December 28, 2022 • 19 mins
Most people struggle with the ability to plan long-term, particularly when it comes to their finances. But learning to set some money goals, no matter how small, is a crucial first step on the journey towards building one’s wealth and financial confidence.
On this week’s episode of It All Adds Up, The Sydney Morning Herald and The Age's senior economics writer Jessica Irvine and money editor Dominic Powell run through some money goals listeners may consider setting for themselves, depending on what life phase they are in.
It All Adds Up is the podcast where we make money easy to understand so that listeners can begin building their financial wealth. You can submit questions via email or voice memo to italladdsup@nine.com.au for Jess and Dom to answer each week.
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
S1 (00:00):
Hello and welcome to It All Adds up the podcast.
So we chat about money, how to get it, how
to spend it and how to invest it. I'm money
and a dumb pal. And you're listening to our summer
series as well, where we're playing some of our hottest
hits to help you get in shipshape financial form for 2023.
It all adds up will resume normal programming in February
with a brand new season full of money saving tips
and insights. So until then, sit back, relax and enjoy.
(00:31):
Hello and welcome to It All Adds Up the podcast
where we chat about money, how to get it, how
to spend it and how to invest it. I'm money
editor Don Powell.
S2 (00:39):
And I'm senior economics writer Jess Irvine. And today we're
going to talk about money goals.
S1 (00:44):
Is that like where they get the people at the
footy and they line him up and they give him
100 bucks if they can kick a goal from 50
metres out?
S2 (00:53):
No, I actually did know a guy who did that
and managed to kick the the goal. I'm not a
sports person so I don't know the technical terms anyway.
But he won $100,000, so that's not actually bad money.
S1 (01:04):
Go 100,000. I mean, I knew I should have been
a footy player, but now I definitely should have been
a 40 player.
S2 (01:10):
That's it. Maybe that's a money tip. Just everyone go
be a money footy player. I think actually the footy
players themselves at a lot more than $100,000 today.
S1 (01:18):
Yeah.
S2 (01:19):
So not quite. But identifying your money goals is really
important and knowing how to achieve them of course is
important too. We're going to get to that.
S1 (01:27):
Yeah, and do stick around to the end of the
episode because we'll be answering another listener question about paying
off the mortgage versus putting money into your super. And
of course, Jess's budget tip of the week.
S2 (01:37):
Yeah, that's a really common question about the mortgage versus super.
So I'm looking forward to that.
S1 (01:42):
So first off, what is a money goal? I mean,
it's I'm sure they're different for everyone, but just fill
me in. What when you're talking about a money goal,
it's not at the footy. What is it?
S2 (01:51):
Have you ever been to see a financial advisor?
S1 (01:53):
I have not. Not.
S2 (01:54):
Hey, all I have. I think this is an age
related thing. I turned 40. 41. When you turn 40,
you'll become absolutely obsessed with retirement too, whether you've got
enough money, Right. It's an age related thing. So I
did actually go to see a financial advisor, and one
of the first things they will always ask you is great. Hello. Welcome.
(02:15):
Sit down. What are your money goals? And if you're
anything like me, you'll probably sit there and go, I
don't know. To have some money.
S1 (02:22):
Yeah. I mean, that's what I would have said. Just
like a little bit of cash in a bag. Like,
that's it.
S2 (02:27):
To have more money. So, you know, if you haven't
seen a financial advisor and lots of people can't afford
to at the moment just to know that this is
part of the process of of starting to think big
picture about your finances. What are you even trying to do?
Getting off the rat race of just I just got
to earn more money. Well, how much money? What are
your goals? What are you trying to achieve? So what
(02:47):
we know is that the money goals that you have
should and will change through the life cycle. So no
person's money goals will be the same at any one
point in time. So, for example, if you're younger, money
goals that you might consider setting for yourself are things
like buying a first home travel, paying off your hex
and whether that's a good idea. You know, then there's
(03:09):
weddings and babies starting a business, all the good stuff.
They could be considered money goals that you have. And
then as you sort of progress into middle age, you're
talking about investing, you're topping up your super. Maybe there's
some home renovations. You know, you always want to be
looking at, you know, retirement planning, as I say, comes
(03:30):
into play. Minimising tax. Having proper insurances in place. So
maybe your goal is just to make sure that your
financial house is sorted. And then, of course, towards the
end of life, you know, you're protecting your assets. You're
thinking about whether you want to leave an inheritance to
any children. Bit more travel, get a caravan, you know,
live that, live the dream life in retirement.
S1 (03:51):
And then go to Broome.
S2 (03:53):
HURST And then, you know, the less fun stuff like
maybe planning for aged care facility funds and you know
much less estate room and wills yet this is a
lovely life arc there. So money goals change, but it's
important to have some idea at any one point in
time of sort of what you're trying to achieve. And
then I you know, when I think about it with
(04:15):
my economist's hat on, if you don't have a money
goal and if you want a money goal, I've got
one money goal that will just suit everybody alive today,
which is the whole point, you know, of your personal
finances and looking after what's the problem you're trying to solve.
