Season 3 Episode 14: Your First Home Might Be Closer Than You Think
Owning your home is a core part of the great Australian dream – but it’s also something many people feel is out of their reach these days, especially for the younger generation.
In this episode, we explore why housing feels so unaffordable for first home buyers and share our best tips for getting into the market (we believe in you!).
We cover:
This week’s personal money truths: balancing the competing priorities of work and family; and wondering when it’s okay to contribute to a kid’s purchase
Where to start as a first home buyer – and why Government schemes can be a great way to get into the market
How much you REALLY need for your deposit
Why it’s essential to know your facts and figures
Why we recommend talking to a mortgage broker before you feel “ready”
The TMC view on why budgets don’t work – and how to make yours stick
If you’re saving for your first home, dreaming of getting into the market or have a loved one who’s planning on buying their first home, we hope this episode is the pep talk you need to understand that it IS possible.
As mortgage brokers, we help people take their first steps towards home ownership every day – and with the right information, preparation and planning, you might be closer than you think.
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 ask questions and talk all things financial wellbeing, home loans, and more. Email team@themoneycollective.com.au
Take action and uplift your own level of financial wellbeing with our online course: https://www.themoneycollective.com.au/onlinecourse
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00:00:00:06 - 00:00:23:20
Welcome to The Money Collective podcast. We're here to uplift your Financial Wellbeing. Your host, Mel Pearce and Darlene Neu. We are the co-founders of The Money Collective, and together we have a 50 years of finance and banking experience where we provide the tools, information and guidance to better understand your money and feel confident making money decisions. It's selling and building the money collective.
00:00:24:01 - 00:00:59:12
Welcome to another episode of Your Financial Well-Being with us. Mel's here with me today, of course, and I am going to kick off and start living my truth. I'm all I want to talk today about a key. Well, my daughter Lily, particularly you and I, and we are very, very passionate about teens. If you haven't realised that already and you renews Al know Annie and Mel and we are very passionate about.
00:00:59:13 - 00:01:46:08
It's like, well, for me, it's like my third child. And it's where all my love and energy, you know, sometimes is spent more than the family. And we've just been a and Mel and I've had a few conversations I am interested in Mills thoughts on these, too, But I am sure there's lots of viewers out there that have the same feeling of how much time you spend at work and how much time we spend with your kids and what that actually means, because it is the ongoing, you know, some you know, obviously we're building business, we work, we want it to be viable, you know, all those things.
00:01:46:08 - 00:02:30:18
But actually my driving factor is I love it. But sometimes, you know, Lily feels that. I reckon I'm off living this glamorous life. Mm. And I'm stuck. And she feels like she's stuck and excluded from my world. And I'm, you know, and that can play out is you don't understand me. I, you know, not home enough. And yeah, it's a continual seesaw in my life always has been because I believe that I am a better human if I, you know, doing the stuff I love to turn up, you know, for her.
00:02:30:20 - 00:03:01:02
And so I then get guilt and then, you know, I do a few things with her and then I, you know, get back to where love and then, you know, so I'm very interested for advice. Okay. On that. Yeah. I don't want to give myself up. No, but it's really important. It's like how we about don't you think it matters if you had your own business or you have a corporate job or any job that you have that you go to because they're competing priorities, right.
00:03:01:02 - 00:03:23:03
And how to balance that is how well is it hard at two months? Oh, that's how we want to think. But I think you're not going to be happy at work if you didn't have a balance between the two. Like, you're going to burn out at some stage and then you're going to ruin your relationships and like it's just not worth it.
00:03:23:05 - 00:03:38:21
No matter how much you love your business or your job or anything that you do, it's not worth it on your own. So that's if you know, you've got a huge, strong family value. Yeah. With our kids. But I think our girls are getting to that stage where they're old enough, where we've started talking about how do we involve them in what they do.
00:03:38:23 - 00:03:57:04
You know, I think they're looking at us telling my daughters 17, finishing year 12, and she's like saying words like, Oh, I don't even understand what you do. And I thought, Oh, you didn't even like what I did. But she says, No, mom, I just don't understand what it is you do. So I think they're at that point where they're being inquisitive.
00:03:57:05 - 00:04:22:06
They want an opportunity to bring them in and they're in our, um. Yeah, yeah. We've been talking, you know, the last few days, you know, like we go and do, you know, some personal development, some way or something, or can they come along or, you know, where we're, it's all about, you know, life stuff and, you know, things that can really make it, it all just spending time with them as well in our world.
