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The Fierce Girl's Guide to Finance

Get your shit together with money

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advice

I know you’re bored AF of the Budget, but just read this one thing

Because I am going to give you a useful view on it, probably with some swearing, and then you can go back to drinking that glass of sav blanc.

First question: Is the Super Saver Scheme the BEST THING EVER for first home buyers? 

No, not really. But it’s not bad either.

The best thing that could happen for the poor young first home buyer is that we stop immigration, use more contraception and go back to living with three generations in one house. None of which I am actually advocating – but the point is, supply is the biggest issue.

I listened to a story on ABC Radio National this week, about the economics of population growth (that’s the kind of party girl I am). Our population is growing faster than ever, and we have to house everyone. At the same time, the number of people who live in each dwelling has gone down a lot since the 1960s. I found this graph in a delightful RBA research paper on house prices (which I read so you don’t have to).

I live by myself, so I am guilty of driving this trend. But the ethics of resource consumption aside, it’s clear that we have too many people and not enough housing, and this will keep prices high for the foreseeable future.

However, that’s OVERALL. House prices rise and fall in line with the fate of the particular cities and towns they’re in. Townsville, Mackay and Perth are just some of the places that have faced steep falls in prices, as the mining industries propping them up have faltered. Hence why the old property investment game is a bit tricky.

“But what does this all mean for me?”

This is a bit of a diversion to say a couple of things: 1. The government isn’t going to solve house prices for you and 2. if you want to buy a property in Sydney or Melbourne you’re kinda screwed.

Well, not completely. There are other ways to get into the market – they just take longer. For example, the ‘rentvesting’ idea: rent where you like living, buy where you can afford to. My new boss, who is a famous finance guru (cos who else would I do PR for?) reckons you should buy not just one, but two or three properties this way.

The key is, they are in areas where the price is more manageable. Regional towns or smaller capital cities (although probably stay out of Brisbane high-rise apartments for the moment – they went a bit nuts building them and have too many now).

You buy these places, build up the equity in them, and then eventually sell them to buy your dream home. That’s the theory anyway – the execution needs to be pretty spot on, so you don’t end up with some shitty properties languishing for years.

Obviously this is a long-term play – five or ten years even. But you won’t die just because you aren’t living in a house you own. The key is that you’re doing something.

The worst fucking option is renting, moaning and spending your money on shit you don’t need ‘because I can’t afford a property anyway’.

But even doing this requires a deposit. Which brings me back to the initial question: how good is the Super Saver Scheme (SSS)? 

Look, it’s better than a slap in the face with a wet fish. Jessica Irvine, whom I love, has a done a great job of breaking down the detail for you here. But I’ll give you the highlights:

  • It’s a good discipline – once you put that money in there, there’s no pulling it back out for a splurge on a new dress or a fancy holiday you just had to have. It’s either ‘spend it on a property’ or ‘get it when you’re 67’ (see ya bye, money!).
  • It’ll mean you pay less tax going in – the cash that goes in gets taxed at the super rate of 15% instead of your personal rate of up to 47% (depending on how much you earn). Think about it like this: for every $100 of your pre-tax pay, you get to keep $85 if it goes into the SSS. If you just took it in your take-home pay, you’d keep as little $53 (in theory – progressive tax means it would be a a bit more than that).
  • …And going out. Anything you earn on the money you save will be taxed at your marginal rate, less 30% when you take it out. If you’re on the 37% rate, you pay just 7 cents. But that’s not bad – if it was bank interest you could pay your personal tax rate – which, as mentioned above, is likely higher.

Of course there are tons more annoying details but if you want a disciplined way to save, and you think you’re getting slugged on your income tax (don’t we all?), it could be a go-er.

“Hey, what about the bank tax? Should I care about it?”

I hear you asking and my answer is, only a little bit. Those banks are not just gonna take the hit to their bottom line, so they will pass it on to either staff, shareholders or customers.

I suspect a bit of each. Interest rates on mortgages and credit cards could rise – if they do, shop around to one of the banks who isn’t paying that tax (remember, it’s only the Big 4 plus Macquarie bank, and odds are you don’t have private banking with the latter).

And although bank-bashing is a national sport, let me just remind you that anyone with superannuation probably is a shareholder in them. The Big Four are called that for a reason – they are the four biggest companies on the ASX. And if your super account is made up of about 40% Aussie shares (most default funds sit somewhere around that level), then you, my friend, own a shitload of bank shares.

So before you gleefully stick the boot into the big greedy banks, remember they are funding your retirement. (Well, not mine – I’m in Australian Ethical and they only invest in Westpac).

So, of course other stuff happened in the Budget, but everyone else has covered that. For a Fierce Girl about town, these are some of the more relevant ones. And now, we may never speak of this again.

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Don’t panic and start early: wise words from rich people

One perk of my job is that I get to hang out with some pretty rich people.

Ok, when I say ‘hang out’, I don’t mean we are drinking champagne on their yachts. More like, we are in meeting rooms and they are telling me the finer details of their investment strategy, so I can PR the shit out of it.

How rich? Well some are just really well-paid, others have a few million sunk in their fund management companies, and a handful are serious, yacht-owning, penthouse-buying ballers.

(On a side note, they are generally totally low-key about their wealth – you have to notice their watches, or do the sums on their ‘funds under management’ to get the idea).

Anyway, because I love you Fierce Girls, and am always thinking about ways to help you own it, I have been asking these people what advice they have for the mere mortals among us. Here are some of the wise words I’ve heard.

Don’t Panic. This is from a lovely fund manager who grew up on a pineapple farm and has just launched one of the biggest listed investment companies on the ASX.  Oh, and he was a professor of finance at one stage (WTF).

