Season 3 Episode 9: What to do when you can't get ahead
IN THIS EPISODE
We are back with an episode talking about something we know a lot of people are feeling right now.
It's that frustrating sense that no matter how hard you work or how much you try to be responsible, you just can't seem to get ahead – or even stay on top of your day-to-day expenses.
Mel kicks things off with an honest money update of her own, sharing why her family has gone back through the numbers and tightened spending. Darlene talks about the money lessons that come with having a teenager earning her first pay cheque – and why letting kids work things out for themselves is sometimes the most valuable lesson of all.
We unpack what to do when you feel like you're constantly treading water financially, how to get a clear picture of where your money is actually going, and why understanding your numbers can be confronting, but incredibly empowering.
In this episode, we chat about:
The shame that comes from feeling like you're struggling financially – and how to move through it
How a spending review can help you stop guessing, face the reality of your finances, and make clearer decisions
Why feeling stuck isn't always about how much you earn – and often comes back to your systems, habits and mindset
Why prioritising your financial wellbeing is just as important as making time for your mental and physical wellbeing
Plus, in our new educational segment, we break down the changes to negative gearing and capital gains tax, and what they could mean if you own an investment property or are planning to buy one
If you've been feeling stressed about money lately, we hope this is a helpful reminder that you're not alone.
ABOUT THE MONEY COLLECTIVE PODCAST
Financial Wellbeing with The Money Collective brings together the stories and experiences of working with thousands of Australians when it comes to money, this is no holds barred, honest podcast. Darlene and Mel have been working in banking and finance for over 50 years and break down the barriers that we face everyday when it comes to our relationships, families and finances.
READY TO GO ON THE JOURNEY OF FINANCIAL WELLBEING?
- Know your cost of living by listing your expenses with our handy spending review spreadsheet: https://www.themoneycollective.com.au/resources
- Book a time with us to chat about money to ask questions and talk all things financial wellbeing, home loans, and more.
- Take action and uplift your own level of financial wellbeing with our online course: https://www.themoneycollective.com.au/onlinecourse
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0:00
Welcome to The Money Collective podcast. We're here to uplift your financial wellbeing.
0:04
Your hosts are me, Mel Pearce, and Darlene Neu. We are the co-founders of the Money Collective,
0:12
and together we have over 50 years of finance and banking experience. We provide the tools, information, and guidance to better understand your money and feel confident making money decisions.
0:25
Hi podcasters, it's Mel and Darlene. We're here um back from more podcasting. So excited. And we're just going to get straight into it today.
0:31
We are all about uplifting financial wellbeing.
0:37
And the very first thing that we always talk about and did I say my name is Mel?
0:43
You did.
0:43
I did. I'm Mel.
0:44
She did. She is Mel. And I'm darling. Just to be clear.
0:48
She did say that already.
0:49
So you know the most important fact of the day. Anyway, I feel like Yes. Anyway.
0:56
What we're going to start off with is talking a bit about the truth when it comes to our own finances.
1:04
And I am going to kick us off.
1:05
Okay, let's go.
1:06
Okay, so I feel like it's been a little bit of time since we recorded our last podcast.
1:10
So I am going to kind of bring the team up to where we are financially and what's been going on behind the scenes.
1:19
So for context am, oh, I can't. I cannot believe that's what I was going... I cannot believe she's open with that statement. There we go.
1:33
So funny. Anyway, I am. It's true. And I love being a wife and having my two children. But the fact of the matter is our kids are growing up.
1:47
So, we've got a 19-year-old son and a 17year-old daughter. Shout out guys.
1:52
Hey, and look, they're awesome kids.
1:56
I also have an awesome husband and we are both self-employed.
2:01
So he is a, I was going to say soul trader, he's not. He's actually got a company structure
2:08
And he works on his own. He's in excavation. He's a tradey and he has worked for had a pretty great gig actually to be honest for going on best part of the last decade to be honest.
2:23
He's had a contracting agreement with a local council and he's loved it and that is no more.
2:29
It's not.. yeah the work there has kind of stopped completely dried up.
2:37
Yeah. Which has kind of put him back into that mindset of going well what he used to do beforehand where he had to go and source jobs.
2:46
He didn't know what was coming one day to the next. and he has a huge sense of responsibility for, you know, providing for the family and things like that and it's caused him to really, not feel great or feel stressed and you know what are we going to do.
3:04
And we have obviously he looks to me for that reassurance but also Mel come on because I just say everything's going to be okay because like honestly what are we going to do we're going to have our best crack we do not know what's in our future.
3:17
So, we're currently like in our first month of navigating this.
3:24
And what we have had to do is go back and look at our numbers.
3:31
I know like for a lot of podcast episodes I said we have to look at our numbers.
3:35
I cannot tell you how many times I've looked at our numbers.
3:37
It just demonstrates though life changes happen all the time and then you've really got to revisit your numbers at that time 100%. Like how are we going to get through this?
3:47
Like understanding our cost of living.
3:48
You regular podcasters will know that we have an awesome spending plan spreadsheet.
3:55
We have available in our online course Spruak. But I have used that.
4:01
It is like our gospel, our Bible. I use a version of it for his business so that we're tracking business expenses and then I do another one that tracks the family expenses.
4:11
And look, it's tight. I'm telling you like it is tight and like the example that I can give you that I have said to the families we've canceled Christmas and we've canceled birthdays like literally tight.
4:25
And the thing that I suppose that I'm most worried about is tax obligations.
4:33
And I know a lot of households who are self-employed need to do tax planning and, I suppose that is something that always hangs in the back of my mind.
4:44
Like how we do, I just want to make sure that we never get behind on that.
4:47
Also, I cannot believe how much income tax we have to pay.
4:49
It's a lot, isn't it?
4:50
It's a lot.
4:52
Yeah.
4:53
So, I just feel like that is like the first obligation.
4:56
You know how sometimes you think it's the home loan or whatever?
