Make the party pay

Bruce Brammall, The West Australian, 29 June, 2019

You have read it on some friends’ faces, for months, before they’ve uttered a word.

It might be the slight wince when jobs or income is raised, not wanting to bring attention to themselves, or the near-whispering tone when they do speak.

But through COVID-19, they’ve been there.

They are the people who have done okay through Coronacrisis.

They maintained full employment, or even picked up more hours, maybe had businesses that weren’t affected, or even benefitted, or who had tenants who paid full rent throughout “The Lockdown”.

They’re definitely not gloating. They’ve supported the community where they could, while naturally being a bit defensive with their spending, just in case.

But the fact is, they’re actually cashed up. And without wanting to be vulturistic, they want to know how to take advantage of an opportunity.

Today, I’m talking to those, somewhat embarrassed, people.

Don’t feel dirty about your relative good fortune. It’s okay.

You have two obvious choices. Altruism – spend as much as you reasonably can to support the economy (while getting a consumer benefit for yourself, of course). Or opportunism – take advantage of today’s climate to invest to support you, and your family, into the future.

Today, the advice is less Mother Theresa, more Gordon Gekko.

Anyone who dislikes, or disagrees … #sorrynotsorry. Not today.

If you’re finding yourself in this position for the first time, make an appointment to see a quality financial adviser.

Having cash, and lots of it, is a never a bad position to be in, obviously. But cash isn’t showing much love at the moment.

The place to have cash, for those with mortgages, is in your offset or redraw account. If not, then an online savings account.

If you’ve got more cash than you’d need in a hurry, the obvious next option is shares and property. But I’ll return to those.

Homeowners might consider investing in their homes, via a renovation. It’s predicted many builders will be scratching for work later this year. You could help local tradies, who might discount their services a bit to keep afloat and put some value on home.

(This is irrespective of the Government HomeBuilder scheme. Few will benefit from this program, as qualification criteria is highly restricted.)

Shares. If you’ve been wondering whether it’s time to get into the stock market, or whether you should wait a bit longer, my answer, as always, is “both now and later”.

The most important part of investing is doing it regularly. If you are constantly adding to your investments, then dips won’t matter much. If you start with an initial investment of whatever amount, but then put in $1000 or $2000 every month into the investment, then you’ll pick up bargains when/if markets do fall.

If you don’t know what you’re doing, find a financial adviser to assist. If you are going to do it yourself, at a minimum, make sure you’ve done a risk profile and understand it … and diversify your investments, via low-cost exchange-traded funds, or managed funds, particularly if you’re starting out small.

Property, oh how Australians love thee. Possibly too much.

There will be opportunities with direct property investment. It’s a matter of when. Perhaps it’s now. But I still believe there will be bigger opportunities when government stimulus is wound back from about September this year.

In any case, property is right for some and not for others. It’s a huge, undiversified, asset class that requires huge debt. And that scares the poop out of some.

Super should be in everyone’s consideration. While everyone over 35 should be putting extra money into super, the closer to 60, or 65, you are, the more you should be doing that.

It’s all-but too late to get more money into super this financial year. But that shouldn’t matter. Set up your salary sacrifice arrangement, or get to know the “personal deductible contribution” rules and make it your thing to start this week, to kick off the next financial year. And invest in some assets while they’re down to reap great medium to longer-term rewards.

But whatever you do, stop feeling guilty about having got through COVID-19 financially unscathed. Or justify it to yourself this way: You’re investing now so you can pay more tax for the economy later.

Bruce Brammall is the author of Mortgages Made Easy and is both a financial advisor and mortgage broker. E: bruce@brucebrammallfinancial.com.au.