His message was that in the current housing market, it can feel like you have to do something fast or you’ll miss out forever.  That’s a natural reaction when prices go up as fast as they have been. And it doesn’t help your FOMO levels when you read about 30 year old property barons. (By the way, Buzzfeed has a very interesting take-down of these stories – recommended read).

Yes house prices are crazy, especially in Sydney and Melbourne. But every generation has its challenges in getting onto the property ladder.

My Gran and Poppa lived in a car container for the first year of their marriage. Gran said she felt pretty lucky, because all some people had was a tent! That was actually a thing in post-war Australia – building materials were rationed, hence all those pokey little fibro cottages. Buying land was kinda easy, but building a house on it? Not so much.

And then our parents’ generation struggled with 18% interest rates and a major recession. Yes, they were still spending less in comparison to wages (as I explain here), but I’m sure we can all agree it felt pretty fucking stressful at the time. And unemployment was high AF, so there was also the chance you could lose your job.

Yes, it’s hard and scary to buy property now, but it always has been. You have to accept that and find a way around it. Maybe you can’t buy in Sydney, for example, but can you buy somewhere else for under $500K and rent it out? Probably.

You still need to do boring things like cut back your spending and save like a tight-arse – but I can tell you right now my Gran was not getting her nails done when she was living in a one-room shed with a husband and a baby.

And if you play the long game, knuckle down, and get serious about saving, you will get there eventually.

Start investing early and take on more risk when you’re young – This solid piece of advice comes from one of my favourite low-key rich people. He manages ridiculous amounts of money for ridiculously rich people, but still gets excited about getting a great deal at the Anytime Fitness near his apartment building. And when I say his building, this guy’s company literally built and sold the whole thing.

Anyway, the point here is two-fold. Firstly, the earlier you start, the easier it is to make gains – this is the magic of compound returns. Please go play with this calculator to see what I mean.

The second point is that you can tolerate more risk when you’re young, because you have a longer investment horizon. If you lose a little bit one year, you have more years to make it back.

Markets are volatile, so you have to build in the likelihood of loss every now and then. In fact, most super funds work out their investment risk based on how often they can lose money. A medium-risk option might tolerate 2-3 years of negative returns over 20 years, while a higher risk option would make a loss in 4-6 years – although aiming for higher returns too. (There’s a good explanation of this concept here).

The upshot is, you can’t make all the money, all the time – but if you have time on your side, you can upsize your risk profile, as well as capture the magic of compound returns.

As you get closer to retirement, and have less time to make up for losses, you should dial down your risk profile accordingly. Some super funds now just do it for you – it’s called a ‘lifecycle’ strategy.

(If you want to read about risk and the different ways it applies to your money, check out my earlier post.)

The key here is that  you don’t have to drop a million bucks on a property to make this advice work. You could sign up to the Acorns app, for example, and start socking away loose change into an ETF. (Of course, do your own research on it).

But remember, you can start small, just as much as you can start early.

So that’s it for now. I have a few more nuggets of advice up my sleeve, which I’ll share in future. In the meantime, ladies, stay Fierce.

What’s holding you back from being Fierce?

It was always going to be tight. I found it hard to negotiate the notice period at my old job and the start date of my new job. Well, when I say ‘negotiate’, I mean I didn’t do that at all; I just did what everyone asked me to.

And so it was that I found myself at Queenstown airport yesterday, with heart racing and palms sweating. With all the demands from employers old and new, I ended up flying to a wedding in Queenstown for about 72 hours. What I didn’t know is that Queenstown is in the Top 10 most difficult-to-land-in airports in the world, with the runway flanked by mountains and choppy winds. The pilots tried to land twice, failed, then flew on to Christchurch to refuel and consider their options.

All this was revealed after we’d cleared customs and reached the gate, and so began a three-hour wait to see if the plane would come back to Queenstown, if it could land, and whether I could start my new job today.

I was pretty zen at first, but as the time dragged on, I cursed my decision to cut it so fine, and my failure – two year earlier – to negotiate down the excessive notice period in my contract.

Thank goodness for those lovely pilots at Jetstar (you didn’t think I’d be on a full-price airline did you?). They finally landed on the tarmac and hauled us back to Sydney.

Knowing your value

It’s a strange thing. If you ask me whether I’m good at my job, I’d say yes. My skills are in demand, I’m a specialist in my field, I bring a wide range of experience. And yet, I have never asked for a payrise. (Click here if you want some tips on that).

In fact, I forgot to ask about salary in my last performance review. I’ve never negotiated a starting salary, always taken what they offered.

This is nothing less than a failure on my part. Because most pay increases are incremental, the earlier you fatten your pay packet, the greater the increase next time. If I hadn’t been so damn nice, there’s a good chance I would make more money now.

This was brought into stark relief for me in the last few months. I was headhunted by a recruiter who was puzzled by the mismatch between my level of pay and years of experience.  I stumbled and mumbled when he he asked what salary I was looking for next.

Then when my employer replaced me, they hired someone with less talent and paid him more. It makes me angry, but at myself more than anyone.

Here I am, cheerleading for the girl squad and telling them to take life and money and career by the balls, but I’m not the best example.

However, I’m trying. I had an ex-investment banker give me a stern talking-to at the wedding. I had an old client make me promise I wouldn’t resign again without him coaching me. I had a colleague promise her I’d never again say in an interview “I’m not that focused on money”. Yeah, that was an actual thing I said. WTF.

The cost of pleasing others

I’ve been trying to unpick the puzzle about why I’m my own worst enemy in this sense. Why do I dislike asking for money? Why do I feel uncomfortable putting a dollar value on myself?

One factor was a fear of the price I’d pay. I believed that if a company paid you more, they expected a pound of flesh for it. That every pay rise would come with a concomitant increase in work. That’s not the case, in reality. You learn to work smarter, you find balance by being good at what you do and you learn to create boundaries.

