June 10, 2025 • 22 mins
Sometimes it's the little things that can have the biggest impact on our money. Join Canna Campbell - a financial planner for 20 years - and Fear & Greed's Michael Thompson as they identify three financial secret weapons: simple changes that could make a massive impact to your financial future.
The information in this podcast is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.
Canna Campbell is a Corporate Authorised Representative and Corporate Credit Representative of Wealthstream Financial Group Pty Ltd ABN 35 152 803 113 Australian Financial Services Licensee AFSL 412079.
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to How Do They Afford That, The podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed business news. As always, I'm with Canna Campbell,
financial planner and founder of Sugar Mama TV, the financial
literacy platform covering YouTube and podcast, books, Instagram threads, TikTok
and more. Hello Canna.
Speaker 2 (00:21):
Hello.
Speaker 1 (00:22):
Over the last few years of doing this podcast, you
have mentioned a bunch of things that can have a
really kind of significant impact on your financial freedom and
your financial future, things that probably haven't almost an outsized impact,
like bigger than you would expect right on the potential
(00:45):
few to have financial freedom into the future. But in
some cases they might be things that you overlook. They
might be things that you ignore, perhaps intentionally because you
think it might be too hard, or that you don't
realize just how important it could be and how much
of a difference it could make. So today that was
(01:06):
a big pause, was it? I was building the dramatic tension.
I wanted to put together a list of your top
three financial secret weapons, the things that people may not
realize that just by making a few simple changes, you're
going to actually have a massive, massive benefit on your
finances into the future. Are you up for that?
Speaker 2 (01:29):
I am, because it sounds like a very efficient effective discussion.
Speaker 1 (01:35):
It will be, It certainly will be. Before we get
into the efficient and effective discussion, just need to mention
that everything we talk about is always general in nature.
They have a personal investment, strategic or product advice purely
for financial education purposes only. And if you hear something
that you think, actually, maybe that works for me, then
you should seek some professional advice to get some advice
that is specifically relevant to you. Number one pound interest.
(02:02):
I made that sound quite kind of dramatic. Dramatic, right,
But this is one thing that you have mentioned this
so many times in the past, just about the long
term effect that it can have.
Speaker 2 (02:13):
What is it first, So, it's when your money is
working for you because you're earning interest upon interest, and
over time, it can actually help you accumulate a large
amount of money where your money has built that money
for you, rather than you having to always contribute.
Speaker 1 (02:31):
So it's the power of time, isn't it. Yeah, It's
like that time really is one of the greatest assets
that you have. Is just why it's so valuable to
get into it early, because of this power of earning
interest on interest on interest on interest, and it just
keeps ongoing and you learn about like it is one
of the things that I remember in the ten learning
how to calculate compound interest. Are we mostly talking about
(02:53):
superannuation here?
Speaker 2 (02:55):
No? It can be. No, Like super is just one
area of our life. So compounding interest applies to any
major long term investment, whether it be you know, super
online interest, to high interest, your savings account, a managed fund,
even dipit in paying shares. And if you say ten
thousand dollars at eight percent per annum net and you
(03:16):
lift it untouched in thirty years, that would be worth
just over one hundred thousand dollars. And that's without you
having to add a single cent.
Speaker 1 (03:25):
And that's without doing anything.
Speaker 2 (03:26):
Just letting it sit there untouched.
Speaker 1 (03:28):
Yeah, because all of a sudden, after that first year,
your ten thousand dollars is suddenly worth ten thousand, eight
hundred dollars correct, And then the following year it is
worth ten thousand, eight hundred plus a new eight percent,
and it just keeps on going. Did you see could
you see the panic on.
Speaker 2 (03:47):
My face like a calculator.
Speaker 1 (03:49):
I don't have my calculator that I was using in
year ten and I am at risk here two were there?
You supported me? So thank you.
Speaker 2 (03:56):
I've got your back.
Speaker 1 (03:58):
That's the long term impact, isn't it? The fact that
and that, as you say, is if you are not
adding anything to.
Speaker 2 (04:05):
It, you can do so much more when you do
regularly contribute, even if it's only a small amount.
Speaker 1 (04:10):
Okay, So that's why it matters. That's the long term impact. Right,
The earlier you start, the better it is going to be.
Speaker 2 (04:20):
Right, correct, You've got the benefit of time.
Speaker 1 (04:23):
Is there a point to which it's too late?
Speaker 2 (04:25):
It's never too late, ever, never, ever, So even if
you're starting in your forties and fifties, you can still
make a massive difference. And a great example is you know,
fifty year old investing five hundred dollars per month, again
it's a a net return of eight percent per annum.
You can still build an extra one hundred and seventy
five thousand dollars within fifteen years.
Speaker 1 (04:43):
Really, okay, Can I just talk to you then about
how practically this would work? Is that that you could
talk to your financial advisor about it and just say, look,
this is I want to make sure that my superannuation
is going to be working for me, and that you're
(05:04):
making sure that you are adding to your super because
I know that you said this isn't just superannuation. But
in most cases a financial advisor isn't probably going to
tell you just to put it all into a bank
account necessarily that's just earning interest. They might say to hey,
let's look at how we can kind of maximize the
power of your superannuation and do some additional contributions that
kind of thing, right.
