Page 1

Summer 2012

Money Works Financial Planning Pty Ltd DECEMBER 2012 Below is a preview of

‘You and Your Money’ An eBook by

Chris Harris

You and your budget Knowing where your money is going and how and what you are spending your money on is another key to the laws of wealth. I seriously suggest you need a plan, some form of map to guide you to where you are going and how you are going to get there. A budget gives us this, keeping in mind that you are now paying yourself first.

Inside This Issue: You and Your Money EBOOK preview


RBA Cash Rate



Economics report,


Dr Chris Caton

2013 Kickstart Workshop


one idea could be massive. Personally, I love to take my lunch to work, both my wife and I do this every day and I am lucky enough to have a wife that shares my views on saving, so she always makes enough from the evening meal to provide a lunch for the both of us the following day. To get serious about this, start a budget by downloading a spreadsheet from my website and go through each category and add your last account, your last bill and the amount you spend from going to the supermarket. I am not suggesting going overboard and ceasing spending on anything for enjoyment, but to look at where it goes as you might find you can make some changes for your benefit. Don't keep your head in the sand, become the master or mistress you want to be.

For example, you may not think twice about buying your lunch every day or even those coffees that we have become so accustomed to having, however if we add up the cost you may find that over the course of a week, a month or even the whole year, this adds up to quite a large expense. I remember before I got married that buying a pie, pasty, or a even a sandwich would cost in today's money at least $7 to $8 by the time I had a drink as well What to read more of ‘You and Your plus the coffees. By taking a sandwich or Money’? even leftovers from your dinner the night before you can save that $50 per week or Please go onto the Money Works website $2,500 per year. To small an amount you think? Look at it And follow the links to register you interest. this way, what would you prefer buying your lunch or, having that $2,500 pay off We will then send you an email with the attached eBook. The eBook will also come your mortgage, go towards a better holiday, children's education, or your future attached in a PDF form ready to be put retirement plan? If you have a partner, straight onto your iPad. and even children, the savings from this

Money Works Financial Planning Pty Ltd

Page 2

RBA Cash Rate Cut – Update

Economics Report

As widely expected the RBA has cut their cash rate by 0.25% to 3.00%. The RBA cash rate is now at the level it got to during the Global Financial Crisis.

with Dr Chris Caton

Should this full 0.25% cut be passed on, it would save someone with a $300,000 variable rate mortgage around $60 per month. The best place for this saving is straight back into your mortgage. Fixed rates are also well worth considering in this current market. Our chart below shows that 3 year fixed rates are at their lowest point since January 1999. In fact the chart also shows that the current rate of 5.39% p.a. is 1.68% below the average of 7.07% p.a. (since 1999).

Dr Chris Caton is the Chief Economist of the BT Financial Group. He was also our guest speaker at the Money Works, BT luncheon held in the Westpac building on Tuesday 27th November. For those of you who did not attend, it was a brilliant day with a very interesting and informative speech. Some of the views and statements Chris shared can be read below

Caton’s Corner November 2012

Data and graph supplied by

David Stoeckel Personal Mortgage Adviser

Quote of the Quarter

“Anything that you do with a positive attitude will work for you. Anything that you do with a negative attitude will work against you.”

Share markets had a mixed month. The ASX200 rose by 3%, finishing at 4517, its highest month-end close since June 2011. It has now risen in nine of the ten months so far this year, to be up by a total of 11.3%. The US share market, as measured by the S&P500 index, fell by 2% in the month, but is up by 12.3% year-to-date. In the US, the end of the month was disrupted by hurricane Sandy, which caused the NYSE to close for two days, and is estimated to have cost somewhere between $10 billion and $45 billion. This could mean that Sandy is as expensive as was hurricane Andrew in 1992, but this will still leave it at less than one-third of the cost of Katrina in 2005. countries recover from a state of devastation; Natural disasters always have costs, not all of which can be adequately measured in monetary terms, but their macro-economic effects are almost always fleeting. 140 years ago, the British economist and philosopher, John Stuart Mill, remarked on “the great rapidity with which the disappearance, in a short time, of all traces of the mischief's done by earthquakes, floods, hurricanes, and the ravages of war.” Incidentally, the last time a weather event caused a two-day market shutdown was as long ago as 1888.

Money Works Financial Planning Pty Ltd

Page 3

Cont Caton’s corner International Developments During the month, the third-quarter GDP release for China suggested that the trough of the slowdown has passed, although some of the other data are less convincing on this score. I remain of the view that the Chinese are very adept at getting that economy going again, and have considerable leeway to do so. It is frequently suggested that stimulatory policy may be constrained by inflation or by the fear of igniting a property bubble. Neither of these is a real constraint at present. Inflation has come down to less than 2% from more than 6% in the middle of last year, and property prices are not an issue right now. In 2011, there was something of a property price bubble. Measures were put in place to limit the ability of nonresidents to purchase property, while residents find it difficult to purchase a second dwelling. Last year, prices were rising in almost all of the 70 major cities; this year the performance has been far more mixed. That said, what stands out in China is the extraordinarily high share of GDP devoted to residential construction (in excess of 6%, compared with 3% in many other economies). This share is so high mainly because it reflects the continued migration from rural areas to the cities.

our exports now go to china. This ratio is higher for Hong Kong (52%), approximately ties with Taiwan, and ahead of every other country.