You're trying to have enough money to buy all the
stuff you need, not just today, but when you're older.
(04:35):
So economists talk about consumption, smoothing, being that process of
trying to match at any one point in time having
some income coming in. You know, when you're a child,
you don't earn much of an income. And then when
you're retired, you don't earn much of an income. So
your overall goal is to try and sort of smooth
that over your your life cycle and have enough money.
S1 (04:56):
Yeah, I think I was when I was a kid,
I had about five bucks a week and I thought
that was a load of money, but.
S2 (05:01):
That's pretty good. Did you have to do anything for that?
S1 (05:03):
Yeah, I did some like chores and stuff, like putting
the washing out the lawn. But yeah, I mean, I
think it's funny that you think it's a you mentioned
some age thing because I'm 26, and if you'd asked
me what my money goal was, I would have been
like to have some, you know, I just don't, you know,
it's just one of those things that I don't really
think about in depth. But I think you're right when
it when it comes to sort of younger people in
my age bracket, it's definitely more about like life events,
(05:25):
I guess. Like it's like having. Going to going overseas,
like a lot of people like to go overseas and
live overseas for a year. Like, that's something that I
wouldn't mind to do it and mind doing at some
point and having enough money to do that comfortably is,
you know, it would be considered a money goal, right?
S2 (05:40):
Yeah. I was going to ask you, do you have
money goals?
S1 (05:43):
That would be possibly one of my money goals, you know,
And I said I'm sort of over services living arrangement.
I'm not really sure. I haven't thought about it that
much yet. But, you know, like things like preparing to
have like kids and, you know, probably going to start
a business any time soon. It's not really my thing, but,
you know, I mean, I already own my own home,
(06:05):
but I know a lot of my friends don't. So, like,
that isn't like a major thing for them. That's you know,
that would be sort of a short term money goal.
What about you? Just what's what's your sort of money goals?
S2 (06:15):
Yeah, I'm very fixated on the consumption smoothing and just
waiting until the point in my life where I can
call it quits and just go, I've got enough money,
I've earned enough income. So I'm quite attracted to There's
a movement called FI, which is financial independence, retire early.
And so just finding what is that point in time
where I can throw in the hat and go, you
know what, I'm going to just go for a walk
(06:36):
or I'm going to sit on the couch. I don't
have to earn any more money. So I'm very fixated
on planning for that, you know, and figuring out what
is the age at which I can retire. You know,
you can get the age pension at 67, and I've
figured out whether I can live on that. And I
figured out if I own my own, I probably can.
You can get your super if you retire and stop
(06:56):
working at age 60. So I'm going to use my
super to bridge from age 60 to 67. And then
whether I can just bring forward the day earlier than
60 that I can retire if I've saved enough in
assets outside of super. So I, you know, do a
bit of investing or whatever that is to sort of
figure out how many years of annual living expenses I
can save and then figure out the day when I'll
(07:18):
say goodbye them, I'll hang up the podcasting. The Mike
I've got podcast.
S1 (07:23):
Is going to run for 20 years.
S2 (07:25):
She's at the beach. As much as I am loving doing.
S1 (07:30):
It in 20 years time, I'm sure we'll talk about
every aspect of money you possibly, possibly could. So how
do you set a money goal, right? Like, I know
it seems like a sort of a silly question, but
for someone who's actually it seems like they thought about
it a lot more than I have, you know, Is
it where do you start? Is it just about picking
an objective?
S2 (07:49):
It is. I mean, it is. And I think most
people sort of have a suspicion of what it is
they want to do. You know, a big one is,
you know, I would like to save for a home or,
you know, I would like to start taking advantage of
super tax breaks. I've heard that sort of thing just
sort of coming up, even with a small list of,
you know, what what things would I like to achieve
for myself, You know, even if it is as audacious
(08:11):
as I would like to retire early or, you know,
just doing some sort of big, big picture thinking. And
that's what the financial planners want you to be able
to do is sort of, you know, given who you are,
what you like to do, you know, what is the
life that you have yourself. And we have an extraordinary
difficulty as human beings trying to get across the idea
that we will get old and we will eventually die. And,
(08:32):
you know, we love to just live in the moment.
S1 (08:35):
That's not going to happen to me.
S2 (08:36):
I'm falling apart from Dom. We're all going to die.
That's good news for you. Yes. So just confronting the
future is can be scary. But, you know, it is
scary if you get down the track and you haven't
actually asked these questions, you know, and you are approaching retirement.
So just starting to list down, you know, what are
some of the things I'd like to to achieve and
(08:58):
and I say, you know, start small. It can be
as small as saying I want to have enough money,
you know, to take a trip over the summer holidays,
figure out how much that's going to cost. You write
it down, then, you know, figure out how much time
you have to for that savings goal and start setting
aside some money so it can be as small as that.
And I do say start small, don't suddenly just go,
(09:21):
Oh yeah, I want to retire. Yeah.
