The detailed report can be downloaded from the following link:

Global Market Update

• The S&P ASX100 Accumulation Index lost 4.37% in July, as Global debt concerns continued to overshadow domestic issues
• Most of the market was negative, however resources (-2%) fell significantly less than the industrials (-4.7%)
• The outperformance of the resource sector was in part due to the return of M&A activity (MCC, SDL)
• The real weak spot continued to be domestic retail, with very soft sales figures pushing all of DJS, MYR, HVN & JBH down more than 10%
• What is already a challenging environment for growth was further undermined by restrictive government policy (carbon tax)
• The $A closed the month just over $1.10, at the top of its recent trading band It would seem the RBA is still on hold for the next few months. While they are still talking the next move being up, the market thinks otherwise

Resources

Coal (Coking/Metallurgical)

• Experiencing price resilience around US$330 per tonne level in past few months as markets settle post January Queensland floods
• March Japanese earthquake didn’t rattle market, despite country being a major coking coal importer
• Forecast Japanese steel mill production of 27 mill tonnes for remainder of 2011 would be down only 2.8% on first half
• Although Chinese imports remain subdued, good underlying demand with 1.97 mill tonne daily rate in April a new record
• Quarterly contract prices expected to remain above US$300 per tonne for balance of calendar year

Silver

• World’s top silver miner, Mexico’s Fresnillo plc, reported first half production of 21.5 mill ounces (2.6% higher than the 20.9 mill ounces of previous first half) and on track for annual 44 mill ounces, which is some 6% of world production
• Top Five silver miners account for 22% of global production with BHP Billiton and KGHM next (5% each), then Pan American Silver (3%) and Goldcorp (3%)
• Primary silver output represents 24% of total global supply, slightly behind co-product from lead/zinc mining (27%), recycled scrap (23%), copper mining (17%) and gold (9%)
• Price has corrected from near US$50 per ounce record in mid April 2011 and likely to stay around current $40 per ounce mark for balance of year

Uranium

• Japan’s biggest-ever earthquake on Friday 11 March triggered a series of tsunamis, highest of which was 38.9m (15 stories) and travelled up to 10km inland
• The island of Honshu was permanently shifted 2.4m east, while the earth’s axis moved 10cm for a period
• Even the ionosphere was affected with tsunami-generated space waves
• Back on earth, uranium markets were buffeted with prices and confidence falling significantly
• Outlook improving of late as testified by private Chinese group Hanlong bidding for ASXlisted Namibian uranium explorer Bannerman Resources

International

US

• Debt crisis seems to be averted now but given the ceiling has been raised 50 times in 70 years it was largely a political stunt anyway
• GDP growth has been revised down, manufacturing, employment and spending data is weak
• Risks of a second recession are rising
• Interest rates are at 0.25% and likely to stay low until the end of year
• Debt crisis has hurt investor sentiment and economy is slowing so downside risks are increasing but monetary policy is still the only positive factor

UK

• Manufacturing fell in July and 2nd Quarter GDP was just 0.2%, the International Monetary Fund (IMF) have warned that more stimulus may be required
• Interest rates are to remain on hold at 0.50 despite inflation and another round of QE possible
• Fundamentals are poor so there is no solid reason for a bull market in UK equities. Market may hold up providing the US maintains ground

Europe

• Greek default was rolled over but Euro debt problems still remain that have not been resolved.
• Economy is slowing, PMI for France and Germany at 21 month lows.
• Interest rates are currently at 1.50, ECB raised rates by 25bp but the need for further action is diminishing
• Trend is faltering given Euro debt problems, easing growth and rising rates. If US holds up then it may steady but otherwise it is turning bearish

ASIA

China

• PMI declined to its lowest level in 2 yrs indicating slowdown is underway & inflation should follow, some are warning of a hard landing but we rate this is a small risk at present
• Interest rates at 6.5, close to peak in monetary policy
• No trend evident but value is building as 18 mth range continues, look for an upward break once monetary policy is normalised