Speaker 2 (05:22):
Exactly, and also looking at well, you know what strategies
are available, like such as the co contribution scheme, what
that might also help to ensure that even more money
is going into whether it be your superannuation for example, and.
Speaker 1 (05:35):
So using super as the as the example. And here,
so you've got this lump sum which is earning interest
on itself, you are then adding more to it every
single year, and so you are not just earning kind
of interest on that that that principal amount, you are
then earning it on the additional repayments or sorry, the
additional payments and edition contributions into it, and it's just
(05:56):
getting bigger and bigger.
Speaker 2 (05:57):
Yes, you've got to make sure obviously it's invested in
all alignment to your risk profile.
Speaker 1 (06:02):
Do you think people overlook that? Do you think they're
just I remember about ten years ago, sitting down and
figuring out just doing a very basic calculation, going, oh,
I really like watching my superannuation going up. I think,
and these are my contributions I'm making. If I was
(06:24):
to not make any additional contributions from now until the
until I retire, how much would that would that be worth?
And I just did it on a calculator. I took
the amount that was in my souper at the time,
and I just took it as being I think it
was like say six percent or seven percent, and so
I just did times one point zero six and then
(06:45):
I was hit equals equals, equals, equals equals equals, and
just each one of those was another year. And it
was the most fun I've ever had with a calculator,
just watching it go up and up and up and
up and up, and I'm like, that's compound interest right there.
Speaker 2 (06:58):
It's so empowering, isn't it. Yeah, that is why I
call super sexy.
Speaker 1 (07:02):
Have I ever sounded more dull than just then?
Speaker 2 (07:05):
But can I take your dullness to a new level please?
So if you'd really like to get amongst it, you
can jump on the sugar on my website, and I
have all these free calculators, including a superannuation calculator that
can show you what your superannuation could potentially be worth
if you do nothing, and if you do a super
(07:26):
contribution strategy like sorry sacrificing, you can actually see it grow.
But I have also, this is really important, got the
impact of inflation. So you can see what the actual
you know, say comes up with five million dollars, You'll
see what that five million dollars is the equivalent of today.
So it helps put things into perspective.
Speaker 1 (07:44):
Okay, God, we are boring, aren't we? When you have
just said if you really want to get amongst it,
go and check out my calculators, and I actually thought,
oh that sounds all right.
Speaker 2 (07:55):
And it's free if anyone can access it.
Speaker 1 (07:57):
Music to my ears. Okay, that's compound interest. That's number
one your first financial secret weapon. One of three. We
have two more to go. Number two mortgage repayments. So
this one right, With interest rates obviously can go up,
they can go down, and with it go your mortgage
(08:19):
repayments alongside that, Just how important is it? And I
know the answer to this, but I'm going to ask
you anyway, just how important is that if you can
to keep your mortgage repayments the same when interest rates
go down, it.
Speaker 2 (08:36):
Is incredibly important. It means that your mortgage is being
paid off faster, which could potentially save you tens of
thousands of dollars in interest over time, but it could
actually help build almost like a safety buffer for future
rate hikes. So yeah, rate hikes. So again, there are
free kkllers on sugar my website. You can actually see
(08:57):
exactly how much time and money you'll save. When I
say tens of thousands of dollars, I'm being serious. In fact,
it could actually be over one hundred thousand dollars in interest.
But here's a little little catch with interest rate cuts,
not all banks necessarily automatically reduce your repayments. Some do,
(09:17):
some don't. So some people will find that with interest
rate cuts their mortgage your payments have naturally gone down,
But not all banks do that for you, So sometimes
you need to go and manually increase it back up
to what you were previously paying. If you're someone who
wants to try and keep maintain their mortgage re payment.
Speaker 1 (09:32):
That was going to be my next question for you,
kind of whether banks or your lender, whether they make
it easy to do this. And I know that with
my bank that I have my homelan with, I receive
a notification saying, look, interest rates have gone down, we
have reduced the minimum weekly payment that you need to
be making. However, we will leave your repayment at the
(09:56):
same amount that you are currently paying unless you otherwise
tell us. And that's perfect. That's great because it just
kind of pushes you, by a default, into a better
financial situation further down the track.
Speaker 2 (10:09):
It's so interesting to say it because I feel like
for a lot of people, they if they're not aware
of this, they run into the lifestyle creep where their
mortgage repayments come down and now they've got saine extra,
you know, one hundred dollars per month to spend, and
not knowing that the bank have dropped it automatically, they
then spend that one hundred dollars per month when really,
if they could afford to maintain it. That would be
(10:31):
so much better for them financially over the long run
because they could be saving serious time and money.
Speaker 1 (10:36):
Yeah, and the time part of that is interesting because
it is not just the fact that you could save
tens of thousands of dollars. You can be mortgage free
a few years earlier, oh.
Speaker 2 (10:46):
Like you know, four years, So on a five hundred
thousand dollars mortgage at six percent, if you can keep
your repayments that the same after a one percent inter
straight cut, you could save over seventy thousand dollars in
interest and reduce your loan term from thirty years to
twenty six years. Imagine being mortgage free four years earlier
in life.
