Speaker 1: Hello, my name's Santasha Nabananga Bamblet. I'm a proud or
Speaker 1: the Order Kerni Whalbury and a waddery woman. And before
Speaker 1: we get started on She's on the Money podcast, I
Speaker 1: would like to acknowledge the traditional custodians of the land
Speaker 1: of which this podcast is recorded on a wondery country,
Speaker 1: acknowledging the elders, the ancestors and the next generation coming
Speaker 1: through as this podcast is about connecting, empowering, knowledge sharing
Speaker 1: and the storytelling of you to make a difference for
Speaker 1: today and lasting impact for tomorrow.
Speaker 2: Let's get into it.
Speaker 3: She's on the Money, She's on the Money.
Speaker 4: Hello, and welcome to She's on the Money, the podcast
Speaker 4: annials who want financial freedom. If you listen to us
Speaker 4: a lot, you know that one of the best ways
Speaker 4: to achieve financial freedom is through investing. But we do
Speaker 4: know that world can sometimes be confusing, So we asked you,
Speaker 4: our incredible community, to send in your burning questions about investing,
Speaker 4: and boy, oh boy, there were some goodies and a
Speaker 4: lot of them, a lot of them. I feel so
Speaker 4: seen by this.
Speaker 2: I feel so overwhelmed. So I'm glad that we're on
Speaker 2: both ends of the spectrum. I'm like, holy moly, I
Speaker 2: thought I'd done a heap for financial literacy, yet there
Speaker 2: are still six billion questions to answer.
Speaker 4: Yeah, I mean I get it, like there are so
Speaker 4: many things that maybe we don't even think about because
Speaker 4: we're in this world.
Speaker 2: If you guys hadn't replied, I wouldn't have a job anymore.
Speaker 2: So thank you for keeping me influenced, Thank.
Speaker 4: You for keeping us afloat. As always, we of course
Speaker 4: have Victoria Divine herself the expert, to share who we see.
Speaker 2: And thanks for introducing me. I just jumped into your
Speaker 2: intro before. Hey, you know that's okay, it's elicited introduction, just.
Speaker 4: In case this is anyone's first time. Victoria Divine is
Speaker 4: the expert, and the one and only and the host
Speaker 4: of this podcast.
Speaker 2: Way, all right, well, let's dive even further in. I
Speaker 2: feel like today is going to be a good.
Speaker 4: E bec if you've been wondering how to get started
Speaker 4: on a tight budget, how to work out how much
Speaker 4: you need to invest for your retirement, or just trying
Speaker 4: to figure out what the heck a franking credit is?
Speaker 4: Stick around the Are you ready to dive in?
Speaker 2: You want to talk about franking credits.
Speaker 4: Do you Yeah, I've always been curious about what the
Speaker 4: who's frank? Why are we giving him credit?
Speaker 2: Exactly?
Speaker 4: What did he even do?
Speaker 2: All right, well let's go. I'm really excited.
Speaker 4: Okay, So this is a really good one to start with.
Speaker 4: How do you work out how much to invest for
Speaker 4: your retirement goal?
Speaker 2: I feel like retirement is a bit of an icky word.
Speaker 2: I don't know about you, Beck, but I feel like
Speaker 2: if someone says, oh, like, have you been planning for retirement?
Speaker 2: You immediately just think gray hair, old age, You're not
Speaker 2: enjoying life anymore. Maybe you're thinking caravans, like the gray
Speaker 2: nomad vibes, but like you're not really thinking financial freedom.
Speaker 2: You're not really thinking rich, You're not really thinking like
Speaker 2: I can set myself up financially. You're kind of just
Speaker 2: thinking about the wind down. I feel like there's such
Speaker 2: a stereotype associated with the word retirement that our generation
Speaker 2: just doesn't resonate with. Do you resonate with that?
Speaker 4: I see we say. Actually, when you said the wind down,
Speaker 4: I was like, that sounds so cozy, I'm so ready to.
Speaker 2: Wa It does, but like that's what we associate with retirement,
Speaker 2: and I mean it should like, when you have financial freedom,
Speaker 2: you've got choice, and if you've got choice, you get
Speaker 2: the choice to not do anything anymore. And I mean
Speaker 2: the entire premise of creating a retirement fund, the entire
Speaker 2: prements of superanuation is to create a fund that pays
Speaker 2: for future use lifestyles so that you don't have to
Speaker 2: go to work anymore. And I think that's really sexy.
Speaker 2: I'm actually sitting on a round table, or did sit
Speaker 2: on a round table with Acik recently to talk about
Speaker 2: how to get more millennials engaged with their superannuation. Honestly,
Speaker 2: an honor like me being asked by ask to come
Speaker 2: and sit on a round table to help guide them
Speaker 2: in how to get people our age more engaged with
Speaker 2: their super one topic of my dreams. I am here
Speaker 2: for it. Like it didn't matter. They were like, what
Speaker 2: day are you free? And I'm like, I'll make myself free.
Speaker 2: I'm here for this. I'm so excited to be involved.
Speaker 4: Good for you.
Speaker 2: Also, we discussed a lot about language and the need
Speaker 2: for language around retirement to change to get us more engaged.
Speaker 2: So like, yeah, obviously that's not answering your question, but
Speaker 2: I think with answering your question, we need to remember
Speaker 2: that what we do today does impact future us. And
Speaker 2: as much as living in the moment and the journey
Speaker 2: is so important, we also need to think about future us.
Speaker 2: And if we are going to plan for retirement, it
Speaker 2: can start now, and it means smallest steps need to
Speaker 2: be taken. And I think that's really really attractive, not
Speaker 2: just because it's like an attractive thing to do, but like,
Speaker 2: I'm creating less work for future me by focusing on
Speaker 2: this right now. So if you want to be saving
Speaker 2: for your retirement, you don't actually have to actively be
Speaker 2: doing anything, but like do some of the hygiene factors
Speaker 2: along the way of checking in on your super making
Speaker 2: sure that you don't have a heap of multiple useless accounts,
Speaker 2: make sure that you are invested in the right risk profile.
Speaker 2: We've done entire podcasts on risk profiling so that you
Speaker 2: know how to do that. But I think it's really
Speaker 2: important that if we're going to talk about retirement, we
Speaker 2: have clear goals. And in that session, in that roundtable,
Speaker 2: we spoke about getting a clearer number on what we
Speaker 2: need to actually retire. So let's start with the numbers
Speaker 2: that are accessible to me. And to you that we can.
Speaker 2: I guess us as a start point, because Beck, if
Speaker 2: I think I flipped the table and said, well, how
Speaker 2: much do you need for retirement, You'd be like, I
Speaker 2: don't know, Maybe I should do a budget, Like maybe
Speaker 2: I should sit down and work out how much food
Speaker 2: is and then you end up overwhelmed because of the
Speaker 2: time value of money and how much inflation might impact
Speaker 2: what you need to save. Right So, at the moment,
Speaker 2: according to the ASFA, Beck, to have a comfortable retirement
Speaker 2: by the age of sixty seven, you need to have
Speaker 2: approximately six hundred and ninety thousand dollars saved or as
Speaker 2: a single, five hundred and ninety five thousand dollars in
Speaker 2: your super How does that feel as a number?
Speaker 4: I guess I'm just like trying to calculate you're alive
Speaker 4: for maybe, let's say, like thirty years after retirement. Yeah,
Speaker 4: if you retire the retirement age, I think that's making
Speaker 4: sense because you're keeping it somewhere and it's still getting interested.
Speaker 4: Is that correct?
Speaker 2: Yep? Ideally Ideally, I like that you're doing some serious
Speaker 2: maths here. H's I feel like that's.
Speaker 4: A I feel like, you know, definitely just looking for
Speaker 4: like a quick yess or.
Speaker 2: No, no, no no. I think it's really important, But
Speaker 2: we also want to talk about how at the same
Speaker 2: time we don't have that amount. Let's just use the
Speaker 2: couple as an example, because I feel like that's the
Speaker 2: most common and you can come to your own conclusions
Speaker 2: about what that means for single people. But if you
Speaker 2: have that income of six ninety thousand each year, and
Speaker 2: you've done your maths, like right now, Beck, I'm assuming
Speaker 2: you earn above minimum wage, right. I know you do
Speaker 2: because you know your tax bracket and she's rolling in it.