Another issue is impostor syndrome. I question, in my heart, whether I deserve more money. Whether I’m that good or useful or worthwhile. Usually I can tell that bitch inside my head to shut the hell up, but not all the time. Sometimes she stands at the edge of my thoughts and whispers such taunts to me.

But I think the biggest issue is my tendency to be a people-pleaser. I don’t want to rock the boat by being troublesome. I don’t want to be the difficult one who makes a fuss. I feel uncomfortable making others uncomfortable. And so I leave difficult conversations about money well alone.

So now that I have identified these issues I can work on them. I can be alert to my own pitfalls.

When I was in that airport, waiting for the plane to break through the clouds, I decided that I had hit rock bottom on people pleasing. Today is the day where I start saying no more often. Where I value myself and my skills and my time more dearly. Where I start learning how to put aside the discomfort of negotiation, and do it anyway. I can do hard things in other areas of my life, so surely I can do it here.

I tell you all this not just because I am a massive over-sharer (although I am), but as a cautionary tale. I see a lot of women consistently undervalue themselves or question their worth in dollar terms. Granted, I’ve also seen women go hard in negotiations, (sometimes against me, their boss!) and succeed in getting more than they had been offered.

The tendency not to make demands seems to sit somewhere alongside the female tendency want to be smaller, less troublesome, less Fierce.

The world pushes us to take up less space all the time: to diet away our body fat, not to get ‘too big’ (as a weightlifter, I’m sometimes warned against this fate). We are told to quieten our voices lest we be called ‘shrill’ (god knows I have been).

All of these are simply attempts to stop us owning our power, and I admit, I fall for it sometimes. I doubt myself, I question my talent, I wish to be leaner. And so do many, many women I know and love.

So I encourage you to question which behaviours are holding you back from being truly Fierce.

What is stopping you from owning your power? Because whether or not we acknowledge it, our wealth is tied up deeply with our power. Our power to demand something from the world. Our power to say, “I am here, working and caring and sweating and delivering, and I ask you to remunerate me accordingly”.

Nobody will give us anything more than we ask, so we must to learn to ask.

And I am learning to ask.

Photo credit: Queenstown Airport by Curtis Simmons

We’re all going to die – so let’s just talk about it here, then move on

That’s quite the dramatic headline, I know. But unless you’re a vampire like R-Patts, it’s true.

And if I said ‘hey girls, come over here and chat about life insurance for a moment’, you’d be about as excited as I was to watch three types of football this weekend (thanks to my brother). But unlike football, I can’t even tempt you with muscular men in very tight shorts.

So I promise to make this short and simple. (If you want a long read on this exciting topic, here’s one I prepared earlier). We’ll have a quick chat and then you can get back to worrying about Prince Harry’s mental health.

Imagine if you couldn’t work anymore. For a few months, for a year or two, or even forever. How the hell would you pay the bills? Your partner would? Ok, sure. What if he left though? What if he died? I know, I am a bundle of fun today.

Seriously though, if you got sick, or were injured in a car accident, do you think you future financial needs would be covered by social security? Maybe, but let me just say the disability support pension is about $400 a week. WTF? I legit pay more in rent than that. I would be in minus figures before I even had a crack at feeding or clothing myself.

So that’s why God (well, actually insurance companies) invented Salary Protection insurance (aka income protection). It pays you 75% of your current salary if you can’t work because of illness or injury. For example, I know a lovely lady who was diagnosed with breast cancer at age 30 and couldn’t work for six months. She didn’t have that insurance so had to rely on her family for support.

What if you’re in a car accident and end up in hospital and rehab for months on end? You may get some sort of compensation (or not) but that often doesn’t get paid till months or even years down the track. Good salary protection will kick in after a month off work and help to pay your ongoing living costs. Some policies cover you for up to two years; others until you’re 65. Obvs the latter one costs more, but could be worth it. (It’s what I have).

A good friend of Salary Protection is Trauma cover. This is a lump sum that you can get paid if you have some sort of accident or serious illness.  Think about how effing expensive it is to get even a bit sick these days – things like cancer or heart surgery are far more exy. Medicare and private health won’t cover all the costs of specialists, scans and tests. The bills don’t stop coming even if you’re off work. And perhaps you want to fly in family to be by your side.

Trauma protection gives you a pot of money to cover all the costs you face in a crisis, and gives you one less thing to worry about at an otherwise crazy stressful time. 

Total & Permanent Disability – This is one of the policies that often comes with your super fund – not for free, but the premiums come straight out of your savings, so you don’t really notice it. It’s a lump sum you can get if you really can’t work anymore. It’s not always easy to claim (given that it has to be TOTAL and PERMANENT) and can take a while to process even if you do, so trauma and salary protection can be useful to have alongside it.

Life insurance – this is really DEATH insurance but it’s not polite to talk about death, so it gets a turned into a lovely euphemism. Obviously it’s a payout to your partner/kids/family if you die. Also available in your super fund, but chances are you don’t know how much you’re covered for or how much it costs. Defo worth looking into and checking that.

Most people underestimate how much they need, because they don’t realise how many years it has to last for and how expensive life is. Even if you’re not the breadwinner, would your partner be able to pay for childcare while they work full-time? There are plenty of things like this to consider.

How to take action

At the very least, look at your last super statement and see what cover you have. Can’t find it? Jump online or call your fund – they can tell you. Think about whether you’d have enough to pay off your debts, and leave the people you love with enough to make them comfortable.

Ideally, you would talk to a financial adviser or insurance broker. (Click here for more about finding an adviser). They not only help you work out what you need, but they do all the shitty dealings with the insurance company – now, and in the event of a claim. It may not even cost you much, because they may be paid by the insurance companies. (Depends on who you deal with and how their business is set up).

