The Fierce Girl's Guide to Finance

Get your shit together with money


March 2020

The time of the tight-arses has arrived: are you ready?

Well, that escalated quickly.

One week I’m all like  ‘sure buy some cheap shares‘ and the next I’m like ‘yeah, so you should probably start learning to grow your own herbs and bake your own bread’.

Things are crazy. Last night I spoke to my retired dad. He said he’s fine, as long as he doesn’t look at the stock market.

We talked about tightening our belts and digging out my Grandma’s CWA cookbook for some thrifty living recipes. Boiled fruitcake recipe available if anyone’s interested (oh wait, you need flour for that, and that’s become a weird luxury item).

His line of the week was: “The time of the tight-arses has arrived”. And damn, he is right. We’re cool all of a sudden.

People have been asking me about various topics and my main answer is: it’s time to hunker down. Sometimes doing nothing is the right choice.

A few people have asked: should I be buying shares now that the market is down?

My answer is: it’s not a bargain if you don’t need it.

If you were already in the market for equities, then sure, take a look in the bargain bin.

But like any shopping trip, you need to ask: is it cheap because it’s sale time or is it cheap because it’s a fluoro yellow mini-dress that nobody else wants? 

I have bought too many of the fluoro-dress-type bargains in my life, so now I’ve taught myself that if I wouldn’t buy it full-price, I don’t want it.

Consider Afterpay (ASX:APT), the market darling who was so obviously over-valued (in my view). It has dropped around 75 per cent – from above $40 in February, to $9.90 at the close on Thursday 19 March.

Investors are worried that all those customers who thought they could totally handle thousands of dollars of debt will, all of a sudden, be not-so-cool with it.

So, is Afterpay a bargain or a fluoro mini-dress? Time will tell.

I’ll be honest, the bargain hunter in me really wants to buy some. But mature Belinda reminds herself of the hot pink high-heels she bought from DJ’s on sale 3 years ago, which she has only worn once.

Also, I need to make an important point:

Only invest if you feel secure and have a seriously big emergency savings buffer. 

It’s clear to me that we are about to enter a recession after about 27 years of uninterrupted  economic growth in Australia. Many of my readers were either kids or not even born when the early 90’s recession hit (good but sobering read about it here).

Pearl Jam were releasing Ten, and they were rocking the finest op-shop fashions for a reason: recession.

Please enjoy this pic of me circa 1991, courtesy of my bestie

I don’t remember much beyond Paul Keating on the news saying it was a recession we had to have, which was apparently not helpful. I think he was trying to say that sometimes the economy is blown up like a bubble and needs a release valve.

For economic nerds, this market downturn is not surprising. The event that sparked it certainly is – nobody expects a pandemic.

But economies and markets always rise and fall – as you can see in the yellow columns below. (I pulled it from this good article).

This chart shows all the market falls since 1973. Source: Firstlinks

The thing that sucks is living through the falls – which we are now.

So, now is the time to shore up your resources.

If you still have a job, save your arse off. Stop wasting money – like NOW. Ignore the politicians saying it’s your duty to prop up the economy – screw that, protect yourself.

I am not in the most secure job situation, so I am not investing much in the market right now. I’m in ‘hunker down and max out the emergency fund’ mode. My emergency funds sit in my mortgage redraw, so I’m also reducing my interest costs (low as they are).

Remember that when you lose your job in a recession, it might not just be a few weeks until you get another one. It can be many, many months.

Without wanting to alarm you, look at how quickly the unemployment rate rose in the 1990s, while I was living in blissful ignorance, worrying about teenage boys and listening to Pearl Jam:

Yes, that’s a 38% increase in one year.

So, if you have the emergency fund situation sorted, maybe investing is an option. But first, make sure you are ready for a world where at least 1 in 10 people don’t have a job.

Sorry, this post turned out to be a major buzz-kill. I just want all you Fierce Girls to be in the group of people who can see what’s coming and prepare as much as possible.

