Speaker 1: Welcome to How Today Afford That, the podcast that peaks
Speaker 1: into the financial lives of every day Australians. I'm Michael Thompson.
Speaker 1: I'm an author and the co host of the business
Speaker 1: news podcast Fear and Breed, and as always, I am
Speaker 1: joined in the studio by financial planner Cannack Campbell, the
Speaker 1: founder of Sugar Mama TV, the financial literacy platform that
Speaker 1: you will find everywhere YouTube, podcast, books, Instagram, threads, TikTok
Speaker 1: and more.
Speaker 2: Hello, Canna, Hello, it's suit of a mouthful.
Speaker 1: It certainly is well one day soon, I'm going to
Speaker 1: shorten that. I'm just going to just describe you as
Speaker 1: being universally present. I feel like, really, yeah, okay, next time,
Speaker 1: you know, I'm gonna forget the next time I'm going
Speaker 1: to launch into the whole spiel again. Today's episode, it
Speaker 1: is going to be slightly uncomfortable, but it is equally important.
Speaker 2: Very important, particularly right now.
Speaker 1: Yeah. Indeed, if you lost your job tomorrow, how long
Speaker 1: could you comfortably last? Is it going to be a week,
Speaker 1: a month, six months, a year?
Speaker 2: Maybe indefinitely? Because you've built financial independence.
Speaker 1: Today we are talking about financial resilience. This isn't about
Speaker 1: fear and it's not intended to be too negative. It
Speaker 1: is just about preparation and the peace of mind that
Speaker 1: comes from knowing that you are prepared if.
Speaker 2: Something happens, and the practical steps that you will be
Speaker 2: really glad that you took regardless of whatever happens.
Speaker 1: Why do you think it is that that kind of
Speaker 1: job loss resilience really is what we're talking about here.
Speaker 1: It's something that people avoid thinking about. Is it just
Speaker 1: that we don't even want to comprehend that, Hey, something
Speaker 1: that gives us so much security and is so much
Speaker 1: a part of kind of who we are and what
Speaker 1: we do could actually end well.
Speaker 2: I think it's because it forces us to confront uncertainty,
Speaker 2: and our brains are always wired to seek comfort and
Speaker 2: just try and be positive and obviously think that everything's
Speaker 2: going to be fine, it's going to sort itself out.
Speaker 2: We don't need to worry. So, you know, thinking about
Speaker 2: a job loss, it feels uncomfortable, it feels incredibly pessimistic.
Speaker 2: But the thing is preparing for it isn't actually about fear.
Speaker 2: It's actually about creating a sense of peace of mind
Speaker 2: so that no matter what happens either way, you'll always
Speaker 2: be Okay, you'll be able to get back on your
Speaker 2: feet again. And financial resilience is actually one of the
Speaker 2: best things and most empowering things you can ever do
Speaker 2: for yourself because it gives you a sense of confidence
Speaker 2: and strength that you can actually handle to a certain
Speaker 2: degree sudden unexpected changes. And you know, life is rarely perfect,
Speaker 2: it is really predictable. So by having a bit of
Speaker 2: a backup plan to the side allows you to be
Speaker 2: able to navigate stressful times with a greater sense of
Speaker 2: you know, resilience and strength.
Speaker 1: Is there a difference in that case because I understand
Speaker 1: all of that that makes affects sense, this idea that
Speaker 1: we actually don't want to confront this because it is
Speaker 1: something that is it makes us uncomfortable, the idea that
Speaker 1: it can all go, the value of actually doing it, Yeah,
Speaker 1: got it. But is there a difference between kind of
Speaker 1: panic planning and going, oh, things are looking a little
Speaker 1: bit shaky at work, I need to get a plan
Speaker 1: in place, or just getting kind of frantic about the
Speaker 1: idea that your job could go. And then this idea
Speaker 1: of perhaps smart long term preparation. What's the difference between those?
Speaker 2: So the difference is reactionary versus proactive. Okay, so when
Speaker 2: we are reactive, we're normally forced into a situation, possibly
Speaker 2: out of the blue, and we become irrational and our
Speaker 2: emotions are running high, and we often make decisions which
Speaker 2: aren't necessarily the smartest and best decisions for us. You know,
Speaker 2: we're almost in like a sense of survival mode and
Speaker 2: the adrenaline kicks in. But when we are being proactive,
Speaker 2: we have done the work in preparation, we have built
Speaker 2: up the emergency savings. We are able to handle the
Speaker 2: situation with grace, with dignity, but we're also able to
Speaker 2: be calm and make smart, intelligent decisions that allow us
Speaker 2: to move forward, to outgrow the situation and to continue
Speaker 2: on getting back on our feet again and building our lives.