But seriously, you are gonna die. And if you do get sick or hurt, the last thing you want to deal with – on top of that – is being broke. You insure your car, your home – maybe even your pets – so please, please insure yourself and your income.

 

Getting a home loan: a Fierce Girl guide for rookies

So you’re going  to buy a property? Congratulations! You must have sold an organ or won the lottery.

Maybe you saved your arse off, or got some help from the parentals. Either way, you have squirreled away enough money for a deposit.

Otherwise, you’re reading this because it’s useful information to have in approximately 72 years when you have saved up enough. I get it – it’s like watching Jamie Oliver.  You aren’t really going to make that 30-minute Peruvian rotisserie chicken, but it feels good intending to.

And like most finance stuff, there’s a whole world of bullshit jargon and rules you’ve never heard of. It’s like your mum trying to navigate Instagram – ‘what does ‘AF’ stand for?’.

I am going to break down the process, but it really is a lot of learning so I’ll keep it topline for now. If you get really excited, you can Google more info.

Find out how much you can borrow.

There are plenty of nifty ‘borrowing power’ calculators that give you a general idea. They’re pretty generous though – they suggest that you can buy a chateau on the banks of the river Seine … as long as you eat baked beans and shop at K-Mart for the rest of your adult life.

So you need to sit down with an actual mortgage broker and go through it.

Make friends with a mortgage broker

Should you use a broker? Fuck yes. Seriously, you’ll feel like a bloke who’s wandered into Sephora if you try and work this shit out yourself. A mortgage broker does all the work for you and you don’t even need to pay them – the winning lender does that!

Keep an eye out to make sure they aren’t just suggesting the loans aligned with their brand. For example, Aussie Home Loans can act as a broker as well as sell you an Aussie loan – but only if it’s the best deal. They have a professional obligation to do what’s in your best interest..

Occasionally you can get a deal that’s not available through a broker – e.g. I refinanced to a UBank home loan that my broker couldn’t match, even though he is a top bloke. But that was when I was already somewhat versed in this stuff. If you’re a virgin, you don’t really want to mess around with clueless Year 8 boys now, do you?

How do you find a broker? Ask around. People who have a good one will happily recommend them – maybe it’s because they play a positive role in such a big event, but people seem to get attached.

Things that might affect your borrowing power:

  • Credit cards. The limit you have is seen as a liability, even if the balance is zero. So if you have a $10,000 limit, the bank assumes you have that much debt and that counts it as a competing priority for your hard-earned cash. So either cancel unnecessary cards or reduce your limits.
  • Personal or car loans – again, if you owe $20K on a car loan, the bank will take this into account. Sensible Aunty Belinda says what business do you have buying a house when you are still paying off a car – HOWEVER, this is the real world, so if you are, be aware that it crimps your spending power.
  • Your credit score. Like an inner wild child, everyone has one of these – even if they don’t know it. If you buggered up a mobile phone plan as a 19 year old, your credit score will know. If you didn’t return that Mean Girls DVDs to the store in 2005, they will know. OK, maybe not the latter one – but you will have a score, it might be compromised by a bad decision or oversight, and you need to know about it. Google ‘credit score’ and get a free one.
  • Your savings history. Even if you have been gifted a hefty sum from the ‘bank of mum and dad’, you need to show the bank you can be a grown up and pay off a mortgage. So they will want to see your bank statements to reassure themselves of that fact.

Building in a buffer

Now just because you CAN borrow a certain amount, doesn’t mean you NEED to. Banks are pretty clueless about how much they think you actually spend. They will say ‘your repayments are this, and your spending is that, so you can borrow this BIG AMOUNT.’

But they don’t know about your penchant for annual ski trips, your addiction to spray tans or your deep-seated desire to pay 30 bucks a pop for an F45 workout. So unless you intend to live like your Nanna, don’t take the max amount.

Also, remember that we are at crazy low interest rates right now, and they won’t last forever. You need a decent buffer in case rates go up, so get your broker to run the numbers as though rates had gone up 3% or more. If you almost pass out when you see those repayments, it means you can’t afford it.

The next step is to get pre-approval on the loan you want. That means you can go to auctions and sales and feel like you have the money in your hot little hand. You actually don’t, because the bank still needs to approve the property you buy, and a bunch of other boring details. But it’s the closest you’ll get until you do the deed for real.

The paperwork gauntlet

Applying for a home loan is seriously one of the biggest paperwork fuck-arounds you will ever experience. They want payslips, bank records, identification and whether you’re oily, dry or combination skin. Well, it feels like it anyway.

A good mortgage broker will hold your hand through it, but be ready to spend time and frustration on it.

Crunching the numbers

How much does a property cost? More than you think. The purchase price is just the start. Other costs are:

  • Legal/conveyancing fees. Depends on who you use and what you need but factor in at least a couple of grand.
  • Building inspections – A few hundred bucks every time you get serious about a property and want to make sure it’s structurally sound and not full of termites.
  • Stamp duty – This is the big one. If you’re a first home buyer, some states have exemptions or discounts, so check out your state government website. Working out the amount is pretty complicated and different in each state, so check out the calculators you find online or ask your broker. But it can add tens of thousands of dollars to your purchase price.
  • Lenders’ Mortgage Insurance – Another annoying trap for the rookie. If you have less than 20% of the deposit, the bank thinks you’re risky. So they make you take out insurance on the amount that’s short. E.g. If you’re at 18%, you may need insurance on the missing 2%. If you get one of those ‘95% of purchase price’ loans, they will hit you hard with this. You don’t have to find this money upfront – they whack it onto the mortgage. But if you throw an extra, say, $10k onto your mortgage, you are then paying interest on it. It’s a rort in my opinion, so do everything you can to scrape up the 20% deposit.On a side note, when I bought my place, the bank valued it at $40K higher than what we paid. We had been just shy of 20%, but at the bank’s valuation, we hit the 20% mark, so my awesome broker made them waive the couple of grand extra we would have spent on LMI. Suffer, bank!

