Latest / The Money Puzzle / The common financial mistakes forcing people to work longer

Transcript

The common financial mistakes forcing people to work longer · The Money Puzzle

• 0:11
  Speaker 1: Welcome to the Money Puzzle. I'm your host Julianne Sprague,
• 0:15
  Speaker 1: wealth editor at The Australian, filling in for James Kirby.
• 0:19
  Speaker 1: He's on a well deserved break. He will return next week,
• 0:22
  Speaker 1: but for now I get to sit in the chair
• 0:25
  Speaker 1: and host this episode for you. Our guest today is
• 0:28
  Speaker 1: a Melbourne based financial advisor, James Wrigley. He's from First Financial.
• 0:32
  Speaker 1: You might know him more from social media. He has
• 0:35
  Speaker 1: won plenty of fans for his plane speaking financial advice.
• 0:40
  Speaker 1: He's got more than twenty years experience and he's seen
• 0:43
  Speaker 1: the good, the bad and the ugly. And for his sins,
• 0:47
  Speaker 1: he's decided to write down his top tips and his
• 0:49
  Speaker 1: pen a new book. It is called Retire Life Ready.
• 0:52
  Speaker 1: It will be available on October twenty nine. It's a
• 0:56
  Speaker 1: bit of a framework to help you make better money
• 0:58
  Speaker 1: decisions and map your job. I need to retire and
• 1:01
  Speaker 1: now the book isn't out until October twenty nine. But
• 1:03
  Speaker 1: we are very lucky here at the Money Puzzle. We've
• 1:05
  Speaker 1: been able to grab James and get a first peek.
• 1:08
  Speaker 1: I'll look inside the book and we're gonna have a
• 1:10
  Speaker 1: chat to James about some of his top tips, James, really,
• 1:14
  Speaker 1: thanks for joining us on the money puzzle.
• 1:16
  Speaker 2: Julyanne, thank you for having me here, pleasure.
• 1:18
  Speaker 1: Congratulations on the book. That's a bit of an epic
• 1:22
  Speaker 1: thing to do.
• 1:23
  Speaker 2: Yeah, it's like I think it was probably about a
• 1:27
  Speaker 2: year ago now, would about October last year that I
• 1:30
  Speaker 2: started having conversations with the publisher and I had never
• 1:33
  Speaker 2: even considered writing a book, never even crossed my mind.
• 1:36
  Speaker 2: And they reached out and said, hey, James, if you
• 1:38
  Speaker 2: thought of writing a book. I said, no, is that
• 1:40
  Speaker 2: we think you could write one? I said, all right,
• 1:42
  Speaker 2: let's give it a go. And anyway, yeah, a year later,
• 1:45
  Speaker 2: we're just about to be on shelves.
• 1:47
  Speaker 1: It will be on shelves now. I've been able to
• 1:49
  Speaker 1: have a little bit of a sneak peek inside this,
• 1:51
  Speaker 1: and it is typical the plane speaking will get you
• 1:54
  Speaker 1: on your way. But it's called retire life. Ready now, babe,
• 2:00
  Speaker 1: you could explain to us why you've called it that,
• 2:03
  Speaker 1: and perhaps maybe if you could. Obviously people could go
• 2:05
  Speaker 1: read the book. But there was this lovely anecdote in
• 2:07
  Speaker 1: there from your fortieth birthday were you told your family
• 2:11
  Speaker 1: you were going to write this book and your aunt
• 2:13
  Speaker 1: told you something I don't know if you can recall
• 2:15
  Speaker 1: what that story was.
• 2:16
  Speaker 2: Yeah, yeah, So I think it's like in the intro
• 2:19
  Speaker 2: part to the book, she said to me, She's like, James,
• 2:21
  Speaker 2: make sure you tell people that if they don't have
• 2:23
  Speaker 2: any money in retirement or something to that effect, that
• 2:25
  Speaker 2: retirement's really boring. Like if she was kind of trying
• 2:28
  Speaker 2: to emphasize this point of if you're just stuck at
• 2:30
  Speaker 2: home watching the clock tick down, it's not a terribly
• 2:33
  Speaker 2: great retirement. And I think she was kind of re
• 2:37
  Speaker 2: very to her own retirement. But she's been on plenty
• 2:39
  Speaker 2: of trips and she's done plenty of things. So from
• 2:41
  Speaker 2: an outsider looking in on her own retirement, I would
• 2:43
  Speaker 2: I wouldn't say it's anything likely like it's boring, but
• 2:47
  Speaker 2: that's kind of what she was trying to get at.
• 2:49
  Speaker 1: So with that in mind, then that idea of it
• 2:52
  Speaker 1: would be good to have money in retirement. And I
• 2:54
  Speaker 1: think also the retirement stage of life is lengthening. It's
• 2:58
  Speaker 1: great that we all live longer where working out how
• 3:00
  Speaker 1: to become healthier for longer, but that also extends retirement.
• 3:05
  Speaker 1: When do you reckon most people get around to actually
• 3:07
  Speaker 1: planning retirement to really sitting there and thinking about, Oh,
• 3:10
  Speaker 1: I've got this other stage to think about.
• 3:12
  Speaker 2: I think in the past it was probably fifty five plus,
• 3:16
  Speaker 2: late fifties, early sixties, possibly because of the social media
• 3:20
  Speaker 2: stuff that I do, and I interact with a lot
• 3:22
  Speaker 2: of people and there's a lot of questions and comments
• 3:24
  Speaker 2: and things. I tend to see that aging down. I know,
• 3:28
  Speaker 2: if it's just a general increase in education levels around
• 3:32
  Speaker 2: money and finances and retirement and super and so forth,
• 3:36
  Speaker 2: because it's so easy to get access to some of
• 3:38
  Speaker 2: these things now, like you can google things, you can
• 3:40
  Speaker 2: go on Instagram and YouTube and all the rest of it.
• 3:43
  Speaker 2: So if you have any interest in any of this stuff,
• 3:45
  Speaker 2: there's plenty of information out there, whereas maybe ten or
• 3:48
  Speaker 2: fifteen years ago it wasn't quite so readily available for you.
• 3:51
  Speaker 2: There was plenty of books and things that you could read,
• 3:54
  Speaker 2: but sitting down and committing to reading a finance book
• 3:56
  Speaker 2: is a bit more of a bigger undertaking than watching
• 3:58
  Speaker 2: a few videos on Instagram might be. So, look, we're
• 4:01
  Speaker 2: seeing a lot of people around the age of forty something,
• 4:06
  Speaker 2: probably mid forties, where they're starting to think about it
• 4:09
  Speaker 2: really seriously. Whereas I reckon if I go back to
• 4:11
  Speaker 2: my earlier.
• 4:12
  Speaker 1: Days, maybe it's a point in the career where they're
• 4:15
  Speaker 1: starting to think this working things have been getting a
• 4:17
  Speaker 1: bit old.
• 4:19
  Speaker 2: That's probably it, and they're likely to peak in their career,
• 4:22
  Speaker 2: you know, demanding work schedule and a demanding home life
• 4:25
  Speaker 2: is like how much longer does this go on for?
• 4:27
  Speaker 2: And what can I do to get out of here sooner?
• 4:29
  Speaker 2: Maybe that's what's driving it.
• 4:30
  Speaker 1: If the boss is listening, very happy love the Australian.
