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The Fierce Girl's Guide to Finance

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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.

The single biggest risk to your money is probably not what you think

There is one thing that can change your financial path forever, and it’s not betting on the share market. It’s not entering the Gucci store. It’s not even buying a house.

It’s walking down the aisle.

When you get hitched to a partner, you’re hitching your wagon to their financial future. And even if you’re already married, please read on, because this is literally one of the most important posts I am ever going to write on here.

I know it’s easy for me to sound like the bitter divorcee who lost money in a divorce settlement. (I did, but I am less bitter about it these days).

That’s not what this post is about. I’m at the age (40) where marriages are starting to fall apart. I see it among friends, acquaintances and friends of friends. After all, the most common age for getting a divorce is 45.5 for men and 42.9 for women (ABS).

Like any long-term decision, marriage is a calculated risk. There is a 1 in 3 chance it will end in divorce. If someone offered you a raffle where 1 in 3 tickets offered a prize, you’d jump right in.

And yet, so many people get married without even considering the ‘what if?’. The suggestion of a pre-nup, or to not change your surname, is taken offensively.

We are socialised to believe that romantic love is the most important part of marriage. This is a relatively recent development (it took off with the rise of the Romantic novel in the 18th century).

For thousands of years, though, marriage was  an economic and child-bearing union. (Well, more of a takeover than a union, because the man got to control all the woman’s wealth once it was done).

Our ancestors were generally more clear-eyed about the fact that marriage is about far more than love. And in the age of Instagram weddings, it’s easy to forget there’s a shitload more at stake than a perfect photo album.

Once you’re married, everything you earn and own belongs to you both. Louder for the people at the back!

This is fantastic when you’re sharing and building together. But if it falls apart, everything you have worked for can be pooled together and a line drawn down it. (And that line may not be in the middle.)

Not only that, you will likely have to start over in a practical sense. New life, new home, new furniture, new insurance, new kitchenware. The things I own today bear very little resemblance to what I owned five years ago.

There is another big complicating factor in all of this: children. If you bring kids into the picture, there’s a good chance you’ll take career breaks that mean you earn less, reduce your super and even stunt your career progression.

Sorry, I know this sounds terribly unromantic and depressing. But hey, we aren’t just here for the LOLs; we’re here for the learning too.

A little bit of planning goes a long way

So I want you to consider marriage (or even de facto living) in this way: there’s a high chance it will be great and last forever. But there’s also a chance that it won’t.

It’s like car accidents – you really hope you won’t have one, and mostly you don’t. But guess what, you have to insure that vehicle every year anyway.

So I want to position this concept as Independence Insurance (thanks to a friend came up with this phrase, you know who you are).

This is the kind of insurance you take out regardless of how happy your relationship is. Because you just never fucking know.

Bae might come in one day and say s/he’s leaving. Maybe you catch them cheating (hey, if Beyonce isn’t safe, who the fuck is). Or the red flags you ignored before, gradually become so big and red you can’t stay, without harming your mental health or your kids’.

The progression of every break up is different, but the one thing they all have in common is the sense that ‘it wasn’t meant to end like this’.

So what does Independence Insurance involve? Well, the good news is, you don’t have to buy it or renew it or find the paperwork for it every year. It’s more about keeping some things in your control.

Always have at least one bank account in your own name. Up to you how much you have in there. I think at least a couple of thousand is a good start. Not only can you buy surprise presents with it, you can also get the fuck out of dodge if you need to. Honestly, this is such a simple thing to do and if I could go back and change one thing about my marriage, it would be this.

Have a car in your own name. If you only have one car, you may have to battle this one out. But if you have two, have one in your name. In NSW you can’t have two owners on the registration (not sure about other states), which is bloody annoying. But if things turn bitter and your partner has their name on both cars, guess what, s/he can keep them both. Happened to someone I know. Her ex has their two cars sitting in the driveway and she can’t do anything about it until they go to court (some years hence).

Don’t stop investing in your career and earning power. I know, this one is a lot more work than opening a bank account. But think of the women you’ve seen struggle after divorce because they put their own career on the backburner, to raise kids. It’s true, childcare is eye-wateringly expensive, but you need to think about the cost of not working. Not in today’s salary terms, but in the many decades from now if you’ve fallen behind your peers. Or you’ve kept low-stress, flexible, low-paid part-time jobs and now find you’re stuck there.

