Speaker 1: Welcome to How Do They Afford That?
Speaker 2: The podcast that peaks into the financial lives of everyday Australians.
Speaker 1: I'm Michael Thompson.
Speaker 2: I'm an author and the co host of the business
Speaker 2: news podcast Fear and Greed. As always, I'm with Canna Campbell,
Speaker 2: financial planner and founder of Sugar Mamma TV, the financial
Speaker 2: literacy platform that is on YouTube, podcast books, TikTok, Instagram
Speaker 2: threads and more.
Speaker 1: Hello Canna, good morning.
Speaker 3: How are you?
Speaker 2: I am exceedingly well. Today we are going to be
Speaker 2: digging into a topic that can be a little bit
Speaker 2: uncomfortable at.
Speaker 3: Times, controversial, polarizing.
Speaker 2: Yet it is something that feels very real for a
Speaker 2: lot of people.
Speaker 3: This is important. We need to be talking about this,
Speaker 3: We need to be getting uncomfortable in this episode.
Speaker 2: Indeed, this is the middle class money trap. All right,
Speaker 2: So you earn decent money, you're doing okay, but somehow
Speaker 2: you do not feel like you're get a head. You're
Speaker 2: not struggling, right, but you're also not building kind of
Speaker 2: real financial freedom either. What's going on?
Speaker 1: That is the question. We're setting ourselves a fairly lofty goal.
Speaker 2: But yeah, as soon as you start talking about class,
Speaker 2: particularly in Australia, it becomes a very it's a difficult conversation.
Speaker 3: It's uncomfortable and it's confronting, and yeah, it's I feel
Speaker 3: funny about this, but I feel it. I know that
Speaker 3: there's a lot of value in actually breaking this down
Speaker 3: and talking about it and racing it front on, if
Speaker 3: you like, what.
Speaker 1: Do we mean by the middle class money trap?
Speaker 3: So the middle class money trap is where as you said,
Speaker 3: someone is earning good money, so anything above. I think
Speaker 3: the definition of middle class is above one hundred and
Speaker 3: twenty to one hundred and fifty thousand dollars a year.
Speaker 3: And they appear from the outside to be doing well financially,
Speaker 3: but behind closed doors, the reality is that they're not
Speaker 3: actually making any sort of meaningful financial progression. You know,
Speaker 3: they have a nice home, they might drive a nice car,
Speaker 3: They might even have say children in like local private schools.
Speaker 3: They seem to go on lovely holidays, you know, domestic
Speaker 3: and international, but they also have you know, the expenses
Speaker 3: of modern day life and the increasing expenses of modern
Speaker 3: day life, and this is where so much of their
Speaker 3: income is sucked up and a lot of it is
Speaker 3: been absorbed in the lifestyle creep over a long period
Speaker 3: of time, and there isn't much leftover to show at
Speaker 3: the end of the day. And because of that, they're
Speaker 3: never really making any sort of meaningful shift or change
Speaker 3: in improving their financial wellbeing. And this is where a
Speaker 3: lot of people are scratching their head, going, well, I
Speaker 3: own really good money, but why is there nothing left
Speaker 3: over to show for it at the end of the day.
Speaker 3: And this is, you know, a classic example.
Speaker 2: So how do you get into this busy? Why do
Speaker 2: so many households that are earning good money feel financially stuck?
Speaker 2: Is it because that those things, as you say, that
Speaker 2: lifestyle creep that as soon as you've got say, school fees,
Speaker 2: they're not going anywhere and they're only just going to
Speaker 2: get more expensive. That there is this expectation that the
Speaker 2: car you're going to drive, you're going to kind of
Speaker 2: replace that and match it, or that you're in a
Speaker 2: way trying to keep up with everyone around you, keep
Speaker 2: up with the joneses, and as a result, you're never
Speaker 2: actually going to make any progress even though you are
Speaker 2: actually earning pretty good money.
Speaker 3: Yeah, and this is why we need systems and structures
Speaker 3: in place to help get ahead of that lifestyle creep
Speaker 3: before it happens, or allows you to increase your lifestyle,
Speaker 3: but under your terms and conditions, you know, with your
Speaker 3: boundaries in place, it happens so easily. And interestingly, if
Speaker 3: you think back, you know, ten years ago, if you
Speaker 3: were earning you know, say one hundred and twenty one
Speaker 3: hundred three thousand dollars, that was a lot of money. Yeah,
Speaker 3: you know, you had a lot of money left over
Speaker 3: the well, it gave you a lot of change. But
Speaker 3: because we've had inflation and the rising costs are living,
Speaker 3: you know, we're now left with nothing when you're owning
Speaker 3: this type of money. So it happens very easily, and
Speaker 3: this is why it's so important to have that awareness
Speaker 3: that you don't ever become a victim of this lifestyle creep.
