Speaker 1: Welcome to How Do They Afford That? The podcast that
Speaker 1: peaks into the financial lives of everyday Australians. I'm Michael Thompson.
Speaker 1: I'm an author and the co host of the business
Speaker 1: news podcast Fear and Greed, And as always I'm with
Speaker 1: Canna Campbell, financial planner and founder of Sugar Mumma TV,
Speaker 1: the financial literacy platform covering pretty much everything we are
Speaker 1: up to. This is like episode one hundred and eighty
Speaker 1: or something around there, and I still cannot get out
Speaker 1: the words financial literacy platform without having to very deliberately
Speaker 1: slow down and think about it as we go.
Speaker 2: Hello, Cannah, good morning, How are you?
Speaker 1: I am very good, Thank you. I I'm going to
Speaker 1: start today's episode with a hypothetical. Yeah yeah, if someone
Speaker 1: handed you ten thousand dollars tomorrow, no strings attached, right,
Speaker 1: no requirements on this. They handed you ten thousand dollars tomorrow,
Speaker 1: what would you do with it? Are you going to
Speaker 1: be kind of paying down debt? Would you be investing it?
Speaker 1: Would you be blowing it on a investing it on
Speaker 1: a holiday. I'm going to reframe my language already today
Speaker 1: We're going to unpack what the answer says about you.
Speaker 1: And what you probably should do rather than what your
Speaker 1: perhaps instinct is telling you to go and do with it.
Speaker 1: Let's jump straight in when people say, imagine getting ten
Speaker 1: thousand dollars, because I think everyone plays around with these hypotheticals.
Speaker 1: If I was to say, win the lottery, win the lottery, right,
Speaker 1: I mean, obviously ten thousand dollars, you're looking at probably
Speaker 1: like a third division prize or something within lotto.
Speaker 2: Hey would still be grateful for ten thousand dollars.
Speaker 1: I certainly would. I mean, I'd prefer forty million, but
Speaker 1: I will take ten thousand as well. What's the most
Speaker 1: common instinct that you see in this scenario.
Speaker 2: I think there's a real mix of reactions, and it
Speaker 2: says a lot about someone's relationship with money. So for
Speaker 2: someone it might be, you know, the reaction maybe a
Speaker 2: sense of relief thinking, okay, great, ten thousand dollars we
Speaker 2: can find and clear that, you know by now pay
Speaker 2: letter debt or critit card debt. We can fix up
Speaker 2: those bills and have a little bit of money, you know, leftover.
Speaker 2: So there's a huge sense of like, all right, I've
Speaker 2: got we can have our head above water and see
Speaker 2: light at the end. Of the tunnel. For other people,
Speaker 2: that might be just the excitement of thinking, great, we
Speaker 2: can go book that holiday or something that they've been
Speaker 2: like saving up for wanting or desiring for a long
Speaker 2: period of time. But what I noticed the most about
Speaker 2: people's reaction and how it reflects their money mindset and
Speaker 2: also their level of financial literacy and how connected and
Speaker 2: committed they are to their financial goals and dreams. So
Speaker 2: you know, it can really the reactions can be quite wide.
Speaker 1: Okay, so it's it's I was going to ask you then,
Speaker 1: whether it's usually an emotional response or a strategic response,
Speaker 1: And it could be either depending on kind of how
Speaker 1: much work they've done on money in the past and
Speaker 1: kind of the position that they are in at the
Speaker 1: time that this sudden windfall lands in their lap.
Speaker 2: Right, So it's always emotions first, you know, the joy,
Speaker 2: the relief, the excite, one of those disbelief.
Speaker 1: One of these days, I'm going to actually assume something correctly.
Speaker 1: I have over the last two hundred odd episodes, I
Speaker 1: have made a number of assumptions assuming that I'm on
Speaker 1: fairly safe ground, and I should learn that I am
Speaker 1: never on safe ground.