As my friend said, she never again wants to wake up and feel like she’s trapped in a relationship because she can’t afford to leave.

Take an interest in the financial paperwork. If you’re the spouse who leaves this stuff to your partner, it might seem like they are doing you a favour. But it has a lot of risk too. When I was married, I was the only one who knew how to access our mortgage redraw. If I was a bitch (which I am obviously not, ok), I could have easily drained thousands of dollars out of it, spent it, and he would neither have known nor had any recourse. Paperwork and banking is the worst, but it’s also the key to staying in control, as it gives you full visibility of your position.

Ok let me stop now and apologise if I sound a little preachy. I just want us all to be the best version of ourselves, and that means being realistic even as we are hopeful. I have more on this topic, so stay tuned.

And let me tell you I very much believe in romantic love. Just not as it applies to me haha.

 

New year, new you: how to up your game this financial year

If I ran a fitness blog, I’d have to wait til January 1 to share good intentions and resolutions with you. Luckily for me, this is a finance blog and I can do it now.

It also requires no activewear or bikini shots, which is a relief, because I have been hitting the red wine and winter comfort food a little too hard.

So, while I commit to no booze and lots of tuna salads for the foreseeable future, you could commit to a few good habits for FY18/19.

Change one bad money habit – It doesn’t have to be outrageously ambitious. You don’t have to makeover your entire financial life. It just needs to be specific and actionable.

For example, you want to control your spending better. My friend Cara gets paid monthly and has a bad habit of ‘making it rain’ the first week, like Drake giving money to poor people. Then she lives like a monk the week before payday.

If you have a similar issue, your goal is to set a weekly spending budget. Look at how much your normally spend (I know: a painful yet necessary step in and of itself. But get out your bank statements and come clean with yourself).

Decide what’s an appropriate ‘discretionary’ budget – lunches, nights out, new shoes, Priceline sales etc. This should be close to what you already spend, otherwise you’re not going to stick to it. Maybe trim a cool 10-20% off it, but don’t go for the diet equivalent of Optifast shakes when you’re used to 2000 calories a day. Now, take that figure and divide by 4. Simples!

Then it’s a matter of putting in place the mechanism for sticking to the weekly budget. Perhaps you get that much cash out, then you see how much is left. Perhaps you have a separate account with weekly auto-transfers of the set amount. Maybe you check your bank account every few days and see if you’re tracking.

Whatever works for you, find a way to put boundaries in place, and automate some of it.

All of this advice is clearly not rocket science. I’m no behavioural psychologist. It’s about intention, action and habit.

Decide what to change, think about a solution, then make it as easy as possible to keep up the habit.

Check out my homeboy James Clear if you want to know more about changing habits – he is the guru.

Other bad money habits you might want to overhaul:

  • Paying too much for convenience: unplanned and expensive groceries, too much Uber Eats, buying a full price dress for a wedding next week etc.
  • Wasting food: throwing out what’s in your fridge, not putting it away properly in the first place, forgetting to eat leftovers – you know the drill. Make a plan, use your freezer and buy some Tupperware FridgeSmarts
  • Dipping into savings for everyday money – you need to re-do your budget, set a mindful spending manifesto, and get an account with a different bank that’s harder to access

Sort your superannuation once and for all – I know, I go on about super and it’s everyone’s least favourite topic. But how about you spend an hour or so on it now, and have thousands more when you retire in a few decades?

I have a deep-dive post about it here, but in short, there are a few basic things that make all the difference:

  1. Find your lost super – That crappy retail job you had for six months? You probably have a super fund for it. If you’ve had more than a couple of jobs there’s a good chance you have a tiny little super balance from it, sitting around in the ATO’s accounts, doing nothing. Get hold of it and put it to work! Some tips here.
  2. Ask your super fund to roll your accounts into one – Your main super fund probably wants to do this lost super thing for you – they often have a rollover service to find your multiple accounts and sweep it into your main one. Let them do the hard work!
  3.  Check your insurance – We get given life insurance without asking – but that doesn’t mean it’s either the right amount or free! Check what you’re covered for, if it’s too much or not enough, and how much it costs. I have a really exciting post about this here (because, let’s face it, the only thing more exciting than super is super AND insurance!).
  4. Review your investment option – Chances are, you’re in the same investment strategy as that 50-year-old bloke on the train wearing a too-tight shirt. Which isn’t ideal if you’re young. As a general rule, younger savers can tolerate more risk for higher returns (they have longer to smooth out the ups and downs). Most super funds will be able to give you advice on what’s right for you. Personally, I will be in high-growth until about the time I need to get botox.