In the United States, no progress was made in the resolution of the “fiscal cliff.” This was not unexpected, given the political pre-occupation with the forthcoming Presidential election. Something will be done about the cliff eventually, but it’s in the nature of the US political process that there will be posturing and delay, meaning that uncertainly will hang over markets for some months yet. The US reporting a surprisingly large fall in the unemployment rate, form 8.1% to 7.8%, in September . That economy is still showing forward momentum, but at an only-moderate pace. It’s been “all quiet on the European front” in the past month, with borrowing costs continuing to decline. The Greek long bond rate, for example, has fallen by some 10 basis points in the past three months. Prices move in the opposite direction, and a fall of this magnitude means that the price of a Greek bond has more then doubled since late-July. How many readers thought to buy Greek bonds 3 months ago? The month also saw the 25th anniversary of the ‘crash’ in 1987. As if on cue, the US market fell on the day. The Australian Picture In the month, we got somewhat disquieting news on both the labor marChina is, of course, on the brink of a ket and inflation. It is becoming progressively more obvious that employleadership transition, with the 18th ment growth in Australia has slowed National Party Congress set to convene on 8th November . The change to a crawl, being up by just 0.05% in the past year, while the unemployin leadership is unlikely to lead to abrupt change in policy, but the new ment rate rose from 5.1% in August to 5.4% in September. This is still a team will have to grapple in the mevery low level compared with other dium term with some substantive isdeveloped nations, but the trend is sues. Among these will be handling now clearly upwards. the transition from investment-led The headline CPI rose by 1.4% in the growth to greater emphasis on conSeptember quarter, with much of this sumption. The growing issues of indue to the introduction of the carbon come inequality will also need to be tax. Of somewhat more concern was addressed. the solid increase in underlying inflaI have made the point before that Australia is now extremely dependent tion. This now stands at 2.5% in yearon china. This is mainly a good story to-terms, which is right in the middle of the RBA’s target range, but it’s up but there will be bumps in the road from 2% in the June quarter. Inflation from time to time. More than 28% of

is certainly not a worry, but nor can it be completely ignored. The Reserve Bank cut the cash rate in October, and it’s doubtful this will be a ‘one-off.’ The Bank has shown a tendency to move on Melbourne Cup Day, having changed the cash rate in November in each of the past six years. This is no coincidence; there is a greater probability of a move in the month immediately after new inflation news, and also immediately before the RBA’s quarterly Statement on Monetary Policy. This year, the fact that the cash rate is already very low, and the ’heavier than expected’ inflation news, may lead the Bank to hold its fire, possible waiting for more international news and one more labour -market report. I would put the odds of a cut un the coming week at close to 50%, with a 75% chance of a cut by the end of the year. The bottom line In early-July I somewhat reluctantly cut my end-year forecast for the ASX200 from 4700 to 4500. I have split the difference, raising it back to 4600. Dr Chris Caton Chief Economist The views expressed in this article are the authors alone. They should not be otherwise attributed. Economics Report 1 November 2012 Disclaimer and Disclosure This publication has been prepared and issued by BT Financial Group Limited ACN 002916458. While the information contained in this document has been prepared with all reasonable care no responsibility or liability is accepted for any errors or omissions or misstatement however caused. All forecasts and estimates are based on certain assumptions which may change. If those assumptions change, our forecasts and estimates may also change.

Like us on Facebook

135 FULLARTON ROAD ROSE PARK SA 5067 PO BOX 241 KENT TOWN SA 5071 PH: 08 8304 8088 FAX: 08 8431 8211 EMAIL:- 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

If you like the work we do for you, the greatest compliment that you can give us, is to recommend Money Works Financial Planning Pty Ltd to your friends and family.

Money Works Financial Planning Pty Ltd is a Corporate Authorised Representative of Millennium3 Financial Services Pty Ltd

2013 Kick Start Workshop When was the last time you took time out just for you? To think about what is important to you, what matters to you and what is going to make a difference in your life? On Saturday the 19th January, you are going to have that opportunity! I am going to facilitate my 1 day Passionate People Workshop for just 60 people. If you would like to spend a whole day … •

Gaining greater clarity in your life, your relationships and career;

• Discovering simple and effective ways to bring the best you that you can be out; • Understand how to be more consistent in everything you do; and • Create certainty in what you want and who you need to become to have a great year in 2013. My firm belief is that when your WHY becomes clear, the HOW will become easy. So my promise is simple I will work with you to … · Discover your personal WHY during the day; · You will commence The 100 Goal Challenge; · Apply the power of FEEL – THINK – DO Goals to your life; · Build a plan to bring the best out of you; ·Create a ritual to create your perfect day. If you want to be ready for a great year ahead, then here are the details … Date – Saturday 19th January, 2013 Venue – The Chancellor Executive Apartments and Conference Centre, 19 Lake Street, Varsity Lakes, QLD. 4227. Web: Times – 10 am to 4.30 pm The Investment in You will be $110

Summer Newsletter 2012  

Articles relating to Financial Planning