Latest / Making Cents / Why Your Money Disappears (And The Fix That Actually Works)

Transcript

Why Your Money Disappears (And The Fix That Actually Works) · Making Cents

• 0:00
  Is your afterpay habit hurting your financial future, stopping you from hitting those big life goals?
• 0:05
  It might be.
• 0:06
  Especially in these times where you are tracked constantly.
• 0:10
  Every financial decision you make is tracked, and the banks and lenders use that info to make decisions about you, both now and years into the future.
• 0:20
  Unfortunately, sometimes it's building up a picture of you that you might not want out there.
• 0:27
  But the problem is there's also a lot of scaremongering and myths in this.
• 0:32
  So we need someone who knows the system from the inside, who can tell us what's fact and what's fiction.
• 0:38
  Well, enter Jessica o', Hare, head of lending at Revolut.
• 0:42
  What lenders are really looking for is, can you afford to make the repayments and are you credit worthy?
• 0:48
  Because when life is noisy enough, we need some easy wins to help us be better with our money, take the.
• 0:54
  Willpower out of it and get more control.
• 0:55
  So as soon as your income hits your account, it can automatically send out to your pocket.
• 1:00
  Welcome to Ask the Experts the part of Making Sense where people from inside the money world answer your questions so you can get the inside word on what actually makes a difference.
• 1:10
  I'm Frances Cook, financial journalist and fellow financial freedom seeker who makes money simple for you.
• 1:16
  Today.
• 1:17
  It's how to make your bank love you and the tactics that make it easy to stick with the good money habits.
• 1:24
  This episode of Making Sense is supported by Revolut, the app that helps your money go further at home and your travel budget go further overseas.
• 1:32
  I want to help as many people as possible build a better life for themselves by understanding and taking control of their money.
• 1:39
  You can be part of how that happens.
• 1:41
  First, make sure you're subscribed wherever you like to listen, whether it's YouTube and Apple Podcasts or Spotify.
• 1:47
  And then send your favorite episode to a mate.
• 1:50
  Then we can all level up with money together.
• 1:52
  The show grows, and I can keep bringing you the money info that actually moves the dial.
• 1:57
  Hi, Jess.
• 1:58
  Welcome.
• 1:59
  Are you ready for the letter?
• 2:00
  Yes.
• 2:01
  All right, here we go.
• 2:02
  Hi, Frances.
• 2:03
  I'm 24, about 18 months into my first real job, and I think I might be bad with money.
• 2:09
  Nothing dramatic.
• 2:10
  Nobody has called debt collectors on me.
• 2:13
  I just feel like I'm not making the progress I thought I would.
• 2:16
  And every now and then I'm missing payments that I know I shouldn't.
• 2:19
  Money comes in and within about a week it's gone on stuff I don't even remember buying.
• 2:24
  Uber eats a candle.
• 2:25
  I didn't need concert tickets.
• 2:27
  I said yes to before checking the price.
• 2:29
  When did one concert become $400?
• 2:33
  I keep telling myself I'll sort it out properly once I'm earning more or once life feels less chaotic.
• 2:40
  But I also worry that I'm getting behind.
• 2:42
  I'd like to buy a house one day.
• 2:44
  And I keep hearing that what you do in your 20s follows you around for years.
• 2:49
  So is the occasional late credit card or after pay payment really that bad?
• 2:54
  How much does this stuff stick to you?
• 2:56
  And how can I make some better choices?
• 2:59
  Thanks.
• 2:59
  She says she feels bad with money.
• 3:01
  That breaks my heart immediately.
• 3:02
  I'm sort of like, we're all bad with money at 24.
• 3:06
  Really?
• 3:07
  And this stuff can be confusing.
• 3:08
  I mean, what sticks out to you about this letter?
• 3:11
  What sticks out is that she's just been too hard on herself.
• 3:13
  Right.
• 3:14
  This is really common.
• 3:15
  If I think back to when I first had my first real income, I was the same.
• 3:18
  I think I spent the whole first year in my student overdraft that I still had.
• 3:23
  So yeah, totally normal that she feels like that.
• 3:25
  And the good thing is that she's thinking about this now and she can start to put things in place to make her in a better situation.
• 3:32
  And I don't want her feeling like she's bad with money.
• 3:34
  Like life in your 20s is expensive.
• 3:36
  It's a cost of living crisis.
• 3:38
  Right.
• 3:38
  Like it's no wonder she feels like her salary's disappearing before her eyes.
