Speaker 1: You're listening to the Weekend Collective podcast from News Talks
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Speaker 3: Moveing to the just spend Somebody.
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Speaker 3: And welcome back to the show. Play that funky music,
Speaker 3: white Boy. I'm not sure if that's a reference to
Speaker 3: me or something, but it is quite a grievy little
Speaker 3: number to get down to. Anyway, if you have missed
Speaker 3: any of the previous hours, had a fun chat there
Speaker 3: with Dr John Cameron about float tanks and then just
Speaker 3: on to general health questions. But if you've missed any
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Speaker 3: then go to the Weekend Collective on iHeartRadio, look for
Speaker 3: the podcast and away you go. But right now it
Speaker 3: is time for the final hour of the show, which
Speaker 3: is Smart Money. And my guest is she's a financial
Speaker 3: advisor and coach and she's well known to all of
Speaker 3: you because she's been on the show a few times
Speaker 3: a half of times. Hannah McQueen, good afternoon.
Speaker 5: Hi are you well, Yeah, I'm great.
Speaker 3: Looks great summary today that it's a summary down now
Speaker 3: rocking the polo shirt. The sun is shining into the
Speaker 3: studio and it does feel a little bit just like
Speaker 3: we're heading towards the warmer weather for once.
Speaker 5: Yeah, we're going in the right direction.
Speaker 3: What's been keeping you out of mischief?
Speaker 5: Just generally, but actually having seen that it just got
Speaker 5: back from holiday busy parenting.
Speaker 3: Actually you have the post holiday sort of relaxed, sort
Speaker 3: of because.
Speaker 5: Normally it goes after the first week. I went over
Speaker 5: to Europe jealous Berlin, did a little marathon there, and
Speaker 5: then you did okay, I did that, yes, And then
Speaker 5: to France and then home by Dubai. We had the
Speaker 5: kids and they were less annoying than the previous holiday.
Speaker 5: So I was saying to my husband, I feel this
Speaker 5: is trending in the right direction. They were, It was good.
Speaker 3: How old are your kids?
Speaker 5: Eleven and sixteen?
Speaker 3: Okay? And where where did you go in France? Did
Speaker 3: you go around or just a couple of two or
Speaker 3: three locations or.
Speaker 5: While we were at Disneyland for a couple of days,
Speaker 5: and then into Paris and then to Versailles, which was amazing.
Speaker 3: I've heard about Versailles. Some people sat it's fantastic, other
Speaker 3: people say that it's not necessary sort of thing.
Speaker 5: But the palace, the palace, that's right, Yeah, the town
Speaker 5: of as. I don't know about that, but the palace
Speaker 5: and the gardens just incredible.
Speaker 3: Just I think we have to stick that on the
Speaker 3: next the list next time we go, even though I
Speaker 3: thought the last time would be the last time, but
Speaker 3: now I want to go every year, which is a
Speaker 3: bit of a bummer, which is why we need ours
Speaker 3: like smart money.
Speaker 5: That's right? Do you speak a little bit of French
Speaker 5: or German or I was gonna say some pigeon German
Speaker 5: or French?
Speaker 3: But I know a vision? What about it? So the
Speaker 3: and so you did the Berlin marathon? Come on? How
Speaker 3: was that? Doesn't sound like it's quite the holiday as
Speaker 3: most of us want to understand a holiday.
Speaker 5: When you break down what makes for a good holiday.
Speaker 5: I always think being able to eat a lot of
Speaker 5: food and do nothing makes for a good holiday, but
Speaker 5: then you feel bad for it, whereas in this situation,
Speaker 5: we did the marathon first week, so I was sanc
Speaker 5: demonious for the next three weeks. Yeah, stop in my face.
Speaker 3: We did it, did you? You and your husband?
Speaker 2: Yes?
Speaker 3: Yes, well done you what time?
Speaker 5: I did four forty he did three fifty something.
Speaker 3: Oh how selfish not to run next to you?
Speaker 5: In soide I don't blame him, but yeah, three what
Speaker 5: three fifty?
Speaker 3: I actually don't really know too much about marathon times,
Speaker 3: but I imagine that three fifty anything under four for
Speaker 3: a guy's pretty, isn't it?
Speaker 6: Was it?
Speaker 1: No?
Speaker 2: For me?
Speaker 5: Well yeah, I think it's incredible.
Speaker 3: Yeah, yeah, Well you ran a marathon in Berlin and
Speaker 3: was weather all right?
Speaker 5: Yeah it was? It was nice, nice and cool. I
Speaker 5: mean I I don't like running in the hot, so
Speaker 5: it was perfect and yeah, excellent, Well well.
Speaker 3: Done, and well done of giving your excuse to gorge
Speaker 3: yourself on food afterwards.
Speaker 2: I know.
Speaker 3: Now Onto more down.
Speaker 5: To worth itship money.
Speaker 3: Yeah, so the first thing I wanted to chat about
Speaker 3: his ideas on on and because you can do all
Speaker 3: sorts of things when it comes to spliting your mortgage,
Speaker 3: and it often seems like it's a newsflash to some people.
Speaker 3: They go, I didn't realize I could split a mortgage.
Speaker 3: Hopefully and more people know that. But with inflation on
Speaker 3: its way down, obviously the cash rate, obviously the cash
Speaker 3: rate's going to fall, of course it is. But I've
Speaker 3: seen some I think heatherdo for Cellen might have wrote
Speaker 3: it was written a piece saying that she doesn't think
Speaker 3: it'll fall as far as it should, because that would
Speaker 3: be a mission by Adrian or that they've got it wrong,
Speaker 3: which very very cylical, cynical. So because I've heard people
Speaker 3: say it could for one or one point two, you know,
Speaker 3: one hundred and twenty five basis points. So she sort
Speaker 3: of was like, maybe at only four seventy five, because
Speaker 3: then it's like, I didn't get it that wrong.
Speaker 5: No, Well, I guess the risk there is that we
Speaker 5: go into stagflation and that would be a fail. Well,
Speaker 5: when it's the opposite of inflation.
Speaker 3: Where it goes backwards, it goes.
