So what is a Tariff anyway?

There is a lot of talk about the US and China and other countries raising Tariffs against each other. So what is a Tariff anyway?

A tariff is a kind of tax placed on imports, sometimes from all countries and sometimes just from one country.  Usually trade arrangements are made between two countries so the tariffs will be at a country level.

In the past most countries had a lot of tariffs, sometimes really high ones.  These taxes encouraged people to buy goods made in their home country rather than imports with expensive taxes on them.  In Australia this system propped up the Textiles, Clothing and Footware industry until reforms were made and the tariffs reduced to almost zero, and in some cases zero.

Tariffs fall under an economic strategy called trade-barriers or protectionism. Protectionism aims to protect the home countries industries, even if they are not competitive and would not survive without the taxes on their competitors.

While tariffs are perhaps good for companies that are in protected industries, and they can continue to employ people, protectionism is bad for consumers and often forces them to pay more for the things they want to buy. In the 1980’s the cost of a T-shirt was much more expensive than the cost of a T-Shirt today.  Wages of factory workers in Australia were and still are much higher than wages in China and other manufacturing competitors, and so consumers in Australia were forced to pay more for their T-Shirts.

If you only have $100 to spend and a T-Shirt is $50 it only leaves you with $50 to spend on other things.  If there are no Tariffs and the T-Shirt is now $40 you have $60 left to spend on other things you want.  Basically you can’t buy as much under protectionism.  In Australia the price of a T-Shirt got much cheaper than $40, because eventually the foreign goods were so much cheaper and more competitive than the local goods. This soon put most of the Textiles, Clothing and Footware industry out of business.  That isn’t necessarily a bad thing,  it’s bad for a while for the people who loose their jobs, the factory owners and their investors. But remember, those factory workers were also having to buy a $50 T-shirt under protectionism, and now they don’t have to spend as much either.  The businesses were not competitive and were being propped up by an artificial advantage.  Generally the standard of living of people increases as protectionism is removed.

However like all things, it’s not black and white and not all people benefit equally from removal of trade barriers. Governments role in this type of situation where there is a massive restructure of the workforce due to change of government policy is to help affected workers find new jobs.  A task government doesn’t always get right.  It is also the responsibility of Industry to be open to employ people from declining industries and to the workers themselves to retrain or gain new skills.

These kinds of changes are worse when they are implemented too quickly, without time for people to adjust and find new work.  Another thing that can exacerbate the situation is when protectionism is removed when there is no other work around.  This can turn structural unemployment, as it is called, into long term unemployment.  This makes life very difficult for workers in affected industries. They may never find employment again. Due to unemployment they do not benefit as much from the rising living standards as people who remain in work gain from removing tariffs.

G20 Summit Argentina

The world is waiting for the outcome of key talks at the G20 Summit in Buenos Aires in Argentina. Primarily investors around the world are waiting for the outcome of the Trump – Xi Jinping talk in the hope that there will be some positive outcome to the trade wars that have placed markets around the world in a state of perpetual fear since they began.

There is a chance that tariffs will be reduced (small), a chance they will be increased (small) or a big chance there will be no change, there is even a small chance of a new Cold War breaking out but I don’t think that is at all likely anymore. Usually at these summits it’s more important what goes on behind the scenes with the advisors and delegates, but Trump is very independent and doesn’t always follow advice and Trump makes deals on his own terms, so this meeting could be crucial. It could also be just a rosey photo opportunity with no substance. We are all waiting.

Portfolio diversification: Starcraft analogy

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My 11 year old is a big fan of Starcraft II, a strategy computer game. If you know the game, you will be aware there are two resources in the game, Vespene Gas and Minerals.  Units in the game can collect these resources and use them as commodities to build new items, or as currency to finance acquisitions, for example fighting or healing units in one of the three armies, Zerg (Alien insects), Protoss (A highly advanced alien race) or Terrans (Humans).  The resources Vespene Gas and Minerals are valuable and necessary for any successful Starcraft II army.  Especially if you want to have success in the game or annihilate your enemy’s bases.  Successful armies require Vespene Gas and Minerals so there is always a market for these resources.

If I was an investor in the Starcraft universe, I would have two possible resources to invest in, Vespene Gas or Minerals.  If I bought only Vespene Gas, my investment portfolio would contain one thing: Vespene Gas.  Say I invested only in a Zerg Vespene Gas field I would have only the risk attached to owning a Zerg Vespene Gas field.

If one day the Protoss came along and blew it up, and blew up all my harvesting units, I would loose all of my investment.  I would have nothing and be all of a sudden very poor.  If I  had instead put only half my assets into the Zerg Vespene Gas field and the other half into a Terran Minerals deposit I would have reduced my risk.  My portfolio would be half Minerals and half Vespene Gas. I would still have my investment in the Minerals even if the gas field was destroyed. I would only loose half of my investment.

By investing in both resources I am spreading my risk and hopefully by doing so reducing my total investment risk. This is why it is so important to build a diverse portfolio and why people say “not to put all your eggs in one basket”.  That is why it is unwise to only invest in Vespene Gas.

 

*Note: This is a very simple example of portfolio diversification for demonstration purposes only. It should not be taken as investment advice. At the time of writing I do not and have not previously held stocks in Blizzard Activision (or Vespene Gas for that matter!)

To Create Gender Equality in STEM Workplaces Must Change.

