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The Fierce Girl's Guide to Finance

Get your shit together with money

Month

March 2018

When are you gonna get serious about your money?

How about now?

Let me tell you a story. Maybe it will inspire you/get you off your arse.

Sonia and Todd are everyday people with everyday jobs and a house in the suburbs. Sonia works in a finance company, so it made sense to get financial advice there when they bought a house four years ago.

An adviser hooked them up with a mortgage and an investment strategy. And since then, they haven’t really thought much about it.

Until a few weeks ago, when Todd was at a loose end on a work trip and bought The Barefoot Investor book*. Suddenly, he got interested in his finances (yay!).

He started looking at his home loan interest rate and the investment loan he’d acquired.

But it din’t make a lot of sense. So they invited me over for a second opinion, and over a few beers and some Trivial Pursuit, we started untangling their finances.

It was kinda hard, because until now, they haven’t paid attention to paperwork or statements. But we cracked on.

Home loan haggling

The low-hanging fruit was the mortgage: they were paying an eye-wateringly high rate, so I suggested that Sonia to call up and ask for a better one (a thing that you can totally do). Turns out they were in the wrong product – an investor loan, instead of owner-occupier.

Four years ago, that wouldn’t be a big difference, but investor loan rates have gone up since then (long story – search ‘macroprudential policy’ if you care). Now, they are paying far too much.

So, the lender helpfully put them into the right product and their rate became waaay more competitive. That’s a potential saving of tens of thousands over the life of the loan.

Why were they in the wrong loan originally, who is to blame, and can they get those extra interest payments back? We’re still working that out.

Borrowing to invest

Then we came to the investment portfolio. They have a sizeable ‘line of credit’ investment loan that funds a managed portfolio, mostly of shares.

Kind of like doing a smoky eye, borrowing to invest is neither good nor bad as a concept – it’s all about the execution. The line between ‘hooker after a big night’ and ‘sultry sex kitten’ is very fine.

Borrowing to buy shares increases your gains (if you have them) but it also increases your losses if the market goes down.

At the end of the day, Sonia and Todd are in an investment they don’t really understand, and one that cranks up their financial risk.

Your best ‘listening face’

That’s not to say the strategy wasn’t explained by the adviser at some point, but here’s the thing about ‘experts’. We often listen to them with an interested look on our face, but only half an ear open.

Whether it’s a physiotherapist explaining the intricacies of lumbar discs, or an adviser explaining leveraged investments, we nod and smile along, while being bamboozled on the inside.

It makes vague sense at the time, but when we get home we don’t really know how to do those stretches properly, or why we have thousands of dollars in a loan.

What’s the solution?

I’m not a professional adviser, so I wasn’t going to say ‘do this’ or ‘don’t do that’. But I did ask Todd and Sonia about their goals and priorities are and what they feel comfortable with.

It was clear they were not comfortable with a leveraged portfolio, and they  wanted to pay off their mortgage as a priority. They also had some expensive credit cards they could ditch immediately.

My take on their investment strategy is that they are Holden customers who have been sold a Mercedes. And they are paying a couple of thousand a year to an adviser, plus investment fees, for the privilege.

So, Sonia called a meeting with their adviser. I suggested some questions they could ask, and they had a positive and constructive conversation.

Over time (to minimise capital gains tax), they will sell down the shares to reduce the investment loan. They might add extra to their super (a cheap and cheerful way to lower your tax) and increase what they pay on the home loan.

Todd is also changing their bank accounts in line with The Barefoot Investor’s advice (similar to my suggestion here).

How to take charge

I don’t think Todd and Sonia had bad advice (except for that wrong home loan business). I just think they were given advice by someone who doesn’t know them well. And they didn’t feel smart enough to question it.

But they are smart. And capable. And pretty decent with everyday budgeting.  They just need to know that.

And I am telling you that you are too. Don’t let men in suits bamboozle you with their suit-tastic jargon.