Speaker 1 (11:05):
That's actually four years of financial freedom.
Speaker 2 (11:08):
Yeah, that's money that you can use to invest, you
can use to have an earlier retire four years earlier.
Even like it gives you so many more choices, which
is really what financial freedom is really about, time and choice.
Speaker 1 (11:21):
Okay, as a financial secret weapon. Do you think that
that again, not enough people know about the power of this,
that that just this little change, because we are talking
today about little things that you can do, little changes
that you can make that just by keeping your repayments
up when rates are cut if you can afford to
(11:42):
do so, and even then further, if you can afford
to do pay a little bit more off on top
of that. Just the massive, massive effect that has long.
Speaker 2 (11:51):
Term, absolutely, and this is the power of almost reverse
compounding interest. So the biggest and best impact you can
make in saving the most amount of time and money
with the smallest amount of money's actually in the first
couple of years of taking out your home loan. So
you want to jump on this and see what you
can do sooner rather than later. But again, there are
free calculators everywhere to show you this, and again the
(12:12):
Sugar Mamma website has these there for you where you
can plug in all your information your loan, the interest
rate you're paying, how far into your homelan, and what
you can You can play around with the variables and go, well,
what if I put an extra twenty dollars per month
or an extra two hundred dollars per month, You will
be blown away And it is a great source of motivation.
Speaker 1 (12:32):
And paying a little bit extra doesn't mean that the
money is actually kind of lost to you as well,
because of the power of redraw facilities and offset accounts
as well, depending on your arrangement that you have with
your bank.
Speaker 2 (12:44):
Yes, so more would you? I get asked this question
all the time. The difference between the two. They have
the same effects. So a redraw facility is money that
you put on your home loan, but if you need to,
you can take it back out. So say I have
a five hundred thousand dollars home loan, I make extra payments,
builds up in there, and they say twenty five thousand.
I'm only being charged on the interest on four hundred
(13:05):
and seventy five thousand instead of five hundred because it's
in the redraw facility, and if I need to access it,
it's the redraal facility switched on. I can get it
back out. And this is why I say to people
who have your emergency money sitting in a redrawor an
offset account rather than a separate online savings account. An
offset account works in the same way. So financially they're
not any better than each other, just different people, different needs.
(13:28):
So if I have twenty five thousand dollars sitting in
an offset account such as my emergency money, and I
have a five hundred thousand dollar homeland, same principle, I'm
being charged interest on four hundred and seventy five thousand
rather than five hundred thousand. And again, you can find
offset and redoor facility calculators online which will show you
exactly how much you can really save.
Speaker 1 (13:49):
Okay, that is two financial secret weapons compounding interest, mortgage repayments.
We have a great one coming up as number three,
but I'm not going to tell you what it is yet.
We're going to take a very quick break and come
back with the third financial secret weapon. Can We are
(14:12):
putting together a list today of three financial secret weapons.
These are things that so far they've been things that
you can just make small changes and it will have
a massive effect on your financial future and financial freedom.
Number three on the list is one that you have
(14:33):
talked about quite a bit, but it feels as though
not enough people know about the potential here for passive income.
Take us through it.
Speaker 2 (14:47):
So I like to call passive income money that you
earn whilst you sleep at night. It is not about
making complicated investment decisions, trading online, jumping in and out
of stocks. It is not about selling a program or tupperware.
It is not about you know, having to pitch something.
(15:08):
It literally is you could go to sleep for a
year and wake up and your money is working for you.
Examples of passive income are earning rent off an investment property,
earning dividends from shares, which is my favorite source of
passive income, even earning interest from bonds or savings accounts.
You haven't physically done anything to earn that money. It
(15:29):
is your money working for you. Haven't have to go
to work but on a suit. It's in front of
a computer screen, touch something, sell something. It's the key
to financial freedom. The more passive income we have, the
better our financial wellbeing.
Speaker 1 (15:43):
Really is, do you need to talk to a financial
planner about this? Feels like the basis of a conversation
that when you sit down with a financial planner for
the first time and you're going through your goals, that
perhaps not enough people are actually putting this down as
one of their goals, that hey, I would love to
have passive income. I would love to be earning money
(16:04):
while I sleep.
Speaker 2 (16:05):
I have done other podcasts on Sugarmum's fireplay about isn't
when people will get stuck as to what can they
have as a financial goal Obviously your goal should excite
you and empower you. But a great goal everyone should
have is a goal for passive income. And ideally you
want to build up enough passive income that covers your
living expenses, so you don't work by force, you work
(16:27):
by choice.
Speaker 1 (16:30):
Where does it come from? Passive income almost feels like
the end result here that you've got to build up
to it through some smart decisions early on, whether it
is about buying an investment property or whether it is
about building an investment portfolio shares that are paying dividends
and that you're able to earn money off those. It
(16:52):
kind of feels like it's the end result rather than
the way to get to it. How do you get
to it? That's probably big question to answer in one episode,
But how do you get there? What's the kind of
where does this money come from? To build this? Well?