Speaker 5: Backwards, and he certainly doesn't want that. No, So I
Speaker 5: I would respectfully disagree with this's comment. He may be
Speaker 5: late to the party because he has it's certainly a
Speaker 5: habit of doing that. And the banks also are particularly
Speaker 5: late to any party that involves dropping interest rates. I mean,
Speaker 5: they are at their own little club somewhere. But I
Speaker 5: do think rates will drop, and I think they'll drop
Speaker 5: by at least one percent of the next year, possibly
Speaker 5: as much as one point five because and that's just
Speaker 5: to get to a neutral.
Speaker 3: So let's just remind usself, where are what is the cash.
Speaker 5: Five point oh, I can't remem what the cash rate is,
Speaker 5: but the interest rates are about five point five for
Speaker 5: twelve months, so we should be in the late fours,
Speaker 5: I would say with thee in.
Speaker 3: My mind, I think it's four point four points. It's
Speaker 3: four point seven, so that would be taking it down
Speaker 3: to sort of like we could get it down to
Speaker 3: maybe three and a half in the next I mean,
Speaker 3: they could.
Speaker 5: Eat and that's not neutral. That's still them trying to
Speaker 5: control slow the economy down. So when they were trying
Speaker 5: to increase the economy, that's when we go lower again.
Speaker 5: But everyone will know, Oh, the banks are slow to
Speaker 5: kick in to gear these interest rate cuts, so I
Speaker 5: don't know what you do about them, but I would
Speaker 5: be expecting interest rates to come down. So then the
Speaker 5: question really is do you fix for six months or
Speaker 5: twelve months? And the answer to that depends on what
Speaker 5: is the gap between the six months and the twelve
Speaker 5: month rate. And if that gap is more than point
Speaker 5: six percent point six of a percent, then you probably
Speaker 5: should be fixing for twelve months. If it's less than
Speaker 5: point six, then I'd be going for six months and
Speaker 5: then refixing in six months time.
Speaker 3: I've just brought up the interest rates on interest stock,
Speaker 3: Court and Z, and it looks, unless my memory is
Speaker 3: betraying me, not long ago the long term interest rates
Speaker 3: were really favorable. They were really trying to entice you
Speaker 3: to a longer interest rate, which tells you the bank
Speaker 3: thinks that the cash rate's going to come down. But
Speaker 3: I'm just looking at A and Z right now and
Speaker 3: this is and their long term rates just on A
Speaker 3: you know, not with the special LVRD or they've got.
Speaker 3: They're six months rates seven point one and their five
Speaker 3: year rate I would have thought would be in the fives,
Speaker 3: but it's six point one nine, which is seems strange
Speaker 3: to me. Is I'm not sure what?
Speaker 2: Yeah?
Speaker 5: Do it with twenty percent?
Speaker 3: Oh okay, yes, well it doesn't show a five yr rate,
Speaker 3: but it says five point six nine percent for three years? Yeah,
Speaker 3: which is is that reasonably enticing?
Speaker 5: Well, I think you would get if you went to
Speaker 5: the bank and said give me your best rate, not
Speaker 5: these kind of interest stock cod or n Z rates.
Speaker 5: Like the best rate, I think you'd get it into
Speaker 5: early fives. And for some people just fixing that for
Speaker 5: three years and giving them certainty for three years at
Speaker 5: that rates, Happy days. I mean, it was I remember
Speaker 5: ten years ago where or fifteen years ago before the
Speaker 5: GFC right where. I mean, everyone talks about eighty seven
Speaker 5: crash and rates going up to twenty two percent, but
Speaker 5: most of us can't remember that. But what we can
Speaker 5: remember is just before the GFC rates got up to
Speaker 5: thirteen percent.
Speaker 3: It's funny we were just talking about than the property
Speaker 3: are yesterday.
Speaker 5: I just upset the eff caut No.
Speaker 3: No, you haven't upset anyone. It's just one of those
Speaker 3: conversations that, during the course of talking about property and
Speaker 3: its affordability, that.
Speaker 5: We take a trip down memory lane to eighty seven.
Speaker 3: We always do. I can't tell you a number in full.
Speaker 3: I mean, it was pretty horrendial, of.
Speaker 5: Course, and I don't want to make laugh of that,
Speaker 5: but the mortgages were like one hundred dollars joking, I'm joking. No,
Speaker 5: of course, that would have been horrible that period, without
Speaker 5: a doubt, and you do have to be able to
Speaker 5: weather that. It was just the extreme weather conditions.
Speaker 3: So I think probably the thing is, are there are
Speaker 3: there different strategies for splitting your mortgage and let's just
Speaker 3: go okay, So when we're talking about splitting your mortgage.
Speaker 3: We might have a portion that you've done for five years,
Speaker 3: you might have another portion for a year, and then
Speaker 3: you might have some revolving Yeah.
Speaker 5: So I'll tell you what I would do with my clients.
Speaker 3: And it doesn' oh, well, I let you explain it.
Speaker 5: And then so this is on the assumption that it's
Speaker 5: your the mortgage on your home, right because that's unproductive debt.
Speaker 5: You want to get that paid off as quickly as
Speaker 5: possible for investment property debt or investment debt, which could
Speaker 5: be investment, for borrowings, for investments, or for your business.
Speaker 5: We're not prioritizing paying that off. It's just the home
Speaker 5: mortgage to start with.
Speaker 3: Okay.
Speaker 5: Typically I want to have a revolving credit that you
Speaker 5: don't have f poss access to. So it's not a
Speaker 5: transactional account that's just a fast way to go backwards.
Speaker 5: So we're not interested in that, but a revolving credit
Speaker 5: facility that equals the size of your annual surplus. So
Speaker 5: if you make if you've got a surplus, so that's
Speaker 5: the amount of money you have left over. A lot
Speaker 5: of families don't actually have any money left over because
Speaker 5: that's one of the first questions I asked, I say,
Speaker 5: how much did you save last year?
Speaker 3: And they're what are you talking about?
