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A Lesson in Finance from the Tulips

After Michael's great market update last week, I thought it was worth re-visiting one of my favourite finance stories as a great reminder about the role emotion plays in sharemarket volatility.

If you've read all the guff about me in my profile, you'll know I have a background in literature and history (yeah, small career swerve!). One of my favourite novels is Thomas Hardy's Far From the Madding Crowd. Great title eh? It was borrowed from a Thomas Gray poem (Elegy in a Country Churchyard).

Given my background, you can imagine how excited I was upon first entering the finance industry, to attend a lecture "Tulip Mania and the Madness of Crowds." And I wasn't disappointed. The protagonist of the story was the humble tulip, and I'm still not sure whether the moral of the story was supposed to be the role of supply and demand in economics, or the stupidity of the human race. 

In the early 17th century, the Dutch literally went mad for tulips and demand ultimately outstripped supply. If I remember rightly, someone brought (stole?) some back from Turkey and didn't want to share. Of course we know what happens when someone tells you that you can't have something – you want it even more right? So began the manic trade of tulips.

There are stories of farmer's mortgaging their farms just to get hold of a couple of tulip bulbs. Tulip traders made a fortune, and there was even a future's market for these much sought after flowers!! 

Obviously they became waaaaaaaaaaaaaaaaaaaaaay over-priced, and what has to happen then? Yep, you guessed it, a market correction! It started with some astute businessmen deciding that they would sell out and take some profits. This proved to be a prudent move given that new tulip varieties were being introduced, and thereby increasing the supply. Then a few more sold out of their "tulip position", then a few more, and suddenly people started to panic, and the tulip market went into freefall. 

To put things in perspective, tulip prices fell more than 90% in a matter of weeks. It's impossible to accurately convert this to current monetary value, however popular consensus puts the comparison at something like $80,000 per bulb to less than a dollar per bulb. 

You have to wonder at what point it occurred to some people that they had spent their life savings on flowers! OUCH.

More than one historian has linked this tulip phenomenon to the onset of the Great Depression in the Netherlands, not to mention "the madness of crowds"…

We often tell our clients that if we took emotion out of the market, it would be extremely rational. However, it's risk that drives reward so if there was no emotion there'd be little opportunity to make money. I guess we can't have our proverbial cake...

The best advice I can give is to make sure you take a leaf out of Hardy's book (pun intended), and stay far from the madding crowd when it comes to investment decisions. Make your decisions based on fact and fundamentals, and with professional guidance from your Financial Planner.

Talk soon,

Setting the Scene

Greek debt levels came to the world's attention in December 2009 when Fitch (international ratings house) downgraded the nation's credit rating. Greece had little government revenue due to widespread tax evasion, and it was revealed that the government had been understating its true debt position for years.

In an effort to avoid bankruptcy, Greece accepted bailouts from the Troika (International Monetary Fund, European Central Bank and European Commission) totalling more than $US264 billion. These were subject to harsh austerity measures that required an overhaul of the Greek economy. You may recall the riots…

But ooops - these funds have mostly been used for private creditors rather than build the foundations of a sustainable recovery. Reforming the economy and austerity measures have been enormously unpopular within the Greek population resulting in three changes of Government since 2012.


The current plot

Jump forward to the situation as it stood just last week…

Greece is once again running out of money to pay international debts. European officials extended the bailout program in February with the extension Tuesday 30 June when Greece was due to make a 1.6bn payment to the International Monetary Fund and also replenish emergency funds used to make a previous €750mn payment to the same institution. Big bucks!

Greece was offered a further bail out agreement by the European Union if it agreed to further austerity measures to cut pensions and raise taxes. This agreement also expired last Tuesday but Prime Minister Tsipras instead called for a referendum to be held on July 5 (which was last Sunday) for the Greek populace to choose whether or not to accept the European Union's proposal and financial aid.

The European Union announced there would be no extension to the existing program and froze Emergency Liquidity Assistance (ELA) last Friday. Over the weekend, Greek people rushed to ATMs to withdraw their funds and so the Greek government closed the domestic equity market for the week and restricted bank ATM withdrawal limits to 60 a day. The Greek banks have also been temporarily closed.


