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The Fierce Girl's Guide to Finance

Get your shit together with money

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December 2017

Want to be wealthy? Put that calculator down! (It’s not about numbers)

I had a conversation with myself on the way home today. It was a bit of a Smeagol – Gollum moment (for the Tolkien fans out there).

Gollum: You should get a Shellac mani-pedi for the Christmas party and holidays.

Smeagol: That’s a solid 70 bucks. You don’t need that. You have a mortgage. And an extensive collection of nail polish.

Gollum: But you have the money. Treat yo’ self!

Smeagol: Yeah but if you keep saying that, you won’t pay off your mortgage early and live a sweet life of early retirement.

I’m pleased to say that the thrifty Smeagol won the day. Almost – I did pick up a new nail gold nail polish from Priceline, but it was half price! And behold:

Home manicures for the win!

I tell this story because it happened after two interesting conversations this week, with two seriously wealthy guys. The first one was an ex-investment banker telling me why he can’t retire at 58: he can’t afford it. I was bamboozled. I imagined he was sitting on a pile of stock options, had millions in the bank and was set for life.

But he reckons he has set up his life in a certain way, and it’s costly. And when he listed some of his expenses, all I could think was ‘That sounds like a prison’. Imagine being locked into all those costs, so that you had to keep slogging away in corporate purgatory.

(I’m sure for some people, the grind itself is the point. I work for a self-made millionaire, and I have no doubt he loves doing deals more than the money itself.)

Then today, I was talking to another successful CEO. I ribbed him a bit about having money, and he got quite philosphical about it. He invests money on behalf of other, seriously rich people, so he knows a lot of them.

He said that wealth is a mindset. I’ll paraphrase: “You can have someone worth $5 million, who thinks they’re doing really well, and who is satisfied with their money. But then you can have someone with $100 million, but it never feels like enough, and they’re always searching for more, and never feel secure”.

Now I know what you’re thinking: “I’d be pretty fucking over the moon about having even one of those millions”. But that’s beside the point.

The point is this: it’s not about how much money you have; it’s about how you see it. Do you have an abundance mindset, or a scarcity mindset?

What does money really mean?

When I think of money, I tend to think of it as a tool for creating the life I want. I don’t want to slog my guts out for a finance company one minute longer than I need to.

I want to build my wealth to a point where I can work part-time, write a novel, work for a charity … or whatever. But I still want a comfortable lifestyle that involves travel and cool stuff.

Now, I know not everyone thinks like that. Maybe you think of money as a means to physical self-actualisation – to have the clothes, hair, nails, body or whatever else you want to look and feel your best.

Maybe you see money as a way to reward your hard work and flag your success – a brand name bag or car tells you (and the world) that you’ve worked hard and achieved success. (While I am over here enjoying my new $15 K-Mart bag).

The fact is, money is never just money. It’s part of a deep and complex set of beliefs. It’s bound up in the way you see yourself and relate to the world.

Nor is that relationship static. It changes over time and in line with your life experiences.

I found myself earnestly lecturing a 24-year-old friend at the pub the other night: “Nobody cares what brand your handbag is, and if they do, you shouldn’t be friends with them anyway”.

God, when did I get so old and parental? It’s a long way from when I had my first job and coveted a Fendi baguette bag (hey, it was 2001).

One lesson that my investment banker friend highlighted is the danger of unconsciously ratcheting up your cost base as years go by. It’s easy to end up as a prisoner of your own lifestyle.

When you get stuck in the merry-go-round of things like salon nails, it’s one more thing that you have to fund (which I have written about here).

Sure, the K-Mart lifestyle isn’t for everyone. I’m not saying give up everything nice and be a boring tight-arse. But focusing on keeping your tastes and expectations modest can be very powerful – especially when it lets you do other, more interesting or meaningful things with money.

The secret to being wealthy is wanting less. If you can consistently create a surplus – so you have a little left over each month to save and invest – then you’re on your way to wealth creation.

As you set your goals for next year, and maybe have some good intentions around money, I would ask you to consider this idea.

More than just making a budget, how can you shift your thinking about what -and how much – you need to be happy?

