Your Financial Questions, Answered: July '20

General

The past few months have brought with them strange and uncertain times as Australia, and the world, knuckled down and stayed inside in an effort to stop the curve of the COVID-19 pandemic.

With the arrival of July signalling that we are officially halfway through 2020, we wanted to take the time to share our thoughts on the latest financial developments that may impact on your financial world.

This Q&A from your team of financial experts covers the following topics:

  1. Defining the recession and what it means for you
  2. A breakdown of the government’s HomeBuilder scheme
  3. How we can help you moving forward from COVID-19

What Is A Recession and What Does It Mean For Me?

In Australia, according to Domain, a recession is defined as contractions in economic growth over two consecutive quarters. The Australian economy shrank by 0.3 per cent in the March quarter, with economists, the Treasury and the Reserve Bank all expecting the June quarter to be the worst since the 1930s due to the ongoing impacts of COVID-19 on Australian businesses.

In early June, Treasurer Josh Frydenberg announced that Australia had officially entered its first recession since the 1990’s following two quarters of negative economic growth. As some may have expected, the recession has been attributed to the effects of the COVID-19 pandemic in Australia and the devastating bushfires affecting many communities across Australia before it.

While some believe Australia’s first recession in 30 years will be short as the nation slowly begins to recover from the effects of the pandemic and the Federal government implements a number of stimulus packages, the major fear of many economists over the coming weeks is the loss of jobs.

Currently, economists in Australia believe that the unemployment rate will jump from the current 5.2 per cent to at least 11 per cent. And with many Australians already struggling with the loss of their jobs or the fear of becoming unemployed due to COVID-19, it’s likely that many will begin to cut their spending, which in turn may lead to a worsening of the recession.

We understand that the news of the recession may cause you worry over how it may affect you and your financial journey to achieving financial success and security. So, as your expert financial partners, we thought we’d break down exactly how a recession may affect you or your loved ones.

Your Recession Questions Answered

  • Q. I’m worried about my kids who are just entering the workforce. How will this impact them?

    With the last recession in Australia occurring nearly 30 years ago, it’s likely that not many of you remember its effects. However, for those of you who are older with adult children just beginning to enter the workforce, you may be worried about how the recession will impact on them.

    With a recession comes little wage growth and a lack of jobs, especially for those who may just be graduating from university and seeking to enter the workforce with limited experience.

    Unfortunately, research suggests that the new generation of workers will be the worst affected by the economic effects of the COVID-19 crisis and resulting recessions. In fact, it is projected that the demographic entering the workforce now will experience wage loss of more than $7 billion over the next decade.

    So what can you advise your children or younger loved ones to do to weather this uncertain financial period?

    Just like every generation, advising your kids to improve their financial literacy and seek the help of a financial expert can ensure they are maximising their savings capacity with the income they receive. Younger workers should also try to be more proactive in their career progression by actively seeking out opportunities for advancement and wage growth.

  • Q. How will a recession affect me or my loved ones?

    A recession can affect a number of aspects of you or your loved ones’ financial worlds.

    We mentioned it before, but rising unemployment and low wage growth is a common result of a recession. This could prompt you to reconsider your financial goals and the timeline it may take you to achieve these goals.

    A recession may also affect the property market, with experts warning current homeowners to expect a sharp fall in prices in the months to come. If you are concerned about this fall and its impacts, your financial advisor is ready and willing to help you review your current financial situation and get you back on track to achieving financial success if you need it.

    On the other hand, for those with a secure income and a deposit already saved, this fall in the property prices may provide an ideal opportunity to break into the market. The same can be said for those who were thinking about purchasing an investment property; the fall in the property market may enable you to purchase a property that was previously out of your price-range before.

    If you’d like to discuss how the recession may affect you and your financial world personally, don’t hesitate to contact your financial advisor today and we’ll be happy to answer all of your questions.

  • Q. Should I rethink my financial plan in light of a recession?

    We understand that the announcement of the recession may have you wondering about whether you’ll still be able to achieve your financial goals or whether you should reconsider your current financial plan.