The plot thickens

As if things weren't already dramatic enough…

British Prime Minister Harold Wilson once famously said, "A week is a long time in politics", and ain't it the truth. The Greek referendum has come and gone and the Greeks have confounded most of the pundits and the opinion polls by voting 'NO' 62% to 38%.

Talk about a landslide… And a landslide that no one predicted – almost everyone felt that despite the austerity measures not being popular, the referendum would be passed.


So what does this 'no' vote mean in the scheme of things?

At this stage everyone has least agreed to negotiate. Fortunately for them the Greek Finance Minister, Varoufakis has resigned, so the European powers should find it less irritating to negotiate with their Greek counterparts going forward - Varoufakis was fairly combative to say the least.

In fact just yesterday Greece called an emergency summit where it asked for a 3 year loan form the European bailout fund. This was met with mixed reactions, especially as the Greek Prime Minister and Finance Minister were still unable to promise anything other than that by today they would announce plans to immediately implement tax and pension related measures starting Monday. This fate will be decided Sunday.

Now if they do leave the Eurozone, all this will cause the drachma to be substantially devalued as Greece prints money and it would reduce the value of its debt.

This will then start to assist its recovery however will have serious implications for other European countries awaiting repayment of its debts. The European Central Bank will be severely compromised given its holding of Greek debt, reducing its ability to assist other countries within the Eurozone.


Implications for financial markets

Angela Merkel and the other leaders of the Eurozone and Christine Lagarde of the IMF may not have blinked yet but they may soon do so, as failing to support Greece will be against their own long term interest. Maybe the Greek voters understood this when they mostly voted no last Sunday… 

The development of the crisis is still a day to day proposition and it will largely be a case of wait and see.

Activity in Greece primarily affects bond, share and currency markets.



Greek bonds have already collapsed but are not likely to fall further into distressed/default territory.

Prices for German bonds may be driven up by a 'flight to safety' out of riskier European assets as investors fear further disruption in the Eurozone.

Australian bonds may also benefit from movement to safer assets.



Uncertainty leads to volatility in the short term and all markets will experience this from risk aversion.

It is likely there will be a selloff in Greek bank shares, along with any other European shares viewed as risky, in favour of other areas such as US and Australia. So a build-up of some cash in portfolios, while offering record low yields, provides an opportunity to take longer term advantage of weaker equity prices in the event of a short run sell off.



The euro has been relatively resilient to date – and let's face it, it's been through a lot -  however investors may move to the US dollar as a safe haven.


The Cliff-hanger

Far from the finale, as of today this Soap Opera ends on a cliff-hanger – leaving us wondering what, when, how much, and how long…

In our view, it will be a bumpy ride and as such, caution and patience are key. But we do also need to keep things in perspective. On it's own, Greece – representing the world's 43rd largest economy – is not going to have a huge long-term impact on economic growth and investment markets. If anything we should be more concerned about China, where the local sharemarket is down more than 20% in the last month. The Chinese government has a very good track record of stimulating the economy. But that's possibly a topic for another blog…

Ultimately, you shouldn't be overly concerned about market fluctuations if you have a long-term financial strategy in place to effectively cope with short-term falls in the sharemarket.

We believe that market volatility will continue for a while and as many of our current financial planning clients already know, we believe times like this usually call for some strategic defensive positioning. In particular, holding enough equity exposure to take advantage of any market rallies over the next 6-12 months, but also putting measures in place to help protect against 'downside' risk.

For this reason we prefer strategies that include tactical decisions, rather than 'set and forget' which is somewhat redundant in this environment.

Of course if you are concerned, or if it's been more than twelve months since you last sat down with us to review your circumstances and strategy, then please don't hesitate to shoot me an email, give me a call, or call 9725 2533 and make a time to come and meet with me.