Speaker 2 (17:07):
There are lots of different strategies and look, you know,
for people who don't have the ability to start necessarily
investing today, what I would recommend they do is turn
their attention to their superannuation because that is essentially an
investment portfolio is just locked away. That is the passive
income that's going to fund your retirement, So make sure
it's invested correctly, make sure it's invested to your risk profile.
(17:28):
You've got some goals behind it, and you understand how
it works, the nuts and bolts, and what you need
to do to help it grow. And you know, superannuation
is just one facet of financial freedom. You know, when
you're in a stage in your life where you can
look at investing, it is a great idea to sort
of have two strategies going in place, but again, speak
to a financial planner because one may be more efficient
than the other depending on where you are in your
(17:50):
life cycle and cash flow and so forth.
Speaker 1 (17:53):
Do you see people that are and you have worked
with a lot of clients over a long period of time,
do you see people where they get to a point
where they are able to live off passive income. Absolutely,
because that to me feels like an incredible goal.
Speaker 2 (18:09):
Yes, and it is. I can't tell you what it's
like to see it and be part of that journey
and what should get to that point where clients couldn't
even spend all the income that they were earning, and
so their wealth just continued and continues today to keep
growing because they just they can't possibly spend all the
income that they've built over time through sticking to a strategy,
(18:32):
getting advice, following advice, listening to advice, applying it, and
not getting caught in market fluctuations and emotional knee jerk
reactions decisions. They've let it do its thing, you know,
let compounding interests work for them, and those people look
so much happier and you know, enjoying incredible lifestyles.
Speaker 1 (18:52):
Now, it's worth probably pointing out that all of those
components that you mentioned, kind of investment properties, building share
portfolios and things, we've done separate episodes on all of those.
So if you go back through the back catalog of
episodes of How Today Afford that you will find kind
of guides to each of those elements. But you kind
of put it together and the potential of having passive income,
(19:14):
earning money while you sleep, and that one day that
could even be enough to be your primary source of income.
Speaker 2 (19:21):
Wow, but also can be a legacy as well.
Speaker 1 (19:24):
True.
Speaker 2 (19:24):
You know, if you're safe for simplicity, you have an
investment portfolio pays you one hundred thousand dollars a year
and you only need eighty to live off. You know,
there's it's obviously a surplus that can continue to grow.
But also when you pass on, you might want to
donate that to a charity, and that gives a charity
one hundred thousand dollars a year.
Speaker 1 (19:42):
And that can continue to be the case, rather than
just donating a sum of money that you are actually
helping to set them up as well.
Speaker 2 (19:48):
Exactly so, and I'm going to completely contradict myself. You
can skip the passive income story if you want. I
don't recommend it, but you know, so I need to
obviously be completely open about other options because passive income
doesn't appeal to some people. You know, there is a
component of the fire community that's very much built focused
(20:10):
on building up a lump sum and in drawing it
down over a period of years.
Speaker 1 (20:17):
So fire is financial independence retire really.
Speaker 2 (20:20):
So I've seen strategies with people who've saved and you know,
built up say an investment portfolio, not sorry, a lot
some amount of money, say a million dollars, and they
just draw fifty thousand dollars a year to live off.
Now that is not passive income. They're eating into the capital.
The concerns and the dangers with this is with inflation
(20:41):
over a ten twenty year period, can see that million
dollars erode away very very quickly. And then what do
you do when that money runs out? You're back to
square one again. If you can have even a small
component of passive income and yes, that million dollars might
be earning some interest, that will help slow it down
and give you more long GeV with that financial independence.
Speaker 1 (21:03):
I reckon we have got some great ones today. That
is three financial secret weapons that is terrific. Number one
compound interest. Number two mortgage repayments and the power of
keeping your repayments up and perhaps paying off a little
bit more, and passive income. That is terrific. Are you
Are you satisfied that these are financial secret weapons that
(21:26):
not enough people know about? But maybe after today a
few more people will yes.
Speaker 2 (21:30):
And to make this even more powerful, please invest time
jumping online looking at visual calculators so you can see
the numbers for yourself. You can look at your situation,
what is capable within your budget and your financial responsibilities,
and see what you can actually do for yourself and
get you most gamified. Because you're like, oh, I wonder
if I could squeeze extra twenty dollars per month in
(21:51):
my budget to put that towards my mortgage. Seeing what
those numbers do, it is the perfect source of motivation
inspiration to try and make that happen.
Speaker 1 (22:00):
Yeah, I'll just go back to me playing with my
calculator and figuring out my superannuation. Just equals equals, equals,
equals equals. It was so satisfying watching those numbers go up.
Speaker 2 (22:09):
Well, go and have a look at play around with
the Sugar Mama website because you can actually see it
in a visual way with lots of pretty colors.
Speaker 1 (22:15):
Yeah, but you don't get to hit the equals button.
It's physically just whack, whack whack. Anyway, that was a
weird way to finish up. Can If we need more
information from you, where do we find you?
Speaker 2 (22:27):
The best place to get in contact with me with
any of your questions is through Sugar Mama TV on Instagram.
