As the days get shorter (and wetter!) and temperatures begin to fall, Federal Treasurer Jim Chalmers presented his second Federal Budget on Tuesday 9 May. It delivered a surprise (estimated) surplus of $4b for this year, thanks to increased tax revenue and high commodity prices.
For a full analysis of the 2023 Budget, you can view our summary here.
The Budget came on the back of the Reserve Bank’s decision to increase the cash rate again by 0.25% to 3.85%. On the upside, the RBA confirmed that inflation has passed its peak but is still at 7%, well above its target of 2-3% and it doesn’t expect it to return to that range until around mid 2025.
The March quarter saw prices rise just 1.4%, the lowest increase in two years, although consumers are still feeling the pressure of rising prices in a number of areas. The most significant contributors to inflation remain fuel and utility prices, medical and hospital expenses, tertiary education and domestic travel costs, whilst goods price inflation is showing clear signs of slowing.
As we are now nearing the end of the financial year, it’s always a good time to review your superannuation. For accumulators who are still growing their retirement savings, there may be opportunities to make additional contributions prior to 30 June. Whilst for those in pension phase, it’s important to check you’ve met your minimum pension requirements for the year. Both of these are dependent on your personal circumstances so please reach out if you’re not sure so we can discuss this further with you.
Enjoy our new articles below and get in touch if there’s anything you would like to know more about.
Getting your bounce back
Life is pretty frantic, and it is common to feel like it’s a struggle to keep up the pace. In fact, feeling exhausted is so common that it has its own acronym, TATT, which stands for “tired all the time”.
While it’s somewhat comforting to know you’re not alone, it’s certainly not a nice feeling, so let’s look at some of the best ways to get some bounce back into your step.
Watch what you take on
One of the first and most obvious things is to look at your busy lifestyle and see if something has to give.
Don’t be afraid to decline invitations if you are feeling overcommitted, in particular say no to the things that are a drain on you physically or emotionally. No one can be busy 100% of the time and it’s important to ensure you have a little downtime to just do sweet nothing – even if you need to schedule it into your calendar!
As you manage your time think about what is most important to you and prioritise things that make you happy and give you energy.
Catching some zzzz’s
Of course, the most powerful downtime, is getting a good night’s sleep. If you are not a great sleeper making some small tweaks to your evening routine can help. Anything you can do to wind down, be it having a hot bath or reading a book, is great for getting in the right zone for a restful night’s sleep.
Avoiding screen time for an hour or two before bed is beneficial as the blue light from laptops and phones is known to trick your brain into thinking it’s still daytime. This reduces hormones like melatonin, which help you relax and get deep sleep.
And while caffeine may be your friend if you are feeling a little lacklustre, it’s not ideal to have caffeine after 3-4pm if you want to have a good night’s sleep.
Stress less to recharge your batteries
Winding down can be easier said than done, however – often we don’t even realise how stressed we are until it gets to a point where it creates a problem for us.
Being in a constantly anxious state is draining. Our body is sending messages to put us on high alert – the fight or flight response – which is fine for short periods of time, but when it’s constant our batteries get drained pretty quickly.
Simple practices like deep breathing and progressive muscle relaxation can be very effective in reducing stress and improving energy and don’t have to take a lot of time or effort.
The right fuel for sustained energy
No amount of relaxation or rest is going to help, if we are not giving our bodies the best fuel for energy. We can’t expect to perform at our peak if we are running on fumes, which is where a balanced diet and hydration are key. Sugar in particular, is a culprit in giving you a burst of energy and then a crash, so instead of reaching for that chocolate bar mid-afternoon, try a handful of nuts or a banana for an energy boost.
Another easy tweak is to make sure you are drinking enough water. Just putting a jug in easy reach on your desk can be enough to have you humming along through the day.
Get your body moving for an energy boost
The last thing you probably feel like doing if you feel exhausted is to pop on your running shoes or go out for a brisk walk, but getting your blood pumping and your heart beating fast is a great way to shake off the cobwebs and boost your energy. It’s important to listen to your body and pace yourself but expanding energy is a great way to create more energy!