I know, that is some serious inner work, and harder than downloading a budgeting app*. However,  it may be the most effective way to build your wealth over time.

*Please download a budgeting app as well.

 

Four things I learnt in my 38th year on Earth

It’s my birthday, but YOU get the presents!

Ok that was super cheesy but I just wanted to say it. The good thing about a December birthday is that you get to do a ‘reflections on the year’ post and combine it with a birthday post.

I am totally not one of those people who’s all like ‘oh I don’t like to make a fuss about my birthday’. I am like ‘bow down bitches’.

Me on my birthday

So, during my 38th trip around the sun, here are some things I learnt:

1. Success flows where attention goes – I know this sounds like a lame motivational motto, but go with me here. In the time I have been writing this blog, I have been thinking about money a lot. And in that time, I have upped my salary, boosted my savings, bought a property and generally got ahead. (It also helped that I settled a long-drawn-out divorce, but more on that below.)

Now I am not saying you need to start a finance blog (don’t steal my idea, bitches). But by making a conscious decision to focus on money,  and checking in regularly, you have a much better chance of succeeding.

You also need to plan like a boss, but don’t worry, I gotcha. Check out my worksheet!

2. The best investments you make are in yourself – This isn’t code for ‘treat yoself’; I’m not saying to drop your cash on botox or hair extensions. I mean educating or improving yourself.

I was falling into some patterns, mainly with men, that weren’t serving me well. So, I decided to see a counsellor and clean out all the mental detritus from the marriage and divorce.

Turns out I had a fair bit to unpack from my younger years, my own family breakdown and just the general trauma we pick up from playing this contact sport called life. It has been so worthwhile – there is enormous power in someone else looking at your life experiences and helping you make sense of them.

But it doesn’t have to be doing the inner work. I also graduated from my Applied Finance course, and it means that when The Daily Mail calls me a ‘finance expert’, I feel legit.

So, don’t be afraid to spend on important stuff that makes you a better person. (But always get the best deal, of course!)

3. Valuing yourself is hard but important work – I already wrote about my failures to demand what I’m worth in my last jobs (check it out here). I still struggle with this, but this year I have done better. For example, I set a freelance rate and was shocked and delighted when people agreed to it.

I still struggle with all of this stuff, but I feel like I am more aware and more committed to asking for money, as I get older and tougher and more woke.

4. Divorce is expensive – Well duh, you say. And maybe if I had a different kind of relationship, it would have been a swift and amicable split. But it wasn’t. Now, I’m not throwing a pity party – I just want to alert you to some facts that you don’t generally learn until it’s too late:

  • Your super is part of your marital estate.  I have been a superannuation-nerd since my 20s, making lots of extra contributions. It all went into the pot to get split up, so I had to give a big chunk of it away. Most women have less super than their husbands, but if you are in the minority who doesn’t – be warned. I don’t know exactly what you can do to avoid it – you can’t even spend it because it’s stuck in super. My dad told me to stop paying extra contributions when things were on the rocks (because he is smarter than me). I was slow to do that, which I regret. I could have just spent it on champagne and oysters instead of giving it away.
  • It doesn’t matter who earned what – it all gets split. In some  twist of law, the person who earns more, gets less. Something to do with future earnings – which I translate as ‘the tax for ruining your ex’s future’. So, yeah, even though I earned more, and we had no kids, I walked away with less than half. Again, not a lot I can recommend here other than Swiss bank accounts.

Getting to those outcomes was a hard, costly and emotional war of attrition. But it’s done, I’m in my new place and the future lies ahead.

All up…

It’s been awesome, ladies. To be honest, creating and building this community is the best thing I have done in a long time. To everyone who reads, shares, comments and puts it into practice – I love you all. Thanks for being my Fierce Girls.

Should I care about the Banking Royal Commission?

A lot happened last week. Taylor Swift announced her Australian tour dates. Prince Harry announced his engagement to Meghan Markle. And in a spectacular show of being skewered by his own political allies, Prime Minister Turnbull announced the Royal Commission into banks.

If you haven’t been following the business press as closely as me, let’s recap the key points.