Science Mag_fig1_jpg1_Scissors of DeathSource: ScienceMag.org. Data from the Third European Report on Science and Technology, 2003,http://www.dife.de/~mristow/2003EU_3rd_report.pdf

What can the disciplines of science, engineering and technology do to increase their female workforce and stop the well documented drop-off of women from the workforce over time?  In the fields of science and technology (STEM) the phenomenon of the so called Gender Scissors or “Jaws- of-Death” or “Scissors-of-Death” is widespread.  The Jaws-of-Death phenomenon is a measurement of male and female participation rates in the disciplines of science and engineering throughout their careers, measured by age.  Due to encouragement of young female students to study STEM subjects in high-school and increased enrollment of female students in STEM courses at university, the gender gap has closed significantly over recent years and almost closed completely in some sciences at this early career stage.  However looking into the future lives of female and male scientists and engineers, female participation rates drop off significantly in comparison to male participation rates.  The Jaws-of-Death graph blatantly shows the loss of women from the field of science and engineering as they age.  In scientific academia there is a marked difference between female and male participation rates, in the EU, only 33% of researchers are female and only 21% of top level academic roles were filled by women in 2015 (1).  In science and engineering the number of women in in top level positions is even scarcer at 13% in 2013 (1).

There are a number of reasons this may occur, but the most startlingly obvious reason is that these professions are not easy for women to stay and to excel.  There are a number of factors in these professions that affect women’s participation rates.  Much the way business is done in these professions means that the odds are stacked against women right from the start and opposing factors only increase against women as they age and try to progress in their careers.

This should not be seen as the fault of women but as a fault in the system. By loosing such large numbers of women from STEM or keeping women subjugated to lower positions due to the ingrained workings of a poor system, the system in place is in effect causing a “brain-drain”, a loss of potential, and a loss of economic benefit that would have been gained if those women were able to stay in STEM related work or to advance their careers.

So what are the major obstacles in the system that women have to overcome?  There are much documented and studied obstacles such as unconscious bias and the gender pay gap, but there are also more physical boundaries such as the availability of maternity leave and flexibility for employees in the workforce.  Business holds a lot of the cards when it comes to negotiating workers hours, and the fields of science and engineering have very low unionisation rates. Low unionisation means women will often be left to negotiate their contracts one on one with an employer, and they will be expected to offer similar hours of labour as male employees if they want to receive coveted roles or permanent positions.  Because of a desire by many women for flexibility, they are often forced by lack of choice and lack cooperation by employers into precarious part time contract and casual work.

The professions of scientist and engineer were male dominated occupations for centuries.  The fields have consequently developed into occupations where it is standard for employers to expect very long hours of work and high output.  Hours of work far past your standard 40 hour week. Many scientists and engineers work weekends as well as week days, and might work away from home for months on end.  As a consequence of this high benchmark for permanent positions, people who want flexibility have much lower bargaining power and much less chance of finding secure work.

There are a number of problems for women trying to work inside this construct. For starters, flexibility is very important for many women, and not just women who have or want to have children.  Many women require adequate recreation time to perform well, and don’t want to work more than 40 hours a week.  Women who are planning a family or have children want to be able to balance their family and work life without risking their career.  It is well known that many women feel they are forced out of STEM professions after having children.  In general, only women with a lot of additional support from their partners, family or already in well paid positions find it possible to stay in STEM after having children, and even then they often talk of it being a struggle.  When you talk to mothers who have been successful in science and technology, they have usually had very supportive husbands, partners or parents who were able to help a lot with children or have been able to afford nannies.  Women who don’t have support, which far out number those with sufficient support are the ones who drop out, and they are dropping out in huge numbers.

If the structure of work could be changed it would benefit not only women, but men who also suffer from being away from home and family for long periods.  For example, the field of academic science is highly competitive.  Scientific teams work long hours and are in metaphorical vicious and eternal competition with their scientific rivals to produce quality novel research and to produce it first.  Academic scientists compete with each other for accolades, for grants, for jobs and for recognition by their peers.  This has built an environment of extreme individual competitiveness where scientists often feel they cannot risk taking time off for fear of falling behind.  God knows, some team in the US or China might make the discovery first!  God forbid they might publish first!  Young academic scientists want to be the lead author, to gain the recognition they feel they deserve, to be Joe Blogs, et al. and not be one of the seemingly unrecognised and forgotten “et al.”, just a footnote at the end of a paper, a name no-one will ever remember.

Other reasons for leaving work in STEM are also commonly sighted, such as nepotism and “jobs for the boys” at higher management levels.  These problems could be addressed by stricter hiring criteria based on merit rather than favouritism, friendship networks or poor interview based character assessments.

I suggest that if the field of academic science could be completely restructured and more value put on people as a whole rather than on an individuals output, not only would women be able to stay in STEM, but the increased workforce and increased diversity would surely improve science.  This would mean a greater emphasis on a teams output rather than on individuals trying to outshine each other.  Increased availability of job share and flexibility so that two or three scientists could perform the work that one scientist working a 60 or 70 hour week currently performs.  A greater emphasis on sharing knowledge and working together as a group rather than on gaining individual recognition.

To achieve this a number of elements in science need to change, from the way scientists are hired to the flexibility afforded to scientists in the workforce, and the way that academic journals publish scientific papers and grants are distributed.  There needs to be is a greater focus on quality teams rather than bright stars. If everyone is chasing their Nobel Prize or equivalent, a situation of survival of the fittest arises and many bodies will be pushed aside.

How fitting that academic science has become a prime example of Darwinism.  But it doesn’t have to be this way. We can change. I read a sign recently that said in my loose translation from Dutch “Expecting change, without doing anything yourself is like waiting for a boat at a train station”.  We can make STEM work more accessible to women (and men) but change needs to occur and people and organisations have to be willing to make change.

We can’t expect women to stay in work in a deeply flawed system. And we can’t expect the system to change on it’s own.  We have to see the problems and be willing step up and fix the system so that it better serves us and helps us to build the kind of society that we want live in.  A society where women can be successful scientists and engineers and don’t have to overcome massive hurdles.  A society where the decision whether or not to have children will not massively impact or end your future career.  Having children or simply being male has never stopped men from being scientists or engineers and parental status or gender shouldn’t stop women either — and if it does, we have to change that.

1. SHE Figures 2015, URL: http://www.genderportal.eu/sites/default/files/resource_pool/she_figures_2015-final.pdf date accessed 25/6/2018.

