Money School

Breaking up is never easy, especially when it comes to sorting out the finances. It's a topic we often avoid, but being financially prepared can make a huge difference.

In a powerful conversation with Philip Clark for - Sydney, Lacey discusses why budgeting before a relationship ends can help you manage your life better.

🎧 Listen to the full segment or jump to the second-hour now https://ab.co/43x0Jzv

If you can see her, you can be her.

This article from Lucy Dean at Yahoo Finance Australia shares an example of someone who's become a successful investor despite knowing very little about investing to start with: https://yhoo.it/485O5KN

'Filipich, who bought her first property at 19 and grew up financially savvy, had similar advice: “Investing is actually a little bit like driving, in that the more practice you [have], the easier it gets.”

The first time you need to merge across three lanes, an accident happens up ahead, or you need to enter a highway is always terrifying. But over time, you’ll grow more comfortable and confident.

And the only way to learn to drive is to get behind the wheel.

“I hope people think about it as being a skill – it's not as hard as it looks,” Filipich said.

“The mechanics aren’t hard. It's about having that map: where are you going and how do you want to get there? Once you've got that it, becomes a lot easier.”'

Q. Is a bad investment?

A. Short answer: no.

Long answer: there is nothing inherently wrong with property investment, it's just a different value creation mechanism from .

Shares create value through businesses that take raw materials and make products and services to sell.

Property creates value by having dwellings available for rent and because developable land in desired areas gets scarcer each year.

Both can be fabulous investments.

Both can be terrible investments.

The devil's in the detail, and which share or which property you buy matters.

Where property DOES have one major downside over shares is debt.

It's unlikely that most of us can save enough cash to buy an average property outright - most of us will need a mortgage. It's that leverage that can create wealth quicker than via shares, but can also create headaches and bankruptcies if property prices go down (and they do at times).

You can buy shares outright with cash and not ever have to use debt, though debt is available via margin loans - not my favourite tool.

There's also huge transaction costs associated with property such as stamp duty, agents fees, conveyancing - and property has ongoing costs like insurance, rates and maintenance. I've never had a company I own shares in call me to say the water heater needs replacing, for example.

Even with all those extra risks and downsides, calling property a 'bad' investment as an entire asset class is, frankly, a sloppy generalisation and signals a lack of understanding.

Whenever someone says one or the other is a bad investment, you don't usually have to dig too deep to find a horror story in their past where that type of investment has gone drastically wrong for them or someone close to them.

Here's some tips for first-time property buyers, so you're less likely to make a mistake: https://bit.ly/4u2qnH2

*** This question came up in the most recent seminar. It's the fourth time Lacey has delivered the 'Securing your financial future' session for Future Women and, as always, the participant questions were fabulous! Thanks to all who attended.

I don’t like blanket rules, including:

‘Save 20% of every dollar you earn.’

*** For some, 20% is way too high. ***

One in seven Australian adults is living on or below the poverty line.

Asking someone who doesn’t live with their parents and earns less than $500 a week to save anything - let alone 20% of their income - is usually ridiculous.

Sometimes, there’s too much month left at the end of the money, and that’s just the way it is.

If you can’t save right now, that's okay. Consider it a temporary situation.

One day, you’ll earn enough money to cover your basic living costs, and then you’ll earn a bit more and suddenly you’ll have the capacity to start saving.

Until then, don’t beat yourself up because someone set a blanket rule about 20%.

*** For others, 20% is way too low. ***

To qualify for the Savings Olympics, you’d need to hit at least a 70% saving rate.

That’s 3.5 times more saving than the 20% blanket rule.

My measly 50% rate probably wouldn't get me further than state championships, and even then I’d be lucky to medal.

When you can (a) earn a lot of money and/or (b) live on very little, you can save like a demon - and it would be worth considering, as it’ll get you to financial independence in a fraction of the time it’d take someone saving 20%.

Don’t take the easy route of 20% if you know you can save more.

*** So, what’s the right number for your savings rate? ***

There isn’t one.

There’s only what works for you.

Whether it’s 5% or 95%, your savings rate is just fine, so long as you’re happy with it and can sustain it.

I encourage you to be ambitious with your target, as you can always get money out of savings if you find yourself eating baked beans on toast seven nights a week. Once it’s spent, it’s gone.

But resist blanket rules like this one.

Whoever came up with that rule doesn’t know you or your circumstances. They can’t make that choice for you.

With the floods of newbies jumping into the stock market for the first time in 2020, you can be forgiven for wondering what you’ve been missing.

Maybe you’ve been held back from joining them by the two questions that stop would-be share investors in their tracks:

1. How do I buy shares in general?
2. Which specific shares do I buy?

The process to buy a share listed on the Australian Securities Exchange (ASX) is straightforward:

- You set up a trading account.
- You place a ‘Buy’ order for the shares you want.
- If your order gets filled, you pay for the shares and they are transferred into your name.

I’ll walk you through how to get set up for trading ASX shares in this article.

Read the full article on Kidspot at https://bit.ly/4pgt9pc

Natalie McGrath is the founder of JOSO Co, a natural medicine supplement range, that attended Curtin Ignition in 2020 when I taught the financial accounting module.

So thrilled the book can support entrepreneurs in their business adventures! Thanks Natalie :)

'Money School is my bible that I keep on my desk. It has sticky notes poking out everywhere.

Reading this book has answered so many questions I have had for years that no one else has been able to answer for me.

Lacey explains complicated financial concepts simply and clearly.

Money School is an essential resource for everyone.'

Want to get the lowdown on Money School's favourite resources that are cheap or even free to access?

📚 Sign up for our newsletter and get instant access to our exclusive eBook! https://www.moneyschool.net.au/

Does this sound familiar? Your friends always want to do things that cost a lot of money, and you're struggling to keep up 😬

In her latest article, Lacey offers her expert advice on how to handle friends who pressure you to spend money.

🔗 Read the full article for Lacey's tips on how to say no without ruining your friendships. https://bit.ly/3IyNRBx

Q. How much extra should you (voluntarily) contribute to your superannuation?

A. There are no right or wrong answers here.

Firstly, if it's a choice between spending that money on something you don't need or putting it aside for , I'll always say - so more money to super would be preferable to more spending money. If your income is more than your expenses, put that extra into super, up to the contribution caps for tax effectiveness.

BUT:
..if it's a choice between putting extra into superannuation or investing it outside superannuation, the answer is far from clear-cut.

The tax implications matter. If you're earning more than the tax-free threshold, putting the money into super means more money kept versus paid to tax, as long as you're under the relevant contribution caps. So, on the surface, money into super is usually the winner on $ alone.

However: do you want to lock that money up till you reach retirement age?

Because I'm a diligent investor, I still prefer to pay the extra tax and take the cash to invest in assets outside super most of the time, because I like to have the benefits of that cash - passive income - now rather than wait for retirement.

Ah, personal finance - it's so personal, right?

Here's some more food for thought on this topic, to help you decide: https://bit.ly/4vwtuIP

*** This question came up in the most recent seminar. It's the fourth time Lacey has delivered the 'Securing your financial future' session for Future Women and, as always, the participant questions were fabulous! Thanks to all who attended.