This period is not about hoarding toilet paper; it’s about hoarding your savings in case the worst comes. 

And if it doesn’t come, and you sail through, then guess what? You’ve got a great savings fund to spend in a few years – on whatever badly-thought-through mini-dress options you desire!


A small request not to freak the hell out about the world right now

Sure things aren’t perfect. Sure we are facing an outbreak of Coronavirus, but maybe it’s best to just sit yourself down like Elle Woods watching hot guys play sport. (On TV though, to be safe).

Of course, some people will get sick. A small proportion will sadly die from complications, in the same way people die from the flu every year. But this is not 1918 and we are not all going to perish from a Spanish flu pandemic.

What we are really witnessing on the markets, in the media and in the supermarket aisles is panic.

This is a downturn driven by emotion.

I suspect that in the face of a vague sense of existential dread caused by climate change and growing wealth inequality and political instability, the virus is something to focus our collective panic on. We can’t stop companies burning dirty coal but goddamn it we can buy some hand sanitiser!

For most people, the biggest threat is not to our health, but to our economic security. There is quite likely to be a recession or at least a downturn. (A recession is technically two quarters of negative economic growth).

The biggest consequence of a recession is that people lose their jobs. Employers create fewer jobs. Casual staff have their hours cut. It takes longer to find a new job.

A recession means people buy less stuff and use fewer services and that’s at the core of the employment market.

What does this mean for you?

Build your emergency fund.

Ideally you will have three months of living expenses tucked away in a place that’s neither too easy to access (like, on a night out), nor too hard. You don’t really want your emergency funds in the sharemarket in case it falls in value at exactly the time you need it (like now).

Having an account with a different bank to your normal one is a popular option. Remember that the Australian Government guarantees bank deposits (up to $250,000 per account, per bank) so it’s pretty darn safe.

Another good idea? Start dusting off your CV and kick up your networking a notch.

Even in good economic times, you never know when you might walk into work one day and be made redundant (God, isn’t that an awful expression?).

So it’s not a bad idea to keep your CV up to date, know some relevant recruiters and make sure you’re out and about at industry events.

I know, networking events are hard work, but they exist for a reason – not because we enjoy balancing plates and wine glasses in one hand and trying to remember four people’s names.

What about my investments?

If you’ve already made your emergency fund, and are worried about your investments, this is a perfect time to do nothing. Or buy more.

OK that’s my opinion, and I’m not an adviser. But the key thing to ask is: am I an investor or a day-trader?

If you’re investing for your future self, then you have to remember that market downturns are as inevitable as someone on Married at First Sight cheating on their fake spouse.

If you don’t need the money right now, it’s time to chill. Or as some market pundits (like this guy) are saying, it may even be time to buy.

I’ve been dropping money into my Raiz account (because I’m too lazy to pick things). My friend just bought a big chunk of bank shares. Another friend who recently bought Gold ETFs is boasting about how well they are doing.

I’m not saying any or all of us are correct, but what we have in common is this: we have taken a view and acted on it.

We also have our other ducks in a row, in terms of mortgages and emergency funds.

The worst thing you can do right now is look at your portfolio on a daily basis. The shorter time-frame you look at, the worst it will seem.

This is the ASX100 if you just look at it over 6 months.

ASX100 chart
ASX100 Chart. Source: Period: 9/9/19 to 9/3/20

But this is what it looks like over the last 10 years.

ASX100 Chart. Source: Period: 9/9/10 to 9/3/20

Sure it’s down now, but it’s still up overall. It looks even better over a longer period but the ASX tool doesn’t go longer than that and I’m too busy to find another one.

The point is this: investing is a long-term thing.

So what I’m basically here to say is:

  1. Be alert but not alarmed. The world isn’t ending;
  2. If you have spare cash you might buy some cheap investments;
  3. But if you need spare cash in case you’re out of work for a while, keep it in the bank.

That’s it Fierce Girls. Stay cool.

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