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10 Tips For Choosing An Investment Property

So, you’re thinking of buying your first residential investment property? There are a few things to consider before making the move. Here are our top 10 tips for avoiding potential difficulties and ensuring success.

  1. Know your goal

Understanding your financial objectives is key to finding the right investment property. The actual property itself is rarely the end goal when it comes to investing – the financial elements should be your key focus. First, decide what your investment goal is and then create a plan to achieve it within a realistic time frame.

Are you looking for a plan for retirement? An income-generator to fund your children’s education? Or building equity to gain a regular income? Define a plan and review it regularly as your situation and the market changes.

  1. Research, research, research

Understanding which property is going to work best for your situation is key. It needs to be one that will be of high demand from renters and, possibly, owner-occupiers down the track. Be sure to research which types of properties are in demand and rents quickly in particular areas, and those that don’t. Is this an area popular with families who want three- or four-bedroom homes, or with singles looking for studio apartments? Speak with property managers and check ads to find out what renters are currently looking for, and how their needs may change in the future. What developments are planned nearby? Get to know the neighbourhood you’re planning to invest in.

  1. Old or new?

It’s the age-old debate: should you buy a renovator’s delight or something you can rent straight away? It’s great if it can be rented out as is, but potential to renovate should also be considered. The ability to easily and economically add value to a property is a plus, as it could increase rental returns. Don’t immediately write off a property just because it needs a paint job or the kitchen cabinets need replacing, but at the same time avoid overcapitalising if it’s not going to deliver returns. It’s a balancing act, so consider your skill levels, the extent of makeover required, and your access to funds to pay for renovations.

  1. Location, location, location

Location is critical to performance. Some of the things to consider include:

  • How far is the property from the CBD or business areas?
  • Are there schools nearby?
  • How’s the shopping? Can tenants walk to local shops or will they need to drive?
  • What and where are the public transport options?
  • What other amenities are close by? Are there cafes, a medical centre, a pharmacy, a gym?
  1. Do your sums

Always check your finances before deciding to purchase a property. Get pre-approval and make sure you can cover repayments as well as extra upfront costs such as conveyancing, inspections and taxes. There are also ongoing costs to consider including landlord insurance, strata and property management fees, property maintenance, council rates and utilities.

You need to set yourself a realistic picture of a property’s cash flow, rather than vague idea of whether rent will cover expenses, so use a spreadsheet to calculate all foreseeable expenses. If cash flow is negative, can you afford to maintain the property? What happens if it’s vacant for a couple of months? Do your sums carefully and always ensure you factor in a financial buffer to avoid mortgage stress.

  1. Choose the right setup

When it comes to investing, it’s important to understand how to set up the purchase to receive the most benefit. The entity should be tax-effective and protect any existing assets. You can purchase in your name, through your super or through a trust, but always understand how the purchase will affect you and your family. Expert advice can assist in maximising your benefits.

  1. Pick the right features

You want to appeal to the highest number of tenants, so look for properties that offer that little something extra, like a second bathroom or a lock-up garage. Also, look at properties that appeal to many segments. For example, a lift may appeal to both retirees and a young family, as both will be looking to avoid stairs. Just make sure the benefits outweigh any extra costs.

  1. Check your emotions at the door

Remember, you won’t be living in this home, so there doesn’t need to be an emotional connection to the home or the area. Your decision should always be about which property will give you the best return, not which one is most suited to your own tastes and lifestyle.

  1. Timing is key

It’s a great idea to keep on top of the market’s movements and its dynamics. While there are investment opportunities available most of the time, some market conditions are more favourable. Do plenty of research and, if you don’t fully understand it, ask for help.

  1. Get expert advice

Your broker can put you in touch with experts when it comes to real estate and investment. This means accountants, real estate agents, lawyers, and valuers. These people are immersed in the industry and will be able to guide you in your decision-making.



Article source here.

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5 Bookkeeping Tips For Your Small Business

Setting up your business is exciting and challenging, and will hopefully bring you the rewards you deserve, along with the autonomy you dream of. However, if your business is going to be profitable, it’s vital that you get the accounts right. That starts with making sure you set up the books correctly.

1. Comply with the law

All businesses must register for an ABN. If you turn over more than $75,000, you will also need to be GST registered. Registering for PAYG Withholding Tax is also essential if you employ staff.