Speaker 1: All Right, it is time to talk about emergency money
Speaker 1: because that is going to be one of the key
Speaker 1: components of this resilience, right, having emergency money saved up
Speaker 1: ready to go in the event that everything changes. And
Speaker 1: this isn't just for job loss. This is for in
Speaker 1: the event of something else big that happens that affects
Speaker 1: your ability to earn an income. Yes, that you are
Speaker 1: covered with emergency money. How much of an emergency buffer
Speaker 1: should we realistically be aiming for. And I know the
Speaker 1: easiest way to provoke right now is to say it's
Speaker 1: just two months of your salary, right or something along
Speaker 1: those even.
Speaker 2: I'm going to like jump across the desk and throttle
Speaker 2: you for saying that is not this arbitrary number and
Speaker 2: it's not this you know, generic formula. What is right
Speaker 2: for someone is different for the other person.
Speaker 1: You've got to look very satisfying, like you've got to look.
Speaker 2: At your own individual situation and the risks and the
Speaker 2: responsibilities that you carry. You know, for example, you know,
Speaker 2: a single parent looking after say three children, carrying the
Speaker 2: bulk with the financial responsibilities and is perhaps self employed,
Speaker 2: needs a lot more emergency money than say a twenty
Speaker 2: two year old that's studying and perhaps living at home.
Speaker 2: You know, if you were to use those generic formulas,
Speaker 2: you know, you run the risk of the young person
Speaker 2: having too much an emergency money and it's not an
Speaker 2: efficient use of funds. And then you run the risk
Speaker 2: of the single mother being exposed to financial risk. She
Speaker 2: would or he would potentially need significantly more money set aside.
Speaker 2: So as a guide, what I suggest people do is
Speaker 2: sit down and look at their situation, and look at
Speaker 2: the safety nets they've got, things like sickly annual leab
Speaker 2: a humulity, perhaps even long service leave, what savings they
Speaker 2: already have established, you know what, things like income protection
Speaker 2: insurance policies they have in place as well. And look
Speaker 2: at what their living expenses obviously come into this as well.
Speaker 2: But look at what are three possible the three most
Speaker 2: expensive I should say possible risks that could actually happen.
Speaker 2: And then what is the cost of each of those
Speaker 2: three And what is the total cost of all of
Speaker 2: these things if they were to happen at the same time.
Speaker 1: So hypothetically that would be And in this scenario where
Speaker 1: we're talking about losing your job, let's say you might
Speaker 1: factor in losing your job tomorrow and it taking you
Speaker 1: three months, for instance, to find a suitable replacement. So
Speaker 1: you're kind of factoring in the ability to continue to
Speaker 1: pay for all of your normal expenses, your mortgage, your groceries,
Speaker 1: your bills, and putting that as well one of your expenses.
Speaker 1: Then you're looking at something else, which might be.
Speaker 2: Say, for example, we were car breaking down and there's
Speaker 2: a three thousand dollar bill and you need your car
Speaker 2: to be able to get to work and to get
Speaker 2: the kids to school.
Speaker 1: It is.
Speaker 2: It is a genuine essential expense, emergency expense, so that
Speaker 2: you'd add that into the list, and then perhaps a
Speaker 2: medical expense where you need to go and get a
Speaker 2: series of scans and tests. And I tore my ACL
Speaker 2: in October and I had knee surgery in December, and
Speaker 2: I think I was out of pocket. I think almost
Speaker 2: twelve thousand dollars. Wow, So you know, these are the
Speaker 2: sorts of things we think about. And a cockroach jumped
Speaker 2: on me like that. It wasn't like I slipped and
Speaker 2: had an accident or it was playing you know, professional
Speaker 2: sport or something glamorous like that.
Speaker 1: Was it a cockroach that did that? Tea? I mean,
Speaker 1: I was very It must have been a very heavy
Speaker 1: cockroach to it.
Speaker 2: I was naked and jumped on my inner thigh because
Speaker 2: I just got another shower. Yeah, So people like that's
Speaker 2: a bit of a stupid overreaction. I'm like, no, I
Speaker 2: was actually naked. It jumped on my in a thigh
Speaker 2: like and it was huge. It was the world's biggest
Speaker 2: cockroach and it flew across the room. It was like
Speaker 2: it was an omen like it was running away from me.
Speaker 2: It stopped, looked at me, and I was thinking, do
Speaker 2: I go get the spray or do I just deal
Speaker 2: with it another time? And as I'm thinking staring at it,
Speaker 2: it was very tired. It jumped on me.