Get a better deal on your boring bills – Once a year, it pays to go through all those dull fixed costs and see if you can cut them down. Are you in the right health fund? Who knows – do some Googling, or call one of those iSelect, ComparetheMarket type services.

Could you be getting a better deal on your phone? Probably, if you’re not already on a contract. They bring out better and cheaper plans all the time, so it’s worth shopping around. The tight-arse circles I hang out in online have  been raving about Kogan.com.au – not an endorsement from me, but can’t hurt to look.

Same goes for your car insurance, power bills and any other painful ongoing cost. Spend a bit of time once a year, and reap the rewards.

Learn about basic investment and finance concepts – Obviously being on this site is a great start. If you’re relatively new here, this post is a good primer.

But if you’ve put off ‘understanding compound interest’ to another day, that day is today.

If you’ve ever thought ‘I’ll look into share investments at some point’, that point is now.

If you’ve pondered ‘how much will I need to retire on?’, then it’s time to do some research.

A great resource is the government-funded http://www.moneysmart.gov.au – it’s designed by financial literacy experts so that anyone can understand it. And it covers a huge range of topics.

And that’s it.

Gosh that was a lot of information for a wintry Sunday morning huh? But you only have to do one thing to make a difference.

And none of those things require diet, exercise or bikini body transformations. So how good is that?

If financial planners are greedy, dishonest or stupid, who should we trust?

That’s a big call, I know. But it’s what the Royal Commission (RC) into financial services seems to be suggesting.

Not all financial planners, just the ones who’ve been blowtorched by bad-arse special counsel Rowena Orr, affectionately  nicknamed ‘Shock-and-Orr’ by the media. (Pictured above, showing  strong side-eye game).

I’ve been following the RC  closely this week. Partly for professional interest and partly because it’s car-crash viewing – i.e. hard to look away from the wreckage.

So far we’ve heard about greed and dishonesty at the top. AMP management all but confessed to charging fees for no service, then lying to the regulator about it. So far, the CEO and head lawyer have taken the fall, but there will be more, I suspect.

We’ve also heard about incompetence and greed at the frontlines.

An adviser who told a couple they could buy a property within their self-managed super fund, to live in. Anyone with even the slightest knowledge of SMSFs knows you can’t do this: only investment properties can be placed into super. That couple ended up with no home of their own to live in.

There was another adviser who suggested his clients change super funds, even though they’d be slugged with a $16,000 exit fee – or a quarter of their (fairly meagre) savings. Because it would make him money.

Then there was a high-profile, TV-star adviser, who told a client to leave her super fund and join his firm’s. Even though it would cost her $500,000 to do so.

This was after his staff had impersonated the client to contact her super fund (which is absolutely not required, because you can easily give an adviser authority to call on your behalf).

Turns out he was confused about whether his client was in a ‘deferred benefit’ fund or a ‘defined benefit’ fund. Those two things are in no way similar; it’s like saying you’d like a pinot noir and being serve a pinot gris. When a girl wants red wine, she does not like getting white.

Luckily, this client is a smart and savvy lawyer, so she picked up the error, rejected the advice and complained to his professional body. In the planner’s response, he called her ‘nitpicky’ and ‘aggressive’.

I don’t know about you, but if I’d picked up a $500K error in advice I’d just been charged several thousand dollars for, I’d feel a little aggressive.

And if knowing the difference between ‘defined’ and ‘deferred’ is nitpicky, then sure, sign me up for pedant of the year.

These are just some examples of the train-wreck that is the Royal Commission. And while there is some schadenfreude in watching it, mostly, it just hurts my heart.

It hurts because these are everyday people who have done the right thing and sought professional advice about something important. Then been totally screwed over for it.

It hurts because, for every dodgy and stupid and incompetent planner, there are many more who care deeply about their clients and give solid advice that’s in their client’s best interests.

But sadly, it’s hard to sort the good from the bad.

When you get a bad hairdresser, you know straight away. Your partner will no doubt declare the shitness of your new ‘do as soon as you walk in the door. Ah well, six weeks and you can move on.

But bad financial advice can take a long time to emerge and even longer to fix. In fact, many of the people affected by bad advice don’t even know it yet. Seriously, AMP admitted that they haven’t quite got around to telling a bunch of clients that their adviser is a chump who’s cost them money.