In addition, it’s vital that you keep all records relating to income tax, GST, payments to employees, superannuation, fringe benefits tax, fuel tax credits and business payments. The law requires you to keep all these records for five years and have them accessible on request.

2. Know what bookkeeping is about

Bookkeeping is the process of organising, recording and reporting on the financial transactions of your business. This involves several different processes:

  • Keeping track of daily transactions.
  • Sending out invoices and managing accounts receivable, including chasing late payments.
  • Managing accounts payable, including payment of supplier invoices, expenses and petty cash.
  • Maintaining the balance of income to expenses, to make sure the business doesn’t run out of day-to-day money.
  • Making sure the books are valid and up to date whenever the accountant needs them.

Good bookkeeping will keep your business running smoothly day to day, and will make your accountant’s job a lot easier.

3. Choose what type of accounts you want to keep

There are two main types of accounting systems:

  • Cash-based accounting. This records transactions at the time the cash was paid or received, not when the transaction actually occurred. It is a relatively easy system and involves little paperwork, but it can be prone to errors. It is usually used by small businesses who mainly deal with cash transactions.
  • Accrual-based accounting. This records transactions at the time they occur, even if the money has not been paid yet. This is the most widely used method and is more accurate but can be more complicated, although it makes it easier to record transactions like wages and credit.

Some businesses use a combination of the two. If you’re not sure which would work best with your business, check with your accountant – he or she is the person who will be helping you out come tax time.

4. Choose your system

Most businesses these days use some form of electronic bookkeeping. There are a variety of options to choose from here, but all require you to be accurate on a computer and have a good backup procedure where information is stored off site. Options include:

  • These are the simplest electronic option and are ideal if you’re accurate at data entry and don’t want to spend out on a full accounting package.
  • Accounting software packages must be compatible with Standard Business Reporting. It’s also vital that you make sure you choose a package that meets the needs of your business.
  • Web-based. “Cloud” systems have the advantage of being able to be accessed from any location, and also solve the problem of off-site data storage. They are usually cheaper than standard software, but are thought to be slightly less secure at present.

5. Stay on top of it and have a great accountant!

It’s vital that you stay on top of the books in order to make sure your business is running as it should. Allocating a set time each week to devote to your books ensures that this habit becomes part of your work routine. It also should help you maintain your profitable business, without getting you too confused in the process.

Make sure you choose an accountant who you feel comfortable asking questions of, and who can guide you through the setup of your books. Great accountants can act as advisers and really make a difference to the success of your small business.


Article source here.

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Farmers Offered More Financial Flexibility

Australia’s biggest agricultural lender has admitted it lost touch with farmers as it moves to relax rules around loan repayments and make it easier to save for droughts.

National Australia Bank will allow primary producers to offset farm management deposits against loans, with other banks being urged to follow suit.

Farm management deposits allow farmers to remove money from their taxable income during good years to later use during tough times.

“The royal commission and other inquiries reveal that in some cases we have lost touch,” NAB chief executive Andrew Thorburn said in Wagga Wagga on Monday night.

The bank will also no longer charge penalty interest payments on farmers who fall into debt on loans.

NAB came under fire during the banking royal commission for charging struggling Queensland cattle farmers more than $2.6 million in default interest over more than five years.

Agriculture Minister David Littleproud wants other banks to follow NAB, encouraging farmers to “vote with their wallets” and tell banks who refuse to “bugger off”.

Rural Bank has until now been the only lender to allow the FMD offset since it was introduced in 2016.

One in three farmers bank with NAB, meaning the other big banks will face increased pressure to join them in making the change.

National Farmers’ Federation chief executive Tony Mahar is hopeful other lenders will allow greater flexibility for primary producers.

“We need to make sure farmers get through these challenging times and are able to continue to produce food and fibre for Australia and the globe,” Mr Mahar told Sky News on Tuesday.

Mr Littleproud tore shreds off the foreign-owned Rabo bank for “turning up its nose” at Australian farmers last week by ruling out an FMD offset product.

“You have to ask how serious that bank is about agriculture in Australia. It’s fantastic an Aussie owned bank has shown a social conscience and led from the front,” the minister said.

Mr Littleproud also wants other banks to follow NAB on removing penalty interest payments for farmers in drought, urging lenders to reassess the practice more broadly.

“I don’t think the charge truly reflects the cost to the bank. It’s really a kick in the guts when someone’s down, which isn’t the Australian way,” he said.