Indonesia

• Foreign capital inflows are among the highest in Asia attracted by higher yields and solid growth, inflation has eased
• Interest rates are at 6.75 with currency appreciation doing most of the work but some increases are still likely
• More new highs makes Indonesia among the best performing markets globally, probably overbought but still positive. Unlikely to be sustainable if other markets roll over

Bonds

US

Yields at YTD lows. Hard to imagine that US bonds are viewed as a safe haven given the risk of default (we wouldn’t touch them) but clearly the bond market has no expectation of that happening

UK

Yields are now below GFC lows in a strong indication that all is not well in the UK, this is highly unusual given the current inflation rate

Corp Bonds

Spreads have increased but corporate & EM bonds are performing strongly on plunging yields

Download update:
July Market update

Australia

• The S&P ASX100 Accumulation Index lost 1.66% during June, finishing the financial year with a reasonable 11.5% total return  
• Our market continued to be driven by global macroeconomic issues, in particular the Greek debt crisis and the end to quantitative easing in the US
• Defensive stocks continued to outperform the cyclicals, with Consumer Staples up again (+0.6%)
• Part of the positive move in Consumer staples was driven by a $4.90 per share bid for Fosters (+18%) from SAB Miller. The FGL board has rejected the bid and the shares continue to trade at a premium to bid price
• Woodside (-­‐12%) fell significantly on a cost and timing blow out for its Pluto LNG project. It is worth keeping an eye on companies starting up major projects, as this may prove the beginning of a trend
• In late June Telstra signed the long awaited NBN deal with the government, however the share price fell due to some concerns regarding the terms
• The RBA remained on hold again due to a drop in GDP growth domestically and concerns regarding the recovery offshore

Resources  

Copper  

• Price strength of late from US$4.10 to US$4.40 per pound now within US$4.50 per pound record high set in February 2011
• World-­‐wide recovery from GFC continues to underpin demand as off take fundamentals return to normal
• China continues to provide further growth in 2011, now accounting for 39% of world’s refined copper demand (up from 28% in 2008)
• Japanese earthquake in February knocked 0.6% off country GDP but still as world’s third largest economy
• Potential substantial supply gap from 2020 onwards
• 2011 price expected to average more than 2010’s US$3.60 per pound

Steaming Coal

• Chinese seasonal (summer) power shortages much earlier than expected due to strong demand and lack of generating capacity investment
• Government has ordered power rationing in various provinces to alleviate blackouts
• Such long term factors positive for Asia Pacific thermal coal prices
• Domestic Australian prices now on par with Newcastle export price as Chinese independent power producers source coal from international market
• Seasonally strong northern hemisphere summer is increasing thermal coal imports
• Current spot of US$120 per tonne likely for balance of calendar year

Platinum  

• Auto catalyst demand up 43% in 2010, to 3.1 million ounces
• Chemical sector off take 53% higher over same period, to 445,000 ounces
• Ongoing production outages from largest producer South Africa due to electricity, skilled labour and water shortfalls plus political factors and technical mining difficulties
• By-­‐product nature of output from base metals mining in Russia and much of Canadian operations has restricted production
• Tighter emissions standards typically require increased platinum per auto catalyst
• Rebound in vehicle demand from developed economies in 2012-­‐13 to underpin prices longer term    

International  

US  

• Consumer confidence at 7 month low, spending weakest in 12 months, housing prices down 4% year on year
• Peak in oil prices is a positive
• Monetary policy trumps most other factors & sharp rebound suggests a move to new highs YTD is possible

UK  

• Producer Manufacturing Index (PMI) fallen to a 2 year low as economy continues to back slide – Bank of England (BE) warning of 3 more years of pain before things improve!
• Market testing high’s for the year and move higher supported by the US trend looks possible but fundamentals are poor, prefer US

Europe  

• Debt crisis has been delayed but not resolved and will remain a negative
• Inflation at 2.7% remains above 2% target, some evidence of growth easing as German retail sales have biggest drop in 4 years
• Increasing rates a negative, unlikely to be best performing equity markets despite the trend being up, prefer US