Speaker 1: It lunged.
Speaker 2: My leg went one way and my body went the other.
Speaker 2: And I heard it and like felt it. It was horrible,
Speaker 2: But there you go. Like private health insurance, yes, helped
Speaker 2: cover like stay in hospital, but everything else I was
Speaker 2: out of pocket a lot of money.
Speaker 1: How though, do you factor that? Are you using this
Speaker 1: as an example? How do you plan for something that
Speaker 1: is and there is no way in the world that
Speaker 1: you could predict the arrival of a particularly malicious cockroach, right,
Speaker 1: so how on earth do you budget for that in
Speaker 1: terms of your emergency money? Going? Okay, I will factory
Speaker 1: in twelve thousand dollars for cockroach attack. It could just
Speaker 1: as easily have been having to budget twenty thousand dollars
Speaker 1: for if I kind of slip over in the garden
Speaker 1: and crack your head open or something like, you know
Speaker 1: what I mean. Like these are all so hypothetical and
Speaker 1: theoretical that it's almost impossible to narrow it down to
Speaker 1: what you should be budgeting for.
Speaker 2: Look, your imagination could go wild here, It certainly can.
Speaker 2: And interesting when I shared this video about all the
Speaker 2: expenses I could, I had so many people reach out
Speaker 2: to me with similar stories where they sort of sappened
Speaker 2: with a spider or a lizard or a snake in
Speaker 2: the garden and they tripped over because you know, it
Speaker 2: was actually quite common. Surprisingly, But this is why I
Speaker 2: say go with three, because of course, you know you're
Speaker 2: just helping giving yourself a bit of financial protection. We
Speaker 2: cannot predict what's going to happen in order we actually
Speaker 2: want to attract or manifest, you know, prophesize this stuff
Speaker 2: happening to us. But by looking at your three most expensive,
Speaker 2: at least you've got something close to what that cost
Speaker 2: could end up being, rather than nothing at all. You know,
Speaker 2: you're not going to come up with the exact perfect figure.
Speaker 2: But also when you have this emergency money there, you
Speaker 2: will know whether that's enough and whether it's right for you,
Speaker 2: and whether it gives you that sense of stability and security.
Speaker 2: And you know I've shared this before. You know we
Speaker 2: had seventy thousand dollars emergency money for our family in
Speaker 2: frugal February a couple of years, it all got wiped
Speaker 2: out as well as additional extra savings in one month.
Speaker 2: So you know, you've got to take this seriously. And
Speaker 2: you know, the whole point about this emergency money is
Speaker 2: it makes you financially resilient. Just like if you're building
Speaker 2: a house. You know, if there's a storm that comes through,
Speaker 2: whether it be a fire, rain, or wind, the house
Speaker 2: might be a little bit damaged. But because you've got
Speaker 2: emergency money, the damage isn't too bad, and it's quickly
Speaker 2: and easily fixable and allows you to get back on
Speaker 2: your feet and living in the house of your dreams
Speaker 2: as you were previously.
Speaker 1: On that point though, when you say you had seventy
Speaker 1: thousand dollars in emergency money, someone hearing that would just
Speaker 1: that it's a rage that's impossible.
Speaker 2: That took years and years of building up.
Speaker 1: And this is what I wanted to get at. This
Speaker 1: is this is where we go back to that difference
Speaker 1: between panic planning and smart preparation. That this is not
Speaker 1: about oh Okay, things are looking shaky at work, I
Speaker 1: better start planning now. This is ideally something that hey,
Speaker 1: if everything's great for you at work at the moment,
Speaker 1: and that's not really a risk start anyway, because five
Speaker 1: years time, ten years down the track, maybe things will
Speaker 1: be different and you've actually attacked it then from a
Speaker 1: point of preparation rather than not exactly.
Speaker 2: And you know, I mean that would have been like
Speaker 2: eight years probably of building that money up and then
Speaker 2: having to go back and start all over again, you know,
Speaker 2: And even I'm still I am still in the process
Speaker 2: of rebuilding our emergency money, you know, after having to
Speaker 2: start over again. But the thing is, at least there's
Speaker 2: something there, and it's slowly and it sits in our
Speaker 2: officeter council. It helps, it is actually working with us,
Speaker 2: and that it helps save interest off the home loan.
Speaker 2: But you know, as it's slowly builds, you do feel
Speaker 2: that you feel a lot more comfortable and safe and secure.
Speaker 1: Okay, And also the fact that when you hear seventy
Speaker 1: thousand dollars right, but keep in mind, yes it is,
Speaker 1: it does sound like a lot of money to have there.
