Latest / The SME Stream / Hannah McQueen: How to split your mortgage

Transcript

Hannah McQueen: How to split your mortgage · The SME Stream

• 0:01
  Speaker 1: So saying and moving to the movement and just when
• 0:07
  Speaker 1: somebody play that newsic.
• 0:25
  Speaker 2: Games.
• 0:33
  Speaker 3: God, wait a.
• 0:52
  Speaker 4: Minute came first?
• 0:53
  Speaker 2: It wasn't easy And welcome back to the show. That
• 1:00
  Speaker 2: funky music, white Boy. I'm not sure if that's a
• 1:01
  Speaker 2: reference to me or something, but it is quite a
• 1:03
  Speaker 2: greevy little number to get down to. Anyway, if you
• 1:07
  Speaker 2: have missed any of the previous hours, had a fun
• 1:09
  Speaker 2: chat there with Dr John Cameron about float tanks and
• 1:12
  Speaker 2: then just on to general health questions. But if you've
• 1:14
  Speaker 2: missed any of the hours you want to catch up
• 1:16
  Speaker 2: on it, then go to the Weekend Collective on iHeartRadio,
• 1:18
  Speaker 2: look for the podcast and away you go. But right
• 1:21
  Speaker 2: now it is time for the final hour of the show,
• 1:24
  Speaker 2: which is Smart Money. And my guest is she's a
• 1:26
  Speaker 2: financial advisor and coach and she's well known to all
• 1:30
  Speaker 2: of you because she's been on the show a few
• 1:32
  Speaker 2: times a half of times. Hannah McQueen, good afternoon, Hi
• 1:35
  Speaker 2: are you well?
• 1:36
  Speaker 4: Yeah, I'm great, very summary today, it's a summary day
• 1:40
  Speaker 4: now rocking the polo shirt.
• 1:42
  Speaker 2: The sun is shining into the studio and it does
• 1:44
  Speaker 2: feel a little bit just like we're heading towards the
• 1:48
  Speaker 2: warmer weather for once.
• 1:49
  Speaker 4: Yeah, we're going in the right direction.
• 1:51
  Speaker 2: What's been keeping you out of mischief?
• 1:54
  Speaker 4: Busy just generally, but actually having seen that it just
• 1:57
  Speaker 4: got back from holiday, busy parenting.
• 2:01
  Speaker 2: Actually you have the post holiday sort of relaxed, sort.
• 2:05
  Speaker 4: Of because normally it goes after the first week. I
• 2:09
  Speaker 4: went over to Europe jealous Berlin, did a little marathon there,
• 2:15
  Speaker 4: and then you did okay, I did that, yes, and
• 2:18
  Speaker 4: then to France and then home by Dubai. We had
• 2:23
  Speaker 4: the kids and they were less annoying than the previous holiday.
• 2:28
  Speaker 4: So I was saying to my husband, I feel this
• 2:29
  Speaker 4: is trending in the right direction. They were, it was good.
• 2:32
  Speaker 2: How old are your kids?
• 2:33
  Speaker 4: Eleven and sixteen?
• 2:34
  Speaker 2: Okay? And where where did you go in France? Did
• 2:37
  Speaker 2: you go around or just a couple of two or
• 2:39
  Speaker 2: three locations or what?
• 2:41
  Speaker 4: We were at Disneyland for a couple of days, and
• 2:44
  Speaker 4: then into Paris and then to Versailles, which was amazing.
• 2:48
  Speaker 2: I've heard about Versailles. Some people sat it's fantastic, other
• 2:51
  Speaker 2: people say that it's not necessary sort of thing.
• 2:55
  Speaker 4: But the Palace of Versailles, the palace, that's right, the
• 2:59
  Speaker 4: town of us I don't know about that, but the
• 3:01
  Speaker 4: palace and the gardens just incredible.
• 3:06
  Speaker 2: Just I think we have to stick that on the
• 3:08
  Speaker 2: next the list next time we go, even though I
• 3:10
  Speaker 2: thought the last time would be the last time, but
• 3:12
  Speaker 2: now I want to go every year, which is a
• 3:13
  Speaker 2: bit of a bummer, which is why we need ours
• 3:15
  Speaker 2: like smart money. That's right, Do you speak a little bit.
• 3:19
  Speaker 4: Of French or German or I was gonna say some
• 3:23
  Speaker 4: bidgeon German or French, but I know ambision?
• 3:28
  Speaker 2: What about it? So the and so you did the
• 3:30
  Speaker 2: Berlin marathon? Come on, how was that? Doesn't sound like
• 3:34
  Speaker 2: it's quite the holiday as most of us want.
• 3:36
  Speaker 4: Understand a holiday when you break down what makes for
• 3:39
  Speaker 4: a good holiday. I always think being able to eat
• 3:43
  Speaker 4: a lot of food and do nothing makes for a
• 3:46
  Speaker 4: good holiday, but then you feel bad for it, whereas
• 3:48
  Speaker 4: in this situation, we did the marathon first week, so
• 3:52
  Speaker 4: I was sanc demonious for the next three weeks.
• 3:56
  Speaker 2: Spot in my face, we did it? Did you? You?
• 4:00
  Speaker 2: And your husband?
• 4:00
  Speaker 5: Yes?
• 4:01
  Speaker 2: Yes, well done? You what time?
• 4:04
  Speaker 4: I did four forty he did three fifty something.
• 4:07
  Speaker 2: Oh how selfish of not to run next to you?
• 4:09
  Speaker 4: And so I don't blame him but ye three what
• 4:12
  Speaker 4: three fifty?
• 4:13
  Speaker 2: I actually don't really know too much about marathon times,
• 4:15
  Speaker 2: but I imagine that three fifty Anything under four for
• 4:17
  Speaker 2: a guy's pretty, isn't it?
• 4:19
  Speaker 4: Or was it recently?
• 4:21
  Speaker 3: No for me?
• 4:21
  Speaker 2: Or yeah?
• 4:22
  Speaker 4: I think it's incredible.
• 4:23
  Speaker 2: Yeah, yeah, Well you ran a marathon in Berlin and
• 4:27
  Speaker 2: was weather all right?
• 4:29
  Speaker 4: Yeah?
• 4:30
  Speaker 6: It was?
• 4:30
  Speaker 4: It was nice, nice and cool. I mean I I
• 4:33
  Speaker 4: don't like running in the hot, so.
• 4:36
  Speaker 2: It was perfect and yeah, excellently, well well done, and
• 4:40
  Speaker 2: well done of giving your excuse to gorge yourself on
• 4:42
  Speaker 2: food afterwards. I know now onto more dowb worth.
• 4:46
  Speaker 4: It true money.
• 4:47
  Speaker 2: Yeah, so the first thing I wanted to chat about
• 4:51
  Speaker 2: his ideas on on and because you can do all
• 4:54
  Speaker 2: sorts of things when it comes to spliting your mortgage,
• 4:56
  Speaker 2: and it often seems like it's a newsflash to some people.
• 4:58
  Speaker 2: They go, I didn't realize it. It's pit for mortgage.
• 5:00
  Speaker 2: Hopefully more people know that. But with inflation on its
• 5:04
  Speaker 2: way down, obviously the cash rate, obviously the cash rate's
• 5:08
  Speaker 2: going to fall, of course it is. But I've seen
• 5:11
  Speaker 2: some I think heatherdo c Allen might have wrote it
• 5:13
  Speaker 2: was written a piece saying that she doesn't think it'll
• 5:16
  Speaker 2: fall as far as it should, because that would be
• 5:19
  Speaker 2: a mission by Adrian or that they've got it wrong,
• 5:22
  Speaker 2: which very very cynical. So because I've heard people say
• 5:27
  Speaker 2: it could for one or one point two, you know,
• 5:30
  Speaker 2: one hundred and twenty five basis points, So she sort
• 5:33
  Speaker 2: of was like, maybe at the only four seventy five,
• 5:34
  Speaker 2: because then it's like, I didn't get it that wrong.
