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The Fierce Girl's Guide to Finance

Get your shit together with money

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Fierce Girl

Hi there, I'm the Chief Fierce Girl. I work in the finance world, and moonlight as a blogger helping to empower women financially. Thanks for stopping by; I can see we are going to be great friends.

From Arts student to Finance nerd: if I can invest, then you can too

I’m the least likely finance blogger.

I dropped maths in Year 12. Messed up chemistry because ‘I didn’t know there’d be so much maths in it!’.

Picked a university course devoted to History, English, French and Latin. Because of course employers want to know if you can decline a Latin noun (I can, but it hurts my head these days).

The important point here is that contrary to popular belief, you don’t need to be good at maths to be good at money.

The maths can be handled by the calculator in your phone or the Excel on your computer. All those times spent crying over an inability to do long division? Wasted. (Serves me right for being such a geek.)

Having observed a bunch of people in the finance industry, and quite a few rich people, I can tell you there are qualities that make you good with money that have nothing to do with your grasp of trigonometry.

Let me share a few of these qualities.

Confidence.

This is the big one. In the finance industry, it often veers off into arrogance, and while that can make people insufferable in conversation, it does help them to take action. 

Let me be clear, I’m not talking about being reckless. What I’m advocating is a willingness to educate yourself, do your research, form a view and then take action.

As long as you’re following the basic principles of investment, taking action is generally better than doing nothing at all. (Basic principles like don’t put all your eggs in one basket, don’t chase ‘get rich quick’ schemes, don’t borrow more than you can afford).

You can always start small until you build your comfort factor. Basically, if you can operate with even half the confidence of a mediocre white man, you’ll be fine.

Curiosity.

There is no one, single way to get ahead with investment. Some people swear by property , others love a managed equities fund and some think ETFs are the way to go.

Personally, I think a bit of everything is good – it’s pretty much how I think about dating: spread the risk and reward, and avoid catching feelings for anyone in particular.

But the key is to do your homework. Read about the things you might invest in; hear from different commentators and sources; pick up magazines or newspapers that cover new topics. Always keep learning.

One of the world’s best investors, Warren Buffett, spends five to six hours per day reading five newspapers and 500 pages of corporate reports.

I mean, if I were that rich, I’d probably allocate at least half of that time to watching Rupaul’s Drag Race and drinking martinis* … but you do you, Warren B.

Clarity.

It’s hard to get excited about anything if you aren’t clear on the ‘why’. Too many of us just stumble around with our money, hoping for the best. Will we have enough stashed away for Christmas, next year’s holiday, or some far-off but vague retirement? Fingers crossed!

Ladies, I want you to be crystal-fucking-clear on what you’re trying to achieve. If you’re saving for a specific thing, write it down, give it a timeline, give it a spreadsheet.

If you’re investing for the future, get down and dirty with what that future entails. Is it a lifestyle? A destination? A few years out of full-time work to raise kids?

Whatever it is, the more you can picture it and feel it, the more motivated you’ll be to work towards it.

Right now, I’m in a period of transition, and my old goals are giving way to new ones. (Hot tip: you can always change your mind about your goals). So now, I’m focused on a short-to-medium term lifestyle goals.

When I was in Year 12, my bestie and I would keep ourselves sane during the HSC by picturing the cute outfits we’d be wearing clubbing (picture Sporty Spice circa 1996).

Right now, I’m getting pumped about the ability to wear jeans, feminist-slogan t-shirts and a pair of Air Max 90s from my (possibly-excessive) collection. The more I can push those smart, corporate Review dresses to the back of the wardrobe, the better.

Sure, wearing trainers isn’t everyone’s jam.

But that’s the fun of it right? We all have different goals and dreams and views on footwear. But having clarity about your own goals is one of the best damn motivators around.

And guess what, I even made you a worksheet to help you work out some goals. You’re welcome!

So there you have it Fierce Girls. The Three C’s of Getting Rich.

That’s totally just something I made up then by the way. But it sounds convincing and who doesn’t love a listicle, huh?

Long story short, you can get on top of all these investing stuff, with a bit of time, attention and a touch of fake-it-til-you-make-it attitude.

*Probably have already overallocated my time to these pursuits, to be honest. 

Just a post about how I’ve quit my job to build a revolution. NBD.

I’m thinking about break-ups.

The work break-ups. The relationship break-ups. The break-ups with a part of yourself – a bad habit, a way of being, a view of yourself.

The ones that hinge on a conversation, and they’re done straight away. No more. Just gone.

The ones that seem settled but drag on. Back again, back for a while, back against your better judgement. Until finally, it’s done.

The ones you saw coming but couldn’t avoid. You resisted, you tried, you struggled, but in the end you could no longer hide from the fact that it was over.