• 4:33
  Speaker 1: I love doing the money Puzzle podcast. Everything's great, but
• 4:35
  Speaker 1: also wouldn't it be nice to be able to choose
• 4:37
  Speaker 1: to do it rather than you have to do it
• 4:39
  Speaker 1: to pay the mortgage. So with that in mind, if
• 4:44
  Speaker 1: that age is coming down, starting to think about retirement,
• 4:47
  Speaker 1: where do people then need to start? So, say you
• 4:49
  Speaker 1: are in your forties, or perhaps people listening to this
• 4:52
  Speaker 1: might be in their fifties, or if they're in the sixties,
• 4:54
  Speaker 1: but at some point you're thinking to yourself, I want
• 4:57
  Speaker 1: to plan for my retirement. Where do you need to
• 4:59
  Speaker 1: sa start?
• 5:01
  Speaker 2: You reference the title of the book Retire Life Ready
• 5:03
  Speaker 2: and the reason why we've kind of called it that
• 5:05
  Speaker 2: and a lot of the financial advice that we do
• 5:07
  Speaker 2: is centered around this idea, at least in the very
• 5:10
  Speaker 2: beginning of the engagement that we might have with new clients.
• 5:13
  Speaker 2: Is because it's all about trying to design the lifestyle
• 5:15
  Speaker 2: that you're aspiring to in retirement. Let's park the numbers
• 5:18
  Speaker 2: for a moment that they're obviously completely relevant and will
• 5:22
  Speaker 2: be the ones that support that retirement. But what is
• 5:24
  Speaker 2: it that you want to do? Where do you want
• 5:25
  Speaker 2: to live, who do you want to surround yourself with?
• 5:27
  Speaker 2: What are you going to do with your time? And
• 5:29
  Speaker 2: I comment on in the book and it's an odd
• 5:32
  Speaker 2: colleague of minding financial advice, he used to talk about
• 5:34
  Speaker 2: this idea of what do you do with your time
• 5:38
  Speaker 2: in retirement when all of your time is leisure time?
• 5:40
  Speaker 2: Whereas at the moment, leisure time is a break from work,
• 5:44
  Speaker 2: a break from the routine. But what do you do
• 5:45
  Speaker 2: when all of your time is leisure time? What do
• 5:47
  Speaker 2: you do for a break from the leisure time? And
• 5:50
  Speaker 2: so trying to design this lifestyle that you want And
• 5:53
  Speaker 2: as I said, where do you want to live, who
• 5:54
  Speaker 2: do you want to surround yourself with? How are you
• 5:56
  Speaker 2: going to occupy your time? Do you want to work
• 5:58
  Speaker 2: part time? Do you want to work casually or do
• 5:59
  Speaker 2: you want to just stop completely and spend thirty years
• 6:02
  Speaker 2: sitting on a beach. That's up to you, and then
• 6:05
  Speaker 2: we can start to look at the numbers that you
• 6:07
  Speaker 2: need to support that life that you want.
• 6:09
  Speaker 1: So, if you're looking at a break in the leisure time,
• 6:11
  Speaker 1: is that indicating that you might want to do some
• 6:13
  Speaker 1: part time work or casual work or what are the
• 6:15
  Speaker 1: other strategy? What are the other strategies?
• 6:17
  Speaker 2: That's it? So it's part time work, it's casual work,
• 6:20
  Speaker 2: it's volunteering work. I had a conversation with a new
• 6:23
  Speaker 2: client just earlier this morning, and she'd had quite a
• 6:26
  Speaker 2: demanding career in the particular field that she's in. Fortunately
• 6:31
  Speaker 2: for her, that particular industry has quite a big casual workforce,
• 6:34
  Speaker 2: and so she's given up the big kind of corporate leading,
• 6:37
  Speaker 2: a big team type job that she had for a
• 6:39
  Speaker 2: large part of her working life. And she's in her
• 6:41
  Speaker 2: mid sixties now and she just picks up casual shifts
• 6:44
  Speaker 2: in the particular industry that she's in, and they'll plan
• 6:48
  Speaker 2: a holiday and they'll go away for three weeks or
• 6:50
  Speaker 2: four weeks or six weeks, and obviously doesn't work and
• 6:52
  Speaker 2: then she'll come back and she'll pick up a couple
• 6:54
  Speaker 2: of shifts here and there, And she says she really
• 6:56
  Speaker 2: loves kind of not having the responsibility of all of
• 6:59
  Speaker 2: the other stuff that with that big career, as she
• 7:02
  Speaker 2: can show up to the workplace, do her job, and
• 7:04
  Speaker 2: then go home and doesn't have to worry about it.
• 7:06
  Speaker 2: But that then keeps her mind occupied and keeps it stimulated.
• 7:10
  Speaker 2: You commented before about retirement lasting a very long time,
• 7:13
  Speaker 2: like a lot of people will live into their nineties
• 7:15
  Speaker 2: and beyond. Now, if you're retiring at sixty something, you
• 7:18
  Speaker 2: know that's thirty forty years of your life. That there's
• 7:21
  Speaker 2: a lot of books that you're going to read or
• 7:22
  Speaker 2: that other sitting on a beach, and so you need
• 7:24
  Speaker 2: something to keep your mind going. And so whether it's volunteering,
• 7:27
  Speaker 2: getting involved with the sporting club or the church, or
• 7:30
  Speaker 2: the kids' school or the grandkids school, or in the
• 7:33
  Speaker 2: case that I was talking about, and doing some actual
• 7:35
  Speaker 2: paid casual work. We see those people that involve themselves
• 7:40
  Speaker 2: in something more than just sitting at home that actually
• 7:44
  Speaker 2: have the most enjoyment through their retirement.
• 7:46
  Speaker 1: So how do I sit down and think from mapping
• 7:49
  Speaker 1: it out The difficulty is trying to work out how
• 7:53
  Speaker 1: much I might need to sustain that lifestyle. I could
• 7:57
  Speaker 1: write you a fantastic list. I want first class travel,
• 8:01
  Speaker 1: I want to go around Europe every year and do
• 8:03
  Speaker 1: all these sorts of things. Is it a matter of
• 8:04
  Speaker 1: having there's your ultimate goal, there's a mid rank of that,
• 8:07
  Speaker 1: and then there's the if you don't do something now,
• 8:09
  Speaker 1: this is how bleak it's just going to be you, yeah,
• 8:13
  Speaker 1: watching Free to Wear TV.
• 8:15
  Speaker 2: But look, there are different levels to it, absolutely, but
• 8:18
  Speaker 2: by and large, we see people generally wanting to continue
• 8:23
  Speaker 2: to live the current life that they're living now. So
• 8:26
  Speaker 2: people will be earning a certain amount of money, maybe
• 8:27
  Speaker 2: it's a lot of money, maybe it's not a lot
• 8:29
  Speaker 2: of money, or somewhere in between, and they're earning whatever
• 8:31
  Speaker 2: they're earning now, and they're living a particular life now.
• 8:35
  Speaker 2: Very rarely do we come across people that are really
• 8:38
  Speaker 2: unhappy with the life that they're leading now. Whatever they're doing,
• 8:42
  Speaker 2: wherever they're living, whatever they're doing with their time, they're
• 8:45
  Speaker 2: generally reasonably happy with that, and kind of the starting
• 8:47
  Speaker 2: point tends to be we'd really love to be able
• 8:50
  Speaker 2: to continue doing what we're doing today through our retirement.