Michael Crowe

Managing Director Financial Planning

Senior Adviser

Authorised rep 232696


The contents of this publication are general in nature and do not constitute or convey personal advice. It has been prepared without consideration of anyone's financial situation, needs or financial objectives. Formal advice should be sought before acting on the areas discussed. The authors and distributors of this document accept no liability for any loss or damage suffered by any person as a result of that person, or any other person, placing any reliance on the contents of this document.  



Unlocking Your Financial Freedom

Transcript date:

Thursday 14 May 2015


New family finances radio program for the outer-eastern community


Topic Introduction and Relevance to you

I'm so excited after more than 15 years on the air, to be launching a brand new segment – Unlocking your financial freedom.

And if you're wondering why I decided to change the segment after so long, well frankly you're the reason!

Each week I get calls and emails from listeners, and so I started asking what is it that you want from a finance program. And the issues that came up over and over were:

-          That you wanted more consistency with the timeslot. Having
           me scheduled on different days and different times was a tad

-          You wanted practical guidance on money relevant to the
           day-to-day lives of families in the outer-east.

-          You wanted ideas that can be implemented by business
            owners and non-business owners alike.

Well folks, I'm responding to your feedback! And what I'd like to do today is give you a taste of what you can expect from this fresh new program, so that you can decide whether it's going to be valuable for you, and if so, it'd be terrific if you could also tell your friends and family about it.

Main Segment

Before I get too far into explaining the new segment, I want to touch very briefly on last Tuesday's Federal Budget. The budget is something that occurs every year, there's always a big hoo-ha about it, and there's a massive amount of information. And it can be really tough to discern from all this "guff" what issues are actually relevant to you, your family, your lives. So what I'm going to do in my next segment is break it all down and make it really easy for you. I'll do the hard work and read through all the reports, attend the briefings, and then I'll come back to you with a 20 minute summary of the issues I believe are most relevant to you and what you need to do about them. How does that sound? Good?

Ok, then let's move on to Unlocking Your Financial Freedom and the exciting new changes I have in store for you.

First up, I've heard your request for less confusion, and so as of today I will be presenting the Unlocking Your Financial Freedom program every second Wednesday from 1.15pm-1.45pm. So pop that in your diary now. That's every second Thursday 1.15pm-1.45pm as of today, so I'll be back on the mike in a fortnight.

I also appreciate that you don't just want information that's informative and interesting, you need it to also be relevant to your day to day lives. That makes sense, and frankly that's what I can do best!

If you're a regular listener then you'll know that one of my soap boxes (and I'm only 5ft so I do have a few) is that we are not taught day to day money management in our school curriculum.

You see, there are what I call the 7 ultimate steps to unlocking your financial freedom – 8 steps if your'e a business owner, and if you can put in place a strategy for each of those steps, financial freedom is pretty much assured.

What I'd like to do now is give you a brief overview of the different steps because the Unlocking Your Financial Freedom segment is going to focus each fortnight on different topics relating to the 8 steps. And I think you'll agree after I've gone through them that they are definitely relevant and practical.


Step 1: Cashflow

It's funny, but when it comes to money – oh hey that rhymes – one of the most stressful things is our income. It's never enough! And if you're a business owner you have the added pressure of irregularity. Your income isn't the same ever week and sometimes it can be a real juggle. It makes such a difference to be in a position of assurance when it comes to your cashflow, and that means you need to get serious about your budget and your spending. Understanding of your net cashflow position (both business and personal) is fundamental to your financial freedom. So that's definitely and area I'm going to help you with.


Step 2: Debt Management:

What would it mean for you to be debt free? Less stress, less arguments, and no more money wasted on loan interest?

Your 2nd step to financial freedom is putting a robust debt management plan in place. One that will make sure your loans are structured correctly and that you pay off your debts faster so that you can focus on getting ahead!


Step 3: Savings

It takes discipline, but if you're sick of living week to week, concerned about not having a decent cash "buffer" for unexpected expenses, or that you won't have enough for that well earned holiday, then it's worth doing. You need a strategy in place that takes into account both your short-term needs (savings) and your long-term needs (investment).