• 5:37
  Speaker 4: No, Well, I guess the risk there is that we
• 5:40
  Speaker 4: go into stagflation and that would fail. Well when it's
• 5:46
  Speaker 4: the opposite of inflation where it goes backwards, it goes backwards,
• 5:50
  Speaker 4: and he certainly doesn't want that. No, so I would
• 5:55
  Speaker 4: respectfully disagree with Heather's comment. He may be late to
• 5:59
  Speaker 4: the party because he has it's certainly a habit of
• 6:02
  Speaker 4: doing that. And the banks also are particularly late to
• 6:06
  Speaker 4: any party that involves dropping interest rates. I mean they
• 6:08
  Speaker 4: are at their own little club somewhere. But I do
• 6:11
  Speaker 4: think rates will drop, and I think they'll drop by
• 6:13
  Speaker 4: at least one percent of the next year, possibly as
• 6:15
  Speaker 4: much as one point five because and that's just to
• 6:17
  Speaker 4: get to a neutral.
• 6:18
  Speaker 2: So let's just remind itself, where are what is the cash?
• 6:21
  Speaker 4: Five point oh? I can't mean what the cash rate is,
• 6:24
  Speaker 4: but the interest rates are about five point five for
• 6:27
  Speaker 4: twelve months, so we should be in the late fours.
• 6:30
  Speaker 4: I would say within the year.
• 6:31
  Speaker 2: In my mind, I think it's four point four points.
• 6:36
  Speaker 2: It's four point seven, so that would be taking it
• 6:39
  Speaker 2: down to sort of like we could get it down
• 6:41
  Speaker 2: to maybe three and a half in the next I mean,
• 6:43
  Speaker 2: they could eat and.
• 6:44
  Speaker 4: That's not neutral. That's still them trying to control slow
• 6:47
  Speaker 4: the economy down. So when they were trying to increase
• 6:51
  Speaker 4: the economy, that's when we go lower again. But everyone
• 6:54
  Speaker 4: will know the banks are slow to kick in to
• 6:57
  Speaker 4: gear these interest rate cuts, so I don't know what
• 7:02
  Speaker 4: you do about them, but I would be expecting interest
• 7:06
  Speaker 4: rates to come down. So then the question really is
• 7:09
  Speaker 4: do you fix for six months or twelve months? And
• 7:12
  Speaker 4: the answer to that depends on what is the gap
• 7:14
  Speaker 4: between the six months and the twelve month rate. And
• 7:17
  Speaker 4: if that gap is more than point six percent point
• 7:20
  Speaker 4: six of a percent, then you probably should be fixing
• 7:22
  Speaker 4: for twelve months. If it's less than point six, then
• 7:26
  Speaker 4: I'd be going for six months and then refixing in
• 7:28
  Speaker 4: six months time.
• 7:29
  Speaker 2: I've just brought up the interest rates on interest stock
• 7:31
  Speaker 2: Court and Z. And it looks unless my memory is
• 7:35
  Speaker 2: betraying me, not long ago, the long term interest rates
• 7:40
  Speaker 2: were really favorable. They were really trying to entice you
• 7:43
  Speaker 2: to a longer interest rate, which tells you the bank
• 7:45
  Speaker 2: thinks that the cash rate's going to come down. But
• 7:47
  Speaker 2: I'm just looking at A and Z right now and
• 7:49
  Speaker 2: this is and their long term rates just on A,
• 7:54
  Speaker 2: you know, not with the special LVRD or they've got.
• 7:58
  Speaker 2: They're six months rates seven point one and their five
• 8:02
  Speaker 2: year rate I would have thought would be in the fives,
• 8:04
  Speaker 2: but it's six point one nine, which is seems strange
• 8:07
  Speaker 2: to me.
• 8:08
  Speaker 6: Is it?
• 8:08
  Speaker 2: I'm not sure what? Yeah?
• 8:10
  Speaker 4: Do it with a twenty percent?
• 8:11
  Speaker 2: Oh okay, yes, well it doesn't show a five yr rate,
• 8:14
  Speaker 2: but it says five point six nine percent for three years? Yeah,
• 8:17
  Speaker 2: which is is that reasonably enticing?
• 8:20
  Speaker 4: Well? I think you would get if you went to
• 8:22
  Speaker 4: the bank and said give me your best rate, not
• 8:26
  Speaker 4: these kind of interest dock cod or n Z rates.
• 8:28
  Speaker 4: Like the best rate, I think you'd get it into
• 8:31
  Speaker 4: early fives. And for some people just fixing that for
• 8:34
  Speaker 4: three years and giving them certainty for three years at
• 8:36
  Speaker 4: that rates, Happy days. I mean it was I remember
• 8:40
  Speaker 4: ten years ago where or fifteen years ago before the
• 8:43
  Speaker 4: GFC right where. I mean, everyone talks about eighty seven
• 8:46
  Speaker 4: crash and rates going up to twenty two percent, but
• 8:47
  Speaker 4: most of us can't remember that. But what we can
• 8:50
  Speaker 4: remember is just before the GFC rates got up to
• 8:52
  Speaker 4: thirteen percent.
• 8:53
  Speaker 2: It's funny, we were just talking about that and the
• 8:55
  Speaker 2: property yesterday.
• 8:56
  Speaker 4: I just upset the car.
• 8:58
  Speaker 2: No, no, you haven't upset anyone. It's just one of
• 9:00
  Speaker 2: those conversations that during the course of talking about property
• 9:03
  Speaker 2: and its affordability.
• 9:05
  Speaker 4: That do we take a trip down memory laying to
• 9:07
  Speaker 4: eighty seven?
• 9:08
  Speaker 2: We always do. I can't tell you a number full.
• 9:13
  Speaker 2: I mean, it was pretty horrendual, of.
• 9:18
  Speaker 4: Course, and I don't want to make laugh of that,
• 9:19
  Speaker 4: but the mortgages were like a hundred dollars joking, I'm joking.
• 9:26
  Speaker 4: Of course, that would have been horrible that period, without
• 9:30
  Speaker 4: a doubt, and you do have to be able to
• 9:31
  Speaker 4: weather that. It was just the extreme weather conditions.
• 9:35
  Speaker 2: So I think probably the thing is, are there are
• 9:39
  Speaker 2: there different strategies for splitting your mortgage and let's just
• 9:41
  Speaker 2: go okay, so when we're talking about splitting your mortgage,
• 9:44
  Speaker 2: we might have a portion that you've done for five years,
• 9:47
  Speaker 2: you might have another portion for a year, and then
• 9:50
  Speaker 2: you might have some revolving.
• 9:51
  Speaker 4: Yeah, so I'll tell you what I would do with
• 9:53
  Speaker 4: my clients.
• 9:54
  Speaker 2: And it doesn't depend Oh well, I let you explain it.
• 9:56
  Speaker 4: Then, on the assumption that it's your the mortgage on
• 10:00
  Speaker 4: your home, right because that's unproductive debt. You want to
• 10:03
  Speaker 4: get that paid off as quickly as possible for investment
• 10:06
  Speaker 4: property debt or investment debt, which could be investment, for borrowings,
• 10:12
  Speaker 4: for investments, or for your business. We're not prioritizing paying
• 10:15
  Speaker 4: that off. It's just the home mortgage to start with.
• 10:18
  Speaker 2: Okay.
• 10:18
  Speaker 4: Typically, I want to have a revolving credit that you
• 10:23
  Speaker 4: don't have if poss access to. So it's not a
• 10:24
  Speaker 4: transactional account that's just a fast way to go backwards,
• 10:27
  Speaker 4: so we're not interested in that, but a revolving credit
• 10:30
  Speaker 4: facility that equals the size of your annual surplus. So
• 10:35
  Speaker 4: if you make if you've got a surplus, so that's
• 10:37
  Speaker 4: the amount of money you have left over. A lot
• 10:39
  Speaker 4: of families don't actually have any money left over, because
• 10:42
  Speaker 4: that's one of the first questions I asked. I say,
• 10:43
  Speaker 4: how much did you save last year, And they're.
