Search

The Fierce Girl's Guide to Finance

Get your shit together with money

Category

Uncategorized

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. 

Ever feel like finance isn’t your thing? It’s not you, it’s them

Sometimes I just can’t keep my mouth shut.

Working in finance, I’m constantly surrounded by a majority of men. It’s not my ideal but it’s a fact of life.

But last week I couldn’t hold myself back. I opened a financial advice industry magazine and was confronted by what I can only describe as a sausage-fest.

It’s an ‘industry roundtable’ organised by a major life insurance company. Don’t be fooled by the two women in the photo; only one was actually allowed to be part of the roundtable. I assume the other was rounded up to give some gender balance to the pic. FFS.

So I got fired up and emailed the editor to complain about this. Something of a risky move, given I have to pitch stories to him occasionally. But hey, when the feminist fire is burning within you…

He was actually great and accepted that it’s not a good look, and as I suspected, it was the paying client who made the call. He said they normally have a minimum 30% females at their events. I’ll take him at his word.

Anyway, it got me thinking about my Fierce Girls. No wonder so many of us feel like finance isn’t our thing. No wonder we don’t feel inspired to work with investment professionals, when they are largely white guys in suits.

In case you (or the men’s rights activists, who take a strange interest in this blog) think I exaggerate, check this out.

I went to two of the ‘go-to’ finance industry sites to get a feel for the visuals. Here’s a panel of ‘investment experts’.

Oh hey there white guys in suits. But wait, maybe I’m just picking one example. Here’s another.

I mean, sure there are more white guys in suits, but maybe I am just being selective. Here’s one more.

Don’t be fooled by the glasses or the bald heads; these are all different people. The only diversity is the depth of their tan and the choice of whether to wear a tie.

I’m not blaming the publication completely for this. These are the spokespeople that the investment managers put forward.

Anyway, just to round out the example and test my hypothesis a little more, I jumped onto another industry website. Here’s a list of the ‘industry expert’ articles.

You guessed, more white guys! Surprising, I know.

But I’m not just here to throw shade at the ingrained gender imbalance of the finance sector. Although that is fun.

And I have nothing against white guys in suits personally. (Let’s be honest, they form a significant part of my dating portfolio).

What I want to say is this.

If you feel excluded from the financial world, IT’S ABSOLUTELY NOT YOUR FAULT.

If you feel like money, investments and finance are complicated concepts, remote from your life, IT’S TOTALLY UNDERSTANDABLE.

If you don’t identify with the blue-suited, white-shirted men of the finance industry, IT’S COMPLETELY REASONABLE.

There are definitely smart and talented women in finance. I know a bunch of them.

There are wonderful female advisers and money coaches like Vivian Goh.

There are boss-lady investment managers like Catherine Allfrey (ok I don’t know her personally but she works in my building and I secretly fangirl her from afar).

There are great female executives running super funds like Deanne Stewart (I fangirled her at an event once, in person).

There is even an amazing woman on the Reserve Bank of Australia Board! I’d go so far as to say I know Carol Schwartz, but I don’t think she knows me.

There just aren’t as many of these women as there are men. And it’s taking aaaaages to address the imbalance.

In the meantime, what can you do in the service of smashing the financial patriarchy?

  1. Search out like-minded women and their businesses. Women supporting women is obviously the best way to start. There are so many great women, so ask around or get Googling.
  2. Be conscious of the bias, then ignore it. Feel totally free to reject the notion that finance is a white guy’s game. It’s totally open and accessible to women who want to get acquainted. Resources like the one you are reading are evidence of that.
  3. Call out gender imbalance when you see it. Like I did to the poor editor mentioned above, if you see events or articles or even companies that are far too male, comment on it. We accept the behaviour we walk past. Also, feel free to take your business elsewhere.

And if all fails, just create your own squad, Taylor Swift, Bad Blood-style. That’s my master plan. Are you in?

3 useful things to help you win the war on adulting

I’ve been adulting hard in 2019. I  finished a bathroom renovation and I got my car registered. Ok, maybe my dad took the car for a service and inspection, but I most definitely did the paperwork.

Anyway it got me thinking about what it means to be a fully functioning adult. Because even though I’m now 40 (wtf), I sometimes feel like a 21 year old, just trying to keep all that adulting, life-admin shit together. (Hence why my dad steps in now and then).