Daniel McCulloch and Matt Coughlan

Article source here.


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The Relationship Between Saving Motives And Saving Habits

Before we dive in, take a moment to consider which of the following best describes you and your household in terms of your current saving habits?

  • Save regularly by putting money aside each month.
  • Spend regular income and save other income (such as investment income, bonuses etc.).
  • Save the income of one family member and spend the other.
  • Save whatever is left over at the end of the month (no regular plan).
  • Do not save.

Saving motives and saving habits 

When it comes to the saving habits of households, there are often three distinct camps, the regular savers, the irregular savers and those that do not save (the non-savers). Interestingly, there is often a relationship between saving motives and saving habits*.

Importantly, saving motives can include things such as, for retirement, for children’s needs, to buy a house or consumer durables (e.g. fridges, motor vehicles etc.), for holidays, for emergencies and to have funds in reserve for necessities.

Here are some interesting findings regarding the relationship between saving motives and saving habits:

  • Someone that has a motive around saving for emergencies and/or retirement is more likely to be a saver, whether regular or irregular.

Also, if we look at people that save regularly versus irregularly, regular savers have a more positive relationship with a retirement saving motive, a high income and/or a long-term saving horizon.

With the above in mind, it’s important to remember that the source of your wealth creation is you. For some of us, saving may be second nature or come easy due to circumstance, whilst for others, it may be more of a struggle. What is important is to enjoy life now whilst also taking the time to make sure this enjoyment flows through and is experienced by your future-self as well.

By having a clear picture of why you need (or want) to save, as well as the motivation and roadmap to achieve it, you might just find this makes all the difference.

The current climate affecting savers

Admittedly, the recent economic environment, namely slow wage growth and the rise in the cost of living may be disrupting the efforts of savers through the need to divert more of their disposable income away from saving to spending.

Unfortunately, the impact of this may be evident in the survey results from ASIC’s Australian Financial Attitudes and Behaviour Tracker (Wave 5). For example, of the Australians surveyed:

  • 23% saved money using a savings account that was automatically linked to their pay. This is down from 24% in the previous survey (Wave 4).
  • 31% saved money using a savings account that was not automatically linked to their pay. This is down from 38% in the previous survey (Wave 4).
  • 16% saved money but not through a savings account, for example, put money in an envelope or money tin. This is up from 13% in the previous survey (Wave 4).
  • 12% saved money by making voluntary contributions to their superannuation account. This is down from 13% in the previous survey (Wave 4).
  • 20% saved money by paying more than the minimum amount off their mortgage or other personal loan. This is down from 22% in the previous survey (Wave 4).
  • 21% did not save any money over the last six months. This is up from 19% in the previous survey (Wave 4).

Moving forward

When it comes to saving, it’s important to understand the positive effects associated with saving a portion of your income from employment each payment cycle. For example, saving can help with:

  • Your capacity to establish and build-upon an emergency buffer (e.g. for unexpected events, such as job loss, medical/dental emergencies, or home/car repairs).
  • Your capacity to utilise and rely on your cash/debit cards, as opposed to credit cards, to meet lifestyle expenses.

For those savers impacted by the current economic environment, some relief may be on the horizon if several of the Government’s 2018 Budget proposed measures are legislated and come to fruition, such as the 7-year personal income tax plan.

In the meantime, it’s important to take stock of your existing financial situation, goals and objectives. This may involve, a closer look at your household expenditure to see whether there are areas were surplus income could still be realised, as well as the continuation of tracking your spending and comparing the results to your budget planner.


Article source here.


New online bank set to launch in 2019

A new, online-focused bank is coming to Australia in the hope it can lure customers from the big four banking giants.

The bank- which will be called 86 400 after the number of seconds in a day – will start offering transaction and savings accounts from early next year followed by home loans by June.

UK banking veteran Anthony Thomson, who will chair the new company, says Australia has the most profitable banking market in the world because of its high fees and charges.

Australia’s top four banks – Commonwealth Bank, ANZ, National Australia Bank and Westpac – posted a combined $31.5 billion in cash earnings in 2017, up 6.3 per cent from a year earlier.

“Banks in general, Australian banks or UK banks, have lost sight of the customer, they just think they exist to make money, and I believe passionately that profit is a by-product of giving the customer better products, a better service or better experience,” Mr Thomson said.

86 400 will be only an online bank, with customers to do all their banking via a phone app.