Step 4: Tax

And speaking of savings (funny how these things just seem to flow; you'd almost think it was common sense). It's important to make sure you don't pay any more tax than you have to because that would be a waste.

Financial Freedom involves knowing how to "squeeze" as much money out of the Government as possible (legally of course!!). As well as maximising your business and personal deductions, you should also review any tax effective strategies you might be able to take advantage of to improve your financial position.


Step 5: Super

Are you on track to have $744,000* saved by retirement? Because according to the *Association of Superannuation Funds of Australia this is the minimum estimated amount needed for a couple to lead a "comfortable lifestyle" in retirement.And if you're single, don't think it's half – it's more.

Superannuation may be the most important investment you make in your future financial freedom.

And business owners, have you thought about what will happen if your business doesn't sell for what you expected?

Decisions about your super today will directly affect your future lifestyle!


Step 6: Protecting your lifestyle

Imagine you had a machine in your home and once a week you turned the handle and it dispensed $1,800. Would you insure that machine for potential breakage or malfunction? Of course you would; in the same way that you've insured your home, contents, car...

You care about the lifestyle and financial security of your family right? You should be spending a small percentage of your income to insure your greatest asset - your ability to earn income.

But this can be a confusing area – so let me guide you as part of the new segment.


Step 7: Estate Planning

Did you hear the one about the 8 year old who inherited $6 million from his dad's estate while his mum inherited the house and $200,000?? How could this happen? Because his father didn't have a Will.

If it's important to you that the right people inherit your assets when you die, and that someone can make decisions on your behalf if you're not able to, then you need to do something about it.

Now the final step is just for our outer-eastern business owners:


Step 8: Business building

When dealing with the day-to-day operation of your business, it's easy to neglect things like finances, systems, and marketing. But this can create run-off problems, including weakening the business, anxiety, and cashflow struggles. This can then in turn lead to business and financial stress and more time away from the family.

So your final step towards unlocking financial freedom is spending time to grow your business, and work ON it not just work IN it.


Summary/Action/Special offer

Ok, so I'm hoping that gives you an idea of the relevant and practical topics I'm going to be covering for you as part of Radio Eastern's brand new segment "Unlocking your financial freedom".

On top of the family finance information, I've also created an email address dedicated to any questions you might have. So from now on if you have any questions after the program about ANY money issues, you can email me directly at askCaren@hendrie.com.au. You're even welcome to email me topics you'd like me to cover- after all, this is your segment!!

And wherever possible I'm going to bring you special offers exclusive to Radio Eastern listeners.

Unlocking your financial freedom

The Hendrie Group are very happy sponsors of Radio Eastern, and have been for – well a really long time!

At The Hendrie Group we guide families through the ultimate 8 step formula to unlocking your financial freedom, and we've been doing this for more than 35 years.

We're a family business and the most important thing to us is looking after you and your family.

We'll get you from where you are now to where you want to be in the future!

The Hendrie Group is located at 23 Lacey Street Croydon and you can call us on 9725 2533.

Don't forget to tune in to 98.1 Radio Eastern on Thursday each fortnight at 1.15pm for the Unlocking Your Financial Freedom segment filled with tips, ideas, and information about achieving financial success for your family.

Next fortnight we'll be discussing the federal budget and what it actually means for you.

You might also like to visit our website which has loads of great information, including a recording of today's program which should be up and running within the hour. Just go to  www.hendrie.com.auAnd of course you can email me directly at askCaren@hendrie.com.au

The Hendrie Group

1st Floor
23 Lacey Street
Croydon, VIC 3136

T: (03) 9725-2533 E: support@hendrie.com.au


Madison Financial Planning Practice of the Year; WINNER Grosvenor Securities Adviser of the Year;
WINNER Count Financial Planning Practice of the Year;
7th Place IFA National Best Practice (of more than 300) firms).





11 ways to save tax if you’re quick

The end of the 2014/15 financial year is almost here, so now's the time to review what strategies you can use to minimise your tax.

