits on certain categories, such as take away coffee!”

Other great features of the software include –

Manage your property by sending requests to your property manager, have your documents and receipts uploaded and stored online and have access to informative property reports.
Find out how much your property is worth, when to buy property, how much equity you have, get a free property appraisal from a local property expert and get home loan pre-approvals online.
Receive free valuations and performance ratings on your vehicles.
With the ability to tag and filter transactions as tax items and upload receipts and documents, allow your accountant to access your Wealth Hub account for an easy end of financial year.

If you would like more information on the Fortress Wealth Hub, please phone us on (07) 4646 4970, watch a short video by clicking here, or visit our website and give the free version a go. Feel in control of your financial future and start making the most of your money today!

Written by Chris Black, Director at Fortress Financial Solutions

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

Should I repay my home loan or boost my super?

Chris Black · Oct 24, 2017 ·

Adding money to superannuation has its advantages and so does making extra repayments on your home loan. So, if you’ve got some extra cash, how do you choose where to channel it, or should you do both? We help you weigh up the options.

On the one hand, contributing more to your super will increase your balance at retirement. On the other, making extra mortgage repayments can help you clear your debt sooner, reduce interest payable, increase your equity position and put you on the path to financial freedom.

The correct answer depends upon your circumstances, tax rates, age, debts, contribution caps and your desire for financial security or freeing up funds for other investments.

Which will give you the best return?

The comparison between super returns vs. interest savings (on your mortgage) is difficult to do! The average return of your super fund over the past 5-10 years may give you an idea of what your final payout figure may look like when you retire. Technically, you can then compare this to your current mortgage interest rate to get an idea of which option is better for you.

Be careful though: past super fund performance is not a reliable indication of future performance!

In addition to this, most people won’t be paying the same interest rate over a 5-10 year period. You may refinance or switch lenders during that time. The benefit of making extra repayments is that you’ll see the benefits much sooner. Because you’re paying more than the minimum mortgage repayment, you end up paying less in interest and more off your principal loan amount (the interest-free component). Paying just an extra $25 a week into a 25-year $300,000 mortgage (at 5.5% interest) saves $32,000 and shortens the mortgage term by 3 years.

current mortgage

Use an extra repayment calculator to see how much you could save!

A fully paid off roof over your head gives financial security and comfort – no one can take it. Additionally, the quicker you get out of debt, the quicker you get beyond the reach of lenders that hoard rate cuts or hike interest rates at will. It is also the surest way to protect yourself and your family if things go wrong. If you do not have to find a big monthly repayment, you only need to cover bills and expenses to survive.

By making extra mortgage repayments, coupled with the increase in the value of your property, you’ll build equity in your property faster. By doing that, you can refinance your home loan to a cheaper rate much sooner and even release some of the equity you built up, freeing you up to invest elsewhere.

If your goal is to pay off your mortgage quickly so you can buy an investment property, make sure to speak to a financial planner. Investing in the property market is by no means a sure way to financial freedom and securing your retirement nest egg. Then again, neither is investing more than the minimum in super.

You should speak to a financial adviser if you’re considering either investing in property, paying off your mortgage faster or making extra super contributions.

Case study… meet George

George recently received a pay rise at work, and as a result has an extra $10,000 a year. He wants to know if he should plow it into his mortgage, or use it to top up his super.

George is a high-income earner, so his income is taxed at 39%. He is paying 4% interest on his mortgage, and wants to retire in 10 years.

As you can see from the purple bar graph below, George can put his extra money into his super pre-tax, through salary sacrificing. This means that instead of being taxed 39% on that money, he pays only 15% (the super contribution tax).

meet george

If George puts his $10,000 per year into his mortgage, he must do this post-tax (after paying 39% income tax).

Over 10 years, George could either:

Save $122,708 in interest on his mortgage; OR
Increase his super by $184,822.

On the numbers alone, the best option for George is putting his extra money into superannuation.

meet george2

So… what’s the conclusion? Super or mortgage?