Speaker 2: It sounds like it's kind of less about splurging and
Speaker 2: less about kind of just having rampant spending and more
Speaker 2: about kind of structural costs, so things that are like
Speaker 2: your mortgage, school fees, that kind of thing, that those
Speaker 2: expenses just keep on creeping up and taking a big
Speaker 2: chunk of your income. It's not about the fact that, hey,
Speaker 2: you're going out for dinner every second night, and that's
Speaker 2: why you've got nothing to show for it.
Speaker 1: It's like almost a structural thing.
Speaker 3: I think now, yes, if you go back, you know,
Speaker 3: when we didn't have inflation a serious problem and the
Speaker 3: rising cost of living, definitely it was more discretionary spending.
Speaker 3: But now it's the essentials that are really dominating most
Speaker 3: family budgets and leaving us with nothing left over.
Speaker 1: Do you think then that people and the perception of this.
Speaker 2: We talked about the fact that this is uncomfortable and
Speaker 2: uncomfortable thing to talk about. Do you think that there
Speaker 2: is a case where people confuse high income with financial progress.
Speaker 2: They assume that, hey, because you're earning a lot of money,
Speaker 2: therefore you have made good financial progress without actually realizing
Speaker 2: what's happening behind the scenes.
Speaker 3: Absolutely, I think we fool ourselves as well. Just because
Speaker 3: you are financially comfortable doesn't mean you are financially successful.
Speaker 3: And you know, there is this whole keeping up with
Speaker 3: the Jones mentality as well that goes on in every
Speaker 3: single suburb around Australia.
Speaker 2: So you know what this podcast is named after, isn't it?
Speaker 2: How do they afford that? It's the question that I
Speaker 2: think everyone has asked about someone that they know, a neighbor,
Speaker 2: a family member, or a friend.
Speaker 3: How on the intrigue voyeurism.
Speaker 1: Indeed, it is.
Speaker 2: In terms of how this comes about and then how
Speaker 2: to either prevent it or fix it. Is there is
Speaker 2: there a danger that people focus too much on some
Speaker 2: of those on the big assets like having a nice house,
Speaker 2: building up their superannuation, and not enough just on the
Speaker 2: day to day cash flow. And as a result, they
Speaker 2: find themselves getting kind of what is an asset asset
Speaker 2: rich asset.
Speaker 3: Rich cash pourse. So they think about, as you said,
Speaker 3: the big the big shiny toys, and the glitz and
Speaker 3: glamour of you know that comes with say you think
Speaker 3: you blo earn good money. I can afford this, I
Speaker 3: deserve it, I'm entitled to it, I'm rewarding myself. So yes,
Speaker 3: you can lose track of actually what the real cost
Speaker 3: of living actually looks like and what is actually you know, affordable,
Speaker 3: and what's actually wise and also not just what's affordable
Speaker 3: right now, what's going to be affordable and say three four,
Speaker 3: five years time where interest rates change again, or you've
Speaker 3: got say another family member or another child that you've
Speaker 3: got to educate or another spence that comes your waist.
Speaker 3: You need to be thinking about what's actually going to
Speaker 3: work for you now and is safe. Also what's going
Speaker 3: to remain safe as well because life changes, it's unpredictable.
Speaker 3: You need to make sure that you're looking at the
Speaker 3: big picture here.
Speaker 1: How do you know if this applies to you? Is
Speaker 1: there a warning sign?
Speaker 3: I think intuitively most people know deep down whether they
Speaker 3: are a victim of this middle class money trap. You
Speaker 3: know that there is nothing left you are asking yourself
Speaker 3: this question, or is where is all the money going?