I’m at a loss to know what to make of it all. How can I sit here and tell all my Fierce Girls to get professional advice? What if you end up with one of the spivs who send you off in the wrong direction?

What if you get sold crap products and solutions just because it puts money in the pocket of the adviser and their company?

You can look for recommendations from family and friends, but what if they have also been given bad advice and just don’t know yet?

I honestly don’t know the answers to these questions. It’s mindblowing to me just how devastating the RC’s findings have been. From the Prime Minister through to the average woman on the street, we are all left shaking our heads at the breathtaking combination of greed and stupidity that appears to infect the financial planning industry – or perhaps the finance sector more broadly.

Take charge of your own money

The only advice I can offer in light of these revelations is this: you can make plenty of good decisions about your money without financial advice.

The first thing to do is get a handle on your spending. Good money management is the biggest challenge for most people; working out how to invest comes later on.

So before you do anything, check out my take on Guilt-free spending and how to wrangle your bank accounts into order.

Beyond that, financial advisers mostly help you in three areas: personal insurance, investments and superannuation. Here are some DIY ways to improve them.

Insurance – You normally get insurance through your super fund without even asking – mostly it’s just death cover and TPD (read this post for more detail). Call them up, check how much you’re covered for, talk to them about whether it’s too much or not enough. Most funds are allowed to provide this ‘limited advice’ as part of your membership. And you should definitely look at adding income protection if you don’t have it already.

Investments – Knowing where to invest your surplus savings is a good problem to have. However, many of us could do great things just by paying extra off our mortgage (and therefore saving thousands in interest over the life of the loan).

We could easily start small with an exchange-traded fund (read more here) or a micro-investing app (like Acorns, which this week rebranded itself to Raiz). Investing doesn’t have to be scary and complicated – and a bit of self-education goes a long way.

Super – With the RC findings ringing in our ears, I’m gonna make a call: a big-bank super fund may not be the best option. I’ve worked with lots of super funds over the years (as clients) and have found that industry funds and values-driven funds (like Australian Ethical) really do approach things with one purpose in mind: their members.

If you’re already in a bank fund, I’m not saying you need to bail out of it. But if you want to roll all your super into one fund (which you totally should, to cut out duplicate fees and insurance premiums), pick one that aligns with your values.

And consider putting a bit extra into super, as it’s a good way to cut your tax bill and keep money aside for the future.

Another thing you can do is speak to your fund about which investment option is best for you. Again, this advice is often part of your membership, so it’s worth seeing if your risk profile is right for your age and situation.

In some cases, the ‘default’ option they put you into is one-size-fits-all. And as anyone who has been entangled in a cheap, Chinese-made ‘one-size’ top in a change room can attest, one-size does not actually fit all.

Take charge

To sum up, I would reiterate what I say on here all the time: you are responsible for your money. Educate yourself. Pick up the Barefoot Investor. Read http://www.financy.com.au or the Money section of the newspaper. Get engaged and involved. The more you know, the more control you have.

Four things rich people do … that you can too

There’s a section in my favourite gossip mag, ‘Celebs – they’re just like us’, where photos like Reese Witherspoon hauling groceries to her car make us feel good – as though there’s not much separating our humble lives from theirs.

Well, I’d like to propose a column called ‘Rich people – they’re just like us. Except not really’.

My career has thrown me in the path of many rich people (who, curiously, don’t call themselves rich most of the time).

They are like us in that they struggle with personal relationships, self-esteem and whether to eat dessert or avoid the calories.

But they are unlike us when it comes to money. I’ve noticed a few things that they have in common with each other, and it might help you too.

Like another favourite section of the gossip mags, here’s my version of ‘Rich People: steal their style’.

1. They spend money to make money

Wealthy people have wealth managers. It might be a financial adviser or private banker (probably both). They have an accountant to minimise their tax, a lawyer to set up trusts, and then they pay fund managers to invest their money. And they’ll pay a lot for these services, if they see value.

The reason for having a coterie of advisers is that each one has specialist skills to maximise return and minimise risk.

Key take-out for you? Don’t be afraid to invest in professional advice. A good financial adviser could make a difference of tens or even hundreds of thousands of dollars over your life.

A good accountant will make your tax and investments work harder for you (and likely give you a way better tax return).

