0:00

Hello and welcome to It All Adds up the podcast.

0:02

So we chat about money, how to get it, how to

0:04

spend it and how to invest it. I'm money

0:06

and a dumb pal. And you're listening to our summer

0:08

series as well, where we're playing some of our hottest hits

0:11

to help you get in shipshape financial

0:13

form for 2023. It all

0:15

adds up will resume normal programming in February

0:17

with a brand new season full of money saving tips

0:19

and insights. So until then, sit

0:21

back, relax and enjoy. Hello

0:31

and welcome to It All Adds Up the podcast

0:34

where we chat about money, how to get it, how

0:36

to spend it and how to invest it. I'm money

0:38

editor Don Powell.

0:39

And I'm senior economics writer Jess Irvine.

0:41

And today we're going to talk about money

0:44

goals.

0:44

Is that like where they get the people at the footy

0:46

and they line him up and they give him 100

0:49

bucks if they can kick a goal from 50

0:51

metres out?

0:53

No, I actually did know a guy who did

0:55

that and managed to kick the

0:57

the goal. I'm not a sports person

0:59

so I don't know the technical terms anyway. But he

1:01

won $100,000, so that's not

1:04

actually bad money.

1:04

Go 100,000. I

1:06

mean, I knew I should have been a footy player, but now

1:08

I definitely should have been a 40 player.

1:10

That's it. Maybe that's a money tip. Just everyone

1:12

go be a money footy player.

1:15

I think actually the footy players themselves at a lot

1:17

more than $100,000 today.

1:18

Yeah.

1:19

So not quite. But identifying your

1:21

money goals is really important and

1:23

knowing how to achieve them of course is important too.

1:26

We're going to get to that.

1:27

Yeah, and do stick around to the end of the episode because

1:29

we'll be answering another listener question

1:31

about paying off the mortgage versus putting money

1:33

into your super. And of course, Jess's

1:36

budget tip of the week.

1:37

Yeah, that's a really common question about the mortgage

1:39

versus super. So I'm looking forward to that.

1:42

So first off, what is a money goal? I mean,

1:44

it's I'm sure they're different for everyone, but

1:46

just fill me in. What when you're talking about a money

1:48

goal, it's not at the footy. What is it?

1:51

Have you ever been to see a financial advisor?

1:53

I have not. Not.

1:54

Hey, all I have. I think this is an

1:56

age related thing. I turned 40.

1:59

41. When you turn 40,

2:02

you'll become absolutely obsessed with retirement

2:04

too, whether you've got enough money, Right.

2:06

It's an age related thing. So I did

2:08

actually go to see a financial advisor, and

2:10

one of the first things they will always ask

2:13

you is great. Hello. Welcome.

2:15

Sit down. What are your money goals?

2:17

And if you're anything like me, you'll probably sit there and go, I

2:20

don't know. To have some money.

2:22

Yeah. I mean, that's what I would have said. Just like a

2:24

little bit of cash in a bag. Like, that's it.

2:27

To have more money. So, you

2:29

know, if you haven't seen a financial advisor

2:31

and lots of people can't afford to at the moment just

2:33

to know that this is part of the process of

2:36

of starting to think big picture

2:38

about your finances. What are you even

2:40

trying to do? Getting off the rat race of just

2:42

I just got to earn more money. Well, how much

2:44

money? What are your goals? What are you trying to

2:46

achieve? So what we know is that the money

2:49

goals that you have should and will

2:51

change through the life cycle. So no

2:53

person's money goals will be the same at

2:55

any one point in time. So, for

2:57

example, if you're younger,

3:00

money goals that you might consider

3:02

setting for yourself are things like buying a

3:04

first home travel, paying

3:06

off your hex and whether that's a good idea.

3:09

You know, then there's weddings and babies

3:11

starting a business, all the good stuff.