5:00
For me, it's like tax, home loan, pay the bills, and at the moment, we really have canceled a lot of the extra things.
5:08
And I think we all kind of know that as a family and it's okay. We're just going to see how it goes, I suppose, for a little bit.
5:16
And I will definitely be lodging our tax returns as soon as we can. I'm in business with Darlene, by the way, guys.
5:22
Okay.
5:23
Because so we're selfish employed on that side, too. So we have to like always be thinking into the future and not just it's not just as the money comes in what do we do with it but it's like really like literally forward planning into what does the next quarter look like what does the next 12 months look like?
5:40
To make sure because the money's got to come out of today's cash flow.
5:43
Exactly. Self-employed people it really is something that you know, you need to plan for all the time. Yeah, because you know it's due, you know, up to 9 months after the tax year ends. Like it's a constant you need to plan.
6:00
Yes. Yeah.
6:01
So anyway, that's my really super boring truth about tax and cash flow planning.
6:07
There's not really a what is it when you, like what's our reflections on that? Is that what you mean?
6:15
No, I mean like you know when you've done something bad and you confess, it's not really a confession. Oh, no.
6:20
That's like juicy gossip. It's a bit boring, but is that something?
6:23
I think juicy gossip. Oh, maybe not. But I I actually think out of that, you know, it's a big reminder like there's a huge percentage of people in Australia that are self-employed or you might be in a relationship with somebody that's self-employed.
6:35
So, through all our work, what I would say is there's not enough education and understanding about what it means to be self-employed.
6:45
Generally speaking, it's how do I get my business in and you paying the there's so much more to it and understanding and being educated around that.
6:55
In this example, tax is super super important.So that's what I take out of that.
7:00
So I don't think it's boring. I actually think if you're self-employed, it is a key thing. No. My truth is actually about my daughter.
7:12
So you can see we've got a family value between Mel and I going on.
7:15
And if you listen to past podcasts, you definitely would have felt that.
7:20
My daughter has recently turned 15. Her name is Lilly. Shout out, Lilly.
7:24
Hi. Hey girl.
7:26
Hey, and she has got her first job. Oh my gosh.
7:32
Woo. You said that Lilly would get a job straight away. And she did.
7:36
She did. She has that personality. I helped her write up a CV. It did take her a little bit of time. So, we have a 2-minute walk from our place.
7:47
We have a local restaurant and it convenience-wise it made so much sense to get a job there. And so, I helped her and we did a CV and she walked down literally handed it in and they said, "Can you come back in 2 hours and do a trial?" And she did and she got the job. So, that is how Lilly rolls.
8:11
Absolutely. she thought that was going to be the answer and it was the answer.
8:14
So yeah, take on board what you can read out of that. Believe in yourself and just get on with it. What I would say is we maybe we're in about the fourth week of the job. Oh my gosh, there's so many things that it brings up.
8:30
Kids and first jobs. So the very first thing is the conflict of living the social life with the money situation.
8:42
And understanding that basically we've just give her $20 a week.
8:49
Still well still. Oh my gosh. I'm getting angry.
8:54
I know. So $20 a week we give her, you know, and she can do with it whatever she wants, but you know, she buys from school lunches too, I don't know if she actually saves it up.
9:03
Buys something, but she doesn't. She definitely eats it. And then, it's whatever money she earns.
9:13
Now, she's earning $15 an hour.
9:15
Not bad.
9:16
I know. I'm not sure she thinks it's okay, but yes, she's happy enough because, you know, and she's got her first paycheck.
9:24
And something Mel said to me the other day, which I reckon is such an important to all you podcasters out there, is if your kid is starting a job and they are wavering because that first week Lilly definitely wavered. Is this like a reality check, right?
9:40
I've got a job. I've actually got to decide on my social life or whether I'm going to go to work. And so that's a big that's actually such a learning for them.
9:48
And then when they go, so she's paid for she went to work and then she's paid fortnightly.
9:56
You got to wait a whole fortnight before you see any reward from your work. Right.
10:02
I know. So that and I could see the waiver in between. And Mel said something to me which I think is really important to say try and encourage your kids to stay to the first paycheck because it does change when they get paid.
10:15
Because actually the paycheck. Oh, actually I now I can feel and I can see what happens.
10:21
Oh, I can get paid. So and then what I can do with the money and then you can start to say if I work I could see a ticking over.
10:30
If I work this many hours then I get that much money. And I can see her trying to navigate and work through those priorities on how much money I need versus how many hours I can work.
10:42
What about social outings? like it's then like deciding what she can and can't do externally and still you know being able to manage her money like, well this.
10:51
How's that going?
10:52
Well very interesting. So we were about a week in and she was asked to work on a Saturday and then she said yes and then an hour before she got a better offer to go out and she texted them and said I'm not coming.
11:10
Oh for our generations that's just horrendous, right? because how do you keep a job like that, you know? But anyway, Lilly did keep her job and she's had lots more shifts afterwards.
11:20
And even that learning about that because they didn't actually call her in for a shift for a couple of weeks and just I think the key message I'm trying to say is you need to let them experience it and then work it out.
11:34
We can't do it for them and then work out. And if you lost a job actually in the end, I felt that's okay. That's a big learning, right?
11:43
Yeah. Let her do the things and she's going to pay the consequences anyway.
11:46
We don't need to teach them the lessons and say it because it's going to happen to them.
11:49
They're going to either lose their job or not get shifts, right?
11:52
And then she's not going to have money and not have choices.
11:55
Exactly. And don't actually top them up with money.
11:58
Yeah. 100%.
11:59
I think that is the answer. So that's basically what we're doing.
12:02
We still pay the $20, but there is nothing else. Yes. So I don't work.
12:08
And I did hear her say to a friend the other day, I've got to work. I need the money. I love that.
12:12
How cool is that?
12:13
So, I can see the shift. Yeah.