00:04:22:08 - 00:04:45:16
I don't know take much usually. Right. You can you can do both you know and I don't think it's a short time. So, you know, I don't I think it's a mindset. I think it absolutely is. And we're going to be talking to these girls every single day of their lives or as close as possible to that. And I'm while they're living with us and that's what they want, looking for that connection at this time in their lives.
00:04:45:18 - 00:05:06:02
Are you still there, Dick? Do you of me, whatever it is, it's all in me. It's, you know, I think that, you know, being in touch, very inquisitive as to what we are doing. And I'm sure that's not just show to us. I'm pretty sure that will be right for most people, especially when they've got teenage kids. Right.
00:05:06:04 - 00:05:26:20
I reckon to like if you you know, you're out there and you just feel like you because you do all these stories working all the time, you know, it is the constant seesaw. When I was in school having high elbows saying I your I, you know, need a time to show you how you are day sensitize yourself from the world for a little bit.
00:05:26:22 - 00:05:55:02
Yeah and trying to feed in all those things and you know you've got somebody that wants you know to be present you could be more defensive about something. No, I would. I would be. I would be. I don't have any words domesticated. I you know, you go to my can you denigrate what this doing grooming little I'm sorry about being regimented but that's nothing compared to other mothers who are more Yes, sure.
00:05:55:02 - 00:06:23:00
Less angry. Yeah. Yeah. My daughter last night we went to. She's been working odd years, working really hard. She's, you know, dancing at school for a couple of days in a concert. And so we flew back from Brisbane to make sure I was there on time. And you do these, you know, lots of mums, you know, I just fe all the time and, and you compare yourself to them.
00:06:23:02 - 00:06:42:11
Well I feel. Yeah. She's comparing you to them. Right. Right. More to the point. More to the point. And there's no right or wrong. It's a personal choice for all of us and I don't think you know, anyone should judge anyone and whatever they choose that you just need to choose what's right for you and lead by example.
00:06:42:13 - 00:07:08:03
You know, with passing, I'm particularly feeling like, you know, with these 15 and starting to mature and some of those beliefs, you know, they he they hearing or wondering why joining connecting dots more if I do these that you know like so I really want instill that you know belief you know think about actually what your mind is telling you is it true or not.
00:07:08:05 - 00:07:26:04
So if you had something to use and how tired we are or whatever, because like if you're it's not actually hard to sit down with them and give them a couple of minutes and say, I'm tired, but hey, I'm here to change that belief. It's a belief isn't a actual tide if you're telling you. It's a belief. Yes, a belief.
00:07:26:08 - 00:07:47:04
Yeah. Well, you could be really buzzed about your day and get up and, you know, and then just be really present. Yeah. I think something simple too is sharing. You know, what happens in our day sometimes like that. You don't want to at all. They want it to go both ways. That's what I'm starting to realize, that I as I get a bit older, it's not just the one way.
00:07:47:04 - 00:08:33:18
What's happened to you during your day. Look at like, Hey, what did we do during our day? Right? I don't want to talk about themselves. 24, seven ago. They want to hear no other stuff. They and they're inquisitive. Anyway, that's my truth. Like in progress and, you know, linked to money. Yeah, absolutely. Time. And, you know, I like where even at a time when your life priorities because really it really is about life not money Yeah all their money parenting podcast I so my truth is and I was thinking kids as well so I've got a 20 year old son who is working full time and he is doing great job.
00:08:33:18 - 00:08:54:06
I feel like managing because I feel like you've gone before me. You've got a son who's a little bit older and I and because of all the work that we do in this money space, is to help him be as independent as possible, like he's with me at home. That's all good. But like, he's so me, I'm working things out in life as he goes.
00:08:54:07 - 00:09:21:13
And then I feel like he. Oh, the thing that's come up for me is like, I he's so independent, doesn't really need me, but like, I'm meeting him this evening at the shops because he's got to buy a suit because his love and he's got to buy a suit to go to an event. And anyways, bangs, he's not a suit guy like he's dying, which I'm sure because big enough is enough anyway.
00:09:21:13 - 00:09:35:22
So it's a big thing. He doesn't know how to do this. He doesn't even think he's being in a suit shop and so we're going to do that together and he's asked mum to come and helping pick a suit. Yeah. Also. And I know that he's been budgeting for it and he's been saying, oh how much do you think it will be?
00:09:35:22 - 00:09:50:19
And I wonder if I have to buy shoes as well type of thing. That's going to bump it up a bit from the end. And I haven't said anything to Paris because this comes on a really key building, listening to podcasts. I'm like, I might just give laundry boxes. Yeah, they'll be mad. How do you ever have that?