The ones that came out of the blue. You thought things were fine, and then all of a sudden it wasn’t. It was over, and you were blindsided.

The tangential ones. Where another break-up came with collateral damage, and you suddenly lost people you cared about. They disappear, alongside the network of family and friends that come with a relationship or a job.

I’ve had all these permutations in my life.

I used to be scared of them. I thought they signalled failure. I was scared of what comes next. Resistant to change.

But life gives you change whether you want it or not. You move states and change schools, your parents divorce, your best friend careens away into illness and addiction.

You try on different identities, change jobs, move countries, move states. You leave beloved bosses, you grapple with the pain of divorce, you emerge stronger and full of fire. Burnished by the flames.

And slowly, you realise that change has become a habit. You’ve learned to “love the sound of your feet walking away from things that aren’t meant for you”.

And this, my friends, is where I find myself.

Once again, I’ve tried on an outfit I thought I wanted. I bought it, took it home, wore it around.

But it doesn’t fit. I can’t do the corporate thing with the resolve and passion it needs. I wish I could, in some ways.

Ironically, for someone who writes a finance blog, I don’t care enough about money to give up things like creative freedom.

Alas, dear reader, I cannot. I make a very unconvincing corporate boss-lady.

My dad observed to me that I’ve never been interested in building an empire. ‘No’, I replied. ‘I want to build a revolution’.

And thus I find myself at a crossroads. My corporate career is asking too high a price. It demands that Fierce Girl stays small and quiet and anonymous.

Sometimes you need an ultimatum to find out what really matters. Asked to choose, I chose the risky path. For the first time in 20 years I’m walking away from a salary, a safety net and all that jazz. It’s kind of nuts.

But if not now, when?

I had a chance meeting in my apartment building recently, where a lovely woman was delivering things to her friend with Stage 4 brain cancer. Her friend is 43 years old and has just months left to live.

Now I don’t want to get all dramatic on you, but sometimes the universe offers up a sign, if you choose to make sense of it. And I ask again, if not now, when?

And so I look to Queen Beyonce for inspiration. “If I’m gonna bet on anyone, I’ll bet on myself”.

What’s next for Fierce Girl.

More Fierceness

Without the shackles of a corporate contract, I’ll be back with my name and my face on the blog. (I did a photo shoot today!)

Gurrrrl, you’re gonna get sick of this face. I’m gonna be out here advocating for change, hustling for women’s empowerment, speaking truth to power, and giving you all the awesome content you need and deserve.

More ways to level up

A blog is a great start to help you change. But real change often comes in the depths of personal connections. So there’ll be more ways to learn and grow and invest. Podcasts, videos, webinars – whatever you like ladies!

And events – all the events. Seminars, and workshops that bring all this stuff to life.

More epic shit to help you step into your power

Education is only one part of the path to getting your shit together with money. The other piece is behavioural change, to help you make good decisions on the reg. Fierce Girl will be giving you tools to make good decisions, as well as the education that underpins it.

And don’t worry, there’ll still be a ton of free stuff. The blog will always be free. But some of you want more, Imma make you pay for it. A sista’s gotta make a living up in here!

I’m working on a new brand and website and it’s gonna be awesome.

So that’s the update today. Thanks for listening… And sharing and supporting. Let’s get cracking on the revolution.

It’s Fierce Girl Finance’s birthday and I have some treasure to share

OMG you guys, can you believe I’ve been working on this thing for four years now?

On one hand that makes me feel like a loser, because I’m still not a household name.

Then on the other hand I remember how I took an awesome job, but had to pay the price of becoming anonymous on this site. It’s made it super hard to build a profile. Being, like, invisible and all.

Anyway, things are changing on that front – more to come in the next month or two. In the meantime I stumbled across this amazing video that started it all!

Big props to Mindy Gold who was my co-founder, before she up and moved to live the London dream.

Initially, Fierce Girl Finance was conceived as a video series. But then a) my co-host buggered off to ol’ Blighty and b) I remembered I am actually a writer.

Next year there will be more video content though, because really, not everyone wants an essay on asset allocation.

If you are still reading, I just wanted to share a few lessons I’ve learned in the past four years.

  1. Women want a positive space to talk about money. We want it to be friendly and and relatable. We don’t want to be lectured to or scolded for ‘wasting’ money. We want an empowering or inspiring conversation. (Hopefully that’s what y’all came here for!)
  2. There are many elements to ‘money’. It’s not just about investing knowledge, or getting your mindset right, or being a tight-arse, or taking positive action – it’s all of those things. That’s why I’ve built the content around these pillars. In the next website iteration it will be easier to find stuff this way.
  3. Success flows where attention goes. The Belinda you see in the video here is barely keeping it together. She was recently separated but still paying half a mortgage on a house she didn’t live in (plus inner-city rent). She had a long and grinding divorce fight ahead. She was going to lose a huge chunk of super in that process. But today’s Belinda has practiced a lot of what she preaches. She has no debt outside of a mortgage, she has savings that allow her to make some hard but exciting career choices. And she is much better friends with money now than she was then. The key has just been focus, focus, focus. That, and finally doing her tax returns.

