20
Nov 2015

What generation am I and what does this mean for my finances?

What generation am I and what does this mean for my finances?

Written by Hudson Editor Hayley Mcleod 

When economists and social commentators talk about “the generations” I often wonder who they are talking about and what generation I fall into. I also wonder what this means for me financially. 


The Greatest Generation
Born: 1901 – 1924
Financial influences: The generation that includes the veterans, who fought in World War II and had their coming of age during the Great Depression.

The Silent Generation
Born: 1925 - 1945 
Financial influences: Generally recognized as the children of the Great Depression, this event during their formative years had a profound impact on them.

The Baby Boom Generation
Born: 1946 up to 1964
Financial influence: This group has suffered the most when it comes to the GFC and recent economic events and changes. Researchers say baby boomers are pitching in to cover areas neglected by public policy, helping their elderly parents and adult children. The more governments take from this group, for example in cutting superannuation concessions, the less capacity they'll have to provide help across generations.

More Baby Boomers are setting up their own Self Managed Super Funds and taking their destiny in their hands. Many are investing in shares, but more and more are investing in property. They aren’t fans of debt, often preferring to have tangible assets (like a house) as their security. They understand the value of hard work, having worked many years to service their obligations financially. 

Generation X (also known as the 13th Generation and the Baby Busters)
Born: 1965 - 1980
Financial influence: This group is often referred to as the most educated generation up until Gen Y. Unfortunately, however, this came at a cost and many GenX spent so many years studying that it delayed their entry into the workforce and thus their ability to accumulate wealth. The spiralling cost of education on this group has also greatly impacted wealth creation. They have, on the other hand, lived through the share market rally of the 80’s, in turn learning more about investments and diversified portfolios than previous generations; but this has not stopped them from holding the lions share of credit card and personal loan debt. 

Generation Y (the Millennial Generation) (or Millennials)
Born: 1981 – 2000
Financial Influences: This group has been greatly influenced by technology and it is this, accompanied by a fast paced society, that has given this group an expectation of quick results. This means they don’t share an affinity with long term investing like their boomer parents (or grandparents). Instead money is for the now and to be used on themselves and their lifestyle. Saving is not a strong point of this generation.

Generation Y, in some respects, feel that previous generations have pushed them out of the market with house prices having gone up significantly in the last 20 years and the financial decisions of their predecessors and those in power reducing their ability to fund an attainable lifestyle. 

This generation is slowly coming around to investing and debt reduction and will need to if they want to enjoy a relaxing and fulfilling retirement. 

Generation Z (also known as Generation I, or Internet Generation, and Generation Text)
Born: 2001 – 2012 
Financial influences: Time will tell.

These are very broad indicators of what economists and scholars believe encompass the mindsets of these generations. In the grand scheme of life we are all in control of our own destiny and financial future. No matter what generation you fall into give your Hudson Adviser a call to discuss your financial future. 

It is interesting to think about overarching traits of a generation and how it has shaped their outlook on finances – perhaps we can all learn a little more from our past and future generations?


Source: http://au.pfinance.yahoo.com/compare/savings/article/-/12863744/baby-boomers-gen-y-gen-x-and-their-approaches-to-personal-finance/ Read in full + comments 0 Comments

20
Nov 2015

Lending – getting it right

Lending – getting it right

Written by Hudson Adviser Michal Park

A recent member debacle has been the inspiration behind presenting a finance article this week. In particular, two aspects:

1. The importance of getting the finance structure correct, and
2. Why brokers are better than personal bankers

Structuring lending correctly can literally save individuals thousands of dollars as well as save immeasurable pain and suffering. This has been highlighted to me this week, when a Hudson member sold his principle place of residence (PPR), only to find that it had been used as security for an investment loan established several years ago to fund a residential investment property purchase (not via Hudson). This is called cross-securitising. The problem arose because when that PPR was sold, the security for the investment loan effectively no longer existed, so the bank wanted to use the proceeds from the sale to pay down that associated investment debt, in order to strengthen their position (It is important to note that this can be done without permission, as permission was already sought at the time when the loans terms were first accepted). The member had no intention of paying down any of the investment debt.

The key issues in this scenario are:
  1. If the bank paid down the investment debt, the deductibility of that debt is lost forever (as confirmed by the member’s accountant). It cannot simply be reinstated with the deductibility in tact. 
  2. The bulk of investment debt (80%) should have been secured by the investment property itself, with the PPR securing only enough to fund 20% plus costs. 
  3. This 80/20 structure also works to avoid Lender’s Mortgage Insurance which can be significant. Cross securitising like this certainly works in the banks favour as it can be very difficult to up and change lenders. #Please note: in some cases cross securitising may be necessary in order to maximise one’s equity position, depending upon the purpose and amount of funds required. It may also be advantageous from a pricing perspective depending on the lender and level of debt.  In regards to using brokers as opposed to personal bankers, it really is a no-brainer. 
Finance brokers can offer:
  1. More effective finance structures – no need to cross securitise assets to keep your business, 
  2. Greater choice – a broker is not limited to a specific financial institution's products, therefore, they can provide a greater range of products to suit your requirements,
  3. Greater discounts – a broker can offer greater interest rate discounts as they are not trying to attain internal KPI’s or the like. 