12:15
Yeah. Yeah.
12:16
So, my daughter Lilly, she's 17. She's in year 12 and she's only just started her first job as well. She was very slow to the party and now has realized the benefits and she totally I thought to be honest that she would spend every scent that came in and she hasn't.
12:39
She is. And cuz we've told her that's a terrible phrase. It really is a bad fire.
12:41
Oh my gosh. So, we explained some philosophies that we had around money and my husband Pur, he is much more of a saver and like has always had those really strong savings habits and I think his parents, you know, really instilled that in him.
12:53
So, he's like sharing his experience with her and he's saying, "Save half of it. Put half of it away and then you can spend half of it."
13:01
She's doing at least that. She's being so quiet about it like stealth and then she's crying poor.
13:09
No, of course I'm not topping her up, but I'm still like letting her fight her own battles.
13:12
Like I'm, and even when we're out, she's the girl who's like, "Buy me food everywhere we go." Like she'll leave the house and not eat the food in the house and say, "Buy me."
13:23
I'm like, she is so, that is not happening anymore. And now she's working. She's a working girl.
13:27
And do you know how much it hurts her to spend her money? She bought an ice cream.
13:31
It cost her 12 days. She probably, I bet she talked a lot about it.
13:34
She talked a lot about that $12 ice cream.
13:36
Yeah.
13:37
Yeah. It actually even teaches understands how expensive things are because she has to spend her own money.
13:43
That's what I was gonna say. How else do our kids understand what things cost if we just keep doing that? So, it's really I love what a job brings.
13:55
And it's, you know, obviously it's money and then they've got all the decisions to make about what they do with it, but there's so many more things about priorities and orders and what matters and what doesn't.
14:06
And that's different for all of us. So it's not to put our, you know, generation, you have to work, you have to turn up, you have to do this, you have to do that.
14:13
It's actually just heaps of decision- making and and growth that you have to work through that they have to work through our job to work through it.
14:23
And if she didn't save all of that money, which I expected, I'm actually blown away that she has.
14:26
But I would like that's not on me. That's not a failure on me if she never saved her money.
14:31
It's a learning curve and a learning experience for her.
14:36
I actually think that's fabulous. That's what you want because things don't always work out in life. That's the other thing out in life.
14:41
Kids sometimes don't have resilience. The way to teach resilience is is to fail or or to not have money and then work out what do I do next time.
14:48
Problems for them.
14:50
Yeah. If something happens, what are they going to do? If they've already spent their money, it might mean they can't go out or have fun things.
14:57
That's it. So, I sort of sit back and and quiet smiles is how it all works out and the conversations and Yeah. So, yeah, I love it.
15:05
So do I. I love it. This is also a parenting podcast.
15:09
Oh, yeah. Oh, family values. Well, money and kids. Take what you will.
15:15
All right. Our topic for today is we're going to talk about how you might be feeling this. So, a circumstance is I feel like I can't get ahead and I just want to get on top of my day-to-day expenses.
15:34
So, we are going to talk through that. What are your thoughts, Mel?
15:38
Well, my thoughts are that people jump on calls with us all of the time and it's really common.
15:50
So, I think it's hugely common, but we don't like talking about it or we do and we kind of brush over it, but we don't like to go into the depths of the solution around it because it's embedded with shame.
16:02
So, yeah, that concept again is like that feeling that we just are not getting ahead. So, we kind of feel like we're treading water.
16:10
And so in a way that I kind of explained that for me and myself and my family,
16:15
You know, we feel like we're just making ends meet at the moment and then we want to overlay that with the additional feeling that we can't get on top of our dayto-day expenses and so that is what I was kind of explaining that was that first go to you know how do we make sure that we can cover those everyday expenses when we don't do any work around this what we operate operate from is the feeling that we're talking about.
16:44
Like it feels like we're not getting anywhere or it's no good. And that feeling leaves us with a deep sense of shame sometimes.
16:50
And we're not coming from fact at all.
16:52
No, not at all. And it stops us from talking to our partner, maybe about it or admitting it because it is admitting that we may have done something wrong.
17:01
Or we're no good with money.
17:05
Definitely. So what we would say and we want to talk about a couple of examples to try and bring it to life today is that you need to work through the facts.
17:16
You need to try and take that emotion of how you feel out of it for a minute. And the step to go forward is to understand your complete position.
17:27
And what I mean by complete position that's understanding how much money is coming into your household. And I mean after tax, so going into your bank accounts
17:34
And then how much are all your expenses? And that takes some effort and some work to understand where all your money is going.
17:41
We're not talking about the bills, just the bills.
17:44
We're talking about discretionary and you know all, all the outs.
17:48
All the outs. The transaction listing all of the outs every sing like where is it all going because that's our cost of living.
17:55
Yeah, that's it. And you know you can def and you definitely need to understand how much discretionary and how much is mandatory.
18:02
That's really, really important because you might be able to make some choices on the discretionary but mandatory is mandatory and if we're doing future budgets we should be making sure we were lifting those mandatory items because right now cost of living is you know difficult.
18:22
Petrol's gone up which you know has a flowing effect to all the other things we have to buy,
18:25
and we know that like sensibly but we don't know how much that all adds up together.
18:30
We know that grocery shopping costs more. We know that the interest rates went up. And we know that we're being charged more at the browser.
18:36
And we know that all the crap we're buying for our kids costs heaps of money.
18:41
So, can you put a dollar amount on it, you know, of what that means?
18:45
And what percentage, you know, has it increased? If you looked last month to this month, has it moved? It probably has. And it probably is going to even go up further.
18:55
Yeah. So it shouldn't worry and we're fearful but we don't know our numbers. And then if we look at the other we talk about four quadrants. The other side of the equation is our assets and our loans because we have to pay our loans.
19:12
So out of that spending the money coming in and after the expenses we also have to include all the loan repayments we might have to pay.