    While it would potentially be unrealistic to say that the effects of the recession, and COVID-19, won’t affect you or your retirement plans at all, any delays that may occur can be discussed with your financial advisor to find the right path forward for your particular needs.

    As your dedicated team of financial experts, we wanted to take the time to reassure you that if you have any concerns about your financial world or your financial journey, we are here to help. In fact, it’s our aim to work with you to ensure that you’ll always be on track to achieve every single one of your financial goals.

    While the recession may mean that you aren’t able to achieve these goals as you originally had planned, we’ll be here to help you identify a new path forward and make sure that you’ll be continuing to progress on your financial journey – no matter what.

    If you’re worried about how the recession may impact your financial journey, don’t hesitate to reach out to your financial advisor now. Remember: expert financial guidance and support is only an email or phone call away.

Implications of the HomeBuilder Scheme

In an effort to boost the economy in the wake of COVID-19, the Federal Government recently announced eligible Australians could receive a grant of $25,000 to build or substantially renovate their homes.

The idea behind this new HomeBuilder scheme, as it has been dubbed, is to increase demand in the construction sector and keep builders employed as Australia faces its first recession since the 1990s.

However, just like many aspects of your financial world, who is eligible to receive this $25,000 grant is more complicated than it may first appear.

For example, there is a means-test involved in determining eligibility, with couples making more than $200,000 per year and individuals making more than $125,000 being excluded from being able to receive the grant. Successful participants will also need to spend a minimum of $150,000 on renovations to be eligible while those building a new home can’t spend more than $750,000.

In order to help you understand how the HomeBuilder scheme could fit into your financial plans, we’ve broken down the topic and answered your questions.

Your HomeBuilder Questions Answered

  • Q: I have an investment property I was thinking about renovating. Will I benefit from this scheme?

    Unfortunately, the benefits of the HomeBuilder scheme are aimed at owner-occupiers of a property. As it currently stands, you will not be eligible for the HomeBuilder scheme if you were intending on using the grant to renovate your investment property. You also won’t be eligible if you were planning to renovate on your own without the help of builders.

    However, if you had planned to renovate both your principal place of residence and your investment property in the coming months, the HomeBuilder scheme may help you to achieve those goals.

    For example, you could apply for the HomeBuilder grant for the renovations for your principal place of residence and, if you’re successful, use your newly freed cash flow the grant affords you to renovate your investment property.

    Your financial advisor will be able to help you identify the options the HomeBuilder scheme may grant you. All you have to do is get in touch.

  • Q: I’m a current homeowner. In what ways could the HomeBuilder scheme benefit me?

    If you’re a current homeowner looking to renovate your current principal place of residence, you’re in luck! The HomeBuilder scheme was designed to help those just like you achieve their renovation goals.

    You will be able to access the HomeBuilder grants if you meet the following conditions:

    • You and your partner earn less than $200,000 per year, or you as an individual earn less than $125,000 per year
    • Your renovation plans cost between $150,000 and $750,000 of your own money
    • The property you plan to alter is valued at less than $1.5 million

    Renovating can have a number of benefits, both financially as it improves the overall value of your home and for your lifestyle. If you’d like to know more about whether renovating your home is right for you, and if the HomeBuilder scheme could benefit you, your financial advisor can work with you to assess your options and help you decide.

  • Q: What construction is and isn’t included as part of the HomeBuilder scheme?

    According to the current conditions, the HomeBuilder can only be used for renovations to the building of your principal place of residence itself. Renovations should improve the accessibility, safety or livability of your home, such as renovating kitchens or bathrooms.

    However, you will not be able to apply for the HomeBuilder scheme if you’re intending to use the grant to renovate structures outside of your main property. These include things like swimming pools, tennis courts and sheds, just to name a few.

    You will also need to sign the contract for the beginning of your renovation work between the 4th of June 2020 and the 31st of December 2020 and the scheme requires that you have no special relationship with the contractor you’ve hired. This means that your contractor cannot be a relative or have any other sort of tie to you personally.

    We mentioned it before but if you’re unsure about how the HomeBuilder scheme applies to your particular financial circumstances, your financial advisor is more than happy to help you review your options. A member of our team can also put you in touch with a member of our expert partner network if you require more specialised knowledge.