S1 (09:24):
Especially if I'm quite young as it's a long life.
S2 (09:27):
Yeah, you will become very obsessed with it at one point.
S1 (09:29):
Oh, I'm looking for actually now I'm looking forward to
that sounds whole idea of retirement. Not nothing's. Does it
help to put a like a figure on it like
you say, be thinking about your money goal. Do you
want do you want to be like, you know, this
is the amount that I need and you're working towards
that amount or should it be a bit more sort
of abstract than that?
S2 (09:49):
So a lot of people will tell you, don't get
too hung up on the figures, just, you know, get
the feelings right. And I'm like, no, no, your figures.
You should know what things cost for you. So if
you're thinking about retirement, you need to know how much
you're going to need in retirement. And how would you
figure that out? You could probably figure out how much
you're spending today. So I am a really big advocate
(10:11):
of people just spending more time looking at their finances,
getting to grips with where their money is going, and
then you sort of know how much you're spending on holidays,
you know, And then so is it achievable that you
would go to Europe? Well, oh, well, I did spend
that much, you know, last year. Maybe that is achievable
and sort of knowing, you know, I love tracking my
spending and knowing what my monthly budget surplus is and,
(10:34):
you know, how much how many months is it going
to take me to save for anything in particular so
that you cannot set goals which are completely unrealistic? You know,
like I want to save a hundred grand by next year.
S1 (10:45):
Yeah. And I think being realistic is a big part
of this as well. Like, you know, either over your
timeframes or your goals. And this goes back to what
you said earlier about sort of starting small, keeping it achievable,
especially I think, for people on the younger end of
the spectrum where it's like you might not be earning
a great deal of money. So therefore thinking about, you know,
really long term goals where you want to retire at
(11:06):
50 or something like that, that might be a little
bit sort of difficult or unrealistic. So those sort of
shorter term things and also keep in mind what your
expenses are at the at the current point. Like, you know,
if you have any major debts, so you're paying off
a car, a lot of young people paying off their
checks like these are things that all need to come
into consideration when you are sort of assessing your your
financial future and setting some setting some goals.
S2 (11:29):
Yeah, because the the first thing financial advisors ask you
is money, goals and objectives. And then they all start
to grill you on your cash flow. So it's as
simple as knowing money and money and don't you? Do
you keep a budget or do you have any sort
of system for tracking your spending?
S1 (11:45):
I'm very I'm pretty loose about it, to be honest,
especially compared to you, though I'm not sure if if
anyone really compares to the sort of meticulous nature of
your budgets.
S2 (11:54):
I think most people are pretty loose. If I said.
S1 (11:57):
I have a sort of a general budgeting system where
I have like a like a series of different sort
of saving accounts, which money gets put into each week.
And I use the money from those accounts to pay
for different parts of my life, which helps me sort
of track how much I spend every fortnight on different
parts of my life. But that's not particularly regimented because
I've got like a slush fund which can just be
(12:17):
used for anything. So therefore it does get just use
for anything. So I'm really I'm all over the shop.
S2 (12:22):
It sounds like you get money in a paper bag
or something from me.
S1 (12:25):
No, I don't. I don't. It's just sort of like
a generic savings account. Yeah, that doesn't have a purpose. Therefore,
it doesn't. It just gets used for stuff that it
shouldn't be used for.
S2 (12:34):
So when people are thinking about their personal finances and
that people always want to get into like, should I? Well,
and we are going to get into it. Should I
invest in shares or property and you know, what's the
optimal this and that and, you know, sort of highly
theoretical things of like which asset classes will go higher
or lower in the future. And, and it's always brought
(12:56):
back and when you see an advisor and you know,
the sort of things I write about knowing your income,
knowing your spending, knowing your surplus cash flow, that's like that,
that is the foundation of knowing what you can do
with your money and knowing what goals are achievable. So
it's going to sound boring, but tracking your spending, knowing
exactly what your income is, is is really the foundation.
(13:19):
And you know, it doesn't need to get much more
fancy than that. And then once you know that, know
what do I want to do with my life? How
much is that going to cost? Yeah, and just breaking
it down and having some sort of vision for yourself
in the future I think is really important.
S1 (13:33):
And I suppose once you've got all this in mind,
you need to then think about what you might need
to do to achieve that goal. Obviously setting a goal
is great, but then actually doing it is the hard work.
So I mean, if you do, if you do all
the sums and you realize you're already on track to
retire at 60 or whatever, right. Good job, happy for
you sort of thing. But that's probably going to be
the case for a lot of people because it's it's
(13:54):
you know, usually these things are quite long term. So
that's when you need to start thinking about what you
can do to change your life or change aspects of
your life to to sort of get to that goal.
S2 (14:06):
Yeah, because here's here's a spoiler alert. Achieving any money
related goal is probably going to involve spending less than
you earn and saving some money.
S1 (14:14):
Then that sucks. We change that.