Even a good career or business coach can make a difference to your earning potential and success. (Mine pushes me to be tougher than I naturally am)

2. They don’t avoid risk, they manage it

I get it: you work hard for your cash so you don’t want to risk it in investments you don’t understand. But shoving your cash in the bank will not build your wealth these days.

Most bank deposit rates barely keep ahead of inflation. For example, inflation is running at around 2%, you’re getting 3% interest, so in fact you’ve only made 1% on your money.

The key is to understand risk management. Diversification is key to that – having your eggs in a few baskets. Another is paying attention to the fine print, so you are only taking risks you understand.

Related to the first point above, good advisers will help you manage risk according to your timeframe and goals. And I’ve written a whole post about risk here – check it out!

The other thing rich people do is insure the hell out of everything. There’s a place called Lloyd’s of London that’s been around since the 1700s, where you can go and get insurance for anything from a giant container ship through to J-Lo’s butt (true story).

It’s a global institution, because insurance has been at the heart of the economy since men were wearing wigs in an un-ironic way.

Insurance is a crucial part of risk management, so if you haven’t seriously looked at your income protection and life insurance, now is the time. (Oh wait, here’s a handy guide I wrote!).

3. They are masters of debt, not slaves

There’s a concept called ‘productive debt’ (aka ‘good debt’), and it’s worth understanding. It’s the debt you take on in order to invest and make more money.

A home loan is the most common form of this debt. But there are also investment loans, such as a margin loan to buy shares. Business loans are also in this class – borrowing to build and grow a business is a big driver of our economy.

‘Unproductive’ or ‘bad’ debt is borrowing money to buy something that just costs you money – a car loan for example. The car you have at the end of the loan will be worth less than you paid for it. Credit cards generally fall into this category too.

I know, you may feel like the investment you made in an Urban Decay Nude II palette at Sephora is productive and will improve your life. But unless you’re an Instagram sensation, or land a millionaire husband who was lured by your perfect eyeshadow contouring, you will not make money out of it.

Good debt still has to be carefully managed, as there are risks associated with borrowing. For example, if the value of the asset you bought goes down, it can create issues. But when used well, leverage (as debt is also known) can magnify your gains.

I’m not saying all rich people use debt to build wealth.  I’m saying that many of them use debt strategically and with a goal in mind … not just because they can’t manage their cashflow in between paydays.

You can learn from these people by thinking about debt as a tool, not as a fallback for bad money habits.

4. They pay attention to their finances

One thing you learn in consulting is this: big clients paying $20K a month have zero shame in questioning a $25 taxi fare you’ve added to their invoice. The same goes for rich people. Just because they’re rich doesn’t mean they’re careless with money.

In fact, they are generally the opposite. They won’t begrudge spending $20 on a cocktail, but they will check their bill in a restaurant. They won’t mind spending thousands to pay an investment manager, but they will expect strong returns.

And they will ask questions. Lots and lots of questions. The more money they are going to hand over, the more questions they’ll ask.

You should do the same. Whether it’s a phone bill, a bank statement, a payslip or an investment statement, pay attention to the details. People and companies frequently get things wrong. Some will deliberately rip you off.  Get ahead of them.

And more broadly, take just as much interest in your finances as you do in the ASOS sale email or the finer points of make-up contouring.

Ultimately, nobody will ever care about your money as much as you, so you’re in the driver’s seat.

 

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.

 

3 ways the world is trying to make you poor

A lady called Jackie used to enjoy making me poor. Sure, she was one of the nicest women you could meet – a sweet, friendly mother of a young son. But she fed my addiction.

Every three weeks, I gave her an hour of my life and $35 of my hard-earned money.

You see, Jackie was one of the best acrylic nail technicians in the city. And for a couple of years, I was addicted to the long, colourful nails she gave me. I reckon I spent around $1200 before I wised up and ditched them.

My nails were really fun. Did they improve my life in any meaningful way? No. Did they attach me to an ongoing cost? Yes.

And this is one of the many ways we piss our money away. Locking yourself into recurring costs is a dangerous, because what becomes regular becomes normalised.

You forget to question it. You assume that you need it. You shape your life around those costs.

And this is one of the ways the world conspires to make us poor. Here are some more.

Micropayments and subscriptions – A useful exercise is to go through your bank statements and review all the monthly deductions. It’s amazing how it adds up.

I have Netflix and Stan (I know, excessive, but I am obsessed with The West Wing and it’s only on Stan). So there’s $264 a year. Then Spotify – $144. Dropbox comes to $156.