 #1 | Superannuation Contributions

Individuals may be able to make tax-deductible personal contributions to superannuation to reduce their taxable income. The advantage of this strategy is that superannuation contributions are taxed at 15% compared to typical personal income tax rates of between 34.5% and 49%.

Superannuation contributions are limited to $30,000 per year for persons under 50 as at 30/6/15, and $35,000 for persons age 50 to 75. Any contributions in excess of these limits can be taxed at a rate of up to 49%, plus an excess contribution charge. Do NOT go over these limits!

Please contact us to verify that you can comply with all the eligibility criteria for this deduction. This includes satisfying the 10% test, meaning that less than 10% of the total of your income for the year must be in respect of your employment.  For the purposes of this test, income is assessable income plus reportable fringe benefits plus reportable employer superannuation contributions.


#2 | Property Depreciation Report

If you have an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) will allow you to claim depreciation and capital works deductions on capital items within the property.

The cost of this report is generally recouped several times over by the tax savings in the first year of property ownership.

#3 | Motor Vehicle Log Book

Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2015. You should make a record of your odometer reading as at 30 June 2015, and keep all receipts/invoices for your motor vehicle expenses. Once prepared, a log book can be used for a 5 year period should the nature of the travel, type of vehicle and business use percentage not alter.

#4 | Sacrifice Your Salary to Super

If your marginal tax rate is 19% or more, salary sacrifice can be a great way to boost your superannuation and pay less tax. By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax. This can be especially beneficial for employees nearing their retirement age.

#5 | Prepay Expenses and Interest

Expenses relating to investment activities can be prepaid before 30 June 2015. You can prepay up to 12 months of interest before 30 June on a loan for a property or share investment and claim a tax deduction this financial year. Also, other expenses in relation to your investments can be prepaid before 30 June, including rental property repairs, memberships, subscriptions, and journals.

#6 | Insurance Premiums

Possibly your greatest financial asset is your ability to earn an income. Income protection insurance replaces up to 75% of your salary if you are unable to work due to sickness or an accident. The insurance premium is generally tax deductible, plus you get the benefit of protecting your family's lifestyle if you cannot work due to sickness or an accident. It's a small price to pay for peace of mind. Similar to rental property interest, income protection premiums can also be pre-paid for 12 months to increase your deductions.

#7 | Work Related Expenses

Don't forget to keep any receipts for work-related expenses such as uniforms, training courses and learning materials, as these may be deductible for tax purposes.

#8 | Realise Capital Losses

Tax is normally payable on any capital gains. You should consider selling any non-performing investments you hold before 30 June to crystallise a capital loss and reduce or even eliminate any potential capital gains tax liability. Unused capital losses can be carried forward to offset future capital gains.

#9 | Defer Investment Income & Capital Gains

If practical, arrange for the receipt of Investment Income (e.g. interest on term deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2015.

The Contract Date is generally the key date for working out when a sale occurred, as is the contract date of purchase for the 50% general discount of Capital Gains Tax, and not the Settlement Date!

#10 | Qualify for a Government Co-Contribution

If your total income is less than $49,488 you may be eligible for a super co-contribution from the Federal Government. For each dollar in personal after-tax super contributions, the Government will contribute from 50 cents up to a maximum of $500 for those earning less than $34,488.

For the purposes of this test, total income is assessable income plus reportable fringe benefits plus reportable employer superannuation contributions, less allowable business deductions.

Please contact us to verify that you can meet all the eligibility criteria for the Government Co-Contribution.


#11 | Net Medical Expenses Tax Offset

Review your net medical expenses and consider prepaying net medical expenses if you are close to the $2,162 threshold (or the $5,100 threshold if your adjusted taxable income is above the applicable amount).  From 1 July 2014, those taxpayers who received the offset in their 2013–14 income tax assessment will continue to be eligible for the offset for the 2014–15 income year if they have eligible out-of-pocket medical expenses above the relevant claim threshold. Generally, taxpayers who don't claim the offset in this 2014 tax year will not be able to claim the offset in the 2015 or later tax years.