S2 (14:17):
So I do like free money for everyone. Yeah. So
getting back to basics, you know, And then. And then
it's a good thing, you know, If you do know
that you're living within your means, you do get to
spend some of your money and you can take the
holiday and you can, you know, you can do nice
things now and in the future and look after future.
You as.
S1 (14:36):
Well. Yeah. And I think like even the things that
you do don't have to be massive lifestyle changes or
anything like that. Like if your goal is retirement focused
and you're looking at how much money you'll have at the,
you know, towards the end of your life then. Look,
it's your super fund. Is your super fund giving you
decent returns? That's where you're going to have the majority
of your money at the end of your life. So
think about putting your money into a different or better
(14:57):
performing fund. There's all these sort of things you can
do to to sort of help the process without having
to do sort of a major sort of life changing
sort of event.
S2 (15:07):
Yeah, I've been meaning to look into my super account
and use that new government website comparison tool to that
is a huge issue as to whether your super is
performing well for you. Let's do it. Let's do another
podcast on that.
S1 (15:19):
Yeah, please do that. We can manage that.
S2 (15:21):
Okay, good. If anyone does come up with some audacious
money goals, we'd love to hear what they are. You
can email us at it all. Adds up at nine.com.au
dot EU. Now we have lots of listener questions coming
in which I love. This week's question comes from Shaun
and he's asking if he's better off. I'm going to
paraphrase If it's better to pay more off his mortgage
(15:43):
or put more money into his super via salary sacrifice.
And he's shared with us that he is currently doing
the latter and he's getting the nice big tax breaks
on super and he thinks he would prefer to have
that nice super income when he's 60, even if he
does have a small mortgage left. But he is worried
about rising interest rates. So Dom, what do you reckon?
(16:05):
Paying off the mortgage or super.
S1 (16:08):
I think he's on the right track here. I think
if you've got a mortgage that's that's manageable at the
current point and you're in a decent right, you may
as well put more of your savings into into super
if you can manage it. But I think it's obviously
this comes with the number of caveats. We don't know
the exact sort of scenario that Shaun's in. But I
think what's worth mentioning is if you're going to be
(16:30):
doing this and you're going to be putting more money
into your super, it would be good to make sure
that first you have a decent pile of of savings
set aside to sort of for any sort of rainy
days for if interest rates start to get really high
and you have to start falling back on that to
pay off that mortgage, you know, it's it would be
good to just make sure you've got a nice stack
of cash as a bit of a back up. But
by and large, I think that's that's not a bad strategy.
(16:52):
What's your what's your take, Jess?
S2 (16:54):
Yeah. Look, there are benefits to owning your home outright
by retirement. But I mean, it is possible when you
get to the 60 to use some of the super
to pay off the mortgage, at least that is possible today.
You never know how things change in super. And with super,
there are such incredible tax breaks, you know, paying the
low 15 cent rate for money that you put in
(17:15):
up to 27,500, I think it is each year you
can get that low tax rate. I'm all about minimising taxes,
but though if you do pay off the mortgage, you
are also, you know, increasing your ownership stake in, you know,
your principal place of residence, which of course is totally
capital gains tax free. So, you know, I think they're
both very good options and people sometimes get stuck in
(17:37):
should I do this or that? And I say, I'm
with the Techo kid. Okay, no, Los Dos.
S1 (17:43):
That's impeccable. Okay. I was so.
S2 (17:46):
Personal, as does my not both don't fit it both.
And you can you can shift and play with it.
But I think if he's in a position where you're
doing either good on you.
S1 (17:55):
Or just and just take us home with your budget
tip of the week.
S2 (17:58):
So this is going to all my money nerd and
book loving friends out there. You can read books for free.
This is a big part of my budget. I spend
a lot of money on books, but a new thing
that has happened in recent years is there are these
new apps that connect you to your local library. And
the two apps I want people to download and to
(18:19):
mention are Borrow Box and Libby as in the female
name Libby And you download them, they'll search. What is
the local library in your area? If you haven't got
a membership card with your local library, you do have
to go and set that up. But then once you do,
you get free access to the library's entire online archive
(18:40):
of audiobooks and, you know, e-reader books and you can
read stuff for free. So if you're sitting there with
your audible subscription, you know, question whether you need that
you can you can now read online for free.
S1 (18:53):
Hmm. What a concept. I mean, I'm an A-rated guy,
so it might be a little bit more difficult, but,
you know.
S2 (18:58):
You can still download the app.
S1 (19:00):
You can still download them.
S2 (19:00):
All right. Let me know. Let me know what you think.
S1 (19:03):
I'll read ten books by the next podcast.
S2 (19:05):
Excellent. You'll be very. You are already very knowledgeable. You'll
be even more knowledgeable.
S1 (19:10):
Well, I think that's all we have time for this week.
And as always, keep those listener questions coming in. The
email address is it all adds up at nine.com.au today.
We'd love to hear from you and we'll see you
next week.