What seem like little amounts add to more than 500 bucks a year.

This isn’t breaking the bank – but is it necessary? I reviewed the first three and decided they are all integral to my life (West Wing is life). But Dropbox has barely anything stored in there, so why am I paying?

This is the kind of review it’s useful to do every 3-6 months. Where can you cancel and trim?

And if anyone is subscribed to those awful ‘Bella Box’ kind of services – sorry, but you are being ripped off. Signing up to pay for shit you don’t need and didn’t pick – every month – is like standing under the shower cutting up ten-dollar notes. Please, cancel that shit now.

The loyalty tax – We often pay more to stay loyal to insurance, phone and energy companies. They assume once you’re in, you’ll be too lazy to switch. They’re often correct.

But not the Fierce Girls! When they send you a renewal notice for insurance, get a couple of quotes elsewhere. You can use comparison websites like Finder.com.au or Mozo.com.au (not an endorsement, just telling you they exist).  Although speaking to individual companies can sometimes get you a better deal, in my experience.

Energy companies are generally awful so I recently signed up to Power Shop, which is kind of the Uber of the energy retailing sector. And it has green energy options, if you care about that. Check it out here and if you want to switch, you could always use this link and I’ll get a discount. (Like, only if you want to. No pressure.)

When my phone comes off plan in March, I will drop to a cheaper ‘BYO’ rate, because I can. Even if it means having an old phone for a while.

I recently changed health funds, because for around the same price I can get full gap-free dental instead of some half-arsed rebate. That will save me a few hundred dollars a year.

Seriously, spend a bit of time doing this type of hunting, and you will save a lot over time. My home-girl Nicole Pedersen-McKinnon has a great article about this.

Credit card minimum repayments and balance transfers – A piece in the SMH last week said that “[e]conomists have found the minimum payments that appear on monthly credit card statements act as an “anchor”, causing many consumers to pay off less debt than they otherwise would – and should.”

If you are paying the minimum, or close to it, reconsider. Where can you cut and trim costs (see above) to increase the repayments?

In an earlier post about good and bad debt, we all agreed that credit card debt is top of the ‘bad’ list (ok, maybe loan sharks are worse, so stay away from men with bad hair and bodyguards).

Is it a viable solution to get a new card with a no-interest balance transfer? Yes and no.

Yes if you have worked out a detailed plan to pay off that amount within the interest-free period.

No if you have just transferred and hoped for the best. Good intentions are not an actual plan.

And don’t even think about spending any more on that card, because that stuff will NOT be interest-free. Choice has a good article about these products here.

But really, if you can’t afford it, don’t buy it. Credit cards can be good for short-term cashflow issues but they are not your friend long-term. I know you know that, but just thought I’d say it again.

And what about Afterpay? I’ve seen this available with online retailers lately. It’s like a lay-by, but you get the item immediately. Then you have a payment plan: for example, pay off a $200 dress in four separate payments over a couple of months.

Because I love you, and because it’s growing really fast, I’ve looked into this service (I even read their prospectus, since they are listing on the stock exchange soon). Here are my thoughts.

Pros – they don’t charge interest – in fact they can’t, because they don’t have the right license from the government (yet). So it’s much better than using a credit card. The company makes money by charging retailers, who are happy to pay because it makes you more likely to buy their stuff.

Cons – it makes you more likely to buy stuff. It’s behavioural economics: we are more likely to spend money when it’s less painful, so four $50 payments feels so much better than dropping $200. Hello, shopping cart!

So, if using Afterpay makes you spend more, stay away from it. If you’re disciplined and it doesn’t change your buying decisions, it’s not a bad idea. (Let’s be honest, though, who is that disciplined?)

There you go Fierce Girls, go forth and save. Or don’t. Just stay Fierce.

Photo credit: Zhao

Hamlet explains: what is a F.U.F and why do you need one?

Sorry I’ve been a bit quiet, Fierce Girls. I have been in that particular hell they call ‘moving home’. And not just moving, also setting up a new home. Buying whitegoods, picking internet providers, assembling Ikea furniture – the lot.

You see, when my marriage ended, I moved in with an awesome flatmate who already had her own sweet apartment set-up. So I just brought my extensive collection of shoes, clothes and Tupperware and slotted right in.

Two years later, she has a bunch of stuff going on that led her to pull the pin on our Bachelor-watching, wine-drinking, bitching-about-men sorority house.  And so, I decided it’s time to act like the adult I am, and get a place on my own.