Speaker 1: But if you are combining the three biggest risks that
Speaker 1: you might be looking at, say three months of lost
Speaker 1: income from losing your job, and already that is going
Speaker 1: to be a significant lack of money and maybe twenty
Speaker 1: thousand dollars for emergency surgery or something else.
Speaker 2: And also got to take into consideration the consequence, the
Speaker 2: financial consequence of not having emergency money. So, for example,
Speaker 2: Tom and I are both self employed, and Tom is
Speaker 2: actually an equine physio, so he's around horses. His job
Speaker 2: is very very physical. If a horse can suddenly snap
Speaker 2: and jump and he gets injured, that could potentially mean
Speaker 2: that we lose our house. So there are serious financial consequences.
Speaker 2: And that's what again why emergency money is needed.
Speaker 1: Okay, very quick break, So I want to talk about
Speaker 1: the other components that beyond that big chunk of savings
Speaker 1: that ideally you would have, but the other things that
Speaker 1: can help build that financial resilience. Back in a moment
Speaker 1: cano we've been talking about financial resilience and this idea
Speaker 1: that if you lost your job tomorrow, how long would
Speaker 1: you last? Are you going to be able to get
Speaker 1: by a week, a month, six months? Not knowing how
Speaker 1: long it will take to find a new job, especially
Speaker 1: in certain industries where there is a lot of change
Speaker 1: coming through, particularly with AI, that it's quite uncertain.
Speaker 2: And also it's not about finding a job. It's about
Speaker 2: finding the right job for you where you actually will
Speaker 2: enjoy the work. You've been compensated fairly. You've also got
Speaker 2: the same future career paths that you don't need to
Speaker 2: worry about losing your job again. You know, these things
Speaker 2: do come into play.
Speaker 1: So beyond savings and having that big chunk of cash
Speaker 1: sitting there, ideally in an offset account, and having it
Speaker 1: in cash so that you can access it when you
Speaker 1: need it. You mentioned in passing insurances and the idea
Speaker 1: of income protection insurance. What role do they play here
Speaker 1: really important?
Speaker 2: You know, it's the other side. We always talk about
Speaker 2: wealth creation. This is about wealth protection. So you know,
Speaker 2: it's a policy, like an income protection policy pays up
Speaker 2: to seventy five percent of your income if you can't
Speaker 2: work due to a medical reason. That means that if
Speaker 2: you get sick and you cannot work because you've got
Speaker 2: to recover, you've got to do treatment, insurance company is
Speaker 2: going to help give you, will give you the money
Speaker 2: seventy five percent of your income, which is obviously taxable,
Speaker 2: but it means you can maintain you know, the mortgage
Speaker 2: repayments or the rant and keep putting food on the table,
Speaker 2: So again it adds that element of financial stability, and
Speaker 2: then things like trauma cover as well, which is another
Speaker 2: important form of insurance. And then you've got the TVD
Speaker 2: and life power, which we've spoken about another episodes. So
Speaker 2: that's a really important part. But also you're forgetting about
Speaker 2: the importance of you know, a good budget and cash
Speaker 2: throw system because you when you have that, well, you
Speaker 2: also have an element of functional resilience and security because
Speaker 2: you know what your living expenses are and should an
Speaker 2: emergency happen, you know, okay, well we're going to need
Speaker 2: this much money to get through X amount of months
Speaker 2: until we're back on our feet again. As well.
Speaker 1: With income protection insurance, is that mostly for if you
Speaker 1: injure yourself or there is something that's preventing you from
Speaker 1: doing your job or does it still exist if you
Speaker 1: lose your job, are you able to still receive income
Speaker 1: protection payments? Then?
Speaker 2: Unfortunately, no, it is related to a medical reason, so
Speaker 2: whether it be an injury like an accident or an illness.
Speaker 2: And I believe this is an old step, but I
Speaker 2: believe in the claims only five percent of the claims
Speaker 2: are actually related to an accident. Most of the claims
Speaker 2: are related to illnesses, right, yeah, which is interesting.
Speaker 1: That is okay, where do you find that balance between
Speaker 1: kind of reducing your expenses and building up savings kind
Speaker 1: of is the goal here really to try and maintain
Speaker 1: your lifestyle that if you were to lose your job tomorrow.
Speaker 1: Is it about cutting back all of your expenses and
Speaker 1: trying to kind of minimize things, or should the priority
Speaker 1: be to build up your safety net so that you
Speaker 1: can maintain your lifestyle in the event of your having
Speaker 1: a period of unemployment.