Life is to be lived and making some tweaks to your lifestyle and routine might just help you get that boost you need to enjoy life to the fullest.
Note: It’s important to also consider that chronic tiredness can have a medical cause, so be sure and see your doctor if you have any concerns about your overall health.
Why an emergency fund delivers peace of mind
When life tosses up an unexpected event – such as retrenchment, a medical emergency or even just a big bill to fix the car – it can be nerve-wracking worrying about how to deal with the crisis. And, if funds are short, that just adds to the stress.
But imagine that you have a secret cash stash – an emergency fund – that will cover the costs, giving you the mental space to deal with the problem.
In fact, an emergency fund is the basis for a strong financial strategy and provides a crucial safety net. It makes sense regardless of your age or income because the unexpected can happen to anyone.
Without a cash reserve, you may have to rely on credit cards or loans, which can put a further strain on your financial situation and your mental health.
An emergency fund gives you the peace of mind to be able to weather the storms that come your way without racking up unwanted debt and interest payments.
How much is enough?
Of course, it can be tough to save when inflation is eating away at your income. Rising interest rates, rents and the cost of groceries is putting a big strain on households. The Australian Bureau of Statistics reports that household savings have been declining for more than a year as people contend with increased mortgage payments among the other rising costs.i
Nonetheless, by putting aside even a small but regular payment into a separate fund you will slowly accumulate enough to cover emergencies.
The size of your emergency fund depends on your own circumstances but an often quoted target is enough to cover between three and six months of living expenses.
It may differ if say, you are planning on starting a family and need funds in reserve to cover the difference between parental leave payments and a salary; you have children in school and want to be able to cover school fees for a year or more, no matter what happens; you need to take time off work to care for a family member; or you need to make an unplanned trip.
On the other hand, if you have retired, it can be helpful to have a buffer against market volatility. If there is a downturn in the markets and your superannuation is not providing your desired level of income, a year’s worth of living expenses in an emergency fund can make all the difference to your lifestyle.
The main thing to remember is that if you need to raid your emergency fund, start work on rebuilding it as quickly as possible.
Building your fund
Putting together a budget can help you to analyse how much you can afford to put away every week, fortnight or month. Then, consistently saving until you reach your goal is the key, no matter how small the amount.
It is best to keep your emergency fund separate from your everyday transaction account to reduce the chance of you using your saved funds for regular expenses. One option is to pay yourself first by setting up a direct debit, so your emergency fund grows automatically with no extra action needed from you, and to avoid the temptation to withdraw your savings.
The type of account you choose for your emergency fund is important. It should be readily available so, while shares and term deposits may offer higher returns, they are not quickly accessible when required. Shop around for a bank account that offers the highest interest to get the most out of your hard-earned income.
Building an emergency fund is an essential component of a strong financial plan, providing a safety net should something unexpected arise. If you are unsure of the best way to set up an emergency fund, we encourage you to reach out to us. We can provide guidance on the best options for your unique financial situation and help you take steps towards
Retirement planning: it’s not all about the money
Retirement is often a massive life change for the majority of people who experience it. Most of us will have mixed emotions around the end of our working life and the beginning of our ‘second half’. For some it will be a relief, and something they have long planned for and are looking forward to, but for others it will be a source of anxiety. This anxiety could be due to many factors including, but not limited to, concerns around the potential for running out of money, feelings associated with a lack of confidence or a lack of control and other factors we will discuss here.
While individuals’ wealth and health are obviously important for anyone heading into retirement, but we have found there are other factors that are usually more important in determining the life satisfaction for retirees.
Surprising results on retirement happiness
“Retirement: The now and the then” a survey of over 1,500 Australians over the age of 50 by Fidelity International, drilled into the many factors driving happiness for retirees, with some surprising results.
