Guest The Pom Queen Posted August 31, 2015 Share Posted August 31, 2015 THE clock is ticking for young Australians who have put their financial future on the backburner in the face of sky-high property prices and a tumultuous share market. But experts say it is still possible to set yourself up for life — provided you don’t bury your head in the sand. “It’s time to start thinking outside the square and move away from the idea of the home being your main investment,” MLC financial planner Renee Hush said. “You can still set yourself up financially without buying property; you just have to be disciplined.” It’s financial planning week, and wealth advisers like Ms Hush are appealing to the subset of the community least likely to use their services: generation Y. With home ownership a distant dream, many young people have given up on trying to save up a six-figure deposit, instead channelling their cash into travel, nights out and other prized experiences. But with a few simple hacks, Ms Hush said, they could put themselves in a much stronger position for the future. START SAVING EARLY “This is my number one tip: put a percentage of your salary into an investment portfolio from day one,” Ms Hush said. “If you put away money from every pay cheque, even $50 a month, that can add up over the decades. Put it into your budget as an expense, not as an option.” In order to start saving early, young people should “start working early” to better their bank balances and future prospects. “Employers want to hire people with experience, so get a job as early as you can.” DON’T BE A HIPSTER While renting is inevitable for many young Australians, Ms Hush said, “you don’t need to be spending $500 a week to live in Newtown (in Sydney’s trendy inner-west).” “Move a bit further out to save cash,” she said. Whether it’s Brisbane’s Fortitude Valley or Sydney’s inner west, the hipster lifestyle comes with a price tag. Source: News Corp Australia DON’T BE AFRAID OF SHARES With that extra cash you are saving, you’re going to need to find somewhere to put it that attracts more interest than the shoebox under your bed. No, we’re not talking about your bank account. It might seem odd to tout the benefits of investing in shares on a day when the global markets are plummeting, but Ms Hush argues now is as good a time as any to jump in. “You don’t necessarily want to buy a house when the price is high,” she reasoned. “It’s about the strategic plan, not what individual stock to buy.” For young people who started working just as the Global Financial Crisis hit, the share market can seem intimidating, but Ms Hush said history showed it paid to ride out fluctuations in the long term. “They’ve heard horror stories of people losing 40 per cent of their wealth,” she said. “An adviser can walk you through that fear.” DO YOUR RESEARCH Australians in gen Y “tend to be self-directed investors”, with only about 20 per cent opting to seek professional financial advice. “It’s the generation that has to do everything for themselves,” Ms Hush said. While there was plenty of personal finance and investment information available online, she said, getting advice from a professional could help nut out goals and strategies for particular circumstances. “There is a perception that you need a lot of cash to justify seeing a financial planner but, if you’re trying to set some goals, you are more likely to achieve them if you’ve got someone to keep you on track,” she said. “Many financial planners at the bottom to mid end offer an initial consultation for free.” If you do opt to seek financial advice, choose one who is certified with Financial Planning Association of Australia, Institute of Chartered Accountants or CPA Australia. PROTECT YOURSELF Gen Ys tend to go through multiple live-in relationships before tying the knot, which makes it important to raise the awkward topic of money at the beginning of cohabitation. “Make sure you’re both on the lease, so if you split up one of you doesn’t get left paying the rent on your own,” Ms Hush said. Couples are deemed to be in a de facto relationship after living together for two years. “Think about what this will mean for you financially.” And, she said, “make sure you’re insured — you are not invincible.” Link to comment Share on other sites More sharing options...
Guest The Pom Queen Posted August 31, 2015 Share Posted August 31, 2015 Ok so that's for the youth of today but what about middle aged people who have no pension or super? What is the best way to save for retirement if you have left it until your forties. I would have thought property over Super. Link to comment Share on other sites More sharing options...
Parley Posted August 31, 2015 Share Posted August 31, 2015 Probably if you are silly enough to not have done anything until your forties and have no super or property, you have left it too late. Unless you can really ramp up super contributions. 1st priority for me would be to own your own home by retirement so at least you can get by on the pension if you have to. Link to comment Share on other sites More sharing options...
Guest The Pom Queen Posted August 31, 2015 Share Posted August 31, 2015 Probably if you are silly enough to not have done anything until your forties and have no super or property, you have left it too late.Unless you can really ramp up super contributions. 1st priority for me would be to own your own home by retirement so at least you can get by on the pension if you have to. Do you really think investing in property is too late. I was reading the thread I posted today on how much property has grown over 20years, I also remember you saying about your house. So surely if you bought a house for $250-$300 as an investment it would be $600-$700 in 20yrs. Link to comment Share on other sites More sharing options...