00:09:50:21 - 00:10:11:13
Because we share caring through money. And in my brain I'm like, I'm not solving this problems. He doesn't know I'm going to help him out. Percy's probably like, just let him do it. You know? We don't have to. Oh, God. How precious is my fault? And by the way, he's the dad. But, you know, because he's very. Percy's very much like you.
00:10:11:13 - 00:10:31:12
And let them be independent. Let them sort their problems, like, Yeah, my little fix for them. But how do you show love as well that you care and all of those things as well? It's an interesting thing, I think, because occasionally that comes out of left field. That's why you just stare at the Schultes. Yeah. And you say there's 100 towards it.
00:10:31:18 - 00:10:58:14
He's not expecting it. No. Like it's it's not. Mum should contribute to this. It's actually a really nice gift giving things to do. But I thought we like it. I like doing it. I'll let you know. Percy Okay, but it's not because as long as it comes from I know you doing it. It can't come from. I know money's tight right now and you're saving for other things, so I'm going to contribute.
00:10:58:14 - 00:11:19:03
That's a very different feeling to just say, Hey, you know, you look dapper. Oh, my gosh, he's 100 bucks. I don't know. You know? So it's just what you are saying. The other way is like, oh, you can't do it so too hard. Or yeah, I got me and then I'm celebrating your problem. That's what I reckon. That's right.
00:11:19:08 - 00:11:50:00
Yeah. I can, I can come from there. But if it just comes from a complete surprise in the moment he go yeah because I want to, I want to give you something that I do know. I suppose I should have my watch anyway. Yeah, yeah, yeah. Anyway, so anyway, so let's, let's do that now. Pantsuits assume our topic today is we want to talk to people out there that might be thinking about I'd really like to buy their first time.
00:11:50:02 - 00:12:16:00
You don't know where to start. Yes, my experience for a very long time but you know definitely of recent times is that people just a first time buyers just don't think it's it's possible and it's true, generally speaking, if they think they're further away than what they are. Mm hmm. Or it's always provable, not achieved where they're getting this from.
00:12:16:01 - 00:12:47:00
Well, it's really interesting. I was saying last year I spoke to an organization that does research into mental health stuff, and they did a study and it was a study done on this generation of Gen Z particularly. And what they worried about the most. And the findings were that the most they worried about that they'd never be out.
00:12:47:02 - 00:13:18:00
This is in Australia of course be able to own a house like their parents and they'll never be able to live a life like their parents. Mm hmm. So that was a come from. The facts are that easy. And I think where it comes from is, look, there is some actuality, in fact, as far as earnings compared to house prices, that's the that gap is widening.
00:13:18:02 - 00:13:40:16
Right. And so there is absolute fact on that. Mm hmm. However, we see people every day buy houses, I'd say the government grants in this country and support for first time buyers are the best. I have seen it in my last 30 years in all my time in my working history. And, you know, if you really want something strong, get it.
00:13:40:16 - 00:13:59:09
You can get it. If you believe you can, you can. There. Yeah. I think too, there's that underlying thing like like it's hard to buy a house that it's hard to pay off the house, which that was a generation thing where you would buy the house and pay it off. Now we're seeing people not paying off their homes.
00:13:59:11 - 00:14:19:05
And so that comes down to the type of home like what you envisage at home to be like the suburban white picket fence, you know, a four bedroom house, whatever that vision is like maybe where how you grew up. And that being, you know, a $1.5 million just to buy. How are we ever going to do that compounding interest?
00:14:19:05 - 00:14:40:11
Oh, my gosh. So then there's that that thought as well. And then because I think the type of asset that we have to buy now is different. So if you want to pay it off, you might need to buy a small apartment and that could be more achievable. It depends on what your goals are and what those goals are and what you're prepared to buy will determine the starting point.
00:14:40:12 - 00:15:00:06
What grants or if I was w were prepared to leave that. That's right. Because I think that is changing. So we need to kind of we need to be accepting of that yet. Definitely. What I do know though, because it scary to me like if we're going to buy like the family house, like I just said, big house and a picket fence or whatever, that's like dual incomes.
00:15:00:08 - 00:15:18:20
Let's say you want to have a couple of kids that working bloody hard. That is not what we said about being domesticated, living at home and having one. No. And then so change, you know, it's people, it takes two people to work and now we're becoming feminists, so we don't want to rely on the other person. How do I be independent all the.