I don’t even have kids and I find it hard – so let me salute all the ladies out there who can deal with car rego and school permission slips (do they even have them anymore or is there some sort of app?). Anyway, I don’t know how you do it all.

But when it comes to money, I am doing ok. So I want to share with you a few things that every girl should have as a serious, responsible adult. This is not an exhaustive list, obviously, but it’s not a bad place to start.

1. A stash of emergency cash – An emergency is not a new outfit for a wedding that you forgot about. It’s your car breaking down and needing expensive repairs; it’s your hot water system exploding and needing immediate replacement; it’s getting out of a bad relationship that’s affecting your mental health.

The spectrum of reasons is wide, but the solution is the same: put at least a few thousand dollars aside with a different bank  –  so that you can’t see or easily access it in your everyday banking. Ideally, you want to have three months of living expenses in there. But if you can only manage a hundred or a thousand, do that and keep building a little at a time.

Some is better than none, so don’t let the ‘three month emergency fund’ rule keep you from getting on top of it.

2. A good banking or budgeting app – One thing I’ve learnt about money is that it’s a needy friend. Your bank account is totally NOT OK with sporadic texts and comments on her Insta posts.

She wants you to check in with her all the time, see how she’s feeling, has she been too busy, is she feeling sick, did someone absolutely flog her on the weekend at a bar around midnight. Ya know, the usual.

We really need to be frequently reviewing our spending, looking for cost overruns and also checking there are no suspicious transactions (cybercrime is real, y’all). Otherwise it becomes an avoidance thing of ‘God I don’t even want to look’. And a spiral of stress.

The next level of adulting to consider is a budgeting app that helps you set up buckets of money and lets you know if you’ve hit them. This is for the advanced level saver, and I know it’s not everyone’s gig. But something to consider.

When I feel like I’m getting a bit outta control, I track every dollar I spend (as per my new year resolution). I enter it into the TrackMySpend app, and it shows me where all my money goes. I like to enter it in manually  (as opposed to just reviewing my bank transactions), because it makes me think about each purchase.

In a cashless world, it’s easy to ignore exactly how much cash you’re dropping. So this is one way to create an additional mental barrier. (And yes, ‘Personal & Medical’ category, I see you and your outsize contribution. So what if I spent $400 at the naturopath? I haven’t even been to Priceline, so there).

3. A decent income protection policy

I know this is boring, but seriously, what happens if you can’t work because you’re really, seriously sick. Cancer, depression, an accident.

For a while there I was paying for this through my superannuation. Which is totally fine and if you do this, then great. I ended up getting a professional insurance review (for free, when I worked in a financial planning company). The outcome is a Rolls Royce policy that even pays my super if I can’t work. It’s very expensive, and I wince when I pay it every month.

HOWEVER, I am a single gal with no safety net other than my family, so I want the best. And then I hear about people like Kim, who beat breast cancer at 30 and had a double mastectomy; and is now battling cancer a decade later. Or the guy I met on the weekend (who is super cute and sweet, but that’s not relevant). He was in a car accident at 22 and spent four months in a coma before having to relearn pretty much everything in subsequent years, due to traumatic brain injury.

And I think damn, I guess I can afford it.

So, if you have an income, you should probably insure it. Talk to your super fund if you aren’t sure how to get started. (Also, note this is not the same as Life and TPD insurance that comes as a default; you need to add it yourself with most super funds).

Read more about the exciting topic of insurance here! We’re all going to die – so let’s just talk about it here, then move on

And that, my friends, is a completely randomly chosen list of things to help you win the war on adulting.

How much is enough? And other deep questions raised by Netflix

It seems like everyone is talking about Marie Kondo, the Japanese tidying-up queen. Her book even spawned a new verb: to KonMari.

Marie Kondo is now on Netflix, where she helps people who have become smothered by their own ‘stuff’, exhorting them to ponder each item and ask ‘Does this spark joy?’. (If it doesn’t, it’s out.)

I’m a fan of the concept.

When I left my marriage, I basically just took my clothes and shoes. Well, ok.  I also took the  Tupperware, the Le Creuset and my Mundial knife. A girl’s gotta cook.

I started again, and it was strangely liberating.

Yet how quickly we acquire more things. I’ve told myself no more kitchenware, but it’s hard. I recently gushed with envy over a friend’s omelette pan.

Which brings me to the a question I’ve been pondering for a while now: how do we know when we have enough?

Enough what, you ask?

Anything, really.

The big challenge of our modern lives and disposable incomes is simply saying no.