Speaker 1 (22:32):
And remember you can hear me every day with Sean
Aylmer on Fear and Greed daily business news for people
who make their own decisions. Thank you for listening to
How Today For that, remember to hit follow on the podcast.
And the best thing you can do is tell somebody
else or perhaps send them this episode and spread the
word about how today for that, thank you for your company.
Join us again next week
Welcome to How Do They Afford That, The podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed business news. As always, I'm with Canna Campbell,
financial planner and founder of Sugar Mama TV, the financial
literacy platform covering YouTube and podcast, books, Instagram threads, TikTok
and more. Hello Canna.
Speaker 2 (00:21):
Hello.
Speaker 1 (00:22):
Over the last few years of doing this podcast, you
have mentioned a bunch of things that can have a
really kind of significant impact on your financial freedom and
your financial future, things that probably haven't almost an outsized impact,
like bigger than you would expect right on the potential
(00:45):
few to have financial freedom into the future. But in
some cases they might be things that you overlook. They
might be things that you ignore, perhaps intentionally because you
think it might be too hard, or that you don't
realize just how important it could be and how much
of a difference it could make. So today that was
(01:06):
a big pause, was it? I was building the dramatic tension.
I wanted to put together a list of your top
three financial secret weapons, the things that people may not
realize that just by making a few simple changes, you're
going to actually have a massive, massive benefit on your
finances into the future. Are you up for that?
Speaker 2 (01:29):
I am, because it sounds like a very efficient effective discussion.
Speaker 1 (01:35):
It will be, It certainly will be. Before we get
into the efficient and effective discussion, just need to mention
that everything we talk about is always general in nature.
They have a personal investment, strategic or product advice purely
for financial education purposes only. And if you hear something
that you think, actually, maybe that works for me, then
you should seek some professional advice to get some advice
that is specifically relevant to you. Number one pound interest.
(02:02):
I made that sound quite kind of dramatic. Dramatic, right,
But this is one thing that you have mentioned this
so many times in the past, just about the long
term effect that it can have.
Speaker 2 (02:13):
What is it first, So, it's when your money is
working for you because you're earning interest upon interest, and
over time, it can actually help you accumulate a large
amount of money where your money has built that money
for you, rather than you having to always contribute.
Speaker 1 (02:31):
So it's the power of time, isn't it. Yeah, It's
like that time really is one of the greatest assets
that you have. Is just why it's so valuable to
get into it early, because of this power of earning
interest on interest on interest on interest, and it just
keeps ongoing and you learn about like it is one
of the things that I remember in the ten learning
how to calculate compound interest. Are we mostly talking about
(02:53):
superannuation here?
Speaker 2 (02:55):
No? It can be. No, Like super is just one
area of our life. So compounding interest applies to any
major long term investment, whether it be you know, super
online interest, to high interest, your savings account, a managed fund,
even dipit in paying shares. And if you say ten
thousand dollars at eight percent per annum net and you
(03:16):
lift it untouched in thirty years, that would be worth
just over one hundred thousand dollars. And that's without you
having to add a single cent.
Speaker 1 (03:25):
And that's without doing anything.
Speaker 2 (03:26):
Just letting it sit there untouched.
Speaker 1 (03:28):
Yeah, because all of a sudden, after that first year,
your ten thousand dollars is suddenly worth ten thousand, eight
hundred dollars correct, And then the following year it is
worth ten thousand, eight hundred plus a new eight percent,
and it just keeps on going. Did you see could
you see the panic on.
Speaker 2 (03:47):
My face like a calculator.
Speaker 1 (03:49):
I don't have my calculator that I was using in
year ten and I am at risk here two were there?
You supported me? So thank you.
Speaker 2 (03:56):
I've got your back.
Speaker 1 (03:58):
That's the long term impact, isn't it? The fact that
and that, as you say, is if you are not
adding anything to.
Speaker 2 (04:05):
It, you can do so much more when you do
regularly contribute, even if it's only a small amount.
Speaker 1 (04:10):
Okay, So that's why it matters. That's the long term impact. Right,
The earlier you start, the better it is going to be.
Speaker 2 (04:20):
Right, correct, You've got the benefit of time.
Speaker 1 (04:23):
Is there a point to which it's too late?
Speaker 2 (04:25):
It's never too late, ever, never, ever, So even if
you're starting in your forties and fifties, you can still
make a massive difference. And a great example is you know,
fifty year old investing five hundred dollars per month, again
it's a a net return of eight percent per annum.
You can still build an extra one hundred and seventy
five thousand dollars within fifteen years.
Speaker 1 (04:43):
Really, okay, Can I just talk to you then about
how practically this would work? Is that that you could
talk to your financial advisor about it and just say, look,
this is I want to make sure that my superannuation
is going to be working for me, and that you're
(05:04):
making sure that you are adding to your super because
I know that you said this isn't just superannuation. But
in most cases a financial advisor isn't probably going to
tell you just to put it all into a bank
account necessarily that's just earning interest. They might say to hey,
let's look at how we can kind of maximize the
power of your superannuation and do some additional contributions that
kind of thing, right.
Speaker 2 (05:22):
Exactly, and also looking at well, you know what strategies
are available, like such as the co contribution scheme, what
that might also help to ensure that even more money
is going into whether it be your superannuation for example, and.