The bank is for cashless transactions, offering customers the ability to use digital services such as Apple Pay, Samsung Pay and Google Pay, but does provide an option for ATM cash withdrawals via Visa debit cards – made easier by the big four banks recent decision to scrap foreign ATM fees.

The bank currently consists of 60 people but will have a customer service team based in Sydney to answer calls and chat messages.

A former head of ANZ Bank’s Japan operation, Robert Bell, is CEO of the bank.

Its executive team also includes a former Westpac general manager of digital and a former CBA international chief risk officer.

The bank is working with APRA to obtain a full banking licence ahead of a soft launch towards the end of the year and entry into the public market in the first quarter of 2019.

Mr Thomson said the bank will have a lower cost base than traditional banks because it doesn’t have legacy technology and physical branches.

Mobile banking is rising in popularity in Australia: research from Roy Morgan shows around 8.3 million people used mobile banking in an average four-week period in the six months to June, 2017, up 72 per cent from 4.8 million users for the same time period in 2013.

Mobile banking was used by 41.5 per cent of banking customers, compared to the 26.5 per cent using branches, the 2017 Roy Morgan survey found.

Mr Thomson is hoping to replicate his success with UK online banks Atom Bank and Metro Bank, in Australia.

Metro Bank was launched in 2010 and after six years had one million customers and a market capitalisation of $5 billion, Mr Thomson said.

Payment processor Cuscal is backing 86 400, with additional shareholders expected to come on board.



Article source here.

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End of financial year tax tips for employees and small business

The end of the financial year is one of the busiest and most stressful times for businesses and employees. Are your financial records in order? Do you know how to take advantage of standard deductions? While many people only see their accountant once or twice a year, you’re much more likely to identify deductions and make necessary adjustments when an ongoing relationship is in place. Whether you’re a business owner or an employee, you need to understand which deductions are available and relevant to you so you can benefit from them.

Tax tips for businesses

If you run a home office, you may be able to get a significant tax break. Sole traders and anyone who is operating a business from their home may be able to claim a deduction for occupancy and running expenses. This includes things like your mortgage and rent, which can add up to a large sum over time.

Business travel expenses are another common deduction, whereby any expenses incurred by you or your employees can be claimed. If you’re away from home for six or more consecutive nights, you need to record all of your activities and expenses.

Auto expenses are another common area for deductions. Any motor vehicle expenses by your employees can be claimed as business-related expenses, with the fringe benefit tax (FBT) also relevant if the employer uses the vehicle for private use. The salaries and wages you pay to your workers can also be claimed as a tax deduction, including any super contributions that you make for them.

Repairs, maintenance, and operating expenses can also be claimed in some situations. The amount of these deductions can vary considerably and is dependent on the type of business that you run, which is why it’s so important to keep up a relationship with an accountant.

Tax tips for employees

With the end of the tax year quickly approaching, it’s time to educate yourself so that you can meet your tax obligations and reduce your tax liability. From vehicle and travel expenses through to self-education and tools, making the right deductions now could have a huge impact on your financial health going forward.

With different deductions available for work and private purposes, and many work-related deductions requiring stringent record keeping, it’s hard to keep on top of it all. Instead of waiting until the end of June to get your financial records in order, perhaps it’s time to set up an ongoing relationship with a qualified and experienced accountant.



Article source here.

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What if your mortgage repayment falls short?

Whether you’re affected by fluctuating interest rates or by a change in your personal circumstances, the pressure of maintaining regular mortgage loan repayments can be overwhelming at times. Here is some information to help you understand the available alternatives.

What to do before it gets worse

If you’re about to miss a mortgage payment or already have, rest assured there is help available. Taking a big breath and raising the issue with your lender is the best thing you can do – in fact, the earlier you do that, the more options your lender will have to assist you.

Failing to resolve the situation may force the lender into taking action against you. This can include:

  • Fees being applied.
  • A higher default interest rate on missed payments.
  • Taking recovery action on your home loan, forcing a property sale.
  • Enforcement charges, plus court and legal costs.