Speaker 2: Never with me. But interestingly, I've seen people have I
Speaker 2: guess a discouraging reaction where people feel guilty about that money,
Speaker 2: or they see have a sense of self doubt or
Speaker 2: you know, self worth, or you know, they come from
Speaker 2: a place of scarcity, and they might even say, oh,
Speaker 2: only ten thousand dollars. You know, as you just said
Speaker 2: Division III, I was the one that said I'd be
Speaker 2: grateful for that anyway. But you know, once the emotions
Speaker 2: have passed, that's when you know that calm, rational, practical
Speaker 2: approach steps in, and you know, you look at asking
Speaker 2: those questions, all right, what can we do with this money?
Speaker 2: What is the smartest thing to do with this money?
Speaker 2: What would actually in our financial lives needs attention immediately
Speaker 2: to improve our financial wellbeing? There is a definitely clear
Speaker 2: transition from the emotional reaction to those strong strategic financial decisions.
Speaker 1: Does it change, though, depending on where you're at in
Speaker 1: your life. I mean surely if you're in say your twenties,
Speaker 1: you're going to have a different reaction to someone, say
Speaker 1: in their fifties, because it's just like the look on
Speaker 1: your face, just that it's just like just stop, Michael,
Speaker 1: because you're heading down the wrong path. But I've committed it.
Speaker 1: I'm going to finish it, okay, in your twenties, right,
Speaker 1: it is about disposable income. It is about having a
Speaker 1: bit of fun with your money. And suddenly you ten
Speaker 1: thousand dollars lands in your account. You're like, fantastic, that's
Speaker 1: that holiday that I wasn't actually sure whether I was
Speaker 1: going to be able to afford. Now I can. In
Speaker 1: your fifties, inching closer to retirement, Hey, that ten thousand
Speaker 1: dollars may make a fantastic additional contribution to my super
Speaker 1: It's going to change.
Speaker 2: Right, you are actually right?
Speaker 1: But better that hurt?
Speaker 2: No, But if you let me continue on without being interrupted.
Speaker 2: You know, money has an interesting way of magnifying what
Speaker 2: exists within this And I've said this before. Clearly you
Speaker 2: were not listening back then. So if someone is really
Speaker 2: driven and motivated and educated about money, they are going
Speaker 2: to use that to leverage and magnify that. So you know,
Speaker 2: if then the flip side is if someone's you know,
Speaker 2: really squandalous or it is really frugal with money, they're
Speaker 2: actually going to probably hold that money more or blow
Speaker 2: that money. So you know, this is where it not
Speaker 2: necessarily is different, but to you know, I guess to
Speaker 2: come to a conclusion with this and agree with you. Yes,
Speaker 2: someone who is young doesn't have serious financial responsibilities. It
Speaker 2: is more likely for them to go and spend that money,
Speaker 2: whereas someone say in their fifties, with significant financial pressures
Speaker 2: and stresses like preparing for retirement, you know, mortgages, maybe
Speaker 2: private school fees, you know, no investments, and they wanting
Speaker 2: to achieve things. Yes, that money would be used very
Speaker 2: very differently and received I guess different level appreciation. Perhaps.
Speaker 1: Can I just clear up one thing along the way
Speaker 1: here that if your first thought is great holiday, it
Speaker 1: doesn't necessarily mean that you're irresponsible with money, does it?
Speaker 2: Absolutely not. I think the investment of travel, exploring, adventure
Speaker 2: is one of the best investments you can make in yourself.
Speaker 2: You know, there's so much intangible value that comes from traveling,
Speaker 2: experiencing different cultures, meeting different people, you know, respecting all
Speaker 2: the different walks of life, and seeing you know, what
Speaker 2: the big wide world really does look like and where
Speaker 2: we sit in it is you know, the significance of
Speaker 2: the world. And yeah, I think it is something that
Speaker 2: I mean, I've never regretted going on holiday ever.
Speaker 1: Yeah, and especially when things are tight, we are still
Speaker 1: in a cost of living crisis and just being able
Speaker 1: to afford to say take the kids to Sea World
Speaker 1: or something like that. This money could make a meaningful difference.
Speaker 2: Yeah, and you know, I mean these memories that you're
Speaker 2: building and these last a lifetime.
Speaker 1: I feel like we're in a place of agreement to you,
Speaker 1: which is just so d right down the date. So
Speaker 1: therefore I'm going to just demolish everything that we've just done,
Speaker 1: all the goodwill that we've built up in the studio,
Speaker 1: and complain a little bit. Why can't you see it
Speaker 1: as free money? Right? This is ten thousand dollars that
Speaker 1: you didn't have yesterday. You weren't expecting it. It's just
Speaker 1: arrived in your account. Why can't I just claim that
Speaker 1: as free money and do whatever the heck I want?