Housing affordability in metropolitan Australia

Why are houses today too expensive to buy for the average person and especially young people in our major cities? Are elements such as negative gearing and overseas investors that are often blamed for the rising prices in the media and by politicians the cause of the inflated prices? Or is there something else that has caused the inflation? The short answer is yes. Yes there is. And quite simply it’s supply.

Demand and supply are two elements of the market that are directly linked. If demand is high and supply is low, prices will be higher. If supply is high and demand is low, prices will be lower. The problem in cities like Sydney is that there is a short supply of housing in areas where people actually want to live. Homes that are of a good size (2-3 bedrooms a good size if you are planning a family), in nice neighborhoods, close to schools, medical centres and hospitals, close to public amenities like parks and swimming pools, close to public transport and within a short commute from places of work, which for a city like Sydney is the CBD.

Over past decades new homes have been predominantly built on the outer fringes of the city, which has stretched our cities of Sydney and Melbourne to massive sprawling suburbia. As you head out into this sprawling suburbia land sizes of individual blocks of land get larger, houses get on average larger and are more spread out. The suburbs get larger, amenities are more spread out, hospitals are further away, work is much much further away, everyone requires a car just to do things like go to the shops or take the kids to school, because everything needed for life is so spread out.

This in turn means that the next set of new houses built is pushed even further again from the city centre. The toll of this on people buying their first home, is that they are forced to have a much lower standard of living than those closer to the CBD because they have to spend a lot more time commuting to the city to work in the morning and home again each evening.

People living on the city outskirts will spend several hours a day either in their car or on the train or bus in long commutes.  People living on the fringes often rely on cars to drive everywhere and therefore spend a lot more on petrol for their cars, as well as the other costs involved in car ownership, compared with people in the inner city who often don’t need a car and thus save money on not running a car. Former Liberal Party Australian Treasurer Joe Hockey infamously said in a radio interview in 2014 “The poorest people either don’t have cars or actually don’t drive very far in many cases” (1). In fact it’s the opposite, most “poor people” do drive cars and the costs of running a car helps to keep them poor. “Poor people” who live on the city outskirts tend to drive much further than those who live in the centre, who tend to be wealthier (2).

Houses are generally larger and temperatures in the west of the city are hotter than by the coast because they don’t receive the cool sea breezes, so electricity costs are higher as homes require air conditioning to remain pleasant to live in.

Long commutes are a waste of peoples time, and seriously cuts into peoples recreation time. Time that could be spent with family or friends. High electricity bills and costs of running a car that is used everyday cuts into peoples ability to save money or spend on items to make their life more pleasant.

The short supply of housing in the inner city has pushed house prices up so high they have become unobtainable for people that did not already own a home in Sydney. In the suburb I live in, Marrickville in Sydney’s Inner West about 6 km from the CBD, the median price for a 2 bedroom house is now $1.23 Million (3). The median price means the price in the middle, it’s a bit like the average but a better indication of the middle price people are paying for homes.

In comparison the median price for a 2 bedroom house in Campbelltown, a suburb on the outskirts of Sydney’s western suburbs, is $476 thousand (4). People who live in Campbelltown and work in the city centre will commute for at least 2 hours a day.

So why is a 2 bedroom house where I live so much higher than that of a 2 bedroom house in Campbelltown? The simple answer is demand. There is high demand for houses in suburbs like Marrickville because they are convenient place to live, we have schools, public transport (trains, buses and close connection to light rail), medical care (like GPs, specialists rooms, dentists, radiography services), grocery shops and a shopping centre all within walking distance from homes. There are top hospitals and universities like RPA and The University of Sydney and University of Technology Sydney only 4-5 km away. For people with disabilities there is more access and choice when it comes to disability services. Suburbs closer to the city tend to have more people around and so there is often a greater sense of being in a community than out in the outer suburbs where you can often feel isolated in your street or home. There are cultural and community events in the inner city like weekend markets and theatre, all of which make life more enjoyable in the inner city. Another reason for higher demand in the inner compared to the outer suburbs is that crime rates tend to be lower in the suburbs closer to the city, obviously with a few exceptions.

In my opinion, more focus needs to be on increasing the supply of homes in the CBD and inner suburbs of cities (within 10 km of the CBD), because this is where people want to live based on price data. Yes, people who are already lucky enough to live in the inner suburbs will argue “But there aren’t enough schools! There aren’t enough hospitals! Over-development! I don’t want high rise apartments over looking my house!” . Government has tried to to increase supply and there has been massive backlash in these communities about any new development. This viewpoint to me seems very selfish and short sighted.

My question to those people resisting development and resenting newcomers is, why do you think that you deserve to live in a convenient area, but other people do not? Is it fair that just because you were there first, future generations are forced to live at a poorer standard of living and have to live in an area which is not good for a productive economy because of the high costs on it’s residents, because you were here first? I don’t think that is either fair or good for the economy or society. It ultimately increases inequality in society.

Census data helps governments to determine the number of hospitals and schools built in an area. If more people move to an area, government will see in the Census that the area requires more infrastructure. If zoning laws are changed to allow more housing to be built in the inner suburbs, government can also plan to deliver more hospitals, schools and public transport, for example the new Sydney Metro line going up along the Bankstown line (one of the two main train lines through the Inner West of Sydney) coincides with the opening up of zoning for high rise residential apartments along the Bankstown line corridor.

In the past, and even in the present the most creative and productive areas of cities are not the outer fringes but the more highly developed inner city. If we want to make productive cities we need to make them more livable, which includes increasing the sustainability of our cities by reducing the number of petrol cars on the road, and increasing the happiness of residents by decreasing commuting times and the cost of living.

Reference

1. URL: http://jbh.ministers.treasury.gov.au/transcript/075-2014/ date accessed 12 June 2018.

2. URL: http://www.abc.net.au/news/2014-08-15/joe-hockey-poor-people-cars-claim-misleading/5671168 date accessed 12 June 2018.