3:14

They could be considered money goals

3:16

that you have. And then as you sort of progress

3:18

into middle age, you're talking

3:20

about investing, you're topping up your

3:22

super. Maybe there's some home renovations.

3:25

You know, you always want to be looking at,

3:27

you know, retirement planning, as I say,

3:30

comes into play. Minimising tax.

3:32

Having proper insurances in place. So

3:34

maybe your goal is just to make sure that your financial

3:37

house is sorted. And then, of course, towards

3:39

the end of life, you know, you're protecting your assets.

3:42

You're thinking about whether you want to leave an inheritance

3:44

to any children. Bit more travel,

3:47

get a caravan, you know, live

3:49

that, live the dream life in retirement.

3:51

And then go to Broome.

3:53

HURST And then, you know, the

3:55

less fun stuff like maybe planning for aged care

3:57

facility funds and you know much

3:59

less estate room and wills yet this

4:01

is a lovely life arc there. So

4:05

money goals change, but it's important to have

4:07

some idea at any

4:09

one point in time of sort of what you're trying to

4:11

achieve. And then I

4:13

you know, when I think about it with my economist's

4:16

hat on, if you don't have a money

4:18

goal and if you want a money goal, I've

4:20

got one money goal that will just suit

4:22

everybody alive today, which

4:24

is the whole point, you know, of your personal

4:26

finances and looking after what's the problem

4:29

you're trying to solve. You're trying to have enough

4:31

money to buy all the stuff you

4:33

need, not just today, but when

4:35

you're older. So economists talk about consumption,

4:38

smoothing, being that process of trying

4:40

to match at any one point in time having

4:42

some income coming in. You know, when you're

4:44

a child, you don't earn much of an

4:46

income. And then when you're retired, you

4:48

don't earn much of an income. So your overall

4:51

goal is to try and sort of smooth that

4:53

over your your life cycle and

4:55

have enough money.

4:56

Yeah, I think I was when I was a kid, I had about five

4:59

bucks a week and I thought that was a load of money, but.

5:01

That's pretty good. Did you have to do anything for that?

5:03

Yeah, I did some like chores and stuff, like putting the washing

5:05

out the lawn. But yeah, I mean,

5:07

I think it's funny that you think it's a you mentioned some age

5:09

thing because I'm 26, and if you'd asked me what my money

5:11

goal was, I would have been like to

5:14

have some, you know, I just don't, you know, it's

5:16

just one of those things that I don't really think about

5:18

in depth. But I think you're right

5:21

when it when it comes to sort of younger people in my age

5:23

bracket, it's definitely more about like life events,

5:25

I guess. Like it's like having.

5:27

Going to going overseas, like a lot of people like

5:30

to go overseas and live overseas for a year. Like, that's something

5:32

that I wouldn't mind to do it and mind doing at some

5:34

point and having enough money to do that comfortably

5:36

is, you know, it would

5:38

be considered a money goal, right?

5:40

Yeah. I was going to ask you, do

5:42

you have money goals?

5:43

That would be possibly one of my money goals, you know,

5:46

And I said I'm sort of over services

5:49

living arrangement. I'm not really sure.

5:51

I haven't thought about it that much yet. But,

5:53

you know, like things like preparing to have

5:56

like kids and, you know,

5:58

probably going to start a business any time soon. It's not

6:00

really my thing, but, you know,

6:03

I mean, I already own my own home, but I know

6:05

a lot of my friends don't. So, like, that isn't

6:08

like a major thing for them. That's you know, that

6:10

would be sort of a short term money goal.

6:12

What about you? Just what's what's your sort of money goals?

6:15

Yeah, I'm very fixated on the consumption

6:17

smoothing and just waiting until the point

6:19

in my life where I can call it quits and just

6:21

go, I've got enough money, I've earned enough

6:23

income. So I'm quite attracted to

6:26

There's a movement called FI, which is financial

6:28

independence, retire early. And so

6:30

just finding what is that point in time

6:32

where I can throw in the hat and go, you

6:34

know what, I'm going to just go for a walk

6:36

or I'm going to sit on the couch. I don't have to earn

6:38

any more money. So I'm very

6:40

fixated on planning for that,

6:42

you know, and figuring out what is

6:44

the age at which I can retire.