S2 (19:21):
See you next week. This episode of It All Adds
Up was produced by Chee Wong. The information discussed is
general in nature and does not take into account your
personal financial situation, goals or objectives. You should always do
your own research or get professional advice before making any
major financial decisions. If you like today's episode, follow in
(19:44):
your podcast app. Leave us a review and recommend it
to all your friends. You can submit your listener questions
in text or audio format too. It all adds up
at nine.com.au. Thanks for listening.
Hello and welcome to It All Adds up the podcast.
So we chat about money, how to get it, how
to spend it and how to invest it. I'm money
and a dumb pal. And you're listening to our summer
series as well, where we're playing some of our hottest
hits to help you get in shipshape financial form for 2023.
It all adds up will resume normal programming in February
with a brand new season full of money saving tips
and insights. So until then, sit back, relax and enjoy.
(00:31):
Hello and welcome to It All Adds Up the podcast
where we chat about money, how to get it, how
to spend it and how to invest it. I'm money
editor Don Powell.
S2 (00:39):
And I'm senior economics writer Jess Irvine. And today we're
going to talk about money goals.
S1 (00:44):
Is that like where they get the people at the
footy and they line him up and they give him
100 bucks if they can kick a goal from 50
metres out?
S2 (00:53):
No, I actually did know a guy who did that
and managed to kick the the goal. I'm not a
sports person so I don't know the technical terms anyway.
But he won $100,000, so that's not actually bad money.
S1 (01:04):
Go 100,000. I mean, I knew I should have been
a footy player, but now I definitely should have been
a 40 player.
S2 (01:10):
That's it. Maybe that's a money tip. Just everyone go
be a money footy player. I think actually the footy
players themselves at a lot more than $100,000 today.
S1 (01:18):
Yeah.
S2 (01:19):
So not quite. But identifying your money goals is really
important and knowing how to achieve them of course is
important too. We're going to get to that.
S1 (01:27):
Yeah, and do stick around to the end of the
episode because we'll be answering another listener question about paying
off the mortgage versus putting money into your super. And
of course, Jess's budget tip of the week.
S2 (01:37):
Yeah, that's a really common question about the mortgage versus super.
So I'm looking forward to that.
S1 (01:42):
So first off, what is a money goal? I mean,
it's I'm sure they're different for everyone, but just fill
me in. What when you're talking about a money goal,
it's not at the footy. What is it?
S2 (01:51):
Have you ever been to see a financial advisor?
S1 (01:53):
I have not. Not.
S2 (01:54):
Hey, all I have. I think this is an age
related thing. I turned 40. 41. When you turn 40,
you'll become absolutely obsessed with retirement too, whether you've got
enough money, Right. It's an age related thing. So I
did actually go to see a financial advisor, and one
of the first things they will always ask you is great. Hello. Welcome.
(02:15):
Sit down. What are your money goals? And if you're
anything like me, you'll probably sit there and go, I
don't know. To have some money.
S1 (02:22):
Yeah. I mean, that's what I would have said. Just
like a little bit of cash in a bag. Like,
that's it.
S2 (02:27):
To have more money. So, you know, if you haven't
seen a financial advisor and lots of people can't afford
to at the moment just to know that this is
part of the process of of starting to think big
picture about your finances. What are you even trying to do?
Getting off the rat race of just I just got
to earn more money. Well, how much money? What are
your goals? What are you trying to achieve? So what
(02:47):
we know is that the money goals that you have
should and will change through the life cycle. So no
person's money goals will be the same at any one
point in time. So, for example, if you're younger, money
goals that you might consider setting for yourself are things
like buying a first home travel, paying off your hex
and whether that's a good idea. You know, then there's
(03:09):
weddings and babies starting a business, all the good stuff.
They could be considered money goals that you have. And
then as you sort of progress into middle age, you're
talking about investing, you're topping up your super. Maybe there's
some home renovations. You know, you always want to be
looking at, you know, retirement planning, as I say, comes
(03:30):
into play. Minimising tax. Having proper insurances in place. So
maybe your goal is just to make sure that your
financial house is sorted. And then, of course, towards the
end of life, you know, you're protecting your assets. You're
thinking about whether you want to leave an inheritance to
any children. Bit more travel, get a caravan, you know,
live that, live the dream life in retirement.
S1 (03:51):
And then go to Broome.
S2 (03:53):
HURST And then, you know, the less fun stuff like
maybe planning for aged care facility funds and you know
much less estate room and wills yet this is a
lovely life arc there. So money goals change, but it's
important to have some idea at any one point in
time of sort of what you're trying to achieve. And
then I you know, when I think about it with
(04:15):
my economist's hat on, if you don't have a money
goal and if you want a money goal, I've got
one money goal that will just suit everybody alive today,
which is the whole point, you know, of your personal
finances and looking after what's the problem you're trying to solve.
You're trying to have enough money to buy all the
stuff you need, not just today, but when you're older.
(04:35):
So economists talk about consumption, smoothing, being that process of
trying to match at any one point in time having
some income coming in. You know, when you're a child,
you don't earn much of an income. And then when
you're retired, you don't earn much of an income. So
your overall goal is to try and sort of smooth
that over your your life cycle and have enough money.
