12th December 2022

Smart Money Weekly; Buying your first home, building good habits and how to nail your new year’s money resolutions

Ben Nash

Hey,

Happy Monday.

We sound like a broken record, but the RBA has raised the cash rate yet again. The official rate is now sitting at 3.1% after the 8th consecutive rise in as many months. Off the back of this, the markets were quite volatile this week. Hopefully, this gift from the RBA right before Christmas won’t impact your jolly spirit too much.

The Australian Retirement Trust released some interesting information this week from a survey consisting of over 2,000 Australians. The research centred around the increasing cost of living and recent economic events detailing how this is causing financial stress for Australians. The survey found 85 per cent of Australians are worried about the impact of recent economic events on their household budget, while almost half (48 per cent) feel financial stress at least once a week. Despite 70 per cent of all participants believing that financial advice could improve their financial well-being, only 32 per cent currently access financial advice in some capacity.

Smart Money upside #96
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 as a result of 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.

Numbers/Background
Individual, mid 30’s; household income ~ $170k; total assets ~ $40k; saving ~ $5k annually.

Frustrations
Paying too much tax, not sure what to do with savings and FOMO (fear of missing out) and FOFU (fear of f***ing up).

What they wanted from us / the advice process
A plan to purchase a property and whether this should be a home or investment, information and knowledge around investing, a plan to reduce tax and a clear understanding of set targets.

What success looks like for them
Owning her own property, having a coach to help her through her financial journey and help with her confidence, clear understanding of her trajectory and goals, better tax management, and ability to travel.

What money strategy they were following before we went through the planning process
No clear banking structure with single stock and ETF investing but most of her surplus is directed towards cash savings.

What money strategy they chose to pursue from our planning work
A strategy to arrange the deposit to purchase her property, a set-out banking structure with separate bank accounts for each expense type, a new super strategy and a clear investment strategy for future cash surplus.

Key benefits of going through the process
A plan to arrange for the property deposit, a clear and easy-to-follow banking structure that makes it easy to track and save, access to diversified investment recommendations that will generate passive income in the future and a switch to a low-cost superfund with access to a range of quality passive investment options.

Value of advice after all advice fees year one: $6k
Year 20 upside after advice fees: $1.1m

If this story resonates you can book an intro call with us here.

Video of the week
We cannot stress enough the importance of consistency and building good habits. You don’t need to make earth-shattering moves with your money to get epic results, but you do have to be consistent. In this post, I chat through how you can build consistency into your money to make sure success is easier. Check out the video here.

Podcast drop
Learn the tips, hacks, and strategies to help you level up your money game. Pods released last week:

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Blog of the week: Why your new year’s money goals will probably fail
This time of year, most people have tapped out.

They’re holding on for the well-earned Christmas break and they take their foot off the pedal…

But here’s the thing, over the last decade or so helping people with their money, I’ve noticed a costly trend. A lot of people have grand plans for the things they’re going to do with their money in the new year. They tell themselves over and over that next year will be the year they nail it.

They take it easy through December, feeling good about the fact they’ve made a decision to change in the new year. But then, before you know it the new year rolls around…

It’s the back end of the holiday break, so January 1 isn’t the perfect time to get started. Then you’re back at work, and coming back is always a bit of a struggle after a couple of weeks off, and you decide you don’t need to push yourself with your money too hard too fast.

Then it’s Australia day.

And before you know it, we’re well into the year and you still haven’t got things on track. This comes with a bunch of guilt and shame, which makes you feel less motivated to move things forward.

From this point, it’s easy to give up, and then the money is back on your list for next year. This is backed up by the statistics that show that around 80% of new year’s resolutions fail.

Anecdotally, I’ve seen this a heap of times over the years. The good news is that most people get things on track eventually. But when they do, every single person wishes they’d done this sooner.

And it’s an expensive way to go about your money because once the time has passed the opportunity cost has been locked in.

If you’d invested more a year ago, those investments would be working for you today, and your money would be compounding every year forever, leading to a significant financial upside.

In Australia at the time of writing the average pre-tax income is $92,029 or $1,342 per week after tax, and the average savings rate is 8.7%, reflecting average weekly savings of $117.

If you could manage to double your savings rate and save an extra $117 per week and then invest that money into the share market, based on the 30-year return on shares of 9.8%, over the next 10 years that money would grow to be worth $102,675. Keep this going, and over 20, 30, and 40 years these extra savings would grow to be worth $375,162, $1,098,307, or $3,017,442.

It’s easy to get off track and let your new year’s money resolutions slip, but finding a way to make them work is valuable.

How to nail your new year’s money resolutions
It’s not easy, but there are some things you can do to drastically increase your chances of success.

Pre-commit
An effective way to make sure your goals get off to a solid start is to ‘pre-commit’ to some actions that will move you forward. It could be locking in a money date night with your partner, setting a time (in stone) to go through your budget or money planning, starting a course, or booking a meeting with a professional financial adviser or coach.

With anything new, important, and challenging, your first step is the hardest – but once taken you to start building momentum that can make your next steps easier. If you have something locked into your calendar and have committed to it, your starting point is sorted.

Build new habits
A big part of money success is driven by your habits and behaviours around money. If you want to get the most out of your money, you need to level up your money habits. This can be around how you spend and save, how you check in on your money, when and how you plan with your money, and your investing.

Changing habits and behaviours takes some time and some work, and in the early days, it can seem like a real struggle. But once you lock your new habits down, they become second nature, and before you know it your new approach becomes almost effortless and part of who you are.

Be accountable
Money is something that’s important but mostly not urgent, which means it’s easy to put off a tomorrow that never seems to come around. Being accountable to your goals and to your money success help you maintain the focus needed to get the results you want.

You can be accountable to a partner, a mate or family member, or a professional adviser or coach – the key is you’ve got someone you have to check in with regularly and report on your progress. Regularly checking in on your money progress has the added advantage of highlighting your wins that you should celebrate, and identifying any issues or areas where you aren’t fully on track so you can course-correct.

The wrap
Money success is something valuable and worth working for, but it’s not easy. Doing better with money is a common goal, but the statistics show us that the majority of people that set out to do better with their money fail – if you don’t want this to be you, you have to take a smarter approach.

To give yourself the best chances of success with your money goals, pre-commit to your initial steps, focus on building better habits and be accountable. When you get this right, you make it easier to get the results you’ve planned for, and before you know it you can focus on taking things to the next level.

To your success,

Ben

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.

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