• 10:45
  Speaker 2: Like, what are you talking about?
• 10:48
  Speaker 4: But if it was twenty thousand dollars, then that would
• 10:52
  Speaker 4: be the size of your revolving credit facility, and your
• 10:55
  Speaker 4: job is to pay that off over the course of
• 10:58
  Speaker 4: the year. That should naturally happen. And the thing with
• 11:01
  Speaker 4: the revolving credit is that it's on a higher interest rate,
• 11:04
  Speaker 4: So it only works to your advantage if you are
• 11:07
  Speaker 4: paying off the principle, otherwise walk away. It is not
• 11:11
  Speaker 4: working for you. You're actually just paying more money to
• 11:13
  Speaker 4: the bank.
• 11:13
  Speaker 2: But if you so, if you're disciplined and you know
• 11:16
  Speaker 2: that you can stick to that saving that you've predicted, yes, then.
• 11:20
  Speaker 4: That will pay half the floating interest rate. So a
• 11:23
  Speaker 4: revolving credit is a floating interest rate, so it's normally
• 11:25
  Speaker 4: one and a half percent higher than a fixed rate.
• 11:28
  Speaker 4: So you should stay away from that if you don't
• 11:30
  Speaker 4: have any surplus, like why would you expose yourself to
• 11:33
  Speaker 4: a higher interest cost? Or you do that if you've
• 11:36
  Speaker 4: actually got the capacity and the discipline to pay off
• 11:39
  Speaker 4: a chunk of it. But the amount you have on
• 11:41
  Speaker 4: your revolving credit is linked to what you can actually pay.
• 11:45
  Speaker 4: And when I'm working with clients. As I say, they
• 11:48
  Speaker 4: might have a natural savings rate of twenty thousand dollars
• 11:50
  Speaker 4: a year. My job is to get them to fifty thousand,
• 11:53
  Speaker 4: so I would have a fifty thousand dollars revolving credit.
• 11:55
  Speaker 4: In that situation, then you say, okay, we want to
• 11:58
  Speaker 4: have a chunk fixed one year. This is typically if
• 12:01
  Speaker 4: interest rates were normalized and we weren't going to an
• 12:04
  Speaker 4: interest rate dropping environment, you'd have a chunk fixed for
• 12:07
  Speaker 4: one year, two year, and maybe up to three years.
• 12:09
  Speaker 4: So back in the day, we used to fix quite
• 12:11
  Speaker 4: comfortably for so you.
• 12:12
  Speaker 2: Have three you'd have three or four splits in your mortgage.
• 12:15
  Speaker 4: That's right, But that's on the assumption interest rates aren't
• 12:17
  Speaker 4: coming down. When interest rates are coming down, there's no
• 12:20
  Speaker 4: point fixing for long unless the balance.
• 12:23
  Speaker 2: The cost, pity and the reason. So if they're stable,
• 12:25
  Speaker 2: you're going you're having a long chunk, which is cheaper
• 12:28
  Speaker 2: because that's right, and then you're having a shorter chunk
• 12:31
  Speaker 2: because you may actually be paying something off on that.
• 12:33
  Speaker 2: I guess in a year or two.
• 12:35
  Speaker 4: That's right. So you think, well, if you had that
• 12:36
  Speaker 4: revolving credit, and let's say it's sort of like a
• 12:39
  Speaker 4: yo yo at the bottom of the yo yo curve,
• 12:42
  Speaker 4: and it's your negative twenty thousand dollars. So your job
• 12:44
  Speaker 4: is to get that up to zero over the twelve months,
• 12:47
  Speaker 4: and then the chunk that was fixed for twelve months
• 12:50
  Speaker 4: comes up, and that then pushes you back into revolving credit.
• 12:55
  Speaker 4: So that one year chunk might be for thirty thousand dollars.
• 12:58
  Speaker 4: It's linked to what you're capable of paying off the
• 13:00
  Speaker 4: next year. In theory, you're supposed to be getting fitter
• 13:03
  Speaker 4: and fitter, so you're supposed to be getting better at saving,
• 13:07
  Speaker 4: and in addition to that, your debt is coming down faster,
• 13:10
  Speaker 4: so you can propel that forward.
• 13:14
  Speaker 2: So what about in the environment we've got now in
• 13:17
  Speaker 2: terms of the way people might want to structure their mortgages,
• 13:19
  Speaker 2: Because let's just assume that there could be another whole
• 13:24
  Speaker 2: one hundred points come off with the cash rate, which
• 13:27
  Speaker 2: would mean instead of a which means a six month
• 13:30
  Speaker 2: term might be instead of I'm just looking at ASB
• 13:33
  Speaker 2: here six point thirty nine, it might be five point
• 13:35
  Speaker 2: three nine or five point four or whatever.
• 13:38
  Speaker 4: So whether you should fix for six months or twelve
• 13:41
  Speaker 4: months comes down to the difference between the six month
• 13:45
  Speaker 4: rate and the twelve month rate. If the gap the
• 13:48
  Speaker 4: difference between them is more than point six of a percent,
• 13:52
  Speaker 4: I would be recommending you fixed for twelve months, because
• 13:55
  Speaker 4: it's unlikely even if the rate drop, the rate would
• 13:58
  Speaker 4: have to drop by one point two percent in the
• 14:01
  Speaker 4: next six months in order to be cash neutral with
• 14:05
  Speaker 4: fixing for twelve months. The probability of that is low.
• 14:09
  Speaker 4: I would say, I would say that the rates will
• 14:11
  Speaker 4: come down, maybe up to one point five percent. I
• 14:13
  Speaker 4: think it'll be in the next six months, probably over
• 14:16
  Speaker 4: the next twelve or so months. So whether you fix
• 14:18
  Speaker 4: for six or twelve months comes down to the relativity
• 14:22
  Speaker 4: of those two interest rates, which differs depending on the banks.
• 14:25
  Speaker 4: Some banks have the rates really close between a six
• 14:28
  Speaker 4: month and a twelve month and so then you're saying
• 14:30
  Speaker 4: fix for six months. It's greater chance you'll make more
• 14:33
  Speaker 4: gain in the next six months than what you will
• 14:35
  Speaker 4: in the first six months, but it will be enough
• 14:36
  Speaker 4: to offset you fixing for twelve months.
• 14:38
  Speaker 2: It was interesting you said about the revolving credit not
• 14:42
  Speaker 2: having access to it, because we did have acs. We
• 14:46
  Speaker 2: did use the revolving credit as our living account, but
• 14:50
  Speaker 2: we shoved everything into it, so we would only be withdrawal.
• 14:53
  Speaker 2: We weren't spending it, using it to spend for just
• 14:56
  Speaker 2: you know, frivolities, but we did. I think that's right
• 15:00
  Speaker 2: where you were using it because we we knew where
• 15:02
  Speaker 2: we're going to have. I think we've got an eighty
• 15:04
  Speaker 2: thousand dollars revolving credit, but it was because we were
• 15:07
  Speaker 2: doing a renovation, and so we would be borrowing that
• 15:10
  Speaker 2: as we spent money, but then we would everything we
• 15:13
  Speaker 2: went went into that account until we hopefully got it
• 15:15
  Speaker 2: back up to zero. Yeah, that's it, And so that
• 15:18
  Speaker 2: felt like a legitimate way of doing a revolving credit.
• 15:21
  Speaker 3: Yeah.