• 8:53
  Speaker 2: So there's some exercises in the book where I talk
• 8:56
  Speaker 2: to and you can kind of get into the nitty
• 8:58
  Speaker 2: gritty of try and work get what you're spending today
• 9:01
  Speaker 2: on all of the things that your life costs. Your mortgage,
• 9:05
  Speaker 2: you know, school fees if you're having to deal with that, holidays,
• 9:08
  Speaker 2: grow throes, all of these kind of things, and then
• 9:11
  Speaker 2: you can cross off the bits and pieces that will
• 9:13
  Speaker 2: stop by the time you're retired. So hopefully you've paid
• 9:17
  Speaker 2: off your mortgage. For example, by the time you're retired.
• 9:19
  Speaker 1: Very much looking forward to putting a line through that line, and.
• 9:21
  Speaker 2: So you cross off. For a lot of people, there's
• 9:24
  Speaker 2: some work to do in getting the mortgage done, but
• 9:27
  Speaker 2: hopefully by the time you're retired, the mortgage is paid
• 9:29
  Speaker 2: off in some way, shape or formance. So you can
• 9:31
  Speaker 2: kind of cross a line through these different things and say, okay, well,
• 9:35
  Speaker 2: today I go to work and I earn a particular
• 9:37
  Speaker 2: amount it's being spent in these different areas, but by
• 9:39
  Speaker 2: the time I retire one, two, three, and four, I
• 9:41
  Speaker 2: won't need to pay for so I'm only left with
• 9:44
  Speaker 2: whatever's left over. And then you can work on how
• 9:46
  Speaker 2: much do you need to fund retirement.
• 9:48
  Speaker 1: But also if I think about it, that my health
• 9:50
  Speaker 1: costs I'm going to imagine will be higher. I'm doing
• 9:53
  Speaker 1: my level best, James, So I'm trying to do weight
• 9:56
  Speaker 1: training now three times a week. I don't care about
• 9:58
  Speaker 1: needing to be slim. I just want to be strong
• 10:00
  Speaker 1: so I can get up and downstairs and not need
• 10:01
  Speaker 1: to be assisted. All that sort of stuff is in
• 10:03
  Speaker 1: my mind now. But presumably my health costs are going
• 10:06
  Speaker 1: to go up, or my private health and premiums will rise.
• 10:08
  Speaker 1: Do you sort of is there sort of a way
• 10:09
  Speaker 1: where you just have to sort of factor that in
• 10:12
  Speaker 1: you just have a stab at it and say, okay,
• 10:13
  Speaker 1: well let's just put twenty or thirty percent on that,
• 10:15
  Speaker 1: Or how do you advise people to work out.
• 10:17
  Speaker 2: You're going to have some ups and downs through the
• 10:19
  Speaker 2: different elements that you're spending money on through retirement. So
• 10:24
  Speaker 2: the common way that people address this all bit as
• 10:27
  Speaker 2: changing as retirement lasts longer. You have an active period
• 10:30
  Speaker 2: of your retirement in the earlier years where you may
• 10:32
  Speaker 2: be traveling and you're getting out and about and you're
• 10:34
  Speaker 2: doing things and you're taking off those bucket list items.
• 10:37
  Speaker 2: Eventually you're going to get to a stage where you've
• 10:39
  Speaker 2: seen and done all of the big things that you
• 10:41
  Speaker 2: wanted to do, and that starts to slow down. Maybe
• 10:44
  Speaker 2: it's because you've seen all done all the things. Maybe
• 10:47
  Speaker 2: it's because your health starts to limit what you can do.
• 10:49
  Speaker 2: But at a point in time that starts to slow down,
• 10:52
  Speaker 2: and so you have this more active phase. You have
• 10:54
  Speaker 2: this period of time where you've done all the big
• 10:56
  Speaker 2: things that you want to do, you slow down a
• 10:58
  Speaker 2: little bit, and then we tend to see the period
• 11:00
  Speaker 2: where the health starts to rise. But you've got and
• 11:04
  Speaker 2: it's horrible to think about it like this, but the
• 11:06
  Speaker 2: activity start to slow down, but then the health costs
• 11:08
  Speaker 2: start to go up. So you're spending less on one
• 11:11
  Speaker 2: area but maybe more on another if you've got these
• 11:14
  Speaker 2: rising health costs as you age.
• 11:16
  Speaker 1: One seat, so you've got a sort of rough mudmap
• 11:19
  Speaker 1: of what you think you would like to be spending
• 11:20
  Speaker 1: to have an enjoyable retirement. So then you're sort of
• 11:23
  Speaker 1: looking at that, what's the next step, What do I
• 11:25
  Speaker 1: need to do if I suddenly go okay? That looks
• 11:27
  Speaker 1: like a fairly large number.
• 11:30
  Speaker 2: The starting point and the whole kind of Australian retirement
• 11:33
  Speaker 2: system and help from Center Lincon Services Australia and so forth,
• 11:36
  Speaker 2: is all geared towards you owning your own home. So
• 11:40
  Speaker 2: in order of priority, if we try and keep this
• 11:41
  Speaker 2: as simple as possible, you want to own your own
• 11:43
  Speaker 2: home or wherever that may be, and whatever that looks like,
• 11:46
  Speaker 2: and different people will have different aspirations there owning your
• 11:50
  Speaker 2: own home and then enough money to support that retirement.
• 11:54
  Speaker 2: The target that we like to try and encourage people
• 11:56
  Speaker 2: to get to as much as they possibly can. Now,
• 11:59
  Speaker 2: not a whole lot of people will eventually end up
• 12:00
  Speaker 2: getting there. Is you've got this income target, multiply that
• 12:04
  Speaker 2: by twenty times, call it the rule of twenty times.
• 12:06
  Speaker 2: So if you wanted to live off one hundred thousand
• 12:08
  Speaker 2: dollars a year of spending money in retirement, multip apply
• 12:12
  Speaker 2: that by twenty which is two million, and so you
• 12:14
  Speaker 2: don't want to have your house paid off and two
• 12:17
  Speaker 2: million dollars worth of other assets to support that retirement.
• 12:21
  Speaker 2: At that level, now, not a whole lot of people
• 12:24
  Speaker 2: get there. Certainly plenty of people do, but not a
• 12:26
  Speaker 2: huge portion of the population. If you get to that level,
• 12:29
  Speaker 2: you're at a level where it's highly unlikely you'll spend
• 12:33
  Speaker 2: your money through retirement. You'll mostly be just living off
• 12:36
  Speaker 2: the earnings of your money, and then it goes in inheritance. Now,
• 12:40
  Speaker 2: if you're at fifteen times or less than twenty times,
• 12:44
  Speaker 2: you get this kind of slowly, you get this curve
• 12:46
  Speaker 2: of your slowly yeating into your capital, which is fine
• 12:49
  Speaker 2: that that's the reality for most people in retirement, and
• 12:52
  Speaker 2: then eventually laid it down the track you qualify for
• 12:54
  Speaker 2: some age pension factor into the equation.
• 12:57
  Speaker 1: It is tricky, though, isn't it? Because I understand the here,
• 13:00
  Speaker 1: but there is an awful lot of people who are
• 13:03
  Speaker 1: leaving money to future generations and every person's situation is different.
• 13:07
  Speaker 1: But I sort of think, if you've done so much
• 13:09
  Speaker 1: hard work, you've really sacrificed and made decisions in your
• 13:14
  Speaker 1: life to build up this wealth, and then all of
• 13:16
  Speaker 1: a sudden, maybe you're not spending the way that you
• 13:19
  Speaker 1: thought you would in retirement, And I guess, I mean, look,
• 13:22
  Speaker 1: I look at it. My mum didn't get to retire.