Speaker 1 (05:35):
So using super as the as the example. And here,
so you've got this lump sum which is earning interest
on itself, you are then adding more to it every
single year, and so you are not just earning kind
of interest on that that that principal amount, you are
then earning it on the additional repayments or sorry, the
additional payments and edition contributions into it, and it's just
(05:56):
getting bigger and bigger.
Speaker 2 (05:57):
Yes, you've got to make sure obviously it's invested in
all alignment to your risk profile.
Speaker 1 (06:02):
Do you think people overlook that? Do you think they're
just I remember about ten years ago, sitting down and
figuring out just doing a very basic calculation, going, oh,
I really like watching my superannuation going up. I think,
and these are my contributions I'm making. If I was
(06:24):
to not make any additional contributions from now until the
until I retire, how much would that would that be worth?
And I just did it on a calculator. I took
the amount that was in my souper at the time,
and I just took it as being I think it
was like say six percent or seven percent, and so
I just did times one point zero six and then
(06:45):
I was hit equals equals, equals, equals equals equals, and
just each one of those was another year. And it
was the most fun I've ever had with a calculator,
just watching it go up and up and up and
up and up, and I'm like, that's compound interest right there.
Speaker 2 (06:58):
It's so empowering, isn't it. Yeah, that is why I
call super sexy.
Speaker 1 (07:02):
Have I ever sounded more dull than just then?
Speaker 2 (07:05):
But can I take your dullness to a new level please?
So if you'd really like to get amongst it, you
can jump on the sugar on my website, and I
have all these free calculators, including a superannuation calculator that
can show you what your superannuation could potentially be worth
if you do nothing, and if you do a super
(07:26):
contribution strategy like sorry sacrificing, you can actually see it grow.
But I have also, this is really important, got the
impact of inflation. So you can see what the actual
you know, say comes up with five million dollars, You'll
see what that five million dollars is the equivalent of today.
So it helps put things into perspective.
Speaker 1 (07:44):
Okay, God, we are boring, aren't we? When you have
just said if you really want to get amongst it,
go and check out my calculators, and I actually thought,
oh that sounds all right.
Speaker 2 (07:55):
And it's free if anyone can access it.
Speaker 1 (07:57):
Music to my ears. Okay, that's compound interest. That's number
one your first financial secret weapon. One of three. We
have two more to go. Number two mortgage repayments. So
this one right, With interest rates obviously can go up,
they can go down, and with it go your mortgage
(08:19):
repayments alongside that, Just how important is it? And I
know the answer to this, but I'm going to ask
you anyway, just how important is that if you can
to keep your mortgage repayments the same when interest rates
go down, it.
Speaker 2 (08:36):
Is incredibly important. It means that your mortgage is being
paid off faster, which could potentially save you tens of
thousands of dollars in interest over time, but it could
actually help build almost like a safety buffer for future
rate hikes. So yeah, rate hikes. So again, there are
free kkllers on sugar my website. You can actually see
(08:57):
exactly how much time and money you'll save. When I
say tens of thousands of dollars, I'm being serious. In fact,
it could actually be over one hundred thousand dollars in interest.
But here's a little little catch with interest rate cuts,
not all banks necessarily automatically reduce your repayments. Some do,
(09:17):
some don't. So some people will find that with interest
rate cuts their mortgage your payments have naturally gone down,
But not all banks do that for you, So sometimes
you need to go and manually increase it back up
to what you were previously paying. If you're someone who
wants to try and keep maintain their mortgage re payment.
Speaker 1 (09:32):
That was going to be my next question for you,
kind of whether banks or your lender, whether they make
it easy to do this. And I know that with
my bank that I have my homelan with, I receive
a notification saying, look, interest rates have gone down, we
have reduced the minimum weekly payment that you need to
be making. However, we will leave your repayment at the
(09:56):
same amount that you are currently paying unless you otherwise
tell us. And that's perfect. That's great because it just
kind of pushes you, by a default, into a better
financial situation further down the track.
Speaker 2 (10:09):
It's so interesting to say it because I feel like
for a lot of people, they if they're not aware
of this, they run into the lifestyle creep where their
mortgage repayments come down and now they've got saine extra,
you know, one hundred dollars per month to spend, and
not knowing that the bank have dropped it automatically, they
then spend that one hundred dollars per month when really,
if they could afford to maintain it. That would be
(10:31):
so much better for them financially over the long run
because they could be saving serious time and money.
Speaker 1 (10:36):
Yeah, and the time part of that is interesting because
it is not just the fact that you could save
tens of thousands of dollars. You can be mortgage free
a few years earlier, oh.
Speaker 2 (10:46):
Like you know, four years, So on a five hundred
thousand dollars mortgage at six percent, if you can keep
your repayments that the same after a one percent inter
straight cut, you could save over seventy thousand dollars in
interest and reduce your loan term from thirty years to
twenty six years. Imagine being mortgage free four years earlier
in life.
Speaker 1 (11:05):
That's actually four years of financial freedom.
Speaker 2 (11:08):
Yeah, that's money that you can use to invest, you
can use to have an earlier retire four years earlier.
