This week we’ve launched a new group money training and coaching service, The Smart Money Accelerator – our newest solution to help people build a second income investing faster WITHOUT making drastic lifestyle sacrifices. I had a blast unpacking it for the people that joined this week’s live online event.
You can check out a recording of me talking it through here, and all the details of the program here. Ahead of kick-off later this month, we’re offering the Pivot community not-to-be-repeated discounted pricing + free bonus 1-1 private money coaching with a Pivot Wealth adviser for a full year to help you accelerate your results. You can check out all the details and secure your foundation membership here.
Like a broken record on repeat, interest rates have risen yet again. 10 consecutive rise now from the RBA taking the official rate to 3.6%. Some are forecasting more pain for mortgage holders this year with further possible rises taking us over 4% and then easing to begin next year. However, I also recall the RBA stating that they wouldn’t raise rates at all until 2024 and look where we are now. One thing that I am certain of, is that a solid strategy is critical to success over the next 12 months.
Smart Money upside #108
Here we unpack the numbers from a recent client we helped, what they were doing with their money when they came to see us, what they chose to do due to going through the financial planning process, and the financial impact and upside we helped them achieve. To chat about how to get these sorts of results, you can book an intro chat with us here.
Couple, mid 40’s; household income ~ $200k; total assets ~ $950k; saving ~ $10k annually.
Not sure what to do with their finances. No structures or strategies in place to level up how they wanted. Wanted to upgrade their home but were not sure where to start and have zero confidence in when to pull the trigger on a property purchase. They had fully paid down their debt but now are not sure about the next move.
What they wanted from us / the advice process
Upgrade their home and help to decide whether to sell or keep their existing property. Ability to fund regular holidays. How to budget to still enjoy life, save for the kids and set themselves up for the future.
What success looks like for them
Clarity and confidence around when to buy the next home as well as a clear plan to build wealth for the long-term but enjoy themselves in the short-term.
What money strategy they were following before we went through the planning process
Allocating savings towards the bank.
What money strategy they chose to pursue from our planning work
Clear plan on the purchase of their property, a new banking structure with separate bank accounts for each expense type, a strategy for what to do with future cash surplus and a new diversified investment portfolio.
Key benefits of going through the process
Clear advice and plan around their new property purchase, less stress and more confidence with their money, an easy-to-follow banking structure that makes it easy to track and save, building wealth through an investment portfolio that will generate passive income in the future, a switch to a lower cost superfund with access to a range of quality investment options.
Value of advice after all advice fees year one: $10k
Year 20 upside after advice fees: $700k
If this story resonates you can book an intro call with us here.
Video of the week
The Australian rental market is in crisis, with rents skyrocketing and vacancy rates tanking, meaning renters are running out of options. This week I unpack the numbers surrounding Australia’s rental crisis. Check out the full video here.
Client story of the week
This week I talk about how to take your investing game to the next level once you’ve built a solid foundation around your savings. This client was already on a solid trajectory with their money and we helped them level up again. Check out the full video here.
Learn the tips, hacks, and strategies to help you level up your money game. Pods released last week:
Free online money education to help you invest smarter and create a life not limited by money:
- Invest with property equity in 2023 – March 22, 2023, 12pm
- How to create generational wealth – March 30, 2023, 12pm
- Financing 101 – April 5, 2023, 12pm
- How to save more money faster – April 19, 2023, 12pm
- How to adult with money – May 3, 2023, 12pm
- How to get started investing – May 17, 2023, 12pm
- Get tax smart – June 21, 2023, 12pm
Blog of the week: How this couple increased their savings by $19k p.a. and bought their first home faster
With the current cost of living crisis, saving money today is harder than it’s been for a long time – but it’s also the key driver of your ability to get ahead.
When most people think about saving more, they think about spending less. But spending less is only one part of the equation, and the reality is that there’s a limit to how much you can cut your expenses.
But there’s no limit to the other side of the equation – how much you can increase your income.
Emily and Ethan were a typical young couple in their late 20s, living in Sydney and trying to break into the property market. They had their hearts set on buying a two bedroom apartment in Sydney’s inner west with a price tag of $900k. But like many first home buyers, they were struggling.
Based on this purchase price, they didn’t qualify for the first home buyer stamp duty exemptions but they did qualify for the first home deposit guarantee. This meant they’d need to save extra money to pay the stamp duty on their property, but that they could use a deposit below 20% and not have to pay lenders mortgage insurance (LMI).
Emily and Ethan were approved for a loan of $800k, which was almost, but just not quite enough to buy the property they really wanted and cover the costs associated with the purchase.
Emily and Ethan were expats and as such didn’t have family support to help them buy property. They’d been working hard to build up their property deposit for the last few years, and had saved just over $110k in that time. Based on their combined income of $200k, they were pretty happy with the work they’d put in to get there – and it did take some work.
While their mates were some of the first people to jet off overseas once the borders reopened post COVID lockdowns, they were focused on hitting the savings target needed to make their property purchase happen.
But even with this sacrifice, their deposit still wasn’t enough to buy the property they wanted. At the same time, the huge jump in interest rates had reduced the amount the banks would lend them. They were at a loss, and were close to putting the property purchase in the too hard basket.