ASIA  

China  

• Inflation still rising but moderating, until it peaks it remains the key negative for markets
• Reserve Requirement Ratio (RRR) increased again but close to peak in monetary policy
• While monetary policy tightening remains in place the market will remain in its 18 month range, but a change in policy will open the door to rally  

South  Korea

• Household debt is higher than US during GFC & is strangling domestic consumption, Central Bank taking measures to correct this
• Exports still booming
• Despite rising interest rates the market trend is still upwards

Bonds

US  

• Yields fell to new lows YTD and below 3% as Greek debt crisis dominated sentiment, flight to quality into US debt hard to comprehend given US debt levels

UK  

• Yields fell to new lows YTD driven by stalled economy and increased chance of QE by the B of E

Corp  Bonds  

• Corp Bonds High grade & high yield spreads have increased marginally, but record investor inflows is a negative for contrarians

Download update:
June Market update

The detailed report can be downloaded from the following link:

Global Market Update

Australia

• The All Ordinaries Accumulation Index lost 1.9% during May, as risk aversion was back in fashion.
• Questions were again being asked about global growth as weak economic data, both domestically and abroad, hit the $A (-­‐3c vs. $US) and WTI Oil (-­‐$11 to US$103).
• Defensive stocks outperformed those with more cyclical earnings -­‐ Telstra continued its rebound (+4%), while Consumer Staples (+0.5%) beat Consumer Discretionary (-­‐3%).
• In Consumer Discretionary, Retail was hit hard, with MYR, DJS & JBH all down more than 9%. Media was also hit as FXJ (-­‐18%) had a profit warning due to the softening ad market.
• Mid month Treasury Wine Estates (TWE) was spun out of Fosters, with the latter adding 6% on the back of further rumours of a foreign takeover.
• The RBA remained on hold in May although inflation data seems to be leading a push for another rate rise sooner rather than later.

Derivatives

• The Australian Vix Index which measures volatility in our markets has moved in a narrow band of 18 – 19% which is indicating that uncertainty over market direction is rising, be it slowly.
• The continuing strength of the $AUD, weaker GDP growth in the March quarter, is leading to downward pressure on equity markets. The political morass is also not helping our market, as foreign investors reduce or hold their capital flow.
• Uncertainty leading into the reporting season is also starting to feed into our markets, primarily driven by uncertainty regarding China growth metrics. Volatility is therefore anticipated to rise in the upcoming months.

Resources

Aluminium

• Demand expected to grow by 12% in 2011.
• China is largest consumer (52% of global output).
• China’s production mainly goes essentially to internal consumption.
• Light-­‐weighting of transport vehicles and rail wagons are key energy efficiency initiatives (over 120 million vehicles to be built in China in next five years).
• Urbanisation in developing countries is main driver to construction usage.
• Electrical infrastructure development in China and developing countries is underpinning demand.

Iron Ore

• April global steel output increased 1% month-­‐on-­‐month and 5.4% year-­‐on-­‐year.
• Improvements were posted during the month from France, Turkey, China, India, South Korea and Australia.
• Iron ore prices for quarter to 31 September 2011 in line or possibly higher than immediately preceding quarter (to 30 June 2011).
• Price support expected during September quarter due to Indian supply disruptions caused by monsoon season commencement, which is usually in May.

Zircon

• Price up 60% since beginning of year.
• Main use is ceramics (wall and floor tiles and sanitary ware) with 60% of demand and increasing with Chinese urbanisation.
• Foundry sands and refractory applications account for 22% and consumption increasing slightly.
• Overall market remains tight with world’s largest supplier Iluka Resources rationing customers.
• Price rise to date likely to consolidate and be retained for balance of 2011 at least.