Should the offset claim be for disability aids, attendant care or aged care you are not restricted to having made a claim in the 2013-2014 year.

2015 will be the final year a claim for medical expenses will be allowed, unless the expenses relate to disability aids, attendant care or aged care.




If a business owner said to you that they run their business without a budget, what would you think? You'd think they were incompetent. Or perhaps lazy? Or both?

But what do most families do?

When you think about it, a family is actually a mini business. There is income, there are expenses and there is, hopefully, something left over to invest and to enjoy.

So why don't most families operate to a budget?

After all, a personal budget helps you to see your financial direction and helps you stay (or get back!) on track. It's a great comfort.

One reason some people don't put together a budget is a feeling of overwhelm, of being too busy, of feeling like modern life is too complex to keep track of all that.

Well the good news is we can handhold you through the process, recommend some time-saving tools and make it easy for you.

But before we look at the 'how' aspects, let's consider 3 more reasons why a personal budget is such an important tool to help you achieve your financial goals and dreams.

1. Most of your money is already spoken for long before you get it

The money you earn has already been promised to keep the electricity on, make the loan repayments and pay for the insurance. Most of what many people think of as budgeting is really honouring the commitments you have already have.

Now since we are all honest people and plan to pay these bills, the first step is to track these bills and see what is left over for your day-to-day living.

2. Your day-to-day living money is spread all over the place...

Some of your day-to-day living money is in the bank. Some is in your purse or wallet. Some is with your partner or children if you have them.

You need a simple system that allows you to track day-to-day expenses such as fuel for your car, shopping and your discretionary spending expenses.

We suggest you don't attempt to keep track of every cent of your day-to-day living money. It's not worth the effort for the benefit you'd get out of that level of detail.

Instead, you need to identify your main day-to-day expenses and make allowance for all other minor day-to-day expenses as a total expense.

Here's a key: You need a system that is so easy to use that you keep using it.

You can track these day-to-day expenses by entering them into a spreadsheet, or better yet, use a tool like Xero Cashbook, that can automatically pull in bank account and credit card feeds to save you a lot of data entry.

These automation tools are brilliant. It makes sense to make use of them.

3. The Number 1 reason people give up on their budgets is that they don't have the right attitude

It's ALL in the attitude!

Have you ever attempted to budget and given up in frustration? What is the reason your budgeting attempt failed? What will make you stick to it?

Think about this…

One of the top reasons-if not the top reason-so many people give up at budgeting is attitude. If you think of it as a penny-pinching sacrifice instead of a means for achieving your financial goals and dreams, how long are you likely to stick with it?

It's like the difference between going on a diet and eating healthily. One is negative and restrictive; the other is positive and allows you to indulge every now and then and yet still achieve your goals.

To increase your chances of success, work on your attitude first.

Many people refuse to budget because of budgeting's negative connotation. If you're one of them, try thinking of it as a 'spending plan' instead of a 'budget'. Once you've attempted to budget and failed, the bad feelings associated with any type of failure can keep you from trying again. Don't give up!

The cold hard reality 

Let's face it. Money is a tool that enables you to reach your goals in life. But the cold hard reality is that until you know where your money goes, you can't make conscious decisions about how to use this tool effectively.

A budget (or spending plan!) shows you exactly where your money goes and provides a clear plan that lets you save for the things that are important to you: a new house, a new car, a comfortable retirement, a tertiary education, high quality health care, travel, or whatever your particular goals and dreams happen to be.

And that's exciting.

Whatever YOU decide you want to save for and achieve, you can. With the right attitude, a focus and a (spending!) plan.

Avoid This Pitfall 

There are several universal budgeting concepts that every successful budget will include, but one of the most important features of a successful budget is for it to be easy to use and suitable for your needs.

Don't try to use a generic, complex, one-size-fits-all budget. A simpler approach makes it easier to stay committed. If you stick with a realistic, effective budget long enough, the rewards will keep you motivated. In the meantime, do whatever it takes to keep yourself going.

