7th November 2022

Smart money weekly; US rates up 0.75%, ATO crackdown, rentvesting & make $250k investing $5k

Ben Nash
Hey team,

Happy Monday.

Inflation is running rampant. It seems to be the only thing that everyone is talking about at the moment. Across the globe, we’re seeing central banks raise interest rates to continue to curb this high inflation. The RBA has lifted our domestic cash rate by another 0.25%, raising our official rate to 2.85%. Over the pond in the states, the Federal Reserve lifted rates another 0.75% and the Bank of England has lifted their rates by 0.75% as reports estimate their inflation levels will reach 11% by the end of the year.

As a lot of you reading this are business owners or directors in organisations, I thought it would be prudent to mention this. The ATO is enforcing Director identification numbers (DINs) for every director covered by the Corporations Act and these must be in place by the end of November. It is estimated that half of the directors in Australia have not yet done this. DINs are being introduced in a bid to crack down on ‘dummy directors’ and ‘company phoenixing’. If you have not yet done so, you can apply for your DIN through the Australian Business Registry Service.

In the news: How investing $5000 could lead to a $250k payday
It’s a common money mistake that most Australians make but the consequence over time is a $250,000 loss. Here’s what to do about it. Check out the full article here.

Upcoming events:
As the year is almost coming to a close, make sure you are on top of your money. We’ve got stacks of sessions to help you get on the front foot and master your finances. Check out all our upcoming events below.

Share market wrap
We saw a strong start to the week in the markets. However, most gains were quickly diminished towards the end of the week in markets all over the world. With the aggressive interest rate rises from most central banks to curb inflation, the market reacted poorly. Towards the end of the week we saw a decline in US markets, followed by FTSE 100 index in the UK, the DAX in Germany and the CAC in Paris. The S&P/ASX 200 is currently sitting at a loss of approximately 10% year to date.

Key sharemarket numbers:  

  • The ASX ‘All Ords’ (top 500 shares in Australia) finished the week 1.7% higher than last Friday at 7,089.30 points.
  • The US ‘S&P 500’ (Top 500 shares in America) finished the week -2.84% lower than last week at 3,770.55 points.
  • The US ‘Nasdaq’ (Top 2500+ mainly tech shares in America) finished the week -5.02% lower than last week at 10,475.26 points.
  • The Global FTSE ‘All World’ index (largest 3100 companies in the world) finished the week 4.42% higher than last week (Friday AEDT) at 7,334.84points.
  • The S&P Cryptocurrency ‘Mega Cap’ Index (tracking market value of Bitcoin and Ethereum) is currently at 2,366.90  for the month, up 4.23% for the month to date.

Investment story of the week: Lendlease Group (ASX: LLC)
The Lendlease Group’s share price plummeted over 8% on Friday. The drop was primarily caused by the release of Lendlease’s strategy briefing. The briefing updated the organisation’s outlook for the remainder of the financial year. They expect to hit the lower end of their return on capital invested and EBITDA margin targets. This negative outlook had an impact clearly. Lendelase has a $5.4billion market cap and is down 28% year to date. It will be interesting to see if they recover from this drop in the months to come.

Smart Money upside #94
Because people don’t often talk about the full ins and outs of their money, it’s hard to learn lessons from hearing what good and bad choices other people make. This story is from one of our clients to help you take your money game to the next level.

Numbers/Background
Couple, mid 20’s; household income ~ $180k; total assets ~ $980k; savings ~ $10k annually.

Frustrations
Uncertainty around whether we have set up our investments so that our money is working as hard as it possibly can, particularly in terms of structure and tax.