00:15:18:20 - 00:15:37:16
So it's a coming in. Yeah. Yeah. How far out do I have to leave my phone? Do I have to commute? What's this last hour going to look like if I find myself up to this in my signing up to the next morning concrete my whole life I've stopped. He's just making the decision now, right? I have to climb the corporate ladder, you can say.
00:15:37:16 - 00:16:08:18
And it's like, My God, that feeling so powerful. Oh, my God. But I suppose and I suppose it is becoming more and more like that, depending on what that, that vision is that you had of what you expected your life to be. Yeah, I'm saying that, though I think that some of what is pushed through the media is, you know, that I think the messaging is loud, you know, in socials that you can't do it.
00:16:08:18 - 00:16:36:17
It's harder than it used to be. And again, that's the belief. So if you believe that politics right, politics is saying to us that the housing is unaffordable. So then we believe but we don't know the numbers now. So how about we go in some numbers? I stick to the same old chestnut from us is no, your numbers and no, you know what's possible from and I say from the inside out in the outside.
00:16:36:20 - 00:16:55:18
And so, you know, would I qualify, you know, to my house? How much could afford to repay? How much would the bank loan me, you know, from the outside in. That's right. But from the inside out, you know, your numbers and what that does to your lifestyle and whether or not that you want to sign up or not, you're going to have to live somewhere, right?
00:16:55:19 - 00:17:27:21
You need shelter and food and housing. Stability is important. And renting in this country is not stable. It is not because of lack of housing supply. So when there's lack of housing, you know, being able to operate, we don't have the safety and security of being able to decide to stay or to go is also less investors coming into the market at the moment because there's been changes in tax laws and things like that.
00:17:27:21 - 00:17:51:12
So there's less rentals available. It also pushes up property, right rent addresses in or continue to make it harder and hotter until we get supply. So what I was going to say before though, what I do know and this I don't think has changed in my 30 years, is that buying the first house or getting in is the hardest thing.
00:17:51:14 - 00:18:13:06
So if you a first time buyer and you don't want to go to Nirvana and the Dream House first and you have a stepping stone to getting into the market and then build a pathway to the next house over the next five or ten years, whatever it might be, then that might be a pathway that's more achievable. Getting in is the hardest.
00:18:13:12 - 00:18:34:10
I know. I see that all the time. And if we because it's always one step away, I see a lot of people like if you want, you know, the million dollar house or 1.5, that's a lot you get to to save up for to be able to do and it might be just too far away particularly if you're paying rent.
00:18:34:12 - 00:18:57:09
But if you can get something small like getting paying off the loan and that is comfortable enough for your lifestyle, you actually creating equity in your home and an asset that you can then step to the next thing that arrives. And so in We Are you and Victoria and our State Government, and most of them do have stamp duty discounts as well.
00:18:57:09 - 00:19:22:21
So for first home buyers and in Victoria at $600,000, you do not have to pay any stamp duty like. And so buying at that lower end of the market, I know you're like, oh, 600,000, it's a lot. But like it's the bottom end basically of the property market here, especially if you're in Melbourne. Sophie going to buy 610 inches New Melbourne, but it's not that much different to other states.
00:19:22:21 - 00:19:47:15
What sort of deposit would I need? I reckon about $30,000, 5% and you can do it. And people are like, what? And then love like that happily, right? I think it's like, like 120,000 or something like that. And then like, well I've already got 28,000 and you like, okay, and you're saving at this rate and you'll be there in a couple of months.
00:19:47:17 - 00:20:14:01
Let's look at borrowing capacity. All that's achievable. Okay. We're looking at a maximum purchase price of 620. What is 620 going to buy me? What do the loan repayments look on? $620,000, you know, purchase price, you know and it does that lifestyle check my boxes am I okay living here is that the type of property you know that I'm can I get to work from this location.
00:20:14:01 - 00:20:33:22
You know can I make those repayments? What does my lifestyle look like? These are questions we need to. So that's where all of that is just facts in is completely different to Oh, I can't do it. I'll never be able to do it. But you know, even if you have no savings and you're starting from scratch, how do you get to 30 grand?
00:20:34:00 - 00:20:52:04
How long they're going to take you? Right. What do you have to do to get that, if that's your goal? Exactly. That could potentially give you a lot of choices later on in life and understanding repayments, because if you're paying rent, then that's a big part of what a chunk of that mortgage repayments are going to look like.