Parley Posted August 31, 2015 Share Posted August 31, 2015 That was my own home not an investment property. No I wouldn't say it is too late but I think first priority would be to buy your own home if possible. I would try to do that first although some others try to buy an investment property first. The best investments for me have been my own home and superannuation where I have salary sacrificed out of pre-tax salary. Link to comment Share on other sites More sharing options...
toOZ2012 Posted August 31, 2015 Share Posted August 31, 2015 Ok so that's for the youth of today but what about middle aged people who have no pension or super? What is the best way to save for retirement if you have left it until your forties. I would have thought property over Super. Deffo an investment property. I find that a lot of people go overboard with PPORs. The only way to keep emotions out of it is to buy an investment and hold for the long term or if the time is right just exit and start over. Salary sacrificing from pre-tax income is also great way to start. Lastly, the most powerful way is to invest in self whether it is just a skills upgrade or finally doing that masters degree. People often forget how powerful they themselves are as investments. Link to comment Share on other sites More sharing options...
ramot Posted August 31, 2015 Share Posted August 31, 2015 We invested in investment properties in our fifty's over 20 years ago, (too late according to some!!?) best thing we ever did, mortgage paid by tenants and provides extra income in retirement, so we have benefited from good capital growth. We bought a property when our daughter went to to university, rented out the other 2 rooms to students, best thing we ever did, but I do think it was perhaps more affordable and easier to do then? Link to comment Share on other sites More sharing options...
Parley Posted August 31, 2015 Share Posted August 31, 2015 We invested in investment properties in our fifty's over 20 years ago, (too late according to some!!?) best thing we ever did, mortgage paid by tenants and provides extra income in retirement, so we have benefited from good capital growth.We bought a property when our daughter went to to university, rented out the other 2 rooms to students, best thing we ever did, but I do think it was perhaps more affordable and easier to do then? The point made was really that you should start young. Not leave it until your 40s or 50s to think about investing for your retirement. Link to comment Share on other sites More sharing options...
buzzy--bee Posted August 31, 2015 Share Posted August 31, 2015 Do you really think investing in property is too late. No. Property will continue to double in value every 10 years or so. Sometimes it will do nothing or go down for 7 years and then rocket up in the last 3. The secret is time in the market more than timing the market. Rental income should only be seen as a way of helping pay for the running costs. The true value is in capital growth which can be realised or used as security later in life. The key to retirement income is having diverse streams, property, shares, superannuation and "other". Anyone who is 10 or more years off retirement (ie 55 or less for most of us) should buy investment properties. BB Link to comment Share on other sites More sharing options...
Guest The Pom Queen Posted August 31, 2015 Share Posted August 31, 2015 So if you had nothing what is the best investment property or start Super. Link to comment Share on other sites More sharing options...
buzzy--bee Posted August 31, 2015 Share Posted August 31, 2015 So if you had nothing what is the best investment property or start Super. Assuming you have a job, then you should have super. I say let the employer pay the super and use your income to make investments. An investment property costing under $400,000 should "cost" you around $100 - $125 per week from the get-go. The balance of expenses would be met by rent and tax rebates on negative gearing (don't forget depreciation - your biggest tax break!). With interest rates as they are, you should be neutrally geared in around 4 - 5 years, in real terms, not including depreciation. Don't buy units, townhouses or apartments. Buy houses with land. They appreciate more. BB Link to comment Share on other sites More sharing options...
toOZ2012 Posted August 31, 2015 Share Posted August 31, 2015 So if you had nothing what is the best investment property or start Super. Comes down to the amount of disposable income really. Investment lending is a lot tighter these days so it can take forever to raise a decent deposit in which case you may have to look at PPOR options. Depending on your risk appetite you can also look into creative investing like vendor financing and such but be careful it's easy to get burned. Link to comment Share on other sites More sharing options...
Bobj Posted August 31, 2015 Share Posted August 31, 2015 Buy land along building corridors, not 'property' Buy gilt edged shares and, if possible, use the dividends to buy more shares. Cheers, Bobj. Link to comment Share on other sites More sharing options...
Teejams Posted August 31, 2015 Share Posted August 31, 2015 I'd be cautious on relying on money made on Australian property, as price increases don't appear to be as predictable as they do in the UK? Maybe it's just down to area? Australian friends of ours bought their house 10 years ago. Over the 10 years, it has gone down in value, the equivalent of £50k and now is only just worth what they paid for it. They are switched on people and didn't pay over the top when they bought initially. In comparison, I'd be amazed if a property anywhere here in Hampshire, still cost what it did 10 years ago! Link to comment Share on other sites More sharing options...
Eera Posted August 31, 2015 Share Posted August 31, 2015 My in-laws had nothing in super in their fifties, now in their early seventies they have about 5 million through having a decent stockbroker and listening to advice. A few years ago he piffed the broker and started going out on his own and even today in a dodgy market has a midas touch when it comes to investing. I would tend to disagree on property being the best sort of investment for someone with nothing; property actually fluctuates as much as shares, but you don't see that fluctuation on a daily basis, plus shares don't have vacancies, rates, maintenance etc. Know your market (i.e. research) and you can make a go of it successfully. Link to comment Share on other sites More sharing options...