When you have money, there’s always more you can buy.

Maybe it’s one more cheap T-shirt. Maybe it’s another pair of designer heels. Maybe it’s one more eyeshadow palette, to get one particular colour.

Whatever your thing, you have the ability and opportunity to continuing indulging in it.

But there comes a point, hopefully before Marie Kondo has to step in, when it’s time to ask the question: is this enough?

It might be that you’re running out of space (or money).

Maybe you have so many Lorna Jane crop tops you struggle to rotate them efficiently (I hear that’s a thing, wouldn’t know myself).

Maybe your wife gets cranky at all the space your bikes are taking up in the garage (sorry dad).

Or maybe you just start feeling guilty about the impact you’re having on the earth.

I’ve been talking to people about this to get their view on this thorny topic.

I asked a girlfriend at work how many work outfits are enough. ‘Ten’, she replied. Two weeks of new outfits, then rotate again. ‘After all, a man normally has a couple of suits and ten shirts’.

The girls in the team nodded thoughtfully, then all agreed that was a preposterous notion. We could quite literally wear a new outfit for a month without duplicating it.

Which really gives you pause for thought. (And hopefully I have that pause, next time I’m in a changeroom.)

Pick your vices

My dad’s advice is to try and limit your number of vices to one. He has chosen bikes, and associated bike gear, as his vice. He claims to have culled to the very reasonable number of three. His wife remains unconvinced, but this is a woman with a chandelier in every room, so I’m not sure she’s blameless.

And if we all have our different vices, we also need to have things we’re happy to be a tight-arse about.

I have an obscene amount of fancy activewear, but use a Kmart handbag. My friend has an obscenely large collection of designer bags,  but buys cheap gymwear. We revel in judging each other about it.

It all comes back to mindful spending (more about that here). This is a concept that I have been spruiking for a while now. Amazingly, this week I spoke to someone who has adopted it!

She said it helps her when she’s having that moment in a store, for example, wondering whether she ‘needs’ a new top, or is just buying it for the sake of it.

But what I like about this approach is that it can actually give you freedom, not just constraints. Mindful spending helps you pinpoint those things that ‘spark joy’ and allocate resources that way. Guilt-free, by the way.

So there is no easy answer to ‘how much is enough?’, but there are definitely some road signs to help us on the journey to find out.

 

3 things I learnt in the Christian Louboutin store

It was the outcome of a conversation at work. Long story, but I decided I needed a pair of designer heels to signal to the world that I was serious. I wanted to prove (to myself, mostly) that I’m a successful, grown-up woman who can do all the serious career things.

And so, my friend who lives and breathes designer shopping, excitedly took me to Pitt Street the very next day.

I had some major ‘Julia Roberts on Rodeo Drive’ vibes to be honest. I pretended like I go into stores that sell thousand-dollar shoes all the time, but as you can guess, I have literally never been in one.

Anyway, I didn’t buy any. It was a little disappointing in the end – not for my wallet, which was totally supportive of my decision. Definitely for my friend.

But life is full of unexpected lessons, so here are some thoughts I had following the great Designer Shoe Store Trail of 2019.

  1. Price does not equal comfort. I had this idea that if you paid a lot of money, these heels would magically not hurt your feet. This is a lie! In fact, those Louboutins were red-soled harbingers of death to the balls of your feet. Also, my ‘plump’ feet didn’t really fit into them or any of the fancy brands, except Salvatore Ferragamo, which is made for well-heeled (pun intended) ladies of a certain age who brunch in Double Bay.
  2. It’s hard to rewrite your money script. I’m a massive tight-arse when it comes to clothes and shoes. Who was I kidding? Like yeah, I’ll shop at the usual suspects like Wittner and Nine West, but I ain’t paying full-price. So it’s hard – impossible even – to go from $100 for a pair of shoes to literally ten times that. And then I started thinking about all Nike Air Maxes I could get for that much (to add to the slightly obscene collection already going). Well, anyway, is it any surprise that I abandoned the whole plan? This isn’t a bad thing – it’s part of mindful spending to know what you’re willing to drop your hard-earned dollars on. Or not.
  3. Self-confidence is about what you think, not what you wear. Sorry if this sounds like a motivational quote from Instagram. Like, it’s still important to look polished and professional. But I was expecting that buying some shoes would convince me that I’m legit. Maybe banish some of my impostor syndrome feelings. It turns out the only way to do that is through some serious inner work. Ugh, so much harder than just going shopping. In fact, that’s how it always is. Buying stuff is never a replacement for self-development. Annoying!

