 |
November 2007 |
In this issue:I’m really worried about our Generation Y’s! What does the future hold for our young ‘Millennials’? |
Hello and welcome to another edition of CommonCents, another way we can keep you up to date and informed on those things that impact our financial world.
For those new clients who have joined us since our last edition welcome on board, and we hope you find some value in this communication.
In this edition of CommonCents, and especially with Christmas on our doorstep we will be tackling the topic of debt, and in particular a look at Generational debt management. How it affects us today and more importantly the younger generation – The Gen Y’s!
Sofie Standfort of KFG Debt Solutions takes a look at Generation Y and the Property market, while Harry Baumeister of KFG Wealth Management delves into the financial challenges of young people today.
For all of those clients who have been interested in my progress towards running in this years New York Marathon, well it is nearly here. I set off with my good friend and client of KFG, Brett Jackson this week and we run on November 4th. Apart from the continual aches and pains of sore knees, ankles, blisters and a recent minor set back with a stomach injury I am as keen as you can imagine. Thank you for your well wishes and I hope to pass on when we next speak a successful result! To get a taste of what we will be experiencing check out: www.ingnycmarathon.org/home/index.php
As always, please don’t hesitate to call our office on (08) 8415 2700 and speak with any of the KFG team if you would like to discuss superannuation or any other aspect of your financial affairs. Enjoy CommonCents!
Scott Kirkwood
Managing Director
I’m really worried about our Generation Y’s!
‘...Marketers have discovered Generation Y is financially broke, with little or no income and no spending power beyond keeping their mobile phone charged.’
Harry Baumeister writes: “I read this in The Australian recently. The article went on to say that ‘Generation Y workers are overconfident, lack practical experience and are unrealistic in their salary expectations’.
So, where have we gone wrong?”
What is the definition of a Gen Y? Born 1982–2000, representing 5.15 million or 28% of the current population.
I’ve seen this problem for some time now. I see this in my own son who is now 20. No matter how hard I try, I can’t get him to save – he goes to Uni, has a good part time job, but doesn’t save a cracker. When it comes to car repairs or new tyres, it’s “Dad can you lend me the money?”
Here I am, a Financial Planner! What have I done wrong? I’ve tried to teach him about budgeting – “make sure you have some ‘rainy day’ money”, “how are you going to replace that car that’s getting tired?” and so on.
Reading this makes me feel a little better, but not much. Where have we gone wrong?
I think it partly comes from money being too accessible – it is too easy to get credit. Also we’ve tried to make life better for our children and grandchildren than it may have been for us. With this comes an attitude that ‘money does grow on trees’. I think we’ve made life too easy for them.
How do we fix the problem?
This is not going to be easy, there is no quick fix. But does this mean I give up? No way!
Those of you who know me, and have met with me, may have heard me discuss this quite openly with anyone who has children and is prepared to listen.
We need to try and teach young people about the responsible use of credit, and the art of budgeting. Or simply, a very old saying, “if I can’t pay cash for something, then I don’t buy it.”
So, my friends, don’t despair, keep trying, there is hope. Thankfully, my daughter (age 17) is on the right track.... so far.
If you haven’t got the skills yourself, come and see a Financial Adviser, or encourage your children and friends to do the same.
Meanwhile………..do I keep bailing my son out?
I’m really worried about our Generation Y’s!
(Harry Baumeister is a KFG Financial Planner and a concerned father with a 20-year old son and a 17-year old daughter.)
What does the future holds for our young ‘Millennials’?
Sofie Standfort, Debt Solutions Manager at KFG, writes:
Generational shift is upon us and what is interesting is observing the impact this is having on the use of debt in society. In particular, how each different generation is using or sadly at times misusing debt in an attempt to financially or socially get ahead.
I often wonder where this will lead us over the next 30 odd years...
Baby Boomers (born 1946 – 1964) will be fully retired and enjoying their twilight years; Gen X’s (born 1963 – 1981) will either be already in retirement, or preparing for it; and Gen Y’s (born 1982 – 2000) will be managing busy careers and dealing with growing families.
The impact of these changes in our society are playing out in the way we now manage our debt.
Lately, in the media we have heard a lot about the ‘housing affordability crisis’ and how it has become more difficult for young people to buy their first home.
The Government has introduced First Home Owners Grant (FHOG), and there is talk about this now being increased. Stamp Duty is reducing and local councils are giving land away to help first time buyers get their foot in the door. This may be great for now, but how do these decisions impact the housing market in the long term?
I lived in Sydney at the time the Government introduced the FHOG. In July 2000, Sydneysiders saw the property boom go through the roof, partly fuelled by a further $5,000 increase in the FHOG by the Government. This initiative was designed to help first homebuyers get in the market. However, in my opinion, the increase in FHOG and subsequently the escalation of house prices made the property market more unattainable for young buyers. History now shows that as quickly as the east coast property market soared in value, it also reduced – almost overnight!