Speaker 5: But if it was twenty thousand dollars, then that would
Speaker 5: be the size of your revolving credit facility, and your
Speaker 5: job is to pay that off over the course of
Speaker 5: the year. That should naturally happen. And the thing with
Speaker 5: a revolving credit is that it's on a higher interest rate,
Speaker 5: So it only works to your advantage if you are
Speaker 5: paying off the principle. Otherwise walk away. It is not
Speaker 5: working for you. You're actually just paying more money to
Speaker 5: the bank.
Speaker 3: But if you so, if you're disciplined and you know
Speaker 3: that you can stick to that saving that you've predicted.
Speaker 5: Yes, then that will pay half the floating interest rate.
Speaker 5: So a revolving credit is a floating interest rate, so
Speaker 5: it's normally one and a half percent higher than a
Speaker 5: fixed rate. So you should stay away from that if
Speaker 5: you don't have any surplus, like why would you expose
Speaker 5: yourself to a higher interest cost, or you do that
Speaker 5: if you've actually got the capacity and the discipline to
Speaker 5: pay off a chunk of it. But the amount you
Speaker 5: have on your revolving credit is linked to what you
Speaker 5: can actually pay. And when I'm working with clients, as
Speaker 5: I say, they might have a natural saving rate of
Speaker 5: twenty thousand dollars a year, my job is to get
Speaker 5: them to fifty thousand, so I would have a fift
Speaker 5: A revolving credit. In that situation, then you say, okay,
Speaker 5: we want to have a chunk fixed for one year.
Speaker 5: This is typically if interest rates were normalized and we
Speaker 5: weren't going to an interest rate dropping environment, you'd have
Speaker 5: a chunk fixed for one year, two year, and maybe
Speaker 5: up to three years. So back in the day, we
Speaker 5: used to fix quite comfortably for so.
Speaker 3: You have you'd have three or four splits in your mortgage.
Speaker 5: That's right, but that's on the assumption interest rates aren't
Speaker 5: coming down. When interest rates are coming down, there's no
Speaker 5: point fixing for long unless the balance the costpity and
Speaker 5: the reason.
Speaker 3: So if they're stable, you're going you're having a long chunk,
Speaker 3: which is cheaper because that's right, and then you're having
Speaker 3: a shorter chunk because you may actually be paying something
Speaker 3: off on that. I guess in a year or two.
Speaker 5: That's right. So you think, well, if you had that
Speaker 5: revolving credit, and let's say it's sort of like a
Speaker 5: yo yo at the bottom of the yo yo curve,
Speaker 5: and it's your negative twenty thousand dollars. So your job
Speaker 5: is to get that up to zero over the twelve months,
Speaker 5: and then the chunk that was fixed for twelve months
Speaker 5: comes up, and that then pushes you back into revolving credits,
Speaker 5: So that one year chunk might be for thirty thousand dollars.
Speaker 5: It's linked to what you're capable of paying off the
Speaker 5: next year. In theory, you're supposed to be getting fitter
Speaker 5: and fitter, so you're supposed to be getting better at saving,
Speaker 5: and in addition to that, your debt is coming down faster,
Speaker 5: so you can propel that forward.
Speaker 3: So what about in the environment we've got now in
Speaker 3: terms of the way people might want to structure their mortgages,
Speaker 3: Because let's just assume that there could be another whole
Speaker 3: one hundred points come off with the cash rate, which
Speaker 3: would mean instead of a which means a six month
Speaker 3: term might be instead of I'm just looking at ASB
Speaker 3: here six point thirty nine, it might be five point
Speaker 3: three nine or five point four or whatever.
Speaker 5: So whether you should fix for six months or twelve
Speaker 5: months comes down to the difference between the six month
Speaker 5: rate and the twelve month rate. If the gap the
Speaker 5: difference between them is more than point six of a percent,
Speaker 5: I would be recommending you fixed for twelve months, because
Speaker 5: it's unlikely even if the rate drop, the rate would
Speaker 5: have to drop by one point two percent in the
Speaker 5: next six months in order to be cash neutral with
Speaker 5: fixing for twelve months. The probability of that is low.
Speaker 5: I would say, I would say that the rates will
Speaker 5: come down, maybe up to one point five percent. I
Speaker 5: think it'll be in the next six months, probably over
Speaker 5: the next twelve or so months. So whether you fix
Speaker 5: for six or twelve months comes down to the relativity
Speaker 5: of those two interest rates, which differs depending on the banks.
Speaker 5: Some banks have the rates really close between a six
Speaker 5: month and a twelve month and so then you're saying
Speaker 5: fix for six months. It's greater chance you'll make more
Speaker 5: gain in the next six months than what you will
Speaker 5: in the first six months, but it will be enough
Speaker 5: to offset you fixing for twelve months.
Speaker 3: It was interesting you said about the revolving credit not
Speaker 3: having access to it, because we did have acs. We
Speaker 3: did use the revolving credit as our living account, but
Speaker 3: we shoved everything into it, so we would only be
Speaker 3: withdraw We weren't spending it using to spend for just
Speaker 3: you know, frivolities, but we did. I think that's right.
Speaker 3: We were using it because we knew where we're going
Speaker 3: to have. I think we're got an eighty thousand dollars
Speaker 3: revolving credit, but it was because we were doing a renovation,
Speaker 3: and say, we would be borrowing that as we spent money,
Speaker 3: but then we would everything we went went into that
Speaker 3: account until we hopefully got it back up to zero. Yeah,
Speaker 3: that's it, And so that that felt like a legitimate
Speaker 3: way of doing a revolving credit.
Speaker 1: Yeah.
Speaker 5: I think that that's a one off use of a
Speaker 5: revolving credit, I think, and that's smart, Like it's an
Speaker 5: efficient one maneuver for most of my clients. We are
Speaker 5: committed to paying the mortgage off in five or six years, right,
Speaker 5: so we need more than one maneuver. We need clarity,
Speaker 5: we need clinical execution, and kind of lumping money into
Speaker 5: an account actually kind of slows things down because when
Speaker 5: you pull that money out invariably, although it literally of course,
Speaker 5: it made sense to have the money and the revolving
Speaker 5: credit that literally will save you more interest but the
Speaker 5: psychology of starting to go backwards has more of an
Speaker 5: impact on your day to day spending when you draw
Speaker 5: that money out. So we're trying to balance the reality
Speaker 5: of people's situations.