Whether you decide to put more into your super or mortgage, you need to pay off your home loan before you retire. At the same time, you must consider whether you’ll need to access any additional funds you put aside before you reach retirement.

HOME MORTGAGE
Pros	Cons
Any capital gain is tax-free Peace of mind knowing you own your own home Easy access to your money (offset account) Paying less interest overall Freeing up your short-term cash flow You have greater equity	Heavy exposure to the property market Repayments come from after-tax dollars (vs. super that come from pre-tax dollars) Right now, interest rates are low
SUPERANNUATION
Pros	Cons
Earnings taxed at a maximum of 15% This will reduce your tax Compound effect of returns over long periods If you’re a low-income earner, the government may give your super an extra boost through their co-contributions scheme Lower tax environment in retirement	You may not discharge your mortgage until retirement Money in super is not accessible until you reach your preservation age Rules around accessing and contributing to super change regularly They can change the rules…

If it’s super, it’s locked away. If it’s in your mortgage, there are options to redraw. Either way, both options are far more valuable than investing in a straight savings account at the bank.

In most cases, there isn’t one set strategy that you should follow and it can quickly change as you grow older, start a family and reach retirement age. For young people, it may indeed be best to attack your retirement once you are liberated from mortgage repayments.

If you carry higher-interest debts such as credit cards, you should pay those off before you attack anything else, mortgage or super.

Life is complex so it pays to have a financial adviser on your side before you make any big financial decisions when it comes to your superannuation or mortgage. To book a free consultation with Fortress, please book online or contact us on info@fortressfs.com.au

Written by Emma Linton Doig, Practice Manager at Fortress Financial Solutions.

SERIES: The cost of living in… Fernvale

Chris Black · Oct 15, 2017 ·

Welcome to the next instalment of our ‘cost of living’ series, where we explore the cost of living in different cities and towns all around Australia. In this post, we will explore the cost of living in Fernvale QLD.

Tell us about your town.

We moved to Fernvale from Brisbane nearly four years ago looking to get out of the fast-paced city lifestyle and to give our children a rural upbringing. We chose Fernvale over other rural areas as we loved the town and it is a good half way mark between our hometown in Toowoomba and our commitments and friends in Brisbane. Fernvale and surrounding areas offer loads of beautiful scenery and outdoor activities, it is close to creeks and dams for swimming, boating, fishing, and camping; it also has beautiful parks and an awesome running track along the old rail trail. We often see kangaroos, a huge range of birds and the odd koala. The country night sky is always breathtaking and the air is fresher and cleaner. The school has a great reputation and the real estate is much cheaper than Brisbane, even though it is rising very quickly.

We rent a lovely home on an acre in a spacious area of Fernvale. Houses like ours are few and far between, most renters are on much smaller blocks. To rent a home like ours in Brisbane, I would estimate it to cost at least 40-80% more depending on the suburb. We enjoy the affordable rent in an area where there is mostly homeowners with families. We plan to eventually buy a home in our current neighbourhood.

We also own a house in Toowoomba which we rent out.

Tell us about your business.

Nearly three years ago we opened Rocket Fitness, our own functional training and boxing studio in Fernvale. It is continuously growing but still in the start up phase so we are working down business loans, paying off equipment and building up our business. When we first opened, Daniel was commuting to Brisbane to train clients and I was running my graphic and web design business to off set the expenses of a new business.

We are now in the position where Daniel no longer commutes and I no longer work in my old business, so our only income is our gym. This was a goal by three years and we are very excited to have achieved that.

Talk us through your cost of living.

Like most families, groceries are our main expense after rent and mortgage. We are very lucky to have Woolworths in our town so groceries are at standard prices and readily available. We also have awesome markets held weekly in the school ground with cheap fruit and vegies from local farmers for sale. We have a rough budget for our spending’s but our income week to week can vary hugely so it’s hard to be strict with a budget. I ring electricity, phone and insurance providers on a regular basis to make sure we are getting the best deal and diarise this as a job I must do, as the savings can be huge!