Global Market

US

• US High oil & food prices constraining growth in short term, durable goods orders down & IP stalled.
• Economy slowing to 1.8% y/y but jobs growth should continue
• housing still near record lows Current = 0.25, CPI @ 2yr highs but Fed claims current inflation is temporary so rates to stay low until year end at least
• US likely to pause after hitting new YTD highs, trend is still upwards & monetary policy remains a positive driver in the short to medium term

ASIA

China

• China Growth slowing & inflation may be near a peak
• electricity shortages & monetary policy raises risk of hard landing
• state of property market a major talking point
• How China comes out of this period is critical for global outlook,
• a peak in inflation & monetary policy will be positive (our current view) but an overshoot & hard landing will be a MAJOR negative, needs to be watched carefully

Japan

• Japan Officially back in recession
• Industrial Production down 15% m/m & probably still worse to come before reconstruction demand kicks in Q3/Q4
• Some suggesting Japan is cheap but the upside is a long way off & there are better opportunities

Singapore

• Singapore GDP up 8% y/y in Q1, but likely to slow,
• property taking off again so further measures to slow it are likely
• Monetary Authority of Sinpagore will continue tightening bias via SGD but less aggressively
• Singapore fundamentals are still strong but a peak in tightening cycle is required for market to resume upward trend

UK & EUROPE

UK

• GDP forecasts cut to under 2% & inflation pushing 5%+,
• consumer spending falls most since Q2 ’09, but exports rising at fastest pace in 30yrs,
• inflation likely to be above target of 2% this yr & next,growth taking priority
• The UK has not been able to clear Mar’11 high & -­‐ve YTD, significant gains look difficult given fundamentals

Europe

• German growth surprises again (+5.2% y/y) but Euro debt problems back in the headlines, Greek default a matter of time,
• ECB likely to raise rates again which is negative for stocks,
• GDP forecast <2% in 2012
• ECB on tightening bias & look set to increase rates by another 25bp
• German growth looks ok but rest of zone poor, debt problems, increasing rates a negative, unlikely to be best performing equity market

Bonds

AUS

• After the release of data which showed the Australian economy shrank during the March quarter, a small change to the longer term bonds was weaker. Three to10 year bond futures fell slightly.
• Short term rates are steady, but the pressure is building for the RBA to raise official rates sooner than later, as inflationary items come to the surface.
• The benefit for investors will be in short term interest baring investments compared to long term.

US

• US Bonds Yields have fallen again despite CPI rising, slowing GDP growth & risk aversion in May the key factor
• Longer term yields will be much higher but in the short term market remains distorted by Fed & end of Fed buying may be catalyst for yields to rise, avoid Govt bond allocations

UK

• UK Gilts Yields fallen to lows for the year @ 3.27% despite CPI rising & above target, economy has stalled the main driver
• Yields look set to remain low & below 4% for some time but longer term will be much higher, no value in owning bonds

Corp Bonds

• Corp Bonds High grade & high yield spreads have stabilised, investor exposure in still near record highs
• spreads are low & have probably fallen too far, investors are already very long so a reversal of positioning would be negative

Download update:
May Market update

• The ASX100 accumulation index was range-bound during April, closing virtually flat (-0.07%).
• $A strength, or rather $US weakness, was the story of the month – with the local currency moving from $1.03 to $1.097.
• The impact on the market was to build in expectations of downgrades for those companies with significant offshore earnings (ALL, IPL, BBG).
• Despite improving commodity prices, the resource sector underperformed the broader market. This was in part due to poor quarterly production data.
• The defensive nature of Telstra (+3.2%) and the Financials (NAB +4.8%) attracted buyers during April, a trend we think is likely to continue.
• Rumors and fact with regard to M&A also helped the market, with Computershare taking advantage of the $A to buy BNY Mellon’s shareholder services business.
• The RBA held rates in April (and have done so again in early May) at 4.75%. The market is factoring in one 0.25% move by July.

Resources Nickel

• Inventories are starting to decline again following a short period of net inflows during the latter part of 2010.
• Sumitomo Metal Mining says Japanese government to support SMM developing major Isabel lateritic nickel in Solomon Islands through provision of 30% of investment.
• Production increasing from lower cost nickel pig iron.
• Some higher marginal output from established sulphide operations later in year.
• Price rises to dampen in latter part of calendar 2011.