Choosing a loan

Fixed, variable, offset, redraw – WTF? Relax, it’s not that complicated.

The first thing to decide is whether to have a fixed rate, meaning the interest rate doesn’t change. A variable loan goes up and down at the whim of the Reserve Bank or even just when your bank feels like it.

A fixed rate means you have more certainty for the term of it (often 3 years) but you are also stuck if rates go down, and may face a fee if you pay the loan out early (a break fee).

There are pros and cons of each, and basically, it’s like placing your money on red or black on a pokie machine – it could go either way. Choose the option that you can sleep at night with.

Then there is ‘offset account’. This is where any money in your bank account counts towards (offsets) the loan. Say you have a cool $10K of your everyday money kicking around in your bank account (well done, I wish I could manage that).

The bank acts as though you paid that money to them, and reduces the amount you pay interest on. So for example instead of paying interest on $400K, you pay it on $390K. All adds up, my friend!

A redraw is similar but I prefer it because it’s an extra level of discipline. Any money that you pay on top of the minimum repayment goes to the loan, but you can redraw it out again. Say you made $10K extra in payments last year – you can claw that back if you need an emergency boob job or something.

In my experience, once that money is in there, it’s a huge guilt trip to pull it out again – and you usually have to wait a day.

In terms of rates, your broker should find the best one for you. But here’s a hot tip – it’s probably not going to be with one of the big 4 banks. It might be with some credit union, or an online bank (like my UBank loan). So don’t be sucked in by their branding. Also, bear in mind the ‘comparison rate’ – this means if they say the rate is 4%, but by the time you add fees and charges, it comes out more like 4.2%, they have to say so. Try and find one with minimal fees, obvs.

Now I am not going to give you any advice about actually choosing a property because that’s a whole other topic and one I’m not really an expert in. But suffice to say do your research – lots of it.

So that’s it Fierce Girls. Save this in your files for your happy house-hunting in the year 2067!

 

What marriage – and divorce – taught me about money

My house was sold on Saturday. It sounds exciting but is in fact painful. It’s one of the last steps on the road to settling my divorce.

Regardless of the price my property commanded, selling it was one more loss in a long process of shedding – which is what a marriage breakdown all comes down to.

You shed your identity as a couple and as a wife. You leave behind cherished memories and possessions that hurt too much to think about, so you shed them too.

And when it’s all done, you find yourself stripped back to a strange hybrid self. The single self you were all those years ago, when you were on your own. But she is overlaid with a new, wiser, older version, burnished by loss and forged in fire.

So because I am a bit too sad and emotional to give you awesome happy money tips today, I instead give you some hard-won lessons. Take from them what you will.

You can walk away with (almost) nothing and be happy. I left a 3-bedroom townhouse with a double garage and extra storage. I ended up with 1 room in an apartment, no garage and no storage.

It was already furnished, so I left a house full of furniture, appliances, books and ‘stuff’. Left it there, threw it out, donated it or squeezed it into a few boxes in mum’s garage. I kept my (real) Tupperware though – that shit has a lifetime warranty!

So, I barely own any stuff now. And I am happier than I have been in years. Now, correlation is not necessarily causation – I am happy for other, more fundamental reasons.

But this process of leaving things proved to me that beyond the basics (like containers for your epic food prep sessions), you don’t need heaps of stuff to be happy.

Money means choices. Nobody gets married thinking it will end. I didn’t think it would happen to me. But sometimes it does, and it did.

And if you’re the one who wants to leave, you have to deal with the emotional upheaval just as much as the practical shitstorm. Finding rent and bond for a new place is a big expense.

I was able to do that because I had savings. I had an income. I could choose a nice apartment in a nice area. That meant I could focus all my attention on the essentials, like bursting into tears on the train every morning, for example.

You need to share the responsibility for money. You won’t be surprised to hear that I was in charge of all the finances. This wasn’t good for either of us. I felt burdened and he felt frustrated by my decisions.

I see both men and women fall into this trap. It seems easier to give up control, but it actually drives you apart. Managing money together means you share the wins and handle the challenges together, rather than one person shouldering the blame for your financial outcomes, or guilt-tripping the other one.

Ultimately, nobody is going to look after your interests like you do. No matter how happy your relationship, you’ll never regret giving yourself the knowledge and tools to be in control of your life and your choices.

You can always reinvent yourself – I’m the Arts graduate who fell into PR. I was all about words and books and writing. And here I am, rocking an actual qualification in finance and being called an ‘expert’ (haha thanks Mamamia).

I was the unsporty, uncoordinated one, and here I am about to compete in a powerlifting competition this weekend. (I won’t beat anyone, but will rock the outfit anyway).

You just never know how things will turn out. You are just one decision away from changing your life, or someone deciding to change it for you.

This is both liberating and terrifying. The only thing to do is be ready for anything – to embrace the new opportunities or tackle the crises. And to put away what money and resources you can, in order to do that successfully.

So that’s what I learnt once I picked my life up and put it back together. If I had to sum it up, I’d say, no matter what happens: you’ve got this.

4 reasons you can stop panicking about buying a home

Sometimes it feels like all money conversations come back to this issue. Can I buy my own home? Will I be a failure if I don’t? Can I ever afford one?

And it’s not a daydreamy, hypothetical convo, like ‘What if I called my kid Joaquin? Would people know how to pronounce it? Did the Pheonix family really lay the groundwork here?”.