WHY use the Hudson Finance Division to apply for a loan and NOT your local Bank?


  • Familiarity of your financial position – Because you are a member of the Hudson Institute and have a dedicated financial adviser we have access to all your up to date financial information. This makes the initial assessment of your financial needs easier and the application process a lot smoother.
  • We want your loan to be approved – We don’t charge any fees to our members for our services in the finance division. We get paid a commission from the lender upon settlement of your loan. We therefore don’t get paid unless your loan is approved and settled and thus we will present your loan application in the best light possible to the bank. Keeping a close eye on any policy changes within our lending panel and ensuring that we have all necessary supporting information available to get your loan approved assist in this process.
  • A smooth transaction – We will work hand in hand with your financial adviser and Solicitor/Conveyancer (if purchasing) to ensure that the approval and settlement proceed with a minimum of fuss. In this day and age of technological advancement the whole loan process can be processed via email, fax and phone. At Hudson we are linked up electronically with each lender on our panel, which allows us to submit the application into their application system at the press of a button.
  • Getting a good deal – The commission we get paid from the lender is similar regardless of what product or rate that we achieve for you. If there is a possibility of achieving a cheaper rate than what is advertised we will endeavor to seek this. This involves us submitting a pricing request to the banks pricing cell, which includes a thorough submission of why we support the further discount. This is the same process for any potential fee waivers or discounts. 
  • Priority Service – We do large volumes of lending at the Hudson finance department mainly because of the above factors. As a result we have been given priority service with some of our main lenders. These lenders include the Commonwealth Bank (Diamond Brokers), Westpac (Advantage Plus Brokers) and St George (Gold Brokers). This ensures that we receive fast approvals and excellent support, which culminates in a smooth process to approval and settlement.
  • Loan structuring – Part of working hand in hand with your Financial Adviser means that we look very seriously as how your loans are structured taking into account tax implications, cost, future plans. Part of this involves keeping your loans stand alone against individual security properties where possible. See link on “why not to cross securitize” for more information.
  • Future Lending – Through our FLEX (online loan application) system all applications that we submit for our members are saved into the FLEX system ongoing. What this means is that your position is saved into our system and therefore when you are looking at any future lending scenarios we can quickly and easily assess your position and have an application submitted within minutes by simply copying your old application, amending appropriate details and lodging it online. This means there are no appointments to be made with a Bank Manager and no 30 page manual application forms to complete.
Read in full + comments 0 Comments

20
Nov 2015

What to do with a windfall

What to do with a windfall

Written by Hudson Adviser Michal Park

Sometimes coming into an unexpected windfall can be a daunting experience. After this year's Melbourne Cup one lucky punter was $125,000 richer when he did the seemingly impossible: successfully predicting the first four horses past the post and put on a $9 bet . My horse failed to come in, and I was not the holder of the unregistered winning ticket in last week's $70 million Powerball jackpot.


Whether the windfall be from gambling, inheritance or redundancy, as the term "windfall" implies, it can be blown quickly and with it may go a one-off chance to repay debts and build a capital base to secure one’s future. There are some legendary stories of Lotto winners squandering their winnings and ending up in a worse financial state (a common statistic is more than 75% of windfalls are squandered).

Given the dollars flowing this week, what better topic than how to wisely manage your money? Below are my top tips:

Wait 
There is a psychology behind making the transition to instant wealth. The emotions that accompany a windfall are temporary and usually go away within six months. The most important secret to preserving a windfall is to not touch it until the emotions subside and you come up with a sound plan for putting the money to work.

Spend some 
That’s right. Go on - use a chunk (say 10%) to throw caution to the wind and let your hair down. Life is too short to be responsible all of the time. It’s really important to get this first step out of your system before moving on to the next.

Offset /reduce personal debt

These debts include things like credit cards, car loans and ultimately your mortgage. Personal debts with higher interest rates should be completely wiped out, whilst a mortgage can be offset until a great plan has been hatched. Eliminating debt effectively guarantees you a return on your money equal to the interest rate you are paying on the debt.

Have a buffer
Predominately for emergencies, a buffer is an amount stowed away at call that can be easily accessed. This can be an amount set aside for school fees, holidays – essentially any “big ticket” items that require payment in the shorter term.

Invest 
This is where things get interesting. Investing takes care of the longer term financial planning and will stretch your money further, at the very least to keep pace with inflation, but also to generate greater income returns and capital growth. Where you invest comes down to a number of factors, predominantly your age, time horizon and risk profile. The smartest financial decision is to split your funds across all asset classes in a proportion, suiting your specific circumstances.

In researching this article, I came across a number of websites with individuals detailing (some in great length) how they would spend millions. My favourite: “I would spend half on wine, women, and song. The other half I would spend foolishly”. Don’t be that guy. Read in full + comments 0 Comments

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