Even like it gives you so many more choices, which
is really what financial freedom is really about, time and choice.
Speaker 1 (11:21):
Okay, as a financial secret weapon. Do you think that
that again, not enough people know about the power of this,
that that just this little change, because we are talking
today about little things that you can do, little changes
that you can make that just by keeping your repayments
up when rates are cut if you can afford to
(11:42):
do so, and even then further, if you can afford
to do pay a little bit more off on top
of that. Just the massive, massive effect that has long.
Speaker 2 (11:51):
Term, absolutely, and this is the power of almost reverse
compounding interest. So the biggest and best impact you can
make in saving the most amount of time and money
with the smallest amount of money's actually in the first
couple of years of taking out your home loan. So
you want to jump on this and see what you
can do sooner rather than later. But again, there are
free calculators everywhere to show you this, and again the
(12:12):
Sugar Mamma website has these there for you where you
can plug in all your information your loan, the interest
rate you're paying, how far into your homelan, and what
you can You can play around with the variables and go, well,
what if I put an extra twenty dollars per month
or an extra two hundred dollars per month, You will
be blown away And it is a great source of motivation.
Speaker 1 (12:32):
And paying a little bit extra doesn't mean that the
money is actually kind of lost to you as well,
because of the power of redraw facilities and offset accounts
as well, depending on your arrangement that you have with
your bank.
Speaker 2 (12:44):
Yes, so more would you? I get asked this question
all the time. The difference between the two. They have
the same effects. So a redraw facility is money that
you put on your home loan, but if you need to,
you can take it back out. So say I have
a five hundred thousand dollars home loan, I make extra payments,
builds up in there, and they say twenty five thousand.
I'm only being charged on the interest on four hundred
(13:05):
and seventy five thousand instead of five hundred because it's
in the redraw facility, and if I need to access it,
it's the redraal facility switched on. I can get it
back out. And this is why I say to people
who have your emergency money sitting in a redrawor an
offset account rather than a separate online savings account. An
offset account works in the same way. So financially they're
not any better than each other, just different people, different needs.
(13:28):
So if I have twenty five thousand dollars sitting in
an offset account such as my emergency money, and I
have a five hundred thousand dollar homeland, same principle, I'm
being charged interest on four hundred and seventy five thousand
rather than five hundred thousand. And again, you can find
offset and redoor facility calculators online which will show you
exactly how much you can really save.
Speaker 1 (13:49):
Okay, that is two financial secret weapons compounding interest, mortgage repayments.
We have a great one coming up as number three,
but I'm not going to tell you what it is yet.
We're going to take a very quick break and come
back with the third financial secret weapon. Can We are
(14:12):
putting together a list today of three financial secret weapons.
These are things that so far they've been things that
you can just make small changes and it will have
a massive effect on your financial future and financial freedom.
Number three on the list is one that you have
(14:33):
talked about quite a bit, but it feels as though
not enough people know about the potential here for passive income.
Take us through it.
Speaker 2 (14:47):
So I like to call passive income money that you
earn whilst you sleep at night. It is not about
making complicated investment decisions, trading online, jumping in and out
of stocks. It is not about selling a program or tupperware.
It is not about you know, having to pitch something.
(15:08):
It literally is you could go to sleep for a
year and wake up and your money is working for you.
Examples of passive income are earning rent off an investment property,
earning dividends from shares, which is my favorite source of
passive income, even earning interest from bonds or savings accounts.
You haven't physically done anything to earn that money. It
(15:29):
is your money working for you. Haven't have to go
to work but on a suit. It's in front of
a computer screen, touch something, sell something. It's the key
to financial freedom. The more passive income we have, the
better our financial wellbeing.
Speaker 1 (15:43):
Really is, do you need to talk to a financial
planner about this? Feels like the basis of a conversation
that when you sit down with a financial planner for
the first time and you're going through your goals, that
perhaps not enough people are actually putting this down as
one of their goals, that hey, I would love to
have passive income. I would love to be earning money
(16:04):
while I sleep.
Speaker 2 (16:05):
I have done other podcasts on Sugarmum's fireplay about isn't
when people will get stuck as to what can they
have as a financial goal Obviously your goal should excite
you and empower you. But a great goal everyone should
have is a goal for passive income. And ideally you
want to build up enough passive income that covers your
living expenses, so you don't work by force, you work
(16:27):
by choice.
Speaker 1 (16:30):
Where does it come from? Passive income almost feels like
the end result here that you've got to build up
to it through some smart decisions early on, whether it
is about buying an investment property or whether it is
about building an investment portfolio shares that are paying dividends
and that you're able to earn money off those. It
(16:52):
kind of feels like it's the end result rather than
the way to get to it. How do you get
to it? That's probably big question to answer in one episode,
But how do you get there? What's the kind of
where does this money come from? To build this? Well?
Speaker 2 (17:07):
There are lots of different strategies and look, you know,
for people who don't have the ability to start necessarily
investing today, what I would recommend they do is turn
their attention to their superannuation because that is essentially an
investment portfolio is just locked away. That is the passive
income that's going to fund your retirement, So make sure
it's invested correctly, make sure it's invested to your risk profile.