• 13:24
  Speaker 1: She was diagnosed with terminal cancer three months out from
• 13:27
  Speaker 1: her retirement, and that on it iyo yo, between let's
• 13:32
  Speaker 1: do the good things that's paid down the mortgage and
• 13:33
  Speaker 1: we're going to go on a family holiday this year,
• 13:35
  Speaker 1: because you never know what's going to happen in retirement.
• 13:38
  Speaker 1: What is your advice to your clients when they're talking
• 13:40
  Speaker 1: to you about they want to have these goals, but
• 13:44
  Speaker 1: you need to sort of factor in lifestyle while you're
• 13:46
  Speaker 1: a bit younger.
• 13:47
  Speaker 2: You're absolutely right. So it's kind of one of the
• 13:49
  Speaker 2: questions that we ask people in the earlier stages of
• 13:52
  Speaker 2: getting to know them, is what is their view on
• 13:55
  Speaker 2: leaving an inheritance to whoever it might be. Some people
• 13:58
  Speaker 2: have this view that we want to try and maintain
• 14:00
  Speaker 2: everything and leave as much as possible to the next generation,
• 14:03
  Speaker 2: maybe because they want to, maybe because they need to.
• 14:06
  Speaker 2: You know, certain kids might have some need some extra
• 14:09
  Speaker 2: support for whatever reason, and so they need to leave
• 14:11
  Speaker 2: a lot of money behind. Most of the time, though
• 14:14
  Speaker 2: we actually see people saying, look, we're happy to just
• 14:16
  Speaker 2: kind of live off the money over time, and if
• 14:19
  Speaker 2: there's less than what we started with, fine, that was
• 14:21
  Speaker 2: the whole intent of it. So people say that in
• 14:24
  Speaker 2: the beginning, but the reality of working with a lot
• 14:27
  Speaker 2: of retiree is over quite a length of time, rightly,
• 14:30
  Speaker 2: so everyone's petrified of running out of money, And so
• 14:35
  Speaker 2: we find some people are stricter on this than others.
• 14:38
  Speaker 2: They try to only spend the earnings of what they've
• 14:41
  Speaker 2: got rather than spending the capital because they're petrified of
• 14:44
  Speaker 2: running out of money. And so we spend a lot
• 14:46
  Speaker 2: of time with these people saying, look, if you continue
• 14:48
  Speaker 2: on this particular trajectory, you're going to die with one
• 14:52
  Speaker 2: and a half million dollars in your super fund plus
• 14:54
  Speaker 2: the value of your house, Like, do your kids really
• 14:56
  Speaker 2: need that much money? What are you forging now versus
• 14:59
  Speaker 2: what extra would you like to do? And some people
• 15:01
  Speaker 2: are doing all that they want to do, and that
• 15:04
  Speaker 2: might mean that they're living on a relatively low retirement income. Fantastic.
• 15:08
  Speaker 2: It's not up to me to tell them they need
• 15:10
  Speaker 2: to spend a whole lot more money. If they're doing
• 15:12
  Speaker 2: all the things, it's my job to help them try
• 15:14
  Speaker 2: and identify are they holding back on things that they
• 15:17
  Speaker 2: would really want to do. The other part to that
• 15:20
  Speaker 2: is is then looking at for people that have the means.
• 15:24
  Speaker 2: Would your children or whoever may inherit from you in time,
• 15:27
  Speaker 2: would they be better off receiving some money from you now?
• 15:30
  Speaker 2: And then, as a consequence, a whole lot less when
• 15:33
  Speaker 2: you're gone, versus receiving this great big pile of money
• 15:36
  Speaker 2: when they're maybe sixty years old and retired themselves and
• 15:39
  Speaker 2: they don't really need it anymore. And so we kind
• 15:41
  Speaker 2: of have that conversation around when is the appropriate time
• 15:43
  Speaker 2: to actually start to leave this money.
• 15:45
  Speaker 1: It is an interesting conversation. We might pick up some
• 15:48
  Speaker 1: of that when we come back from this break. I
• 15:50
  Speaker 1: also want to have a chat to you, James, about
• 15:53
  Speaker 1: the common mistakes that you see. There must be a
• 15:55
  Speaker 1: few of them over the journey in twenty years or
• 15:57
  Speaker 1: so in financial advice, the common mistakes people are making
• 16:00
  Speaker 1: and if you could just give people one little bit
• 16:03
  Speaker 1: of advice on how to manage their money better. We'll
• 16:05
  Speaker 1: have that chat when we come back from this break.
• 16:14
  Speaker 1: Welcome back to the Money Puzzle. I'm your host, Julianne Sprague,
• 16:17
  Speaker 1: wealth editor at The Australian, filling in for James Kirby
• 16:21
  Speaker 1: and our guest today, Melbourne based financial advisor from First Financial,
• 16:25
  Speaker 1: James Wrigley, a bit of a social media star at
• 16:29
  Speaker 1: his pend to book it is out on October twenty nine,
• 16:31
  Speaker 1: called Retire Life Ready. We've been having a chat about
• 16:34
  Speaker 1: what you need to do to make sure you can
• 16:35
  Speaker 1: have the retirement that you actually want, rather than being
• 16:38
  Speaker 1: completely bored and wondering when it all ends. There is
• 16:41
  Speaker 1: a better way to do it. James, thanks very much
• 16:43
  Speaker 1: for the top tips. I would have thought that part
• 16:46
  Speaker 1: of planning for a retirement is actually just getting your
• 16:48
  Speaker 1: house in order and being better with your money from
• 16:51
  Speaker 1: the get go. You've been a financial advisor for a
• 16:55
  Speaker 1: while now, is there a common mistake you see and
• 16:57
  Speaker 1: you just want to bash your head against the wall
• 16:59
  Speaker 1: and just wish people would up doing it.
• 17:01
  Speaker 2: You're probably the one that, yeah, that I'll finish meetings
• 17:05
  Speaker 2: with people say oh I wish I just had done
• 17:07
  Speaker 2: this and done that. Is is generally people trying to
• 17:09
  Speaker 2: make things too complicated, Like it doesn't need to be
• 17:12
  Speaker 2: that hard. There's paying off your house and trying to
• 17:15
  Speaker 2: have as much money and other things to kind of
• 17:17
  Speaker 2: pay off that retirement. But people come to us and say, oh,
• 17:20
  Speaker 2: do I need this trust or this company, or do
• 17:22
  Speaker 2: I buy a fourth investment property a fifth investment property
• 17:25
  Speaker 2: and negative gearing, and like there's so many different things
• 17:27
  Speaker 2: out there when we need to just take a step
• 17:29
  Speaker 2: back and say, let's just look at where you're at it,
• 17:32
  Speaker 2: What are the things that we need to do to
• 17:33
  Speaker 2: help you to help you get there. On various occasions,
• 17:37
  Speaker 2: we've had meetings with people that in the last couple
• 17:40
  Speaker 2: of years of their working life they've decided to go
• 17:42
  Speaker 2: and buy another investment property, and so, well, how are
• 17:44
  Speaker 2: you ever going to pay off the debt associated with
• 17:47
  Speaker 2: this property when you've only got another couple of years
• 17:49
  Speaker 2: to work? How are you ever possibly going to afford
• 17:52
  Speaker 2: to pay off this property? They've bought it just because
• 17:54
  Speaker 2: of the negative gearing benefits to try and save some
• 17:56
  Speaker 2: tax without actually thinking that step further to say, how
• 18:00
  Speaker 2: can I retire when I have all of this debt
• 18:02
  Speaker 2: associated with the property? It ends up needing to be sold,
• 18:05
  Speaker 2: and so they got all the transaction costs to buy
• 18:08
  Speaker 2: and sell.