3. URL: https://www.domain.com.au/suburb-profile/marrickville-nsw-2204 date accessed 12 June 2018.

4. URL: https://www.domain.com.au/suburb-profile/campbelltown-nsw-2560 date accessed 12 June 2018.

How to save money when you’re a fashionista: My guide to not overspending on clothing and accessories.

When you love fashion it is very easy to get swept up in trends and spend a lot of money on clothes that you will no doubt wear only a few times, perhaps only once, after which the dresses and outfits you shelled out big bucks for sit in your wardrobe unworn because they don’t fit into the next season or they were not “wearable” clothing. By not wearable clothing I mean garments that look great but might be uncomfortable to wear for long periods, occasional wear that you can’t wear again easily, or clothes that just don’t go with your other clothes. I’ve fallen into this trap many times in the past, paid a lot of money for a dress only to wear it once and afterwards have it hang in my wardrobe unused. A classic example of this was the Romance was Born Link dress that I purchased, it looked good, had a great colour and movement, a great dress to dance in, but ultimately I only had one occasion I was able to wear it to, a friends wedding reception. I bought it on sale and it was a size 6, and I am probably closer to an 8 so it was really too tight for me to wear comfortably. I have quite a few size 6 dressed I wish were size 8…Sure you could try selling your unwanted clothes on eBay, but what if they don’t sell? Or what if they only sell at such a great loss you wonder if they were worth the money you paid for them?

I’m going to give my advice now on how to build a wardrobe that transcends seasons and years, so you will be able to look fashionable despite whatever the trend might be. The key, and you may have heard this before is building a great basic wardrobe from which you can accessorise and mix and match to get different looks. I have a variation on this basic wardrobe that works for me, and you will no doubt make your own adjustments based on your needs. Make sure the clothes you buy have a great fit, don’t fall into the trap that I and many others have fallen into of buying the size down because it was the “last one and on sale” because you will find something in your size. Always try it on before buying if possible. I’ve tried on a dress and it was great, seen a fault and just picked up another in the same size off the shelf and bought it without trying on, only to realise when I got it home that it pinched in places the other dress didn’t. There can be small variations piece to piece, different items in the same size and style will not always be identical.

Most people recommend having a classic white shirt in your basic wardrobe, but I live in hot and sunny Sydney, Australia where a white shirt is usually a bad choice for any season but winter because they tend to get hot and sweaty and unbreathable in summer months. I find I rarely want to wear or need to wear a white shirt. It is true if you choose a great cut white shirt they can be versatile but if you live in a warm climate like Australia you might find you don’t get much wear out of your cotton shirts. If you do want one, it is probably better to invest in one that is a more breathable material that resists stains like linen.

My secret (well, not so secret) way to save money on quality clothing.
Buy from thrift stores, second hand stores, vintage stores, eBay and save hundreds of dollars on your wardrobe. It is not only savvy to do this, it is also the most sustainable way to dress yourself, you are doing something good for your wallet and the planet but reusing clothing. The best things to buy second hand are vintage coats and jackets, for example woollen winter coats and trench coats which are often in great condition second hand because outerwear does not have the same stresses on it as everyday items like t-shirts. You can buy a woollen coat even if it’s a bit big because it is easy enough to have most coats altered to fit you. One of my best second hand coat purchases was a double breasted vintage cream coloured wool blend coat with wide lapels that cost me about $25, it is of the highest quality, exceedingly warm, and has attracted many compliments. As long as it is kept away from hungry moths and dry-cleaned occasionally it will last for decades. A similar coat bought new would have set me back at least $400, so I have straight up saved $375. The reason why you can buy vintage coats and look amazing is that coats often transcend seasons and years, a classic woollen coat, a trench coat, pea coat and black leather motorcycle style jacket will be wearable for years to come, you will even find if you hold onto them faux fur coats will also come, go and return to fashion every 5-10 years. In my wardrobe I always have a great trench in a neutral colour like black or beige, a woollen coat in black or beige and then a really warm coat for trips and those 5 degree Celsius days we get sometimes in winter, for example a long-line hooded down or synthetic insulated coat or anorak. These three coat types usually keep you covered in from mid-Autumn to Early Spring.

So what do you need to wear under this fabulous coat? A great versatile basic wardrobe. For me, this includes a few different styles of trousers because I do not wear dresses and skirts much. I find that separates make for a far more versatile wardrobe than dresses and one pieces. It is good to have a few nice dresses for summer but in cooler months your better off with tops and bottoms.

My basic cooler month wardrobe includes a pair of great fitting classic straight cut Levis jeans (or your choice) in a mid blue. It is good to also have a darker pair of jeans and a lighter pair of jeans or cotton jeans-look pants, they could be straight or skinny cut but I would avoid boot-cut jeans or flares that will very rarely be in fashion. For the lighter pair you could choose light blue, olive or grey but I wouldn’t choose white because they won’t stay white for long. I also like to have a pair of black jeans and really miss them when I don’t have them. I would also have at least one pair of wide legged black trousers which are nice enough to wear to work, and a pair of fitted suit trousers in black or grey. I keep wide legged trousers in a few colours, like navy and light grey because I mainly wear trousers and wide legged trousers are very comfortable.

For winter I like to have at least one black vintage leather skirt in my wardrobe. I would suggest either a mini skirt or a longer A-line or pencil skirt depending on what your preference is. You can generally get a nice vintage leather skirt for less than $50. If you get a second leather skirt for your wardrobe, get a different style in black or a different colour like brown or burgundy. You can also get great leather handbags second hand, if you shop around, for the same price or less than you would pay for a new synthetic handbag. I was lucky enough to find a genuine Rebecca Minkoff bag for $15 at my local Op-Shop. I have another Rebecca Minkoff bag I got from eBay for $30. The best colour handbags to get for long term use are black and brown. It’s nice to have some coloured bags, especially to brighten up an outfit, but you will find you tire of them faster than back and brown.