No, the tone is more like ‘Will I die in a gutter, languish in poverty, or be photographed collecting mail in nothing but a bedsheet, if I don’t get onto the property ladder?’.

There is a sense of panic, as if not hobbling yourself with a million dollars in debt means you will end up on the scrapheap of life.

So let’s all just take a moment and STOP PANICKING. People who panic don’t make good decisions. You know that dress you bought the day before a high-stakes date with Mr Future Husband? Let’s admit: you’ve never worn it again.

Instead, let’s have some realtalk about property, saving and wealth.

Because there are more ways to build wealth than buying a house.  Property is just one ‘asset class’, as the professionals call them. There are many more (read a whole post about it here) and they are all viable ways to build wealth.

However, there are some valid reasons that people go nuts for property in Australia. For example:

  • It can increase in value without you doing anything (aka ‘capital growth’)
  • It is easy to borrow money, because it’s a secured asset. In other words, the bank can repossess it if you go broke, to get its money back. It’s more complicated for banks to do that with something likes shares.
  • You get great tax breaks. If you sell the home you live in and make a profit on it, you don’t have to pay capital gains tax on that profit. If you did the same with any other investment – e.g. shares, bonds or an investment property – you would. And then there is the old negative gearing heist (which I won’t go into here – but basically the government rewards you for losing money – wtf?).
  • You get to live in it and nobody can kick you out. You can also renovate and hang hooks and shit. (Although why anybody in their right mind would renovate is beyond me. Dust, paint splatter and interminable trips to Bunnings. Lord give me strength).

These are all compelling reasons that I acknowledge warmly. I own property and it has been a good investment.

But here are some downsides that don’t get a lot of airplay, especially in the media.

By the way, the mainstream media has a huge vested interest in talking up property. Ever notice those thick, glossy real estate liftouts in the paper? Yep, they are rivers of gold for media companies, so it’s not in the interests of News Ltd, Fairfax or their mates to say ‘hold up, property is totes overrated!’, is it?

But here are some counterpoints to the national narrative.

1. You pay a huge amount of interest over the life of a mortgage

This graph is from an earlier post (which you should also read). I include it here to defy the people who say ‘renting is just giving money away to someone else’. Well, Mr Mansplainer, a mortgage is just giving  interest payments to a bank.

Say you borrow $500,000 over 25 years, you will pay nearly $300,000 in interest (at 4%, which is a historically low rate in this country). That interest amount is represented by the light pink below.

Source: Moneysmart.gov.au

Source: Moneysmart.gov.au

Hopefully the property increases in value so you make some of that money back. But it’s not guaranteed. Which brings me to the next point.

2. House prices don’t always go up

I know, they do in your living memory, and certainly in the last few years. Mr Mansplainer may even tell you ‘house prices double every seven years’.

HOWEVER, this somewhat dubious assertion is based on averages, which don’t tell the whole story. You know, your ex-boyfriend was only an arsehole to you half the time, on average. But that didn’t make it worth staying with him.

Don’t just take my word for it – take the Reserve Bank’s! I know you won’t read their paper on the topic, so let me summarise. House prices rise faster and slower depending on other stuff going on in the economy.

But over the long-term, that shit is all over the place. The graph below gives you an idea of how house prices resemble a 5-year-old kid high on fairybread and Cheezels at a birthday party.

screenshot-2017-02-26-at-11-28-45-am

 

 

 

 

Source: RBA (which is why it’s crappy low-res). NB: This shows prices when inflation is removed. 

So it depends on when you bought, and also where you bought. And so we come to another point.

3. Picking property is a lottery

When we talk about property going up by, say 7% a year, that’s averaged out across the country. It masks the fact that some people bought gems, while others bought dogs.

Maybe they paid too much in the first place. Maybe they bought in an area that hasn’t gone up much, or worse, in an area that has gone down. Places like Mackay or Townsville boomed as a result of mining a few years back. Now, they have bust, with prices actually dropping.

Here’s a real-life example. A couple I know, let’s call them Kylie and Jim, bought a new house in an estate in Townsville in 2004. They paid $254,000.

Five years later, having been sent interstate for work, they sold it for $379,000, netting them a tidy profit of $125,000 (less taxes and costs). Nice deal.

That same house sold this year for $340,000.

Yep,  eight years later, it sold for nearly $40,000 LESS than it did in 2009.

Kylie and Jim were just lucky that they caught the cycle on its way up, and got out before it went down.

If you live somewhere like Sydney right now it’s easy to feel like there is only one direction and pace for prices: up and fast.

But I know another couple with an investment property on Brisbane’s outer edges, whose property value has grown at about the same pace that I lose fat, i.e painstakingly slowly.

I did some sums on it and the capital growth has been about 2.5% a year. That’s not taking into account the extra money they need to find every month for the mortgage, because it’s negatively geared.

The moral of this story is not that Queensland property is a mug’s game. It’s not – plenty of people have done well there, and all over Australia.

The point is that there is a good deal of luck and timing involved in buying property. The same is true of any asset class. But don’t look at the headline figures and decide buying a property is a rolled-gold, surefire way to get rich. As with any investment, there are risks.  And so, to the next point…

4. We may be in a property bubble – and it could burst

Now I am not a crazy doomsayer. I am only saying we might be in a bubble.

But some people are convinced of it. Here’s a chart of house prices since the 19th century from a blog called macrobusiness (they are a little ‘out there’, but I read widely). All the labels on it are theirs, btw.

Source: Macrobusiness
screenshot-2017-02-26-at-1-21-26-pm

 

 

 

A while back, I fan-girled Greg Medcraft, the head of ASIC (our corporate watchdog in Australia). He was on the 389 bus to Bondi, so I went up to him and started chatting about property bubbles. (True story, I swear). He said words to the effect that when people are in a bubble, they’re in denial about it.