• 18:08
  Speaker 1: I would have thought that someone thinks, well, what tenants
• 18:10
  Speaker 1: and they'll pay the rent and we'll just make a
• 18:12
  Speaker 1: dent into it first couple of years and then we'll
• 18:14
  Speaker 1: be right. But you're saying that, actually, you've overextended yourself
• 18:18
  Speaker 1: at the wrong period of time, and now that's it, because.
• 18:21
  Speaker 2: You end up in this position where yet, yes, the
• 18:23
  Speaker 2: tenant's paying your rent and that can go towards the mortgage,
• 18:26
  Speaker 2: but there's all this kind of value tied up in
• 18:29
  Speaker 2: the property that the money's coming in for the mortgage,
• 18:32
  Speaker 2: but then there's nothing left over to spend. It's trying
• 18:35
  Speaker 2: to get people around to this mindset of when it
• 18:37
  Speaker 2: comes to retirement, it doesn't matter quite so much what
• 18:40
  Speaker 2: the value of all of these assets are that you own.
• 18:44
  Speaker 2: What matters more is your ability to get your hands
• 18:46
  Speaker 2: on some cash to spend when the fortnightly or the
• 18:49
  Speaker 2: monthly pay stops being dropped into your bank account. So
• 18:53
  Speaker 2: you might have this great, big pool of assets, but
• 18:54
  Speaker 2: if you've got too much debt associated with it, any
• 18:57
  Speaker 2: income you're generating from those investments just goes to pay
• 19:00
  Speaker 2: off the debt and there's nothing left over for you
• 19:02
  Speaker 2: to spend, and so you can't retire.
• 19:04
  Speaker 1: Well again, it goes to this inheritance pool too, So
• 19:06
  Speaker 1: then you're going to be keeping working to pay for
• 19:08
  Speaker 1: an asset that you don't have to have access to,
• 19:10
  Speaker 1: but it will go to your kids.
• 19:11
  Speaker 2: And your grandkids something else will get it later on.
• 19:14
  Speaker 1: Lucky them. Does this then feed into that idea of
• 19:18
  Speaker 1: you shouldn't really be making financial decisions for the tax purposes.
• 19:21
  Speaker 1: So if the tax benefit is your primary motivator, probably
• 19:23
  Speaker 1: step away.
• 19:25
  Speaker 2: That's it. So the tax benefit needs to be the
• 19:27
  Speaker 2: kind of the secondary consideration that if you're whatever investing
• 19:31
  Speaker 2: that you're doing, you're generally going to be doing that
• 19:33
  Speaker 2: with a view to try and build your assets in
• 19:36
  Speaker 2: one way, shape or form. And then yes, whenever you're
• 19:39
  Speaker 2: buying something, whatever it is that you're buying, then you
• 19:41
  Speaker 2: want to consider how do I own that? How do
• 19:43
  Speaker 2: I fund it? Is there some way that I can
• 19:46
  Speaker 2: optimize my tax situation here? Yes, but that shouldn't be
• 19:49
  Speaker 2: step one. That should be step two. It should be
• 19:51
  Speaker 2: I'm buying this thing for some other wealth creation reason.
• 19:56
  Speaker 1: Is there something you think most people should be able
• 19:59
  Speaker 1: to do and it would improve their financial position almost
• 20:02
  Speaker 1: overnight if they started to do this one thing. So
• 20:05
  Speaker 1: I've just thrown sort of a lot at you, But.
• 20:10
  Speaker 2: I think the one the one thing that we see
• 20:12
  Speaker 2: time and time again is potentially leaving it too late
• 20:15
  Speaker 2: to actually start the investing side of the equation. When
• 20:18
  Speaker 2: we get this question all the time about should I
• 20:21
  Speaker 2: pay off my mortgage fast, or should I put money
• 20:23
  Speaker 2: in my super fund or should I do something else
• 20:25
  Speaker 2: with this extra dollar I've got. Where should I put
• 20:27
  Speaker 2: this dollar that I've got? The maths says you should
• 20:30
  Speaker 2: probably put it into your superannuation. But then people are
• 20:32
  Speaker 2: worried about rules changing and taxes and bits.
• 20:35
  Speaker 1: And pieces, so you can blame them when the result
• 20:37
  Speaker 1: the rade going on. Now, I appreciate three million dollar
• 20:40
  Speaker 1: super balance seems like a lot to a lot of people,
• 20:42
  Speaker 1: but it won't be indexed, and everyone's thinking, well, why
• 20:44
  Speaker 1: would I pull more into that? Because who knows at
• 20:46
  Speaker 1: what point will that impact me? I understand white people.
• 20:48
  Speaker 1: That's it.
• 20:49
  Speaker 2: That's it. And so you've got this idea or what
• 20:52
  Speaker 2: do I do with this dollar in a mortgage or not?
• 20:54
  Speaker 2: And maths is one thing. Reality is a different story.
• 20:57
  Speaker 2: But the maths suggests that you should probably pay off
• 21:00
  Speaker 2: your mortgage a little bit slower and instead invest a
• 21:03
  Speaker 2: little bit of money in shares or property or suprawl
• 21:05
  Speaker 2: or whatever it might be. That the growth return and
• 21:09
  Speaker 2: the compounding that you get on investing that dollar is
• 21:11
  Speaker 2: generally better than the interest saved on the mortgage. Now
• 21:14
  Speaker 2: it's not all of one or all of the other,
• 21:16
  Speaker 2: but for most people it's a balance of both. But
• 21:18
  Speaker 2: we see a lot of people that have just paid
• 21:21
  Speaker 2: off their mortgage and done nothing else.
• 21:23
  Speaker 1: That used to be the gold standard advice. Pay off
• 21:29
  Speaker 1: your mortgage, do nothing else, throw it all at that,
• 21:31
  Speaker 1: paid off as fast and as quick as you can,
• 21:33
  Speaker 1: and then do the rest. Has that now shifted because
• 21:36
  Speaker 1: property prices have galloped away. And if you spend all
• 21:40
  Speaker 1: of your time and money and effort paying down that mortgage,
• 21:42
  Speaker 1: but you'll pay it off by the time you retire,
• 21:44
  Speaker 1: but they won't. You won't, like you said, there won't
• 21:46
  Speaker 1: be time in market for the other investments.
• 21:48
  Speaker 2: Won't be much else. Yeah, And so then people are
• 21:50
  Speaker 2: left with this decision. All of this money's tied up
• 21:53
  Speaker 2: in my house. I haven't done much of anything else
• 21:54
  Speaker 2: in the way of investing. Maybe I could have afforded to,
• 21:58
  Speaker 2: Maybe I couldn't have afforded to. Who knows. It depends
• 21:59
  Speaker 2: on someone's situation. And then they're kind of faced with
• 22:02
  Speaker 2: this downsizing scenario. Just say, okay, well, do I now
• 22:05
  Speaker 2: need to sell my expensive house that I've paid off
• 22:07
  Speaker 2: over the last twenty five years and it's grown exponentially
• 22:09
  Speaker 2: in value to then move into something cheaper to release
• 22:13
  Speaker 2: some money, and that can work. We kind of rather
• 22:17
  Speaker 2: see people doing a bit of both, and depending on
• 22:19
  Speaker 2: an individual, it might be more mortgage and less investing,
• 22:22
  Speaker 2: and others it might be more investing and less and
• 22:24
  Speaker 2: more gadgets about getting the.