Speaker 3: Isn't there something as well? I don't know, maybe this
Speaker 3: is just stay in z where I can't remember if
Speaker 3: it's at the end of each term or at the
Speaker 3: end of each year. You had the option of paying
Speaker 3: off a five percent lump some.
Speaker 5: Yes, but you can't reaccess that. So most banks give
Speaker 5: you that opportunity.
Speaker 3: So what I mean is that something useful for I mean,
Speaker 3: if you've got a long term mortgage, is that you
Speaker 3: could instead of having revolve and credit, if you can
Speaker 3: save that up, you just whack it off that long
Speaker 3: term But.
Speaker 5: That but you can't reaccess it. And the most important
Speaker 5: thing I think when you're trying to make financial progress
Speaker 5: is to have flexibility, because opportunities come usually at the
Speaker 5: most inopportune time. And you make a lump some payment
Speaker 5: on your mortgage, sure as eggs, you will regret that
Speaker 5: about forty eight hours later when you needed that money
Speaker 5: for something else that you just didn't even know about then.
Speaker 5: So I'm a believer that you don't pay anything off
Speaker 5: your mortgage voluntarily unless you can reaccess that money.
Speaker 3: Okay, I had not thought of that at all, because
Speaker 3: I've considered that five percent payment even though I've never
Speaker 3: made it.
Speaker 5: Well, but I get it. The theory of it makes
Speaker 5: perfect sense, just like the theory of credit cards makes
Speaker 5: perfect sense, you know, like, use the bank's money, save
Speaker 5: what it's.
Speaker 3: Don't miss a payment.
Speaker 5: Yeah. Look, I think the psychology if you told me
Speaker 5: you use your credit card, I will know straight away
Speaker 5: that you are inefficient with your money. Sure as ex we.
Speaker 3: Do everything on our credit card, and we pay it
Speaker 3: off every month.
Speaker 5: We go, yes, inefficient with your money, because the point
Speaker 5: isn't that you can't pay it off. That means that
Speaker 5: you're not going backwards. Right, you've paid it off. There's
Speaker 5: enough money to cover your credit card. For many of us,
Speaker 5: we can pay our credit cards in full. The issue
Speaker 5: is that because you've used a credit card, have you
Speaker 5: spent more than what you would have other worse I
Speaker 5: spent if you do.
Speaker 3: I think that's a very good question. I think we're
Speaker 3: reasonably disciplined on that. But actually, and I'll tell you
Speaker 3: this is you're going to tell me off of this.
Speaker 3: I do it because I just love the points.
Speaker 5: Oh my lord.
Speaker 3: Well, hands up? Who's hands up? If you are out
Speaker 3: there listening, how many of you have got a credit
Speaker 3: card and you know that maybe you should listen to
Speaker 3: Hannah's advice, But you do it because you like that
Speaker 3: little the fact that when you go for your your
Speaker 3: annual holiday, you go, hey, guess what, we've got one
Speaker 3: thousand dollars in airpoints.
Speaker 5: Okay, okay, So I will listen to that. But at
Speaker 5: the same time, you are not allowed to complain that
Speaker 5: the banks make billion dollar profits. They go hand in hand.
Speaker 5: Oh I never do.
Speaker 3: Really, No, I'm not a complainer about I think everyone's
Speaker 3: in it to make money and if it's up to
Speaker 3: us to make the decisions we want to make, and
Speaker 3: don't bitch about the profits. Okay, very surprised. I thought
Speaker 3: you were going to say, surprisingly reasonable?
Speaker 5: Are they go hand in hand?
Speaker 3: Mentioned Republicans? Ready, Hey, so how do you structure your mortgage?
Speaker 3: What are your rules of thumb that you use when
Speaker 3: it comes to spliting your mortgage? Revolving credit? But actually,
Speaker 3: while we've thrown it out there, it's just become the
Speaker 3: hot topic. What's wrong with having a credit card and
Speaker 3: paying on our for every month. Hannah's audience. I'll talk
Speaker 3: about on eight hundred eighty ten eighty and you can
Speaker 3: text on nine two nine two. The lines are open.
Speaker 3: Let's get cracking.
Speaker 7: Well done, cure, it's tonight. I got to feel something, right,
Speaker 7: I'm so scared. He kids a phone off my chair
Speaker 7: and one'll get down the stairs. Clowns to the letting
Speaker 7: me jokers to the raid. Here, I am nuck in
Speaker 7: the middle with you your.
Speaker 3: Sounds, and welcome back to the show. I'm Tim Beverages.
Speaker 3: This is a smart money. We have Hannah McQueen in
Speaker 3: the studio. She is fresh from her holiday and running
Speaker 3: the Berlin Marathon. And I don't know how long we
Speaker 3: can use that line. Probably just today.
Speaker 5: It's done. Really, yeah, it feels we're even talking about embarrassing.
Speaker 3: Really, I think we can use it for the next
Speaker 3: half an hour. But anyway, the question is how are
Speaker 3: you structuring your mortgages with the cash rate looking like
Speaker 3: it's going to fall and the also my confession that
Speaker 3: I use. We use our credit card for all that spinning.
Speaker 3: We pay it off every month. Of course we like
Speaker 3: the points, and Hannah, I think we've just resuscitated her
Speaker 3: and she's she's back, she's back up right again. But
Speaker 3: we're taking your calls on that as well. On eight
Speaker 3: eighty lou Hello.
Speaker 2: Hi, how are you good?
Speaker 3: Thanks good.
Speaker 6: I basically I was raised by my family using our
Speaker 6: credit cards on a monthly basis, and then when the
Speaker 6: bill comes once a month, we pay it up. I
Speaker 6: have moved away from it ever since then and started
Speaker 6: using my debit card more. But there's certain things that
Speaker 6: I do that I've found is work better if I
Speaker 6: put it on my credit cards, such as my feel.