Speaker 2: She's fine, she's just spending out the kazoo. But if
Speaker 2: we did some maths around this, so six hundred and
Speaker 2: ninety thousand dollars fantastic at a draw down rate of
Speaker 2: five percent. Now I use five percent because it's a
Speaker 2: really conservative number. We know that the Australian share market
Speaker 2: over the last thirty years has returned more than nine
Speaker 2: percent each year, but we don't want to use that.
Speaker 2: I'm very much a believer of like underpromising and over delivering,
Speaker 2: Like I'd never want you to go through, you know,
Speaker 2: economic hardship and you're not being able to draw down
Speaker 2: what you need to from your super and therefore your
Speaker 2: lifestyle is completely whacked. Right, So we always budget when
Speaker 2: it comes to retirement predictions on a really low draw
Speaker 2: down rate. And I don't say really low, like it's
Speaker 2: quite conservative. In the financial advice world, most financial advisors
Speaker 2: use five percent. So we're going to use five percent here.
Speaker 2: So if you got to having six hundred and ninety
Speaker 2: thousand dollars across two people, and you drew down five
Speaker 2: percent each year, which means you're taking five percent of
Speaker 2: that amount Beck to live your life, because that's what
Speaker 2: the ASFA has said is a comfortable retirement that is
Speaker 2: an income of thirty four thousand, five hundred a year.
Speaker 2: Oh is that enough? Well, no, exactly, no, no, no, it depends.
Speaker 2: And don't get me wrong, that's thirty four thousand, five
Speaker 2: hundred dollars that you didn't have before that. But that
Speaker 2: is less than minimum wage. And we are seeing people
Speaker 2: now retiring with mortgages. We're seeing them retiring not owning
Speaker 2: property and having to pay rent. That comfortable retirement figure
Speaker 2: that the ASFA is using assumes Beck that you own
Speaker 2: your own home and you don't have housing costs. What
Speaker 2: we need to do is actually find our own figure.
Speaker 2: And so the best way that I can say to
Speaker 2: do that is work off the five percent rule that
Speaker 2: I've just invented right now. Right, So, if I said,
Speaker 2: all right, well, what do you want to earn? Like
Speaker 2: right now, let's pretend you have an income of seventy
Speaker 2: thousand dollars per year, and I go, Beck, is that comfortable?
Speaker 2: All right? Like I could probably live on that. Yep,
Speaker 2: no worries. That makes sense for me. Between a couple.
Speaker 2: Do I want more than that? Like there's two of
Speaker 2: us now I'm currently in a dual income situation. Do
Speaker 2: I want seventy thousand dollars for me and my husband?
Speaker 2: You might go, yeah, that's fine. So if we go
Speaker 2: you want to have seventy thousand dollars as in income
Speaker 2: in retirement, we need to go to our calculator app
Speaker 2: and we take seventy thousand and we times it by
Speaker 2: twenty times in it by twenty beck will effectively mean
Speaker 2: that you're using that income as five percent. So five
Speaker 2: percent of one point four million dollars is seventy thousand dollars,
Speaker 2: So that becomes your retirement goal. So that's the maths
Speaker 2: that I'm going to tell you to use so beck
Speaker 2: to work out what you want to retire with. You
Speaker 2: need to work out what your retirement goal is, Like
Speaker 2: what's your lifestyle? Is it that comfortable lifestyle that everyone
Speaker 2: is talking about in media or is it something different?
Speaker 2: It's so okay to have something different, But if it's
Speaker 2: one point four million dollars across you and your partner,
Speaker 2: what does that actually mean for you? How much do
Speaker 2: you have to save each and every single month to
Speaker 2: achieve that? Have you gone and looked at your current
Speaker 2: SUPER contributions with your partner and worked out okay, well,
Speaker 2: you know, my partner's employer contributes eight hundred dollars a
Speaker 2: month to his SUPER and my employer contributes nine hundred, Like,
Speaker 2: is that amount going to be enough to sustain you
Speaker 2: in retirement? If it is, slay, you're well on the way.
Speaker 2: Anything you do is above and beyond and that's really attractive.
Speaker 2: If not, what are we going to do about it?
Speaker 2: Are we going to be planning to contribute more to super?
Speaker 2: Are we planning on investing outside of superannuation? Are we
Speaker 2: just in the middle of a chapter of our lives
Speaker 2: that is not possible and we need to put that
Speaker 2: idea on the shelf. Do our hygiene, make sure we've
Speaker 2: got a good super fund, make sure that it is
Speaker 2: performing well. But no, I do not have the funds
Speaker 2: right now to contribute extra. But I know that one
Speaker 2: day when that comes, I'm going to change it. Like,
Speaker 2: we need to have a plan irrespective of what our
Speaker 2: current budget is. Does that make sense? I feel like
Speaker 2: a maths figure is going to be the best way
Speaker 2: to calculate it. I feel like I could tell you
Speaker 2: to budget until the cows come home. And don't get
Speaker 2: me wrong, a lot of people are going to listen
Speaker 2: to this who are a lot more technical than I
Speaker 2: am right now and say, Victoria, you haven't calculated for inflation, Victoria,
Speaker 2: you haven't calculated for the changing rate of compound interest Victoria.
Speaker 2: What about taxes, Victoria, what about the superannuation tax back?
Speaker 2: I don't care about that in this moment. If this
Speaker 2: math's calculation gets you off to a clean start. So
Speaker 2: we want to do our hygiene. We want to make
Speaker 2: sure that we're in the best possible pause, But then
Speaker 2: we also want to do some maths and go, hey,
Speaker 2: in my head, I've just worked out that a five
Speaker 2: percent draw down is about seventy thousand dollars, Like, that's
Speaker 2: what I want to earn, and that means I probably
Speaker 2: am aiming for about one point four million dollars in
Speaker 2: super We can work with that, We can go from there.
Speaker 2: Do not get me wrong. Stuff is definitely going to
Speaker 2: cost more in the future, because like a basket of
Speaker 2: goods today, beck costs a lot more than it did
Speaker 2: last year. But over time, inflation will hopefully be much
Speaker 2: lower than the compounding interest that you achieve, so it
Speaker 2: will work out in the end. Sure, But I feel
Speaker 2: like that's a really good place for you to start.
Speaker 2: So you've got a lot of clarity on your goal,
Speaker 2: Like that's a very clean goal.
Speaker 4: I just have it in my head. I imagine that
Speaker 4: I'll be single when I'm older, and so I do
Speaker 4: want to ask you like that doesn't necessarily have to
Speaker 4: be romantic. You could be like, oh, I'm shacking up
Speaker 4: with a housemate after I retire, you know what I mean? Like,
Speaker 4: there could be other ways if you are single, you
Speaker 4: can find that extra of like helping hands or whether
Speaker 4: it's share housing or whatever it is.
Speaker 2: It's an interesting conversation, right because I was having a
Speaker 2: chat over the weekend with my best friend who is
Speaker 2: currently single. If there are any hot chicks out there
Speaker 2: who are interested in my best friend, let me know.
Speaker 2: I'm happy to hook her sister up. But I was
Speaker 2: talking to her about it, and she is the same
Speaker 2: age as me, or she's a year younger than me,
Speaker 2: and we were just talking about how she's just like
Speaker 2: sick of this like share house life. I don't want
Speaker 2: to share my living quarters with someone, Like I want
Speaker 2: to go home and know that my stuff is left
Speaker 2: where my stuff is left, and like I totally get it,
Speaker 2: but I also just think, how can we make this
Speaker 2: possible and feasible for people who just want to be
Speaker 2: single by choice? Like what if you just decide you're
Speaker 2: not interested in a relationship, Like that's not for everybody.
Speaker 4: No, I don't feel like there's this.
Speaker 2: Cookie cutter idea that you have to live with other people.
Speaker 2: But like I don't know, Like if I was single,
Speaker 2: I feel like I would want my own space at
Speaker 2: this age, like she was right, Like if I left
Speaker 2: something on the bench, I want it to be there
Speaker 2: when I get back. If you know I cleaned the bathroom,
Speaker 2: I want the bathroom to be clean when I get back.