• 3:42
  The trap she needs to avoid is thinking that she'll solve it when she starts doing more money.
• 3:46
  She needs to put the things in place now so she gets more money.
• 3:49
  She'll just have more Uber eats orders or more fancy candles.
• 3:52
  Exactly.
• 3:52
  You can spend any amount of money.
• 3:54
  That's why private jets exist.
• 3:56
  Or as a below deck fiend.
• 3:59
  I mean yachts.
• 4:00
  I don't think I'll ever earn the amount of money where I could go on one of those yachts.
• 4:03
  But I'd love to.
• 4:03
  I'd love to try, but yeah, exactly.
• 4:07
  I think when you're starting out, it is hard.
• 4:09
  Hard.
• 4:10
  You're still sort of figuring out the adult world when you've got that first job and you're just figuring out running your own household, running your own bills.
• 4:17
  And I think there is a benefit, like you say there, of first taking off the pressure.
• 4:23
  Right.
• 4:23
  And being able to look at things clear eyed without judgment.
• 4:26
  You might still make changes, but to take the judgment out of it, I feel like that makes you.
• 4:32
  You can make some decisions from a more empowered place and that helps, right?
• 4:37
  Yeah.
• 4:37
  Definitely.
• 4:37
  I think not beating herself up about the current situation she is, and just taking some simple steps to kind of get herself to feel more in control.
• 4:45
  And that will make her feel better 100%.
• 4:47
  Okay, so she's mentioned some bad habits here.
• 4:51
  So missing some credit cards, missing some afterpay payments, she's not feeling fully in control of her spending.
• 4:57
  Then there.
• 4:58
  How common is this?
• 4:59
  Really common.
• 5:00
  And I don't want her to like freak out and panic that she's doing this, but I also want her to take it seriously.
• 5:06
  In New Zealand, repayment information from your buy now, pay later from your credit cards, but also your phone bills and your utility bills is sent to our credit reference agencies and your payment history is stays on your file
• 5:18
  for two years.
• 5:19
  And if you've got a more serious default, that stays on your account for up to five years.
• 5:24
  So while I don't want her to freak out and think that she's ruined her financial future, she hasn't.
• 5:29
  But it's really important for her, as you say, to get control of those finances.
• 5:32
  So she is not missing payments.
• 5:34
  Yeah, because that is a big red flag.
• 5:36
  Right.
• 5:36
  You know, she mentioned she'd like to buy a house some, some point in the future.
• 5:39
  Like you say, that'll stay on your record for a period of years.
• 5:43
  So if you're really making any sort of long term financial decisions, a missing payment is a fairly big red flag.
• 5:50
  Right?
• 5:51
  I guess it depends, like very much depends on how often she's missing payments and how, how many days late she is.
• 5:57
  So if she's missing occasionally a payment by one day, like that's not an issue.
• 6:01
  What's an issue is she's repeatedly, consistently missing payments and missing them and not paying them back for an extended period of time because that kind of just signals that you can't manage the commitments you've got now.
• 6:12
  So lenders won't look to, I guess, lend you more in the future.
• 6:16
  What lenders are really looking for is quite simply can you afford to make the repayments and are you credit worthy?
• 6:24
  Right.
• 6:25
  Is it likely you're going to make the repayments?
• 6:27
  So from an affordability perspective, they're looking at your income, is it stability, stable, what are you spending your money on?
• 6:32
  But gone are the days where they're looking at like every single latte purchase.
• 6:35
  Right.
• 6:35
  They're just looking to make sure that you've got kind of free cash flow to cover the additional amount that you want to borrow.
• 6:41
  And then I guess from a credit worthiness perspective, they're just Looking at things like your account conduct, are you missing payments, can you repay things on time, do you have good, I guess, account standing?
• 6:52
  And those are the kind of things that lenders look for.
• 6:55
  Yeah.
• 6:55
  And it's really tough, right, because I do think people get into this panic mindset and I, I think that's a bit of a theme in our conversation so far, is trying not to get into the panic mindset.
• 7:05
  But I see how people get into that because I do think there's this whole level of sort of distrust between customers and then especially the big banks.
• 7:16
  I mean, I was quite surprised when Consumer NZ had its People's Choice Awards recently.
• 7:21
  And the.
• 7:22
  They have a whole category for the big banks in New Zealand and they made the incredibly unusual step this year of saying nobody wins because you're all so bad, none of you get it.