A two-way relationship

Your lender will want to help you maintain your mortgage. One option is to give your lender a hardship notice. It looks like this:

  • First, you contact your lender to explain the situation, which may require a person-to-person meeting at their office.
  • Before the meeting, consider what options are available and define a ‘plan of attack’. This will show the lender that you’re proactively searching for an answer. After all, people are more likely to want to help you if they can see you’re trying to help yourself.
  • Whatever plan you decide on, you can give your lender a hardship notice orally or in writing that you are unable to meet your obligations – your lender can guide you in this.
  • Your lender has 21 days from receiving your hardship notice to ask you for any further information it requires. If it does not require further information, it has 21 days from receiving your hardship notice to decide whether or not it will agree to change your loan.
  • Depending on your situation, the lender may come back with a scenario to ease payments for the short term, increasing them later. This may escalate your overall loan costs, but you will maintain your home and mortgage, and will be better off in the long run.
  • Your lender must give you a notice as to whether or not it agrees with to change your loan following a hardship notice. If the lender does not agree, it must give you reasons why.

Lenders do have an obligation to consider your request, so don’t think that it’s a lost cause. If the lender will not assist you, you may be able to make a complaint to an external dispute resolution scheme of which your lender is a member. Your lender can give you details of how to contact that scheme.

Helpful support

Believe it or not, you’re not on your own – every month there are mortgage holders having issues with making payments, and just as there are legal rights for home buyers, there are also legal services for mortgage holders.

Perhaps there are also other financial issues, or bills, that also need attention, in which case we offer financial advice so feel free to contact us.

Albeit a difficult and somewhat embarrassing issue, you can speak to your mortgage broker about your loan issues. They will explain your options, suggest a plan, and work with you to minimise worries and achieve a resolution.

Whether you’re a client or not, if you require more information or advice contact your local broker as soon as possible. They can help with sorting through what options are available to resolve your financial difficulties.

You can also visit Moneysmart.gov.au, another great resource for tips to help you keep up with your mortgage repayments.

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Couple’s finances: Being in tune with one another.

In our article, ‘Recognising and dealing with financial stress’, we discussed that close to a third of Australians find dealing with money stressful. In light of this, one of our suggestions for dealing with financial stress was to talk to your partner. One of the reasons behind this is due to the conflicts and stresses that may arise between couples when there is a difference in their beliefs on money and/or their money personalities, and these differences are not appropriately recognised and addressed.

Importantly, beliefs on money and money personality can be interconnected.

Consequently, we discuss ways to help you with recognising and addressing the differences that may occur in both of these areas through the fostering of communication, mutual understanding and teamwork.

Beliefs on money

The experiences that you have throughout your life (and your interpretation of these experiences) can shape the way that you view the world and your engagement within it on a conscious level. Importantly, the same may be said in terms of the formation and shaping of your beliefs on money.

Briefly, your beliefs on money are protective or liberating ideas, thoughts, or opinions that you hold about money. Depending on your personal circumstances, these beliefs on money may or may not be beneficial or desirable to you as they can influence your financial attitudes and behaviours.

If you are unsure about how to discuss your beliefs on money with your partner or even what your beliefs may be in the first place, consider completing the following together:

Identifying your beliefs on money through language

  • Write several short sentences about money, starting each sentence with ‘I should…’ For example, ‘I should invest more for my retirement’.
  • Repeat above, but now change the start to ‘I believe my partner should…’ For example, ‘I believe my partner should save more’.

Identifying your beliefs on money through feeling

  • Write down how you are feeling right now. For example, joyful, grateful, hopeful, helpless, depressed, jealous, or angry.
  • Repeat above, but now write down
    • The feelings you believe someone who is financially insecure would have.
    • The feelings you believe someone who is financially secure would have.

Once done, read out your answers to one another and discuss how you both feel. Now take some time to engage in ‘perspective shifting’, in this instance, seeing your beliefs on money as ideas, thoughts, or opinions rather than truths. A simple way to do this may be changing ‘should’ to ‘could’ in the first exercise above and discussing how you both feel afterwards. By practising perspective shifting, you may find that you not only allow yourself to gain a better understanding of your partner’s beliefs on money, but also open yourself up to the possibility of replacing your existing beliefs on money with new ones.

Money Personalities

Why do you manage money the way you do? Many of the decisions you make when dealing with money, such as how you earn, spend and invest your money, may be done on a subconscious level. We explore this in our Money Personality learning module.

Briefly, your money personality is the set of preferences you have with regards to dealing with money. Importantly, your money personality, like your beliefs on money, can influence your financial attitudes and behaviours.