19:21
Yeah. you know, and we have to prioritize generally or in Australia anyway, we prioritize, you know, paying those loans before we even feed ourselves generally because this is literally the side of the balance sheet that we're not considering in our daytoday life.
19:34
We see the money going in, going out, coming in, going out, but the feeling that we have that we're not getting ahead is because we're not growing our assets or reducing our liabilities.
19:46
That's right.
19:47
Right. And so that's why understanding those numbers are really important because the more we grow our assets, the more resilience we have.
19:54
That means we've got savings in the bank.
19:56
You know, because at the moment the fear is that what would I do if oh my gosh, I've got no money to cover, you know, an unexpected bill or an expected bill that you haven't budgeted, budgeted for.
20:08
The other thing I want to say and raise before we get too deep into this subject matter is that it doesn't matter. We're not talking about people who are on struggle street income wise.
20:16
You could be earning a good dollar. You could be in a dual income family, both working corporate jobs, great money coming in, and still be feeling this feeling like you can't get ahead and you can't, you know, everything's just going on daily expenses.
20:33
And that causes fear too, like I've got all of this opportunity and I'm wasting it.
20:38
That's that feeling that we're talking about again.
20:42
Yeah. I think you know if I come back to the statement of what the podcast is I feel like I can't get ahead and get on to my day-to-day expenses what Mel's saying it it it is such a range of people and the reason I'm there
20:57
is so varied it could be that I'm a a single mom for example and have two kids and all we can afford is just day-to-day living and mandatory expenses and it's really difficult to have an emergency fund for example.
21:13
But it could be as Mel said like you've got really good income but you might have a few loans to pay and then you don't even maybe your discretionary spending and where money's going and what's priorities and what your goals are.
21:22
There could be quite a lot of opportunity in there as well. I have seen this where the income is so good and there is no debt and it's still happening.
21:35
Because the mind it's all a mindset thing. So in that example that I'm thinking of right now, it is like, well, we didn't have this.
21:43
This is a great opportunity. We might only have this, you know, situation for a little bit in our life, so let's live it up, you know, and I don't want to say no to my partner.
21:53
That putting it being a blocker on somebody is a real Debbie Downer sometimes. And people just like flat out sometimes don't want to do it.
22:02
What I think ultimately is missing no matter even if you're that person who really is struggling.
22:10
Is the goal and the vision for the future and feeling optimistic and being able to link because you need to change. You need a purpose to actually change because you're being rewarded by the current behavior.
22:24
So, if you've got a really loose money system and this is just everyday living, then you need a really good reason because you're being rewarded.
22:33
Because you can have all the things that you want right now and you can solve the problems later as they arise, which is worrying and can cause stress or we can put the stoppers on it right now and create some rules in our system.
22:48
I think that's a really good point. So a couple of scenario you know that I'm thinking about is it depends on your beliefs around money and how you grew up with it or your expectations of how you live your life and whether your money matches that as well.
23:07
Because you really again need to understand your values and what matters to you, right? because if if it's not working and it's there's pain and it hurts because you you haven't got enough money to do all the things you want to do, something needs to give.
23:22
So there's definitely better systems and you know understanding your money and being very deliberate, but you can't do that if you don't know what you're striving for and why.
23:35
Yeah. And it's really hard to do that if you've got a belief that you're bad with money.
23:40
Because that's not motivating. It's just like I'm bad. This is always going to happen.
23:44
So why bother putting in the effort or I haven't even got time is another barrier to wanting to change these things.
23:51
So putting time aside and being really purposeful about why the change matters because sometimes all we need to do is a tweak in our system.
24:03
Because if we're not, if there's an if you are fairly sure that there's an opportunity to be doing better with your money then you're probably right.
24:11
And in most cases it's a problem with your spending system.
24:19
So there's something that you can actually do to change that.
24:22
Setting up your accounts and automating your money in a much more deliberate way.
24:27
And also knowing what it is that you're trying to achieve to that's going to make you feel better.
24:33
Like we need to be really clear about that. Like are we trying to make sure that there's money aside in an emergency account?
24:42
Are we trying to make sure that we are more set up for retirement by reducing some of our debt or growing some of our other investments?
24:53
Are we trying to just learn how to be better with our money?
24:55
Sometimes the first step is just I need to start having better money conversations at home so that I can release this feeling that I have that's hanging over me.
25:06
Anyway, we love these conversations. So, this is what the money collective does all day talking to people about their money situations.
25:15
Yeah, exactly. And I've got,you know, two scenarios as I mentioned in my mind and they're so different, but it's the same thing. I feel like I can't get ahead and get on top of my day-to-day expenses. I'm going to say it again because one party likes even the value of money.
25:36
So, the person that I'm thinking about like even some people think $1,000 is a lot of money for example.
25:43
Some people think $1,000 is pocket change.
25:46
Our view on that is very different.
25:52
So understanding, you know, so one person I worked with, you know, had one wage and because, you know, you're a single parent and you've got that mandatory situation that I was talking about, $3,000 left over, was the number for the year,
26:09
For the year.
26:10
But that to them is now $3,000 that I can get very deliberate on. And to some people that would say I'm going to go backwards, right?
26:21
But to that person, $3,000 was okay, I can make ends meet and I can actually maybe, you know, build an emergency fund.
26:29
100%.
26:30
And then another case study I've got where you might have $80,000 left over for a year and that feeling of I just can't get ahead. I don't know if I can't make it change anything.
26:43
And all my spending is going to stay the same, you know, and I'm going to keep spending that $80,000 and I cannot.
26:47
Even though it's not mandatory spending, I can't make the change in my everyday life to free that up.
26:53
That's right. So, really challenge yourself on your lifestyle and whether you can or you can't. It all comes back to your money story.
27:02
It really does.
27:03
And your belief that I'm bad with money. So, one of the things we ask people to do, and it is a barrier and a blocker, is to actually do a spending audit, a spending review.