Speaker 2: I totally resonate with that because I can also empathize
Speaker 2: with you, going, oh yeah, like you could have a
Speaker 2: whole heap of options to support you, but like why
Speaker 2: should that be the outcome? If that makes sense? Like, yeah,
Speaker 2: as a choice, I also same best friend if we're
Speaker 2: both single when we're older, we're moving in together and
Speaker 2: we're going to live our best life. It's so flat
Speaker 2: we are convinced that we're going to be the old
Speaker 2: ladies on the scooters going around the nursing home getting
Speaker 2: in trouble, Like that is my future, yes, but what
Speaker 2: if you don't want you have to rely on another
Speaker 2: human being to sure if your lifestyle. Yeah, and that
Speaker 2: number of five hundred and ninety five thousand dollars back
Speaker 2: at a five percent draw down rate is about twenty
Speaker 2: nine thousand dollars, right, that's less than a couple's amount,
Speaker 2: But it's still not enough to pay for rent. Even
Speaker 2: like let's just be really modest outside side of a city.
Speaker 2: You're still paying like three hundred dollars a week on average,
Speaker 2: I would say for a one or two bedroom apartment.
Speaker 2: But we're not talking about having a house with heaps
Speaker 2: of land. That's still three hundred dollars a week, and
Speaker 2: three hundred dollars a week over a year is still
Speaker 2: half of what that income is. So that person is
Speaker 2: paying fifty percent of their income to rent. And then
Speaker 2: what groceries. Groceries right now are three hundred dollars a week,
Speaker 2: whether you're single or a couple. Families are even worse.
Speaker 4: It's not just scare.
Speaker 2: You start breaking it down, and that's really grim. And
Speaker 2: I mean, this is a Q and A. So we'll
Speaker 2: get off this because I've probably got another podcast in
Speaker 2: me to rent all about the renuation and retirement savings
Speaker 2: and whatnot at some point. I mean, we've done it before,
Speaker 2: but I get so passionate about this because if you're
Speaker 2: not planning for retirement, you're shooting yourself in the foot. Sure, like,
Speaker 2: there is small things that you can do today that
Speaker 2: put you in hundreds of thousands of dollars of a
Speaker 2: different position in the future that don't cost you a
Speaker 2: dollar today, Like go do that. Go check your superanuation
Speaker 2: and consolidate your accounts. Beck, when I checked my supbranuation
Speaker 2: way back in the day, I had like five different accounts,
Speaker 2: and I calculated that over that period of time. Had
Speaker 2: I not consolidated my super, I would have spent an
Speaker 2: additional seventy thousand dollars on superfees.
Speaker 4: Oh, don't think about it. Do you think about it?
Speaker 4: Don't think about it.
Speaker 2: No, do think about it so much yourself from doing that,
Speaker 2: because there are people that didn't make that change. There
Speaker 2: are people right now that are exactly like you and me.
Speaker 2: Had a heap of hospital jobs, we worked retail, you know,
Speaker 2: we then got our big girl jobs and we like
Speaker 2: didn't think about it again because super is icky and
Speaker 2: it's not very sexy, Like, just go consolidate it. It's
Speaker 2: the light at the end of the tunnel right now.
Speaker 2: If you don't have anything in your budget right now
Speaker 2: to put towards future, you at least make sure her
Speaker 2: house is clean, be for real, Like, go and set
Speaker 2: that up so that when future you can contribute more money.
Speaker 2: She's not starting from scratch. Take care of a Oh anyway,
Speaker 2: ask me another question, because otherwise this is going to
Speaker 2: become a massive rant about zuperannuation and retirement and that's
Speaker 2: not what y'all came for.
Speaker 4: Okay, let's go to the next one. So what is
Speaker 4: the rule of seventy two that I hear Victoria talk about.
Speaker 2: Oh my gosh, I love the rule of seventy two.
Speaker 2: I heard you talk about that now. I say it
Speaker 2: all the time, but you just tune out, you don't.
Speaker 4: Listen, Sugar, I'm sorry.
Speaker 2: I feel like it makes sense though, because it's really boring.
Speaker 2: So it's a resence that I first heard growing up
Speaker 2: from my dad, who's an accountant, and he was always
Speaker 2: like the rule of seventy two is very important to understand,
Speaker 2: and like, as kid, I'm like, bor But it is
Speaker 2: actually a really nifty little tool that's going to help
Speaker 2: you to figure out how long it will take for
Speaker 2: your investment to double. That's more attractive than just hearing
Speaker 2: the rule of seventy two, right, Like, it's a formula
Speaker 2: that helps you work out when your money is going
Speaker 2: to be worth double. Attractive. We like it very demure.
Speaker 2: So it's actually quite simple. It's a maths formula and
Speaker 2: it's based on a fixed annual return, which I often
Speaker 2: calculate at either five percent, which we've just discussed on
Speaker 2: this exact podcast, or I talk about seven and a
Speaker 2: half percent, because I like to be consistent across the
Speaker 2: content that we put out, so all you need to
Speaker 2: do is divide seventy two by your annual interest rate.
Speaker 2: So for example, Beck, if you're earning an eight percent
Speaker 2: interest rate, you're going to divide seventy two by eight.
Speaker 2: I've done the maths for you, and you'll find out
Speaker 2: that it will take about nine years for your money
Speaker 2: to double. Ah, very sexy, very mindful.
Speaker 4: We like, so if your annual return, if it's like
Speaker 4: five or yeah, and or it would be different than.
Speaker 2: Yeah, yeah, And we know that the average rate of
Speaker 2: return for the Australian share market is just over nine percent,
Speaker 2: so you could use that. But that's why I often
Speaker 2: say on the podcast, Beck, your money will probably double
Speaker 2: within seven to ten years, because that's the average timeframe
Speaker 2: of the average rate of return across the Australian share
Speaker 2: market but also the international share market and all the
Speaker 2: assets that we talk about on the podcast. So it
Speaker 2: works the other way around as well. So you want
Speaker 2: to double your money in six years, Beck, you divide
Speaker 2: seventy two by six and then you'll see that you
Speaker 2: need a rate of return of twelve percent to hit that,
Speaker 2: and you can work out if that's reasonable or not.
Speaker 4: Where does the seventy two come from?
Speaker 2: It's just the magic numbers, and you don't need to
Speaker 2: understand the number, because if we were to explain exactly
Speaker 2: how we get the seventy two number, it would be
Speaker 2: an entire podcast in itself. But what you need to
Speaker 2: understand is seventy two is the magic number. We love
Speaker 2: seventy two, and seventy two is going to be the
Speaker 2: number that tells you how to double your money. But
Speaker 2: the rule of seventy two is basically a super quick,
Speaker 2: super handy way to set really really stick investment goals
Speaker 2: and understand how your money can grow and work over time.
Speaker 2: And the thing I want you to keep in mind
Speaker 2: is it's just approximate. It's obviously not set in concrete,
Speaker 2: but it's an approximate and it works best with interest
Speaker 2: rates between six and ten percent, which often in our
Speaker 2: market at the moment, and historically that's what they've returned.
Speaker 4: At Sure, and I guess we can all find comfort.
Speaker 4: Just don't worry about where seventy two comes from. Just
Speaker 4: know that experts and scientists and all these people.
Speaker 2: You can goog You could do a deep dive. There
Speaker 2: are a lot of really nerdy people who have done
Speaker 2: a lot of very good YouTube content on the rule
Speaker 2: of seventy two. Go look at that. It's not for today.
Speaker 2: What I want you to understand is that seventy two
Speaker 2: is the magic number, and it's gonna teach you how
Speaker 2: your money can double.
Speaker 4: I love that.
Speaker 2: I love money. I love it doubling.
Speaker 4: I don't mind it wouldn't say no. Okay, here's another one.
Speaker 4: Does chess matter? I'm thinking game of chess. I love
Speaker 4: a game of chess.
Speaker 2: I love chess as well.
Speaker 4: Is that what you're thinking.
Speaker 2: No, it's not. It's investing chess. Do you know what
Speaker 2: investing chess is?
Speaker 4: I know that you've probably told me, but I've gotta
Speaker 4: be honest.
Speaker 2: I don't know if I have. I can't remember. I
Speaker 2: did it on an episode with Glenn James, Like we're
Speaker 2: talking about chess and we broke down absolutely everything you
Speaker 2: need to know about chess with him. So go back
Speaker 2: and listen to that episode. But pop, quiz, what does
Speaker 2: chess stand for? If we're talking about it in an
Speaker 2: investing perspective, so it.
Speaker 4: Is actually an investing term?
Speaker 1: Is that?
Speaker 4: Okay? I'm going to guess it's.
Speaker 2: Not a game currency.
Speaker 4: Nope, We're going to be here for a few hours
Speaker 4: you want to tell you yes, please, Yeah.
Speaker 2: So it's clearing house electronics sub register system. That was
Speaker 2: what you were going to guess next, actually your next guest.