Speaker 1: Why don't we.
Speaker 2: Just like reframe this together right now and see this
Speaker 2: as like an opportunity blessing. Unexpected money can actually represent
Speaker 2: a really powerful turning point in our lives. You know.
Speaker 2: For some people that might mean they can finally clear
Speaker 2: the debt that has been weighing on them, like not
Speaker 2: just financially but mentally as well. But for others. It
Speaker 2: also could be the catalyst of starting something really big,
Speaker 2: perhaps kickstarting that share pot follio or you know that
Speaker 2: is the ten thousand dollars that kickstarts the decision to
Speaker 2: try and save up for a deposit on a home,
Speaker 2: or some sort of other financial investment such as starting
Speaker 2: up a business that they've always wanted to. So, whilst
Speaker 2: it can feel like bonus money, it often has the
Speaker 2: potential to create some really serious long term improvements and
Speaker 2: shifts in our lives. So, you know, sometimes a small
Speaker 2: financial blessing ten thousand dollars I think still a lot
Speaker 2: of money, can actually be absolutely the turning point for
Speaker 2: a new financial chapter of your life.
Speaker 1: Yeah, ten thousand dollars can be enough to kind of
Speaker 1: get you out of credit card debt. It can be
Speaker 1: enough to kickstart your emergency money savings. It can do
Speaker 1: a lot of things. So I just want to make
Speaker 1: it very clear that I am certainly not turning up
Speaker 1: my nose at ten thousand dollars, but if I'm going
Speaker 1: to win lotto, I would prefer it to be something
Speaker 1: with a few more zeros after it.
Speaker 2: Well, it all boils down to your money mindset and
Speaker 2: your attitude and your financial literacy, you make that money
Speaker 2: actually really count.
Speaker 1: Yeah. Yeah, indeed, so that I buy enough lottery tickets
Speaker 1: in order to increase my chances of winning. Is that
Speaker 1: what you're trying to say?
Speaker 2: No, okay, not at all. Right, I think we're getting somewhere.
Speaker 1: Last one before we get into the practical side, because
Speaker 1: I really want to kind of go through a step
Speaker 1: by step of how you might actually make those decisions
Speaker 1: around where the money goes. And I want to know
Speaker 1: from you what you would do specifically if you had
Speaker 1: ten thousand volts. But we'll do that in a minute.
Speaker 2: It's going to be really cool. Just so you know
Speaker 2: what I'm going to share with you. You'll be really impressed.
Speaker 1: Are you the one that has assessed it as being cool?
Speaker 1: Because you and I have very different definitions of cool.
Speaker 2: We'll have to see.
Speaker 1: Okay, all right, great teaser. Just quickly. Mistakes. What are
Speaker 1: the mistakes that you see people make when they receive
Speaker 1: win for money? And we're talking I suppose here it's
Speaker 1: not just about winnings. It's more likely going to be
Speaker 1: a tax refund, for instance, or a bonus from work,
Speaker 1: maybe an inheritance, those kinds of things. What are the
Speaker 1: mistakes that you see people make? Is it these emotional
Speaker 1: decisions just rushing out and doing things too quickly.
Speaker 2: So actually, one of the saddest patterns I have seen
Speaker 2: and witnessed professionally and personally. He is actually self sabotaged.