What they wanted from us / the advice process
How should we best use our existing equity, define and execute a property strategy, reach financial stability ASAP, how to better structure our investment portfolio

What success looks like for them
Another property, debt-free, builds stock portfolio and confidence around family planning

What money strategy they were following before we went through the planning process
Share portfolio, offsetting mortgage

What money strategy they chose to pursue from our planning work
Banking structure, super rollover, insurance rollover, debt recycling, family trust, convert home to investment property

Key benefits of going through the process
Education, more confidence to execute plans, family planning education, understanding of how decisions today can impact the long-term financial health

Value of advice after all advice fees year one: – $23k
Year 20 upside after advice fees: $1.6m

If this story resonates and you want to chat about how to get these sorts of results, you can book an intro call here.

Giving update of the week
This week we wanted to celebrate our amazing Philippines based team and the great work the future generation of entrepreneurs are doing in the ‘peens’ to grow their economy. So we celebrated by providing a month’s worth of social entrepreneurship education to students in the Philippines. This is all part of our ongoing commitment to make a difference in the lives of our clients and simultaneously make an impact on our world through our partnership with B1G1 (Buy 1 Give 1). You can check out more information about our giving here.

Money hack of the week: When should you ask for advice?
How do you know when to get help from a financial planner? Well, many people think you need to be earning the big bucks before it’s necessary to ask for help. I talked to Pivot Wealth clients Christine and Walter about this myth and the groundwork they did before coming on board with us. We talked about being disciplined, removing distractions, and knowing their finances to a degree before diving deep into their plan. Check out the full chat here.

Money mistake of the week: Why there’s so much more to managing money.
Who else used to think that managing money was simple – just money in and money out? Then to realise you need to think about super, investing, saving, and prioritising your spending. I recently talked to Pivot Wealth client Avani about how her thoughts on money have changed since joining Pivot. Check out our chat here.

Jargon Buster of the Week: Cash flow (via Macquarie)
The cycle of money coming into and out of an account according to income/revenue and expenses. Negative cash flow is when expenses fall due before income/revenue is available and the account experiences a shortfall. Positive cash flow is when income/revenue outstrips expenses and there is excess cash in the cycle.

Podcast from last week:  #262 How to be smarter with money through your career
This podcast is a recording of a live online event I did on How to be smarter with money throughout your career. I talked about the most important things you need to understand while your career progresses to remain on the front financial foot and take advantage of the opportunities.

This episode is perfect for anyone who wants to understand how to make the right moves at the right time and how to get the most out of their money throughout their career.

Helping people with this stuff is our jam, so if you want to chat about how to make your money success easier, you can book an intro call with us here.

Be awesome,

Ben

Disclaimer:
I know you’re smarter than someone that would need me to write the words that come next, but our compliance peeps are real hard asses so here we go… This information is not personal advice, poetry, or a map to where Jimmy Hoffa is buried. It may only be regarded as general advice and shouldn’t be considered something worthy of inclusion for Donna Hay’s next cookbook or the Archibald prize. This is actually just an email communication that has been sent to a bunch of people and doesn’t even have your name on it. Your personal objectives, needs or financial situation have not been considered when preparing this email, but I want you to know that I have spent a lot of time thinking about the Venn diagram intersection of poetry, landscaping, and essential oils – if you’re fascinated by this same phenomenon please reply so we can compare notes. You should consider the appropriateness of any general advice we have given you, regarding your objectives, financial situation and needs, and if necessary, seek advice before acting on it. You should also consider other people when getting on and off public transport, smiling more, eating healthy, and listening to your mum when she tells you that you’ve been working too hard. Where the information relates to a financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product. Where the information relates to a hilarious joke I’ve made, you should consider belly laughing deeply. Worth noting also that past performance is not a reliable indicator of future performance when it comes to investments, and definitely not when it comes to the Wallabies. Financial services guide. All jokes aside and just to be clear, this information may only be regarded as general advice. Your personal objectives, needs or financial situations were not considered when preparing it.  You should consider the appropriateness of any general advice we have given you, regarding your objectives, financial situation and needs, and if necessary, seek advice before acting on it. Where the information relates to a financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product. Past performance is not a reliable indicator of future performance.