Speaker 2: I think it's very situational. Okay, So if you know
Speaker 2: that there are warning signs that your job is in jeopardy,
Speaker 2: you should definitely be prioritizing building up that emergency money
Speaker 2: as quickly as possible, which means obviously going back to
Speaker 2: the budget, looking at what you can temporarily cut out
Speaker 2: or cut down, and then redirecting those funds to a
Speaker 2: separate savings account, a redow facility or an offset account
Speaker 2: is a great way to hold that money if you
Speaker 2: have a home. But if you're sitting in a safe,
Speaker 2: secure position, you think, well, okay, I get it, I
Speaker 2: do need emergency money, don't have any I need to
Speaker 2: get started. Just look at your budget and set up
Speaker 2: a regular savings plan, for example, two hundred dollars per
Speaker 2: week if you can afford that, Because by the end
Speaker 2: of the year, if you're automated and you stick to it,
Speaker 2: there's ten thousand dollars sitting in that account, which you
Speaker 2: haven't had to think too hard about making happen other
Speaker 2: than programming it and planning it in your budget.
Speaker 1: Okay, is that then the best way to just get
Speaker 1: started in terms of if you're feeling a bit overwhelmed
Speaker 1: hearing this and honestly hearing that emergency money can sometimes
Speaker 1: be fifty sixty seventy thousand dollars sitting in an account.
Speaker 1: I understand that would be overwhelming to hear that, But
Speaker 1: how do you build that security without feeling overwhelmed by it?
Speaker 2: So you just focus on short term, small amounts of money.
Speaker 2: So you would say yourself, Okay, by the end of
Speaker 2: July twenty twenty six, I want to have a thousand
Speaker 2: dollars saved up. And then once you've got that thousand dollars,
Speaker 2: you then do the same process again. You go, ok well,
Speaker 2: I want to take it from a thousand dollars to
Speaker 2: fifteen hundred dollars. But if you invest some time can
Speaker 2: understanding what that money represents, you know the why behind
Speaker 2: that money. It's not just a oh my gosh, I've
Speaker 2: got to have ten thousand dollars emergency money. It's actually
Speaker 2: I'm building this because this is going to make sure
Speaker 2: that I don't go back financially, I don't undo all
Speaker 2: of the hard work that I've done with my own
Speaker 2: financial journey so far. Will you'll take it a lot
Speaker 2: more seriously, and you'll also be because of that, a
Speaker 2: lot more open to opportunities to save more money, to
Speaker 2: put more money into that sooner so that you can
Speaker 2: actually tip that box off and then go back to
Speaker 2: all the other things that actually add value to our
Speaker 2: lives financially, but also add further financial resilience through something
Speaker 2: like investing.
Speaker 1: Okay, So one thing, then, if someone's listening to this,
Speaker 1: they can start right now in order to improve the
Speaker 1: financial safety nets that they have around them is just
Speaker 1: to start saving.
Speaker 2: Small amounts of money on a regular basis, that habit,
Speaker 2: that consistency, and that will build and compound into a
Speaker 2: decent savings amount. And I mean, as I said, it
Speaker 2: took I think eight years for us to build up
Speaker 2: that emergency money. Yeah.
Speaker 1: The other good piece of advice would probably be to
Speaker 1: get your house sprayed for pervert cockroaches that attack you
Speaker 1: when you are most vulnerable.
Speaker 2: It's a real trigger every time I see a cockroach.
Speaker 1: I'm not surprised. That sounds most traumatic. All right, if
Speaker 1: anybody wants more information, also, actually sorry, I will mention
Speaker 1: before we go too far. Financial planners, this is something
Speaker 1: that you specialize in, that building these safety nets and
Speaker 1: ensuring that the emergency money is there, but that you
Speaker 1: have the right combination of insurances in place. That a
Speaker 1: financial planner. The value of speaking to a professional here,
Speaker 1: it is extraordinary.
Speaker 2: And the financial planner can be you know, play Devil's
Speaker 2: Out for good and say to you, right, Michael, what
Speaker 2: would happen if this got shut down tomorrow? And what
Speaker 2: would happen if this happened? You know, like they can
Speaker 2: throw scenarios at you, and you know they're quite uncomfortable questions,
Speaker 2: but it does make you really wow. I hadn't thought
Speaker 2: of those risks, and yes there are real risks, and
Speaker 2: I want to protect myself and my found me against
Speaker 2: these things from happening. No, no, one has ever regretted
Speaker 2: having emergency money? Ye indeed?
Speaker 1: Okay for you more information, where do we find you?
Speaker 2: The best place you can contact with me directly is
Speaker 2: through 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
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Speaker 1: Thanks for your company. Join us again next week