6:46

You know, you can get the age pension at 67,

6:49

and I've figured out whether I can live on that. And I figured

6:52

out if I own my own, I probably can. You

6:54

can get your super if you retire and

6:56

stop working at age 60. So I'm going

6:58

to use my super to bridge from age 60

7:00

to 67. And then

7:02

whether I can just bring forward the day earlier

7:05

than 60 that I can retire if I've saved

7:07

enough in assets outside of super. So

7:09

I, you know, do a bit of investing or whatever

7:11

that is to sort of figure out how many years

7:13

of annual living expenses I can save and

7:16

then figure out the day when I'll say

7:18

goodbye them, I'll hang up the podcasting.

7:21

The Mike I've got podcast.

7:23

Is going to run for 20 years.

7:25

She's at the beach. As

7:28

much as I am loving doing.

7:30

It in 20 years time, I'm sure we'll talk about every

7:32

aspect of money you possibly, possibly could. So

7:34

how do you set

7:36

a money goal, right? Like, I know

7:38

it seems like a sort of a silly question,

7:41

but for someone who's actually it seems like they thought about it a lot

7:43

more than I have, you know, Is it where

7:46

do you start? Is it just about picking an objective?

7:49

It is. I mean, it is. And I think most people

7:51

sort of have a suspicion of what it is they want to

7:53

do. You know, a big one is, you know, I would

7:55

like to save for a home or, you

7:57

know, I would like to start taking

8:00

advantage of super tax breaks. I've heard

8:02

that sort of thing just sort of coming

8:04

up, even with a small list of, you

8:06

know, what what things would I like to

8:08

achieve for myself, You know, even

8:10

if it is as audacious as I would like to retire

8:13

early or, you know, just doing some

8:15

sort of big, big picture thinking. And

8:17

that's what the financial planners want you

8:19

to be able to do is sort of, you know, given who you are,

8:21

what you like to do, you know, what is

8:23

the life that you have yourself. And we have an extraordinary

8:26

difficulty as human beings trying to

8:29

get across the idea that we will get old and

8:31

we will eventually die. And, you know,

8:33

we love to just live in the moment.

8:35

That's not going to happen to me.

8:36

I'm falling apart from Dom. We're

8:38

all going to die. That's good news for you. Yes.

8:41

So just confronting the future

8:44

is can be scary. But, you know, it

8:47

is scary if you get down the track and you haven't

8:49

actually asked these questions, you know, and you

8:51

are approaching retirement. So just

8:53

starting to list down, you know, what are some of the

8:55

things I'd like to to achieve

8:57

and and I say, you know, start small.

8:59

It can be as small as saying I want to have enough money,

9:02

you know, to take a trip over the summer

9:04

holidays, figure out how much

9:06

that's going to cost. You write it down,

9:09

then, you know, figure out how much time

9:11

you have to for that savings

9:14

goal and start setting aside some money

9:16

so it can be as small as that. And I do

9:18

say start small, don't suddenly just go,

9:21

Oh yeah, I want to retire. Yeah.

9:24

Especially if I'm quite young as it's a long

9:26

life.

9:27

Yeah, you will become very obsessed with

9:29

it at one point.

9:29

Oh, I'm looking for actually now I'm looking forward to

9:31

that sounds whole idea

9:33

of retirement. Not nothing's. Does

9:36

it help to put a like

9:38

a figure on it like you say, be thinking about

9:40

your money goal. Do you want do you want to be like,

9:43

you know, this is the amount that I need

9:45

and you're working towards that amount or should it be a bit more sort

9:47

of abstract than that?