S1 (04:56):
Yeah, I think I was when I was a kid,
I had about five bucks a week and I thought
that was a load of money, but.
S2 (05:01):
That's pretty good. Did you have to do anything for that?
S1 (05:03):
Yeah, I did some like chores and stuff, like putting
the washing out the lawn. But yeah, I mean, I
think it's funny that you think it's a you mentioned
some age thing because I'm 26, and if you'd asked
me what my money goal was, I would have been
like to have some, you know, I just don't, you know,
it's just one of those things that I don't really
think about in depth. But I think you're right when
it when it comes to sort of younger people in
my age bracket, it's definitely more about like life events,
(05:25):
I guess. Like it's like having. Going to going overseas,
like a lot of people like to go overseas and
live overseas for a year. Like, that's something that I
wouldn't mind to do it and mind doing at some
point and having enough money to do that comfortably is,
you know, it would be considered a money goal, right?
S2 (05:40):
Yeah. I was going to ask you, do you have
money goals?
S1 (05:43):
That would be possibly one of my money goals, you know,
And I said I'm sort of over services living arrangement.
I'm not really sure. I haven't thought about it that
much yet. But, you know, like things like preparing to
have like kids and, you know, probably going to start
a business any time soon. It's not really my thing, but,
you know, I mean, I already own my own home,
(06:05):
but I know a lot of my friends don't. So, like,
that isn't like a major thing for them. That's you know,
that would be sort of a short term money goal.
What about you? Just what's what's your sort of money goals?
S2 (06:15):
Yeah, I'm very fixated on the consumption smoothing and just
waiting until the point in my life where I can
call it quits and just go, I've got enough money,
I've earned enough income. So I'm quite attracted to There's
a movement called FI, which is financial independence, retire early.
And so just finding what is that point in time
where I can throw in the hat and go, you
know what, I'm going to just go for a walk
(06:36):
or I'm going to sit on the couch. I don't
have to earn any more money. So I'm very fixated
on planning for that, you know, and figuring out what
is the age at which I can retire. You know,
you can get the age pension at 67, and I've
figured out whether I can live on that. And I
figured out if I own my own, I probably can.
You can get your super if you retire and stop
(06:56):
working at age 60. So I'm going to use my
super to bridge from age 60 to 67. And then
whether I can just bring forward the day earlier than
60 that I can retire if I've saved enough in
assets outside of super. So I, you know, do a
bit of investing or whatever that is to sort of
figure out how many years of annual living expenses I
can save and then figure out the day when I'll
(07:18):
say goodbye them, I'll hang up the podcasting. The Mike
I've got podcast.
S1 (07:23):
Is going to run for 20 years.
S2 (07:25):
She's at the beach. As much as I am loving doing.
S1 (07:30):
It in 20 years time, I'm sure we'll talk about
every aspect of money you possibly, possibly could. So how
do you set a money goal, right? Like, I know
it seems like a sort of a silly question, but
for someone who's actually it seems like they thought about
it a lot more than I have, you know, Is
it where do you start? Is it just about picking
an objective?
S2 (07:49):
It is. I mean, it is. And I think most
people sort of have a suspicion of what it is
they want to do. You know, a big one is,
you know, I would like to save for a home or,
you know, I would like to start taking advantage of
super tax breaks. I've heard that sort of thing just
sort of coming up, even with a small list of,
you know, what what things would I like to achieve
for myself, You know, even if it is as audacious
(08:11):
as I would like to retire early or, you know,
just doing some sort of big, big picture thinking. And
that's what the financial planners want you to be able
to do is sort of, you know, given who you are,
what you like to do, you know, what is the
life that you have yourself. And we have an extraordinary
difficulty as human beings trying to get across the idea
that we will get old and we will eventually die. And,
(08:32):
you know, we love to just live in the moment.
S1 (08:35):
That's not going to happen to me.
S2 (08:36):
I'm falling apart from Dom. We're all going to die.
That's good news for you. Yes. So just confronting the
future is can be scary. But, you know, it is
scary if you get down the track and you haven't
actually asked these questions, you know, and you are approaching retirement.
So just starting to list down, you know, what are
some of the things I'd like to to achieve and
(08:58):
and I say, you know, start small. It can be
as small as saying I want to have enough money,
you know, to take a trip over the summer holidays,
figure out how much that's going to cost. You write
it down, then, you know, figure out how much time
you have to for that savings goal and start setting
aside some money so it can be as small as that.
And I do say start small, don't suddenly just go,
(09:21):
Oh yeah, I want to retire. Yeah.
S1 (09:24):
Especially if I'm quite young as it's a long life.
S2 (09:27):
Yeah, you will become very obsessed with it at one point.
S1 (09:29):
Oh, I'm looking for actually now I'm looking forward to
that sounds whole idea of retirement. Not nothing's. Does it
help to put a like a figure on it like
you say, be thinking about your money goal. Do you
want do you want to be like, you know, this
is the amount that I need and you're working towards
that amount or should it be a bit more sort
of abstract than that?