27:14
Go back and look at where your money's gone. And we provide our spreadsheet, as Mel's mentioned, to help you do that.
27:24
Because if you're able to do that, then you've got such a great baseline to look at things in a high level way.
27:29
And that is where the benefit is not from a micro week to week but that bigger picture point of view to see what changes I can really make.
27:44
But sometimes people find that really difficult to do. So if you're saying I'm bad with money for that task you're talking yourself out of it.
27:54
You can't do that task and you're trying to pull pieces together and I'm not the manager of money.
27:57
My other partner does it. You know, I hear all these reasons all the time.
28:02
Rather than actually getting in deep and doing the task.
28:07
Because if you do the task, your life will change considerably.
28:11
Yes.
28:12
But it's actually that barrier and the messages we telling ourselves to not be able to do that. If I could crack why people can't do that.
28:22
Yes.
28:23
It's such a game changer. So, we see, you know, people on multiple occasions and they come back and they haven't done it. They've guessed. There's heaps of blanks. Yeah.
28:34
And they just can't prioritize it. And that's okay. I literally had that person this morning and they said, "How'd you go with your homework?"
28:41
Nope. No homework done.
28:43
But that's okay cuz we can help you work through it together. And sometimes accountability, that's what is lacking. Like we don't have that.
28:52
Yeah. and we're like, we don't have confidence in ourselves. And it's silly. Like, this is not a hard task.
28:58
But it's so hard to self-reflect. It's like staring yourself in the mirror of like all the things you've done in the past and it's confronting, right?
29:07
Yeah. Why would I want to do that?
29:08
That's it.
29:09
Yeah. But my client this morning found $5,000 for the year. Yeah.
29:13
And that person, they are so like they she used the word liberated.
29:18
Feels so liberated. What she did do was cancel some things that weren't required in the, you know, that she had been paying for.
29:26
And she goes, "This is so good. I've never thought about this or never tried this. I just thought I was so bad with it.
29:30
And I've never ever even thought about my money. I've just done it."
29:36
Just rolled along. Yeah.
29:38
I think it's the Australian way. I think about this a lot because I want to crack the code to help people uplift their financial wellbeing.
29:46
And I know practically it's about understanding your numbers, but I do see a barrier where people don't do it.
29:57
And trying to understand that psyche is, you know, obviously very helpful cuz then we might be able to help.
30:01
So Mel’s right. If you can't do 12 months worth of spending, do one month and you know, do one thing that helps you feel like you understand it better.
30:12
For example, just start putting some time into it. And I think that's what we need to understand is that it puts time.
30:18
You know, you need to put time aside for your finances like you would any other part of your health and wellbeing. So like we all know that to feel good.
30:27
We need to do self-care and maybe run a hot bath and turn the candles on or go for a walk, you know, maybe get therapy, whatever it is, you do you.
30:37
And we know that if we want to be healthy in our body that we need to do physical education, physical exercise and we need to eat a healthy diet.
30:49
But there was no one usually telling us that you need to put away some time maybe 3 or four hours a month to work on your finances.
30:59
You know, if you really love it, you could do an hour a week, but you know, no thanks.
31:02
Yeah. But just keep an eye on the prize. like how do you know how you're progressing or how it's going?
31:10
And the difference for me, and this is what I think financial wellbeing is, because the definition of financial wellbeing is being able to meet your everyday expenses, having some money left over to enjoy your everyday life, plus feeling optimistic for your future, right?
31:23
So, even though our budget is super tight and we can't do amazing great things, I know that we can meet our everyday expenses.
31:32
I've kind of cut out a lot of the extra things everyday, but I'm feeling optimistic about the future because being able to meet all of our expenses means that we are still, you know, being able to pay the tax obligations.
31:46
I know that we can pay all of our bills cuz I've got money going into a bills account. I know I'm going to be able to pay our rates, which are ridiculous.
31:55
Ridiculous.
31:57
I'm just going to say my rates are $55,000. So yeah, it's ridiculous.
32:01
Ridiculous.
32:04
Special charges scheme. Thanks for the sealed road.
32:09
Anyway, but all of those things, they're not a surprise. Like we have calculated and gone through everything what it costs to run our business or husband's business and then also what it costs to run the family.
32:19
And we just put the money aside so I'm not stressed. I don't run and go to bed thinking how am I going to manage the monthly budget because it's all automated.
32:29
And I know the other thing is that we're paying down our debt.
32:32
So if you think a long time into the future, we're holding on to our home which is growing in value and we're paying down our home loan even though it's just a little bit and I wish I could be doing more but you know that will just be what it will be.
32:50
I know that over time if we can hold on we are going to be really thankful for that.
32:55
So sometimes it doesn't if we can. This is why it's important to see the big picture that Darlene was talking about earlier about our financial position being able to understand our assets and liabilities as well as the ins and outs of income and expenses.
33:05
We can even if we're just treading water that it's okay because it's still building our future.
33:10
Yeah. That gap even if you're just paying off the home loan and not growing savings, it's just like for savings isn't it? because you're paying down the loan.
33:21
So, the loan's getting lower and over time property goes up and down, but on average, you know, I think in history it's gone up about 6%.
33:30
You know, per year on average averages are bad, but so you can see over time your property is going to be worth more.
33:40
Your debt is going down. The gap is widening, which means your net asset position or what you're worth in a financial sense is growing.
33:51
So that is good for the longer term. But something Mel mentioned like in that definition of financial wellbeing is being able to cover your day-to-day expenses.
34:00
And I say if you don't know your day-to-day expenses, how can you have financial wellbeing?
34:07
How can you like something you don't? And then you just worry.
34:12
We see people all the time worried and fearful of how to make ends meet. like that pain like how bad it needs to become.
34:21
To understand the point where you just go oh my god I've only got 10 years left to work what am I going to do now, like where's the turning point to make the change.