Speaker 2: So this stems from you know, low self worth, and
Speaker 2: it's deeply ingrained in money beliefs, and some people subconsciously
Speaker 2: feel like they don't actually deserve financial abundance. You know,
Speaker 2: they haven't necessarily worked for it for their because they've
Speaker 2: won it, for example, or inherited it, and so they
Speaker 2: literally get rid of it and they'll spend it, they
Speaker 2: make impulsive decisions just to get it out of their
Speaker 2: hands away from them, or even I've seen situations where
Speaker 2: people even just give the money away. And you know,
Speaker 2: it can look like all sorts of different things going on,
Speaker 2: like you know, excessive spending, risky decisions, or simply not
Speaker 2: even having a plan or even being thoughtful about making
Speaker 2: that money last, or actually taking a moment to stop
Speaker 2: and actually think about the heritage of that money, if
Speaker 2: you like, and what that money actually represents. And this
Speaker 2: is why I always talk about, you know, when someone's
Speaker 2: looking at going down a path of financial literacy. The
Speaker 2: first place to invest time isn't actually the budget of
Speaker 2: the goals, is actually your money mindset, so that you
Speaker 2: can actually embrace the adventure and the journey ahead. Knowing
Speaker 2: that you know what you're doing for yourself is actually
Speaker 2: really important and as actually building up your self confidence
Speaker 2: and your belief in yourself.
Speaker 1: Okay, let's take a very quick break, come back and
Speaker 1: go through the main options of what you can do
Speaker 1: and in particular what you would do as well. Can
Speaker 1: I We are talking today about the ten thousand dollars question.
Speaker 1: This is the hypothetical that if you were to receive
Speaker 1: ten thousand dollars, if someone handed it to you tomorrow,
Speaker 1: what would you do with it? Take us through the
Speaker 1: main options, so paying off debt, boosting, savings, investing.
Speaker 2: So the order of priority, and of course it depends
Speaker 2: on your situation. But if you had, say, credit card
Speaker 2: debt or buy an hour pay later, your number one
Speaker 2: priority is to clear that instantly as much as you
Speaker 2: possibly can.
Speaker 1: Toxic debt.
Speaker 2: Toxic debt, the non deductible debt, the debt where you've
Speaker 2: just used borrowed money to just buy stuff that's depreciating value,
Speaker 2: including actually car loans in that. The next one is
Speaker 2: obvious courses in emergency savings, so you know you already
Speaker 2: may have some emergency savings, but it may not necessarily
Speaker 2: be enough where you may have recently taken some money
Speaker 2: out of that emergency savings as the need of being
Speaker 2: topped back up again, so that would be your next
Speaker 2: point of call. The third step really comes down to
Speaker 2: your situation, like what are you working on right now?
Speaker 2: What are your big long term financial goals. Perhaps you
Speaker 2: know you want to put that money towards, if there's
Speaker 2: any leftover, towards you know, saving up a deposit for
Speaker 2: a home, or perhaps you want to use that money
Speaker 2: to start investing and start earning passive income. Or perhaps
Speaker 2: you're at a stage in your life where you're looking
Speaker 2: at retirement and you're looking at some sort of financial
Speaker 2: goals to work on, and you've now got idea as
Speaker 2: to how much money you need and SUPER, perhaps it
Speaker 2: is time to then put that money in SUPER. But
Speaker 2: it really depends as to where you are in your
Speaker 2: life stage and cycle and what your goals really are
Speaker 2: and what's going to add the most value to your
Speaker 2: financial well being.
Speaker 1: Okay, but that's a pretty clear guide actually that really
Speaker 1: you do start with the thing that is going to
Speaker 1: cause you the most damaged financially and rather to reframe
Speaker 1: it that will do you the most good to clear.
Speaker 1: So say that toxic debt.
Speaker 2: It will rebuild financial stability and resilience if you can
Speaker 2: clear that debt and then stay out of that debt,
Speaker 2: because the last thing I want to do is clear
Speaker 2: the debt and then find six months later you're back
Speaker 2: because you haven't addressed your habits, your mindset, your attitude.
Speaker 1: Okay, and then it's working through kind of where you
Speaker 1: are at with your other assets. Say you already have
Speaker 1: emergency money, you may not need to be adding to it.
Speaker 1: If you've already got if you're happy with her superza,
Speaker 1: you may not need to be adding to that. Or
Speaker 1: if you go, hey, this would actually benefit me best
Speaker 1: as an additional contribution to my super then maybe that's
Speaker 1: and I suspect it would be quite valuable getting some.