S2 (09:49):
So a lot of people will tell you, don't get
too hung up on the figures, just, you know, get
the feelings right. And I'm like, no, no, your figures.
You should know what things cost for you. So if
you're thinking about retirement, you need to know how much
you're going to need in retirement. And how would you
figure that out? You could probably figure out how much
you're spending today. So I am a really big advocate
(10:11):
of people just spending more time looking at their finances,
getting to grips with where their money is going, and
then you sort of know how much you're spending on holidays,
you know, And then so is it achievable that you
would go to Europe? Well, oh, well, I did spend
that much, you know, last year. Maybe that is achievable
and sort of knowing, you know, I love tracking my
spending and knowing what my monthly budget surplus is and,
(10:34):
you know, how much how many months is it going
to take me to save for anything in particular so
that you cannot set goals which are completely unrealistic? You know,
like I want to save a hundred grand by next year.
S1 (10:45):
Yeah. And I think being realistic is a big part
of this as well. Like, you know, either over your
timeframes or your goals. And this goes back to what
you said earlier about sort of starting small, keeping it achievable,
especially I think, for people on the younger end of
the spectrum where it's like you might not be earning
a great deal of money. So therefore thinking about, you know,
really long term goals where you want to retire at
(11:06):
50 or something like that, that might be a little
bit sort of difficult or unrealistic. So those sort of
shorter term things and also keep in mind what your
expenses are at the at the current point. Like, you know,
if you have any major debts, so you're paying off
a car, a lot of young people paying off their
checks like these are things that all need to come
into consideration when you are sort of assessing your your
financial future and setting some setting some goals.
S2 (11:29):
Yeah, because the the first thing financial advisors ask you
is money, goals and objectives. And then they all start
to grill you on your cash flow. So it's as
simple as knowing money and money and don't you? Do
you keep a budget or do you have any sort
of system for tracking your spending?
S1 (11:45):
I'm very I'm pretty loose about it, to be honest,
especially compared to you, though I'm not sure if if
anyone really compares to the sort of meticulous nature of
your budgets.
S2 (11:54):
I think most people are pretty loose. If I said.
S1 (11:57):
I have a sort of a general budgeting system where
I have like a like a series of different sort
of saving accounts, which money gets put into each week.
And I use the money from those accounts to pay
for different parts of my life, which helps me sort
of track how much I spend every fortnight on different
parts of my life. But that's not particularly regimented because
I've got like a slush fund which can just be
(12:17):
used for anything. So therefore it does get just use
for anything. So I'm really I'm all over the shop.
S2 (12:22):
It sounds like you get money in a paper bag
or something from me.
S1 (12:25):
No, I don't. I don't. It's just sort of like
a generic savings account. Yeah, that doesn't have a purpose. Therefore,
it doesn't. It just gets used for stuff that it
shouldn't be used for.
S2 (12:34):
So when people are thinking about their personal finances and
that people always want to get into like, should I? Well,
and we are going to get into it. Should I
invest in shares or property and you know, what's the
optimal this and that and, you know, sort of highly
theoretical things of like which asset classes will go higher
or lower in the future. And, and it's always brought
(12:56):
back and when you see an advisor and you know,
the sort of things I write about knowing your income,
knowing your spending, knowing your surplus cash flow, that's like that,
that is the foundation of knowing what you can do
with your money and knowing what goals are achievable. So
it's going to sound boring, but tracking your spending, knowing
exactly what your income is, is is really the foundation.
(13:19):
And you know, it doesn't need to get much more
fancy than that. And then once you know that, know
what do I want to do with my life? How
much is that going to cost? Yeah, and just breaking
it down and having some sort of vision for yourself
in the future I think is really important.
S1 (13:33):
And I suppose once you've got all this in mind,
you need to then think about what you might need
to do to achieve that goal. Obviously setting a goal
is great, but then actually doing it is the hard work.
So I mean, if you do, if you do all
the sums and you realize you're already on track to
retire at 60 or whatever, right. Good job, happy for
you sort of thing. But that's probably going to be
the case for a lot of people because it's it's
(13:54):
you know, usually these things are quite long term. So
that's when you need to start thinking about what you
can do to change your life or change aspects of
your life to to sort of get to that goal.
S2 (14:06):
Yeah, because here's here's a spoiler alert. Achieving any money
related goal is probably going to involve spending less than
you earn and saving some money.
S1 (14:14):
Then that sucks. We change that.
S2 (14:17):
So I do like free money for everyone. Yeah. So
getting back to basics, you know, And then. And then
it's a good thing, you know, If you do know
that you're living within your means, you do get to
spend some of your money and you can take the
holiday and you can, you know, you can do nice
things now and in the future and look after future.
You as.