So, as you can tell from all my lame cryptic comments, there are some changes afoot here at Fierce Girl HQ (like, my apartment, not an actual office).

I’m super pumped for it and can’t wait to share it. In the meantime, please wish the blog Happy Birthday, and enjoy the Bindi and Mindy show.

The ultimate ‘get started’ guide to investing (and stuff)

So, you’ve made the decision.  It’s time to put on your serious-lady-suit (Romy and Michelle style) and get busy with money.

Whether daunting, exciting – or both – you need to start somewhere.

And that’s where it can come undone. What do I choose? How do I choose? What should I ask?

All very good questions. I can’t promise I will answer all of them, but let me give you some starting points on your journey.

I want to invest in ETFs

Exchange-traded funds are a popular, low-cost way to invest in a range of asset classes, from shares to bonds. I’ve written more about them here.

If you’ve done your research and want to get started, first thing you need is a broker. As the ‘exchange-traded’ name suggests, ETFs trade on the Australian Securities Exchange. While the days of guys shouting at guys on chalkboards are over, brokers still need to do the trade for you. There are lots of well-known online ones like CommSec, but the nerds in the forums I hang out in reckon Selfwealth is the cheapest.

Speaking of brokers – a great opportunity to appreciate Leo in Wolf of Wall St

If you don’t want to go down that road, you can consider an app like Raiz or a Roboadviser (see below), and they do that part for you.

In terms of choosing which ETFs, you really need to spend some time with your friend Google.

I want to invest in a Managed Fund

Rather than buying or selling units on the ASX, like with an ETF, you apply for units in a managed fund, directly to the company. There is usually a form to fill in (online or paper), you give them money and they give you units in the fund.

There is also an ASX service called mFund, which allows you to bypass the old form-filling grind. It does require a broker or financial adviser though – so if you have neither of those, probably not worth the effort.

In terms of how to choose a managed fund, it’s kind of like saying ‘how do you choose a dress?’. Do your research, have a clear idea of what you want, keep a keen eye on prices (fees), and get recommendations from friends. There is a handy tool on the mFund site to get you started.

Pretty sure Gaga did some solid research on this dress.

I want to get Financial Advice

First up, be clear on what you want and how much you want to spend. (This post may help).

Money Coaching – this is the mani-pedi of the advice world. It helps you with goal-setting, budgeting, cashflow, saving, and everyday money goals. It’s more like a life coach, in that it’s not regulated by ASIC and they can’t legally tell you what to do with your savings – they mainly help you accumulate the money. Sometimes they have affiliated services to take you to the next stage.

I see a lot of people who think they want financial advice, but really want money coaching. It’s way cheaper because there isn’t a bunch of expensive compliance sitting behind it.

People like Vivian Goh are leading the charge in this area.

The most iconic manicure of them all

Robo Advice – Let’s call this the fractional laser treatment of advice: yay technology!  These services use powerful algorithms to give you an investment plan. You tell them your goals, and the friendly robot builds a portfolio to achieve them. Stockspot and Six Park are two of the bigger players in Australia – they have lots of helpful articles on their websites, with more information.

Comprehensive Financial Advice – This is the full day spa treatment of advice with a price to match. It looks at your whole financial picture: goals, retirement planning, risk tolerance, tax issues etc. But it takes a lot of time and compliance on the adviser’s side, so you’re looking at upfront fees or $3000-4000 or more, with the option of ongoing service (and fees).

How to find an adviser? Check out this post. 

I want to sort out my super 

Sorry but this is the only pun that makes super interesting

So, you want to merge multiple accounts, check your insurance, review your investment options or generally find out WTF is going on with your retirement savings (yeah girl!).

Call your main super fund. If you want to roll multiple accounts into one, the fund will do the heavy lifting for you. If it’s other questions, they are generally pretty helpful and can often provide ‘limited advice’ at no cost.

Don’t know which one you should pick? The big-name industry funds are pretty solid, but you can also check out this website for more information.

Fear, failure, shame: are there red flags in your relationship with money?

Money is never just money.

Money is feelings.

Money is fear or worry or failure or shame. It’s hope or excitement or success or freedom.

It’s a currency that we use to communicate things.

How much you spend on a gift reflects how much you love someone.