• 15:21
  Speaker 4: I think that that's a one off use of a
• 15:23
  Speaker 4: revolving credit, I think, and that's smart, Like it's an
• 15:25
  Speaker 4: efficient one maneuver. For most of my clients. We are
• 15:30
  Speaker 4: committed to paying the mortgage off in five or six years, right,
• 15:33
  Speaker 4: so we need more than one maneuver. We need clarity,
• 15:37
  Speaker 4: we need clinical execution, and kind of lumping money into
• 15:43
  Speaker 4: an account actually kind of slows things down because when
• 15:46
  Speaker 4: you pull that money out invariably, although it literally of course,
• 15:51
  Speaker 4: it made sense to have the money and the revolving
• 15:53
  Speaker 4: credit that literally will save you more interest but the
• 15:56
  Speaker 4: psychology of starting to go backwards has more of an
• 16:00
  Speaker 4: packed on your day to day spending when you draw
• 16:02
  Speaker 4: that money out. So we're trying to balance the reality
• 16:05
  Speaker 4: of people's situations.
• 16:07
  Speaker 2: Isn't there something as well? I don't know, maybe this
• 16:08
  Speaker 2: is just stand z where I can't remember if what
• 16:11
  Speaker 2: it's At the end of each term or at the
• 16:13
  Speaker 2: end of each year, you had the option of paying
• 16:15
  Speaker 2: off a five percent lump some.
• 16:18
  Speaker 4: Yes, but you can't reaccess that. So most banks give
• 16:21
  Speaker 4: you that opportunity, all right, So what.
• 16:23
  Speaker 2: I mean is that something useful for I mean, if
• 16:26
  Speaker 2: you've got a long term mortgage, is that you could
• 16:29
  Speaker 2: instead of having revolve and credit, if you can save
• 16:31
  Speaker 2: that up, you just whack it off that.
• 16:32
  Speaker 4: Long term but that but you can't reaccess it. And
• 16:37
  Speaker 4: the most important thing I think when you're trying to
• 16:39
  Speaker 4: make financial progress is to have flexibility, because opportunities come
• 16:43
  Speaker 4: usually at the most inopportune time. And you make a
• 16:46
  Speaker 4: lump some payment on your mortgage, sure as eggs, you
• 16:49
  Speaker 4: will regret that about forty eight hours later when you
• 16:52
  Speaker 4: needed that money for something else that you just didn't
• 16:54
  Speaker 4: even know about then. So I'm a believer that you
• 16:57
  Speaker 4: don't pay anything off your mortgage volunteer heaily unless you
• 17:01
  Speaker 4: can reaccess that money.
• 17:04
  Speaker 2: Okay, I had not thought of that at all, because
• 17:07
  Speaker 2: I've considered that five percent payment even though I've never
• 17:10
  Speaker 2: made it.
• 17:12
  Speaker 4: Well, but I get it. The theory of it makes
• 17:15
  Speaker 4: perfect sense, just like the theory of credit cards makes
• 17:17
  Speaker 4: perfect sense, you know, like use the bank's money.
• 17:19
  Speaker 2: Save what it's don't miss a payment. Yeah.
• 17:23
  Speaker 4: Look, I think the psychology if if you told me
• 17:26
  Speaker 4: you use your credit card, I will know straight away
• 17:29
  Speaker 4: that you are inefficient with your money. Sure is X.
• 17:32
  Speaker 2: We do everything on our credit card and we pay
• 17:33
  Speaker 2: it off every month.
• 17:35
  Speaker 4: We go, yes, inefficient with your money because the the
• 17:38
  Speaker 4: point isn't that you can't pay it off. That means
• 17:40
  Speaker 4: that you're not going backwards. Right, you've paid it off.
• 17:45
  Speaker 4: There's enough money to cover your credit card. For many
• 17:47
  Speaker 4: of us, we can pay our credit cards in full.
• 17:50
  Speaker 4: The issue is that, because you've used a credit card,
• 17:52
  Speaker 4: have you spent more than what you would have otherwise
• 17:55
  Speaker 4: spent if you didn't use it.
• 17:56
  Speaker 2: Think that's a very good question. I think we reasonably
• 17:59
  Speaker 2: disap on that. But actually, and I'll tell you this
• 18:03
  Speaker 2: is you're going to tell me off for this. I
• 18:04
  Speaker 2: do it because I just love the points. Oh my lord,
• 18:08
  Speaker 2: well you got hands up? Who's hands up? If you
• 18:11
  Speaker 2: are out there listening, how many of you have got
• 18:13
  Speaker 2: a credit card? And you know that maybe you should
• 18:16
  Speaker 2: listen to Hannah's advice, But you do it because you
• 18:18
  Speaker 2: like that little the fact that when you go for
• 18:20
  Speaker 2: your your annual holiday, you go, hey, guess what, we've
• 18:22
  Speaker 2: got one thousand dollars in airpoints.
• 18:24
  Speaker 4: Okay, okay, so I will listen to that. But at
• 18:26
  Speaker 4: the same time, you were not allowed to complain that
• 18:28
  Speaker 4: the banks make billion dollar profits. They go hand in hand.
• 18:32
  Speaker 4: Oh I never do.
• 18:33
  Speaker 2: Really, No, I'm not a complainer about it. I think
• 18:36
  Speaker 2: everyone's in it to make money and if it's up
• 18:38
  Speaker 2: to us to make the decisions we want to make,
• 18:40
  Speaker 2: and don't bitch about the profits. Okay, very surprised. I
• 18:45
  Speaker 2: thought you were going to say, surprisingly reasonable of me.
• 18:48
  Speaker 4: Are they go hand in hand?
• 18:50
  Speaker 2: Mentioned Republicans? I'm ready, Hey, so how do you structure
• 18:57
  Speaker 2: your mortgage? What are your rules of thumb that you
• 19:00
  Speaker 2: years when it comes to spliting your mortgage? Revolving credit?
• 19:02
  Speaker 2: But actually, while we've thrown it out there, it's just
• 19:04
  Speaker 2: become the hot topic. What's wrong with having a credit
• 19:06
  Speaker 2: card and paying on our for every month? Hannah's well
• 19:10
  Speaker 2: aden on eight hundred eighty ten eighty and you can
• 19:17
  Speaker 2: text on nine two nine two. The lines are open.
• 19:19
  Speaker 2: Let's get cracking.
• 19:22
  Speaker 4: Well done, cure you tonight.
• 19:26
  Speaker 2: I've had to feel something, right, I'm so.
• 19:30
  Speaker 5: Scared and kids are full of my chair and one
• 19:35
  Speaker 5: I'll get down the stairs.
• 19:38
  Speaker 4: Clowns to the letting me jokers to the raid.
• 19:41
  Speaker 2: Here I am nucking the meddle with you your sounds
• 19:46
  Speaker 2: and welcome back to the show. I'm Tim Beverages. This
• 19:48
  Speaker 2: is a smart money. We have Hannah McQueen in the studio.
• 19:51
  Speaker 2: She is fresh from her holiday and running the Berlin Marathon.
• 19:54
  Speaker 2: And I know how long we can use that line.
• 19:57
  Speaker 2: Probably just today.
• 19:58
  Speaker 4: It's done. Really, yeah, it feels we're even talking about embarrassing.
• 20:02
  Speaker 2: Really, I think we can use it for the next
• 20:04
  Speaker 2: half an hour. But anyway, the question is how are
• 20:06
  Speaker 2: you structuring your mortgages with the cash rate looking like
• 20:08
  Speaker 2: it's going to fall and the also my confession that
• 20:14
  Speaker 2: I use. We use our credit card for all us spinning.
• 20:16
  Speaker 2: We pay it off every month. Of course we like
• 20:18
  Speaker 2: the points and Hannah, I think we've just resuscitated her
• 20:22
  Speaker 2: and she's she's back, she's back up right again. But
• 20:25
  Speaker 2: we're taking your calls on that as well. On eight
• 20:28
  Speaker 2: and eighty Lou, Hello, Hi, how are you good? Things good? I?
• 20:34
  Speaker 6: Basically I was raised by my family using our credit
• 20:38
  Speaker 6: cards on a monthly basis, and then when the bill
• 20:40
  Speaker 6: comes once a month, we pay it up.