Speaker 2: Advice, definitely, And one thing I should also say is
Speaker 2: it's not one or the other. You can definitely have
Speaker 2: a combination of PA. You can split it well, you know,
Speaker 2: and you know at the end of the day. This
Speaker 2: is your money, it's your business what you choose to
Speaker 2: do with it, and you want to feel good about
Speaker 2: what you decide to do. And that's why it's important
Speaker 2: to like not rush out and do this straight away,
Speaker 2: but to get advised, to sit and think, to write
Speaker 2: down some goals, and to really understand also your values
Speaker 2: around money. So for some people, that actually may look
Speaker 2: doing a little bit of everything. So you may already
Speaker 2: have a good debt payment plan in place, but you think,
Speaker 2: you know what, I'll put to say two thousand of
Speaker 2: that ten thousand towards that. Technically it's not the smartest
Speaker 2: thing to do, but it's okay. And then you use
Speaker 2: the other two thousand, for example, to top up your
Speaker 2: super the other two thousand to buy a parcelo shares,
Speaker 2: and you know, others say remaining four thousand news is
Speaker 2: emergency money. At least you're addressing all of those goals
Speaker 2: on a maybe you could say a holistic level, but
Speaker 2: at the end of the day, is what makes you
Speaker 2: feel good and what you decide understanding all the pros
Speaker 2: and cons behind each one, even though it's not technically
Speaker 2: the smartest thing to do, but it's okay. It's what's
Speaker 2: smartest for you.
Speaker 1: Okay, it is funny. I'm getting the sense that you
Speaker 1: can actually tell quite a bit about somebody's money mindset
Speaker 1: from the way that they If you were to walk
Speaker 1: up to somebody in the street and say, right now,
Speaker 1: what would you do if I gave you ten thousand
Speaker 1: dollars tomorrow? You can learn a lot about somebody's money
Speaker 1: mindset from that.
Speaker 2: You can learn so much in the way someone talks
Speaker 2: and the language they use as well, and even the
Speaker 2: tone of their voice. And it's funny, like even at
Speaker 2: the dog park, like I've made some amazing friends and
Speaker 2: I love sometimes talk about money. And there's one particular
Speaker 2: couple in particular, and it's fascinating listen to the way
Speaker 2: that they talk about money because they have such an
Speaker 2: abundant mindset and everything is positive, everything's an opportunity, everything's exciting,
Speaker 2: everything is celebrated.
Speaker 1: Is it easier to have an abundant mindset when you've
Speaker 1: got money? Though, without being too negative about this, just
Speaker 1: playing Dell's advocate, I suppose it feels like it's easier
Speaker 1: to be abundant and welcome the flow of money when
Speaker 1: you're not having to scrap for every cent and you're
Speaker 1: not just trying to go, Okay, how am I going
Speaker 1: to pay the mortgage this week?
Speaker 2: But this is where it comes down to understanding your values.
Speaker 2: Not everyone views abundance as lots of money in the banker,
Speaker 2: I don't. I view abundance as richness in relationships and
Speaker 2: connections to people around me and myself, richness in health
Speaker 2: and well being. You know, it goes deeper than just
Speaker 2: financial when it comes you know, when it comes to
Speaker 2: the topic of abundance. So I don't it depends on
Speaker 2: where you're at and what you're working towards and were
Speaker 2: you really value.
Speaker 1: Yeah, this wasn't even the topic of today's There we Go,
Speaker 1: Good Life. I feel like there is another episode in
Speaker 1: this where I entirely understand the value and the importance
Speaker 1: of an abundance mindset. But I just feel like it
Speaker 1: is such a difficult thing to grasp when you are
Speaker 1: stuck in that day to day just trying the grind
Speaker 1: to keep a living coming through the door.
Speaker 2: But this is the cool thing about having an abundant
Speaker 2: mindset is it helps you get you out of that
Speaker 2: place of you know, this hand to mouth living, paycheck
Speaker 2: to paycheck. If you can focus and intentionally build something
Speaker 2: that is a focused around getting out of this situation,
Speaker 2: and you do learn to slowly grow and nurture and
Speaker 2: harvest an abundant mindset, it does help significantly in coming
Speaker 2: out the other side and making those consistent changes where
Speaker 2: you do end up eventually transforming your life financially.
Speaker 1: Okay, Canna, I have ten thousand dollars in my pocket,
Speaker 1: and I'm gifting it to you, no strings attached, except
Speaker 1: for one string, which is that you have to tell
Speaker 1: me what you're going to do with it. What are
Speaker 1: you doing with this cash?