I also love having a pair of black leather trousers but it can be very hard to find a nice vintage pair so you might have to look out for them at sample sales or online auctions. I got my leather trousers for $130 at a sample sale, whereas new they sell for $700, that’s a saving of $570. If you live in Australia, then you can sign up to the Missy Confidential email newsletter which gives all the latest major sample sales in your city (for the cities covered). Just to be clear I’m not sponsored by Missy Confidential in any shape or form, I just find the emails useful.

For tops, I have a few well made black long-sleeved blouses and at least one cream or ivory coloured long-sleeved blouse. A well fitted ribbed top in silk or cotton with long or T-shirt length sleeves will also look good in colder months.  You’ll need a few nice jumpers or sweaters, I actually love vintage jumpers but if you want new, go for something that will last for a long time like a wool or mohair blend and buy it on sale (usually the beginning and end of winter). The best advice I have heard for buying a new cardigan or jumper is only to buy one you can see yourself wearing for the next 5 years, otherwise it’s just not worth it. Don’t buy cheap poorly made synthetic crap that will just fall apart after a few months, buy natural fibres like wool, mohair or organic cotton. Natural fibres are also better for the environment and pure wool and mohair are resistant to fire. Blends are not necessarily resistant and may burn hotter than synthetics so don’t go standing too close to any bonfires!

I have 3 pairs of gloves, a pair of black gloves, a pair in lighter beige and a dusty pink leather pair that I got this season from Forever New for about $50. I have invested in leather because a good pair will last you ten years. I also have a pair of beige felted wool gloves and they have also lasted well, they cost me about $15 from a pharmacy store. I got the black pair from a leather goods and formal dress store Chinatown 10 years ago, and it’s only this year they are starting to look tired.

You probably are picking up a trend in the basic wardrobe, the palette is white, cream, grey, denim-blue and black. This is because from this colour base you can co-ordinate with any bright accessory or jewellery you might want to throw in to look more on trend, like a bright handbag, beanie or scarf.

This means, when a new season comes around you will be looking to accessorise with cheaper items like hats, sunglasses, jewellery and scarves. You won’t need to fork out for the more expensive items because your basic wardrobe is always classic and fashionable.

For warmer months you will want a pair of cut off denim shorts or a mini skirt if you prefer skirts, and some feminine dresses and tops, because it doesn’t really matter if colour block is on trend this season, feminine looks are always going to look good year in year out. Whereas that colour block top you bought 5 years ago, doesn’t look so hot now. I am quite thin and have a fairly straight up and down body shape, so for me the best things to buy for summer are floral prints, plain light coloured frills over the chest, broidery anglaise and crochet, and bohemian (Bo-Ho) style blouses, shirts and dresses. I have a mixture of long and shorter dresses, I often prefer a long loose fitting Maxi-dress in summer. The best thing about this is, you probably guessed it, because they are a recurring fixture in fashion you can get great pieces second hand or vintage. If you have a bigger chest you might want to downplay it by wearing darker plain coloured tops which will make your top look smaller. If you have a more pear shape body, you might try wearing darker pants and lighter tops which will make your top look bigger and slim down your bottom half. It is up to you, but the main point is to buy items you can wear for several summers, that won’t look “so last year”. For this reason, I would often avoid prints unless they soft floral prints or are very artistic and can be worn as a statement piece. I would also avoid heavily embellished pieces unless they fit a recurring theme in fashion such as so called “ethnic” needlework and embroidery or tough girl styles like studded moto jackets.

I don’t have a or need many pairs of shoes, I have less than ten pairs of shoes, mostly flat because I prefer flat shoes as I can wear them all day, they include, leather Converse sneakers for weekends and causal days, black ankle boots, black knee-high boots, brogues or “nurse shoes” for wearing to work, a pair of sandals or espadrilles that can be dressed up or down for evening or day, a pair of Australian made Ugg boots for winter slippers and a pair of jogging sneakers. You’ll notice almost all my shoes are in neutral black and can be dressed up or down. If I still lived in the country I would also keep a pair of hard wearing elastic side boots to walk in the paddocks, and I would probably wear more flannelette shirts!

Now for probably the most important bit of advice…don’t go out and buy all of these items in one go. Don’t max out your credit card or use payment schemes like After Pay, Zip Pay and the like. I personally wouldn’t buy any clothes on credit EVER. The thing to know about building a classic wardrobe is it can’t be done well or effectively overnight, and it will take some work looking for pieces and some saving of cash to invest in the pieces you need to buy new. The key to not spending too much money is to slowly build up your wardrobe based on need and what funds you have available to spend on clothes.

For example, if you need a pair of great boots and already have 3 coats, then buy yourself the boots not another coat even if it’s on sale or the sales person says “It really suits you!”. If you hardly ever wear high heels or dresses, don’t buy another dress or high heels because “They would look so pretty on me”. I’m sure they would look pretty on you, but if you’re like me those high-heels and dresses won’t see the outside of your closet! If you can hold out for sales, great but make sure you go into the sale knowing exactly what you need and not buying anything but the item type you set out to buy and you will save money. This takes will power and the ability to block out advertising and pressure from sales staff. Most people will be swayed, but you can’t let yourself be swayed or you will waste your money. Going into a sale or a clothing store to buy clothes but not knowing exactly what you want, is how you will end up with a heap of clothes you won’t wear.

We unfortunately live in an era of mass consumption where most people feel like they are missing out in some way. Remember that you are in control and you don’t HAVE to buy anything if it’s not perfect and doesn’t fit your criteria. In economics we call this separating your needs from your wants which was one of the most important things I learned from my High School Economics teacher. Buy what you need first before you spend on wants. If you need to, make a list or inventory of your basic wardrobe so you know what you already have and from there you can figure out if you need to buy anything new that would make building outfits easier or if you simply need or organise your wardrobe better so it’s easier to find pieces that look good together.

I hope this blog post was helpful to you!