34:30
I think that we need to know the three things like we need to know how much we're prepared to like if you think about the income coming in how much are we prepared to spend and how much are we prepared to save.
34:42
I think often we don't even think about that and we just leave it as hope as a strategy.
34:46
Whatever's left over, we'll save.
34:49
Or we could be a lot more strategic about it and understand that we're prepared to spend.
34:52
Well, we know our understand our cost of living is this plus we're going to have this much for our fund money.
34:58
And then the rest is going towards these purposes and being really clear about those purposes.
35:02
So, if you don't have an emergency fund.
35:06
And that's what keeps me feeling good at the moment. I've got an emergency fund.
35:10
So, that also helps me sleep really late at night.
35:14
If I didn't have one, that is the first thing that I'd be going to.
35:19
And then, but if you have an emergency fund and you still have money left over, what's it towards?
35:23
Going like the goal could be a holiday. It could be you need to replace a car.
35:27
It could be growing your assets for your future and it or it could be reducing your debt.
35:32
I think they're the main ones. layer. Obviously, you could have other goals, things you are by,
35:39
But it should be that r like a mixture of short-term goals.
35:44
Medium and long-term that ‘cause you want to also enjoy your life.
35:48
Like you don't want to be stuck in this system where saving all our money and being-
35:54
Financial wellbeing is about, you know, the balance of well, not even the balance.
35:58
We're all different depending on our values, whether or not we want to spend it today or have to keep it for tomorrow or somewhere in between.
36:01
Yeah,
36:05
it's about like if you wonder where you are, think about what you worry about.
36:11
That will give you a really good sign of how you feel about how whether it's now or later or in between.
36:18
Might be and your goals and maybe what's coming up and whether you can afford it.
36:22
But generally it needs to be a bit of both. You know, I do see and I talk about money personalities of savers for example.
36:27
I think if you've got this is my hypothesis, I'd love to test it one day.
36:31
If you've got a saver and a spender, I do wonder and the saver is the stronger personality.
36:41
I do wonder whether savers actually have more marriage breakups or partnership breakups like life relationship breakups because a lot of the time they're too far into the future and they're not creating really good memories with your people today.
36:57
Pages like if you're on different pages with how you spend.
37:01
So you get constantly if the saver is getting angry with the spender spending and wasting all the money and then the sa spender is getting angry with their saber for not living in the now and they can't understand each other.
37:14
Then the relationship and the communication shuts down.
37:17
And then the other person really gets painted as the evil devil.
37:23
You know the other person's always wrong.
37:24
Yeah. there no win unless we can the thing that I think gets people on the same page is if we can decide on how we're going to spend the money so that there's a balance between the spending and the saving.
37:36
And we have some future goals that we both agree on.
37:38
Definitely. Yeah. And then you can understand, you know, your money together.
37:44
You know, and have an exit plan on how the hell you're going to get out of that relationship if you don't want to be in it.
37:50
Who gets what? And how are you going to go about that?
37:52
Exactly. The other thing a spending review can do, I see a lot of assumption that goes on in relationships where, you know, I'm sure you've heard this, she spends all the money.
38:07
I hear that a lot. But that's just a saying. Actually look at the numbers. Look at the review and see where the money is actually going.
38:15
Maybe it's on basic things or family things or daystoday things, you know, maybe it's just part of living.
38:22
Again, where's the evidence? That's right.
38:25
Food out there caring good family doing and buying the food that adds up.
38:29
My husband when he occasionally does the shopping, he cannot he's blown away how much it costs.
38:35
It's so fascinating. I love it when he does some shopping.
38:38
Yeah.
38:39
And I think what the point you're getting to is you you actually did a cost analysis and you go,
38:45
Well, that was all mandatory spending. I'm sure they're usually accused of having bought a boat or car or got big loans. Or might want a bigger purchase.
38:58
You haven't thought about it really holistically about where all the money's going.
39:01
That's right. Until you actually get it down in front of you, then you know you've got real you can make real decisions from rather than just what you believe to be true.
39:12
That's right.
39:13
Is it true?
39:14
Yes. We work off these fake assumptions and beliefs that aren't even true.
39:20
So the point of the story, the moral of the story is know the numbers and know that get the facts and make decisions off that.
39:25
Yeah.
39:25
Because the rest probably isn't even real.
39:28
That's right.
39:28
What we're thinking.
39:29
Exactly. And then the nuts and bolts and the mechanics.
39:32
The best thing if you're in that position, I feel like I can't get ahead and get on my day-to-day expenses is to do a spending review, set up a new budget and new banking system.
39:40
But all the feeling stuff that Mel's talking about with goals and you know your beliefs etc.
39:45
That is the why it's really happening and you need to go deep to address that.
39:50
And you know if you set up a new system and a budget and you can't make it work it will come down to that.
39:55
But to begin with just you know set a new system some joint goals or individual goals it will encourage you to keep it on track.
40:08
Cool. So, we're going to change the tuna.
40:11
Yeah. So, for our podcast going forward we are going to have an education segment we call it. Is that right?
40:21
Yes. Like the TMC takes on a money topic like what do we believe about this particular thing? And look, we got a long list people endless content.
40:33
I built out a plan the other day with 24 topics. Oh my gosh.
40:39
And it was way more than that.
40:39
That was for the year. But anyway, we'll see how we go.
40:44
And already today we've changed our topic because I reckon I've got a hundred in my brain.
40:49
Well, we've added a topic. So what are we because we want to be current and up to date.
40:54
The budget as in the government budget came out last night.
40:59
Thank you, Labor.
41:00
Wow. you guys are so amazing. Like I woke up this morning and I'm like oh my dreams I didn't come true.
41:11
I was going to say it come true.
41:12
Nothing came like seriously oh my god my actually I'm just going to like put it out there and go this budget and I don't know whether it's because I know more about what's going on with politics and things like that as I get older.
41:27
I really don't think I do but I don't think they do either. I don't think it's going to make life easier for most people.