00:20:52:06 - 00:21:18:08
It might be, you know, not all that much extra that you've got if you're renting a loan. Shade You know, housing is different, but if you're renting a loan, then it, you know, yes, it might be a bit of a bump up, but it might not be as big as what you think, depending on your purchase price. And having that feeling of I've got an asset, I'm growing it, I'm paying down is I also like a bit like full, full savings.
00:21:18:10 - 00:21:40:19
So if you're in the market rather than just despairing, you are paying down your loan, so you are creating, you know, an asset more savvy or an actually financial resilience. If something goes to crap, we can sell the house, right? You have whatever's left over because you've got a two bedroom apartment and I took out this home buys about this.
00:21:40:19 - 00:22:02:23
But, you know, backup planning is really also important. So maybe I'm going to live on my own and on a single person buying a home. And I might think I can only do one bedroom, but it's really helpful maybe to look at one or two bedrooms, because if I buy two, maybe my backup plan is I can rent a room out, you know, thinking about what those choices are.
00:22:03:01 - 00:22:28:02
Interest testing the numbers is also really important. So do things well. This is what you need to know is definitely how much mills tax already. How much contribution do I need to make based on my income? How much can I borrow? And then you know what? What's available in that price range. Yeah. Is it is it something I actually should be investigating that one.
00:22:28:03 - 00:22:49:06
Right. Yeah. I'm going to go and do some opens. I was going to say don't talk to uninformed old people. Oh yes. Who are going to tell you that it's harder than what it is because back in their day, you know, whatever, because banking and finance, they want all these grants available. Right now. I just you can come in with 5% now.
00:22:49:09 - 00:23:17:23
I know stamp duty and there's no mortgage insurance. Mortgage insurance is like an insurance premium that like 15 years ago people had to pay when they didn't have a 20% deposit. It doesn't happen anymore because the Government are providing a 5% deposit scheme with no caps on income. Unlimited positions like this came out in October last year. So if you're not on the pulse, you might people might be telling you that it's harder than what it is you might have and you have to save more than what you do.
00:23:17:23 - 00:23:40:03
And there's so many banks participating in all these schemes and they're becoming better all the time. Deals. And yeah, before it was a bit like remembering COVID times when they started bringing out some more of these schemes. The spots were limited, like there's only 10,000 for the year. You had to get in quick and get your spot, you know, and that was kind of pushing up price or income hurdles and it ain't over sentiment.
00:23:40:04 - 00:24:08:16
You can do that. But all that's disappeared is state and federal government schemes that are making it easier. You just need to decide, understand what your facts and figures are and then make your decision. I think that's it. And how do we go about understanding my facts and figures, you know, for repayments, interest rates, you know, whether I qualify understanding these grants more So you know, my thoughts are becoming and I think you don't even need to be ready.
00:24:08:16 - 00:24:28:09
Can I say the same thing you could say for yourself? Just a routine or rule it out or pack it for a while or say, Yep, I'm going to go for it rather than sitting back feeling I'm never going to do it. Actually go and find out. You don't have to to talk to someone. You don't have to be ready.
00:24:28:11 - 00:24:56:20
We have said this for years. People don't come because they feel that. I don't know, maybe they're wasting your time. Maybe. But it doesn't matter if you're 12 months off, if your car is Sarika or even sure they're going to help you. Right. I think because you could you're going to do other than that is you're going to listen to these podcast, you're going to listen to other podcast, you're going to read a book, you're going to go using Google I.R.A. chat app, right?
00:24:56:22 - 00:25:26:17
And you're going to get fan booze. So much information and information that you do not know how to apply to yourself. Secondly, you need to go and talk to somebody like us and you can call us, look us up. We're on the Internet, look up a local mortgage broker, right. And you need a booking, an appointment, and then there will use a calculator and tell you what you can borrow, what you can buy for, and how much deposit you need, and how much your repayments will be just fine and dusted in an hour.
00:25:26:17 - 00:25:49:03
And a good mortgage backed will write that all down for you. And you know, don't be scared to go with all your questions. It doesn't matter whether you are ready or not. I might help you with a really good list of questions to take off. What a good idea. Yeah. Yep. You could plug these transcribe our podcast into I and respect you for your list of questions lot.
00:25:49:05 - 00:26:09:08
Yeah, definitely. But yes, but don't be scared. Go and get the numbers. Don't leave in the fear. Don't try. You know, you don't have to do it. Always self seeking information, you know, even if you've got to seek it from two or three brokers or you know, whatever you decide, that's okay. It's just information you information gathering and learning about that.