How much you spend on a wedding reflects your standing in the world.

How much you spend on a car reflects how successful you think you are.

It shouldn’t, but it can.

Money is never just money.

It’s wrapped up with how you feel about yourself and your worth and your future and your past.

I wonder if that’s why women have a complex relationship with it. We are often in our feelings.

It’s why opening our banking app is rarely a neutral experience. It’s not like checking the bus timetable. We open that app and we feel things.

We hope there’s enough money in there. Or we feel happy there’s more than expected. Or we feel satisfied with our savings. Or we feel disappointed with our spending habits. Or we feel ashamed that we aren’t where we think we should be.

How did you feel last time you thought about money?

Was it this morning, when your inbox had a bunch of emails about the new season collections from a bunch of stores? Did you feel desire? FOMO? Annoyance?

Was it last night, when you had to pay some bills for super boring stuff? Did you feel annoyed about the pain of adulting?

Was it yesterday, when your kid’s school told you about the next thing you have to pay for (excursions, costumes, sports, devices)? Did you feel exhausted?

I think it’s useful for all of us to identify and unpack some of the emotions behind our finances. My hunch is that many of them are negative. And is there any better way to turn your emotions around than to feel them, speak about them, hold them up to the light?

How about I tell you some of my feelings, and you can think about yours. 

If I had to pick two words that I associate with money it would be: fear and safety.

The fear is about not having enough to do the things I want, to live the way I want. I don’t really know where it comes from. Maybe my family. My dad was a successful lawyer with a tendency towards impostor syndrome. He was always looking at the downside and planning for it. (What if he lost his job etc.)

Maybe I picked up some of this; maybe I was just born with it. Either way, I’m scared of not having money, but on the other side of fear is safety, and that’s what I aim for.

I would much prefer to have money in the bank and a good income, so I can plan against the slings and arrows of outrageous fortune. My ex used to accuse me of being obsessed with insurance; I’d argue there are worse thing to be obsessed with. But he’s not wrong.

I’m not saying this is the only feeling I have about money, but it’s kind of the bedrock to everything else. I prefer not to buy expensive things for the sake of it, because that money could be better used to shore up my safety barrier. It also means I experience guilt when I do spend, because I feel like I’m chipping away at that barrier.  Guilt is a default setting with me though, so it’s not that big of a deal, and I do still spend money on shit (hello new Mecca palette!).

Overall, this emotional relationship to money has worked well for me. I was able to leave a marriage and land on my feet, financially, because of the decisions I’d made. I have a manageable mortgage and an old car, because I have distaste for debt. It means I can take some career and income risks at this stage, because I’m not a slave to a giant black hole of home loan and car debt.

Sit down and check in

I encourage you to think about how you feel towards money. I see a lot of people, especially women, feel shame about it.

They’re ashamed because they don’t feel in control, think they spend too much, or don’t know enough about it. They think it’s somehow their fault – when in fact society has done literally everything possible to make them feel like this – from not socialising us to discuss money, through to telling us we are ugly and fat if we don’t buy products to fix ourselves.

So please, sit down in a quiet moment and list your emotions about money.

See if you can unpack them a little. Do they stand up to scrutiny? Are they serving you well? Or are they holding you back?

The good thing about feelings is we aren’t just stuck with them. We can always change them, with some work. Time to have a long chat with money … and show it who’s boss.

 

Should I move to a fixed rate homeloan? And other questions for a 1% world

There was a big to-do this week about fixed rate home loan rates falling below 3%. And sure, it’s kind of a big deal.

Consider, for example, that our parents were paying up to 20% for their (admittedly, very small) home loans back in the 1990s. (God they talk about it like it was the depression and they had to walk to school in the snow, when they just had to hand over approximately $20 a month on their cheap-as-chips four bedroom home.)

What’s changed in the last few months?

Well obviously there were two interest rate cuts from the Reserve Bank of Australia, bringing the cash rate to 1%. I could go on about the reasons for this, but the too-long-didn’t-read version is that inflation, employment and economic growth is, in the immortal words of Flo Rida, gettin’ low, low, low, low, low.

And since the rest of the world’s rates are low too, and there’s no actual plan to boost growth, it’s kinda like ‘well, this is my life now’. Rates will be lower for longer.

How do I know? Well here’s quick explainer on bond yields (accuracy not guaranteed). Please skip to the photo of shirtless Thor below if you don’t care.

Bonds are a way for governments (or companies) to borrow money. They agree an interest rate on that loan, just the way you would with your bank.

In this case it’s a fixed rate loan – we set it now, and it stays that way (unless it’s a floating rate, but we aren’t discussing that here).

Now, if you’re agreeing a loan for just a couple of years, you’d have a pretty good idea of where rates will be in 2021, so it’s not that big of a deal.