Speaker 4: Like, I get it. What does that mean?
Speaker 2: So basically, if you're curious about how chess works, obviously
Speaker 2: listen to that episode. But it's a computer system that
Speaker 2: is used by the ASX to manage the settlement of
Speaker 2: share transactions and to record who owns what and TLDR.
Speaker 2: To me, as an individual investor, there is personal opinion,
Speaker 2: not advice. Beck, I could not give a flying bleep
Speaker 2: sound about chess. I don't care if I have chess.
Speaker 2: I care obviously if my investments are registered through the ASX.
Speaker 2: But I own ETFs and an ETF. The chess does
Speaker 2: not sit with me. Chess sits with the underlying owner
Speaker 2: or the founder of the ETF, and I'm quite comfortable
Speaker 2: with them having that. Because we are a very secure country.
Speaker 2: I don't need to worry about chess. I feel like
Speaker 2: it's a very hot topic in our community at the moment.
Speaker 2: If you are a bit more nerdy, which I am,
Speaker 2: and you spend a lot of time on Reddit, and
Speaker 2: you spend a lot of time you know, reading forums
Speaker 2: about investing, lots of people get really heated about like
Speaker 2: having to have it be chess and having to have
Speaker 2: access to it and having your very own name on
Speaker 2: that share. But from my perspective, it's actually about the
Speaker 2: legitimacy of the asset that you own, and an ETF
Speaker 2: is a very legitimate asset to own. I don't need
Speaker 2: my name on every single individual share because when I
Speaker 2: buy into an ETA, if I become an underlying owner
Speaker 2: of that asset, does that make sense? And it's all
Speaker 2: registered very legally, and I'm very comfortable with that. I'm
Speaker 2: not going to lose my investment because I don't have
Speaker 2: it chess sponsored. If that makes sense. Yeah, that's but
Speaker 2: I think that it's one of those questions that people
Speaker 2: start to ask when they're getting analysis paralysis, and we
Speaker 2: did an episode about that recently as well. You are
Speaker 2: diving deep and you are so excited to invest back,
Speaker 2: and you start doing all of these googling and you're
Speaker 2: like typing away and typing away and working out what's
Speaker 2: going on, and then chess comes up and you're like,
Speaker 2: oh my god, I didn't know anything about chess. I
Speaker 2: better google that. And then you read all these people
Speaker 2: who are really passionate about it and go, oh my god,
Speaker 2: all the investments that I shortlisted, they're not Chess. Oh
Speaker 2: now I'm gonna have to start again, Like, what does
Speaker 2: this mean? How does this? I feel like it is
Speaker 2: a semantic that matters to a very small handful of
Speaker 2: people but does not matter to the masses.
Speaker 4: Is there a benefit to chess?
Speaker 2: I mean, yeah, you get your name on the individual.
Speaker 4: Share okay, and that's like maybe more secure in some circumstances.
Speaker 2: I don't believe it is more secure. I believe it
Speaker 2: is more about having direct ownership.
Speaker 4: Of that share.
Speaker 2: I understand right now, the ETF that I own owns
Speaker 2: that share certificate and keeps it very safe. I've trusted
Speaker 2: them to invest with them, and I am as an
Speaker 2: investor of that ETF and underlying owner of that trust
Speaker 2: that owns all of those share certificates. So I don't mind. Okay,
Speaker 2: I think I get that, And I feel like it's
Speaker 2: a personal question, right, So you might still save all
Speaker 2: v it does matter to me, yeah, And I go, well,
Speaker 2: that's absolutely fine. What I want you to be is
Speaker 2: as educated as possible to make the right decision for
Speaker 2: you not the right decision for me, So go and
Speaker 2: do your research. But personally, as an ETF holder, don't mind.
Speaker 4: Don't mind.
Speaker 2: It's all good.
Speaker 4: Do you feel satified?
Speaker 2: You feel I feel satisfied. I love chatting about this.
Speaker 2: So what's the next one?
Speaker 4: Okay, this question is actually something I haven't heard before,
Speaker 4: but I should have asked you this already. What is
Speaker 4: the difference between market buy limit by.
Speaker 2: Ah, you want to talk investing with me? All right,
Speaker 2: let's break down the difference between a market by order
Speaker 2: and a limited by order in the super simple terms.
Speaker 2: So when you place a market by order, you're saying,
Speaker 2: all right, get me those shares right now at the
Speaker 2: current price. Like I want to put an order in
Speaker 2: and I want it delivered today. I want to own
Speaker 2: those shares when the share market opens, Beck, I want
Speaker 2: to own those shares and the share market is open
Speaker 2: in Australia. I bet you won't guess this between ten
Speaker 2: and four ten am for BM. Yeah, it gives you
Speaker 2: time to get into work, get across your admin, and
Speaker 2: then the share market opens and it goes wild, and
Speaker 2: then it closes it four and then you can do
Speaker 2: some admin and go home. Work life balance, I suppose
Speaker 2: I love that, but that's interesting. That means that if
Speaker 2: last night you put a share order in and the
Speaker 2: market wasn't open, it would be fulfilled at ten am
Speaker 2: this morning when the market did open back up, or
Speaker 2: you could just log on right now ten twenty four am. Technically,
Speaker 2: I mean not for the people listening, but for you
Speaker 2: and I it is in the past. But that means
Speaker 2: that you could go and buy a share right now
Speaker 2: for that current price. So it's all about speed.
Speaker 4: It's all about.
Speaker 2: Getting the share as quickly as possible, but the price
Speaker 2: might fluctuate slightly by the time the order goes through.
Speaker 1: Ah.
Speaker 2: The downside is that the market jumps up before your
Speaker 2: order is filled. So you might put in an order
Speaker 2: last night the market opens, it's actually at a higher rate.
Speaker 2: Now you might end up paying more than you'd anticipate it.
Speaker 2: So a market buy order is basically give me that,
Speaker 2: don't care how much it costs, and I mean the
Speaker 2: market doesn't fluctuate too much, so don't want to be
Speaker 2: too dramatic about going give it to me at any
Speaker 2: price like you're buying it and it might fluctuate a
Speaker 2: few cents. You're not going to see a share jump
Speaker 2: astronomically and then it absolutely financially screw you. But the
Speaker 2: other one is kind of like the cool boy way
Speaker 2: of investing. So a limited buy order is basically when
Speaker 2: you're like too call for school, and you're like, I'm
Speaker 2: only paying x amount and if it goes up, I'm
Speaker 2: not interested. So you set the price that you are
Speaker 2: willing to pay and the order will only go through
Speaker 2: if the market hits or drops low that number. So
Speaker 2: it's perfect if you've got a specific price in mind,
Speaker 2: but you don't mind waiting. The catch is kind of
Speaker 2: that if the market doesn't cooperate and the price doesn't
Speaker 2: hit your limit that you've set, like your buy price,
Speaker 2: you might not actually end up purchasing the share at all.
Speaker 4: Yeah, okay, Yeah.
Speaker 2: And I think that this is a good one where
Speaker 2: I'm a bit petty, so like I don't want to
Speaker 2: overspend on something, and if I see the market fluctuating
Speaker 2: a little bit, so like, there's been a share that
Speaker 2: I've recently been following, and to be honest, it's probably
Speaker 2: a little bit of a gamble, so I'm not going
Speaker 2: to share it, but I've been following it a little
Speaker 2: bit and it's going up and down by a few
Speaker 2: cents here and there. And this is just me being
Speaker 2: investor Victoria. This is not me being Victoria creating retirement
Speaker 2: fund Victoria. This is me having a little bit of
Speaker 2: fun because I really enjoy investing. I've set a buy
Speaker 2: price for that because I'm like, no, I've seen it
Speaker 2: drop to that a couple of times over the last
Speaker 2: you know, few months, and now I've finally decided that
Speaker 2: I do want to invest in this asset. I don't
Speaker 2: want to pay more than what other people have paid. Yeah,
Speaker 2: I want to see it drop back down to that
Speaker 2: because it's a bit of a risk. It's a bit
Speaker 2: of a punt, so I'm not willing to pay that
Speaker 2: even slightly higher price. But the same is true if
Speaker 2: you're budgeting for a share right, like you might go,
Speaker 2: I really want to, you know, get.
Speaker 3: X for X.
