Smart Money Weekly; Clarity on cash, crypto in your portfolio and facing financial stress
Hey,
Happy Sunday.
December is here which means 2023 is just around the corner. As central banks around the world, including Australia's Reserve Bank, are committed to reducing inflation to more sustainable levels, we have to wonder what is in store for the markets next year.
Deutsche Bank has bought out a statement commenting that this desire to curb inflation will come at a significant global economic cost. They estimate major stock markets could plunge by 25 percent if a US recession hits. However, they have estimated a full recovery by the end of 2023.
If this plays out, we could see some good investment buying opportunities coming up, and if it doesn’t, investors are in for some upside - either way 2023 is shaping up to be a good year to get ahead, but having a solid plan to take the smartest action for you with your risk well managed is all important.
Smart Money upside #95
Here we unpack the numbers from a recent client we helped, what they were doing with their money when they came to see us, what they chose to do as a result of going through the financial planning process, and the financial impact and upside we helped them achieve. To chat about how to get these sorts of results, you can book an intro chat with us here.
Numbers/Background
Couple, mid 40’s; household income ~ $200k; total assets ~ $70k; saving ~ $10k annually.
Frustrations
No clarity or plan in place, too much information, have some cash but don't know what to do with it and not sure whether they can buy a property or not.
What they wanted from us / the advice process
Identify best strategy to build wealth, help purchase a property and some clarity on what to do with existing cash.
What success looks like for them
Retire younger than normal, investing in a diversified mix, getting two properties in 3 years and having these be tax efficient, ability to travel when they want, ability in the future to start helping and teaching kids about finances and the freedom with cash to invest when there is opportunities.
What money strategy they were following before we went through the planning process
No banking structure, just started passive investing into Ethical index ETFs and directing any excess surplus towards their savings.
What money strategy they chose to pursue from our planning work
Chose to buy an investment property in the short-term, directing excess cash towards super and a diversified share portfolio as well as implementing the Pivot banking structure to help them save more.
Key benefits of going through the process
Clear advice and plan around arranging for the property deposit using existing cash, a clear and easy to follow banking structure that makes easy to track and save, access to diversified investment recommendation that will generate passive income in the future, a switch to a low cost superfund with access to a range of quality passive investment options.
Value of advice after all advice fees year one: $5k
Year 20 upside after advice fees: $1.3m
If this story resonates you can book an intro call with us here.
Video of the week
Investing in crypto can be challenging but many Aussies are wondering if crypto should be part of their investment portfolio. In this week’s video I cover how to understand if cryptocurrency investing is for you and the key ways to avoid mistakes. Check out the video here.
Podcast drop
Learn the tips, hacks, and strategies to help you level up your money game. Pods released last week:
Money news in human words, Mortgage lending shifts, insto property domination, and top stocks for 2023
How to FIRE without sacrificing your lifestyle [Live event recording]
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Blog of the week: How to avoid being part of the $66b financial wellbeing gap
In Australia and around the world, our levels of financial wellbeing are low. According to research from AMP, almost one million Australians report they’re facing ‘severe’ financial stress. The cost of financial stress has been estimated at $66 billion annually, which has more than doubled since 2020.
The two areas impacted most by financial stress are lost workplace productivity, and lost time. The statistics show us that over 21% of Australians reported lost productivity due to financial stress, and the average worker loses over 10 hours every single week dealing with financial issues and stress.
There are significant challenges when it comes to financial wellbeing, but on the flip side there’s also significant opportunity.
Apart from just avoiding the stress and lost time that will allow you to focus better on your work and career, nailing your financial wellbeing is going to help you do better with your money. Getting this right will allow you to move forward confidently towards the goals that are really important to you.
There are three main elements you need to get right if you want to reduce financial stress and improve your money wellbeing.
A clear plan
If you don’t know where you’re headed with your money, it’s hard to build confidence. It’s also impossible to know if you’re doing enough, too much, or if you should be doing more. This is the area that has the biggest impact on your levels of money stress.
It still blows me away how few people know the financial trajectory they’re on, or where they’re likely to end up financially if they keep doing exactly what they’re doing today.
When you take the time to map this out and understand how and where you’re heading with your money, there’s an immediate shift. You get instant feedback on whether what you’re doing is enough to get to where you want to be, allowing you to course-correct if it’s needed.