But if you’re agreeing a loan for like 10 (or even 30) years, you’re taking a gamble.

It requires some serious crystal ball gazing. Imagine someone demanding that you predict what style jeans will be in fashion in 2029.

Like, we would all want high-waist to still rule. But what if we have a moment of madness and see the return of Britney-style low-riders, with muffin tops just spilling everywhere like the good ol’ days of the early 2000s?

I know, I don’t even want to consider it. But that’s what the people who issue and buy bonds are doing: making a prediction about what the interest rate will be over that 10 year loan period.

The other aspect is how to price the bond. Once it’s issued, you can buy and sell the bond to someone else (known as a secondary market). The bond will therefore have a price, based on market demand – it might be above or below the price it was issued at, depending on what people are feeling.

I swear to God, a huge part of our economic system is based on people having ‘the feels’ about what’s going to happen. Like sure, they have graphs and shit, but ‘sentiment’ is also key – and that’s a fancy word for a feeling.

Anyway, the things that matter when it comes to bonds are: the interest rate, the length of time and the price. When you add the first two together, you get a ‘yield curve’ – which is meant to be some magical view into the future. You know when Frodo looks into Galadriel’s magical water feature in Lothlorien (Tolkien nerd alert!) and sees what may be the future, but also, may not?

That’s basically the same as a yield curve.

At the moment the US yield curve is inverted, and I’m not going to explain what that means because it hurts my head. Except to say, it’s like a guy with dreadlocks and firesticks, chatting you up at a party: kinda weird and not that great.

The Aussie 10-year yield curve is like that guy’s creepy quiet friend, silently giving you a bad feeling.

According to my boss, who knows about these things, we are in a new and unfamiliar phase of the interest rate, economic and property cycles. While we are ‘late cycle’, that doesn’t mean it’s going to end soon, and in fact we could be hanging around in this low-growth phase for a decade or more.

So, now that we all understand interest rates (right?), let’s talk about our home loans (either real or aspirational).

And here endeth the yield curve lesson.

There is no reason for this picture except general thirst.

chris-hemsworth-shirtless-in-thor-3-trailer-new-poster-01

What’s happening with home loan rates?

Interest Rate Buffer gets a glow-up – Until just over a month ago, banks were forced to assess mortgages with a serviceability buffer of over 7% interest. Meaning they worked out how much you could reasonably borrow if rates went up to 7%.

But in fact, rates haven’t been that high since Beyonce was still part of Destiny’s Child. And in this low-interest-rate world, it’s unlikely they’ll get that high again, at least not before the Destiny’s Child reunion tour (not counting the joyous moment in Homecoming where they have a cameo).

So, the regulator had a rethink, and now the banks get to pick a buffer linked to their current rate. If the rate being offered is 3%, for example, they see what you could afford with another 2.5% on top. It doesn’t sound like a lot, but when you’re dealing with big house price numbers, it can mean a difference of $50,000 or more in terms of how much you can borrow.

Investor loans come in from the cold – A couple of years ago, the regulators were (quite rightly) freaking out about the property market free-for-all that was sending prices through the roof, and encouraging investors to load up on huge piles of debt.

Their solution was to tell the banks they had to put a handbrake on the growth of loans to investors.

Now, if you were a bank, you could do this by, I don’t know, just saying no to more loans, right? Wrong! Don’t you know anything about banks?

Their solution was to make them more expensive! And so, we saw a growing gap between owner-occupier rates and investor rates. Even for people who already had the loans (my old boss called this ‘repricing the back book’ and as an ex-banker, he thought it was dodgy AF).

Anyway, now that property investment is about as cool as last year’s platform sandals (ugh), the investor rates are coming back down.

Fixed rate loans are so hot right now – The banks are falling over themselves to get people locked in to one of these, hence the 3% on offer (by comparison, my variable loan is around 3.4%).

Now before you get all excited and think ‘well of course that sounds awesome, why would I pay over 3%?’, remember what we know about banks.

They never do anything to be nice.

Like the bond issuers discussed above, banks are betting that interest rates are coming down further. So they want to lock you in at today’s rate.

Sorry banks, but I’ll take my chances on a variable rate thanks very much.

Look, some people like fixed rates because they mean more certainty around cashflow. You know exactly what you’re paying for the fixed period. If that’s your thing, you do you, boo.

But fixed loans are normally attractive in a rising rate environment. Quick, lock in before rates go up!

In a falling rate environment, I struggle to see the attraction.

So don’t get all caught up in the breathless media stories. If you have a variable mortgage already, there’s a good chance it will go down further (according to all the smart people who predict these things – not just me).