00:26:09:08 - 00:26:32:14
And then how to spot yourself. And then you've got obviously all that the feelings that go over the top and understanding your own numbers and how you live, your lifestyle and whether it's a good choice for you and your values, you know, do you I mean, in Australia it is the Australian way to own property and a house, you know, Do you have that same feeling or not.
00:26:32:14 - 00:26:54:06
Some people do, some people don't. Jared It's do or you know, I understand you, you know, worry about or not. Yeah. So those values and what you value and what you want really important. That's right. But you can find out the information and you'll get your answer. Let's see what's right for you. Funny information is actually the easy part.
00:26:54:08 - 00:27:21:19
Yeah. So yeah. Which are the bamboozled with just about a shit ton of information that you can find in the internet of places. Just go and get it. Realistically. All right. Well, that's it for you guys are now we want to talk about where our budgets all tend to take you and why budget style, right? Or because people how you do budgeting, right?
00:27:21:23 - 00:27:46:04
Like your budgeting service. Uh huh. Having here, like that's the most common thing people say. And I think financial oh you it with budget. One little aspect to our budget is super super duper important. But like I'm sure that if you've got any life experience and you've tried a budget before, most people, you throw a spreadsheet out the window, you go, Well, I'm never doing that again.
00:27:46:04 - 00:28:07:12
Didn't work. I'll give it a go. It's like a diet. I was kind of like, But in Jenny Craig, it's just like I've tried a diet that maybe I'll buy this. So I you wind five, I do this and I just do it Why diet it Why. Right. That's so old and so so anyway, whatever Weight Watchers I am 43.
00:28:07:12 - 00:28:33:01
So there has been 5225 diet and the current one is peptides. Okay, I'll get on it. But is it going to work for you? How long is it going to work for? This is the question. So why do you budget, by the way, if your budgets fail? So budget sale because we are unrealistic hurricane ads in this first point, I think that's true.
00:28:33:03 - 00:29:00:16
So unrealistic. I think it's because we think we set it up and think it's going to work, but don't realize that we have to be flexible with it. Oh, that's the one. Yep. And the other one is something else that I've forgotten about what it acquire while I did budget. So when I say unrealistic, it's because we don't understand our behaviors with money.
00:29:00:18 - 00:29:37:03
And when we don't understand our behaviors with money, we just I mean, humans don't change easily. But we don't. We, we we like doing what we do, whatever. But if you you need, you know, change takes change, takes a lot of energy and discipline to change. And you can't just magically set up a new budget and think, Oh, I'm just gonna spend in a different way than I've ever done before and it's going to work because you were already behaving in the way that you wanted to behave, right?
00:29:37:08 - 00:29:51:21
So even though you've got to go that you're natural on it, It depends on how good that goal is, because you model is everything. And so I think people do this. They might go, Right, well, I want to go on that holiday and I'm going to do everything. I am going to live on baked beans and every minute noodles.
00:29:51:21 - 00:30:14:10
I am good for that because I know I'm going to wherever I'm going on that holiday. Right. You're my European holiday. It's happening. Yeah. McInnes. Here I come. Wherever I don't, I am. Yeah. And so we can do that. And then we do that. But then we come back from the holiday about we can't repeat it, right, because we haven't got a burning enough goal.
00:30:14:12 - 00:30:55:10
So we always need to have a goal to attach it to that is more important than doing shitty everyday spending. Yeah, but the point that we always make is that so let's just say in the course of life, if we want to achieve medium long term goals as well as those short term ones that are fun like a holiday, if we want a budget that's going to set us up more long term too for that stability that we're off after, we need to factor in our behaviors in money and we can't just write it down in a spreadsheet and think that we're going to achieve it when we haven't factored in our current behaviors.
00:30:55:12 - 00:31:17:06
That's right. And the way to do that, if we we recommend people do a spending review or spending audit, you know, say you going back over all of what you've spent, You mean I don't have a budget? This is what I do. This is where all my money goes, which is my car behavior. This is my behavior. This is not John MacDonald.
00:31:17:06 - 00:31:41:14
This must go wrong. Whatever you do. Don't know. Yeah, and it is sticky how the people because they can't. It could be two things it's dramatic to do that actually is three things. One is yes, it's a it takes energy and it's it's not a quick, you know, task. And but the third thing is people don't see why what the value is in doing it.
00:31:41:16 - 00:32:03:18
The value in doing happily is going to move forwards. Well, I don't even bother looking backwards. Right. But the value is understanding your behavior. I when you see you spending ten days, you'll be at Kmart and Bunnings, right? But I might not be able to put any more extra into my superannuation. Yeah. Right. It helps you actually work out your priorities.