But the last time I lived on my own was literally 1998, so I had a lot to organise and a lot to spend.

Which brings me to the Fuck You Fund (aka Fuck-Off Fund, depending on circumstances really. And sorry if you don’t like swearing – best not read ANY of this site). I always knew I would need to set myself up at some point, so I had mentally budgeted for it.

But still, it’s hard pulling together a month’s rent upfront, a higher bond payment than your old one, funds for furniture and appliances, and money for Burgers Anonymous, which is totally in walking distance and serves the best loaded fries EVER.

Luckily I managed it, admittedly with a little help from the old parentals, because I like to let them show their love that way.

And here’s the lecture part. I knew I’d need to do this all at some point, but I never knew when. To be honest, my flattie sprang the whole thing on me. We are good friends, but she had shit going on that I didn’t know about. So one day, I am living it up in Darlinghurst and the next, I am chilling in Surry Hills (admittedly, about 1.5km away).

And that’s the exciting but fucked-up part about life. You just never fucking know.

You never know when your partner will declare they are leaving you (just ask my ex, who swears it was a surprise).

You never know if you’ll lose your job to a round of redundancies (like a mate of mine earlier this year).

You never know if you’ll be diagnosed with cancer in your thirties (I lost an old friend to the disease, just a few days ago).

You never know when your top-floor apartment will be flooded and ruin all your stuff (happened to a friend last week).

Life is heartbreakingly unpredictable, and all we can do to guard against it is buy insurance and save our pennies. As Hamlet said, ‘the readiness is all’.

So the F.U.F is partly to let you leave a situation of your own accord, but it’s also a buffer against the slings and arrows of outrageous fortune (a little more Hamlet for you).

How much do you need in your F.U.F?

Well, how much ya got? No seriously, there is no magic number – some say three months’ salary, but that seems very ambitious. Just try and put aside some of your salary every pay, in a separate account, that you can’t see or touch as part of your normal banking (so, ideally, a different bank).

Still paying off a credit card? Then do that first. Keep a few hundred around in cash, but you need to get rid of that expensive interest-bearing debt first. Please do that, Fierce Girls. Like, with a payment plan and stuff, not a vague intention.

So, no complicated investment lessons today. Just a reminder that nothing is permanent, life is a total shit-show, and all we can do is save, plan, insure and laugh about it all.

Photo credit: Bill Dickinson

Just do one thing: A Fierce Girl Action Plan – Part I

Money is tricky. Debt is distressing. Saving is hard.

And so the easiest thing to do is not think about those things. Sort them out another day. Leave them to your responsible future self.

Unfortunately that future self has all the same flaws as your current self. Damn it!

So there is only one thing to do. Start Now.

“But where do I start? What can I do that will make a difference?”

Well, I like to take life advice from everybody’s favourite nun-turned-governess, Fraulein Maria. She says, “Let’s start at the very beginning”. And I think we can all agree that is a very good place to start.

Financial triage. You know that mean nurse at the hospital emergency room, who decides you wait four hours and that dude goes straight in? That’s the job of the triage nurse: to work out who is most likely die, and who is just there because their arm hurts.

You can do this with your money too. There is no perfect order, and you can do some of them at the same time, but a useful road map will look something like:

  1. Have an emergency savings stash
  2. Insure your most valuable asset
  3. Sort your super
  4. Pay off ‘bad’ debt
  5. Pay off ‘good’ debt
  6. Save for fun stuff
  7. Invest

We will look at each one in separate articles, because there is a fair bit to cover. But here are the first two. And I promise if you spend five minutes reading about insurance, we shall never speak of it again. 

(Well, not promise, as such…)

Emergency savings – This is money you can call on if you lose your job, have an accident, your fridge dies or you suffer any number ofthe disasters that befall us in this crazy little thing called life.

The right amount is different for everyone. If you have a direct line to the parental back-up system, you can get away with less. If you are really doing this adult life thing on your own, then you need at least a month’s salary – preferably three.

You can put it in a plain old bank account (ideally a different bank to your everyday banking, so you don’t see it all the time and mentally spend it on fun things).

Or if you have a mortgage, put it in an offset or redraw facility, so it reduces the interest you pay.

How do you save this amount? Basically, you spend less. Amazing, I know. Check out this post for some tips.

Insure your best asset – No, not like J.Lo insuring her butt. This is about insuring yourself and your earning capacity.