Speaker 2: This is a really good way of doing that. But
Speaker 2: I also think it's important to understand that it's about
Speaker 2: balancing urgency and price control, but then also remembering that
Speaker 2: there's no such thing as timing the market. So when
Speaker 2: we're talking about this, it's so nice to be able
Speaker 2: to set a limited by order and go I only
Speaker 2: want that asset if it comes in at X. But
Speaker 2: there's never going to be a good time to invest, Beck,
Speaker 2: because I can't predict it. Like the best time to
Speaker 2: invest was twenty years ago. The second best time is
Speaker 2: to get your shoe in the door today, because we know,
Speaker 2: based on the rule of seventy two Beck, that your
Speaker 2: money should double after a certain period of time. And like,
Speaker 2: starting now means you're not starting tomorrow, and you cannot
Speaker 2: predict that the share is going to go back down.
Speaker 2: But for me, I don't want that share in my
Speaker 2: portfolio if I have to overpay for it. I only
Speaker 2: want it if I kind of get it for a
Speaker 2: good deal. Yeah, it's like that top that you would
Speaker 2: only purchase if it was on sale.
Speaker 4: Totally.
Speaker 2: You're like, I wouldn't pay full price for that. There
Speaker 2: are some stores that I'm literally convinced I will never
Speaker 2: purchase full price. I just know they go on too
Speaker 2: good a sale.
Speaker 4: I know I'm at the same house back right now,
Speaker 4: I'm always on sale.
Speaker 2: If you're paying full price at that store, what are
Speaker 2: you doing?
Speaker 5: What are you doing?
Speaker 2: What are you doing with your life?
Speaker 4: Wait? Literally three seconds, it'll be on sale again, exactly
Speaker 4: all right, let's go for a quick break. I'm just
Speaker 4: need to check out the house website and see this
Speaker 4: on side. Yeah yeah, fair be everywhere. Okay, guys, we
Speaker 4: are back and we are doing a bit of a
Speaker 4: Q and A today. So V, I don't know how
Speaker 4: you feel.
Speaker 2: I'm ready. I'm sad that we checked the house website
Speaker 2: and they were still on sale. God, I thought they'd
Speaker 2: gone like super sale or something. But I really want
Speaker 2: to answer more investing questions. This is my bread and butter, Babe.
Speaker 4: You're in your element right now.
Speaker 2: Yeah, living, live, love, laugh or something.
Speaker 4: Yeah, something like that.
Speaker 1: All right.
Speaker 4: So the second one is how do you collect revenue
Speaker 4: from investments? Oh?
Speaker 2: Yeah, beg, you're investing now, you're an investor.
Speaker 4: Actually, all these questions of mine.
Speaker 2: Yeah, how is it going to make you rich?
Speaker 4: I'm not ready for that.
Speaker 2: Let me tell you. So. There are a heap of
Speaker 2: different ways that you can make money from shares. Investment
Speaker 2: increases in value over time, and then you potentially sell
Speaker 2: it for a profit. Money win. The other one is
Speaker 2: that it pays you for the privilege of owning it.
Speaker 2: I love that, Like imagine something just being like, hey, Beck,
Speaker 2: thanks for coming here's some cash. Oh, thanks for still
Speaker 2: being here. There's some cash. Literally, your share portfolio is
Speaker 2: your sugar daddy. Now that's so good, Like start referring
Speaker 2: to it as daddy.
Speaker 4: Yeah, ideally they like that you like it more.
Speaker 2: But there are a few things. So increasing in value
Speaker 2: is the most widely understood way of making money in
Speaker 2: the share market, right, Like you bought a share for
Speaker 2: a dollar and then in ten years Beck, you sold
Speaker 2: it for ten money.
Speaker 4: Win.
Speaker 2: But for me, I am greedy. I want my shares
Speaker 2: to increase in value, but I also want them to
Speaker 2: pay me for the privilege. So we have talked about
Speaker 2: it on podcasts before. Dividend yielding shares. So a dividend
Speaker 2: is a payment that a company makes to you because
Speaker 2: you are technically a part owner in the business, and
Speaker 2: as a part owner, you are entitled to part of
Speaker 2: the profit. And the percentage of which you own shares
Speaker 2: is the percentage that you get paid out. And I
Speaker 2: always use NAB shares for some reason on the podcast
Speaker 2: as an example, So let's keep that consistent. So say
Speaker 2: you which is a NAB share, Beck, and a NAB
Speaker 2: share is probably today about thirty seven dollars per share,
Speaker 2: and we're just going to keep it clean. You just
Speaker 2: purchased one. The dividend yield over this year four NAB
Speaker 2: has been a dollar and sixty eight cents for the
Speaker 2: entirety of the year, so it pays out twice a year,
Speaker 2: and it pays out in July and December, and it
Speaker 2: gave in December about eighty four cents and also gave
Speaker 2: eighty four cents in July, so that brings you up
Speaker 2: to a total of one dollar and sixty eight cents.
Speaker 2: Which you go, oh, one dollar and sixty eight cents
Speaker 2: for a NAB share, didn't you say it was thirty
Speaker 2: seven dollars. That doesn't seem like a good deal, but
Speaker 2: is a good deal because you end up with a
Speaker 2: dividend yield of about four point five five percent, which
Speaker 2: in the grand scheme of things. You know how we
Speaker 2: said that the Australian share market returns about nine percent
Speaker 2: each year. It's obviously significantly lower than that. But NAB
Speaker 2: is consistent. It is a blue chip share. It is
Speaker 2: a share that is tried and true and tested. It's
Speaker 2: like that consistent friend that is always there. So I
Speaker 2: love to see that. Also, it increases in price over time.
Speaker 2: So I'm being paid eighty four cents every six months
Speaker 2: for owning an AB share. Again, not a recommendation, just
Speaker 2: an example, but these are companies that are paying percentages
Speaker 2: of their profit to you. Beck that right now don't
Speaker 2: seem really big, but can either contribute to your share portfolio.
Speaker 2: So you can pick what's called a dividend reinvestment plan
Speaker 2: and it's just a box on your SHARE's 's account.
Speaker 2: Oh like, this is just side note for you. Obviously
Speaker 2: anyone listening, you can hit dividend reinvestment plan and every
Speaker 2: dollar that your share portfolio makes will just be reinvested
Speaker 2: for you, so you don't even have to lift a finger.
Speaker 2: But then when you get to retirement, Beck, that eighty
Speaker 2: four cents will be put into your bank account instead
Speaker 2: of your share portfolio, and that becomes your income instead
Speaker 2: of you going to work. So over time, when you
Speaker 2: have more and more shares and more and more profit,
Speaker 2: that eighty four cents becomes that, you know, forty thousand
Speaker 2: dollars or that seventy thousand dollars of income that we
Speaker 2: were talking about at the start of the episode.
Speaker 4: If you had, for example, one hundred shares, yes, then
Speaker 4: there we go, we've got.
Speaker 2: To start coming. And this is say it can be
Speaker 2: so disheartening at the start of an investment journey because
Speaker 2: you're like, oh, gung ho, and you're so excited, and
Speaker 2: I just don't want you personally to fall in this
Speaker 2: trap of like, I've invested thee and I'm so excited.
Speaker 2: And then it comes to tax time and you get
Speaker 2: your tax statement, which is probably one of the first
Speaker 2: times that you would just see on a statement of
Speaker 2: paper how much you earned the previous year on your investment.
Speaker 2: You'd be like, wait, what it was like four dollars?
Speaker 4: What the hell? Right?
Speaker 2: All of this for that? Like yes, because at the start,
Speaker 2: compounding starts off really slow, and it really starts to
Speaker 2: kick into gear at about seven years. And that goes
Speaker 2: back to our rule of seventy two where you usually
Speaker 2: if you have a rate of return between six and
Speaker 2: ten percent, it will usually be seven to ten years.
Speaker 2: So compounding starts to take effect once your money starts
Speaker 2: to double, and once it starts to double, compounding just turbocharges,
Speaker 2: which is so exciting. But that's why we talk a
Speaker 2: lot about delayed gratification on the podcast, because you need
Speaker 2: to be in it for the long term, you can't
Speaker 2: just go, oh, it was four dollars v it wasn't
Speaker 2: worth it like that. Four dollars. Next year is going
Speaker 2: to be eight, and after that it's sixteen, and after
Speaker 2: that it just gets bigger and bigger, and it's so exciting. Beck.
Speaker 2: So that's cash dividends. You mentioned frank and who's giving
Speaker 2: him credit earlier? And you want to know about that.