• 7:34
  And I was like, whoa, that is a huge shot across the bow from Consumer, like, go for it, guys.
• 7:42
  Make your statement.
• 7:42
  And they sure did.
• 7:43
  But I think that really speaks to this level of distrust and how broken that relationship is getting with the traditional financial institutions.
• 7:52
  So when lenders are looking at a customer and deciding whether or not to lend for something really important, like your first home, what are some of those red flags, green flags?
• 8:03
  Because they don't just weigh up bad behavior, they also weigh up good behavior too, right?
• 8:08
  Yeah, definitely.
• 8:09
  As I mentioned before around your payment history.
• 8:12
  So if you've got a history of repaying your phone bill on time every month, that actually counts and that that's showing good account behavior and then looking like you've got a sense of control that you can meet the
• 8:21
  repayments that you've got.
• 8:22
  You've kind of signed up for today and then, yeah, the red flags are constantly missing payments, unpaid bills, when we get your credit report, things that show on there are not only your repayment history, but if you've asked
• 8:34
  for a lot of credit.
• 8:35
  So if you've got lots and lots of credit applications, a bit of a red flag.
• 8:38
  Also if you've got defaults or unpaid court fines, et cetera, those are the things that flag is read.
• 8:44
  It's quite an interesting comparison between sort of New Zealand and overseas sometimes, right?
• 8:48
  Because I mean, it's.
• 8:50
  I think a lot of New Zealanders do get confused when trying to compare some of the advice you get that's maybe coming out of the US where they're like, oh, you know, have a credit balance all the time
• 8:59
  and yada, yada, yada.
• 9:01
  And I think it was Dave Ramsey that called a credit Score in the US and I love debt score.
• 9:06
  And it's not really the same in New Zealand here.
• 9:08
  Right.
• 9:08
  I mean, I think a rule of thumb that makes sense for people is they're just trying to figure out is this person in control of their money.
• 9:15
  Right.
• 9:15
  And that's where all of the wonderful red and green flags that you've brought out, those, those tangible things, they slot quite neatly into those categories.
• 9:23
  Once you understand they're basically just trying to figure out is this person okay at handling their money and are they likely to pay me back.
• 9:31
  Yeah, it is quite different overseas.
• 9:33
  Like I've worked for a long time in the UK and a lot they have a lot of products called like credit builders where you're demonstrating that you're credit.
• 9:40
  But the great news about New Zealand is you can build, I guess, repayment history through things like utility bills, which is.
• 9:46
  Is.
• 9:47
  So we have a lot of positive data that's shared with our bureaus, which is really great.
• 9:51
  So you don't need to have big debt balances to have a good credit score.
• 9:55
  This episode of Making Sense is supported by Revolut, where you can manage everything from daily spend and monthly budgets to wealth management and future planning in one place.
• 10:05
  Get instant spending notifications, set monthly budgets and see your spending automatically categorized to understand exactly where your money is going.
• 10:15
  Split out your salary for things like bills, savings, spending and more and then automate it so it happens the moment your money hits your account.
• 10:23
  How's that for a peaceful payday?
• 10:25
  Plus, you can get more from your money by earning points on everyday spend, which can be redeemed for gift cards, airline miles and hotel discounts.
• 10:33
  You can join over 75 million users worldwide on our link, please.
• 10:38
  Plus get $40 when you sign up and spend T's and C's.
• 10:41
  Apply.
• 10:42
  What about in terms of.
• 10:43
  We're all looking for easy ways to do these sorts of things, ways that maybe have a little bit less mental admin.
• 10:50
  Are there sort of shortcuts or any little bits of tech help that can help us do better with our money in general?
• 10:59
  Yeah.
• 10:59
  And I think back to your earlier question around the lots of trust.
• 11:03
  I'm not surprised.
• 11:04
  I think that banks haven't really innovated in this space here in New Zealand for quite some time.
• 11:09
  So basically everything's just in one account.
• 11:11
  Like this reader, I really feel for her, right?
• 11:13
  Like she feels so out of control, but the current setup is kind of the reason why she feels so out of control.
• 11:19
  Right?
• 11:19
  Everything's going into her same pot.
• 11:21
  You know she's spending on those concert tickets before she's paid her, like, must have bills, and that's why she's missing payments.
• 11:26
  What she really needs to do is, I guess, take the willpower out of it and get more control.
• 11:30
  So at Revolut, we've got this great thing called Income Sorter.