Boring, I know. But like cleansing and moisturising on a daily basis, insurance is a dull but necessary part of life. So what do you need?

Life insurance – it’s up for debate, but my view is that this is mainly needed if other people depend on you and your income. i.e. if you have kids, or you have a mortgage with a partner. If you’re single or your partner looks after himself/herself, having life insurance is kind of like being on the pill when you aren’t getting any action – a bit of a waste.

HOT TIP: You most likely have some life insurance already, because it comes as a default in super funds. Yes, you are probably paying for it RIGHT NOW. And if the only one who needs your money once you’re dead is the drycleaner, who has half your wardrobe waiting to pick up, you may consider opting out (which you totally can).

TPD – This is for total and permanent disability. Like serious Million Dollar Baby stuff.  You get a payout if you are very seriously buggered up and unable to work ever again. That doesn’t mean ‘I fucking hate my boss and also I hurt my back’. It means you are very, very disabled. Usually physically – it’s often hard to prove permanent mental disability.

Again, this is usually a default option in superannuation, and I would argue it’s better to keep it. If you were, God forbid, in a position to need it, you would be really glad to have it. You may even want more than the default amount.

Trauma – similar to the above, but a lower bar to qualify for it. Say you’re in a really bad car accident and can’t work for months, this will help tide you over and pay for all the crazy costs. It’s generally not included in your default super, so talk to a financial adviser, insurance broker or insurance provider about whether it’s for you.

Salary Protection – This is the underloved but very useful member of the insurance family. Say you’re diagnosed with aggressive breast cancer at age 30 (as happened to a friend of mine. No, not Kylie Minogue, an actual real life friend). You have to take six months off work. How do you live? You can’t rely on social security – that shit is hard and slow to access – you will legitimately be living on the streets if and when you ever get a dollar from the Government.

So, unless you relish the thought of cancelling Netflix, drinking Nescafe and taking goon to dinner parties (uni life!) take a good look at this option. You can often get it through a super fund, where  it comes out of your super payments, but you normally have to ask for it. If you get it outside of super, the premiums are even tax deductible. I once had it covered by a generous employer.

You can get a cheaper version, where you get paid out for two years, or the fancy one where it goes until you’re 65. You can also choose how long it takes to kick in (1 – 3 months usually) and that affects the cost.

But the key point here is: think about getting it.

Health Insurance – Look, the public health system isn’t going to let you die just because you don’t have insurance. But you might have to share a room with a loud, weird or stinky person if you’re in hospital. You might have to wait a couple of years for knee surgery, with really painful knees, instead of having it on-demand. You might not be able to afford IVF if you ever need it.

It’s a lifestyle choice. I personally hate paying it, but do it anyway, because I can afford it and, as my ex-husband once said ‘I’m obsessed with insurance’. (Ha! As if! I don’t even know anything about it!).

But don’t be afraid to shop around for a better deal. I used comparethemarket.com.au to do that, because I like the meerkat. But you could try iSelect or other comparison sites. (HOT TIP: these are free to use, because the winning insurer pays the site a commission).

What’s all this stuff about superannuation? Well by some quirk of history, your retirement savings have become wrapped up with insurance. You generally get allocated default Life & TPD insurance when you join, and pay from your contributions. Salary protection and trauma can be paid the same way but you normally have to request them.

Now, you are under no obligation to use your super fund’s insurance (although it can be handy). You can buy any of these products directly from an insurance company. I’m not here to tell you one is better than the other – just make sure you have looked at what you have.

The bottom line

 The action points around this are:

  1. Check your superannuation statement, (or call your fund,  because I know you can’t find it). Find out what insurance you have, and how much you’re paying for it.
  2. Work out how much you need and where the gaps are. MoneySmart has some good stuff on this. Financial advisers and insurance brokers are also helpful. Australians are generally underinsured, but you may be overinsured too, if you don’t want life insurance, for example. Or, if you have multiple super funds, you could be paying for several life insurance products. Sort that shit out now. Please.
  3. Shop around for a better deal on existing insurance by using a comparison site. But if you do this, make sure you read the fine print, to make sure you’re not giving up something you need. Yes, reading the fine print is an important adult skill!

So, there you go, insurance is “Simples!”

meerkat

Disclaimer: I’m not a financial adviser and this isn’t finance advice. If you think you need professional advice, speak to your super fund or an adviser.

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