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Spring Newsletter 2011 Money Works Financial Planning Pty Ltd

September 2011

A Word from Chris

Inside this issue: A word from Chris Oliver’s Insights


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with Michael Pascoe

Your Cash Flow Manual


Money Works


Let family and friends know about us The Divine


Many clients and interested parties are asking me “where is the market heading?” It certainly is an interesting time. With Dow falling below 10,800 and now as I write this, up 143 points to 11,320 which is the 4th straight day increase, there is much volatility. As I search through all the Equity Indices around the Globe – they are also up. Not so long ago, once again, we were reading doom and gloom. Only last week I received a report from Comsec by Craig James who says, “We now expect the all ordinaries to end 2011 at 4,950 and the ASX 200 to be near 5100”. Other technical analysts write that this will be the fourth wave of a 5 wave movement so we could see further decline coming. My point is this, the share markets will rise in time, so be patient. Since 2008 we have witnessed markets rise and fall, and rise and fall. We know this, however there is so much noise and commentary about world markets (I won’t discuss Europe or Asia in this newsletter) and so many people, economists included are what I call “Vocal Experts”. All I can see is opportunity.

Markets are still showing signs of growth, P/E ratios are down, offering more opportunities to buy and there are signs of value. So remember, you are not trading the market, you are long term investors, that is, you have purchased your share portfolio to possibly keep over 7 – 10 years and in some cases longer. You will only have a loss if you sell now, if you purchased just prior to this current correction or prior to November 2008. If you have “geared” investments portfolios – the cost of the loan is a tax deduction, but not your loss, although you may offset losses against capital gains when realised. So my suggestion is “don’t panic and enjoy the ride”, there may be more bumpy roads to come and still some time before we start seeing true bullish signs. Naturally if you wish to speak to me, I am always available.

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Oliver’s Insights

The US loses its AAA credit rating from S&P. Not good but maybe not as bad as feared

the currencies of other AAA rated countries including the Australian dollar (A$) and Singapore dollar, but in the short term it only adds to existing uncertainty. • The downgrade should have been Key points priced into share markets already, but • Ratings agency Standard & Poor’s it reinforces pressure around fiscal (S&P) has followed through with its tightening in the US as well as being a threat to downgrade America’s blow to US confidence. sovereign credit rating. Budget savings fell short of the desired levels While shares could remain volatile thought to stabilise the debt to gross for a while, there are indications that policy makers will swing into action, domestic product (GDP) ratio, so with reports the European Central America’s rating has been downBank (ECB) will buy Italian and Spanish graded from AAA to AA+. The impact this downgrade will have bonds while the G7 leaders commit to a liquidity injection to stabilise on US borrowing costs is likely to be markets. minor, although the market will be swamped by the impact of weak Shane Oliver, Head of Investment economic growth and safe haven Strategy & Chief Economist demand for bonds. • Over time it could be a positive for

Breakfast with Michael Pascoe Michael Pascoe, is an economist who does some work for Channel 7, and is also a well known speaker. He recently held a breakfast presentation at Office Works, Anzac Highway.

puts thing into perspective. Michael showed many graphs illustrating how well we are placed for growth compared to the USA and Europe and it’s all due to our relationship with China and India basically. During the presentation, Michael He showed an amazing graph made some very interesting showing how China has “built comments. Firstly, he said that the Europe” in just 15 years - that is that Global Financial Crisis “saved us”. construction has increased from Australia was in a state of wonder400msq in 1999 to 3,500msq in 2010 land. We had rising interest rates (9.45% in May 2008), unemployment (e.g. comparing the size of the Czech Republic in 1999 to building a at 4.2% and core inflation at 4.1%, city the size of Brisbane every very similar to today, the main month). I think this picture says it all, difference is that the majority of our retailers are presently finding it very we are riding on the back of our difficult. However in 2008 we were in Asian cousins and we should be his words “heading for a cliff” and the thankful. GFC did put the proverbial breaks on. The future is still very bright for Australians, a trip overseas surely

Spring Newsletter

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Simple & Straight Forward Ideas to help you get Ahead Financially or “Your

Cash Flow Manual”

I have spoken at many events and whether it was at a high school, breakfast meeting or corporate event, one of my favourite questions has been “when we earned our first pay check did we get a manual on how to handle our well earned income? The answer is NO, we did not. We get manuals on a range of things from electrical appliances to new cars so why don’t we get some sort of guide or instruction booklet on how to manage our money? Here are the top 6 “MUSTS” for a comfortable financial future. Save 10% of what you earn, pay yourself first and put this into a separate bank account that has high interest earnings. If you do this first you will be amazed that you are able to live on the remaining 90% and equally amazed at how quickly the balance will grow. After a while you will then be able to invest this into other investments and give yourself a kick start to financial security. Just add a little more to your mortgage payments’. Just like your money growing at a compound rate i.e. interest on interest, your mortgage works in much the same way but in reverse. An extra $100 per month can take off over 4 years on an average loan of $350,000 or to add to this idea, add your 10% savings account as an offset account to your loan. Credit Cards, the big NO NO, if you must have a credit card, link it to your savings so that you can a) Save more, and b) Pay off the full balance every month. Some banks offer credit cards with longer interest free period, allowing you to save more. If you do have a large debt on your credit card work out a plan to pay this off completely before you go out and spend more. This way you remain in control of your credit card. Have a plan: Work out what you really want. What do you wish for, and then

add some details to the goal. A strong hint here is to make the goal achievable. If you are earning an average wage of $54,000 P/A. Don’t wish for 1million by the end of next financial year. Probably a little extreme but I think you know what I mean. Make your goals small ones to start with i.e. save $10,000 by Jan 2013 this will give you confidence and a sense of well being. Then reset your goal to a slightly bigger one and so on. Discuss your goals: especially with your You can work partner and family member, make them for your part of your idea. This will help them money with their own personal goals and provide flexibility to be part of each other’s goals and achievements. Discuss OR ideas openly and search for information, if necessary seek advice – from a have your competent Financial Planner. Always Remember: You are the master and money work for you!!! money is the servant. Never the other way around. Most of us live our life dictated by the money we earn from our job. Never really realising that we can earn more through saving and investing wisely. It’s nice to spend money and buy new things, but if you work out how much you have earned over the past 10 years and look at how much you have actually saved, you will be amazed- Go on work it out! Don’t dwell on the past. Tomorrow is a new day and you can change your habits and your thinking. “You are wealthy and you do have a wonderful life financially” Hint: There are only 2 ways of making money – You working for it, and it working for you. One day soon you will be asking for your Money to work for you.

Its called retirement.

The information provided in this newsletter is of a general nature only and does not constitute financial advice or a recommendation. You should obtain and consider a Product Disclosure Statement (PDS) before making any decision to acquire a product. Please seek expert advice from a qualified and experienced Financial Planner or accountant or other professional, prior to making a decision on your financial situation. Detailed information on our services and fees is provided in our Financial Services Guide, which is provided prior to or at the first consultation and is also available on request.


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Breakfast with Michael Pascoe Your Cash Flow Manual September 2011 The Divine 4 Let family and friends know about us A word from Chris 1 Ins...