• 11:33
  So as soon as your income hits your account, it can automatically set it, like, be sent out to your pockets that you've set up.
• 11:39
  And you can set up up to a hundred pockets.
• 11:40
  Not saying to set up that many, but having different pockets for, okay, my fund spending.
• 11:45
  This is for these bills.
• 11:45
  This is for these bills.
• 11:46
  This is how much I'm going to spend on this.
• 11:48
  And just means that she can feel a bit more in control about where her money's going and knowing that those missed payments aren't going to be missed.
• 11:56
  Right.
• 11:56
  And I think that's the key thing that I think that she could really help her is just to ensure she's got money aside for those payments that she's committed to so those aren't missed.
• 12:06
  And I think that will make the biggest difference.
• 12:08
  Also, the tool on Revolut that I use, you can set, like, custom budgets for certain pockets.
• 12:13
  And so I'm like, my fun money.
• 12:15
  I can see how I'm tracking throughout the month and knowing, okay, well, I'm already in the red in month two in terms of, like, gone over my, like, like, threshold for where I should be in the month.
• 12:25
  Does that make sense?
• 12:25
  Because I think it's like, you get paid.
• 12:27
  Well, I guess lots of people in New Zealand get paid fortnightly, but if it's still kind of the first day.
• 12:32
  Right.
• 12:32
  I remember when I first started getting paid, you feel really rich, right?
• 12:34
  And you're like, I can buy that, oh, yeah, who wants a drink?
• 12:37
  Kind of situation.
• 12:38
  And then there's a lot.
• 12:38
  The early you get and you're like, no, I'll be not going out today.
• 12:41
  And it's kind of getting to the end of the month and then not having money for those kind of important payments that.
• 12:46
  That really matter.
• 12:47
  And so it's about kind of one, separating that money out, but also understanding where you are within the month and have you spent it all.
• 12:54
  So you're not spending it all on the first week and buying everyone around the drinks.
• 12:57
  Yeah, I remember my first job as well.
• 13:00
  I was paid monthly.
• 13:01
  And of course, that was my first job, so it was the least I've ever been paid.
• 13:04
  And that first week I would live like an absolute queen.
• 13:07
  And then Yeah, a little bit tighter for week two and three and then week four was brutal.
• 13:13
  That was beans and rice style and it was just really rough.
• 13:17
  I could have done with some sort of tracker there.
• 13:20
  And I do think as well when you're saying about, you know, you can have these pockets and different places where you're putting your money.
• 13:27
  I am such a believer in budget for everything, including budget for your fun.
• 13:32
  A good budget doesn't mean every dollar is assigned to something sensible and you're living like a monk and everything has to go into savings or investments or whatever.
• 13:41
  Budget for fun too, because otherwise you will lose your mind.
• 13:45
  But just have a certain amount put aside.
• 13:47
  Like, yeah, this is my guilt free fun money and it is part of my plan.
• 13:51
  And then it stops it being, you know, the money equivalent of a crash diet.
• 13:55
  Right.
• 13:55
  100%.
• 13:56
  And I feel like if you then go into the situation where you feel like you have to live like a monk and the bank manager is saying that you need to like be perfect, you don't have to be
• 14:04
  perfect.
• 14:05
  And I think you're more likely to kind of give up or binge eat, binge spend when you kind of am like, oh, well, I'm so over it kind of doesn't matter anyway, right?
• 14:14
  You need to like feel more in control.
• 14:16
  You're more likely to make better choices.
• 14:19
  I think I've never been one to have like a sit down, full budget.
• 14:22
  I find it quite like restrictive, et cetera.
• 14:25
  And I think if you just start to use some simple tools and kind of, you know, you don't have to say, I'm going to spend exactly $42 on this this month, but kind of in the Revolut you can
• 14:34
  have categories, okay.
• 14:35
  On restaurants, I'm going to roughly spend $300.
• 14:38
  And so therefore you can kind of see where you are with that as you go.
• 14:43
  And so it's not like overly convincing because I think if you've got to sit to a situation which is once a month, I've got to sit down with an Excel spreadsheet that's potentially again going to put you off.
• 14:51
  Right.
• 14:51
  It's just about making it super simple, easy, quick ones that are kind of like in your everyday kind of life that you don't have to, I guess wait till the end of the month to figure out, oh God,
• 15:00
  I've overspent or spent that it's kind of like in life kind of management.
• 15:04
  Yeah, yeah, absolutely.
• 15:06
  Bless my husband.