  • Banks have done a bunch of dodgy things, from ripping off financial planning customers, to denying life insurance clients their claims. Labor and The Greens have been gunning for a banking Royal Commission for ages.
  • The Government was, for a long time, seen as an ally of the banks. But in a high-drama, high-school-style reversal of friendship, the Libs came up with a new bank tax in this year’s budget. Turnbull, like a mean girl, sensed the direction of the wind, saw that people don’t like banks, and figured he may as well take money off them. All of sudden it was like ‘you can’t hang with us’ and ‘can I have my CDs back’.
  • But the Government wouldn’t go so far as calling a Royal Commission, because a) they had said they wouldn’t and b) they still secretly love banks.
  • That was, until the crazy Nationals got in on the act last week. Like a group of Emo kids and nerds united by their tendency to get teased, the Libs and Nats have an uneasy coalition. And last week some Nationals threatened to call a parliamentary inquiry, which the Greens had already had a crack at. You know that when the Nats and Greens are pushing the same barrow, some weird shit is about to go down.
  • And then, in a crisis response Ferris Bueller would be proud of, the banks sent the PM a letter saying, essentially, ‘Bring it on, bitches’. You see, if the Nats/Greens’ inquiry got up, those parties would control the terms of reference.
  • But if the banks and the Libs called their own Royal Commission, they could set the chess pieces up the way they wanted. Choose the guy running it, decide who it would cover and most importantly, what it would exclude.
  • Like a kid about to have his locker searched for weed, the banks were all like ‘Nothing to see here’, madly hoping they didn’t accidentally leave a baggie of bud at the back of the locker last week.

So, the terms are set and from what one columnist described, it will have all the impact of being slapped with a wet lettuce.  It will also cover more than banks, and sweep in superannuation and insurance. This has the impact of spreading the attention and therefore the depth across more companies. While it’s costing a bomb (like $75m) and will take a year, the word on the street is that’s not actually enough to cover all those sectors. Time will tell.

What does it mean for you?

Probably not a lot. Maybe it will shine a light on the potential conflicts of interest within banks (where they provide financial planning then sell a bunch of their own products, for example).

But we already have a highly regulated bank and financial services sector. What’s harder to control is culture, and that’s what the banks need to work on. When money is involved, and large sums of it, it’s easy for greed to take over in some corners of an organisation.

A good culture calls out bad behaviour and shuts it down. I suspect that hasn’t been happening enough in some parts of some banks. (There are also genuinely good people  in banks, doing great work – let’s not forget that).

Caveat Emptor – the real answer to all of this

That just means ‘buyer beware’ – but it sounds way smarter in Latin right? My take on the whole thing is this: there will always be people trying to take your money. So when it comes to big financial decisions, the key is to keep your dubious face on.

Here’s an example. One of the issues that people want the Commission to cover is how ANZ got mixed up in the collapse of Timbercorp. This was a forestry investment that was tax deductible because it was agriculture or something. Basically, if you invested, you got a bunch of tax breaks. So, people chucked a bunch of money into it, and many lost said money when it all collapsed.

I feel sorry for them, but here’s the thing. The people I heard interviewed had broken the basic rules of investment.

Firstly, does it sound too good to be true? Shitload of tax breaks for planting trees? Sounds legit. Not!

Secondly, are you throwing all your money at it? Or are you building a diversified portfolio of investments so that if one goes sour, you don’t lose it all.

Thirdly, have you protected your downside? This means looking at all the things that could go wrong, what they would cost, and how you would bounce back from the worst outcome. If you haven’t played out this scenario, then you’re not ready to invest.

None of these things are super complex or require a degree in finance. It’s just having a good bullshit detector, not ever trusting anyone too much, and following some basic principles.

If you’re ever thinking about an investment and aren’t sure about your own BS filter, ask someone else – someone you trust, or who’s really cynical. Or both. Like a poorly lined pencil skirt, when you hold something up to the light, you often see its flaws.

So, short answer is this: nobody is going to protect your money as well as you. No royal commissioner, no regulator, not even Ferris Bueller. The only option is for you to take charge, Fierce Girls!

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