• 20:43
  Speaker 3: I have moved away.
• 20:44
  Speaker 6: From ever since then and started using my debit card more.
• 20:48
  Speaker 6: But there's certain things that I do that I've found
• 20:51
  Speaker 6: is work better if I put it on my credit cards,
• 20:53
  Speaker 6: such as my feel I've discovered that it's it's easier
• 20:58
  Speaker 6: to manage your fuel that way then paying for an
• 21:01
  Speaker 6: upfront through your debit card. But also things when it
• 21:04
  Speaker 6: comes to my house, if I need to buy new
• 21:06
  Speaker 6: things for the house, it's easier to put that on
• 21:07
  Speaker 6: the credit card than on my debit card.
• 21:09
  Speaker 2: Oh why would that be? You mean you rely on credits?
• 21:14
  Speaker 2: In other words, you rely and borrowing.
• 21:15
  Speaker 6: No, no, no, I definitely do not rely on my
• 21:17
  Speaker 6: credit card to buy these things. I can buy it
• 21:20
  Speaker 6: out for outright I need to, but it's it's more
• 21:23
  Speaker 6: of a I feel like it's more of a separation
• 21:26
  Speaker 6: of my money. Even if I buy stuff on my ABMB,
• 21:29
  Speaker 6: obviously that's a business expense, but I still buy it
• 21:32
  Speaker 6: on my credit card because there's that separation that Okay,
• 21:34
  Speaker 6: this is my feel this is my property expenses, and
• 21:37
  Speaker 6: this is my personal expenses. I can sing like if
• 21:41
  Speaker 6: I go shopping, if I go buy, if I go
• 21:44
  Speaker 6: out and buy some homes, that goes on my debit card,
• 21:47
  Speaker 6: but not on my credit card.
• 21:48
  Speaker 4: Yeah, so you're using your cards to kind of give
• 21:50
  Speaker 4: you some structure and segregation between your spending. That makes sense. Yeah,
• 21:54
  Speaker 4: I think that the key with credit cards is definitely
• 21:58
  Speaker 4: bills and things provide you're not negatively impacted. You know
• 22:03
  Speaker 4: they're not going to put a premium because you're paying
• 22:05
  Speaker 4: by credit card. It makes sense to put to automate
• 22:08
  Speaker 4: your bills as much as possible. And whether that's a
• 22:10
  Speaker 4: credit card, well, a separate account is normally what I
• 22:13
  Speaker 4: would have, but or a credit card, it's just the
• 22:16
  Speaker 4: discretionary spending. When you use a credit card, you spend more.
• 22:22
  Speaker 4: Like the studies are conclusive, you spend more. But I
• 22:25
  Speaker 4: like the idea, Lou, that you've separated out the airbnb
• 22:27
  Speaker 4: so that that sits in a separate account or a
• 22:30
  Speaker 4: different way kind of methodology of how you account for it.
• 22:32
  Speaker 4: That makes a lot of sense.
• 22:35
  Speaker 6: And because I can't justify going out for dinner and
• 22:37
  Speaker 6: spending one hundred and fifty dollars, let's say, for three people,
• 22:39
  Speaker 6: I can't justify putting that on my credit card because
• 22:41
  Speaker 6: of the interest that A will be paying back on that.
• 22:44
  Speaker 6: I would rather just pay one hundred and thirty dollars
• 22:46
  Speaker 6: once and call it a day instead of having to
• 22:48
  Speaker 6: pay back for I can take one hundred and seventy
• 22:50
  Speaker 6: dollars for a night out, but that's.
• 22:52
  Speaker 4: On the assumption you don't pay it off at the
• 22:54
  Speaker 4: end of the month.
• 22:56
  Speaker 6: Yes, but that's why I put do it that way.
• 22:58
  Speaker 6: But obviously the card always gets paid. But it's more
• 23:01
  Speaker 6: just yeah, it's more bringing in that structure. And I
• 23:03
  Speaker 6: don't know i've done it that way. My family said
• 23:06
  Speaker 6: I'm stupid by doing it that way, but I've just
• 23:07
  Speaker 6: felt that it's given me more financial security as well
• 23:11
  Speaker 6: as financial structure.
• 23:12
  Speaker 2: And what don't your family like about it? What's the objection?
• 23:16
  Speaker 6: The objection that I'm using my debitcat to basically fund
• 23:18
  Speaker 6: my day to day lifestyle. It comes down to the
• 23:22
  Speaker 6: principle that it's against how they've done it their whole lives.
• 23:26
  Speaker 6: But at the end of the day, I mean, I'm
• 23:27
  Speaker 6: twenty four. I can kind of make these decisions on
• 23:29
  Speaker 6: my own, can't.
• 23:30
  Speaker 4: I absolutely go forth, Lo, you're doing well.
• 23:33
  Speaker 2: Actually you are paying off. When you're talking about your
• 23:35
  Speaker 2: credit card, you are paying the entire credit card some off,
• 23:38
  Speaker 2: are you.
• 23:39
  Speaker 6: Yes, So at the end of every month, I pay
• 23:41
  Speaker 6: the lump sum on the bill. I don't just pay
• 23:43
  Speaker 6: the monthly informent. Okay, yeah, so it's lead Fivensay, let's
• 23:47
  Speaker 6: say this month's bill is five grand. I'll put the
• 23:49
  Speaker 6: five grand down and then it's done.
• 23:51
  Speaker 2: Okay, Okay, Now, thanks for your cool mate, I appreciate it.
• 23:55
  Speaker 2: Are we arguing? Are you sort of almost arguing against
• 23:58
  Speaker 2: having a credit card? Full stop? Anyway? Just because credit card?
• 24:01
  Speaker 4: I think, pay your credit cards. Use credit cards to
• 24:03
  Speaker 4: pay your bills, internet purchases. There's a place for that.
• 24:07
  Speaker 2: Okay, discretionary transacting.
• 24:10
  Speaker 4: Like, yeah, for your discretionary purchases, whether that is what
• 24:14
  Speaker 4: you spend on hobbies or going out or food or
• 24:18
  Speaker 4: special events whatever. When you use a credit card, you
• 24:21
  Speaker 4: spend more than when you have to use cash? MM
• 24:26
  Speaker 4: conclusively is that yes?
• 24:28
  Speaker 3: You do?
• 24:29
  Speaker 2: So if I don't think what matter what card I had,
• 24:32
  Speaker 2: I would buy what I need when I need it,
• 24:34
  Speaker 2: And I don't mean not otherwise.
• 24:36
  Speaker 4: It's this, Well, the study is the pain of paying.
• 24:38
  Speaker 4: When there is a pain to pay, you spend less generally,
• 24:44
  Speaker 4: or the easier it is to pay, the more you spend.
• 24:46
  Speaker 4: So it's the inverse of that. So credit card tap
• 24:48
  Speaker 4: and go like, oh my lord, that's the worst now
• 24:54
  Speaker 4: and pay later. I'm like, what the heck is it
• 24:56
  Speaker 4: all about? Fastest way to end up poor?
• 24:58
  Speaker 2: Actually, my sixteen year old actually, isn't it funny? I don't.
• 25:02
  Speaker 2: I wouldn't say I got any particular financial guidance from
• 25:06
  Speaker 2: my parents, but instinctively I always thought maybe Mum must
• 25:11
  Speaker 2: have said something about layby and and oh and just
• 25:16
  Speaker 2: going into debt to buy something that's an optional thing
• 25:20
  Speaker 2: always just to me intuitively, I just thought, hang on
• 25:23
  Speaker 2: a minute, if I can't afford to buy it now,
• 25:25
  Speaker 2: you know I'm not going to buy it, why would
• 25:27
  Speaker 2: I want to pay that price plus the interest over
• 25:29
  Speaker 2: several years. And yet for some people it's sort of
• 25:31
  Speaker 2: their modus operando. I just sort of throw that in there.