And I’ve already said a lot now so let’s just end on a shirtless photo of Wolverine. Because, why not?

(God, my search history is messed up – yield curve to shirtless Wolverine).

The-Wolverine-Logan-shirtless-again

Made to measure? Ready to wear? All about off-the-plan apartments

Last week I witnessed the glorious sight of 120 women drinking wine and listening to a seminar on getting started with investing.

Girls Just Wanna Have Funds was a puntastic pleasure. I liked Molly’s description of investment being like the free weights room at the gym: full of men and very intimidating.

(Personally, I am that bitch – the one who struts around the weights room, frowning at men who don’t unrack their weights).

Anyway, the seminar focused a lot on listed investments such as shares and ETFs. This is great, because they can be a wonderful way to get started. (Click here for an explainer).

But I know that when many Australians think of investment, they think of property. And so, I wanted to talk about something in the news recently: buying off-the-plan apartments.

I know people who have done this successfully, so I’m not here to throw shade at the whole idea.

But when a big developer went bust last week, it added to the negative headlines around this sector. Remember the infamous Opal Tower, whose residents were evacuated at Christmas thanks to some big concrete cracks? It was followed by a similar issue in Mascot recently.

As a result, people are scratching their heads about whether purchasing off-the-plan is such a great idea. So, let me give you a quick rundown on the pros and cons of this style of investment.

Why do developers sell off-the-plan?

So they can borrow money to build. Most developers don’t just use their own money for a project; they usually need a loan.

And the lender wants to know that buyers have put their money on the table to provide ‘debt cover’ for the loan. Once the lender feels comfortable that they could be repaid if things go wrong, they’ll stump up the money for construction to start.

Why do people buy off-the-plan?

Lots of different reasons, but here are some:

  • Brand spanking new – nobody else has lived there when you move in. Some people really like that. You can often choose the fixtures and finishes too, so it is like buying a made-to-measure wedding dress  – the design is standard but the details are yours.
  • Lock in a price upfront – this is appealing in a rising market. Say you agree to pay $500K and then the market rises by 5% over the next year – your asset has increased in value by $25K without you doing anything.
  • Have time to save up – the time that the developer spends marketing and building the property is often a couple of years. So, you have that time to keep saving and boost your deposit/reduce your mortgage – all the while knowing you have locked in a price that won’t go up.
  • Depreciation tax benefits – when you buy a property as an investment, you may be able to claim ‘depreciation’ as the property ages. It’s quite complicated, but it can give you some tax benefits.

So, there are definitely upsides to the idea. But there are some risks to consider too:

The project may not go ahead. The developer normally has to wait and sell a good chunk of the units – maybe 75% or more – before building can start. In the market peak, when projects sometimes sold out in days, that wasn’t such an issue. But at this point in the cycle, sales have slowed significantly.

So, it could take months or years to reach the minimum debt cover; and in the worst case scenario, they never get there. That doesn’t mean you lose the deposit – you have just have that cash locked up in some sort of trust account, earning little to no interest. The contract should have a sunset clause that says if the project doesn’t start by X Date, the buyers can have their money back. So, be clear what that date is when you sign up!

The value of the property might fall by the time it’s finished. As explained above, you can make money in a rising market by locking in a price and just waiting. Perhaps that $500K unit is worth $550K the day you move in.

But in a falling market, it can lose value instead, and the unit is now valued (by a professional valuer) at $450K.

It’s only a paper loss at this stage – i.e. you don’t lose the money until you sell it. But where it can cause trouble is if you’re getting a mortgage. The bank will agree to lend a percentage of the VALUE, not the PRICE. So, if they are providing 80%, it’s 80% of that $450K. If they won’t go any higher, you need to find the extra money somewhere else. If you can’t find it, you may have to walk away … and lose the deposit.

The finished building may be poor quality. That’s what happened with the Opal Tower. Most finished buildings end up with some defects, anything from broken tiles to leaking windows. Many only appear over time, and the builder is contractually obliged to fix them within a certain period from completion.

It’s when that period is over, or when the cause of the problem is unclear, that things can escalate.

I should point out that this isn’t unique to new buildings. My own apartment block is 20 years old and had a very expensive water seepage issue a few years ago. That’s why the strata has insurance and collects a sinking fund. Although if that’s not enough, you can get hit with a ‘special levy’. Home ownership can be hard!

The developer could go broke before it’s finished. This is a remote risk, but the key is to be aware of what your contract says. We don’t know all the facts yet, but word on the street is that Ralan, the developer who just collapsed, had convinced its buyers to release their deposit to cover interest costs. This is highly unusual – some are saying it’s even illegal – but the fact is, everyday buyers wouldn’t have realised what they’d signed up to.