Speaker 2: So some dividends come with a franking credit, and I
Speaker 2: think a franking credit is best viewed as a tiny
Speaker 2: flag that they put on their heads. So your dividend
Speaker 2: comes in and it might be a unfranked dividend, no flag,
Speaker 2: franked dividend. He's got a fancy hat with a flag
Speaker 2: on it, right, and it means that the company he
Speaker 2: has come from has already paid the thirty percent tax
Speaker 2: at a corporate rate and you get a credit for it.
Speaker 2: So he's really attractive. So the flag on his hat
Speaker 2: doesn't make him look silly. It makes him look more attractive,
Speaker 2: and it represents the tax that the company's already paid
Speaker 2: on the profits that have been distributed as dividends, and
Speaker 2: those credits they can be collected. So you want lots
Speaker 2: of little men with lots of little hats, because it's
Speaker 2: used to offset your personal tax liability.
Speaker 4: Oh so for example, if you got a dividend, like
Speaker 4: a one dollar dividends from NAB and they had not
Speaker 4: paid tax yet on this difference.
Speaker 2: You'd pay four takes on that dividend if.
Speaker 4: They had the tax has been taken out.
Speaker 2: Yes, but maybe no. So it depends on what your
Speaker 2: marginal tax rate is. So if you pay tax that's
Speaker 2: less than what your franking credit is, it's not as attractive.
Speaker 2: But for most of us, we have a tax rate
Speaker 2: of thirty nine percent or more. And I say most
Speaker 2: of us because that's just how the Bell curve falls.
Speaker 2: Not a good or a bad thing. It just is
Speaker 2: the state of the economy. Most people fall into a
Speaker 2: thirty nine percent tax bracket, and because of that, you're
Speaker 2: nine percent on average better off. Ah, because the corporate
Speaker 2: tax rate is about thirty percent. Yeah, and he's got
Speaker 2: a thirty percent flag on his head.
Speaker 4: So even if you make more or less, or you
Speaker 4: fit into a different tax bracket, you don't have to
Speaker 4: pay any more tax.
Speaker 2: Well, you might have to pay the difference, so you
Speaker 2: might have to pay the nine percent, but that's instead
Speaker 2: of thirty nine yer cent.
Speaker 4: That's very sexy, really good.
Speaker 2: Yeah, so tiny Dividend has a hat and the hat
Speaker 2: is a flag. I don't know if that's how every
Speaker 2: other ex financial advisor used it, but I've always just
Speaker 2: thought as Frank as a dude who has a red
Speaker 2: hat on and it's got a flag on it.
Speaker 4: I'm also curious for anyone listening what their little man
Speaker 4: with a flag looks like. Mine is a white ball
Speaker 4: with a red hat, and I wonder what yours looks like.
Speaker 2: It's a MEDIOCM middle aged white man, ah with a
Speaker 2: bad fall cat like you know, like the cap that
Speaker 2: you that has the like fan on the top of it.
Speaker 4: Yea's like a colorful hat really called propeller.
Speaker 2: I don't know, propeller hat. Yeah, so that is Frank.
Speaker 2: Let's get on to some more questions.
Speaker 4: All right, let's go. So this next one is an
Speaker 4: important one. What type of reporting do I need for
Speaker 4: tax time?
Speaker 2: Oh? You need all of it. Thankfully we live in
Speaker 2: twenty twenty four, so a lot of investing platforms and
Speaker 2: a lot of your employers actually have data feeds that
Speaker 2: go straight to the ATO. So if you don't log
Speaker 2: in on the first of July, which I don't recommend
Speaker 2: anyone does their tax on the first of July. I
Speaker 2: know lots of people are like so gung ho about
Speaker 2: like getting it done. Oh my god, I get my return.
Speaker 2: I know that that's you, Beck. But if you wait
Speaker 2: a little bit longer, it gives time for your employer
Speaker 2: to upload all of your tax information, It gives time
Speaker 2: for all of the investing platforms to upload it, and
Speaker 2: it might already be on the portal. To make your
Speaker 2: life really, really easy. But when it's time to do
Speaker 2: your taxes, you need to make sure that you're as
Speaker 2: prepared as possible. In Australia, this includes understanding and knowing
Speaker 2: the dividends from your shares, the interest from your savings
Speaker 2: account or your bonds that you own, and any rental
Speaker 2: income that you have received. If you are a fancy
Speaker 2: pance and have an investment property, if you've made any
Speaker 2: sales like you've sold some shares or some property, you
Speaker 2: need to report any capital gains or losses and remember
Speaker 2: that there is a potential CGT discount if you've held
Speaker 2: the asset for more than a year. If so, you're
Speaker 2: in a good position because yes well, you'll still have
Speaker 2: to pay capital gains tax on that. The profit will
Speaker 2: be taxed at fifty percent your marginal tax rate. If
Speaker 2: you own an asset for less than twelve months, make
Speaker 2: a profit and then sell, the profit will be taxed
Speaker 2: at your marginal tax rate, and we pay tax on
Speaker 2: money that we earn. That is just a reminder that
Speaker 2: there are potential CGT discounts if you own it for
Speaker 2: more than a year. I have more term holdings. Now
Speaker 2: they're moving back into reporting. You can also deductions related
Speaker 2: to your investments, which is important to track as well.
Speaker 2: So if you've got interest on loans or property related
Speaker 2: expenses or like management fees, keep all your paperwork, your receipts,
Speaker 2: your bank statements, transaction histories, and keep them in order
Speaker 2: because the ATO might want to check your claims, you
Speaker 2: might get audited, but stay on top of it. Not
Speaker 2: only because obviously we want to comply with the ATO
Speaker 2: and not getting any trouble or strife, but it optimizes
Speaker 2: your return, Like you're going to get the best possible
Speaker 2: return if you track your expenses. Yeah, smart girl, things.
Speaker 4: Smart girl, God, you're smart.
Speaker 2: No, not me, Just people who track their expenses are smart.
Speaker 2: Ten out of ten.
Speaker 4: Okay, so this is going to sound like me, but
Speaker 4: it's not me.
Speaker 2: I feel like all of them sound like you.
Speaker 4: They all do sound like me. Actually, you're right.
Speaker 2: I saw them come in from the community. That's literally
Speaker 2: your only saving grace. Otherwise I do questioning whether you
Speaker 2: just keep this episode in so that you got investing advice.
Speaker 2: Now you started, I've got receipts, so do I.
Speaker 4: I want to try a budget. What's the smallest amount
Speaker 4: I can invest with?
Speaker 2: One cent?
Speaker 4: That is so true, v I was gonna say, I
Speaker 4: was actually about to screen this from the rooftops.
Speaker 2: Yeah, one cent.
Speaker 4: That you say, start with as little or as much
Speaker 4: as you like.
Speaker 2: Yeah, but like you are investing on Charesy's right now,
Speaker 2: you can literally invest for one cent.
Speaker 4: I've got nine dollars in there.
Speaker 2: See exactly. That's a lot more than one cent. So
Speaker 2: let's hold on. Let's flip this Beck. You started your
Speaker 2: investing journey, how much did you start with?
Speaker 4: I started with ten dollars actually, and it has gone down.
Speaker 4: But as you say, it's the long game that we're playing. Yeah,
Speaker 4: I think it just feels good knowing that I have
Speaker 4: some money out of shares. Like it's good to start. Yeah,
Speaker 4: I feel motivated. It's just like chuck a couple bucks
Speaker 4: in there every now and then. It's doing some I
Speaker 4: don't know what it's doing, but it's doing doing its
Speaker 4: thing exactly.
Speaker 2: And to me, that's so exciting and probably even better
Speaker 2: than me explaining it because I feel like a broken record.
Speaker 2: But I'm like, you can invest for as little as
Speaker 2: one cent, like Beck's investing with nine dollars. I feel
Speaker 2: like that's really a proachable and it's really realistic, Like
Speaker 2: it's where lots of us start, and it's where lots
Speaker 2: of us should start. Because Beck, you're dipping your toes
Speaker 2: in the water. Like if you lost that nine bucks,
Speaker 2: you're like, beh, whatever, that's absolutely fine. But if you'd
Speaker 2: started with like five hundred dollars and you'd seen it
Speaker 2: go down a little bit, because that's the nature of
Speaker 2: the market, I think you would have been really stressed.
Speaker 4: Yeah, that's true.