If you do need to change what you’re doing to get to where you want to be with your money, at least you know so you can figure out how you’ll make it happen. Because of the compounding effect of time and money, the sooner you start making changes, the smaller the changes you need to make to get things on track. If you wait a week, a month, or a year, you’ll just need to do more to get to the same outcome.
Having a clear plan and seeing that what you want is possible will also give you motivation. You’ll realise that what you want to achieve is realistic and achievable, and this will give you the motivation to put in the work to get there.
A clear plan also works as a tool to help you understand the impact of making changes to what you’re doing with your money. Once you know where you’re headed if you keep doing what you’re doing today, you can then look at what would happen if you were to save more, invest more, or make other changes to your money tactics or strategy.
Know your unknowns
One of the biggest detractors of financial wellbeing is doubt. Because there are so many different aspects and elements to money, and because it can be so complicated and confusing, it’s common to have that niggling thought in the back of your mind that there's something you’re missing that’s going to lead to trouble.
Because there are so many unknowns, it’s close to impossible to have full confidence without having an external set of eyes looking at what you’re doing.
In the early stages when you’re just getting started saving and investing this is needed less, because your path is generally pretty clear. But as you start building some solid money momentum, along with accelerating money progress, increasing doubt and uncertainty is common. The most effective solution here is having your money approach sense-checked by a professional.
A good professional will be able to quickly see if there’s something you’re missing out on, something that might be slowing you down or holding you back, or something unknown bubbling away below the surface that could lead to trouble later on.
And on the flip side, a good professional will be able to identify areas you can optimise and improve to get better results out of what you have in place today.
Once you know your unknowns are covered, you’ll have peace of mind to go ‘all in’ on what you’re doing with your money. You’ll follow through to get the results you want faster. And, you’ll do it with more confidence.
Manage your risks
Ultimately, risk is a good thing, because it’s what will make you money when you invest - but if your risks aren’t well managed they can cause you trouble.
Some risks are obvious, like needing to have a stash of cash savings as an emergency fund buffer. But others are less clear, like the lifestyle risk that can come with purchasing a property.
If you aren’t aware of (or ignore) money risks they can cost you money, causing setbacks that derail your money progress.
Risk often can’t be eliminated altogether, but it can be managed and reduced. And knowing your key risks are managed is something that goes a long way to driving true money wellbeing.
As you’re planning and executing your money moves, take the time to understand the risks you’re facing and how to manage them well.
The wrap
In Australia there is a large financial wellbeing gap that’s impacting millions of people and collectively costing us a huge amount of money every single year. Our financial wellbeing is in decline, and the costs and impact are accelerating.
But it doesn’t have to be this way.
Your financial wellbeing is largely within your control, and there are some key things you can do to improve your money wellbeing today. When you take the time to make this happen, you’ll see an immediate shift in how you think and feel about your money, and have more confidence to take the steps you need to take to get the results you want.
To your success,
Ben
PS: Pivot Wealth exists to help people invest smarter to create a life not limited by money. If you want help to make your next steps easier, you can book a 10 minute, no BS chat with us here.
Disclaimer:
I know you’re smarter than someone that would need me to write the words that come next, but our compliance peeps are real hard-asses so here we go... This information is not personal advice, poetry, or a map of where Jimmy Hoffa is buried. It may only be regarded as general advice, and definitely shouldn’t be considered something worthy of inclusion for Donna Hay’s next cookbook or the Archibald prize. This is actually just an email communication that has been sent to a bunch of people and doesn’t even have your name on it. Your personal objectives, needs or financial situation have not been considered when preparing this email, but I want you to know that I have spent a lot of time thinking about the Venn diagram intersection of poetry, landscaping, and essential oils - if you’re fascinated by this same phenomenon please reply so we can compare notes. You should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs, and if necessary, seek advice before acting on it. You should also consider other people when getting on and off public transport, smiling more, eating healthy, and listening to your mum when she tells you that you’ve been working too hard. Where the information relates to a financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product. Where the information relates to a hilarious joke I’ve made, you should consider belly laughing deeply. Worth noting also that past performance is not a reliable indicator of future performance when it comes to investments, and definitely not when it comes to the Wallabies. Financial services guide.