When we started working together, we started stress testing their approach and realised there was a big opportunity they hadn’t considered. They ultimately took advantage, and recently purchased their first home – and did it almost two years sooner than they thought was possible.
Like many others before them, Emily and Ethan had followed the conventional wisdom – do a budget, set a goal, and then put in the work to build up their deposit to the point they needed to buy the property they wanted. All good, smart, things to do.
But through our conversations we realised that one thing Emily and Ethan hadn’t considered was the impact increasing their income would have on their property purchase.
When we flagged this, our young couple told us they hadn’t thought about this more than how most people often think about getting a pay rise or promotion, and so they hadn’t focused on this when planning out their property purchase.
They told us they didn’t really think a pay rise was particularly likely in the short term, but that they were keen to understand what impact it might have.
We started crunching the numbers, and found that if Emily and Ethan could get a combined income bump of $30k it would increase their borrowing capacity. This, combined with a couple of small tweaks to their property strategy and what they were doing with their money would give them the ability and confidence to purchase the property they wanted almost immediately.
Emily and Ethan were excited by the possibility of making this happen in a way they felt was much easier than continuing slugging away with their savings for the next two years. They agreed to put their thinking caps on.
Emily and Ethan went to their employers. Ethan was up first, and when he spoke it through with his manager it was a difficult conversation. He was uncomfortable asking the question, and his manager wasn’t very receptive.
The manager agreed to take it up the ladder and let Ethan know. Ethan left that conversation feeling ok, but not super hopeful.
Emily got a more positive response. She had been working hard to make a name for herself in her company over the last couple of years, and business was good – but Emily got a bit lucky with her timing.
A couple of days prior to the conversation with her manager, one of Emily’s colleagues she had resigned. Her manager was figuring out how to resource the role, and by talking it through Emily’s manager advised that if she was prepared to pick up some of the responsibilities of this team member, the business would save money on replacing the outgoing team member, which would create the ability for them to look at a pay bump.
They agreed to think about this further.
A couple of days later, Emily was offered a $20k pay increase. Emily was pumped, but at the same time a little disappointed as it didn’t quite get her to what she needed for the property purchase.
She considered taking the win and using it to put a solid dent in their property purchase timeline. But after talking it through, we agreed she didn’t have a lot to lose by going back to them to see if there was any way she could get to her $30k target.
Emily outlined the importance of the $30k increase to her manager and explained what it would mean for her personally, and ultimately her company agreed to come to the party. She thought that they figured that it would essentially give them a good staff retention strategy, as they knew she’d be appreciative, but also not likely to move on from the business if she was able to buy her first home.
Unfortunately, Ethan’s manager didn’t come through on an increase, saying something about how business conditions didn’t allow them to uplift salaries in the current environment. He was a little disappointed, but ultimately they’d collectively hit their target, and so it was game on.
Emily’s pay rise came through, and they were able to re-apply for a mortgage and were approved for a higher loan of up to $850k, which gave them enough to fund the purchase at $900k, cover the deposit and stamp duty, and leave them with some cash savings to hold as an emergency fund – something that was important to them.
I’m happy to report that just last week Emily and Ethan had an offer accepted on their first home, and are due to settle on the property in a few weeks. They’re stoked because it’s all happening more than 18 months sooner than what they thought was humanly possible.
Emily and Ethan’s story goes to show that there’s always more than one way to get what you want. Emily and Ethan had been putting in the work for years to get to where they were, but like a lot of people hadn’t thought about seriously targeting a pay increase.
If you’re trying to save and invest more, it makes sense to look at where you can cut expenses to free up more cash. But don’t forget to consider the other side of the coin, what you can do to increase your income. This can help you increase your savings rate today faster, and make your money easier every year moving forward.
To your success,
PS: Pivot Wealth exists to help people invest smarter to create a life not limited by money. If you want help to make your next steps easier, you can book a 10 minute, no BS chat with us here.
Founder and Adviser
The information in this note is not personal advice, a guaranteed pathway to that elusive beach bod, or the lost script of Edna St. Vincent Millay’s Pulitzer Prize-winning Conversation at Midnight. This is just a bulk communication pushed out into the internet, and it doesn’t even have your name on it. Your personal situation, needs & objectives, and financial situation have not been considered in putting this together – nor have we considered your dietary preferences, the way you like your hair cut, or your favourite travel destination – but we have spent a lot of time thinking about the future of urban society, whether there is other intelligent life in the solar system, and the pervasion of soy and linseed bread in Australian metropolitan hubs. You should consider the appropriateness of any general advice in relation to your own objectives, financial situation and needs and seek advice before taking any action. You should also consider using a variety of eau de toilette fragrances to keep your partner interested and colleagues on side, not using plastic straws, and minimising your screen time. Where information relates to a financial product, you should read and understand the relevant product disclosure statement. Where information relates to your own potential for awesomeness, you should consider backing yourself totally and completely. Past performance is definitely not an indicator of future performance when it comes to investments and financial products, as well as the likelihood of your children sitting still and quiet for an hour being satisfied playing with a used piece of wrapping paper. Financial services guide.