• 22:25
  Speaker 1: Balance right and what about the investing piece? Should it
• 22:28
  Speaker 1: just be go try something? It doesn't. You don't have
• 22:30
  Speaker 1: to sit there and have this huge pool of cash
• 22:32
  Speaker 1: sitting there. You could. It's pretty easy to get into
• 22:35
  Speaker 1: some different investments these days. You know, maybe it's five
• 22:37
  Speaker 1: hundred bucks for an eat. I'm not sure what you
• 22:39
  Speaker 1: would recommend to people. But does it just get started?
• 22:41
  Speaker 2: It is actually just get started. Whatever it is that
• 22:43
  Speaker 2: you do, just get started. It's so easy to just
• 22:45
  Speaker 2: kind of put it off and put it off and
• 22:46
  Speaker 2: put it off. And as you said, you know, if
• 22:48
  Speaker 2: a share market investing in particular in some way, shape
• 22:51
  Speaker 2: or form, there's so many means out there to actually
• 22:53
  Speaker 2: start that with a really low amount of money. And
• 22:56
  Speaker 2: then it's kind of it's the habits that you're getting into.
• 23:00
  Speaker 2: Are you starting to put some money in, You're like,
• 23:01
  Speaker 2: oh wow, look it's going up or it's going and
• 23:03
  Speaker 2: it might go down from time to time. And then
• 23:06
  Speaker 2: as you get a pay rise, maybe you add a
• 23:07
  Speaker 2: little bit of extra into it when you get a
• 23:09
  Speaker 2: pay rise, and so you just kind of start slowly.
• 23:11
  Speaker 2: Obviously with all of these things, the earlier that you
• 23:13
  Speaker 2: can start, the better. But it's putting a few dollars
• 23:16
  Speaker 2: in learning about it, feeling and touching it, see how
• 23:19
  Speaker 2: it goes. And then with confidence you then start to
• 23:21
  Speaker 2: add more, and you add more, and you add more,
• 23:24
  Speaker 2: and then if you do it for long enough, it
• 23:26
  Speaker 2: works out well for you over time.
• 23:27
  Speaker 1: And hopefully you can write out the downturns, because they
• 23:30
  Speaker 1: do happen, don't they. James, I feel like we're in
• 23:32
  Speaker 1: a miraculous time. Markets are booming, property markets are going up.
• 23:35
  Speaker 1: But I tell you what, as the financial listen me
• 23:38
  Speaker 1: is just IM just sitting here watching it, thinking it's
• 23:40
  Speaker 1: a matter of time. That's a matter of time, and.
• 23:43
  Speaker 2: Look at it happens that that's the thing. From time
• 23:45
  Speaker 2: to time you have these downturns. If you're in the
• 23:48
  Speaker 2: building up stage. As I say to a number of
• 23:50
  Speaker 2: people that I talk to, the crazy thing is if
• 23:52
  Speaker 2: you're still working and earning a salary, and you've got
• 23:55
  Speaker 2: plenty of years of that working life ahead of you.
• 23:57
  Speaker 2: As crazy as this might sound, the best thing that
• 23:59
  Speaker 2: can actually open to you is there is a downturn
• 24:01
  Speaker 2: in the property market or the share market or whatever
• 24:03
  Speaker 2: it is, and gives you that opportunity to buy whatever
• 24:06
  Speaker 2: you're buying at lower prices than what you could then
• 24:09
  Speaker 2: to get the recovery heading to retirement. That's the ideal
• 24:13
  Speaker 2: scenario now those but the right time. Yeah, if you're
• 24:17
  Speaker 2: retired at the other end, living off your money, then
• 24:19
  Speaker 2: you clearly don't want it to go down, do you.
• 24:22
  Speaker 1: No, exactly, you justify. It's the same with interest rates
• 24:24
  Speaker 1: when we have stories at the Australian on interest rates.
• 24:26
  Speaker 1: It depends which side of the fence you're on. If
• 24:28
  Speaker 1: you're relatively new into the property market, have a very
• 24:32
  Speaker 1: significant mortgage, there's so much relief. There's those who have
• 24:35
  Speaker 1: paid off their properties and they're living on income from
• 24:39
  Speaker 1: savings accounts and their rates are going down.
• 24:41
  Speaker 2: So it's just.
• 24:43
  Speaker 1: Depends which start of the coin you're on. We'll get
• 24:46
  Speaker 1: to some questions from some of the listeners in just
• 24:48
  Speaker 1: a set, but I did want to talk to you
• 24:49
  Speaker 1: about the social media profile that you've built up. Did
• 24:52
  Speaker 1: you have any idea that you could build this massive
• 24:55
  Speaker 1: social media profile when you started it? How did you
• 24:58
  Speaker 1: get into it and what did it involve?
• 25:00
  Speaker 2: Not at all? So I just started. It was years
• 25:02
  Speaker 2: and years back now. I started recording some videos and
• 25:05
  Speaker 2: putting it up on LinkedIn. I've been actively posting other
• 25:08
  Speaker 2: things on LinkedIn as it means to try and find
• 25:11
  Speaker 2: new clients in the financial advice business that I work in.
• 25:14
  Speaker 2: When I was posting on LinkedIn, they ended up sending
• 25:17
  Speaker 2: me a message saying, hey, we're going to try video
• 25:20
  Speaker 2: on LinkedIn. Up until that point, you couldn't put a
• 25:22
  Speaker 2: video up. We noticed you've been pretty actively posting written content.
• 25:26
  Speaker 2: Would your mind being like a tester of the video thing,
• 25:29
  Speaker 2: I said, all right, sure, I'll give it a go.
• 25:31
  Speaker 2: And at that point I hadn't recorded a video whatsoever,
• 25:34
  Speaker 2: and so I said, yeah, I'd give it a go,
• 25:36
  Speaker 2: as it means kind of I stood out a little bit. Anyway,
• 25:39
  Speaker 2: that years and years went on. Of that, not a
• 25:41
  Speaker 2: whole lot happened. But then maybe too.
• 25:43
  Speaker 1: Video So you're talking about you just get your your phone.
• 25:46
  Speaker 1: You're just as simple as that. You're just talking to
• 25:48
  Speaker 1: your phone about simple bits of financial advice up onto LinkedIn.
• 25:52
  Speaker 2: Yeah, yeah, like a selfie type video. And I look
• 25:55
  Speaker 2: back if I scrolled back far enough on my LinkedIn
• 25:57
  Speaker 2: is where as I said it, where for as the
• 25:59
  Speaker 2: video is a whole horrible I look at it like,
• 26:01
  Speaker 2: oh my god, this is so bad, but you know,
• 26:03
  Speaker 2: you just do it, and like anything is just repeat, repeat, repeat,
• 26:06
  Speaker 2: And now I'm really comfortable doing it. And then just
• 26:09
  Speaker 2: in the last couple of years, the way Instagram and
• 26:12
  Speaker 2: Facebook and TikTok and the way some of these platforms
• 26:15
  Speaker 2: work has changed dramatically in my favor, I guess is
• 26:20
  Speaker 2: probably the way to put it. These platforms are now
• 26:23
  Speaker 2: work on an interests basis, not how many followers did
• 26:27
  Speaker 2: you have. So when I opened my Instagram account that
• 26:29
  Speaker 2: I posted my videos on, I had no followers. But
• 26:31
  Speaker 2: because people became interested in these kind of little finance
• 26:35
  Speaker 2: tips that I was posting, that started to gather momentum.
• 26:39
  Speaker 2: People watch it, they share it, and it grows, and
• 26:42
  Speaker 2: you know, here we are today and there's a lot
• 26:44
  Speaker 2: of followers there.