Speaker 2: I think you would have been like, oh my god,
Speaker 2: the I've actually lost so much money, Like I've lost
Speaker 2: ten percent. And that's what you're explaining to me. You
Speaker 2: were like, up, started with ten dollars, it's now down
Speaker 2: to nine. You've lost ten percent, but you're not that
Speaker 2: stressed about it because you started small and you're going
Speaker 2: to build it up over time to put yourself in
Speaker 2: the best possible position. So obviously great news is if
Speaker 2: you're on a tight budget, Beck, you can invest with
Speaker 2: as little as one cent. I just see no barrier
Speaker 2: to entry anymore except people having cash flow and having
Speaker 2: an education, because I feel like the education part is
Speaker 2: the thing that terror fives people. You don't know what
Speaker 2: you don't know, and if you don't know what you
Speaker 2: don't know, you're not going to do anything, are you.
Speaker 2: So I feel like my job is education, and then
Speaker 2: all these other platforms it's their job to make it
Speaker 2: super accessible for you to get your foot in the door.
Speaker 2: Because I can guarantee Beck that nine dollars You'll blink
Speaker 2: and we'll be talking in a couple of years and
Speaker 2: you'll be like, oh, yeah, it's nine grand, yo. But
Speaker 2: it is that's the plan, is it? Not Like the
Speaker 2: plan is not to take the money out, it's to
Speaker 2: build over your lifetime to put you in the best
Speaker 2: possible position so that when retirement, as boring as it sound, comes,
Speaker 2: you can afford to go out for the coffees that
Speaker 2: you love so much, like, we don't want to compromise
Speaker 2: our lifestyle, and by you doing this, you're putting future
Speaker 2: you in the position to not have to do that.
Speaker 2: Isn't that sexy?
Speaker 4: Definitely so sexy.
Speaker 2: So obviously platforms like shares is the way they make
Speaker 2: it accessible is not because, as we said, nabshares thirty
Speaker 2: seven dollars, that's not that accessible. But they allow you
Speaker 2: to buy fractional shares, so you can buy a fraction
Speaker 2: of a share, and the way they do that is
Speaker 2: by not being chess sponsored. So essentially shares is buy
Speaker 2: the share and break it up and give you the
Speaker 2: portion that you want, which makes it much more accessible.
Speaker 2: And I'm quite comfortable with that. But it's a really
Speaker 2: great way to build your portfolio bit by bit, even
Speaker 2: if you're working with literally the smallest budget known to man,
Speaker 2: which is one cent and I mean shameless promo here
Speaker 2: use the code SotM Beck.
Speaker 4: What do you get ten bucks?
Speaker 2: Actually I think that's what we get ten bucks for free.
Speaker 2: So your ten bucks that is invested wasn't even your
Speaker 2: own money.
Speaker 4: Yeah, I actually didn't even remember that. I didn't put any.
Speaker 2: Money, So you've got free money. And then you've been
Speaker 2: investing it. Tell me a better money win.
Speaker 4: Oh wait, so true, that'll be something one day.
Speaker 2: All right, let's move on more questions. What are they?
Speaker 4: Okay, this next one? I feel like I hear about
Speaker 4: it a lot, but I have never had any idea
Speaker 4: what it is. What is negative geary? All right?
Speaker 2: So an investment is considered to be negatively geared when
Speaker 2: you buy it with borrowed money. And then the expenses
Speaker 2: so like the interest that you're paying on the loan
Speaker 2: are higher than the income that the investment brings in.
Speaker 4: Okay, but I thought it was a good thing.
Speaker 2: No, it can be. Oh so. Currently in Australia, those
Speaker 2: excess expenses are often claimed as a deduction on your
Speaker 2: otherwise taxable income, which is why people want that to happen,
Speaker 2: which might help reduce your tax bill, which we obviously
Speaker 2: love as investors. And while negative gearing is most commonly
Speaker 2: associated with investment properties, it's also something that can be
Speaker 2: applied to your chess.
Speaker 4: I'm taking it on.
Speaker 2: But also no, no, so I'm going to go back. You
Speaker 2: know how I do dumb things like Frank who wears
Speaker 2: the red hat. Yes, like I don't think you're going
Speaker 2: to forget Frank. Right, Frank has a red hat?
Speaker 4: Why Beck, because he comes with a credit comes with
Speaker 4: Frank is tax already and non Frank is not taxed.
Speaker 2: Yet, exactly right. It's like I have all these things
Speaker 2: in my life that I still do. Lefty lucy, righty tidy. Yes,
Speaker 2: I know how to set the table because fork has
Speaker 2: four letters in it and so does left. Thank you,
Speaker 2: I'm user, Yeah you welcome. But I just have these
Speaker 2: things in my head that work, right. Negative gearing is
Speaker 2: negative because I have to pay for it. Yes, that's
Speaker 2: how I see it in my head. It's not a
Speaker 2: bad thing technically. But negative gearing is negative because you're
Speaker 2: going to take some money out of my bank account
Speaker 2: to make that investment dream come true.
Speaker 5: Right.
Speaker 2: Positive gearing is where the investment makes more money than
Speaker 2: it costs me. So positive good for me. I'm getting money.
Speaker 2: I love getting money. Neutral gearing is where they just
Speaker 2: break even.
Speaker 4: Yeah, okay. And then if you're negatively geared on occasion.
Speaker 2: You're gonna have to cough up some cash back.
Speaker 4: Yes, so pay for it, and that cash that you
Speaker 4: cough up.
Speaker 2: Maybe claimable bull a tax. Okay, So it's negative because
Speaker 2: you have to put money in and we don't want
Speaker 2: to do that. Like in a perfect world, everybody would
Speaker 2: just be giving me money, but for me to own
Speaker 2: that asset, I have to tip some cash in and
Speaker 2: that's how I remember it.
Speaker 4: Hey, in investments and investment, isn't it? Yeah?
Speaker 2: I guess. I mean that sounds really silly, but like
Speaker 2: if it sticks in your brain, yeah, I don't care
Speaker 2: how it sticks.
Speaker 4: That actually is sticking. So thank you so much, so V.
Speaker 4: Throughout this episode, you've kind of jumped to those two
Speaker 4: figures it's seven point five percent return and five percent
Speaker 4: return as like an example when you're trying to explain something,
Speaker 4: why do you jump to those I feel like.
Speaker 2: That's really interesting and I don't think I have disclaimed
Speaker 2: it before. It's just a good example, right. So, as
Speaker 2: I said before, the average rate of return of the
Speaker 2: Australian share market over the last thirty years has been
Speaker 2: more than nine percent. But I feel like it's really
Speaker 2: irresponsible of me, as a finance professional to then use
Speaker 2: that number as the example, because we always want to
Speaker 2: underpromise over deliver, Like in a perfect world, you would
Speaker 2: get more than what your target is by retirement when
Speaker 2: you are talking about retirement, You've probably noticed that I
Speaker 2: always tend to use the five percent example. But if
Speaker 2: we're just talking about the share market and I'm just
Speaker 2: talking about average rates of return, I might use seven
Speaker 2: and a half. Because it's day to day. Both of
Speaker 2: those are obviously significantly below what the average rate of
Speaker 2: the share market does actually return. Five percent because I
Speaker 2: want to account for inflation. Five percent because I want
Speaker 2: to account for the time value of money and how
Speaker 2: things are going to cost a lot more in the future,
Speaker 2: and I'm taking care of inflation in my head when
Speaker 2: using five percent. So if I say, Beck, you've got
Speaker 2: a five percent draw down rate on your investment when
Speaker 2: you come to retirement, that means that we've got a
Speaker 2: lot of wiggle room. Whereas if you looked at the
Speaker 2: average rate of return and said, well, there it's more
Speaker 2: than nine percent, So I'm going to use that number
Speaker 2: to calculate it. What if the market's off, what if
Speaker 2: we're going through a recession, what if COVID happens, Like what,
Speaker 2: you just take less than half of what your income
Speaker 2: is today. Percent a rate of draw down means in
Speaker 2: economic turmoil, we can still take five percent and not
Speaker 2: impact the underlying asset. When the market is doing really well,
Speaker 2: we still take five percent, but that amount that is
Speaker 2: above and beyond goes into our investment so that we
Speaker 2: can continue to take five percent even when the market
Speaker 2: is off, so that we maintain a consistent lifestyle. So
Speaker 2: that is something that a lot of financial advisors do
Speaker 2: because we want to make sure that we can just
Speaker 2: be consistent. We can use a good example that is
Speaker 2: lower than the market, because there's nothing better than when
Speaker 2: people go, well, where's that number even come from? And
Speaker 2: I can be like, well, it's actually higher, so you're
Speaker 2: going to do better, but if you really want to
Speaker 2: fight me, So it's nice to have a consistent low number.
