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