The 3 steps for effective personal budgeting (spending planning!) are:

1.   Build a Budget,

2.   Track Income and Spending, and

3.   Compare Budget to Actual.

Once you start budgeting with a positive attitude, you will see the difference a budget or spending plan can make in your life.

And by using the right tools, you can track your spending and stay on track much more easily these days, thanks to modern technology.

If you'd like to discuss how to get a budget and tracking system in place, get in touch and we'll make a time for our budgeting expert Michael Crowe to sit down with you and step you through the process. All you need to is call us on 9725 2533 or email support@hendrie.com.au and we'd love to help!


Each year one of my favourite Australian economists (yep, I am that nerdy) Dr Shane Oliver puts out a great report reviewing the economy and sharemarket over the previous year, and gives his outlook for the coming year.

Here is a sneak preview of his "insights":

  • 2014 has been a reasonable but somewhat messy year for investors as the global economy remained in a cyclical "sweet spot" despite various threats, but Australian shares underperformed.
  • 2015 is likely to see okay but uneven global growth, low inflation and easy monetary conditions.  While the US is likely to start gradually raising rates, other countries including Australia are likely to ease monetary policy.
  • Against this backdrop the bull market in shares and most growth assets is likely to continue.  However, with shares dependent on rising earnings, volatility is likely to be a bit higher and returns okay but constrained.
  • The main things to keep an eye on are: when/if the Fed starts to raise rates, Europe, the Chinese property slump, and growth outside of mining in Australia.

Click here for a FULL copy of his most recent report, which is as always, full of great information and a fairly entertaining read given his profession tee hee.

And if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.






What's the deal with housing prices?

For all of you who are sick of the sound of my writing, you're in for a treat today. Caren Hendrie Discusses House Prices

Property is always one of the hottest topics for us Australians, and one of my fave economists Dr Shane Oliver (Felix Stephen is still my number one) has written a terrific - and very reader friendly - article about the current state of play for housing.

It's not overly long and there's some pretty pictures.  Just click here for a copy.

And if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,


It's tax time - now it's a party!!!!

We're well into the personal tax season, which means it's party time at The Hendrie Group, as we keep busy during one of our favourite times of year (Christmas comes a close second of course ha ha).

We're still offering evening appointments through to the end of September, so if you can't come during the day then just call and make a time in the next few weeks.  As you can imagine, evenings book up pretty quickly so the sooner you call us the better.

The ATO's turnaround time for lodged tax returns has been pretty good, with most of them coming back just on two weeks.  However, we recommend allowing three weeks as sometimes they take a little longer.

We appreciate that most people don't find tax time as exciting as we do, but part of our job is to keep you informed, and this year Dean's personal tax newsletter addressed a few issues that you may find of interest including, but not limited to:

  • A guide to 2014 tax return preparation charges;
  • How the tax-man helps you protect your family;
  • New criteria for the net medical expense tax offset;
  • A simple explanation of the Medicare Levy Surcharge;
  • Changes to the private health insurance rebate;
  • The ATO's new stance on claiming travel and overtime meal expenses;
  • Buying an investment property.

Click here if you hadn't had a chance to read this year's Personal Tax Newsletter for a quick and informative look at some of this year's relevant tax issues.

If you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,





Should you be managing your own super?

We recently held an education session on Self Managed Superannuation Funds (SMSF).  The feedback was terrific, and whilst I can't fit two hours worth of information into one blog, I can share a few of the salient points, and also extend an offer that we made on the night - not something we do very often.

A SMSF is quite simply a super fund that is set up by people who want to control their own retirement savings, and has less than 5 members.

What you find is that your standard super funds can be quite limiting in the types of investments that you can choose from.  So for people with reasonably high super balances that can be a real disadvantage, and you find that often those people will prefer the flexibility of a much greater range of investment opportunities, and having complete control over investment decisions.

The Australian Securities and Investment Commission will tell you that you probably need $200,000 - $250,000 to make it worthwhile, and that's because you need to justify the compliance or accounting costs that are involved.