Speaker 3: You know, and you're not seeing any progress. You're not
Speaker 3: seeing the mortgage come down, or you're seeing it come
Speaker 3: down a very slow, frustrating rate, or it's been another
Speaker 3: year where you haven't been able to find money to
Speaker 3: start investing, or you know you still haven't been able
Speaker 3: to set up that salary sacrificing. These are the red
Speaker 3: flags that you are potentially part of this and that
Speaker 3: the sooner you can do something, the better. Because not
Speaker 3: only is this money trap sometimes a waste of money,
Speaker 3: particularly when there is a large allocation of your budget
Speaker 3: going towards discretionary spending, you're also wasting valuable, precious time
Speaker 3: that could be actually helping you pay down the mortgage sooner,
Speaker 3: start investing, building up your super having emergency money, and
Speaker 3: actually alleviating the financial stress in your life. And you know,
Speaker 3: it's the thing with the money trap is that people
Speaker 3: can make it look like, oh, we're killing it in life.
Speaker 3: We'd go off on this holiday and we just got
Speaker 3: back from that holiday, and we're going to upgrade the car,
Speaker 3: and we're going to be buying a boat, and you know,
Speaker 3: they're living this life on a built with a pack
Speaker 3: of cards. It could come crumbling down and behind the
Speaker 3: scenes what it does to someone's stress levels and anxieties
Speaker 3: is huge, and where it infiltrates into the other parts
Speaker 3: of your life.
Speaker 2: Yeah, and we do need to acknowledge, of course, that
Speaker 2: there is a lot of privilege involved in this conversation.
Speaker 2: One hundred percent that this is the case that there
Speaker 2: would be people listening to this. This sounds like a
Speaker 2: problem I would like to have, right to be in
Speaker 2: that position of having enough money to be able to
Speaker 2: have those things and then wonder where the money. This
Speaker 2: is not something that applies to everyone. We completely understand that,
Speaker 2: but it doesn't change the fact that for a lot
Speaker 2: of people that it's kind of almost then feeling trapped
Speaker 2: in the jobs that they're doing just in order to
Speaker 2: continue to fund the basics that lifestyle, which isn't a
Speaker 2: healthy place to be in either because.
Speaker 3: You're backed in a corner and your options, most options
Speaker 3: are taken away. You almost need to kind of push
Speaker 3: through or make a major change.
Speaker 2: Okay, we have established what the problem is. We've established
Speaker 2: kind of how you get into that position. We're going
Speaker 2: to take a quick break. On the other side of
Speaker 2: the break, it is how to get out of it,
Speaker 2: or if you suspect you could be heading in that direction,
Speaker 2: the steps that you need to take in order to
Speaker 2: prevent it from taking place. Back in a second, can
Speaker 2: we are talking about the middle class money trap today?
Speaker 2: We've established what it is that it's basically this, as
Speaker 2: your lifestyle expands to kind of meet the money that
Speaker 2: you're earning. You feel like you're actually earning pretty good money,
Speaker 2: but the school fees, there's mortgage costs, and even the
Speaker 2: grocery bill.
Speaker 1: That inflation has.
Speaker 2: Caused these costs just to explode, and as a result,
Speaker 2: that just doesn't feel like there's anything left. If someone
Speaker 2: is listening to this right now and thinks that, hey,
Speaker 2: this actually does sound like me.
Speaker 1: What do you do?
Speaker 2: What are the steps?
Speaker 3: So the first thing is the acknowledgment, going, yep, you
Speaker 3: know what this is us. This is exactly what Kenna
Speaker 3: and Michael are talking about. This is where we are,
Speaker 3: and we want to change it. Some people are very
Speaker 3: happy to live this life, you know. They don't. It
Speaker 3: doesn't impact them, it doesn't wear them down. They sometimes
Speaker 3: some people even enjoy the adrenaline of living like this,
Speaker 3: you know. But if you're listening to going this is
Speaker 3: where we are and we hate it, it doesn't service.
Speaker 3: It is time to do something about it. But the
Speaker 3: first thing is obviously taking that responsibility and saying, okay,
Speaker 3: all right, this is where we are. We're going to
Speaker 3: learn and grow and we'll never get back to this
Speaker 3: position ever again. So then you look at all right,
Speaker 3: go straight to the budget. Look at where all your
Speaker 3: money is going. And I have a course where I
Speaker 3: teach people how to do a budget and a cashrow system.