• 15:07
  Love him to bits.
• 15:08
  But he is an absolute spreadsheet man.
• 15:10
  And at the very beginning, before I'd gotten into personal finance journalism.
• 15:15
  So we've been together a wee while now.
• 15:18
  And he once made me an Excel spreadsheet.
• 15:20
  Every dollar was allocated and I was like, thank you so much.
• 15:24
  And I never once opened that Excel spreadsheet a second time.
• 15:27
  I opened it to say thank you, and then that was it.
• 15:29
  What's worked for me is very much what you're describing is chunking it.
• 15:33
  Where I'm like, here is my main bills, everything is in there.
• 15:37
  And then here is my fun money, and everything is in there.
• 15:40
  And then here's my savings, here's my investments, and just really quite big chunks that I can be quite loosey goosey with.
• 15:46
  But it's chunked and it's there and it makes sense to me.
• 15:48
  And having them in different places really works.
• 15:51
  Yeah.
• 15:52
  And I think with, like, things like what we have in, like the Revolut app and having pockets and having multiple pockets, you can kind of chunk it out.
• 15:58
  How?
• 15:59
  It's not like you have to have a whole separate suffix and separate account and you can link cards to each of the different pockets.
• 16:04
  So it's very easy to be like, okay, right, I want to spend from my beauty pocket.
• 16:09
  And therefore you're kind of like, this is my beauty card and this is what I'm spending.
• 16:11
  So you can kind of track it in a very simple, easy way.
• 16:15
  Finding a system that works for you to give you that sense of control is really important.
• 16:19
  She's panicking about the situation and I.
• 16:22
  Guess and labeling herself.
• 16:24
  Labeling herself bad with money.
• 16:25
  You don't need to do that.
• 16:26
  Exactly.
• 16:27
  And I think that she's not bad with money and she needs to stop thinking that just spending too much money on her beats doesn't make you bad with money.
• 16:33
  Like, none of us were taught this in school.
• 16:36
  Like, I left university with a finance degree and I didn't know how to manage my money.
• 16:39
  When I came out of it, I was like, surely, like, now I'm rich, right?
• 16:42
  I've got a job, so I can just spend everywhere, right?
• 16:44
  Round of drinks on me.
• 16:45
  But that's not reality.
• 16:46
  And I guess until you actually sit down and start, as you say, doing this and learning kind of on the spot, right?
• 16:53
  Like, she's 24, she's got time, she's.
• 16:55
  Going to nail it.
• 16:56
  She's already thinking about this stuff.
• 16:57
  I feel like that's often the biggest thing.
• 16:59
  If there's one thing that you think most people could do to feel more in control, to feel like they're Being good with their money.
• 17:08
  What do you think is one big win most people could put in place?
• 17:11
  Well, I think in addition to the kind of separating out your money, I think she mentioned that she wanted to buy a house eventually.
• 17:18
  And I think a lot of people put off saving for a house because they feel like they've got to have these big lump sums or it's kind of too hard to start or things are very expensive right now.
• 17:26
  I'll do it in a few years.
• 17:27
  I think doing something like setting up spare change roundups so that every time she's buying her flat y or her grocery shop, the spare change is rounding up and being put in a separate pocket.
• 17:37
  It just basically builds that saving momentum to kind of give her a bit of confidence that she has a bit more control and it will gradually, surprisingly, kind of accumulate really fast.
• 17:47
  Yes.
• 17:47
  I mean, we've seen this with KiwiSaver, right?
• 17:49
  A little bit often grows way faster than you think.
• 17:53
  So if you have something like the roundup, then it's just making it part of your daily life and that's really key.
• 17:59
  And you don't have to do anything, right?
• 18:00
  You turn it on and it's kind of just happening in the background.
• 18:02
  You don't see it and it kind of just, you know, if you look in every kind of month or so, it just gives you that bit of confidence.
• 18:08
  Thank you so much.
• 18:09
  Jess o' Hare coming in from Revolut and answering all our questions.
• 18:12
  Now, if you have more questions on this.
• 18:14
  I've had heaps of questions along these lines.
• 18:17
  Send them to me.
• 18:18
  We can deep dive your specific situation.
• 18:20
  Ask at Francesco Cook co nz until next time, have a great day.
• 18:27
  This podcast can only give you general information about how things work in most situations.
• 18:32
  It's not individual financial advice.
• 18:34
  If you're after that, a financial advisor is always the best bet.