Speaker 2: I ran some numbers, okay, so I'm going to turn it.
Speaker 2: I'm going to turn this ten thousand dollars into one
Speaker 2: hundred and forty six thousand dollars.
Speaker 1: I am most definitely listening. Go on, all right.
Speaker 2: I would use a debt recycling strategy, so I would
Speaker 2: put ten thousand dollars directly onto my mortgage to reduce
Speaker 2: obviously the non deductible debt. I would then go and
Speaker 2: redraw that money through a separate investment loan obviously secured
Speaker 2: against my home, after checking my budget and looking at
Speaker 2: interest direct rises, and then I would go and invest
Speaker 2: that money into a diversified share portfolio of say like
Speaker 2: listed investment companies, allowing obviously all of those dividends to
Speaker 2: be reinvested and compound over time. So over a thirty
Speaker 2: year period, that ten thousand dollars, assuming a net return
Speaker 2: on average of say ten percent per annum, would actually
Speaker 2: be around one hundred and ten thousand dollars. But this
Speaker 2: is where there are other benefit comes in. Because I
Speaker 2: have prioritized paying down debt, I would actually have saved
Speaker 2: over thirty six thousand dollars in interest off my home
Speaker 2: loan assuming a six and a half percent mortgage, and
Speaker 2: I'm using an average sh loan size of six hundred
Speaker 2: and fifty thousand, which is the average home loan in Australia,
Speaker 2: and I would shorten my debt free mortgage free journey
Speaker 2: by ten months.
Speaker 1: That's actually really cool, And what I like about that
Speaker 1: is the fact that you are essentially paying it off
Speaker 1: your mortgage only to then reborrow the money again, but
Speaker 1: you're doing it in a more You're taking it from
Speaker 1: kind of semi toxic debt to tax deductible debt exactly.
Speaker 2: And this is why having financial goals and then having
Speaker 2: a financial plan built around these goals means that you
Speaker 2: do you make really wise, intelligent decisions. When abundance like
Speaker 2: ten thousand dollars lands magically lands in your lap, you
Speaker 2: have all those positive feelings and then you can hit
Speaker 2: the ground running with that money.
Speaker 1: I want to make two things very clear. The first
Speaker 1: is that this is a very specific scenario for you. Yes,
Speaker 1: that definitely yeah. And that if you think, hey, that
Speaker 1: sounds great, talk to a financial planner, get some advice
Speaker 1: that is tailored specifically to you, because that is just
Speaker 1: a scenario that is tailored to your own circumstances.
Speaker 2: And debt recycling is a high risk strategy is not
Speaker 2: for everyone. And we've even got quite a few episodes
Speaker 2: now all about debt recycling. So if you like the
Speaker 2: sound of what I'm talking, obviously it's not strategic advice whatsoever,
Speaker 2: but you can go and learn more from our other
Speaker 2: podcast where we talk about this and how to do
Speaker 2: this in an intelligent, sensible, wise way.
Speaker 1: Indeed, and the other thing I need to make clear
Speaker 1: is that I do not have ten thousand dollars for you.
Speaker 1: That was purely hypothetical. I suspect you're not surprised by that.
Speaker 2: That's okay, because I have an abundant mindset and I
Speaker 2: will manifest ten thousand dollars. There, we got the end
Speaker 2: of the wink.
Speaker 1: I love the fact that we've managed to bring in abundance.
Speaker 1: We brought in manifesting, we brought in debt, recycling, We've
Speaker 1: brought in so many different things. It really has just
Speaker 1: been a mixed bag of concepts. In today's episode, where
Speaker 1: can people find you if they want a bit more information?
Speaker 2: If you like to understand and learn more, always reach
Speaker 2: out to me on Instagram at Sugar Mama TV.
Speaker 1: And you can hear me every day with Sean Aylmer
Speaker 1: on Fear and Greed business news you can use. Thank
Speaker 1: you for listening to how do they afford that? Remember
Speaker 1: to follow on the podcast, and the best thing you
Speaker 1: can do is actually spread the word. Send the link
Speaker 1: to this episode to somebody else if you think that
Speaker 1: they might benefit from hearing it. Thanks for your company.
Speaker 1: Join us again next week