(17:28):
You've got some goals behind it, and you understand how
it works, the nuts and bolts, and what you need
to do to help it grow. And you know, superannuation
is just one facet of financial freedom. You know, when
you're in a stage in your life where you can
look at investing, it is a great idea to sort
of have two strategies going in place, but again, speak
to a financial planner because one may be more efficient
than the other depending on where you are in your
(17:50):
life cycle and cash flow and so forth.
Speaker 1 (17:53):
Do you see people that are and you have worked
with a lot of clients over a long period of time,
do you see people where they get to a point
where they are able to live off passive income. Absolutely,
because that to me feels like an incredible goal.
Speaker 2 (18:09):
Yes, and it is. I can't tell you what it's
like to see it and be part of that journey
and what should get to that point where clients couldn't
even spend all the income that they were earning, and
so their wealth just continued and continues today to keep
growing because they just they can't possibly spend all the
income that they've built over time through sticking to a strategy,
(18:32):
getting advice, following advice, listening to advice, applying it, and
not getting caught in market fluctuations and emotional knee jerk
reactions decisions. They've let it do its thing, you know,
let compounding interests work for them, and those people look
so much happier and you know, enjoying incredible lifestyles.
Speaker 1 (18:52):
Now, it's worth probably pointing out that all of those
components that you mentioned, kind of investment properties, building share
portfolios and things, we've done separate episodes on all of those.
So if you go back through the back catalog of
episodes of How Today Afford that you will find kind
of guides to each of those elements. But you kind
of put it together and the potential of having passive income,
(19:14):
earning money while you sleep, and that one day that
could even be enough to be your primary source of income.
Speaker 2 (19:21):
Wow, but also can be a legacy as well.
Speaker 1 (19:24):
True.
Speaker 2 (19:24):
You know, if you're safe for simplicity, you have an
investment portfolio pays you one hundred thousand dollars a year
and you only need eighty to live off. You know,
there's it's obviously a surplus that can continue to grow.
But also when you pass on, you might want to
donate that to a charity, and that gives a charity
one hundred thousand dollars a year.
Speaker 1 (19:42):
And that can continue to be the case, rather than
just donating a sum of money that you are actually
helping to set them up as well.
Speaker 2 (19:48):
Exactly so, and I'm going to completely contradict myself. You
can skip the passive income story if you want. I
don't recommend it, but you know, so I need to
obviously be completely open about other options because passive income
doesn't appeal to some people. You know, there is a
component of the fire community that's very much built focused
(20:10):
on building up a lump sum and in drawing it
down over a period of years.
Speaker 1 (20:17):
So fire is financial independence retire really.
Speaker 2 (20:20):
So I've seen strategies with people who've saved and you know,
built up say an investment portfolio, not sorry, a lot
some amount of money, say a million dollars, and they
just draw fifty thousand dollars a year to live off.
Now that is not passive income. They're eating into the capital.
The concerns and the dangers with this is with inflation
(20:41):
over a ten twenty year period, can see that million
dollars erode away very very quickly. And then what do
you do when that money runs out? You're back to
square one again. If you can have even a small
component of passive income and yes, that million dollars might
be earning some interest, that will help slow it down
and give you more long GeV with that financial independence.
Speaker 1 (21:03):
I reckon we have got some great ones today. That
is three financial secret weapons that is terrific. Number one
compound interest. Number two mortgage repayments and the power of
keeping your repayments up and perhaps paying off a little
bit more, and passive income. That is terrific. Are you
Are you satisfied that these are financial secret weapons that
(21:26):
not enough people know about? But maybe after today a
few more people will yes.
Speaker 2 (21:30):
And to make this even more powerful, please invest time
jumping online looking at visual calculators so you can see
the numbers for yourself. You can look at your situation,
what is capable within your budget and your financial responsibilities,
and see what you can actually do for yourself and
get you most gamified. Because you're like, oh, I wonder
if I could squeeze extra twenty dollars per month in
(21:51):
my budget to put that towards my mortgage. Seeing what
those numbers do, it is the perfect source of motivation
inspiration to try and make that happen.
Speaker 1 (22:00):
Yeah, I'll just go back to me playing with my
calculator and figuring out my superannuation. Just equals equals, equals,
equals equals. It was so satisfying watching those numbers go up.
Speaker 2 (22:09):
Well, go and have a look at play around with
the Sugar Mama website because you can actually see it
in a visual way with lots of pretty colors.
Speaker 1 (22:15):
Yeah, but you don't get to hit the equals button.
It's physically just whack, whack whack. Anyway, that was a
weird way to finish up. Can If we need more
information from you, where do we find you?
Speaker 2 (22:27):
The best place to get in contact with me with
any of your questions is through Sugar Mama TV on Instagram.
Speaker 1 (22:32):
And remember you can hear me every day with Sean
Aylmer on Fear and Greed daily business news for people
who make their own decisions. Thank you for listening to
How Today For that, remember to hit follow on the podcast.
And the best thing you can do is tell somebody
else or perhaps send them this episode and spread the
word about how today for that, thank you for your company.
Join us again next week
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