S1 (14:36):
Well. Yeah. And I think like even the things that
you do don't have to be massive lifestyle changes or
anything like that. Like if your goal is retirement focused
and you're looking at how much money you'll have at the,
you know, towards the end of your life then. Look,
it's your super fund. Is your super fund giving you
decent returns? That's where you're going to have the majority
of your money at the end of your life. So
think about putting your money into a different or better
(14:57):
performing fund. There's all these sort of things you can
do to to sort of help the process without having
to do sort of a major sort of life changing
sort of event.
S2 (15:07):
Yeah, I've been meaning to look into my super account
and use that new government website comparison tool to that
is a huge issue as to whether your super is
performing well for you. Let's do it. Let's do another
podcast on that.
S1 (15:19):
Yeah, please do that. We can manage that.
S2 (15:21):
Okay, good. If anyone does come up with some audacious
money goals, we'd love to hear what they are. You
can email us at it all. Adds up at nine.com.au
dot EU. Now we have lots of listener questions coming
in which I love. This week's question comes from Shaun
and he's asking if he's better off. I'm going to
paraphrase If it's better to pay more off his mortgage
(15:43):
or put more money into his super via salary sacrifice.
And he's shared with us that he is currently doing
the latter and he's getting the nice big tax breaks
on super and he thinks he would prefer to have
that nice super income when he's 60, even if he
does have a small mortgage left. But he is worried
about rising interest rates. So Dom, what do you reckon?
(16:05):
Paying off the mortgage or super.
S1 (16:08):
I think he's on the right track here. I think
if you've got a mortgage that's that's manageable at the
current point and you're in a decent right, you may
as well put more of your savings into into super
if you can manage it. But I think it's obviously
this comes with the number of caveats. We don't know
the exact sort of scenario that Shaun's in. But I
think what's worth mentioning is if you're going to be
(16:30):
doing this and you're going to be putting more money
into your super, it would be good to make sure
that first you have a decent pile of of savings
set aside to sort of for any sort of rainy
days for if interest rates start to get really high
and you have to start falling back on that to
pay off that mortgage, you know, it's it would be
good to just make sure you've got a nice stack
of cash as a bit of a back up. But
by and large, I think that's that's not a bad strategy.
(16:52):
What's your what's your take, Jess?
S2 (16:54):
Yeah. Look, there are benefits to owning your home outright
by retirement. But I mean, it is possible when you
get to the 60 to use some of the super
to pay off the mortgage, at least that is possible today.
You never know how things change in super. And with super,
there are such incredible tax breaks, you know, paying the
low 15 cent rate for money that you put in
(17:15):
up to 27,500, I think it is each year you
can get that low tax rate. I'm all about minimising taxes,
but though if you do pay off the mortgage, you
are also, you know, increasing your ownership stake in, you know,
your principal place of residence, which of course is totally
capital gains tax free. So, you know, I think they're
both very good options and people sometimes get stuck in
(17:37):
should I do this or that? And I say, I'm
with the Techo kid. Okay, no, Los Dos.
S1 (17:43):
That's impeccable. Okay. I was so.
S2 (17:46):
Personal, as does my not both don't fit it both.
And you can you can shift and play with it.
But I think if he's in a position where you're
doing either good on you.
S1 (17:55):
Or just and just take us home with your budget
tip of the week.
S2 (17:58):
So this is going to all my money nerd and
book loving friends out there. You can read books for free.
This is a big part of my budget. I spend
a lot of money on books, but a new thing
that has happened in recent years is there are these
new apps that connect you to your local library. And
the two apps I want people to download and to
(18:19):
mention are Borrow Box and Libby as in the female
name Libby And you download them, they'll search. What is
the local library in your area? If you haven't got
a membership card with your local library, you do have
to go and set that up. But then once you do,
you get free access to the library's entire online archive
(18:40):
of audiobooks and, you know, e-reader books and you can
read stuff for free. So if you're sitting there with
your audible subscription, you know, question whether you need that
you can you can now read online for free.
S1 (18:53):
Hmm. What a concept. I mean, I'm an A-rated guy,
so it might be a little bit more difficult, but,
you know.
S2 (18:58):
You can still download the app.
S1 (19:00):
You can still download them.
S2 (19:00):
All right. Let me know. Let me know what you think.
S1 (19:03):
I'll read ten books by the next podcast.
S2 (19:05):
Excellent. You'll be very. You are already very knowledgeable. You'll
be even more knowledgeable.
S1 (19:10):
Well, I think that's all we have time for this week.
And as always, keep those listener questions coming in. The
email address is it all adds up at nine.com.au today.
We'd love to hear from you and we'll see you
next week.
S2 (19:21):
See you next week. This episode of It All Adds
Up was produced by Chee Wong. The information discussed is
general in nature and does not take into account your
personal financial situation, goals or objectives. You should always do
your own research or get professional advice before making any
major financial decisions. If you like today's episode, follow in
(19:44):
your podcast app. Leave us a review and recommend it
to all your friends. You can submit your listener questions
in text or audio format too. It all adds up
at nine.com.au. Thanks for listening.
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