And if it’s true (as some have suggested) that the conveyancers they used were recommended by the developer, it’s even fishier.

Life pro tip: whatever big purchase you make, always get your own, independent advice, from mortgage brokers through to lawyers. Don’t use the people your vendor recommends!

So, should you buy off the plan?

It’s totally up to you. Like every single investment, there are risks and rewards. The key is to see them all in advance.

One option is to buy recently completed apartments –  this ‘residual stock’ may be marketed as ‘Final Release’ and is made up of the units that weren’t sold in the pre-sales period. They don’t want to dump them on the market in a fire sale, so they sell them off one by one. These are an option if you want a brand new place, but also want to see it first – like a wedding dress that’s ‘off the rack’.

Overall, any investment comes down to your personal goals and preferences. Buying property for investment creates concentration risk – i.e. putting all your eggs in one basket – but some people like the feeling of being able to see and touch their investment. If you’re buying to live in it, the risks (and benefits) can be different, but they still exist.

Before you make any decision, be sure to have a clear view of your timeframe, risk appetite and lifestyle preferences. And please, if you do go ahead, get decent legal and tax advice. Think of it as part of the cost – you need someone providing you with objective advice and pointing out any red flags.

 

What you need to know about money, explained by Taylor Swift songs

No tricks in that headline. Just legitimately good life advice from T Swift.

Ok maybe you don’t play TayTay every time you need a pick-me-up. (But I do)

Maybe you don’t judge your nieces for only liking her new stuff and not appreciating the country years. (But I do).

And maybe you missed the clever reference to Begin Again in those last two lines. (But I do. And if you didn’t, you’re kind of a loser).

But let me assure you, there is some solid sense to be found in Taylor’s music, and I offer it to you here. You’re welcome.

Taylor Swift I Knew You Were TroubleI Knew You Were Trouble – We all know those people. They come into our lives, sweeping us up in romance and excitement, but in our hearts we know it’s going to end badly.

This is because we don’t listen to our gut: that inner voice telling us that something’s not right.

And if you’re facing a financial decision that feels a little … off, then it’s telling you something.

The people who lose money to financial scams, poor advice or just super risky investments probably had that moment of thinking I knew you were trouble when you walked in.

The key is to school yourself on the basics of money e.g.:

  • The higher the return, the higher the risk. Know your risk appetite and work from there.
  • If it sounds too good to be true, then it is.
  • Always find out who’s getting paid, and how much, when a product is recommended. It explains a lot.

It’s easy to be bamboozled by all the information out there. But trusting your own research, and your own gut, can actually be really empowering.

Read more here: If financial planners are greedy, dishonest or stupid, who should we trust?

bad blood newBad Blood – A classic tale of love/friendship gone wrong. You just never know when things will turn sour and you have to create a secret society of female assassins. Or maybe just leave a dodgy relationship.

The key lesson is that whatever ‘mad love’ you had, be ready in case it turns to ‘bad blood’. Have an emergency fund, keep some of your finances separate, and always know what’s happening with the money going in and out of your accounts.

Read this post for more: The single biggest risk to your money is probably not what you think

Who-Taylor-Swift-I-Did-Something-Bad-AboutI Did Something Bad – We all did, didn’t we? We spent too much on a new dress that wasn’t remotely on sale. We didn’t do our tax return for far too long. We ignored our super for years and paid way too many fees. Whatever your guilty secret – big or small, low-grade or serious stuff-up – it’s ok!

A lot of us get caught up in the guilt and shame spiral, which makes it hard to act. You had a spending blowout, so you think bugger it, I’ll keep going. You didn’t do last year’s tax, so you may as well not do this year’s. You lost track of your super and now you figure it’s too hard to find.

How do I know this? I did it myself. Confession time. My life admin was a mess after my divorce. It started when someone changed the locks on my house and ‘couldn’t find’ a bunch of my paperwork. It ended up with me totally overwhelmed by my tax.

In the end, after much proscrastination and a kind and supportive accountant, I sorted it out, and the relief was amazing.

If you’ve done something bad – or, more likely, not done something good – then take my advice. Just do one thing. Send one email. Call one super fund. Compare one insurance quote. Whatever it is, just getting started is both the hardest and the easiest thing you’ll do.

Read more: Fierce Girl Action Plan: Part II – Super fun!

taylor-swiftShake it Off – The social conditioning of the patriarchy, that is. Yeah, shake off the shit that people might talk about you.