“This time it’s different”, they say – like an ex-boyfriend who’s trying to win you back.

For my mate Greg, this market looks, smells and tastes like a bubble. And that was 2015, before we hit the point of a $1 million median house price in Sydney.

Other people disagree, and point to population growth, lack of supply and a bunch of other factors driving prices ever upward. I see their point too.

The fact is, nobody knows for sure.

If house prices stay high, there are benefits, mainly to people who already own them.

If house prices fall, the economy will definitely suffer – but it will also mean aspiring buyers get a better shot at affording something.

Either way, you shouldn’t give up on the idea of buying your own pad eventually. Which brings me to…

One last (very important) thing. 

If you can’t afford a property yet, that doesn’t mean you can piss your money away in protest or despair.

There are plenty of options for building wealth (check out this post). But you have to get serious about saving and investing to do it (check out this post about the four best friends who will make you rich).

Just because you don’t have a white picket fence doesn’t mean you can’t be a serious money saver or investor.

It doesn’t matter how much you have, saving and investing is a mindset and a habit. So work on that and ignore the noise about house prices, smashed avo and property bubbles.

You’ve got this!

If you liked this post, you could totally sign up to receive more! I post every week and you might not always see them on Facebook (because something something algorithm). So pop your email address in that box up top. Thanks! 

photo credit: ruimc77 Burbujas via photopin (license)

Why the baby boomers have all the money, and what we can do about it

I love my parents, and my parents’ friends and all the wonderful baby boomers in my life.

But geez they annoy me as a generation.

Swanning around in million dollar properties they paid 25,000 bucks for. Earning a tax-free income in retirement. Cashing in on their free university qualifications without a HECS debt in sight.

Baby boomers account for 25% of the population but own 52% of the wealth. They built their careers and wealth over an unprecedented period of economic growth.

Did you know we’ve now had more than a hundred quarters of positive growth? This is like having a hundred consecutive days of perfect dieting with no accidental chocolate incidents – i.e. practically unheard-of. (I admit we have lived through this period too – but with a lower base of assets to grow from).

Sure they had the recession in the 90s and the 1987 stockmarket crash. They had to live through skinny jeans before lycra was invented, and they didn’t get to play Where in the World is Carmen Sandiego at school. I’m not saying their lives were perfect.

But they have done ok, and Smashed Avo-gate brought this simmering divide to the surface. It’s partly because the world has changed so quickly, so deeply. Home ownership used to be an expectation for any adult with a job and a bank account. It’s now a mythical place of $100,000 deposits, heartbreaking auctions and million-dollar median prices.

The luckiest among us will get help from our parents. Others have parents who can’t or won’t contribute, creating a further divide.

So, what can we do about it? How can we stop those greedy (but totally loved and appreciated!) baby boomers from stealing our futures?

Don’t get mad, get even. And get advice.
Investment Trends says baby boomers account for four in five dollars under advice (i.e money being looked after by financial advisers). That means they are out there getting financial advice while all of us suckers are messing around reading The Fierce Girl’s Guide to Finance. JK! That’s a great idea!

But it might not be enough. I’m not a profesh, and I can’t tell you what’s best for your circumstances.
Sure, advice isn’t free, but it is an investment. Do it early, do it right and it will pay dividends in future. It’s like the difference between messing around at the gym on your own and losing half a kilo in six months, or getting a PT and dropping 5kg in six weeks.

And just like paying a PT makes you really think twice about eating that piece of cake (because hey, you just dropped 80 bucks on a workout), getting a financial plan can make you much more focused and disciplined. If you want to find a good one, my homegirl Nicole P-M has a good column about this.

If you still don’t want to stump up for the full box and dice, you could look at a digital option – aka Robo-advice. Decimal and Stockspot are some of the bigger players (but I haven’t used them so can’t provide a recommendation).

Take Baby Boomer advice with a very big grain of salt. The stuff our parents did to get ahead was done in a different world. Back in the 80s you could get 15% interest for sticking money in the bank. Inflation could be up to 10% as well, but worst case scenario, that’s still a 5% gain.

The best you can hope for today is a 3% interest rate if you shop around. Inflation has been hovering around 2%. So, that’s a big old 1% gain for stashing your money in a bank. (Don’t understand the inflation thing? Check out this post).


Before 2008, the world hadn’t heard of quantitative easing (i.e. governments printing money) or negative interest rates (an actual thing). Now, bank deposits barely keep up with anaemic inflation rates (and in countries like Switzerland you have to pay the bank to look after your money, thanks to negative interest rates. I shit you not).

Buying property was a stretch, but a sure bet for building wealth. You could probably even do it on one income. Today, a mortgage that’s 6 or 8 times the average income means you both work and possibly pay for childcare too. And the stockmarket generally doesn’t deliver the double-digit returns it did back then.

The finance industry calls this a ‘low growth, low return’ world.
So hey, thanks boomers for setting that up!

I’m sorry that have no good news for you on this front. It’s going to be like this for a while yet.
What it does mean is that taking advice from your folks can be tricky. They’re in a different headspace (in retirement or close to it) and need to focus on protecting their nest egg.


But we don’t.


There’s a concept called ‘pushing up the risk curve’ – it means that you take on more risk in order to chase higher returns. Instead of buying bluechip stocks you buy cheaper, more speculative ones. Instead of investment grade bonds you buy unrated ones. Instead of buying fixed interest bonds, you buy shares with high dividends.


Remember when you first start drinking alcohol and it took you two Bacardi Breezers to get hammered? But as you increase your ‘piss fitness’ you need a whole six pack and some shots to get to ‘hilarious drunk shenanigans’ level.

Similarly, we need to take more risk in this environment to get the same returns as before.