• 26:44
  Speaker 1: It's grown quite a lot. So how much time do
• 26:47
  Speaker 1: you have to put into this now? So if you manage,
• 26:50
  Speaker 1: have you found a way that if you've got an
• 26:51
  Speaker 1: AI clone that's.
• 26:53
  Speaker 2: Doing it, So I have to I do it all myself.
• 26:56
  Speaker 2: I just record some videos, but I found what I've
• 26:59
  Speaker 2: learned over time is the more raw and kind of
• 27:02
  Speaker 2: just I don't know, spur of the moment type video
• 27:05
  Speaker 2: that I post the better. So I used to worry
• 27:08
  Speaker 2: about it being perfect and record and edit it down
• 27:11
  Speaker 2: and you know, trying like I was a newsreader on
• 27:12
  Speaker 2: Channel seven or something like that. But it doesn't matter
• 27:16
  Speaker 2: me just walking to the gym or I don't know,
• 27:19
  Speaker 2: sitting here in the room where I'm recording with you.
• 27:21
  Speaker 2: If I got some idea in my head, I just
• 27:23
  Speaker 2: record a video O for a minute and a HALFNM,
• 27:25
  Speaker 2: post it and forget about it. And that has just
• 27:27
  Speaker 2: worked so much better than trying to make it perfect.
• 27:30
  Speaker 2: The ums and the ass.
• 27:31
  Speaker 1: Are just normal also, probably because it's just you as
• 27:34
  Speaker 1: opposed to being the Channel seven or Channel nine version
• 27:36
  Speaker 1: of James Wrigley.
• 27:37
  Speaker 2: Right.
• 27:37
  Speaker 1: I mean, if you want, you could try a newsreader
• 27:40
  Speaker 1: voice for us now if you can affect that, give
• 27:43
  Speaker 1: it a night ago. Okay, been there, you've done that.
• 27:46
  Speaker 1: We do have some listeners with some questions giving you
• 27:49
  Speaker 1: a financial advisor. I thought i'd put them to you.
• 27:52
  Speaker 1: We'll get the answers when we come back. But there
• 27:56
  Speaker 1: is one of our listeners who is just pondering what
• 27:59
  Speaker 1: the point of an actual advisor actually is if they
• 28:02
  Speaker 1: can't really actively outperform the market, and they can't really
• 28:05
  Speaker 1: time the market, So what's the whole point. I'll get
• 28:07
  Speaker 1: you to respond to that when we come back. We've
• 28:09
  Speaker 1: got another one to get to too. Well. Welcome back
• 28:18
  Speaker 1: to the Money Puzzle. I'm your host, Julianne Sprague, joined
• 28:20
  Speaker 1: by financial advisor James Wrigley, and we've been talking about
• 28:25
  Speaker 1: how to get retirement ready. It is for James's new book.
• 28:28
  Speaker 1: His first book is out on October twenty nine, Retire
• 28:33
  Speaker 1: Life Ready. It is called We've gone through some top steps.
• 28:38
  Speaker 1: How did enjoy wat Chat James? And now we're up
• 28:40
  Speaker 1: to the nitty gritty part of the money Puzzle. We
• 28:43
  Speaker 1: have listeners who love listening to, usually James Kirby, and
• 28:46
  Speaker 1: he will be back next week. We'll have a few
• 28:48
  Speaker 1: questions fired in and I thought, James, I've just put
• 28:50
  Speaker 1: this one to you from Andrew. He says, I have
• 28:52
  Speaker 1: a question about the value of financial advisors in relation
• 28:55
  Speaker 1: to investment performance. So I appreciate there ore aspects of
• 29:00
  Speaker 1: up trust structures and all these other parts of financial
• 29:03
  Speaker 1: advisors but Andrew says it's been observed on the Money
• 29:07
  Speaker 1: Puzzle that active stock picking does not usually beat the
• 29:10
  Speaker 1: market over time, and that timing the market is not
• 29:13
  Speaker 1: a winning strategy. So therefore, what exactly does a financial
• 29:16
  Speaker 1: advisor do? Why would I pay them? Andrew wants to know,
• 29:19
  Speaker 1: what do you reckon, James? Here you are in defense
• 29:20
  Speaker 1: of your industry.
• 29:21
  Speaker 2: Yeah, yeah, defense. So that kind of the investment selection
• 29:27
  Speaker 2: and the timing of the placing of the investments and
• 29:29
  Speaker 2: so forth is generally part of the process that people
• 29:32
  Speaker 2: will go through. But if you're going to a financial
• 29:36
  Speaker 2: advisor expecting them to have some type of crystal ball
• 29:40
  Speaker 2: that's going to help them, you know, identify better investments
• 29:42
  Speaker 2: than someone else and the perfect timing and they when
• 29:45
  Speaker 2: to buy and when to sell, that's not it. You
• 29:47
  Speaker 2: would go to a financial advisor to help you kind
• 29:50
  Speaker 2: of work through some type of complication that you might
• 29:53
  Speaker 2: have in your life. More most of the time it's
• 29:55
  Speaker 2: around some type of transition, like we've been talking about retirement,
• 29:59
  Speaker 2: and so there's this work around. Okay, you look like
• 30:01
  Speaker 2: this today, you aspire to get to this particular point
• 30:04
  Speaker 2: in the future. How do we connect the dots what's
• 30:07
  Speaker 2: the path for you to follow, and what are the
• 30:09
  Speaker 2: steps for you to do. Now, part of that may
• 30:12
  Speaker 2: very well be about investing. Maybe it's changing the investing
• 30:16
  Speaker 2: that someone's doing, Maybe it's getting them to start investing
• 30:18
  Speaker 2: in the first place. And then you'd go on to
• 30:21
  Speaker 2: conversations around what's the individual's appetite for risk and return
• 30:26
  Speaker 2: and reward and all of these kind of things, and
• 30:28
  Speaker 2: then you start to look at the types of investments
• 30:30
  Speaker 2: that might be appropriate for that client. So it's not
• 30:33
  Speaker 2: necessarily about stock picking. And I would never claim to
• 30:36
  Speaker 2: say I'm going to pick the best stocks and get
• 30:38
  Speaker 2: you the best returns. If someone's coming to us or
• 30:41
  Speaker 2: any other financial advisor and they're suggesting that, you probably
• 30:45
  Speaker 2: want to go and find someone else to be talking to.
• 30:47
  Speaker 1: Now, are there some red flags that people should be
• 30:49
  Speaker 1: aware of when it comes to financial advisors. They're not
• 30:51
  Speaker 1: all created ecal. I mean, obviously they are sure, come
• 30:53
  Speaker 1: see you, James, but.
• 30:56
  Speaker 2: So look red flags is a difficult one that promises
• 31:01
  Speaker 2: of returns. If someone's leading the conversation with you around
• 31:05
  Speaker 2: promises of returns, we'll help you get better returns than
• 31:08
  Speaker 2: your current super fund or whatever else that you're doing.
• 31:12
  Speaker 2: That's a bit of a red flag, so no one
• 31:13
  Speaker 2: can guarantee returns. And if they're leading with that, as
• 31:17
  Speaker 2: I said, I'd probably wanting to go and talk to.
• 31:19
  Speaker 1: Someone else, maybe just go and seek a second opinion.
• 31:22
  Speaker 1: Way are at it? Okay? Fair enough?
• 31:24
  Speaker 2: All right?