00:32:03:21 - 00:32:27:08
It works out with the you know, you might see you, you spending it like it or not, but it'll help you decide on your priorities, where the options are for change and what you are willing to change and what is realistic. You know, if you think you're going to spend $50 a week on groceries and you're currently spending 350, is that realistic?
00:32:27:10 - 00:32:44:15
That's not what we're going to get. The savings, everything. So I mean, you could also honestly think they go, I spend so much on food at the supermarket because that's where you can see it's obviously a big one that repeats over and over every single week. You like spending hundreds of dollars at the supermarket. So we think it's the problem.
00:32:44:15 - 00:33:04:19
But then when we add it up, it's like, actually, no, we need to spend 15 grand a year on those things. We can't. It's actually a cost of living that can't really effectively be substantially changed in size. And unless you're going to complete, we change your lifestyle and start growing your own vegetables. And I don't know what milk your cow.
00:33:04:19 - 00:33:26:06
I think people think also a spending review is going to limit my spending. And I've got to find those one and they progress on the one percentage. Yeah. Rather than zooming out and looking at the picture and my behaviors and then change, what behavior do I want to change? Yeah, because I would prefer to hit these other goals.
00:33:26:08 - 00:33:46:11
The other thing this is the thing that I forgot before that second thing is that people, when they set up a budget, they just go as far as working out their bills. Oh, that's common. Yeah. Yeah, that is fixed. Feel. See, I go in and go. These are all of my bills. It's my light bill and my phone bill, my rent and my.
00:33:46:12 - 00:34:06:01
We've got to make sure we can pay our bills right? Well, that makes sense. We need to be able to do that. But the main problem or the main area is like the tap, tap, tap, tap, tap, tap, tap that we're doing every single day. That's where the money's actually going. If we do too much of that, then obviously we can't pay our bills.
00:34:06:07 - 00:34:27:03
But we need to have oversight on both because you can say to yourself, Right, I'm going to set up an account for my bills and yet have them all covered. Your stress list. You are happy as she goes, but then all the rest of the money, whatever's left in your account is still going to spend. You're not saving for anything.
00:34:27:05 - 00:34:50:09
You've solved one problem. You've solved the bills problem that you haven't solved the goals. Problem? What? Because that's exactly right. They go hand in hand. Because what you can also say when you do a spending review and it's all there in front of you on a page and all the line items, you might see the opportunities coming that you couldn't actually see before.
00:34:50:11 - 00:35:11:00
So you know how you know how much is being spent on the credit card. You know what behavior that is causing you to behave like. What if I didn't do that? What if I focus and I paid off that credit card and I've freed all that money and then I and then actually what I could do with that money and that that helps with that goal setting.
00:35:11:00 - 00:35:35:04
Yeah, as well. If I can see where my opportunities are, where I can free money up to make change. Yeah, it's not necessarily from the groceries now and I don't, I haven't come across it yet with groceries yet. Not because groceries are groceries and we, you know. Yeah. Eating is a requirement of human being. Yeah. And look what is a budget.
00:35:35:04 - 00:35:57:18
I would say a budget is a system for your money. Usually we would write a budget down. So it's a plan for our money. So a budget would typically be done in a spreadsheet and oh, you might even write it down on a piece of paper, which as simple as this is, how much money is coming in, this is the expenses going out and trying to stick to that.
00:35:57:22 - 00:36:27:22
Right. But the idea of the budget is to have money left over and stick somewhere else into something else or that you want a goal. That's right. And so then we have to go and create systems around that. And then there's also questions around what are we including in this budget? Is it just your income? Or if you go to partner in the is there two incomes in the household because all of those different things can will play a factor into whether this is successful or not.
00:36:27:22 - 00:36:45:14
Well I think the the you know off the back of that the other reason the budget budget sale is because we don't set up a good enough system to help them succeed. That's right. You can hide it down, but it doesn't mean that's going to happen if you you know, I see it. We see people all the time.
00:36:45:14 - 00:37:06:07
They might have me as an example. So you've got your salary goes into one account and then you've got, you know, maybe bills account and you've got savings and you've got this extra one that the next one never gets used. You know, there's never enough to go into the extra one like it's a savings account and we will save whatever's left over.
00:37:06:09 - 00:37:37:02
But then there's no left over and we might that might be your travel account. And then we've got this general savings account, which might be emergency money or something like that. But what happens is we, you know, we might even be we had some on and I went over Right. So we might have some, some automations where on none or you manually transferring money that that is why budgets might fail or you might actually even have some direct debits going into the savings account upfront.