Tin

• Demand (and price) benefiting from main use of soldering in burgeoning electronics and television industry.
• Higher demand for tin in solder as lead phased out.
• Record-breaking price performance has not yet triggered significant industry supply response.
• Japan’s huge participation in electronics sector could be impacted medium term by March earthquake damage.
• Ongoing supply disruptions from Indonesia, world’s second largest producer and biggest exporter of tin, as government limits exports of unprocessed ore or concentrate in favour of added-value products.

Zinc

• Japanese earthquakes closed 65% of country’s production of galvanised automotive steel sheet and building construction applications.
• Some output now coming back on stream.
• More cars sold in China in 2010 than any other country at any time in history.
• But 30% sales growth to more than 18 million vehicles probably unsustainable as car restrictions under consideration to reduce Beijing traffic congestion.
• Inventories remain high and supply/demand balance is not conducive to significant price gains this year.

Global Market Asia

• Asian heavy weights China & India are the most significant drags.
• YTD performance lags behind the leading developed markets, rising inflation leading to tighter monetary policy is the main factor behind the under performance.
• China increased interest rates for the 5th time & the Yuan has been allowed to rise more quickly, the economy still grew 9.7% in the 1st qtr.
• But evidence continues to build that this extended period of tightening is having an impact, manufacturing slowed in April, fixed asset investment is falling & inflation is expected to ease in the 2nd half.
• We see China “H” shares as a developing opportunity. When/if inflation peaks & monetary policy moves to “on hold” we expect China stocks to move much higher.
• The 1st set of data from Japan is as bad as expected, Industrial production fell 15.3% in March, the sharpest fall since 1953, in addition, household spending fell a record 8.5%.
• The Nikkei has been relatively stable over the month, it seems anybody needing to sell has done so, but it will take some time before the economy can support rising prices.
• Asian currencies have been rising against a weak USD, there is some talk of intervention to halt the speed of that rise but that is unlikely, inflation concerns still dominate central bank thinking.
• Higher currencies will have a negative impact on exports & growth and reduce the need for tighter monetary policy which is very unpopular domestically, as a result, Asian CBs will tolerate further appreciation.

US

• US equities have rallied to new highs for the year & their highest level since mid ’08, US Small Caps are now at record highs
• The possible downgrade of US debt rating & the US deficit had a big impact on the USD but equity investors do not seem to be worried.
• The Fed has played a clear role in the rally to new highs and has indicated that interest rates will remain at near zero lows for a good while yet.
• The economy has slowed to 1.8% pa from 3.1% in Q4 but there are still concerns about the sustainability of the recovery once QEII comes to an end.
• Confidence has improved from a 16 mth low as a result of an improvement in the jobs market – retail sales are up 7.0% y/y, but higher food & energy costs are starting to squeeze households.
• Oil prices are therefore a concern, some research suggests oil in the $135-$150 will reduce global GDP growth by 2-3%. Clearly the US & the developed world cannot afford this & a double dip recession would result.
• But while the Fed tells us there is no inflation (& we believe it!) they will continue to keep rates low.
• How the US is going to fix its debt, deficit & real inflation issues is a BIG problem & it is unlikely to end well. But for now that is a tomorrow’s problem.

UK & Europe

• The German DAX rebounded very quickly from last month’s sell off and is now trading at its highest level since early ’08.
• The ECB was the first to move with an increase in interest rates, the Euro has now reversed nearly all of the 2010 fall.
• This currency fall was important in the export surge in Germany during ‘09/10, a higher Euro will be negative. GDP is forecast for 3.1% y/y this year, but some leading indicators are turning down & growth may only be 2% y/y in 2012.
• With the ECB likely to increase rates further, a strong Euro & a slow down in growth it is difficult to see German stocks keeping pace. Needless to say the rest of Europe is in much worse shape
• The FTSE 100 is testing its highs for the year, but performance still lags behind the US & even Germany.
• UK Retail sales fell by record amount in March. Household spending power is being eroded at the fastest pace in 60 yrs as inflation rises & wages stall. The stalled UK economy also is causing concerns over job security for households.
• Growth estimates have been trimmed to under 2% for 2011 with 2012 only marginally better. While this will probably delay rate rises, which is positive, there are other opportunities available.