Other observations show that in our largest population – the Baby Boomers – property purchase has been high on the agenda, not only with a residential home but also often investment properties. Changing attitudes also highlight a trend where many Baby Boomers are becoming “SKI” (Spending Kids Inheritance) advocates.
With the lack of provision for retirement and introduction of reverse mortgages, a lot of homeowners will need to release equity in their homes to fund their retirement. This, coupled with the fact that we are all living longer, means that there will be a greater impact on debt in our society.
So, where does this potentially leave the generations who follow us? Consider these questions:
- Should Gen Y’s really be so worried about getting into the property market at this point in time?
- For those struggling to get into the property market now, is it wise for them to borrow as much as 105% with some lenders of the value of their homes?
- Are they really investing wisely for the future? Or are they setting themselves up for financial failure?
Property will always be a great avenue to create wealth and the ‘Great Australian Dream’ of our own bit of land will continue for many years.
The key is to wisely manage debt levels and to treat the purchase of any property as you would any other investment or serious decision, and do your due diligence. Homework is critical in ensuring that we not only allow for the good economic times, but also the ‘not so good’. Property, like any other asset can go up and down, and managing your debt levels so as not to create a situation where the outcome is only painful, is important.
The message to all generations – but especially those Gen Y’s who are entering the housing market for the first time – is to remember that decisions about proper insurance, emergency savings, tax management, and retirement, should not be shelved in the rush to get into the property market.
A thoughtful balanced approach with suitable advisers along the way is, without a doubt, the best way to avoid any generational fallout from the use, overuse or misuse of debt.
Talk with your KFG Financial Planner today or call our qualified Debt Solutions specialist, Sofie Standfort directly on (08) 8415 2727, or contact us at info@kfg.com.au.
(KFG Debt Solutions operates as an independent business from KFG Wealth Management and is not licensed through GWM Adviser Services Pty Ltd.)
In our last article, Max and Gloria had lived on Bribie Island for about 10 years and were still kicking along quite happily. But they decided they wanted a change...
Usually at this stage, many older Australians would downsize, but Max and Gloria decided to build another house around the same size.
“We could have, and maybe should have, downsized. But we don’t see ourselves living in a unit or townhouse at this stage,” Max said. “Gloria still needs her space for a sewing room, and I like to have a big garage for a boat, camper trailer and the cars. And we still entertain a lot of friends.”
They found a block of land off Bribie Island at Sandstone Point, which is still one hour north of Brisbane, and built a new house.
“We just didn’t see ourselves in a unit or townhouse just yet,” Max said. “But if we had to put the house on the market suddenly, we could. We keep the place well-maintained so we could put it on the market with very little effort if we had to.”
Max and Gloria have been in their new home for three years, and apart from the change of location, Max and Gloria had no other lifestyle changes. They still use the same health and business services they always did.
Moribund though it is, it’s probably in the interests of Max and Gloria’s children that they are pragmatic about aging, illnesses that rob them of their decision-making capacity and accidents that might take them suddenly.
“I’ve got friends who don’t buy green bananas now because they think they won’t see them ripen.” said Max.
“Our wills are up to date, and include our grandchildren now,” said Gloria. “And we know that we’ll have to give up our independence some time, but we don’t have to do it at the moment.”
Max and Gloria also intend to do another caravan trip around southern Australia.
“About two trips ago we said we’d done our last major driving trip. But here we are again, going to caravan expos and getting the road atlas out,” Gloria said. “We can travel so we are.”
Unlike many self-funded retirees, Max has taken to using technology like a ‘brick duck’.
“I use the Internet, but I’m not that good at it,” said Max. “My son set my home page to my financial adviser’s page and that has all the information I need about my investments.”
“I look at my share prices three times a day after meals. Sometimes four, if it’s raining. But my preferred method of finding information is still the newspaper or magazines. We don’t use the Internet for banking, but a lot of what we do is automatic – rates, electricity, health insurance, phone bill. We do all of these by direct debit.”
“It means we can travel with no worries about coming home to no power or phone.” he added.
It also means that in the event of a health crisis, they don’t need a power of attorney to keep their affairs running.
Lasting considerations
Estate planning is something everyone at all ages should consider. It doesn’t mean you’re shuffling off to buffalo, but it means your family isn’t faced with unravelling your affairs while they grieve for you.
Talk to your kids about what you want. It’s likely they’ll have to make some tough decisions on your behalf.
Taking the guesswork out of those decisions will help them deal with it better.
You can be independent as long as you want, but consider developing a contingency plan. A car accident or sudden illness can force you to change your plans very quickly.