00:37:37:04 - 00:38:01:08
But then when things get short or tight, you're taking the money out of there manually. Yeah. All the other thing we don't plan for is chunky bills. So how the frequency comes and we think, Oh my God, this guy is going to have all this money go to that. But what we set up systems saying is you are setting up a system without doing the budget first, basically.
00:38:01:10 - 00:38:23:00
Right. So this is three stages really. So you need to first of all, reflect on your current spending, where the money's going, create a new budget based on what behavior change you would like, which frees up a certain amount of money. Then you need to create the system that supports achieving that budget and you need to automate it.
00:38:23:00 - 00:39:04:16
Yes, right. You can't do the system without the budget and you can't do the budget and expect it to work without looking retrospectively on your behaviors. Yes, right. It's a three step process, Three step process, not just writing in a budget and hoping for the best, but it's also the other thing that can create it or make it all on stock is if you're in a relationship, you're going to do all of this work, but then you're not on the same page or you haven't explained what we're doing, why we're doing it any and or you not agreed on the end outcomes right?
00:39:04:18 - 00:39:26:14
All the money hasn't been included in this business and you're trying to do this chunk, all the heavy lifting and then the other person isn't. And then it becomes resent. Man, I don't know. It's a whole thing, this ability and if things are good, doing it jointly is very, very helpful and disbelieve all the money making, you know, very deliberate decisions of where it all goes.
00:39:26:15 - 00:39:49:10
Oh, this is the other thing. You cannot do those three steps, right? Set up your system and then think it's done more. My gosh, it's not perfect. And if it's it's not right, it's not broken. That's right. Okay. Like I teach you that, it's like trial and error. You've got it set up. You've done the best job you possibly can.
00:39:49:10 - 00:40:07:18
You're totally informed. You've got your goals, you've looked at your behaviors, you looked at your all your past spending you set up. You teach them it's not broken when it's not working, it just means it needs tweaking. All right. And something's always going to change in this system. Your income's going to change. Your goals are going to change, your expenses are going to change.
00:40:07:22 - 00:40:32:00
We need to tweak that system. Right? It's a living beast. And it's not that your systems that are added to all this effort and I should a budget didn't do what you just want to get it right. It is transparent. Everything's trial and error. Like what money is. And then we keep monitoring. It takes too much time. Well, that's a belief, but it does take time.
00:40:32:01 - 00:41:00:08
You need to actually put time aside to do some of this stuff. Once you've done the legwork, it's just a little bit of How's it going, checking in. What have you changed your belief? I mean, people think budgets, you know, you chained to limiting yourself on spending. It's actually the opposite. It will be liberating and you feel like you are working towards choice and you're spending some you know, the money's going where you want that makes you feel good about yourself.
00:41:00:09 - 00:41:23:07
It might be his financial wellbeing. This is like I go and put my hand on the pure, but not in a go. I did the best I could. That's literally I did. Actually, I could. Right. And I just want to say one last thing. My budget sale is emergency fund. I How often do I hear an idea last year.
00:41:23:07 - 00:41:45:01
You want such a bad you. I had this happen I had that happen and this happened. I had to pay my insurance. What a surprise. Emergency fund is a really good the insurance she had emergency, by the way. No, no. But emergency fund is a really good thing to have. When you set up in you budget to those things you might have missed.
00:41:45:03 - 00:42:10:20
But if you've done a really detailed spending review, you will have. LOYOLA Your money went last year and you can actually see where money went in emergency category and how much you need and how much you need to allocate into that every single year. Right? What a good idea. Right. And it's not this is not about percentages. People say how much percentage I save my emergency fund, what percentage should I have for my home loan?
00:42:10:22 - 00:42:43:20
It's not real. They're not numbers. You just need to know your numbers. Exactly. I know anyway, and change your mindset about what budgeting actually means. Budgeting is linked to freedom. Yeah, it is. All right. Well, thanks for joining us again. You go get those budgets, ladies and gentlemen, and best of luck. And if you you know, you don't have a really good, you know, budgeting, spending review well down on my list.
00:42:43:22 - 00:43:14:19
It's all on that. That's got that three step arrangement that we talked about. So there. All right. Catch you later, guys. Yeah, but 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. If you'd like to find out more, head to the Money collective scheme that I use or our socials to take action and engage our services in our Facebook group, join the conversation and help us break down the taboo around money.
00:43:14:21 - 00:43:23:17
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