It's important to point out that you still pay accounting and compliance costs in a retail or industry super fund, the difference is that they are often percentage based or a combination of fixed and percentage.  This means that people with small balances don't pay a lot for the accounting, but people with higher balances are actually often subsiding the costs for other people.

From the research we've done over the past few years, we'd agree that at $200-$250K it's definitely worth considering, especially if you're going to be making contributions for a while, but it becomes particularly cost effective for balances of $400,000 plus.  In many circumstances it will be a cheaper option than retail or industry super!

Oh and that doesn't mean $400,000 per member, but combined... Just bear in mind that members of a super fund must be family or in business together.

Perhaps the greatest SMSF misconception is that it is a lot of work for the members, but for the SMSF owner it doesn't need to be any more difficult than being in a standard super fund.  Make your Accountant and Financial Planner (ideally under one roof) do all the hard work!

Our accounting team has a specialisation in this area and we manage about 120 SMSFs and I can tell you right now that very few members want to have involvement in the compliance side of things like preparing the accounts and tax returns, updating trust deeds, writing minutes, arranging actuarial certificates...

When it comes to the rules, well they're pretty much the same as for any standard super fund - the difference is that you (and your Accountant) are responsible for making sure the fund meets it's obligations.

One rule that's changed relates to borrowing within a SMSF.  Previously no SMSF was permitted to borrow, but now you can - within some pretty tight rules.  If you're considering taking advantage of this opportunity you should definitely get advice.

And finally, within your SMSF you can invest in pretty much anything that constitutes a legitimate investment - shares, property, managed funds, artwork, coin collection, wine collection - as long as it meets all the legal guidelines of the "sole purpose" test which means it MUST be solely invested for your retirement.

Ok, so that's the "bare bones" summary.  At our education session we offered everyone who attended a free 45 minute session to chat about whether or not a SMSF would be worth considering.  We don't usually extend these offers to people who didn't attend, but in this case we're making an exception.  Do-it-yourself super is an area that's growing and growing fast (there's currently more than 500,000 funds in Australia!!) so we want to make sure you have all the facts to make an informed decision as to whether it might be a worthwhile strategy for your long-term financial security.

Click here for a copy of the offer - it expires June 30.

And if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,
Any time you apply for a loan, your information is shared by lenders for the purpose of assessing what sort of credit risk you pose.  This obviously helps them determine whether or not they're prepared to loan you money or not.

New Comprehensive Credit Reporting changes the way credit information can be shared by lenders and will have a significant impact on whether or not your application for financial credit will be approved.

Up until recently, you really only received a negative credit score if you defaulted on a loan or didn't pay a bill.  But as of 12 March 2014, loan and credit repayment details are just one of the additional pieces of information that lenders can pass on to credit bureaus as part of a new more comprehensive credit reporting regime.

Under the new rules, there'll be a lot more data sharing and a lot more information available to your financial institution. In fact, every time someone misses paying a bill or loan re-payment of more than $150 by more than five days, their credit file is marked and their credit rating is affected.

On the flipside, under the new regulations, the data provided will also include positive information such as how often repayments have been made on time, so you can actually be rewarded for your years of good behaviour.

The type of information your financial institution will be able to obtain as part the new credit checks include:

If repayments have been made on time over a two-year period;

  • If payment of a bill over $150 is more than 60 days late, it will be listed as a default;
  • The limit on credit cards that you have applied for;
  • The date your credit account was opened, type of account, and when it was closed; and
  • If, because of a default, someone has entered into a new varied arrangement for repayments.
For more information on the new regulations, what it will mean for you and other ways you can take control of your credit history, click here.

In the meantime, click here for our brochure on Protecting Your Credit Reputation, which includes more details on the new rules, as well as handy tips for getting yourself a good credit rating, and avoiding a poor rating.

Of course if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,

PS. Special thanks to our Senior Financial Adviser Michael Crowe from whom I pinched a lot of this information!

PPS. Please don't keep me a secret!  If you know someone who'd enjoy this or find it useful, pass it on! 
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