Hey team,
Happy Monday.
Firstly, I just wanted to say a massive thank you to the people that have got behind the launch of Replace your Salary by Investing, I’ve been completely blown away by the support and the clock is now well and truly ticking toward the 29 March in-store release date.
For anyone that hasn’t yet picked up a copy, we’re still offering a $100 discount on our Pivot 1-on-1 Money Education sessions for anyone that purchases a copy ahead of the official launch date. You can access this promo by sending us a copy of your book proof of purchase and we’ll hook you up. Grab your copy on Booktopia | Amazon.
In money news, the government is considering making some changes to the superannuation system in May’s federal budget release. It is estimated that by 2050 the cost of tax breaks provided within super will outweigh the costs of the age pension. So the government is considering possible superannuation balance caps or reducing tax concessions. I’ll be keeping my ear to the ground on this one but we’ll know for sure by May’s federal budget.
Smart Money upside #106
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, late 30’s; household income ~ $150k; total assets ~ $100k; saving ~ $5k annually.
Frustrations
Feeling overwhelmed, having no plan in place and lacking financial education.
What they wanted from us / the advice process
Help to purchase a property, put a clear financial plan in place and help with improving financial confidence.
What success looks like for them
Not having to worry about money and having clarity on finances.
What money strategy they were following before we went through the planning process
Any savings building in the bank.
What money strategy they chose to pursue from our planning work
Purchase a property, implement a structured cash flow system and allocate surplus towards paying down debts and building wealth.
Key benefits of going through the process
improved education and confidence, having structure and a plan and feeling supported reducing stress.
Value of advice after all advice fees year one: $30k
Year 20 upside after advice fees: $1.7m
If this story resonates you can book an intro call with us here.
Video of the week
When the value of your property is less than the amount you owe on your mortgage, you’re in negative equity – and if you don’t know how to navigate this it can lead to a heap of stress and reactive money moves. In this week;’s video I explain what this means for the Australian property market. Check out the full video here.
Client story of the week
Having the freedom to retire doesn’t mean you want to stop working. These clients were looking to create financial self- sufficiency so they could give back by working full-time with a charity and spending more time with family. No matter what your definition of money success is, your wealth is the thing that dictates your possibilities. Check out the full video here.
Podcast drop
Learn the tips, hacks, and strategies to help you level up your money game. Pods released last week:
Upcoming events:
Free online money education to help you invest smarter and create a life not limited by money:
- Build a second income investing in 2023 – March 8, 2023, 12pm
- 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: Three roadblocks that can sabotage your savings
In Australia, our savings rates have just tanked, with recent ABS data showing the household savings rate has declined to 6.9%. Saving isn’t easy, but if you can crack the code it goes a long way to driving serious money success over time.
For example, for a 30-year-old earning the average Australian income of $92,029, increasing your savings by just 5% and investing the money into shares would increase your wealth by $628,233 by age 60.
But it’s not easy.
There are three major savings challenges that make saving hard work and slow going. But, if you know what to look for and how to tackle your savings this potential roadblock can become an opportunity to get ahead faster and easier.
Saving and spending habits
Your money habits and behaviours will have a significant impact on your levels of money success. These impact all areas of your money management but are particularly impactful when it comes to your spending and saving.
Spending money is fun and brings us immediate pleasure, so resisting the urge to spend can be challenging.
When you layer on top of this the fact that we’re often saving money today to benefit us at some point in the future, often many years in the future, it gets even harder. We struggle to prioritise actions that will benefit our future selves over what we want today (like right now).
This leads us to create poor spending habits. You choose to do something that’s easy over something that you know is better for your money’s success.
For me in the past, one of my bad spending habits was ordering dinner through a food delivery app. I’d go to work, and couldn’t be bothered to stop at the supermarket on the way home to pick up something I could cook for dinner, so I’d get home and order in.
I enjoyed the tasty food, and it was so easy, all done with a few flicks of my thumb and seven steps from my couch to my door to collect the food. Before I knew it, the habit was built.
But the result was that I was struggling to stick to my budget – each week there wasn’t as much money leftover for the other things I wanted to do, specifically building my travel fund and savings account.
It took some conscious decisions and careful planning, but ultimately, I made the decision that things needed to change. I then worked hard for the next couple of years on shifting my day-to-day money habits and behaviours in a way that made it easier for me to save and work to my budget and spending plan.
In the early days, it was a real struggle, and I’d fairly frequently get off track. But over time, I shifted my lifestyle and the spending behaviour that came with it. Instead of ordering in every night, I’d do some shopping and food prep. Four coffees a day turned into two and then turned into the Nespresso machine in the office (I’ve since gone back to the cafe coffee but am now down to one daily). And instead of catching an Uber to every destination I’d be a little more prepared and walk more.
These were all things that didn’t drastically reduce the quality of my life, but they did make a big difference to my ability to save. Today I find it easy to work within my spending plan, and I now allocate more money to travel and the bigger ticket things I get more real enjoyment from.
Changing your spending habits takes some focus and effort, but it doesn’t reduce the quality of your life, and the impact and financial opportunity in this area is huge.
The juggle
These days it’s easy for us to end up with a heap of different bank accounts, and get caught in the constant juggle, shifting money from one account to another, and hoping like hell that at the end of the pay cycle you’ve hit your savings targets.
More commonly, you haven’t – but the more accounts and steps you have in your banking, the harder it is to figure out where you went wrong.
If you want to be good at saving, you need to make your money management easy.
I’m a bit of a process nut, and I’ve found that having an automated money management system goes a long way to making saving easier. The more you need to manually do, the more you can get wrong. Automating as much as you possibly can will increase your chances of success.
This is a challenge, but also an opportunity to automate your savings success, save you a heap of time, and accelerate your rate of financial progress.
Finding balance
My definition of true money success is saving (and investing) at a rate you’re happy with while living the lifestyle you want. It’s important you get ahead with your money, but you also want to enjoy your life.
Finding that balance isn’t easy, because we’re naturally drawn to wanting more. If you spend more money you receive an immediate pleasure hit and more fun and enjoyment today, but you’ll save less.
Saving too little will give you more stuff today, nicer things and experiences, a bigger house in a nicer suburb, more travel, and you’ll have more shiny toys to play with. But you essentially end up trapped, working forever as a slave to your paycheck.
When you save too much, you’ll make rapid progress getting ahead and you’ll replace your salary investing much faster. But when you get to where you want to be, it’s likely you’ll look back and regret wasting years you could have been enjoying more.
Balance is key. It’s also not easy to find.
A great savings plan is one that has you saving at a rate you’re happy with. The one factor that dictates how happy you should be with your savings rate is what that number means for your rate of money progress.
Saving more or saving less will increase or decrease your rate of progress. To find your ideal savings number, you should look ahead at the impact of different saving rates both today and into the future, aiming for a savings number that gives you the rate of progress you want.
The wrap
Saving isn’t easy, and if you don’t take the time to nail your savings your money progress is going to be hard fought and slow going.
But the results are worth it. When you nail your saving and spending habits, eliminate the juggle, and find balance, you immediately accelerate your rate of financial progress, make your money management easier, and get more peace of mind from feeling in control.
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.
Founder and Adviser
Pivot Wealth
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.