41:38
What we have seen when I'm coming out from that is this building financial resilience for ourselves like because it's more than just the income and the expenses which we know that I don't think there's any relief for any of that in the budget but also the wealth creation for everyday Aussies trying to build everyday wealth.
41:58
So there's lots of the two things that we're going to talk about today are negative gearing.
42:03
And capital gains tax.
42:05
Which both relate to negative gearing is particularly related to holding investment properties.
42:14
That's where we see it most commonly and that's where the impacts are going to be. Capital gains tax impacts all of your investments.
42:23
Yes. So where do you want to start? Negative gearing or capital tax?
42:29
Let's talk negative negative gearing and it's really really financial wellbeing TMC lens.
42:37
It's really really important to understand and educate yourself on all things finance because then we feel more empowered and educated to make decisions for ourselves.
42:54
So that is why this is really important and you might find it dry but it's important to understand what it means to you in your current position or what it means to you in your future goals decision.
43:06
You might change what you decide to do and you can't do that unless you understand the rules.
43:11
So the rule change is so let's start with negative gearing.
43:16
Back to your first question. Negative gearing. Let's explain what negative gearing was because from today if you buy an investment property, you can't negative gear it anymore.
43:27
So, negative unless it's a brand, you're buying a brand doing a new build and you're ‘cause the government wants new housing, right?
43:36
They want more housing. So, if you whack up a new house, you get negative gearings.
43:39
Yep. in the majority negative gearing from today gone.
43:45
So what does that mean? So what is negative gearing?
43:50
So negative gearing is if we have an investment other than our house, our owner occupied house was previously exempt from what we call negative gearing.
43:56
And the idea is if I use an investment property, if I went and I bought an investment property then think about it like a business.
44:14
So we rent it out and we earn lots of rent hopefully and in this market that's what happens. Rent is quite high.
44:19
So we earn rent and then it costs us to keep that property, right?
44:25
So we can claim all or we could claim all the expenses that that property incurred to maintain so we could keep renting it out.
44:36
So they're things like council rates like M was talking about before, maybe body corporate all the maintenance on the property.
44:46
Maybe you got to paint it, keep it up to scratch, you know, do some things. And then, you might rent it out through a real estate agent.
44:51
So you'll have some fees that they might charge you.
44:55
But the big one is if you've got a loan that you, you know, took out to buy that property, you could claim all the interest on the loan as an expense.
45:07
So then what you would do is how much rent came in.
45:11
So let's say 25,000 a year. I'm just going to make a figure up.
45:15
And then you've got all those expenses that you could claim included your interest.
45:19
And a lot of time those expenses were more than the rent. So that meant maybe your expenses were $30,000 all added up. You've got a minus5,000.
45:30
So 25,000 rent minus all your expenses 30 minus 5,000.
45:36
So the way negative gearing worked if I say I had a job and I was earning $80,000 a year. My loss on my investment property was $5,000. So it would mean that I only have to pay personal income tax on 75,000.
45:47
So I've already paid $80,000 and I might get a bit of a refund come tax time. That's what negative gearing in detail was.
45:59
And so anybody that had and I've used an investment property but you know the same principle say you know worked on other investments as well.
46:10
So then come today if I have actually they're going to draw a line in the sand.
46:15
So the rule is if I've already got an investment property that can continue.
46:20
So that model I've just talked about will remain.
46:24
If I buy an investment property from today onwards and it's established.
46:29
And it's established, you can't do that anymore. So it just is what it is.
46:37
So you will do your rent, your out of pocket 5k is what is refunded.
46:42
That's it. And then what you're getting out of that property.
46:46
So, you're kicking money into it, right? Every single year in that example, you're putting in $5,000, but with the hope that it's going to grow in value, right?
46:54
Because at the moment, you're going backwards. Five grand every year for holding that property with no tax break.
47:02
So, what we want is to one day hold that property long enough that it's gone up in value and we can realize a capital gain on that property. Right.
47:13
Right. And so here comes the second change in the system.
47:20
So at the moment, if you have a property in this scenario and you go and sell it in the future and you've made $100,000 on that property, then you have to pay capital gains tax on 50% of that gain, which is $50,000.
47:30
So in the example that you used where your salary is $80,000 minus the negative gain for the negative gains tax for the year down to 75 and then you might add on the capital gains tax which is another $50,000 onto your income.
47:47
So your taxable income in that year is $125,000.
47:55
That is how capital gains tax has worked in the past where we only pay tax on 50% of the gain. So that's where we're trying to make our money.
48:05
As long as you've had the property for longer than 12 months. Yeah,
48:08
That's right. So that is what investors are trying to do. They're trying to minimize their tax while holding on to a property while one for the future hope that one day they make money on it which they have to pay some tax on.
48:26
So those tax laws have also changed.
48:29
That's right. So, the new capital gains tax is actually not going to kick in till 1st of July 2027.
48:42
So we've got a little bit of time, but still the new rule will be that if and this depends when you bought the property.
48:47
So if we bought a property after 1st July 2027 and then at some future point in time you wanted to sell it.
48:58
The new law is that you have to pay 30% on the gain.
49:03
Yeah. So I bought it for 500 again. I sold it for 600.
49:10
That's a $100,000 gain. I pay 30% of that in tax.
49:19
So if I've bought a property, obviously it's the old law if you buy and sell before those times, but likely for existing investment property holders that you've got a property now and you might keep it past that date.
49:28
So, sometime in the future, you might sell it. So, you're going to be on a hybrid model.
49:38
So from the time you bought it to the 1st of July 2027.
49:41
You do the 50% off thing and then that gets added to your taxable income.
49:46
Yeah.
49:46
And then you pay PY tax and then whatever the value is from 1st of July 27. I'm not sure how we're doing that.
49:53
Until the time you sell it. Then that's the 30% rule. So 30% on the real sale.