Speaker 3: But look at where the financial wastage is. And this
Speaker 3: is why it's worth looking at your value system so
Speaker 3: you can see, well, actually have outgrown that, or I
Speaker 3: don't value that anymore and you can look to cut it,
Speaker 3: and then you start to build financial buffers and breathing
Speaker 3: space in your life, so making some extra payments where
Speaker 3: you can on any debt, building some goals around those
Speaker 3: debts as well, so that you don't feel suffocated by
Speaker 3: the lifestyle creep, you don't feel suffocated by your previous
Speaker 3: historical decisions in life where you have perhaps previously wrapped
Speaker 3: up a whole pile of credit card debt in order
Speaker 3: to pay for all these things and keep up with
Speaker 3: everyone else. It's about owning it and going right. I'm
Speaker 3: going to build a goal, set a goal, and I'm
Speaker 3: going to start paying that down so you can actually
Speaker 3: start immediately feeling a bit better and a lot more
Speaker 3: empowered about what you can actually do to fix this,
Speaker 3: because at the end of the day, it boils down
Speaker 3: to us. We are not going to you know, someone's
Speaker 3: not going to come out of nowhere and wave a
Speaker 3: magical wand and fix our finances. There's a lot of
Speaker 3: personal growth and development that comes from going through this,
Speaker 3: and then of course looking at Okay, what do I
Speaker 3: really want in my life? What does my life look like?
Speaker 3: In order to be able to enjoy it on a
Speaker 3: meaningful level where I can see the financial progress. Does
Speaker 3: that look like a share port follow? Does that look
Speaker 3: like having a mortgage paid off? Does it look like
Speaker 3: having a lot of money and superannuation knowing that I'm
Speaker 3: on track to retire. Everybody's different. There's no wrong or right,
Speaker 3: but as long as it reflects back to what your
Speaker 3: goals are, your value system, and what's going to help
Speaker 3: take the stress and pressure off your life so that
Speaker 3: you can enjoy life again, because you know, it's a
Speaker 3: bit of a beato killer financial stress, you know, and
Speaker 3: it impacts our relationships, It impacts our physical and mental health.
Speaker 3: We feel forced into career paths that we don't necessarily
Speaker 3: feel fulfilled and you know, rewarded necessarily. So we can
Speaker 3: sort of come to that. And this is where I
Speaker 3: think a lot of people decide to then downsize the
Speaker 3: home if they are if they're in a fortunate position
Speaker 3: where they own a home, they look at downsizing, or
Speaker 3: perhaps they look at moving to a different area where
Speaker 3: it's not as expensive and they don't have as many transactions,
Speaker 3: so not transactions don't have as many distractions and temptations
Speaker 3: around them, So you know, there is a lot of
Speaker 3: work to be done, but this is completely fixable, and
Speaker 3: how much you want to fix it comes down to
Speaker 3: how much you want to change things. And you know,
Speaker 3: maybe for some people, and I've seen this as well,
Speaker 3: where people move away temporarily just to help find themselves
Speaker 3: again and rebuild and get off that hedonistic treadmill.
Speaker 2: If you like it's breaking the cycle. Yeah, okay, as
Speaker 2: you're talking, it sounds to me like it is less
Speaker 2: about kind of going out and trying to earn more
Speaker 2: in order to increase the amount of money that's coming
Speaker 2: into the household, and more just about good old fashioned
Speaker 2: cash flow management and.
Speaker 3: Just sometimes the soulfness of just going back to the essentials,
Speaker 3: the basics, and stripping everything back and going all right,
Speaker 3: let's start again from scratch and rebuild from here.
Speaker 2: The hard part there, right, would have to be the
Speaker 2: psychological element. Hue, do this right, because it is really
Speaker 2: quite something, especially if you have built yourself up into
Speaker 2: this position, and you have got yourself at a house,
Speaker 2: and you've got yourself a nice car perhaps and holidays
Speaker 2: and things. To actually be able to put your hand
Speaker 2: up and say this isn't working for me anymore.
Speaker 1: That would be really hard.
Speaker 3: It's hard, but it's also liberating because that's where the
Speaker 3: shift happens, and you have this sense of relief going,
Speaker 3: all right, I'm not burying my head in the sand.
Speaker 3: I'm not going to live my life like this. I
Speaker 3: deserve better. I'm smarter, and we can transform this and
Speaker 3: you can.
Speaker 1: Does it.
Speaker 2: I'm really just fascinated by the psychological side of it
Speaker 2: because it would also feel though, as though you don't
Speaker 2: have a right to complain because you're earning good money,
Speaker 2: You've got really nice things. Therefore, how is it fair
Speaker 2: to then say, hey, I can't do this anymore, I
Speaker 2: need help, I need some support. It feels like you've
Speaker 2: you've kind of put yourself in that position of being
Speaker 2: unable to complain, because if you do, it's just like, oh,
Speaker 2: the poor little rich person is now complaining about their
Speaker 2: about having too many nice things. You know, And I
Speaker 2: know that I'm paraphrasing, I'm generalizing here, but I'm just
Speaker 2: trying to put myself in the position of someone going.