Speaker 6: I've discovered that it's it's easier to manage your feel
Speaker 6: that way than paying for an upfront through your debit card.
Speaker 6: But also things when it comes to my house, if
Speaker 6: I need to buy new thing for the house, it's
Speaker 6: easier to put that on the credit card than on
Speaker 6: my debit card.
Speaker 3: Oh why would that be? You mean you rely on credits?
Speaker 3: In other words, you rely and borrowing.
Speaker 6: No, no, no, I definitely do not rely on my
Speaker 6: credit card to buy these things. I can buy it
Speaker 6: out for outright I need to, but it's it's more
Speaker 6: of a I feel like it's more of a separation
Speaker 6: of my money. Even if I if I buy stuff
Speaker 6: on my ABMB, obviously that's a business expense, but I
Speaker 6: still buy it on my credit card because there's that
Speaker 6: separation that Okay, this is my feel this is my
Speaker 6: property expenses, and this is my personal expenses. I can
Speaker 6: say like if I go shopping, if I go buy out,
Speaker 6: if I go out and buy some posts, that goes
Speaker 6: on my debit card, but not on my credit card.
Speaker 5: Yeah, so you're using your cards to kind of give
Speaker 5: you some structure and segregation between spending. That makes sense. Yeah,
Speaker 5: I think think that the key with credit cards is
Speaker 5: definitely bills and things, provided you're not negatively impacted. You
Speaker 5: know they're not going to put a premium because you're
Speaker 5: paying by credit card, it makes sense to put to
Speaker 5: automate your bills as much as possible. And whether that's
Speaker 5: a credit card, well, a separate account is normally what
Speaker 5: I would have, but or a credit card, it's just
Speaker 5: the discretionary spending. When you use a credit card, you
Speaker 5: spend more. Like the studies are conclusive, you spend more.
Speaker 5: But I like the idea, Lou, that you've separated out
Speaker 5: the Airbnb so that that sits in a separate account.
Speaker 5: Or a different way kind of methodology of how you
Speaker 5: account for it that makes a lot of sense.
Speaker 6: And because I can't justify going out for dinner and
Speaker 6: spending one hundred and fifty dollars, let's say, for three people,
Speaker 6: I can't justify putting that on my credit card because
Speaker 6: of the interest that will be paying back on that.
Speaker 6: I would rather just pay one hundred and thirty dollars
Speaker 6: once and call it a day instead of having to
Speaker 6: pay back. I can take one hundred and seventy dollars
Speaker 6: for a night out, but.
Speaker 5: That's on the assumption you don't pay it off at
Speaker 5: the end of the month.
Speaker 6: Yes, but that's why I put do it that way.
Speaker 6: But obviously the card always gets paid. But it's more
Speaker 6: just yeah, it's more bringing in that structure. And I
Speaker 6: don't know i've done it that way. My family said
Speaker 6: I'm stupid by doing it that way, but I've just
Speaker 6: felt that it's given me more financial security as well
Speaker 6: as financial structure.
Speaker 3: And what don't your family like about it? What's the objection?
Speaker 6: The objection that I'm using my debit card to basically
Speaker 6: fund my day to day lifestyle. It comes down to
Speaker 6: the principle that it's against how they've done it their
Speaker 6: whole life. But at the end of the day, I mean,
Speaker 6: I'm twenty four. I can kind of make these decisions
Speaker 6: on my own, can't.
Speaker 5: I absolutely go forth. Lo, you're doing well.
Speaker 3: Actually you are putting off when you're talking about your
Speaker 3: credit card. You are paying the entire credit card some off,
Speaker 3: are you.
Speaker 6: Yes, So at the end of every month, I pay
Speaker 6: the lump some on the bill. I don't just pay
Speaker 6: the monthly informent. Okay, yeah, So it's leads five minutes.
Speaker 6: They let's say this month's bill is five grand. I'll
Speaker 6: put the five grand down and then it's start.
Speaker 3: Okay, Okay, now, thanks for you cool mat, I appreciate it.
Speaker 3: Are we arguing? Are you sort of almost arguing against
Speaker 3: having a credit card? Full stop? Anyway? Just because credit card?
Speaker 5: I think, pay your credit cards. Use credit cards to
Speaker 5: pay your bills, internet purchases. There's a place for that.
Speaker 3: Oh okay, your discretionary transacting, Like.
Speaker 5: Yeah, for your discretionary purchases, whether that is what you
Speaker 5: spend on hobbies or going out or food or special
Speaker 5: events whatever. When you use a credit card, you spend
Speaker 5: more than when you have to use cash. M conclusive
Speaker 5: is that yes, you do.
Speaker 3: So if I don't think would matter what card I had,
Speaker 3: I would buy what I need when I need it,
Speaker 3: and I don't and not otherwise.
Speaker 5: It's this, Well, the study is the pain of paying.
Speaker 5: When there is a pain to pay, you spend less generally,
Speaker 5: or the easier it is to pay the more you spend.
Speaker 5: So it's the inverse of that. So credit card tap
Speaker 5: and go like, oh my lord, that's the worst now
Speaker 5: and pay later? What the heck is said all about
Speaker 5: fastest way to end up poor? Actually, my sixteen.
Speaker 3: Year old, well, actually, isn't it funny? I don't. I
Speaker 3: wouldn't say I got any particular financial guidance from my parents,
Speaker 3: but instinctively I always thought maybe Mum must have said
Speaker 3: something about layby and and oh and just going into
Speaker 3: debt to buy something that's an optional thing always just
Speaker 3: to me intuitively, I just thought, hang on a minute,
Speaker 3: if I can't afford to buy it, now you know
Speaker 3: I'm not going to buy it. Why would I want
Speaker 3: to pay that price plus the interest over several years.
Speaker 3: And yet for some people it's sort of their modus operando.
Speaker 3: I just sort of throw that in there. I'm not
Speaker 3: sure what value it has to the conversation, but there
Speaker 3: we go. Yes, nothing from Hannah.
Speaker 5: They will keep something in French to say to you,
Speaker 5: but no.
Speaker 3: Okay, right, okay, let's carry on with the calls. We're
Speaker 3: are we up to Danielle? Hello? Hello?