(If you would like to discuss your financial situation further, please contact us on (08) 8415 2700 or at info@kfg.com.au.)
 |
As Debt Solutions Manager, Sofie Standfort assists clients to turn bad debt into good debt and provides them with a loan structure tailored to their specific needs. As you’ll read below, a common thread in Sofie’s career has been her passion to help people achieve financial freedom through strategic debt management. |
CC: How did you get into mortgage brokering?
SS: I’ve been in the financial services industry for 3 years now. A lot of factors brought my career to where it is now. When I moved to Adelaide from Sydney 3 years ago I worked for the Commonwealth Bank as a lender. Prior to this I spent 5 years in fashion retail management whilst studying numerous courses ranging from fashion design to a degree in Commerce. I always knew I would want to be in an environment that was encouraging, supportive and truly cared about people. That is how I came to be part of the KFG team.
CC: What do you enjoy most about working in a financial planning business?
SS: I love the debates in the office around which is the better investment - property or shares. They always make for interesting discussion. I also love coming up with different solutions for clients’ situations and helping them to achieve financial freedom. It's a good feeling being able to help someone achieve his or her financial goal.
CC: What types of people do you think benefit from seeing a mortgage broker?
SS: I think anyone who is looking to buy a house, consolidate debts, review their home loan, or stressed about mortgage repayments should talk with a broker. We have the benefit of having access to multiple lenders - even ones you may not have heard of, and this enables us to compare many different loans that are on the market on your behalf. We receive advance notice of special offers from lenders, which saves you all the legwork and also means there are no hidden surprises.
Of course, you still need to be careful about who you choose as a broker. One way is to ask friends and family whom they have used and would recommend.
CC: Tell us about your worst moment in your financial career.
SS: There is no one specific moment. However, I find it particularly distressing when I hear of people who have been led astray and lost their money to ‘dodgy’ investment schemes or individuals whom they trusted them to look after them and their financial future.
CC: What about your favourite moment?
SS: Again I don't have a standout favourite, but I get really excited when I meet with people who have a financial goal, whether it’s to save a deposit for a house or pay off their credit card debt, and they achieve it. You can actually see the sense of achievement and pride in that person and they feel they can achieve anything. I love it when I can experience those moments.
CC: What do you do when you’re not working at KFG?
SS: My biggest passions are shopping for handbags, shoes and houses. I love expressing my character through my wardrobe and the houses pay for me to be able to do this. I am also addicted to sudoku puzzles!
CC: What do you think is the biggest challenge facing people today regarding their finances?
SS: Definitely, ‘keeping up with the Joneses’. I was having a conversation with my stepfather recently about when he was my age (20’s). He told me he held down 3 jobs, one of which was an above average salary at the time, a house and 2 kids. This seemed to be the reality for most people back then.
Can you imagine not being able to buy the latest gadgets, go out for dinner, or go on an overseas trip when you want to? Nowadays, we seem to want it all, and we want it now…sometimes so badly that we’re prepared to go into debt way over our heads by the age of 30 - with not much to show for it.
I like to encourage people to adopt a financial goal and do everything possible to fulfil it without going into debt…in other words, SAVE. You can take control of life and live with the freedom of no debt (with the exception of housing and investment). Don’t spend more than you earn and put a little away, and you’ll be setting yourself up for an enjoyable stress free, debt free life.
Renee and Scott join the team
 |
Renée has recently joined the KFG financial planning team as a Paraplanner, bringing with her over five years experience working within the financial services industry in both Client Service and Paraplanning roles. Renée feels very strongly about educating and empowering clients to achieve a greater level of financial understanding and independence. Her primary passion is people and as a result of her keen interest she has also completed a Bachelor of Arts Degree with a major in Psychology in addition to her Diploma in Financial Management. |
 |
Scott has very recently joined the KFG team. With over 10 years experience in the financial planning industry, Scott has worked in a range of different roles including client service, research and analysis and as a Financial Planner. Joining KFG as a paraplanner, Scott's professional interest lies in portfolio design and the technical issues surrounding financial planning. |
The Investment Review & Outlook for September 2007 is available by clicking here.
The Australian economy
The RBA Governor was still referring to the upside risk to inflation at his parliamentary appearance despite the 25 bps increase to the cash rate.
The RBA’s August Monetary Policy Statement released on 13 August showed higher inflation forecasts for both December 2007 and June 2008.….read more.
Australian shares
Australian market volatility soared in the first half of August on the back of further bad news of losses from exposure to CDOs and sub-prime mortgages..….read more.
The global economy
Inflation remains the primary concern of the US Federal Reserve while downside risk to growth will be monitored.….read more.
International shares
Global financial market conditions have settled in recent weeks. It is likely that a similar trading pattern will be seen in September as in August.….read more.
Whether it is just for a quick chat or to make an appointment, you can contact us by telephone: (08) 8415 2700, fax: (08) 8415 2701 or on e-mail: info@kfg.com.au.
Even better, drop in and see us at Level 6, 13 Grenfell Street, Adelaide. We really do have great coffee!