9:49

So a lot of people will tell you, don't get

9:51

too hung up on the figures, just, you know, get

9:53

the feelings right. And I'm like, no, no,

9:55

your figures. You should

9:57

know what things cost for

10:00

you. So if you're thinking about retirement, you need to

10:02

know how much you're going to need in retirement.

10:04

And how would you figure that out? You could probably figure

10:06

out how much you're spending today. So I

10:09

am a really big advocate

10:11

of people just spending more time looking

10:13

at their finances, getting to grips

10:16

with where their money is going,

10:18

and then you sort of know how much you're spending on holidays,

10:21

you know, And then so is it achievable that you

10:23

would go to Europe? Well, oh, well, I did spend

10:25

that much, you know, last year. Maybe

10:27

that is achievable and

10:29

sort of knowing, you know, I love tracking my spending

10:31

and knowing what my monthly budget surplus

10:33

is and, you know, how much how many months is it

10:35

going to take me to save for anything in

10:37

particular so that you cannot

10:39

set goals which are completely unrealistic?

10:42

You know, like I want to save a hundred grand by next

10:44

year.

10:45

Yeah. And I think being realistic is a

10:47

big part of this as well. Like, you know, either over your timeframes

10:50

or your goals. And

10:52

this goes back to what you said earlier about sort of starting

10:55

small, keeping it achievable, especially

10:57

I think, for people on the younger end of the spectrum where it's

10:59

like you might not be earning a great deal of money. So

11:02

therefore thinking about, you know, really

11:04

long term goals where you want to retire at

11:06

50 or something like that, that might be a little bit sort

11:09

of difficult or unrealistic. So those

11:11

sort of shorter term things and also keep

11:13

in mind what your expenses are at the

11:15

at the current point. Like, you know, if you have any major

11:17

debts, so you're paying off a car, a

11:20

lot of young people paying off their checks like these

11:22

are things that all need to come into consideration when

11:24

you are sort of assessing your

11:26

your financial future and setting some setting

11:28

some goals.

11:29

Yeah, because the the first thing financial

11:32

advisors ask you is money, goals and objectives.

11:34

And then they all start to grill you on your cash

11:36

flow. So it's as simple as knowing money

11:39

and money and don't you? Do you keep

11:41

a budget or do you have any sort of system

11:43

for tracking your spending?

11:45

I'm very I'm pretty loose about it, to be

11:47

honest, especially compared to you,

11:49

though I'm not sure if if anyone really compares

11:52

to the sort of meticulous nature of your budgets.

11:54

I think most people are pretty loose. If I said.

11:57

I have a sort of a general budgeting system where I have

12:00

like a like a series of different

12:02

sort of saving accounts, which money gets put into

12:04

each week. And I use the money from those accounts to

12:06

pay for different parts of my life, which

12:09

helps me sort of track how much I spend

12:11

every fortnight on different parts

12:13

of my life. But that's not particularly regimented

12:15

because I've got like a slush fund which can just be used

12:18

for anything. So therefore it does get just use

12:20

for anything. So I'm really I'm all over the shop.

12:22

It sounds like you get money in a paper bag or something

12:24

from me.

12:25

No, I don't. I don't. It's just sort of like

12:27

a generic savings account. Yeah,

12:29

that doesn't have a purpose. Therefore, it doesn't. It

12:32

just gets used for stuff that it shouldn't be used for.

12:34

So when people are thinking about

12:36

their personal finances and that people

12:38

always want to get into like, should

12:41

I? Well, and we are going to get into it. Should I invest

12:43

in shares or property and you know, what's

12:45

the optimal this and that and, you know,

12:48

sort of highly theoretical things of like which

12:50

asset classes will go higher

12:52

or lower in the future. And, and

12:54

it's always brought back and when you

12:56

see an advisor and you know, the sort of things

12:58

I write about knowing your income,

13:01

knowing your spending, knowing your surplus

13:03

cash flow, that's like that, that is

13:05

the foundation of knowing what you

13:07

can do with your money and knowing what

13:09

goals are achievable. So it's going to sound boring,

13:12

but tracking your spending, knowing

13:15

exactly what your income is,

13:17

is is really the foundation. And you

13:19

know, it doesn't need to get much more fancy than that.