Speaker 8: So my thought comic credit thing is that I think
Speaker 8: it's a bad habit to get into, to be paying
Speaker 8: on your credit card and paying it off at the
Speaker 8: end of the month, because what happens if sometime within
Speaker 8: that month, maybe you have an accident or lose your
Speaker 8: job and you're not able to pay that amount and
Speaker 8: then you're stuck with a bill. In that habit, you're
Speaker 8: not able to keep it going because you can't don't
Speaker 8: have a job anymore, or something like it sounds like
Speaker 8: you're getting in debt for no reason, Like, well, not
Speaker 8: for no reason, but that kind of thing, like that's
Speaker 8: just my thinking.
Speaker 3: I know what I mean, what if there's a catastrophe
Speaker 3: and you have bought something on your credit card.
Speaker 5: Well, I think that what Daniel's saying is that with
Speaker 5: that paid at the end of the month, there's no
Speaker 5: rigor in emot instance, there's not much consciousness with your spending.
Speaker 5: There's just an assumption that you'll have enough money to
Speaker 5: pay it at the end of the month, and most
Speaker 5: people do. But equally most people well let's let's say that,
Speaker 5: but equally most people aren't making financial progress. And there
Speaker 5: is a link between the two. And I think when
Speaker 5: you can introduce rigor and structure and guard rails and objectives,
Speaker 5: people with anything, whether it's fitness or finance, you tend
Speaker 5: to level up. And what credit cards do is they
Speaker 5: take down the guardrails, they take down the consciousness. Everything
Speaker 5: is easy, it will always be okay. The issue isn't
Speaker 5: whether you can pay that in full at the end
Speaker 5: of the month. The issue is did you spend more
Speaker 5: because you used it?
Speaker 8: And also can you afford to keep that going? If
Speaker 8: you don't have a job, or you don't or you've
Speaker 8: had an accident or something, can you afford to keep
Speaker 8: that habit going? Because you've built this habit up. It
Speaker 8: takes thirty days to build a habit. You've built this
Speaker 8: habit up of using your credit card every single purchase
Speaker 8: that you make.
Speaker 5: Or on the way that you could get around that. Danielle,
Speaker 5: though it could be to just pay it off weekly
Speaker 5: or with my clients who insist on using their credit
Speaker 5: card because they get these points or whatever. I say,
Speaker 5: we'll run it either in the positive or pay it
Speaker 5: every forty eight hours so that you're always at a
Speaker 5: zero sum balance. That brings in more true consciousness as well.
Speaker 3: That's yea, and I thank you. I appreciate that, Danielle,
Speaker 3: thank you. I think that's an interesting question around the
Speaker 3: whole pain of paying, isn't it if And I might
Speaker 3: have even said this to you, but I've played around
Speaker 3: with the idea just philosophically because I couldn't ever be bothered,
Speaker 3: to be honest. But imagine if I wonder what difference
Speaker 3: there would be in people's expenditure if we, despite the
Speaker 3: ability to have credit cards and order things online, et cetera,
Speaker 3: but if every time you went shopping down to the moor,
Speaker 3: every time you bought something, you had to hand over cash. Yeah,
Speaker 3: I wonder what difference that would make on the way
Speaker 3: we spend money. Because there is something. I mean, there's
Speaker 3: a generation, there's a generation of kids who don't even
Speaker 3: know what it's like to hand over cash these days,
Speaker 3: because it's just mum, can I have this, or I've
Speaker 3: got somebody's given me a pressI card. It's all plastic,
Speaker 3: I know.
Speaker 5: Yeah, So it's well with my clients. I find that
Speaker 5: it's on their most frequent costs and can be as
Speaker 5: much as thirty percent difference. But it's your You've got
Speaker 5: the tactile payment of cash or the inconvenience of pain
Speaker 5: with cash cash, the increased consciousness, and the other bit
Speaker 5: there is that there's a target on what they're spending.
Speaker 5: So normally those three things are what creates the improvement.
Speaker 5: Probably with a bit of a bit scared by me
Speaker 5: as well, is.
Speaker 3: That the part is that the part of the equation
Speaker 3: that we have ignored.
Speaker 5: It's like people want to result, right because I don't.
Speaker 3: The callers have said something about credit cards and just
Speaker 3: the discipline you need. If I decided that I wasn't
Speaker 3: even very much, if I found out that I, say
Speaker 3: I lost my job or something, wasn't even the money,
Speaker 3: I actually just wouldn't use the credit card. And I
Speaker 3: don't think I'd find that a hard adjustment to make,
Speaker 3: because I just I'm very conscious of what goes in,
Speaker 3: what goes out has to come back in, and so
Speaker 3: I cautious with my spending that's right.
Speaker 5: So you're not reckless at all with your spending, but
Speaker 5: there is all so en acknowledgment that there's no room,
Speaker 5: there's no margin of error when there's no income coming in, right,
Speaker 5: you just have to spend less. And it's interesting that
Speaker 5: you acknowledge that you'd put the credit card away because
Speaker 5: the fear or the risk that you might spend more
Speaker 5: than what you should is removed when you remove the
Speaker 5: credit card.
Speaker 3: I guess the thing is, how do you actually get
Speaker 3: that consciousness of the pain of what you're paying because
Speaker 3: as you're right, I mean, you go, you look at
Speaker 3: what it's simply you hand over something over you want this,
Speaker 3: you just hand over the plastic magic, it's paid for you.
Speaker 5: That's why they say physically using cash is helpful as
Speaker 5: a second thing. Using a f boss or a debit
Speaker 5: card after that, but links to a bank account that
Speaker 5: tells you you're about to go backwards. When you are
Speaker 5: about to go backwards, it's because the problem with the
Speaker 5: credit card, which Danielle was highlighting, is that you can
Speaker 5: goo a whole month and you can still keep spending.
Speaker 5: So you're trying to introduce rigor that not around the
Speaker 5: things that are important to you, but you lose that
Speaker 5: rigor you give it away. And it's kind of like
Speaker 5: if you say you do want to lose weight or
Speaker 5: get fit, but you don't actually ow the couch. It's well,
Speaker 5: you've got to do something.