• 31:24
  Speaker 1: Now Paul has written in Now it's a little bit convolated,
• 31:29
  Speaker 1: but I think we'll get we'll get to this. So
• 31:31
  Speaker 1: he says, I'm interested to know if I contributed my
• 31:35
  Speaker 1: concessional contribution, so the thirty thousand dollars concessional contribution to
• 31:40
  Speaker 1: my super on the first day of the new financial year,
• 31:43
  Speaker 1: and then submitted the notice of intent on the last
• 31:46
  Speaker 1: day of the financial year, so that's thirtieth of June.
• 31:49
  Speaker 1: Would the super fund only deduct the fifteen percent tax
• 31:52
  Speaker 1: on the thirteenth of June, or would I be earning
• 31:54
  Speaker 1: the growth on the full thirty thousand rather than in
• 31:58
  Speaker 1: Paul says twenty five thousand, five hundred after tax. So
• 32:00
  Speaker 1: you're saying it's not substantial over twelve months, but could
• 32:03
  Speaker 1: mean five hundred dollars extra than if I submitted the
• 32:06
  Speaker 1: notice of intent on the first of July. So I
• 32:09
  Speaker 1: think he's saying he's going to chuck in an extra
• 32:11
  Speaker 1: five hundred dollars. But what happened?
• 32:14
  Speaker 2: Yeah, I know what he's talking about. Yep, yep, Yeah.
• 32:18
  Speaker 2: So he's talking about the concessional superannuation contribution that you
• 32:22
  Speaker 2: can make, which is tax deductible. Now, assuming the person
• 32:26
  Speaker 2: asking the question isn't in paid employment and then they're
• 32:29
  Speaker 2: collecting contributions from their employer, if you could do like
• 32:33
  Speaker 2: he's asked in the question, putting your thirty thousand dollars
• 32:36
  Speaker 2: at some point throughout the financial year, Now, the question
• 32:40
  Speaker 2: kind of gets to some of the nitty gritty of
• 32:42
  Speaker 2: how the super funds actually operate in this space. So
• 32:44
  Speaker 2: when you're putting your thirty thousand dollars contribution, most super
• 32:47
  Speaker 2: funds will have a certain B pay code or something
• 32:50
  Speaker 2: like that to notify them that they call it a
• 32:52
  Speaker 2: particular type of contribution. Even though you notify them through
• 32:56
  Speaker 2: a particular B pay code or whatever it might be,
• 32:59
  Speaker 2: the super funds you'll count that as what's called a
• 33:01
  Speaker 2: non concessional contribution, so one they don't deduct tax from.
• 33:06
  Speaker 2: It's not until you lodge this form that then the
• 33:10
  Speaker 2: super fund will then kind of change that overcall it
• 33:13
  Speaker 2: the concession or contribution and therefore deduct the tax. So,
• 33:16
  Speaker 2: as you suggested, if you put in the contribution at
• 33:18
  Speaker 2: the beginning of the financial year and then don't lodge
• 33:21
  Speaker 2: this notice until the end of the financial year, they
• 33:23
  Speaker 2: won't deduct the tax. But they're they won't deduct a
• 33:27
  Speaker 2: tax until the end of the financial year. So it's
• 33:29
  Speaker 2: right that you could have more money in your superfund
• 33:31
  Speaker 2: invested in whatever it's in, potentially earning more for the year,
• 33:34
  Speaker 2: rather than having some tax deducted that sits in a
• 33:37
  Speaker 2: reserve with the superfund that doesn't even go to the
• 33:39
  Speaker 2: ATO Australia.
• 33:40
  Speaker 1: That seems quite clever. But you just have to make
• 33:43
  Speaker 1: sure you do the paperwork in time, right, So you
• 33:45
  Speaker 1: put you you put the concessional and you put your
• 33:47
  Speaker 1: thirty k in at the beginning of the financial year,
• 33:49
  Speaker 1: and you've just got to make sure sort of. I
• 33:51
  Speaker 1: would say not to June thirty. I'd say maybe the
• 33:53
  Speaker 1: middle of June to get the paperwork because the super
• 33:55
  Speaker 1: Fund's cut it off a little bit earlier.
• 33:57
  Speaker 2: Yeah, so the paperwork. It's interesting that the time of
• 34:00
  Speaker 2: that paperwork you don't have to lodge. You have to
• 34:02
  Speaker 2: lodge that notice with your superfund the earlier of before
• 34:06
  Speaker 2: you lodge your tax return for the particular year, okay,
• 34:10
  Speaker 2: or the end of the following financial year. So you
• 34:13
  Speaker 2: can leave it until after the end of the year,
• 34:14
  Speaker 2: but don't forget it. I want to add something else
• 34:17
  Speaker 2: to don't forget to do it. The other missing piece
• 34:20
  Speaker 2: of the puzzle here, though, is when you lodge your
• 34:23
  Speaker 2: tax return, you also have to claim the tax deduction
• 34:26
  Speaker 2: in your tax return. Over the years that I've been
• 34:29
  Speaker 2: doing this, there's plenty of people I've come across where
• 34:32
  Speaker 2: they've made the super contribution. They've lodged the notice with
• 34:35
  Speaker 2: the super fund, so the superfund has it recorded properly.
• 34:39
  Speaker 2: Even then, the superfund still reports the contribution to the
• 34:43
  Speaker 2: ATO is what's called a non concessional contribution. It's not
• 34:47
  Speaker 2: until you've claimed the deduction in your tax return that
• 34:50
  Speaker 2: the whole thing all marries up and it all gets
• 34:53
  Speaker 2: treated properly, so you can This happens from time to time.
• 34:58
  Speaker 2: You can fall into a position where you forget to
• 35:01
  Speaker 2: claim it in your tax return, and so then the
• 35:04
  Speaker 2: superfund has taken tax out, but it was never a
• 35:08
  Speaker 2: you never claim the tax deduction forward and then can
• 35:10
  Speaker 2: end up with excess contributions. It's a whole mess. You
• 35:13
  Speaker 2: need to remember to claim the tax deduction at in
• 35:15
  Speaker 2: your tax return too.
• 35:17
  Speaker 1: Okay, very good advice. I'm glad I got that. Not
• 35:21
  Speaker 1: that I'm in that particular friend of mine right now,
• 35:23
  Speaker 1: but it has made me aware that tax returns I
• 35:26
  Speaker 1: should probably get one done, right. Yeah. Yeah, Thank you
• 35:29
  Speaker 1: very much for joining us on the Money's Puzzle, and
• 35:31
  Speaker 1: good luck with the launch of the book out on
• 35:34
  Speaker 1: October twenty nine. Retire Life ready, presuming you can get
• 35:40
  Speaker 1: it from all good bookstores and digitally.
• 35:45
  Speaker 2: So you can pre order it from a whole lot
• 35:47
  Speaker 2: of online retailers, and then the physical books from the
• 35:49
  Speaker 2: twenty ninth. There'll be the ebook version on the kind
• 35:52
  Speaker 2: of the kindle readers and all those kind of things,
• 35:55
  Speaker 2: and there's also an audiobook too, so all of the different.
• 35:57
  Speaker 1: Formats and I'm looking forward to it. Wriggly, thank you
• 36:00
  Speaker 1: very much, Thank you for having me, James Riggly. They're
• 36:03
  Speaker 1: joining us now, James Kirby. He will be back in
• 36:07
  Speaker 1: the chair next week hosting the Money Puzzle. Thank you
• 36:09
  Speaker 1: very much for letting me step in while he's been away.
• 36:13
  Speaker 1: If you want more financial insights, you can head over
• 36:15
  Speaker 1: to the Australian dot com dot au slash wealth. We've
• 36:20
  Speaker 1: got plenty of money tips sitting there for you. Thanks
• 36:22
  Speaker 1: for joining me.