How I saved $10,000 a year, over 4 years.

A few years ago I had very little in savings in my savings account, let’s be honest and say I had nothing in my savings account after having to spend all my savings on child care fees before my son went to school while I was finishing my degree at university. It was a tough time and when I started living pay cheque to pay cheque I had to really evaluate my financial position.

I found that my Big Four bank account was giving me very little interest post financial crisis. Where I used to get about 6.00 % in about 2007 I was now getting less than 3.00 %  in 2013. The bank had also charged ridiculous fees such as a $35 fee for overdrawing my account by $20. I decided that something had to be done to change my financial situation and getting low interest and paying $6/month in bank fees to a Big Four bank (with billion dollar profits) was not going to cut it anymore.

So I started to do my research and looked up savings account interest rates online for local banks, credit unions and international subsidiaries operating in Australia. I found the best rate offered at that time was with ING Direct (now ING). I had banked with ING in the Netherlands so it was more familiar to me than other online high interest bank accounts. I didn’t have any savings so I didn’t really have much to loose anyway.

The positives for me were that there were no bank fees and that I could withdraw from ATMs for free (when I opened the account you had to withdraw $200 or more for the ATM fee to be paid by ING, now it’s any amount) or withdraw as cashout from the supermarket for free. If I deposited more than $1000 a month to my linked transaction account I would get a higher interest rate on my ING Savings Maximiser account which at the time it was about 3.8 % c. 2013, compared with my 3.00 % now it’s 2.8 % which is to the best of my knowledge still higher than all other online savings accounts in Australia, and much higher than the old Big Four bank account which is currently offering only ~0.81 %.

I actually kept my Big Four transaction account so that I could use cheques to pay my rent (by another financial justification because it was the lesser of two evils when it came to paying my rent). However it is only used and kept open for that reason. If I didn’t need cheques or my new bank account had that functionality I would close it in a heartbeat.

When I recently complained about my low interest rate on my online savings account to the Big Four bank they offered me the same interest rate the offer their new customers, which was ~2.30% for 3 months because I was “a long time customer”, which is really crappy considering I get 2.80% in my ING bank account all the time.

I went with ING because they were familiar to me, but there are other banks and credit unions that offer no monthly fees on savings and transaction accounts, online only high interest accounts. Money magazine ranked them highest that year in that category which was another reason I went with them. And I’m Dutch, so I like orange.

I’ve never really looked back since opening up my online no fee bank account. I deposit my salary into it and I save what I can each fortnight. With ING you can have more than one savings account and give them different names. The down side to this is that the secondary savings account does not attract the higher interest rate, the current rate as of January 2018 is 1.35% which is still higher than the Big Four account. However the advantage is you can have different accounts for different things which makes saving easier.

I have one primary Savings Maximiser account that I NEVER touch (as in I never withdraw from it), which is my home deposit savings account, originally it was going to be for a holiday to Europe, but after some deliberation of my priorities I decided purchasing our own home might be more important than a holiday. It receives the higher interest rate and contains the bulk of my savings. I have a secondary savings account where I save up for bills, school fees and other expenses which gets used regularly.

Because I often can’t afford to pay big bills like the electricity bill out of my fortnightly salary, having an account where I can save a bit each week so I have enough to cover all my bills when they come in is really handy. I also use this account to save for trips to Queensland to see my parents or little getaways once in a while or any large purchase, like a new computer or washing machine. I’ve called it “Expenses Rainy Day” account, but it could have easily been called “Bills and Expenses” account.

I said earlier that I kept my Big Four bank account for the cheque functionality, I did also keep the online savings account because it attracts no fees and I wanted to see if the interest rate would improve, but I again don’t touch this account. I kept this account because I am a highly skeptical and somewhat pessimistic person. I don’t place a huge amount of trust in any financial institution. I kept this account basically in the case there is a real emergency, and I need a few thousand dollars. A while ago I worked out the cost of moving house if we were evicted and our landlord refused to give us our bond back and we lost the tribunal would be about $3000. That would cover the cost of paying a new bond and movers to keep a roof over our heads. I decided that $3000 was the baseline savings I had to have for a real emergency.

I kept it in that bank because I wanted to spread my cash investments, like you would if you were investing in the stock market. You wouldn’t just invest all your money in one firm in case that firm failed. I figured in the worst case scenario, if Australia were to have a Greek style collapse of the banking system, I’d want my money to be in more than one bank. I never want to be in a situation where I loose everything because my bank fails and the government fails to bail them out. Luckily the chances of this happening are very low in Australia, but like I said, I’m a skeptical person. The fact that it’s in another institution to my transaction account means I am also less likely to be tempted to dip into this money.

Recently I’ve been looking at my dismal ~0.80% interest on this account and thinking along the lines of John Bull and 2% interest rates, to paraphrase, John Bull can stand many things but he cannot stand 2% and this is less than half that amount. So I have been researching interest rates again to see if I can find a better deal for my $3k that is at least in line with inflation. The best I’ve found so far is Suncorp’s eOptions account, currently offering 1.55% on savings, which is almost twice the rate of my unhappy account. It’s a bricks and mortar bank rather than purely online and it is larger than some of the other “small banks”. This would be a much healthier interest rate for my emergency fund. An account can easily be opened online, but the drawback is the easiest way to withdraw money due to Suncorp’s token and secondary password system is to also open a linked transaction account. The best thing to do is to either not get the card and go to a branch directly to withdraw funds or destroy the card or if you can’t bring yourself to do that put this card somewhere safe where it won’t be stolen and basically forget you have it, for instance if you keep your title deeds or another precious possession in the bank then put the card with that. By using another bank there is less temptation to spend my emergency fund money. The card definitely doesn’t belong in my wallet. Really I don’t even need this card, because I can walk into a Suncorp bank to make my withdrawal if that worst case came to be. However if there was a Greek style collapse, the banks may not open their doors and you may need a card to access the ATM.