Speaker 2: But then also that seven point five is more around
Speaker 2: predictions of when money is going to double, because if
Speaker 2: we only focused on five percent, we're not doing ourselves justice.
Speaker 2: So they are literally just examples that I use to
Speaker 2: make sure that one I give our community consistency because
Speaker 2: you are always going to have me use seven point
Speaker 2: five or five percent, and those numbers are things that
Speaker 2: I would be really happy if you were away doing
Speaker 2: your own calculating and in your head you go, oh,
Speaker 2: V always says five percent or V always says seven
Speaker 2: and a half instead of you googling and getting six
Speaker 2: million different options.
Speaker 4: Thank you V.
Speaker 2: Well they're just two numbers.
Speaker 4: Okay, So next one, this is a good one to
Speaker 4: end on, I think. So what should we read and
Speaker 4: understand before purchasing any investment product?
Speaker 2: Okay, so you hear it on ADS all the time,
Speaker 2: Read the PDS and TMD before making an investment, or
Speaker 2: read the PDS and TMD before making.
Speaker 4: A decision, right, I couldn't.
Speaker 2: Yeah, I read that on ADS all the time, and
Speaker 2: I feel very grateful to be able to read ads.
Speaker 2: But what does it even mean? So PDS is the
Speaker 2: product disclosure statement and TMD is the target market determinate. Yes,
Speaker 2: so we're just going to focus on the PDS because
Speaker 2: the PDS basically is all the information about the product,
Speaker 2: and then the TMD is basically who that company thinks
Speaker 2: is a really good fit for that product, which I
Speaker 2: think is important to understand. So when people say read
Speaker 2: the PDS and TMD, it's basically saying, read about the
Speaker 2: product and understand whether you're interested in it, and also
Speaker 2: check if that might actually align to you and your
Speaker 2: lifestyle and what you're after. Because You might go to
Speaker 2: a TMD beck after hearing that there's a finance product
Speaker 2: on the radio or something, and you go, that sounds interesting,
Speaker 2: and then you look into it and they're like, it
Speaker 2: is targeted towards people ready for retirement in their fifties
Speaker 2: and sixties, and you might go, well, maybe this isn't
Speaker 2: actually for me, maybe this isn't something that I'm too
Speaker 2: interested in. But before you jump into any investment, I
Speaker 2: think it is so important to read the pds and
Speaker 2: do you know why, So, even if it's not to
Speaker 2: do what you need to do, which is understand all
Speaker 2: the details what the investment is and what the risks
Speaker 2: are and what fees are involved. One time a girl
Speaker 2: read the PDS of some company's product, and in the
Speaker 2: pds was really fine print that says, if you read
Speaker 2: this and get this far, message us because you want
Speaker 2: a cash prize of five thousand dollars.
Speaker 4: Wow. Yeah.
Speaker 2: And it was because they just knew that no one
Speaker 2: was going to read the pds and they wanted to
Speaker 2: reward the person that actually did read the pds. And
Speaker 2: she contacted them and was like, hey, I know this
Speaker 2: is really weird, but like I saw this in your
Speaker 2: pds and they come this way, here's five grand.
Speaker 4: Wow. Be for real, right, I'm going to be reading
Speaker 4: every single PDS.
Speaker 2: So like, don't get me wrong. Companies know that you
Speaker 2: don't read them like, but they are a legal obligation
Speaker 2: and to be honest, if you want to put yourself first,
Speaker 2: scan them. They are written in plain English. They aren't
Speaker 2: written technically, they aren't for technical people. They are written
Speaker 2: in black and white language that basically says, this is
Speaker 2: what the product is, this is where our fees come from,
Speaker 2: this is how we've made money, and this is what
Speaker 2: you'll be invested in. And for me, if you're going
Speaker 2: to invest in anything, I feel like we all google.
Speaker 2: Right back to the nab share example. You're going to
Speaker 2: purchase a nab share beck, You're going to google it.
Speaker 2: You're going to probably see a few forums discussing it.
Speaker 2: You're probably going to see you a whole heap of
Speaker 2: different investor websites that give you insight into different shares
Speaker 2: and what they mean and how they work. Fluff, absolute fluff.
Speaker 2: Go to a PDS and read about that asset class,
Speaker 2: what does it cost, how does it work, what does
Speaker 2: that mean? Go to any website I'm going to throw
Speaker 2: Shares's under a bus right here for good reason. Go
Speaker 2: to their website, scroll to the bottom. The PDS will
Speaker 2: be right there, and it will explain to you, in plain,
Speaker 2: very easy English, how they get paid, what it will
Speaker 2: cost you, how it will work, how their entire business
Speaker 2: model is structured so that you can be as educated
Speaker 2: as possible. Okay, and I know you're not going to
Speaker 2: do it, but like, obviously it's a good idea. And
Speaker 2: don't get me wrong. I mean, if it's a company
Speaker 2: that she's on the money is working for, you, best
Speaker 2: believe I have not only combed through that PDS, but
Speaker 2: I've also sent it to my lawyer to make sure
Speaker 2: I didn't miss a thing.
Speaker 4: What if your lawyer finds that little don't.
Speaker 2: Work with them? Huh? Like if a lawyer finds something
Speaker 2: in a PDS no of a different company, I won't
Speaker 2: work with that company.
Speaker 4: Lawyer finds the little statement that says you've won five thousand.
Speaker 2: Dollars, Oh, maybe she get Do you know what if
Speaker 2: she does that and I'd already read it, she deserves
Speaker 2: the fight.
Speaker 4: Yeah, if you missed it somehow, but that's a thing.
Speaker 2: Google it, Like woman wins money from reading pds. I
Speaker 2: promise it's a thing. God, I mean, it's probably never
Speaker 2: going to be a thing again because now everyone's reading pds.
Speaker 2: Is like Beck would be so that she can win money.
Speaker 2: She's not interested in her assets, but she is interested
Speaker 2: in some free cat Oh yeah, which ironically is what
Speaker 2: I would get if you just invest it. Oh well,
Speaker 2: game the system.
Speaker 4: We have covered a lot today. If you guys found
Speaker 4: that helpful, don't forget to hear that subscribe button so
Speaker 4: you never miss an episode and also really helps us.
Speaker 4: It does help us. But also if you do have
Speaker 4: any questions that we didn't get to today, don't worry.
Speaker 2: We're always listening is a not creepy way, like in
Speaker 2: the way that your iPhone is not. Like, we're listening
Speaker 2: if you actively engage with us, not passively while you're
Speaker 2: a brunch with your friends.
Speaker 5: Yes.
Speaker 2: Yeah, disclaim that we're always listening in twenty twenty four
Speaker 2: is a dangerous statement that I'm not sure why you used.
Speaker 2: But anyway, make sure you follow us either, make sure
Speaker 2: you subscribe. Subscribing to our podcast actually makes a massive difference.
Speaker 2: I don't think people understand that. So we're going to
Speaker 2: do some more call outs on that in the future,
Speaker 2: because we really want you to be as engaged with
Speaker 2: our content as possible. And also, our Instagram has been slappin' recently.
Speaker 2: It has been so good. I shouldn't use like gen
Speaker 2: Z terms like slapin and sleigh and stuff, but my
Speaker 2: team is gen Z Yes, So they all say these
Speaker 2: things and then all of a sudden, I'm adopting them,
Speaker 2: and I feel like that millennial dad on tiktop who
Speaker 2: like embarrasses his kids by using gen X words.
Speaker 4: I think the fact that you said slappin', yeah, it's
Speaker 4: a bit skibbity.
Speaker 2: You know, I'm out to take you home. We are right,
Speaker 2: but obviously follow us on Instagram because that's where we
Speaker 2: drop all our call outs for questions for episodes exactly
Speaker 2: like this, And I'm going to make sure that I
Speaker 2: put that Shares's code that Beck used that we were
Speaker 2: talking about in our show notes for you to make
Speaker 2: it as easy as possible for you to start your
Speaker 2: investing journey. So have the best day, guys, and we
Speaker 2: will see you on Friday. Bye, guys.
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Speaker 4: Consider your individual circumstances.
Speaker 5: She's on the Money exists purely for educational purposes and
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