When it comes to preferences in dealing with money we are all unique, which is why we developed four money personality animals to help broadly describe the differences that can arise from one person to the next. Here is a brief overview of each money personality animal:

If you are unsure about how to discuss your preferences with your partner or what they may be in the first place, consider completing our Money Personality quiz together. Our Money Personality quiz assesses your preferences for dealing with money with regards to three key metrics:


Continue reading the article here.

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How to add maximum value with renovations.

Renovating is one of the best ways for property owners to increase the value of their homes. If you’re looking to add value to your home, but don’t want to renovate every room, it can be difficult to decide where to start.

Here are some ideas to help you decide which part of your property to focus on for the best results.

The kitchen

The kitchen is widely regarded as the best place to start when renovating – and while it can be a lot of work, the rewards can be substantial. Despite being one of the most expensive rooms in the house to renovate, there’s no need to break the bank.

An updated kitchen can make a huge impact on potential buyers, by giving your home a ‘ready to move in’ feel. The Housing Industry Association of Australia report that the average cost of a kitchen renovation(PDF) in Australia is $21,862, but the difference a modern kitchen makes when you’re selling can be substantial.

As far as appliances go, you might choose to purchase a single-brand suite to give a cohesive look and feel to the room. However, there’s often no need to go ‘top of the line’ when it comes to elements such as ovens. Adding value is about keeping costs to a minimum while refreshing the room.

The bathroom

Next on the list is the bathroom, a key element in any house – especially if the structure isn’t particularly modern. Similar to kitchens, an updated bathroom can provide a home with a much-needed contemporary boost, and it doesn’t have to cost the earth.

There are a number of cost factors to consider when renovating a bathroom that don’t apply to other rooms in the house, such as plumbing and waterproofing. Moving the location of sinks, toilets and showers can add a lot to the overall cost, and this money probably won’t result in a lot of value being added in the long run. Therefore, a key tip for doing up a bathroom: don’t overcapitalise.

It’s important to consider the home as a whole, and the features you believe will be desirable for your location and target buyers. If you’re hoping to attract a family, for example, consider installing a bath.

The great outdoors

Another area ripe for high-impact renovation is gardens and back yards. Opening up the rear of your home to create an outdoor entertainment area is effectively the same as adding a whole new room.

If your home already has an outdoor entertaining area, it’s worth considering whether there are elements that could be updated. Adding an outdoor kitchen or designated barbecue area can have a positive impact on the value of the property.

And because first impressions count, don’t overlook the front yard.  ‘Curb appeal’ can be the difference between potential buyers driving by or stopping to take a look inside.

There’s more to adding value than giving your property a quick lick of paint and hoping for the best. The right renovation, in the right area of the house has the potential to add tens of thousands to the value of your home – and choosing the right way to invest your time and money could mean a better result when you decide to sell.


Source: (Your Loan Hub)

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How supermarkets influence your buying.

When you walk into a supermarket, the game begins between you and the sales/marketing team of that supermarket. Your goal is usually to get in and out with the groceries that you need. Whereas, their goal is to influence your buying in an attempt to get you to spend as much money as possible. Largely, this is done by specifically designing a supermarket that leverages off the findings from behavioural economics research.

The entrance

A humble trolley
Prior to walking into the supermarket, you will often head over to the trolley area. Unfortunately, there is more to that humble trolley than you might think.

One of the first shopping trolleys, referred to as a ‘folding basket carrier’, was introduced in 1937. It consisted of a foldable metal frame that moved around on wheels and could hold two small baskets. Since then, the design has undergone numerous changes. However, of most note has been its size and carrying capacity. For example, most trolleys that you find today in supermarkets are much larger in size and carrying capacity than their predecessors.

Whilst there are many good reasons for this change, a larger array of items available in supermarkets to purchasefor example, a major reason is the impact that a trolley’s size and carry capacity has on us from a psychological point of view. Namely, the bigger the trolley, the greater the likelihood that we will be inclined to fill it further.

First impressions 
You have probably heard the phrase, ‘First impressions matter’. When it comes to supermarkets, this is particularly relevant. As we often have multiple competing priorities, setting the time aside to do the shopping can be quite stressful (especially if we have children that need to tag along). This means that our initial mood when we step through the entrance of a supermarket can often not be ideal from the point of view of a supermarket’s sales/marketing team. Namely, we want to get the experience over and done with as quickly as possible.