Bonds

• Bond yields have fallen again after peaking in early Feb’11
• Equity markets are pricing in ongoing recovery in contrast with bonds as falling bond yields do not normally equate with this view.
• The bond market is distorted by Government intervention so we need to be careful drawing conclusions.
• The Fed are still indicating interest rates are likely to remain low for some time but bond investors seem comfortable accepting the view that there is no inflation at present.
• Spreads to corporate bonds fell to their lowest level since mid ’07.
• Investors are chasing corporate bonds for yield but with spreads at these levels there is no value. Stocks with decent dividend yields are much more attractive at these levels.

Download update:

April Market update

You might already have insurance to protect your home, car or valuable possessions from damage or theft, but if you become seriously ill or injured those assets could still be lost if you are unable to work.

It’s estimated that less than 10 percent of Australians have insurance against loss of their income, yet it’s often considered to be the most important type of insurance cover needed for income earners.[1]

A lack of income protection cover is a real issue. In 2005-06, the Australian Bureau of Statistics reported 43% of people suffering a work-related injury did not receive any financial assistance for time off work.[2] Those who become ill or injured away from work cannot even access workers compensation, making their financial situation even more precarious.

Income protection insurance

Income protection insurance can help support you financially if you suffer an illness or injury that prevents you from undertaking your normal employment. It provides you with an income based on your usual earnings, so that you can continue to support yourself and your family financially.

Income protection is important for all working Australians but is considered to be an essential type of insurance for those under age 50, who are generally more reliant on their salary than someone who has been able to build up assets over the course of their working life.

Income protection can ensure you are paid up to 75% of your normal salary if you are disabled and unable to work. A good policy should also;

• pay for rehabilitation programs,
• provide cover if you are overseas, and
• supplement your income if you are only able to return to work in a reduced capacity.

Should you be injured or too ill to work, income protection insurance can provide you with pre-determined, regular payments based on your income. It’s different to health insurance which covers medical expenses, but does not compensate you for time spent recuperating at home.  Unlike other forms of insurance, you can access income protection benefits when you most need them, not only upon your death.  Put simply, it’s ‘insurance for living’.

Why you need it

You should consider this type of insurance if the loss of your salary or wage would cause you or your family significant distress, and you couldn’t get by on government benefits alone. For example, if you are paying a mortgage, or your partner is reliant on your salary, income protection could be an important consideration for you.

One way you may be able to access income protection cover is through your superannuation (super) fund. Income protection (or ‘salary continuance cover’ as it is often called) offered by super funds is usually cheaper than purchasing an individual policy as the super fund trustee/s normally arrange cover at concessional (group) premium rates. You also have the convenience of having the premiums deducted from your super account automatically, eliminating the need to make arrangements to pay your premiums separately.

It can be difficult to find an insurance policy that covers everything you might need at a reasonable price. Your financial adviser can offer expert advice and take the time to gain a full understanding of your situation to ensure they recommend the most appropriate policy to match your needs and budget.

[1] MoneyManagement.com.au article, refer: http://www.moneymanagement.com.au/Articles/A-matter-of-life-and-death_0c037a25.html

[2] ABS, refer: http://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/4C1F7A19EF4AEEA9CA2572490018107D/$File/63240_2005-06.pdf

For more information about income protection, contact us at sgray@chesterfields.com.au

General Advice Warning

Information contained within this article has been prepared as general advice only as it does not take into account your investment objectives, financial situation or particular needs. The presentation is not intended to represent or be a substitute for specific financial or investment advice and should not be relied on as such.  You should consider whether the information is appropriate to your situation, and where appropriate, seek professional advice from an adviser before making an investment decision.

If you choose a ‘balanced’ profile, it generally means you are willing to take a moderate amount of risk with your investments and probably have a combination of higher risk investments, such as shares, together with lower risk investments, such as government bonds.

The problem with risk profiling is that an investor’s risk tolerance is dynamic. Interestingly, in a bull market, when asset valuations tend to be higher, investors are often more willing to take on a higher level of risk. In a bear market, however, when valuations tend to be lower and therefore asset prices less expensive, investors tend to be more risk averse. In essence, our risk tolerance tends to increase at the exact time we should be scrutinising our portfolios the most!