• 25:35
  Speaker 2: I'm not sure what value it has the conversation, but
• 25:37
  Speaker 2: there we go. Yes, nothing from Hannah.
• 25:40
  Speaker 4: They're something in French to say to you, but no, okay, right, okay.
• 25:44
  Speaker 2: Let's carry on with the calls. We're we up to Danielle.
• 25:47
  Speaker 3: Hello, Hello.
• 25:49
  Speaker 7: So my thoughts on the credit thing is that I
• 25:53
  Speaker 7: think it's a bad habit to get into, to be
• 25:55
  Speaker 7: paying on your credit CAD and paying it off it
• 25:58
  Speaker 7: in the month, because what happen if sometime within that month,
• 26:02
  Speaker 7: maybe you have an accident or lose your job and
• 26:05
  Speaker 7: you're not able to pay that amount and then you're
• 26:07
  Speaker 7: stuck with a bill. In that habit, you're not able
• 26:11
  Speaker 7: to keep it going because you can't don't have a
• 26:13
  Speaker 7: job anymore, or something like it sounds like you're getting
• 26:16
  Speaker 7: into SEBT for no reason, Like, well, not for no reason,
• 26:20
  Speaker 7: but that kind of thing, Like that's just my thinking.
• 26:23
  Speaker 2: I know what I mean, what if there's a catastrophe
• 26:26
  Speaker 2: and you have bought something on your credit card.
• 26:29
  Speaker 4: Well, I think that what Daniel's saying is that with
• 26:32
  Speaker 4: that paid at the end of the month, there's no
• 26:34
  Speaker 4: rigor and inmost instance there's not much consciousness with your spending.
• 26:37
  Speaker 4: There's just an assumption that you'll have enough money to
• 26:39
  Speaker 4: pay it at the end of the month, and most
• 26:41
  Speaker 4: people do. But equally, most people, well let's let's say that,
• 26:46
  Speaker 4: but equally most people aren't making financial progress. And there
• 26:50
  Speaker 4: is a link between the two. And I think when
• 26:53
  Speaker 4: you can introduce rigor and structure and guard rails and objectives,
• 26:59
  Speaker 4: people with anything, whether it's fitness or finance, you tend
• 27:04
  Speaker 4: to level up. And what credit cards do is they
• 27:07
  Speaker 4: take down the guardrails, they take down the consciousness. Everything
• 27:11
  Speaker 4: is easy, it will always be okay. The issue isn't
• 27:13
  Speaker 4: whether you can pay that in full at the end
• 27:15
  Speaker 4: of the month. The issue is did you spend more
• 27:17
  Speaker 4: because you used it?
• 27:19
  Speaker 7: And also can you afford to keep that going if
• 27:22
  Speaker 7: you don't have a job, or you don't or you've
• 27:25
  Speaker 7: had an accident or something, can you afford to keep
• 27:27
  Speaker 7: that habit going? Because you've built this habit up. It
• 27:29
  Speaker 7: takes thirty days to build a habit. You've built this
• 27:32
  Speaker 7: habit up of using your credit card every single purchase
• 27:35
  Speaker 7: that you make, or or the.
• 27:37
  Speaker 4: Way that you could get around that. Danielle, though it
• 27:39
  Speaker 4: could be to just pay it off weekly, or with
• 27:41
  Speaker 4: my clients who insist on using their credit card because
• 27:44
  Speaker 4: they get these points, or whatever, I say, we'll run
• 27:46
  Speaker 4: it either in the positive or pay it every forty
• 27:49
  Speaker 4: eight hours so that you're always at a zero sum balance.
• 27:52
  Speaker 4: That brings in more true consciousness as well. That's a
• 27:56
  Speaker 4: point than thought.
• 27:57
  Speaker 2: And I thank you. I appreciate that, Danielle, thank you.
• 27:59
  Speaker 2: I think that's that's interesting question around the whole pain
• 28:01
  Speaker 2: of paying, isn't it if? And I might have even
• 28:05
  Speaker 2: said this to you, but I've played around with the
• 28:07
  Speaker 2: idea just philosophically, because I couldn't never be bothered, to
• 28:10
  Speaker 2: be honest. But imagine if I wonder what difference there
• 28:14
  Speaker 2: would be in people's expenditure if we, despite the ability
• 28:19
  Speaker 2: to have credit cards and order things online, et cetera,
• 28:21
  Speaker 2: but if every time you went shopping down to the moor,
• 28:23
  Speaker 2: every time you bought something, you had to hand over cash. Yeah,
• 28:27
  Speaker 2: I wonder what difference that would make on the way
• 28:32
  Speaker 2: we have we spend money. Because there is something. I mean,
• 28:34
  Speaker 2: there's a generation, there's a generation of kids who don't
• 28:37
  Speaker 2: even know what it's like to hand over cash this day,
• 28:39
  Speaker 2: because it's just mum can I have this, or I've
• 28:41
  Speaker 2: got somebody's given me a pressI card. It's all plastic,
• 28:44
  Speaker 2: I know.
• 28:46
  Speaker 4: Yeah, So it's well with my clients. I find that
• 28:48
  Speaker 4: it's on their most frequent costs and can be as
• 28:50
  Speaker 4: much as thirty percent difference. But it's your You've got
• 28:55
  Speaker 4: the tactile payment of cash or the inconvenience of pain
• 28:58
  Speaker 4: with cash cash, the increased consciousness, and the other bit
• 29:02
  Speaker 4: there is that there's a target on what they're spending.
• 29:06
  Speaker 4: So normally those three things are what creates the improvement.
• 29:10
  Speaker 4: Probably with a bit of a bit scared by me
• 29:13
  Speaker 4: as well, is that the.
• 29:19
  Speaker 2: Part of the equation that we have ignored.
• 29:21
  Speaker 4: It's like, well, people want to result, right, because I don't.
• 29:27
  Speaker 2: The callers have said something about credit cards and just
• 29:30
  Speaker 2: the discipline you need. If I decided that I wasn't
• 29:33
  Speaker 2: even very much, if I found out that I, say,
• 29:35
  Speaker 2: I lost my job or something, wasn't any the money,
• 29:37
  Speaker 2: I actually just wouldn't use the credit card. And I
• 29:39
  Speaker 2: don't think I'd find that a hard adjustment to make,
• 29:41
  Speaker 2: because I just I'm very conscious of what goes in,
• 29:46
  Speaker 2: what goes out has to come back in, and so
• 29:48
  Speaker 2: I cautious with my spending.
• 29:52
  Speaker 4: That's right, so you're not reckless at all with your spending,
• 29:54
  Speaker 4: but there is also an acknowledgement that there's no room,
• 29:58
  Speaker 4: there's no margin of err when there's no income coming in, right,
• 30:01
  Speaker 4: you just have to spend less. And it's interesting that
• 30:04
  Speaker 4: you acknowledge that you'd put the credit card away because
• 30:08
  Speaker 4: the fear or the risk that you might spend more
• 30:12
  Speaker 4: than what you should is removed when you remove the
• 30:15
  Speaker 4: credit card.
• 30:16
  Speaker 2: I guess the thing is, how do you actually get
• 30:17
  Speaker 2: that consciousness of the pain of what you're paying Because
• 30:20
  Speaker 2: as you're right, I mean, you go, you look at
• 30:23
  Speaker 2: what it's simply you hand over something over. You want this,
• 30:26
  Speaker 2: you just hand over the plastic magic, it's paid for you.
• 30:29
  Speaker 4: That's why they say physically using cash is helpful as
• 30:33
  Speaker 4: a second thing. Using a f boss or a debit
• 30:37
  Speaker 4: card after that, but links to a bank account that
• 30:39
  Speaker 4: tells you you're about to go backwards. When you are
• 30:42
  Speaker 4: about to go backwards, it's the because the problem with
• 30:46
  Speaker 4: the credit card, which Danielle was highlighting, is that you
• 30:48
  Speaker 4: can sco a whole month and you can still keep spending.