I have been saving with my partner who gives me about 65 % – 70 % of his pay cheque to pay our bills, rent, sons school fees etc and keeps some aside for himself to buy groceries and general expenses like pay for his various hobbies or if we have a day out. I use his pay cheque for most of our expenses and cost of living and basically try to save as much of my pay cheque as possible. From saving this way and focusing on saving as much as we can afford I have managed to save with my partner over $40 000 over the past 4 years which is more than I could have hoped for considering our living expenses are fairly high in Sydney but I am still working towards having enough for a home deposit. I try to save regularly and save what we can afford.

My partner pays me as soon as his pay cheque clears and I distribute this money as soon as it enters my account (either paying bills immediately or putting into my cheque account for rent or the bills savings account). I put my money into savings as soon as my pay cheque clears so there is no temptation to spend it. Saved money does not exist in my mind as spending money. I figure out approximately how much my major bills like phone, internet, electricity, gas, ambulance insurance, swimming lessons for my son etc for the year cost add a bit extra for unexpected costs and divide that number by 26 weeks, so I know how much I need to save in my bills savings account each pay. I work out how much I need for rent and set that aside too. Then I figure out how much I need to spend on travel and food and leave that in my transaction account and then I put what I have decided I can afford into my home deposit account. Sometimes I might put some of the money destined for the home deposit account into my bills account just in case other expenses come up like an expensive school camp or new school uniforms or shoes.

I try to be aware about my expenses but I don’t let my self worry about bills because I know I am prepared and I have enough to cover all my bills saved. It’s a nice feeling to have peace of mind, and takes away a lot of stress in your life.

I want to make a disclaimer that you should not take the general advice on my blog as qualified financial advice and that you should make your own decisions or seek advice from an independent qualified financial advisor about your own finances based on your unique circumstances.

I recommend listening to any good financial advice that is offered to you and considering if it is best for your circumstances before following it. Don’t blindly follow what people tell you to do including me, always consider if it’s right for you in your own situation, and if you’re not good with money seek professional advice or go to the government website moneysmart.gov.au

Before I make any major financial decision I always try to remember my friend who in university lost $20 000  that their parents had given them to cover their living expenses on the stock market, thinking they could make a profit and who after loosing all that money was very very poor for the rest of that year. At the time being a poor student myself I could hardly imagine having $20 000 in the bank let alone loosing it on the stock market. Knowing what can happen when you make a poor financial decision made a huge impression on me. 

Last Christmas my mother bought me a book called The barefoot investor by Scott Pape. Scott Pape has formed a very similar savings strategy to mine, he is a good writer with a style that is easy to digest and I recommend the first chapter of the 2017 edition on savings accounts. I didn’t follow his strategy when setting up my savings account strategy, I hadn’t even heard of Scott Pape before my mum gave me the book. Previously to me Barefoot was a film from Germany about a girl with mental illness.

 

 

 

 

 

 

 

 

 

The Looming Sydney Housing Crisis

What is it that people say? It’s a recession until you loose your job, then it’s a depression. I feel it’s a bit like that with the Sydney housing market. It’s not a crisis, it’s a bubble, until your bubble pops and you are pushed out of the property and rental market because you’ve been out priced.

One of the problems with the Sydney housing market is that it’s been treated by many as an easy no brainer investment class. I’m talking about people who buy houses as an investment to sell at a profit rather than to live in them. It doesn’t really matter whether they are local baby boomer investors or overseas investors, the end result is that because there has been so much speculation in the market for so long, we in Sydney (and Melbourne) have seen an artificial elevation in house prices that is not linked to wage growth. This has ultimately out priced many younger people from the market, and basically anyone who wasn’t on the property ladder to begin with.

Now there is a phrase I have a real problem with “the property ladder”, which implies a buying and selling of properties to upgrade ones housing, presumably for comfort, but more recently (say the last decade at least) for sheer profit.

The thing about houses is they don’t generate any income until they are rented out or sold, and if you have a very big loan you won’t really see the revenue until you sell. People have seen housing as an easy get rich quick scheme, they don’t tend to loose value because people always need somewhere to live, and the more people started investing, the more new investors were drawn in. Until recently property investors (that sounds a bit ominous “investors”, but here I mean anyone who was not buying a property for themselves to live in long term) could buy in parts of Sydney and sell a year later making a 20% profit. It’s a bit reminiscent of other bubbles in the past, most recently the Bitcoin bubble which worked on the same easy money principle.

The problem with the housing bubble, is that it’s not just currency like in the case of Bitcoin, it’s houses, that is homes that people live in. If prices get too high many people are spending too much of their income on loan repayments or rising rent prices. This becomes a delicate balance and if something happens, like you loose your job or prices go up again or let’s say interest rates rise, some people are ultimately going to be pushed off the edge, when their bubble pops (e.g. they can’t make their mortgage repayments and default on their loan). This  can even be the first step towards homelessness. If you are a young person paying high rent with low wage growth and probably low wages due to the casualisation of the workforce that is happening in Australia, you can’t even save enough money to become an investor or home buyer to get yourself out of paying high rents.

The problem is, houses only really generate income when they are sold, and because people have seen the housing market as an easy way to make money there has been a massive wave of speculation. The housing market isn’t as complicated as the stock market, prices have tended to go up without the investor having to do much research or anything much once they have invested. Sure this has made some people rich, but the purpose of housing, something I think people in Australia and some other parts of the world have forgotten, is that houses should be viewed primarily as places for people to live in, not an income generating stream or investment class.

Investing in housing only pushes house prices up and doesn’t have any real benefit. Because really, if you own a place that is overvalued, there will eventually be a price adjustment (read price fall). You don’t really have a million dollars if you own a house valued at million dollars. You own a house and if you sell you will only receive what the market says it’s worth. You only have a million dollars if you sell that house for a million dollars and put that money in the bank.