Speaker 3: Well. Actually, there is an analogy with the creds to diet.
Speaker 3: It's that you think I must eat more healthily, and
Speaker 3: then you walk past the cake store and you go,
Speaker 3: I might have one of those. It's only once, and
Speaker 3: then you do it again in the afternoon. You don't
Speaker 3: really realize because you haven't got a plan. You're just
Speaker 3: living sort of a bit too in the moment, which
Speaker 3: you just relax.
Speaker 5: I think most people would say that they're not bad
Speaker 5: with money, but they're just relax It's sort of I've
Speaker 5: got enough money to not worry, as opposed to well
Speaker 5: how do I get this money working harder for me,
Speaker 5: which is a different mindset.
Speaker 3: Okay, well we're going to take a break, come back,
Speaker 3: and we've actually introduced by accident. It's sort of deliberately
Speaker 3: by accident, just the question around credit cards, but it's
Speaker 3: all connected with structuring your mortgage. On the news of
Speaker 3: the cash rate and the OCI heading down and how
Speaker 3: you split your mortgage. We've got correspondence on people telling
Speaker 3: us how they put their mortgages and all that sort
Speaker 3: of thing. We're going to do that as well, but
Speaker 3: also our credit cards the devil. If you really want
Speaker 3: to get disciplined and feel the pain of every dollar
Speaker 3: you spend, it is eighteen minutes to six news talks.
Speaker 3: He'd be.
Speaker 5: Arnings. We're back up in the wood among the evers.
Speaker 3: Yes, this is smart money, and my guest is Hannah MacQueen.
Speaker 3: She's a financial advisor and coach. We're talking about how
Speaker 3: you structure your mortgage, but also just the whole deal
Speaker 3: with credit cards. Because I say I stick all out,
Speaker 3: We stick all our expenses on the credit card. And
Speaker 3: Hannah has told me that I'm a very naughty boy
Speaker 3: for doing that. But actually, before we get into some
Speaker 3: of some of the correspondents, by the way, if you
Speaker 3: want to give us a call and express your opinion
Speaker 3: on that, you'll get straight through eight hundred and eighty
Speaker 3: ten eighty. Let's just remind people, because you know, people
Speaker 3: have a little bit of extra money and they might
Speaker 3: think about all that. You know, people can make decisions
Speaker 3: about how they spend their money, of course, but they
Speaker 3: might decide they're going to have a holiday, or they
Speaker 3: might decide to pay it off the mortgage. But it's
Speaker 3: worth thinking about, Oh if I save that twenty grand
Speaker 3: now and pay it off the mortgage instead of spending it,
Speaker 3: how much is that actually worth further down the track
Speaker 3: compared to the interest you'll pay if you haven't actually
Speaker 3: paid that off. You know, the I don't know what
Speaker 3: the expression is for it.
Speaker 5: Bit well, the pigeon economics of it is sort of
Speaker 5: one for one pigein economics. So you had a mortgage
Speaker 5: of five hundred thousand, you're going to pay close to
Speaker 5: three times that back to the bank over the life
Speaker 5: of it, right, which is just.
Speaker 3: It is.
Speaker 5: It is out of control. I'm just like, how is
Speaker 5: that even legal? But that is our system. So you're
Speaker 5: going to pay that. For every dollar you put against
Speaker 5: the mortgage, that tends to save you a dollar in interest.
Speaker 5: So if you choose to put ten thousand dollars against
Speaker 5: the mortgage, of course you'll pay down the mortgage by
Speaker 5: ten thousand dollars, but you will save yourself a further
Speaker 5: ten thousand dollars an interest that you won't pay, which
Speaker 5: is great.
Speaker 3: I guess well makes a big difference when you're talking
Speaker 3: about retirement as well. If people are thinking, oh, I'm
Speaker 3: just going to say, if you've got you come into
Speaker 3: a lump some of fifty thousand bucks and you think, oh,
Speaker 3: let's do something nice with that. But what you can
Speaker 3: potentially do if you whack that off your mortgage and
Speaker 3: put that money which you would otherwise spend into interest
Speaker 3: into the bank over that period of time, that's got
Speaker 3: to be worth well.
Speaker 5: Where you get the kind of the extra the compounded
Speaker 5: return is if you've got your fifty grand, you put
Speaker 5: it against the mortgage, it's going to save you interest costs.
Speaker 5: You're going to get mortgage free faster with that money.
Speaker 5: You've channeled it through a revolving credit facility so you
Speaker 5: can reaccess it, and then that becomes a deposit for
Speaker 5: an investment property as well, and then you're getting capital
Speaker 5: gain on a new asset. You've paid off more debt
Speaker 5: on your home, and your safe yourself interest. That's sort
Speaker 5: of the quite it's quite a hefty triple axel.
Speaker 3: It's quite a hefty water if scenario. Isn't it just
Speaker 3: that simple decision to maybe just use that money, pay
Speaker 3: something off, and get a head on something else. It
Speaker 3: can really turn your fortunes around, can't it.
Speaker 5: Yeah, Well, I think that the everything's about trade offs.
Speaker 5: And I think one of the concerning things is most
Speaker 5: people don't realize what is possible. If we kind of
Speaker 5: got rid of all their inefficiencies and really started working
Speaker 5: to a plan, they will get ahead so much faster.
Speaker 5: But they don't know that, you know, because their reflection
Speaker 5: to themselves is, well, I'm not bad with money, so
Speaker 5: I don't understand how I can be that much better? Like,
Speaker 5: how is that even possible? And I think there's just
Speaker 5: a knowledge gap, and we've got to overcome that because
Speaker 5: people are capable of more than what their bank balance suggests.
Speaker 3: Okay, let's take some more calls. Lynn.
Speaker 2: Hello, Hi, how are you this afternoon?
Speaker 3: Actually you're beat.
Speaker 5: I'm loving this.
Speaker 2: Oh it's quite It's a lovely day here in Central Targo.
Speaker 5: There you go?
Speaker 3: Which part of Central Otago?
