Welcome to Finance and Fury, The Say What Wednesday Edition
special series – running through the catalogue of questions and concerns
The series is broken down into three stages – 50 years or so timeline – last week was basics and the first stage
https://financeandfury.com.au/how-do-i-start-my-journey-to-financial-independence/
Teenage to young adults (16-25): 10y - The focus of these years is to learn the basics of money finish schooling/education - next step is setting up the basics in last weeks ep Family and home (25-45): 20y - Whether your goals are to buy a house, start a family, education costs or anything else - the biggest part of this stage is preparing for the financial responsibility that comes along with each goal – this week Accumulating to Retire (45-65): 20y – Normally have larger disposable incomes – set sights on accumulating more to fund rest of life – next weekWhat is life normally like before the 20s? Up until this point – have been a consumer – younger people are naturally socialist Rely on family – living at home, parents provide for you, go through school – have been told what to do mostly up until early adulthood After this – time to take charge – Finish school and likely have first income – going forward in life Ages differ – but principles stay the same The last ep – went through some of the basics – principles of solving the economic problem Prioritise around the economic problem – Finite resources (money) – so where is it best put? Setting out your own goals/needs – building a plan based around where to put each dollar to meet goals Make your own target ratio – budgeting to pay yourself first – why prioritising helps – sets clear goals Invest in yourself – continue to gain experience and knowledge – this doesn’t change What are the economic problems at this stage? – Today – Start looking at events that tend to occur over time - First home, mortgage, starting a family – all about balancing finite resources to maximise your gains (utility) This stage is mostly defined by debt or expenses – can mean limited room for wealth accumulation which is why these first stages are important – covered in the last episode –
Firstly - Likely in debt or about to get into debt
– personal, mortgage or education debt – there are also two stages of either preparing for upcoming events (family, home, etc.) or already gone through them
Defining stages – Preparation – Preparation for buying a home, getting a mortgage, starting a family Considerations that need to be accounted for Debt and expenses normally take charge over wealth accumulation Wealth protection strategies – insurances to cover debts and family Or – you are currently in that position of having a mortgage and having a young family
For each one of these things – we have done plenty of eps on each individual thing – so we put links to each in the show notes
Everything here is about asking yourself the important questions – you are your own boss in personal finances – look to your own situation to answer these
Preparation for events – does require sacrifice First home, mortgage Deposits and getting financing – tools to use to solve the economic problems How much will you need? Look at the type of property you want to buy? Can you afford it? Wants v needs Tools to use FHSSS - personal savings – aim these to be enough of hitting your targets for deposits Hint - Avoiding LMI if you can – over leverage can be a killer of personal finances Kids Education costs – probably not a while off if you haven’t had your first kid – cover in a second More important – Budgetary issues - Single income/maternity leave This is why the basics of having your budget in place is important What will your finances look like on a single income or mat leave income? Starting a family - Protection – Getting into debts – make sure protected and have adequate covers to make sure if something happens to income-producing ability – Different levels of lump sums – the level of debts, or sole income provider leaving leftover life covers Ongoing income replacement – is it needed? In most cases it is likely - All about having your goals written down – working out how to solve the economic problem – no single correct way – Figures, strategies, timelines – all depends on your personal situationNow – if you have already bought a home, had kids, etc. – not preparing for these events but in the middle of it First home and got a mortgage – do you know what your rate it? Know how long until paid off? Know how much interest over life of loan? Deposits and getting financing – aren’t the issue here The repayments of debt have to be balanced with lifestyle costs – Economic problem – Cost benefit analysis Where compounding comes into it again – compounding of interest on your mortgage debt versus investing into growth investment for long term or education costsThe low interest rate environment make it easier to answer that question – but the size of mortgages is forgotten about - $680k today vs $70k 20ish years ago – low rates on massive mortgage still means lots of interest paid – just slowly over time Have a young family – few kids - Education costs – either from savings/cashflow Private schooling – might need to get up education funds – previous episode links Cashflow and another lifestyle expense Might be on part time income – lower budgets can be accounted for – might have to sacrifice Getting kids involved in finances – school won't educate them on this – how value of money works to them This is all about looking at your cashflow – sorting out where funds should go – solving the economic problem Look at $1 into debt versus $1 into super or an investment – what is interest saved over 20 years v value gained? Later often doesn’t get looked at – the long term isn’t as pressing – but remember the rule of 72 and compounding – little bits now can help a lot in the long term – Again – the first stage of goal planning is important – all workbooks available through members at FF Create priorities and allows you to have certainty – less stress
Thanks for listening, if you want to get in contact you can do so here.
Previous episode links -
Deposits
https://financeandfury.com.au/say-what-wednesday-first-home-super-saver-scheme/
https://financeandfury.com.au/what-is-the-first-home-loan-deposit-scheme-and-how-to-use-it/
Obtaining Loans
https://financeandfury.com.au/9-reasons-your-loan-may-have-been-rejected/
Education
Insurance
Stress
https://financeandfury.com.au/financial-stress-a-major-issue-for-many-australians/