I am NOT saying go to Vegas and put it all on black. I am NOT saying attend a property spruiker seminar that promises you vast riches if you sign up RIGHT NOW, TONIGHT ONLY!

What I am saying is that we may need to look at something more aggressive than a bank account. Buying bank shares because your dad says they’re good? Maybe not. Buying an investment property because your parents made a killing on a Gold Coast apartment circa 1994? Maybe think twice.

The good thing is, we are young. We can tolerate more risk. If we go backwards we have many more years to go forward.

So just make sure you run any well-meaning advice through a filter, the same as you would when your mum gave you fashion advice as a teenager. (On second thoughts, my mum probably had some useful insights then). 

And short of just asking your folks to stump up funds for a house deposit, I don’t have a lot more advice than this: save more, spend less. That’s what a lot of our parents did. My family ate at the Yarrawarrah Windmill Chinese Restaurant once in a while, but that was the eating out budget. They didn’t get a new iPhone every two years. We had the world’s shittiest cars (Subaru Enduro – wtf). They never took to us to Disneyland. And that’s how my parents ended up paying off the house.

So, take the best bits of the boomers, ignore all the cushy tax breaks they’ve made for themselves, and crack on with you own money goals.

 

Daddy Lessons: 3 tips from a Fierce Girl father

While support for this blog from the sisterhood has been fantastic, I’ve also been delighted by the number of men who have got behind it.  My dad is one of these honorary Fierce Guys, and because I am studying for my last exam, he offered to do a guest post. What a legend.

So, here are some tips from a guy who lives the ideal retirement lifestyle, after a long and intense career in the corporate world.

A Fierce Girl dad chips in – by David White

I’d better fess up at the outset.  I’m one of those baby-boomers.  You know, the ones who got a free university education, lucked out in the property market, got the best out of the super system.  What could I possibly have to say to the Gen Ys and Xs who have to live in a much less opportunity-rich environment?

Trust me, I know how lucky I’ve been and the media keeps reminding me if I forget.  But I think there are a few rules applicable at any time, which is what my Fierce Girl has been trying to tell you.  So that you don’t have to listen for too long to an old bloke’s pontificating, I just want to suggest three ideas you might consider.

Your super

I know it’s getting hard to trust the system when they keep tinkering with super.  Do you really want to put your money into a game where the goalposts keep moving?  Here’s the thing, though – even this penny-pinching government won’t change the rules backwards.  They had a go recently and their own hard-arsed conservative mates forced a backdown.  All the rule-changing has confirmed this  – every bit you can get into your super account before the next bit of tinkering is a bonus that will pay you back later on.

I would say to you, stuff every bit of left-over cash you can manage into your super account, while the rules let you still contribute.  Do it to the point where it hurts you just a little bit.  In 20 or 30 years’ time you will love yourself for it.

One thing you need to remember, though, is that your super balance (even though you might not be able to get your hands on it for decades), is counted at its face value as part of your total asset pool in some cases.  So if you find your Mr Darcy, and he turns out to be Mr Wickham, all your hardscrabble super would fall into the pot to be divided between you.  It will hurt you to have to give that creep anything, when he’s been out putting new gadgets on his four wheel drive and drinking fancy single malt Scotch while you’ve been sensibly trying to assure your financial future together.  And now he wants some of your super!

But think about this if that shit happens to you – what you have in your super can never be replaced if you have to trade it away as part of the split, because of those changing rules.  Maybe let that freeloader have a bit more of the hard assets, and hang on to as much of the super pie as you can.  Down the track you ‘ll be feeling smug when all he can afford is Johnny Walker Red and a secondhand Hyundai.

Don’t buy a Porsche

That may be the wankiest piece of advice you will ever get in the Fierce Girl’s Guide.  But there was this one time, late in my career, when for the only time ever via some fluke in the market, the company had a great result and we maxed out our bonuses.  The executive team did particularly well out of it (yeah, I know, fat cat bosses).  Out of the seven of us, the car park count was:  two of the most expensive Harley Davidsons you could buy; two Porsches; one BMW.  One of us (a girl of course) put it towards the house she was in the midst of buying.  Being the tight-arse I am, I paid off my last bit of debt.

Now I’m never going to have another chance to buy a Porsche.  But every time I see some grey-headed dude drive past in one, it reminds me that I made a good decision.

What should you do if a bundle of cash falls unexpectedly into your lap?  I would apply the 80-10-10 rule.  With 80% of it, do something boring and sensible:  pay it off your mortgage, invest it, stick it into super.  With 10%, blow it on yourself and get something you’ve really lusted after but couldn’t prudently afford.  Then give the last 10% away, to your family, to charity, to some cause you’re passionate about – it will feel amazingly good.  You’ll end up with a triple shot of self-esteem, instead of that hangover feeling after you pissed the money away.

It’s not all about you

Without wanting to contradict all the good advice you get from this Guide, I want to suggest that you don’t button yourself down so much financially that you might be hurting people you love.  I asked my Fierce Girl if I was too much of a tight-arse when she was growing up.  She said, “It wasn’t too bad, but you should have taken us to Disneyland.”

She’s right, I could have afforded it, and going to Disneyland in your thirties just isn’t the same. Thus my unrelenting financial prudence was in some ways not so clever.  Precious memories can give just as good a return on investment as bluechip shares.

So, you go for it, all you Fierce Girls.  It’s a hard world out there, but you can do it.  Oh, and remember your dads love you, and we’re proud of you.

Note from Belinda: If you haven’t seen Beyonce sing Daddy Lessons with the Dixie Chicks, do yourself a favour and go here

Also, my dad and I have blogged together for ages on http://www.lifein500words.wordpress.com if you’re interested. #nerdfamily

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