50:00
So how much it all was worth, how much you sold, 30% on that gain.
50:06
Yes. So, that's it.
50:07
But let's just say the gain was $100,000 a gain in that scenario. 30%, so you're paying tax on 30%. Isn't that less than 50%.
50:16
Well, it's not 50% because you got a two-step sort of arrangement, right?
50:21
So 50% So of the 100,000 Mel mentioned 50 cents, 50,000. 50,000 gets added to your taxable income. So 80,000. So think of PAW tax rate. So 80,000 plus Mel took off the five. So $125,000.
50:38
You don't pay 30% on 125 across the board because we've got tax tears.
50:44
Are you saying you repay 30% tax rate on the entire gain?
50:49
Yes.
50:49
So there is it, it doesn't get added to your taxable income. You just get straight taxed 30% on the gain.
50:59
Right? So you get so you pay 30 grand on $100,000 instead of it being added on to your taxable income.
51:09
So where before depending on your tax bracket was a 50% $50,000 extra you had to pay tax on but I mean you might be depending on your tax bracket that is a very that's a varied thing right. Yeah.
51:20
So it might be worse or better off depending on your tax bracket.
51:24
Exactly. So in summary, the negative gearing is being grandfathered.
51:31
So if you hold an investment property already, then there's no change for you.
51:36
But if you buy a new property from next financial year, oh, negative gearing is today.
51:42
It's today. If you buy a negative new investment property as of today, then there is no negative gearing for you. Sorry, folks.
51:51
So I suppose that's great for the people who made those decisions in the past.
51:54
Not great for future property investors, rent investors, people who are trying to buy, you know, get into the property market as within rental property.
52:03
You're not going to get those tax incentives that you had before. It's got to impact your choices on how people enter the market and whether what the government is ultimately trying to do is slow down property investing so that there and it's also to slow down housing prices so to make housing more affordable so that it's not going up in value as quickly as it has.
52:27
Like because I think we've had like 400% increase in housing in a 10 year period or something.
52:33
Crazy.
52:34
That's right. So whether it works or not.
52:38
So this is a political view. So the reason the problem in Australia is that we don't have enough housing.
52:47
So we are going backwards every year with the amount of houses we need to house all the people.
52:51
So makes it more expensive,
52:53
Right? Because supply and demand. So you haven't got enough houses.
52:57
That pushes property prices up. So realistically the fix is is to build more houses or maybe encourage more people to live together.
53:03
I don't know whatever other rules and social reforms might happen.
53:09
Going to get the negative gearing if you do buy the build a new house.
53:13
Yes, true. They're encouraged to do that.
53:16
That's right. Because that builds an extra house. That makes sense.
53:19
It might make sense for the rent vesters to go and you know get into a housing estate or something like that, right?
53:24
But otherwise the sort of tweaking around the edges and it'll be very interesting to see whether it's a good policy change or not.
53:35
So in New Zealand they abolished native gearing with the last government and the new government that's been in I don't know, now maybe a few years brought it back.
53:47
So interesting.
53:48
interesting to see whether it has the impact and one of the reasons for that was that particularly rents through went through the roof.
53:57
So people that are renting you know it's really difficult and challenging because you know, it just moves who can buy like you said some people might be able to buy but some people aren't in a position to do that.
54:08
So, yeah. So, anyway, that's the change. We don't know what it all means, but I would, the reason in this e education segment is if you've got an investment property, really take the time to understand the new change and what it means to you in dollar terms so you can plan for it.
54:29
Right? It might change the strategy of when you sell potentially or being more prepared for it and what that's going to mean because it's going to have a flow on effect to the outcome for you and the long term. Yeah.
54:43
Maybe your retirement or something like that.
54:46
Exactly.
54:46
Whatever it is you're building for in your financial strategy.
54:51
Exactly. And it's never one-size-fits-all. That's the thing.
54:55
You've really got to look at it from your perspective and what you're trying to achieve and what you're trying to do cuz buying investment properties positively geared could be a really good thing.
55:02
And what we mean by that is you're actually making money out of the investment property where you know the costs and it is being covered by the rent if you can get to a situation like that.
55:15
It could still be a good investment strategy. It just depends on what you're trying to achieve, your goals, your situation.
55:24
And so it it it's just not one simple answer.
55:26
And that is why education around all these things are very important and the media everybody's going to say there, you know, it's it's not great, right?
55:35
And we've also given that feel. But what I want you to take away from the segment is to understand your numbers.
55:44
Your numbers and what it would mean for you and your decision making.
55:47
Yes. 100%. Don't listen to the propaganda that's out there. and make your decisions based on fact. I think that's been the whole every podcast is going to be the same. Just know your numbers. Make your decision.
55:59
Make your own decisions. Don't make let the media make your decisions for you.
56:02
That's right.
56:02
And that's what financial wellbeing is all about.
56:04
Exactly.
56:05
I understand your position being powered and educated to make the best decisions for you.
56:11
That is what this is about.
56:13
So, thank you so much for joining us and we look forward to catching you all at the next podcast. See ya. Bye.
56:23
At the Money Collective, we provide financial wellbeing premium coaching, mortgage broking, and workplace financial wellbeing programs, which we couldn't do without the seamless support of our fabulous team.
56:34
If you'd like to find out more, head to themoneycollective.com.au or our socials to take action and engage our services in our Facebook group.
56:38
Join the conversation and help us break down the taboo around money. All content in this podcast is for educational purposes only and is generally nature.
56:51
For tailored personal advice, please seek out a professional.
This podcast provides general advice only. It does not take into account your objectives, financial situation or needs. Before acting on any information provided, you should consider the appropriateness of the information and the nature of the financial product in regards to your objectives, financial situation and needs. We recommend discussing your personal situation with a financial professional.
Podcast by:
MEL PEARCE & DARLENE NEU
Co-Founders, Financial Wellbeing Coaches and Mortgage Brokers
The Money Collective
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