Consequently, after negotiating the trolley selection, the first thing that confronts you in a supermarket is often the bakery and fresh produce sections, as well as some ambient music playing over the internal speakers. The smell of freshly baked goods, the brightly coloured fruits and vegetables, and the often slow tempo music are all attempts to try to ‘recalibrate’ your mood to something more conducive. They are looking to elicit two main responses, relaxation and hunger, because studies have shown that these things can influence your spending behaviour:

  • Relaxed = more time spent in the supermarket, leading to increased purchasing.
  • Hunger = more food item purchases.

The layout

Department locations
Have you ever had to pick up some mid-week supplies, such as bread and milk, and found yourself with a few extra items when you reach the checkout area? One of the reasons for this is the layout of the supermarket departments (bakery, fresh produce, meat/deli, general grocery, dairy, frozen goods etc.).

By placing essential items, such as the bread and milk example above, at different ends of a store, it requires you to walk through other departments to get to what you want. This tactic is aimed at distracting and enticing you towards other items that you see along the way.

There are many tactics employed by the sales/marketing team when it comes to aisles, such as displays and general product placement. We have listed a few here:

  • Displays. Research has shown that when people shop, they tend to go around the edges of the supermarket, dipping in and out of the aisles. Consequently, items on display at the end of aisles aim to entice you. Unfortunately, despite them often being accompanied by signs saying ‘SPECIAL’, they are usually highly priced items (with high-profit margins) when compared to alternatives.
  • Aisle width. You will often find that the aisles are quite wide in supermarkets, noticeably more so than in the past. This is not just for your convenience when manoeuvring your oversized trolley around other people (and their oversized trolley). Wide aisles, just like the freshly baked goods, the brightly coloured fruits and vegetables, and the slow tempo music, aim to make you feel relaxed and… relaxed = more time spent in the supermarket, leading to increased purchasing.
  • Eye level. It’s often human nature to focus on things that are at eye level. The sales/marketing team frequently take advantage of this by putting expensive items at eye level (even if they have a SPECIAL sign). As such, by looking above and below eye level, you may find cheaper, but still good quality alternatives. However, importantly, certain aisles are set to influence two different eye levels, namely, adults and children. You can probably guess which aisles these are.
  • Charm pricing. By marking an item with a nine at the end ($5.99), many of us are still falling victim to the belief that it’s a good deal. This can be in terms of a comparison between a rounded alternative ($6.00) or with shopping in general.
  • Spend and save. You have probably seen multiple purchase pricing many times before, the five-for-$5 deals for example. Often people that are enticed by this offer tend to buy five items when in fact they probably only needed one. A slight variation to multiple purchase pricing, but with a similar premise, is the ‘buying one item and getting the second for half price’ example.
  • Emotional purchases. There are some items in the supermarket that you may engage with on an emotional level, coffee/tea or baby food for example. Because of this, you may spend a little more time before making a decision. As such, you will often find these types of items in the middle of the aisle. The rationale behind this can be as follows:
    • It draws you further into the aisle so that you interact with other items.
    • It stops you from obstructing others from entering the aisle.
  • Layout swaps. When you have been shopping in a particular supermarket for some time, you might reach a point where you think you have figured out where everything is located. This serves to not only make you more efficient in your shopping time, but also less susceptible to distractions and enticements. Consequently, from time to time, a supermarket will undergo a layout swap, with the aim of disorientating you and subsequently exposing you to other items.

The finish line

Checkouts and those last minute purchases
You made it, albeit probably with a little more in your trolley than expected. Now it’s time to put everything through the checkout. But wait, what about those chocolates, magazines, and chewing gum that are just within arm’s reach. This is one of the last attempts by the sales/marketing team to get you to purchase more items. Unfortunately, this can often be especially difficult to navigate past if you have children accompanying you.

Moving forward

As you might have already been aware, the supermarket is a complex place. Thought has been put into every little detail often with the sole aim of influencing your buying. So when you do your next grocery shop take some time to be mindful of all the different tactics that are employed by a supermarket’s sales/marketing team – you might just find that you spend less and save more.

Lastly, we leave you with a few handy tips for your next shop:

  1.  Plan your meals in advance.
  2.  Consult your fridge/freezer/pantry for items you already have.
  3.  Write a shopping list before heading to the supermarket.
  4.  Although, not always possible, consider leaving children at home with the spouse.
  5.  Opt for a basket over the shopping trolley.
  6.  Look at the unit prices between packaged and unpackaged items.
  7.  Despite rewards programs, don’t be afraid to shop around for a better price.


Article source here.