People should be investing in local businesses and companies as those forms of investment do generate income and they can cause growth in the economy in areas that actually have some benefit to Australia like growth in jobs and wages. Australia has had so many great new technology companies leave because they couldn’t find investors here. The ones that spring first to my mind are the new energy solar power companies that went to China or the US when they couldn’t find investors here. There are your jobs of the future and they’ve all gone overseas and will never benefit Australia.

Australia having a trillion dollars in private home loan debt is not benefiting anyone except the banks that are selling the majority of the loans (1), who will see even more profits roll in when interest rates eventually rise, and they will eventually rise . It wasn’t that long ago real interest rates were around 6% and in the 1980’s they came close to 8% (2). I’m talking about real interest rates too here, not what the banks charged as the interest rate on their home loans which reached staggering levels close to 17% in the 1980’s. Anyone with a large home loan should be very concerned about what interest rate they are paying. If interest rates were raised a few percent higher without wage growth in Australia, many borrowers would default on their loans.

Being tied to high home loan repayments and rents also limits what households can spend as consumers, because all their income is going into housing. This also does nothing to stimulate wage growth and other parts of the economy.

To exacerbate the problem there has been very poor housing affordability policy by all levels government which has played a part in rising house prices and household debt.

The Housing Bubble and Homelessness

We are already seeing the effect of this bubble in the increase in homelessness in Sydney. Don’t think there is a connection between homelessness and rising house and rental prices? Think again. When the Government doesn’t provide enough crisis housing or long term housing for people on low incomes, and the unemployment policy is that if you leave an area with more jobs (like Sydney) for an area with less jobs (like a country town with a cheaper cost of living) you could be cut off unemployment benefits.

So picture the scenario,  you loose your job or you get sick and can’t work for a long period, then because of the drop in income you can’t pay your rent or mortgage and you loose that place. You can’t afford rent on a new place in your area because you haven’t found work again and there is not enough crisis accommodation for all who require it, so you have to find somewhere to go. You probably can’t leave Sydney and move somewhere cheaper because you will be cut off any unemployment benefits by the Government. If you can’t find a place you can afford in the city and unless you have someone who can support you you might eventually end up homeless. you might couch surf for a while, but one day you might run out of people to stay with or you might have some kids, and your friends don’t have room for all of you, so you are living in your car, until you can’t afford your car anymore.

This is a reality, and it is partially caused by housing speculation. There are however many other contributing factors to homelessness. Low wage growth, poor housing policy by Government, poor (or should I say stagnant and un-evolving) unemployment benefit policy and poor mental health and domestic violence policies by Government have all contributed to homelessness in Australia.

 

Affordable accommodation for disadvantaged university students?

There are many things I want to address about the Australia Governments 2016-2017 budget. Alongside only postponing fee deregulation for another year the government has released a paper entitled “Driving Innovation, Fairness and Excellence in Australian Higher Education” to inform stakeholders and hope to influence the terms of the changes to higher education in the future.

Although the paper addresses some of the major problems faced in terms of fairness in higher education, for example equity for students from lower socioeconomic (SES) backgrounds and regional and rural backgrounds, and Aboriginal and Torres-Straight Islanders, it doesn’t do much to suggest an actual plan to see more of these groups attending higher education, particularly universities.

The paper outlines briefly a plan to improve infrastructure at regional universities to boost the number of students at those universities, while it states that institutions in the city already have enough infrastructure. While it would be great to improve regional higher education providers facilities to support students, I would strongly argue that institutions in major cities have enough key infrastructure to support these students. For example, one of the most important aspects that prevents these students attending universities is affordable accommodation close to campus.  Affordable accommodation on campus or nearby affordable accommodation for students from SES, rural & regional and  Aboriginal and Torres-Straight Islander backgrounds is utterly key to ensuring that they can attend tertiary education institutions. There is an inadequate number of subsidised accommodation for students from these backgrounds at many universities in Australia.

While expensive student accommodation does continue to be built, for example UrbanNest, which offers share twin share rooms from $340/week or even the Sydney University Village, with the lowest available room rate of $294/week per person (for a single room in a 4-5 bedroom apartment).  These prices for accommodation are far outside the reach of students from disadvantaged backgrounds who receive approximately $433.20/fortnight or $216.60/week in living away from home Youth Allowance payments. Youth Allowance, which is meant to cover the cost of accommodation, food and bills for students living away from home, who are between the ages of 18 to 24 years old. If you live in a major city like Sydney, you would be very lucky indeed to find accommodation close to the University of New South Wales (UNSW) or University of Sydney (USYD) in the form of a room in a share house for less than $200/week, leaving you with $16.60 for food and bills. There is still also a small amount of rent assistance for people on low incomes, about $50 a fortnight. This still leaves little to live off, unless you can find a part-time job along side your already full time study load (and that’s not that easy in the current climate). Changes to Sunday penalty rates will also affect students on lower incomes who are working part time and casual jobs in hospitality. Many disadvantaged students cant even afford basics needed to their university studies, like broadband internet at home, expensive text books, up-to date laptops (most students will be able to find a way to purchase a secondhand computer or laptop to complete assignments on, within a price range of $200 – $300).

Full time students studying STEM courses, are usually on campus 4 full week days a week, which only leaves 3 days a week for them to earn enough money to cover the cost of living in the inner city, which realistically requires about $450/week minimum in a city like Sydney, more if you are living somewhere like UrbanNest. The breakdown would be something like $250 for rent, $100 for bills and public transport, and $100 for food and necessities. If a student finds cheaper accommodation, it is probably further away, which pushes up their public transport costs. If you don’t have access to cheaper supermarkets and food co-ops, the cost of food increases.

If the government and universities REALLY want to improve the percentage of students from SES, rural & regional and  Aboriginal and Torres-Straight Islander backgrounds at universities, real affordable accommodation needs to be offered, not “affordable” accommodation, which requires the student has parents wealthy enough, or a flexible well paid part-time job to support them, which often in the case of these students, just is not the case.