Parley Posted August 31, 2015 Share Posted August 31, 2015 My in-laws had nothing in super in their fifties, now in their early seventies they have about 5 million through having a decent stockbroker and listening to advice. A few years ago he piffed the broker and started going out on his own and even today in a dodgy market has a midas touch when it comes to investing. I would tend to disagree on property being the best sort of investment for someone with nothing; property actually fluctuates as much as shares, but you don't see that fluctuation on a daily basis, plus shares don't have vacancies, rates, maintenance etc. Know your market (i.e. research) and you can make a go of it successfully. So the broker took them from $0 to $5M in 20 years and then they sack him. Can you please get me the stockbroker's details as I will employ him. He sounds like a genius to me. Link to comment Share on other sites More sharing options...
buzzy--bee Posted August 31, 2015 Share Posted August 31, 2015 I would tend to disagree on property being the best sort of investment for someone with nothing; property actually fluctuates as much as shares, but you don't see that fluctuation on a daily basis, plus shares don't have vacancies, rates, maintenance etc. You can't gear shares as well though. I can buy a property using $85k of my own money and $300k of the banks money. In a few years I will have doubled my $85k but still only owe the bank $300k. The property market only has to go up in value 20% for this to happen. If I bought $85k worth of shares they would not double in value in a few years. If the share market went up 20% I would have made only $17k. This is simplistic maths and doesn't take into account a lot of things, but it does demonstrate how gearing can help people achieve their investment dreams. BB Link to comment Share on other sites More sharing options...
flag of convenience Posted August 31, 2015 Share Posted August 31, 2015 Do you really think investing in property is too late. I was reading the thread I posted today on how much property has grown over 20years, I also remember you saying about your house. So surely if you bought a house for $250-$300 as an investment it would be $600-$700 in 20yrs. Why should this surely be so? Just look at an historical chart over say one hundred and so years and see the belief that property can only rise simply isn't true. Link to comment Share on other sites More sharing options...
flag of convenience Posted August 31, 2015 Share Posted August 31, 2015 You can't gear shares as well though. I can buy a property using $85k of my own money and $300k of the banks money. In a few years I will have doubled my $85k but still only owe the bank $300k. The property market only has to go up in value 20% for this to happen. If I bought $85k worth of shares they would not double in value in a few years. If the share market went up 20% I would have made only $17k. This is simplistic maths and doesn't take into account a lot of things, but it does demonstrate how gearing can help people achieve their investment dreams. BB This is a fallacy with the belief that property can only go up. Of course property seminars sell this myth and present the above as fact. An historical look at property will see ebbs and flows. Buying over inflated property as is the case at the moment would require a degree of caution to say the least if looking into investment options in particular. Link to comment Share on other sites More sharing options...
Parley Posted August 31, 2015 Share Posted August 31, 2015 I would be confident buying a house in a suburb of Australia. Where you can have problems is with overpriced apartments in the city centres. I would steer clear of these. Link to comment Share on other sites More sharing options...
flag of convenience Posted August 31, 2015 Share Posted August 31, 2015 No. Property will continue to double in value every 10 years or so. Sometimes it will do nothing or go down for 7 years and then rocket up in the last 3. The secret is time in the market more than timing the market. Rental income should only be seen as a way of helping pay for the running costs. The true value is in capital growth which can be realised or used as security later in life. The key to retirement income is having diverse streams, property, shares, superannuation and "other". Anyone who is 10 or more years off retirement (ie 55 or less for most of us) should buy investment properties. BB The doubling of property every seven to ten years is an urban myth that seems to be considered factual by many. The law of common sense should rule that out. Who could afford property that being the case? Link to comment Share on other sites More sharing options...
Skani Posted August 31, 2015 Share Posted August 31, 2015 Australian friends of ours bought their house 10 years ago. Over the 10 years, it has gone down in value, the equivalent of £50k and now is only just worth what they paid for it. They are switched on people and didn't pay over the top when they bought initially. Australian median house prices have almost tripled in 10 years so they can't have purchased very wisely. Link to comment Share on other sites More sharing options...
robfromdublin Posted August 31, 2015 Share Posted August 31, 2015 The Australian system is biased towards property, as it's easier and cheaper to borrow large sums for investing in property, and you also have things like depreciation to help reduce your taxable income. So prima facie it's better to invest in property. HOWEVER, property is highly priced at the moment, with very little rental income for the sum invested. I would consider property (especially in places like Sydney) to be a risky investment right now. You basically need capital growth of about 7% p.a. to make it worthwhile. This has been happening for years but it can't go on forever without wages growth outpacing property growth. If this happens then people will still be able to afford housing. If it doesn't then housing will become unaffordable for most and prices will plateau. The way I see it, property is a bet on wages growth and, personally, I don't see that happening with the way the economy is right now. Where is all that money going to come from? Link to comment Share on other sites More sharing options...
robfromdublin Posted August 31, 2015 Share Posted August 31, 2015 Australian median house prices have almost tripled in 10 years so they can't have purchased very wisely. Australian-wide statistics are dominated by Sydney and Melbourne. Outside of these cities, property fluctuates wildly (e.g. Gold Coast) Link to comment Share on other sites More sharing options...
buzzy--bee Posted September 1, 2015 Share Posted September 1, 2015 The doubling of property every seven to ten years is an urban myth that seems to be considered factual by many. True. Where I live the house prices have doubled in 6 years. BB Link to comment Share on other sites More sharing options...
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