• 30:51
  Speaker 4: So you're trying to introduce rigor that not around the
• 30:56
  Speaker 4: things that are important to you. But you lose that
• 30:58
  Speaker 4: rigor you give it away. And it's like if you
• 31:01
  Speaker 4: say you do want to lose weight or get fit,
• 31:03
  Speaker 4: but you don't actually the couch, so well, you've got
• 31:07
  Speaker 4: to do something.
• 31:08
  Speaker 2: Well. Actually, there is an analogy with the creds to diet.
• 31:11
  Speaker 2: It's that you think I must eat more healthily and
• 31:13
  Speaker 2: then you walk past the cake store and you go,
• 31:16
  Speaker 2: I might have one of those. It's only once, and
• 31:17
  Speaker 2: then you do it again in the afternoon. You don't
• 31:19
  Speaker 2: really realize because you haven't got a plan. You're just
• 31:22
  Speaker 2: living sort of a bit too in the moment.
• 31:24
  Speaker 4: Where you just relax. I think most people would say
• 31:27
  Speaker 4: that they're not bad with money, but they're just relax
• 31:30
  Speaker 4: It's sort of I've got enough money to not worry,
• 31:33
  Speaker 4: as opposed to well how do I get this money
• 31:35
  Speaker 4: working harder for me, which is a different mindset.
• 31:38
  Speaker 2: Okay, well we're going to take a break, come back,
• 31:40
  Speaker 2: and we've actually introduced by accident. It's sort of deliberately
• 31:44
  Speaker 2: by accident, just the question around credit cards, but it's
• 31:47
  Speaker 2: all connected with structuring your mortgage. On the news of
• 31:50
  Speaker 2: the cash rate and the OCI heading down and how
• 31:53
  Speaker 2: you split your mortgage. We've got some correspondence on people
• 31:56
  Speaker 2: telling us how they split their mortgages and all that
• 31:58
  Speaker 2: sort of thing. We're going to do that as well.
• 32:00
  Speaker 2: Also credit cards the devil. If you really want to
• 32:04
  Speaker 2: get disciplined and feel the pain of every dollar you spend.
• 32:08
  Speaker 2: It is eighteen minutes to six News Talks. He'd be.
• 32:23
  Speaker 4: New Orleans. We're back up in the woods among.
• 32:26
  Speaker 2: The everre Yes. This is smart money, and my guest
• 32:30
  Speaker 2: is Hannah McQueen. She's a financial advisor and coach. We're
• 32:34
  Speaker 2: talking about how you structure your mortgage, but also just
• 32:36
  Speaker 2: the whole deal with credit cards, because I say I
• 32:38
  Speaker 2: stick all out, we stick all our expenses on the
• 32:40
  Speaker 2: credit card. And Hannah has told me that I'm a
• 32:42
  Speaker 2: very naughty boy for doing that. But actually, before we
• 32:46
  Speaker 2: get into some of some of the correspondents, by the way,
• 32:48
  Speaker 2: if you want to give us a call and express
• 32:49
  Speaker 2: your opinion on that, you'll get straight through eight hundred
• 32:51
  Speaker 2: and eighty ten eighty. Let's just remind people, because you know,
• 32:55
  Speaker 2: people have a little bit of extra money and they
• 32:57
  Speaker 2: might think about, oh they you know, people can decisions
• 33:00
  Speaker 2: about how they spend their money, of course, but they
• 33:02
  Speaker 2: might decide they're going to have a holiday, or they
• 33:04
  Speaker 2: might decide to pay it off the mortgage. But it's
• 33:07
  Speaker 2: worth thinking about, Oh if I save that twenty grand
• 33:12
  Speaker 2: now and pay it off the mortgage instead of spending it,
• 33:15
  Speaker 2: how much is that actually worth further down the track
• 33:18
  Speaker 2: compared to the interest you'll pay if you haven't actually
• 33:21
  Speaker 2: paid that off. You know, the I don't know what
• 33:23
  Speaker 2: the expression is for it.
• 33:24
  Speaker 4: Bit well, the pigeon economics of it is sort of
• 33:28
  Speaker 4: one for one pigeon economics. So you had a mortgage
• 33:32
  Speaker 4: of five hundred thousand, you're going to pay close to
• 33:34
  Speaker 4: three times that back to the bank over the life
• 33:37
  Speaker 4: of it, right, which is just.
• 33:39
  Speaker 6: It is?
• 33:40
  Speaker 4: It is out of control. Yeah, I'm just like, how
• 33:43
  Speaker 4: is that even legal? But that is our system. So
• 33:45
  Speaker 4: you're going to pay that. For every dollar you put
• 33:48
  Speaker 4: against the mortgage, that tends to save you a dollar
• 33:50
  Speaker 4: in interest. So if you choose to put ten thousand
• 33:53
  Speaker 4: dollars against the mortgage, of course you'll pay down the
• 33:55
  Speaker 4: mortgage by ten thousand dollars, but you will save yourself
• 33:58
  Speaker 4: a further ten thousand dollars an intro that you won't
• 34:00
  Speaker 4: pay which is great.
• 34:02
  Speaker 2: I guess it makes a big difference when you're talking
• 34:04
  Speaker 2: about retirement as well. If people are thinking, oh, I'm
• 34:06
  Speaker 2: just gonna say, if you've got you come into a
• 34:08
  Speaker 2: lump some of fifty thousand bucks and you think, oh,
• 34:10
  Speaker 2: let's do something nice with that. But what you can
• 34:12
  Speaker 2: potentially do if you whack that off your mortgage and
• 34:15
  Speaker 2: put that money which you would otherwise spend into interest
• 34:18
  Speaker 2: into the bank over that period of time, that's got
• 34:21
  Speaker 2: to be worth well.
• 34:23
  Speaker 4: Where you get the kind of the extra the compounded
• 34:26
  Speaker 4: return is if you've got your fifty grand, you've put
• 34:28
  Speaker 4: it against the mortgage, it's going to save you interest costs.
• 34:31
  Speaker 4: You're going to get mortgage free faster with that money.
• 34:33
  Speaker 4: You've channeled it through a revolving credit facility so you
• 34:36
  Speaker 4: can reaccess it, and then that becomes a deposit for
• 34:38
  Speaker 4: an investment property as well, and then you're getting capital
• 34:41
  Speaker 4: gain on a new asset. You've paid off more debt
• 34:43
  Speaker 4: on your home, and you save yourself interest. That's sort
• 34:45
  Speaker 4: of the quite it's quite a heafty triple axel.
• 34:49
  Speaker 2: It's quite a hefty waterf scenario. Isn't it just that
• 34:52
  Speaker 2: simple decision to maybe just use that money pay something
• 34:57
  Speaker 2: off and get ahead on something else. It can really
• 34:59
  Speaker 2: turn your fortune around, can't it.
• 35:01
  Speaker 4: Yeah, well, I think that the everything's about trade offs.
• 35:06
  Speaker 4: And I think one of the concerning things is most
• 35:08
  Speaker 4: people don't realize what is possible. If we kind of
• 35:12
  Speaker 4: got rid of all their inefficiencies and really started working
• 35:16
  Speaker 4: to a plan, they will get ahead so much faster.
• 35:19
  Speaker 4: But they don't know that, you know, because their reflection
• 35:22
  Speaker 4: to themselves is, well, I'm not bad with money, so
• 35:24
  Speaker 4: I don't understand how I can be that much better? Like,
• 35:27
  Speaker 4: how is that even possible? And I think there's just
• 35:30
  Speaker 4: a knowledge gap, and we've got to overcome that because
• 35:34
  Speaker 4: people are capable of more than what their bank balance suggests.
• 35:38
  Speaker 2: Okay, let's take some more calls. Lynn.