Speaker 2: Come on, I'm just above Alex so I'm actually heading
Speaker 2: down to Gore.
Speaker 3: And I love Central Love Central Right, let's go. What
Speaker 3: did you want to discuss?
Speaker 6: So?
Speaker 2: I have a credit card, but I don't use it.
Speaker 2: I the only time I use it is when I'm
Speaker 2: buying bolved from a company up in the North Island.
Speaker 2: But apart from that, I never use it. If I
Speaker 2: can't really pay cash for the bigger things, I you know,
Speaker 2: go it out to use.
Speaker 5: It's good practice, that's very good practice.
Speaker 2: Yeah. I think I got that installed in me for
Speaker 2: my ex who was very frugal. And it's like, you
Speaker 2: can't afford to pay cash, you can't don't.
Speaker 5: Need it, So it sounds like that's that's.
Speaker 3: Sort of my philosophy. I mean, I'm using a credit card,
Speaker 3: but I sort of think can I afford to buy
Speaker 3: it or not?
Speaker 2: Yeah, And I've got to my mortgage. I have a
Speaker 2: small mortgage and next year my Kiwisaver comes due, so
Speaker 2: I'm going to whack everything that's on my Kiwisaver onto
Speaker 2: my mortgage, which will then reduce it down at a
Speaker 2: heck of a lot further.
Speaker 5: Before you do that, sorry, Lynn, who's the bank that
Speaker 5: you've got your back mortgage with? We stack right, So
Speaker 5: before you pay off the portion of the mortgage that
Speaker 5: the kiwisaver can pay down, you need to split the
Speaker 5: mortgage to the amount. So and you can split mortgages
Speaker 5: that should be fine. I mean, sometimes there's a break cost,
Speaker 5: but often there just isn't, so we'd ask the bank.
Speaker 5: But let's say your Keiwi saber was fifty thousand dollars
Speaker 5: and hypothetically your mortgage was seventy thousand dollars, so we'd say,
Speaker 5: let's split seventy thousand dollars off the mortgage. So you'll
Speaker 5: then have two mortgages, one of twenty thousand, and one
Speaker 5: of said I don't know, I've lost my mask fifty.
Speaker 5: So then and with the fifty thousand dollars, we convert
Speaker 5: that to a revolving credit facility or even an offset facility.
Speaker 5: Then you deposit your key we saver in and that
Speaker 5: has the same outcome of you've paid off the debt.
Speaker 5: You're not getting interest charged, but it has the benefit
Speaker 5: of you being able to reaccess that fifty thousand dollars
Speaker 5: should you need to.
Speaker 2: Okay, quite good stuff.
Speaker 3: Hey, thanks Lin, unfortunate we've got to go to a break.
Speaker 3: We'll be back in a tick nine minutes to sex
Speaker 3: news talk. Se'd b BlimE me. Time flies when you're
Speaker 3: having fun. This is smart money. We've only had a
Speaker 3: couple of minutes left with Hannah McQueen. I do love this.
Speaker 3: I have to do this text that we're talking about.
Speaker 3: You know, whether you pay the money off now that
Speaker 3: you've might have on a holiday, how much it's worth
Speaker 3: if you pay for your mortgage. It's probably an extra
Speaker 3: dollar for every dollar you pay off. Somebody said, yes,
Speaker 3: it does cost more down the track, but then you
Speaker 3: don't get to go to Berlin.
Speaker 5: You're more good free to start with, babe.
Speaker 3: Yes, indeed, that's real. Well, that's the one guys. I
Speaker 3: split the mortgage into one, two and three year portions
Speaker 3: once is recommended by the broker. The market dropped and
Speaker 3: three years ended up too long. Then since then two
Speaker 3: years max and one in recent time mature again March
Speaker 3: there might be a short term again with another drop
Speaker 3: likely question mark from Mike. Oh no, he's having a
Speaker 3: good crack at splitting this mortgage.
Speaker 5: Yeah, I agree with it that probably for the next
Speaker 5: year you don't want to be fixing much more than
Speaker 5: twelve or eighteen months. But it's just going to come
Speaker 5: down to what those interest rates are. It's more drops
Speaker 5: to come.
Speaker 3: And lucky last, Hannah, I put most everything on the
Speaker 3: credit card. I pay in full every month never pay interest,
Speaker 3: receive points and a cash bonus every year. Well that's
Speaker 3: all good so long as you are feeling the pain
Speaker 3: of each purchase, isn't that right, Hannah?
Speaker 5: Or you're more good free? Oh okay, right, so you
Speaker 5: don't have to care as much. But if you're not
Speaker 5: more good free, does it really matter if you get
Speaker 5: your points back? Because I would have saved you more
Speaker 5: money so you could have bought the thing yourself with
Speaker 5: the cash you didn't actually pay.
Speaker 3: If people want to catch up with more of your work, Hannah,
Speaker 3: where should they go?
Speaker 5: Pop to enable dot me and let's get serious about
Speaker 5: getting your hit.
Speaker 3: When's your next marathon April? Oh good, you have got
Speaker 3: one schedule, got to.
Speaker 5: Have the next goal?
Speaker 3: Really where we're all to events?
Speaker 5: London?
Speaker 3: London?
Speaker 5: Yeah? My son said, why don't you do it at
Speaker 5: marathon in New Zealand. I'm like, because I don't think
Speaker 5: I'd be motivated to do it. You've got to work
Speaker 5: out what's going to motivate you.
Speaker 3: So because it's a big trip and you've got this
Speaker 3: thing planned, it makes it really work for it.
Speaker 5: Yeah, brilliant, good work.
Speaker 3: Well, good luck on that anyway. Thank you for joining
Speaker 3: us on the show. Thanks for my producer, Tyra Roberts.
Speaker 3: If you've missed any of the previous hours, you can
Speaker 3: all this hour. You can check it out where you
Speaker 3: podcast look for The Weekend Collective Sunday at six as next.
Speaker 3: I'll be back at the same time next weekend and
Speaker 3: enjoy your evening.
Speaker 1: For more from the Weekend Collective, listen live to News
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