I turned 40 and here’s what I’ve learnt about money

To be honest, I was freaking out about turning 40 at first. Thought I’d run away for my birthday and hide in shame.

Then I remembered who I am. Bad-arse bitch who loves attention! I have a great job, my own, sweet bachelorette pad, cash in the bank and a zippy 2005 Mazda in the garage (lol, it doesn’t even have power windows).

20181209_124253
I kept the celebrations totally low-key and subtle, of course

So now that the Festival of Belinda has successfully been celebrated, I give to you four gifts of wisdom – one for each decade.

Money isn’t about stuff, it’s about choices.

I know, I say this a lot. But the longer I live, the more I see it play out. I have watched friends stuck in marriages they can’t afford to leave, or stuck in jobs they hatett. When I left my marriage, the quality of life I had afterwards was a direct outcome of the money I could save and earn.

So, the more you spend on clothes, jewelry, homewares, cars and other ‘stuff’, the lower your buffer when you want to make a change. I controversially believe in having a ‘FU Fund‘, even if you’re married, because you honestly just never fucking know when you need to leave something or someone.

Money’s always hard, because temptation’s always there.

I’d like to think I have my shit together financially. But I still struggle.

Whether it’s the small temptations (I swear this is my last Shellac for a long time), or the big decisions (do I renovate the bathroom or sit on the cash?), it’s hard.

We are wired to like shiny new things and fun experiences. And they get advertised to us everywhere! The gym, the toilet, the elevator – nowhere is safe.

Plus modern life is complicated and relentless. I got a credit card for work and forgot to pay it off the second bloody month I owned it. (I’m smart but so, so vague).

So we need to create frameworks for ourselves. I diarised my credit card due date, for example.

We need to pay attention to what matters, by creating a mindful spending manifesto.

We need to practise saying no to things if they don’t align with our goals.

And we need to check in with our bank statements reguarly, not wish them into another dimension.

It’s a grind, but we just need to suck it up, buttercup. The alternative is to be broke AF and/or not meet our life goals. And who wants that?

Nobody cares about your money as much as you do.

Remember the post a while back where I got my friends a $6k refund from their bank? The short version is they were on the wrong interest rate, and nobody – neither their mortgage broker, financial adviser nor the bank – gave a shit.

It was only when they picked up The Barefoot Investor and started asking me stuff, that we realised they were getting screwed over.

I’m not against using advisers or brokers or accountants. But you still have a responsibility to keep an eye on things and to educate yourself. The more you know, the likelier you are to ask tough questions or spot bullshit.

Similarly, no energy company, telco or insurer is going to offer you a better deal for the hell of it. Do your research, call them up,  give them a hard time, or simply switch. It’s your money, so be a tight-arse with it.

Only you can decide what’s important to you.

Remember my friend Jen who loves designer bags and shoes? Girlfriend got two pairs of Valentino heels delivered to the office just a couple of weeks ago. About $1500 all up and that was ON SALE.

And yet she can’t fathom how I’d spend over a hundred bucks on LuluLemon leggings, when I could get them for $30 at Cotton On. I could give you chapter and verse about the superiority of the Align leggings, and how I train every day etc.

But at the end of the day, I care a lot about exercise and all the stuff that goes with it. Including sneakers that are technically just for walking around. (Hey, walking is exercise ok). So I spend money on it.

And I spend less on other stuff. I don’t spend much in bars; I buy cheap wine whenever I need it; and that aforementioned Mazda is worth so little I don’t even pay for comprehensive insurance for it.

It’s ok to have things you splurge on. The trouble comes when you splurge on everything. When you feel out of control so you end up saying ‘YOLO’ and whacking it on the credit card.

You can always stop and reset (read this post). You can always do better. And you can pick one or two things to treat yourself, while still achieving your goals.

If I had to sum up my financial life, from my first job at 13 until now, I’d say it was a work in progress.  I’ve been broke, learnt the hard way, had some good luck, made a shitload of mistakes, had some great help and advice, and muddled my way through. The best thing I’ve done is stay interested and curious.

After all, if you keep learning, you keep improving. Which is pretty great life advice right there. You’re welcome.

photo credit: donbuciak Another Hot Year via photopin (license)

Blog at WordPress.com.

Up ↑