• 35:40
  Speaker 5: Hello, Hi, how are you this afternoon?
• 35:44
  Speaker 2: Actually?
• 35:45
  Speaker 4: But I'm loving this.
• 35:47
  Speaker 5: Oh it's quite It's a lovely day here in Central Otago.
• 35:52
  Speaker 2: There you go, which part of Central Otago? Come on.
• 35:56
  Speaker 5: Just above Alex So I'm actually heading down to Gore
• 35:59
  Speaker 5: and I love Central love Central Right, let's go.
• 36:03
  Speaker 2: What did you want to discuss?
• 36:06
  Speaker 3: So?
• 36:06
  Speaker 5: I have a credit card, but I don't use it.
• 36:10
  Speaker 5: I the only time I use it is when I'm
• 36:14
  Speaker 5: buying bolved from a company up in the North Island.
• 36:17
  Speaker 5: But apart from that, I never use it. If I
• 36:20
  Speaker 5: can't really pay cash for the biggest thing, I you know,
• 36:26
  Speaker 5: go it out just to use.
• 36:28
  Speaker 4: It's good practice, that's very good practice.
• 36:32
  Speaker 5: Yeah. I think I got that installed in me for
• 36:36
  Speaker 5: my ex who was very frugal. And it's like, you
• 36:40
  Speaker 5: can't afford to pay cash, you can't don't.
• 36:43
  Speaker 4: Need it, So it sounds like that's sort of my philosophy.
• 36:47
  Speaker 2: I mean, I'm using a credit card, but I sort
• 36:50
  Speaker 2: of think can I afford to buy it or not?
• 36:53
  Speaker 5: Yeah, And I've got my mortgage. I have a small
• 36:58
  Speaker 5: mortgage and next year my Kiwisaver comes due, so I'm
• 37:03
  Speaker 5: going to whack everything that's on my Kiwi Saver onto
• 37:07
  Speaker 5: my mortgage, which will then reduce it down at heck
• 37:11
  Speaker 5: of a lot further.
• 37:13
  Speaker 4: Before you do that, sorry, Lynn, who's the bank that
• 37:16
  Speaker 4: you've got your back mortgage with?
• 37:19
  Speaker 7: Have we spack?
• 37:20
  Speaker 3: Right?
• 37:21
  Speaker 4: So before you pay off the portion of the mortgage
• 37:25
  Speaker 4: that the Kiwisaver can pay down, you need to split
• 37:28
  Speaker 4: the mortgage to the amount so and you can split
• 37:32
  Speaker 4: mortgages that should be fined. I mean, sometimes there's a
• 37:35
  Speaker 4: break cost, but often there just isn't. So we'd ask
• 37:37
  Speaker 4: the bank. But let's say your kiwisaver was fifty thousand
• 37:40
  Speaker 4: dollars and hypothetically your mortgage was seventy thousand dollars, so
• 37:44
  Speaker 4: we'd say, let's split seventy thousand dollars off the mortgage.
• 37:47
  Speaker 4: So you'll then have two mortgages, one of twenty thousand,
• 37:50
  Speaker 4: and one of said I've lost my mask fiftyconcerting. So
• 37:57
  Speaker 4: then and with the fifty thousand dollars, we convert that
• 38:00
  Speaker 4: to a revolving credit facility or even an offset facility.
• 38:04
  Speaker 4: Then you deposit your key we saver in and that
• 38:07
  Speaker 4: has the same outcome of you've paid off the debt.
• 38:10
  Speaker 4: You're not getting interest charged, but it has the benefit
• 38:13
  Speaker 4: of you being able to reaccess that fifty thousand dollars
• 38:16
  Speaker 4: should you need to.
• 38:19
  Speaker 2: Okay, good stuff, Hey, thanks Lin. Unfortunate we got to
• 38:22
  Speaker 2: go to a break. We'll be back in a take
• 38:24
  Speaker 2: nine minutes to Sex Newstalk. Sa'd b blimey, time flies
• 38:32
  Speaker 2: when you're having fun. This is smart money. We've only
• 38:34
  Speaker 2: had a couple of minutes left with Hanna McQueen I
• 38:38
  Speaker 2: do love this. I have to do this text. That's
• 38:40
  Speaker 2: we're talking about. You know, whether you pay the money
• 38:43
  Speaker 2: off now that you've might have on a holiday, how
• 38:45
  Speaker 2: much it's worth if your power for your mortgage. It's
• 38:47
  Speaker 2: probably an extra dollar for every dollar you pay off.
• 38:49
  Speaker 2: Somebody said, yes, it does cost more down the track,
• 38:52
  Speaker 2: but then you don't get to go to Berlin or.
• 38:55
  Speaker 4: You're mortgage free to start with boe.
• 38:57
  Speaker 2: Yes, indeed, Well that's the one guys. I split the
• 39:02
  Speaker 2: mortgage into one, two and three year portions once is
• 39:04
  Speaker 2: recommended by the broker. The market dropped and three years
• 39:07
  Speaker 2: ended up too long. Then since then two years max
• 39:09
  Speaker 2: and one in recent time mature again March there might
• 39:12
  Speaker 2: be a short term again with another drop likely question
• 39:14
  Speaker 2: mark from Mike. Oh no, he's having a good crack
• 39:17
  Speaker 2: at splitting this mortgage.
• 39:18
  Speaker 4: Yeah, I agree with it that probably for the next year.
• 39:20
  Speaker 4: You don't want to be fixing much more than twelve
• 39:22
  Speaker 4: or eighteen months. But it's just going to come down
• 39:24
  Speaker 4: to what those interest rates are. Is more drops to come.
• 39:28
  Speaker 2: And lucky last Hannah, I put most everything on the
• 39:31
  Speaker 2: credit card. I pay in full every month, never pay interest,
• 39:33
  Speaker 2: receive points and a cash bonus every year. Well, that's
• 39:36
  Speaker 2: all good, so long as you are feeling the pain
• 39:38
  Speaker 2: of each purchase, isn't that right, Hannah?
• 39:40
  Speaker 4: Well, or you're more goodge free. Oh okay, right, so
• 39:43
  Speaker 4: you don't have to care as much. But if you're
• 39:45
  Speaker 4: not more good free, does it really matter if you
• 39:47
  Speaker 4: get your points back? Because I would have saved you
• 39:49
  Speaker 4: more money so you could have bought the thing yourself
• 39:51
  Speaker 4: with the cash you didn't actually pay.
• 39:53
  Speaker 2: If people want to catch up with more of your work, Hannah,
• 39:55
  Speaker 2: where should they got.
• 39:57
  Speaker 4: Pop to enable top me? And let's get serious about
• 39:59
  Speaker 4: get in your head.
• 40:00
  Speaker 2: When's your next marathon April? Oh good, you have got
• 40:03
  Speaker 2: one schedule.
• 40:04
  Speaker 4: I have the next goal really when we're all events London, London?
• 40:09
  Speaker 7: Yeah.
• 40:10
  Speaker 4: My son said, why don't you do it at marathon
• 40:12
  Speaker 4: in New Zealand. I'm like, because I don't think I'd
• 40:14
  Speaker 4: be motivated to do it. You've got to work out
• 40:15
  Speaker 4: what's going to motivate you.
• 40:16
  Speaker 2: So because it's a big trip and you've got this
• 40:19
  Speaker 2: thing planned, it makes it really work for it. Yeah, brilliant,
• 40:23
  Speaker 2: good work. Well, good luck on that anyway. Thank you
• 40:26
  Speaker 2: for joining us on the show. Thanks my producer Tyra Roberts.
• 40:28
  Speaker 2: If you missed any of the previous hours you can
• 40:30
  Speaker 2: or this hour, you can check it out wee Podcast.
• 40:33
  Speaker 2: Look for the weekend collective Sunday at six as next
• 40:36
  Speaker 2: I'll be back at the same time next weekend and
• 40:39
  Speaker 2: enjoy your evening