13:21

And then once you know that, know what

13:23

do I want to do with my life? How much is that going

13:26

to cost? Yeah, and just breaking it down

13:28

and having some sort of vision for

13:30

yourself in the future I think is

13:32

really important.

13:33

And I suppose once you've got all this in mind,

13:36

you need to then think about what you might need to do

13:38

to achieve that goal. Obviously setting

13:41

a goal is great, but then actually doing it is the hard

13:43

work. So I mean, if you do, if you do all

13:45

the sums and you realize you're already on track to retire

13:47

at 60 or whatever, right. Good

13:49

job, happy for you sort of thing. But

13:51

that's probably going to be the case for a lot of people because it's

13:54

it's you know, usually these things are quite long

13:56

term. So that's when you need to start

13:58

thinking about what you can do

14:00

to change your life or change

14:03

aspects of your life to to sort of get

14:05

to that goal.

14:06

Yeah, because here's here's a spoiler alert.

14:08

Achieving any money related goal is probably

14:10

going to involve spending less than you earn and

14:12

saving some money.

14:14

Then that sucks.

14:16

We change that.

14:17

So I do like free

14:19

money for everyone. Yeah.

14:22

So getting back to basics, you know, And

14:24

then. And then it's a good thing, you know, If you do

14:26

know that you're living within your means, you

14:29

do get to spend some of your money and you can take the

14:31

holiday and you can, you know, you can do nice

14:33

things now and in the future and look after

14:35

future. You as.

14:36

Well. Yeah. And I think like even the

14:38

things that you do don't have to be massive lifestyle

14:40

changes or anything like that. Like if

14:42

your goal is retirement focused and

14:44

you're looking at how much money you'll have at the, you know,

14:46

towards the end of your life then. Look, it's your

14:48

super fund. Is your super fund giving you decent returns?

14:51

That's where you're going to have the majority of your money at the

14:53

end of your life. So think about putting your money into

14:56

a different or better performing fund. There's

14:58

all these sort of things you can do to to sort

15:00

of help the process

15:02

without having to do sort of a major

15:05

sort of life changing sort of event.

15:07

Yeah, I've been meaning to look into my super

15:09

account and use that new government website comparison

15:12

tool to that is a huge issue as to whether

15:14

your super is performing well

15:16

for you. Let's do it. Let's do another podcast on that.

15:19

Yeah, please do that. We can manage that.

15:21

Okay, good. If anyone does come up with some

15:23

audacious money goals, we'd love to hear

15:25

what they are. You can email us at it all. Adds up

15:27

at nine.com.au dot EU.

15:29

Now we have lots of listener questions

15:31

coming in which I love. This

15:34

week's question comes from Shaun and

15:36

he's asking if he's better off.

15:39

I'm going to paraphrase If it's better to

15:41

pay more off his mortgage or

15:43

put more money into his super via

15:45

salary sacrifice. And he's

15:47

shared with us that he is currently doing

15:49

the latter and he's getting the nice

15:52

big tax breaks on super and

15:54

he thinks he would prefer to have that nice

15:56

super income when he's 60, even

15:59

if he does have a small mortgage left. But he

16:01

is worried about rising interest

16:03

rates. So Dom, what do you reckon?

16:05

Paying off the mortgage or super.