You might have a simpler set-up than my friends. But the same rule applies: take an interest and you’ll get a better outcome.

Don’t be scared to ask questions – especially “why?” and “how much”. Why this home loan and not that one? Why this super fund?  How much am I paying in fees? What’s the long-term cost?

Another hot tip: read your paperwork. Every six months your super fund has to send you a statement. Open it. Read it. Compare it to other funds (some help here). And if you don’t get those statements, contact the fund and update your details.

Same with your home loan, personal loan or credit card – check out the interest rate. See if you can get a better one. Call them up. Put pressure on. In the case of home loans, the lender’s worst outcome is that you go elsewhere – so they will often bend over backwards to keep you. If you used a mortgage broker, get them to do it for you.

When’s the right time to do this stuff? 

Well, obviously … NOW.

Not sure where to start? Ask people (smart ones that you trust). Read The Barefoot Investor. Read the Money section of the newspaper. Google stuff. Visit http://www.moneysmart.gov.au

The knowledge is out there, you just need to get started.

*A lot of people ask me about this book. I haven’t read it all, but in general I like Scott Pape’s way of thinking and I am impressed at his ability to get people fired up about money. So yeah, go ahead and read it.

3 things to remember for smashing the patriarchy

I was sitting under a tree at my holiday house recently, next to my older and wiser cousin Jenny. I asked her, kind of out of the blue, “Do you ever wonder if you’re doing enough to smash the patriarchy?”.

“No”, she said. “Never crosses my mind”.

However, she is a bad-arse woman who gets shit done all the time. She is a certified Fierce Girl-level budgeter. She empowers her 14-yo daughter every day. So Jenny is actually helping with the smashing-the-patriarchy job all the time, whether or not she thinks about it.

And we can all do that. We don’t need an International Women’s Day to be empowered, awesome, independent or feminist. We slay all day, erry day.

However, since we are allocated one day a year to step this up, I feel compelled to celebrate it. So, today, I give you some fiercely held beliefs that underpin the Fierce Girl Finance universe.

  1. You are way better at money than you think. Yep, you’re a financial guru in the making. Ever watched a make-up contouring tutorial on YouTube? Ever done the mental math on how many tops in your wardrobe go with the skirt you’re wearing in the change room? Ever done some sneaky calorie calculations to work out whether you should drink this glass of wine?

    I thought so. Fact is, we are always learning, researching, calculating and rationalising in our everyday lives. And these are all the skills required to get in control of our money. Don’t let anyone (especially yourself) tell you that you’re ‘just not good with money’. Women are fucking great at it, when we give ourselves permission to be.

  2. Nobody cares about your money as much as you. Not your husband, boyfriend or father. Not your bank manager, fund manager or financial adviser. The best person to look out for your interests is YOU.

    Educate yourself, go with your gut, ask difficult questions and generally be a pushy bitch when it comes to managing your money. The only person you can always rely on to have your interests at heart is yourself, so you may as well give yourself the education and knowledge to kick arse at finance.

  3. You have more hurdles to overcome, so you’d better ‘work bitch’.  As with so many life events, Britney said it best. You’ better work, bitch, because as a woman, you start behind the 8-ball.

    We get paid less, for complex reasons (including structural workforce issues and not asking enough). We have lots of time out of the workforce to care for kids and elderly parents. And we end up in lower-paid sectors that someone (maaaybe men) have decided are worth less.

    Regardless of all the complex reasons, there is just one solution: work and save hard. We have to (as usual) do even more to get ahead. We need to add more to super early on, before we have kids. We have to take charge of our cashflow and budgets to make sure we save for the future. And we have to make sure we have money set aside for disasters (aka a Fuck-off fund).

So,  for IWD2018 this year, I say what I say 364 other days of the year: money is power. If you  take charge of it, you take charge of your life.

Please ladies: go forth and be fierce. 

 

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