What I should or shouldn’t do with my money – 5 key tips to avoid.
Peak Wealth Management headquarters in Sydney, Andrew Debono sharing this video with some insight into a few key themes that we have come across repeatedly over the years.
Some of these ‘tips’ or ‘here’s what you should do with your money’ really aren’t right.
Here’s what the key themes are:
- Dodgy investment advice – hype things / stock tips / crypto tips / mining town property
- Lifestyle Choices – “give up your small pleasures or you will be broke”
- Hurry up and pay off your HECS/HELP student debt
- Rent is dead money – Australian fascination with property / do you consider interest paid to a bank as dead money too?
- “Just borrow it” – Even if you can’t afford something, debt is cheap so why not just borrow it and pay it off at a later date?
Before you read on, if you want to learn a lot more about setting up your financial foundations in a long term successful way … download our latest ebook (click the button and it will take you to the form below)
Dodgy investment advice – hype things / stock tips / crypto tips / small mining town property
Things listed above are just a few things that have popped up recently that we “have to buy or will miss out”
We have also heard time and time again “the ASX casino” “the sharemarket is just a pure gamble” … asking more questions. What we find is that a lot of this comes back to buying into hype and selling as it comes crashing down. Very quick way to permanently lose money.
More education is needed in this space when dealing with any growth style assets – check out our latest ebook in the “Superannuation” section we go through investing for the long term.
I’ve used this image below with emoji’s to explain it very quickly.
Once ‘everyone’ is talking about it and the asset has been going up and up and up it’s more than likely somewhere around the EUPHORIA phase … this is where we see a lot of people BUY. One or two bad news articles or declining price days and it can quickly turn to FEAR, PANIC and ANGER which is when it’s common for people to sell.
Lifestyle Choices – “give up your small pleasures or you will be broke”
A good budget will be structured to meet your goals from the high level. Regular savings is what you can plan with.
It’s so common that we see people dwell on “a cup of coffee a day” but fail to review their big ticket expenses like their home loans or renting way above their needs.
It’s all about getting a healthy relationship with money, not taking away everything you love and expecting to be able to do that for 20 years to get ahead. From my view, only focusing on taking away the small enjoyable things and discounting the big picture… will be unlikely to succeed like that.
Hurry up and pay off your HECS/HELP student debt
This one is pretty straight forward, it comes down to opportunity cost.
Student debt in Australia doesn’t have any interest associated with it … yes it does have ‘indexation’ which reflects the increases in the cost of living in 2020 it was 1.8%
Property and Shares both have a long term average above 5% per annum … so doesn’t it make sense to invest your money instead?
A key reason you would pay it off sooner is if it is required to help your borrowing capacity.
Rent is dead money – Australian fascination with property / do you consider interest paid to a bank as dead money too?
We’ve all heard this time and time again.
“Rent money is dead money” “Why are you paying off someone else’s loan when you can pay your own off”
We’d all love to own our own home … but there’s a lot of ways to get to that point.
The reality is… if you overpay for your own home (which is very likely living in Sydney) you will be paying a higher amount of interest to the bank than you would be paying to someone else as rent.
If you could have a higher regular savings amount for the longer term … it’s very likely that you would be ahead by investing than just having your own home. Tax can make big differences here also.
We have found people won’t overcommit to a property beyond their means if it is a rental where if it is an own home purchase it seems to be very different.
- Rent where you live, buy a property and have someone else rent it out.
- Rent where you live, buy shares regularly etc etc.
“Just borrow it” – Even if you can’t afford something, debt is cheap so why not just borrow it and pay it off at a later date?
This is so easy to do.
Money is cheap at the moment. It really is setting us all up for some horrible habits.
Borrowing does make sense in a variety of situations … the best one is borrowing money to invest because that has tax advantages.
Stretching your budgets with repayments like afterpay, declining assets and having no space for long term goals can really negatively impact your lifestyle later down the track.
It is also difficult to break the habit of buying something the moment you want it without having to feel any level of sacrifice for.
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