16:08

I think he's on the right track here. I think

16:11

if you've got a mortgage that's that's manageable

16:13

at the current point and you're in

16:15

a decent right, you may as well put more of

16:17

your savings into into super if you can

16:19

manage it. But I think it's obviously

16:22

this comes with the number of caveats. We don't know the

16:24

exact sort of scenario that Shaun's

16:26

in. But I think what's worth

16:29

mentioning is if you're going to be doing

16:31

this and you're going to be putting more money into your super, it

16:33

would be good to make sure that first you have a decent

16:35

pile of of savings set aside

16:37

to sort of for any sort of rainy days for

16:40

if interest rates start to get really

16:42

high and you have to start falling back on that to pay

16:44

off that mortgage, you know, it's it would be good to

16:46

just make sure you've got a nice stack of cash

16:48

as a bit of a back up. But by and large,

16:50

I think that's that's not a bad strategy. What's your what's

16:53

your take, Jess?

16:54

Yeah. Look, there are benefits to owning your

16:56

home outright by retirement.

16:58

But I mean, it is possible when you get to the 60

17:00

to use some of the super to pay off the

17:03

mortgage, at least that is possible

17:05

today. You never know how things change in

17:07

super. And with super, there

17:09

are such incredible tax breaks,

17:11

you know, paying the low 15 cent rate

17:14

for money that you put in up to 27,500,

17:18

I think it is each year you can get that

17:20

low tax rate. I'm all about minimising

17:22

taxes, but though

17:24

if you do pay off the mortgage, you are also,

17:26

you know, increasing your ownership stake in, you

17:29

know, your principal place of residence,

17:31

which of course is totally capital gains tax free.

17:33

So, you know, I think they're both

17:35

very good options and people sometimes get

17:37

stuck in should I do this or that? And

17:39

I say, I'm with the Techo kid. Okay,

17:41

no, Los Dos.

17:43

That's impeccable. Okay.

17:45

I was so.

17:46

Personal, as does my not

17:48

both don't fit it both. And you

17:50

can you can shift and play with it. But I think if

17:52

he's in a position where you're doing either good

17:54

on you.

17:55

Or just and just take us home with your budget

17:57

tip of the week.

17:58

So this is going to all

18:01

my money nerd and book

18:03

loving friends out there. You can

18:05

read books for free. This is a big

18:07

part of my budget. I spend a lot of money on books,

18:10

but a new thing that has happened in recent years is

18:12

there are these new apps that connect

18:14

you to your local library. And the

18:16

two apps I want people to download and

18:18

to mention are Borrow Box and

18:21

Libby as in the female

18:24

name Libby And you download

18:26

them, they'll search. What is the local library

18:28

in your area? If you haven't got a membership

18:30

card with your local library, you do have to

18:33

go and set that up. But then once you do,

18:35

you get free access to the

18:37

library's entire online

18:39

archive of audiobooks and, you

18:41

know, e-reader books and

18:43

you can read stuff for free.

18:45

So if you're sitting there with your audible subscription,

18:48

you know, question whether you need that you

18:51

can you can now read online for free.

18:53

Hmm. What a concept. I mean, I'm an A-rated guy, so

18:56

it might be a little bit more difficult, but, you know.

18:58

You can still download the app.

19:00

You can still download them.

19:00

All right. Let me know. Let me know what you think.

19:03

I'll read ten books by the next podcast.

19:05

Excellent. You'll be very. You are already

19:07

very knowledgeable. You'll be even more knowledgeable.

19:10

Well, I think that's all we have time for this week.

19:12

And as always, keep those listener questions coming

19:14

in. The email address is it all adds up

19:17

at nine.com.au today. We'd love to hear

19:19

from you and we'll see you next week.

19:21

See you next week. This

19:27

episode of It All Adds Up was produced by

19:29

Chee Wong. The information discussed

19:31

is general in nature and does not take into

19:33

account your personal financial situation,

19:35

goals or objectives. You should always

19:37

do your own research or get professional advice

19:39

before making any major financial decisions.

19:42

If you like today's episode, follow in

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and recommend it to all your friends. You can

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submit your listener questions in text or

19:50

audio format too. It all adds

19:52

up at nine.com.au. Thanks

19:55

for listening.