But more importantly, try and catch yourself believing the bullshit that the world teaches young girls and that we drag into adult life. Here I present a random list of beliefs you should shake off, Taylor Swift style:

  • That you’re no good with money – you totally are, in the same way you can be good at winged eyeliner: with time, attention, a lot of practice and strong self-belief. (God I fucking nailed my eyeliner today. I’ve come a long way).
  • That investing is too hard and risky to tackle – you know what’s a risky investment? Waiting for that fuckboy you’re dating to turn into a fully-fledged human person. If you’re willing to invest time into something like that, with little-to-no chance of success, imagine investing some money into something like the sharemarket, which most definitely goes up far more than it goes down.
  • That finance is just too boring to bother with – sure, a lot of the finance information out there is boring. But not all of it. And if you can spend an hour on The Iconic looking for the perfect short-sleeve turtleneck (I didn’t find it btw), then you can read some stuff about money. Check out some women-friendly resources like Financy or Ellevest.

These are just some of the limiting beliefs that we can hold us back. Try and police your own negative thoughts, and see if you can shake them off!

Read more: What if you’re actually smarter with money than you think?

Two insider tips from the finance industry that may just make you rich

Haha sorry about the clickbaity title. But it’s kind of true. These two things may just help you get past your fear and lack of confidence about investing.

You see, there are a lot of vested interests who like to make investment seem haaaard and scary and complex. (So you pay them to do it for you, ya see?).

But it doesn’t have to be that hard, I swear. So, here I offer you two truth-bombs to consider.

1. It’s all about the big picture, not the details.

There’s an investment concept called ‘asset allocation’, and before you hit the snooze button, let me explain why it’s important. It refers to the big ol’ mix of investments you have, like a  recipe.

A bit of property here, some shares there, here’s a parcel of bonds, and here’s a pinch of alternatives!

Each ‘asset class’ has its pros and cons, and when you mix them all together you get a delicious mixed fruit cake. (psych! fruit cake isn’t delicious at all).

People selling you investment products will often tell you theirs is the best. Performance this, fees that. But you know what’s more important than the separate ingredients? The recipe you start with.

(Actually that assertion is a hotly contested debate in the industry, on a par with the great Kimye vs T Swift battle).

Broadly speaking though, having a good, diversified mix of investments is pretty damn effective for building wealth. The recipe should be matched to your goals and timeframe.

When you go to a robo-advice service like Six Park or Stockspot, they are helping you choose the right recipe for you. They’ll also help with the ingredients, of course, through ETFs and Index funds (more on that below). So robo-advice can be a good (low-cost) way to get your head around the whole shebang.

The takeout: Don’t worry about finding the ‘perfect’ fund manager or picking the ‘hot’ stocks. Just make sure you have the right mix of investment types (i.e. asset classes) to meet your goals. 

2. Investors do stupid things … all the time.

That’s why markets are so choppy. At the moment, some of the most valuable stocks on the ASX are trading way beyond their intrinsic value. Take Afterpay – the favourite frenemy of the cash-strapped millennial shopper.

It’s currently overpriced because investors are piling into it in a frenzy.

The stock is currently trading at an astronomical high – a Price Earnings (PE) ratio of over 180 forecast earnings. You don’t need to know what a PE ratio is, you just need to know that even hot-tech-fave Google only has a PE of around 20.

Basically this stock is as popular as a fidget spinner in the playgrounds of 2017 (and personally, I think it’s heading for the same fate).

Markets boom and they bust. Particular stocks are in fashion, then they aren’t. Investors get caught up in ‘irrational exuberance’, and pile into the same companies, based on a good feeling and  some comforting projections in an Excel sheet.

When a professional investment manager does this, it’s called ‘active management’, and they charge handsomely for it. Unfortunately, they aren’t always worth the money.

But you can avoid these professionals and their big bets by just ‘tracking the index’. You see, there’s an alternative to active and it’s called – surprisingly – passive!

Rather than picking particular investments, you just follow the market. The passive-vs-active debate is a long-standing one and I’m not here to adjudicate. (Unlike Kim vs Taytay, where I am team Taylor to the death).

I will say, this week the New York Times published a piece (which I stumbled across today – after I’d planned this post), where the author opines:

I had accepted the imperfect choices and high fees imposed by so-called active mutual funds, and I had compounded those liabilities by buying and selling at the wrong times.

“The Dalbar data leads to the inescapable conclusion that most investors, this one included, are bunglers: We panic and exult at the wrong moments, impairing our chances of success.”

He goes on to conclude:

“Most people, including me, would be better off if we gave up on being smart and stuck with a simple approach: long-term holdings of diversified, low-cost index funds, using only money we can afford to tie up for years.”

So if you are wondering how to get in on this passive investing gig, you could do worse than read my aptly titled post ‘WTF is an ETF‘, or check out Canstar here. If you want to dip your toe in the water, I like Raiz, because you can invest a small amount.

The takeout: there are simple, low-cost ways to access investments like shares, and they are totally within your reach and skillset. 

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