The survey found that the top four drivers of overall life satisfaction for experienced retirees – i.e. those with more than 10 years living in retirement – were:
Emotional experience relates to the sense of optimism and contentment that retirees feel. It was the strongest driver of overall life satisfaction and significantly more important that health and wealth.
Positive emotional experiences often correlate with retirement journeys that have been well considered and planned, or ones in which despite retirees’ plans not having worked out but in which they already had a Plan B or a backup plan. Negative emotional experiences are often felt by those people who may not have planned adequately and may have been forced into retirement through job loss or other factors out of their control.
Emotional roller coaster
This chart is a useful illustration of what range of emotions are possible during a retirement journey.
The green line shows that the emotional experience of a well-planned and prepared retiree is usually fairly steady with low stress levels and a generally positive emotional experience.
In contrast, the journey of the reactive retirement is much more variable where the lack of planning can lead to significant swings in lived emotional experience.
The journey of the person forced into retirement through an unplanned redundancy is much more unpredictable and can be a difficult period from an emotional perspective. However, it can also be turned around with the right mindset and often with the help of a good financial planner, as the alternative paths highlight.
Promoting a good life
In thinking about how best to prepare for a long and fulfilling retirement, we believe that there are six key building blocks that are important elements of any plan.
We call these the six Cs:
Firstly, there is capability, which is the agency and ability to act and adapt to optimise a good life trajectory. If a retiree has the capability, they have the potential to turn a negative emotional experience into a more positive one.
Then there is confidence, or the peace of mind and optimism to keep looking forward to a good life while still enjoying your existing life. We may all wish we had a bit more confidence sometimes, but this is more about inner confidence and the belief that you have made the right choices and are living, and will continue to live, a good life.
Control is another C. This is about feeling like the master of your destiny while avoiding the pain of uncertainty and failed expectation. Obviously being forced into retirement through a job loss or redundancy is a lack of control but having a plan B already in place can help regain that sense of control.
Circumstance is how we like to bundle health and wealth together. These are critical components for enjoying a good life. A major health problem can derail an otherwise planned retirement but if the other Cs are all there, the overall experience will be better.
Character refers to self-esteem and a person’s resilience. These factors can ensure a positive inner narrative which is important for a good life. Again, having the character and discipline to have a plan B already in place, to have a flexible disposition and a positive outlook significantly helps build resilience to life’s unexpected turns.
And finally, there is connection, which refers to a sense of connection with family and the community. Quality relationships and being able to look beyond, or transcend, a purely inward focus are central pillars of a good life. It turns out thinking of others is also good for us too.
Lessons from the ‘elders’
There is a lot to be learned from those that have journeyed before us and retirement is no different. Our survey asked experienced retirees about lessons learnt and challenges did they not anticipate.
Many said they underestimated the emotional impact of retirement, such as their sense of loss of purpose and their personal identity when they retired.
Many also said that due to unexpected life events – such as losing a partner, health and mobility issues or dealing with homecare and aged care needs – they needed to be flexible and had to adapt and change their plans during retirement. Some downsized their homes or returned to work, to do more in retirement.
The two most important pieces of advice that late retirees can give to pre-retirees are not financial but emotional.
First, having a positive and optimistic outlook on life received the joint highest vote in our survey at 64% of respondents.
Second, also from 64% of respondents, investing in your health, and do it early, don’t leave it until too late.
Being flexible and adaptable was the next most popular at 61%, followed by finding purpose beyond work at 58% and taking control early with 55% of the vote. Always having a plan B was also important with 52% of the vote.
Plan beyond wealth
We hope that pre-retirees can incorporate some of these insights into their retirement plans. It’s not just about wealth, the size of retirement savings and how to build that over time. There are more important factors that can build a satisfying and happy retirement.
The survey showed that having a positive outlook with a sense of confidence, taking control and forming a sense of connection with friends, family and community are significant in building and maintaining a happy retirement.
Reproduced with permission of Fidelity Australia. This article was originally published at https://www.fidelity.com.au/insights/investment-articles/retirement-planning-its-not-all-about-the-money/
This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information. You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity Australia’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise.
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