    Get In Touch Now!

We’re Here For You Moving Forward From COVID-19

It’s no secret that for many members of the My Wealth Solutions community – and Australia as a whole – the continued effects of COVID-19 has impacted many aspects of your financial world.

And as we as a community and a nation begin to move forward, we at My Wealth Solutions understand that you may be worried about what the path ahead looks like for you.

That’s why we just wanted to take the time to reassure you that we are here to help – no matter what comes your way.

After all, our aim is to ensure you always have the expert information and professional financial guidance you need to continue making smart financial decisions on your journey to achieving financial success and security.

That’s why we’ll always only be a phone call or email away, to provide you with said expert guidance whenever and wherever you need it.

With that in mind, If you’re concerned about any aspect of your financial world or anything contained in this Q&A, don’t hesitate to get in touch and a member of our team will be happy to help.

CLIENT TESTIMONIAL

I was referred to My Wealth Solutions during an informal conversation with an acquaintance about consolidating superannuation accounts and financial advice in general. After some research, my wife and I decided to contact My Wealth Solutions and signed up. Following a number of friendly, focussed and professional conversations with Nikki about financial goals and priorities, My Wealth Solutions presented us with a well-researched and comprehensive report that detailed a number of options that we could consider. My wife and I have since decided which options and financial goals to pursue, and have been impressed with the prompt, courteous and professional service provided by Nikki and her team.

Joerns
CLIENT TESTIMONIAL

Fabulous team. Incredible personalised service. I have been with MWS for a number of years now and recommend to everyone! 5 stars.

Jessica J
CLIENT TESTIMONIAL
Nikki and the team at My Wealth Solutions have been extremely helpful in building a savings strategy for my wife and I, as well as tuning our superannuation and life insurance to make the most of our money and get the best coverage for us. Nikki explains everything in a clear and easy to follow way, and we didn’t feel at any point that we were being lost in the jargon or terminology. My wife and I are very happy with the service that we are being provided, we are glad that My Wealth Solutions are helping us reach our savings goals, and we would definitely recommend them for any financial planning or advice.
Tony B
CLIENT TESTIMONIAL

I believe whole heartedly everyone needs to take their wealth and future in their own hands and not just rely on their industry super fund. Financial industry professionals like Ben are key in helping us all achieve the goals we need looking beyond retirement. We were grossly under insured and had a poor idea about what insurance could really do for us as a family. He was so friendly and very approachable…Big tick from us!

Kristy R
CLIENT TESTIMONIAL

We have found the team at My Wealth Solutions to be professional and extremely knowledgeable within their field. Ben has taught us so much about how to better our financial situation. Dallas and I highly recommend Ben and the team to anybody wanting to take their finances to the next level.

Renee W
CLIENT TESTIMONIAL

Excellent service, very professional and great attention to detail. Highly recommend Ben and the team at My Wealth Solutions to take care of any of your financial needs.

Ilija S
CLIENT TESTIMONIAL

Ben and the team have been such an asset to our wealth building journey. They’re always readily available for help and advice, specific to our particular scenario. It has been a pleasure working with this team and look forward to many more interactions in the future.

Erika D
CLIENT TESTIMONIAL

We had an outstanding experience in dealing with My Wealth. They have set us up for the future and educated us all things finance. Couldn’t recommend more.

Danny K

You May Also Like:

Your team of financial experts answers your questions about the recent changes to superannuation law for employees and the upcoming...
21 September 2020

Your Financial Questions, Answered: September ’20

General
READ MORE
Hana reached out for the help of the My Wealth Solutions team in a time of crisis. This is how...
23 June 2020

Case Study: Financial Support In A Time of Crisis

General
READ MORE
We share our thoughts on the financial impacts of coronavirus on the global financial markets, amongst other updates.
16 March 2020

COVID-19 & Its Ongoing Implications

General
READ MORE
award winning and highly recommended

Want advice specific to your unique situation?

We hope this resource gave you a start in tackling the financial challenges you may be facing.

If you’d like guidance tailored specifically to you and your particular needs, we’re here to help.