So, how do we get away from this way of thinking? One way is to set a savings goal and only take as much risk as is needed to reach your target. Even as markets move up and down, the overall level of risk will remain the same. That way, you are not tempted to stretch your risk tolerance just because markets are strong.

Another way to look at your risk profile is to look at age-based risk profiling.

Investors in the accumulation phase might be more willing to take on a higher degree of risk in their portfolios because of their stage in life. Generally, these investors will have a longer investment time horizon and/or earnings capacity, allowing for more time to ride out the volatility in markets.

As an investor gets closer to retirement and looks to start drawing down their accumulated funds, their risk profile is likely to become a little more conservative, simply because losses at this later stage of life are harder to recoup as there is less time available.

In the retirement phase, an investor can use an appropriate combination of both of these strategies. The population is ageing; people are now living longer. To meet their expected lifespan, investors need to manage their accumulated pool of savings by targeting a certain level of earnings. What does this mean? For a risk averse investor, who avoids shares and other more volatile investments, the biggest risk is that their savings run out before they do! Investors, therefore, may need to consider holding a portion of higher risk investments in order to meet their overall retirement needs; being mindful, however, to limit that exposure to manage any market volatility.

For more information about risk profiling, contact us at sgray@chesterfields.com.au

General Advice Warning

Information contained within this article has been prepared as general advice only as it does not take into account your investment objectives, financial situation or particular needs. The presentation is not intended to represent or be a substitute for specific financial or investment advice and should not be relied on as such.  You should consider whether the information is appropriate to your situation, and where appropriate, seek professional advice from an adviser before making an investment decision.

Financial Literacy: Australians understanding money reports on the results of a national survey of Australians and money.

Around 90 per cent of Australians are highly confident in their ability to budget and 57 per cent recognise the importance of budgeting. Yet 48 per cent of adults say they don’t budget regularly for their day-to-day finances and 27 per cent admit they have difficulty setting money aside for big purchases.

Interestingly females were more likely than males to say they budget regularly, but were less confident than males in coping with financial emergency.

Why budget?

Successful budgeting is the key to good financial management. Budgeting is a simple activity that helps to track income and expenses. By understanding your day-to-day finances, you’re better able to judge whether spending is essential or optional and to think about ways to curb spending and save more.

By making a plan and setting goals, it’s easier to stay within your budget by having something to work towards.

Savings goals can be anything from saving for something specific, getting debt under control, saving for a deposit for a house, investing or saving for retirement

A budget is a powerful too to help you take control of your money, ensuring you can enjoy your desired lifestyle today whilst putting aside adequate savings to help you reach your financial goals over the longer term.

Some easy tips on budgeting

• Don’t make your budget so tight that it’s impossible to stick to. A successful budget is one that’s flexible in difficult times but rewarding when finances are good.
• If you blow your budget one month, try to make up for lost finances in areas that are more flexible.
• Revisit your budget regularly, say every three months, to see if there are any areas you can tighten up to improve your savings potential.
• You can start a budget by simply writing down what you spend over a couple of months. Remember your budget is your personal tool and you can choose how much detail you want to include.
• When starting out, you may find it helpful to put your spending into categories – such as groceries – rather than keeping tabs on individual items.
• There are no hard and fast rules when it comes to creating a budget. The key is that you understand it and are able to follow it.
• It might be helpful to work with two groups of expenses – essentials such as bills, public transport costs, housing (rent or mortgage), groceries, health etc and extras which include the added expenses like entertainment, holidays, gifts etc.

For more information about the benefits of budgeting, contact us at sgray@chesterfields.com.au

General Advice Warning

Information contained within this article has been prepared as general advice only as it does not take into account your investment objectives, financial situation or particular needs. The presentation is not intended to represent or be a substitute for specific financial or investment advice and should not be relied on as such.  You should consider whether the information is appropriate to your situation, and where appropriate, seek professional advice from an adviser before making an investment decision.