We have outgoing expenses set up on weekly direct debit/deposits as much as possible to help with cash flow. I think we are very ‘balanced’ with money; wherever possible we will save on outgoing expenses but we also love to visit friends and shoot off on short camping adventures.

Child care for our youngest child is expensive but much cheaper than the city. Costs for a three-year-old is $87/day in Fernvale, whereas I have been told that care in the city is $125/day. We are lucky that Fernvale has a wonderful state school so we do not pay school fees.

We expect our cost of living to decrease soon as we pay down business related loans, grow our business and both kids go to school (eliminating day care fees).

Any spare cash we have sits in an offset account so it reduces the home loan for our Toowoomba-based rental property. We have owned that house for nearly 10 years and expect it to be positively geared in the next financial year.

We love living and working in Fernvale and I’m very thankful that we made the move!

Many thanks to Jody for sharing!

To book a free consultation to improve your budgeting, please call our office on 07 4646 4970 or contact us on info@fortressfs.com.au. If you’d like to share the cost of living in your town, please send us an email.

Chris Black

Developments in the global economy

The US economy continued to show robust growth in the final quarter of 2017 while survey indicators suggest that momentum is likely to be maintained into the new-year. In Australia, consumer sentiment has shown further improvement and this is now being reflected in actual spending behaviour.

Australia

US

Europe

China

Japan

Developments in financial markets

Global equities markets powered ahead in January with the major drivers being continued robust economic data and a positive response to the US tax cuts, although Australian equities failed to share in the enthusiasm. Fixed interest markets responded to the same news with yields moving higher.

Australian shares

International shares

Fixed Interest and Cash

Property

Currency and commodities

A financial plan is a set of strategies that help you achieve your goals. Not sure what your long-term financial goals are? One of the easiest places to start is to focus on getting the fundamentals right so that when your goals become clearer, you are in a great position to hit the ground running.

1. Setup a budget.

2. Setup an emergency fund.

3. Stay out of debt.

4. Protect your wealth.

5. Learn how to invest.

Developments in the global economy

The US Federal Reserve increased official interest rates by 25 basis points to 1.25%-1.50% in December – the third rate rise this year. Expectations are for three more hikes in 2018. Economic data globally continues to be robust, although some signs are appearing that momentum may be slowing.

Australia

US

Europe

China

Japan

Developments in financial markets

Australian shares

International shares

Fixed Interest and Cash

Property

Currency and commodities

Key market returns at 31 December 2017

Developments in the global economy

Australia

US

Europe

China

Japan

Developments in financial markets

Developed markets performed strongly in November although this was largely due to strong US returns, whereas European markets were almost uniformly weak. Australian shares also posted solid returns with resource stocks dominating. Chinese equities remain erratic.

Australian shares

International shares

Fixed Interest and Cash

Property

Currency and commodities

Make a list and check it twice

Be a scrooge online

Re-gift your gift cards

Track your spending

Ease up on Christmas entertaining

Developments in the global economy

Inflation remains low through most of the world, although the weaker Pound has seen UK inflation move above 2%. As a result, the Bank of England increased official rates at its November meeting. Politics dominated Asia with the Chinese National Congress and Japanese elections.

Australia

US

Europe

China

Japan

Developments in financial markets

Australian shares performed strongly in October, after lagging for some months. Nevertheless, international markets still posted robust returns on continued positive economic news and despite the distractions of Japanese elections, the Chinese National Congress and European separatist concerns.

Australian shares

International shares

Fixed Interest and Cash

Property

Currency and commodities

Who can I leave my super money to?

How do I nominate beneficiaries?

1. Binding nomination

2. Non-binding nomination

3. No nomination

Will my beneficiaries be taxed if I leave them my super?

1. Paying super as a lump sum

2. Paying super as an income stream

What do I do now?

When choosing witnesses, ensure:

HOME MORTGAGE

SUPERANNUATION

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