Speaker 1: How is that going to look to those around them?
Speaker 3: Why are we judging ourselves? Everyone here is doing the
Speaker 3: best job they can. It's like judging, you know, someone
Speaker 3: for like putting on weight and giving up on their exercise.
Speaker 3: Like everyone's on their own journey. Everyone's trying to do
Speaker 3: the best they can with the situation they're in and
Speaker 3: the tools and opportunities around them. I think there is
Speaker 3: something extremely honorable about saying, all right, we got a
Speaker 3: little bit well with our money, we got a little
Speaker 3: bit responsible, we did actually have a really good time,
Speaker 3: and we're grateful for all the you know, the lifestyle
Speaker 3: and the holidays and the weekends away. But now things
Speaker 3: get real and I'm ready for this new chapter. It
Speaker 3: doesn't need you don't need to be ashamed or embarrassed
Speaker 3: or feel guilty about your past. And you know, we
Speaker 3: are surrounded by this constant materialism and consumerism and all
Speaker 3: the advertising and marketing around us, you know, which is
Speaker 3: really sophisticated and really clever at sucking the money out
Speaker 3: of our bank accounts. We just now need to be
Speaker 3: a lot smarter than that and identify when it does
Speaker 3: actually improve our lives and when it's actually a waste
Speaker 3: of money. And you know, learning also how to compromise
Speaker 3: with money as well. It's not about just stopping spending
Speaker 3: money completely, and you know, living off the center of
Speaker 3: an early rag. It's about going okay, well, instead of
Speaker 3: having two holidays a yeah, we'll maybe have one holiday
Speaker 3: every twenty four months, and we'll included weekends awave domestically
Speaker 3: as well, Like it's about finding ways that you can
Speaker 3: within the family unit, you know, be on the same
Speaker 3: page together and keep every everyone connected and moving in
Speaker 3: the right direction.
Speaker 2: I actually think that's a really good place to leave it,
Speaker 2: because it's quite a positive way to finish. And the
Speaker 2: fact is that this would be a stressful place for
Speaker 2: people to be in because there's not much kind of
Speaker 2: margin fererra. I suppose if you have got yourself living
Speaker 2: to a point of yes, you've got high expenses, high
Speaker 2: income as well, if something does go wrong, there is
Speaker 2: actually not much room if something goes south, yeah, and
Speaker 2: you need to find a lot of money quickly, you
Speaker 2: may not be able to do it. And it's got
Speaker 2: to be a stressful way to live, right.
Speaker 3: It's terrifying. Why would you want to do that to
Speaker 3: yourself and to your loved ones as well? But can
Speaker 3: I say one last thing? Yes, you said no, I'd
Speaker 3: like too bad.
Speaker 1: I know I've got no say in this. Go on?
Speaker 3: You know, building wealth or really, I don't think has
Speaker 3: too much to do with what you earn, but more
Speaker 3: about what you do with what you earn. And sometimes
Speaker 3: if you feel that you are a part of this
Speaker 3: middle class money trap, it's perhaps the time to look
Speaker 3: at redesigning your life, you know, being more intentional with
Speaker 3: money and looking at ways to get your money to
Speaker 3: work harder few rather than you always working harder for money.
Speaker 1: I like that.
Speaker 2: If we want more information from you, find you one.
Speaker 3: Well quotes the days, a.
Speaker 1: Little bit more inspiration, more motivation. We head to Instagram.
Speaker 1: I must hear me.
Speaker 3: Actually, oh, two's something different. I have started a sub
Speaker 3: stack account, really yes, and it's called Quiet Wealth and
Speaker 3: I've only just penny just dropped. I talk about this
Speaker 3: a lot, about this need to just silence the noise
Speaker 3: around us and the distractions and just go deep within
Speaker 3: to work out who we are, what we stand for,
Speaker 3: and what actually does actually make us feel authentically wealthy
Speaker 3: beyond the dollars and cents.
Speaker 1: Quiet wealth.
Speaker 2: Yeah, okay, all right, sounds good. And you can hear
Speaker 2: me every day with Sean Aylmer on fear and Greed
Speaker 2: business news.
Speaker 1: You can news.
Speaker 2: Thank you for listening to how do they afford that.
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