We Asked a Financial Expert to Answer 8 Common Questions About Money
If there’s one thing we know everyone loves talking about and lamenting over, it’s money. Which is why it's important to really talk about it and understand it.
Rather than lusting after the latest Chanel Boy Bag, or a newly-upholstered vintage chair that's begging for a space in your living room (although that’s fun too)—it's more important to be knowledgeable and savvy with your hard-earned cash. Sure, a little splurge every now and then is justified, but when it comes to being fiscally responsible with a long-term goal in mind, it's an area everyone can always learn more about.
Keep scrolling for some sage advice on the sometimes-confusing arena of finances, and what to do with your super, savings, and spending.
What’s the best type of account to keep your savings in?
"I think it's good to have two types of savings accounts. The first is for your everyday transactions. The second should be a high-interest savings account for keeping the bulk of your money. You should shop around for the best deal on this second one as banks generally offer different interest rates and there are some attractive introductory offers you can get your hands on."
Are there ways to maximise your super, if so, how?
"The first thing you need to know is that not all superfunds are created equal. They all have different fee structures and different historical performance. Again, shop around! You absolutely have the right to choose your superfund. When in doubt, go for the one with lower fees as these can really add up over time. Another strategy for maximising super is making additional contributions, which can be organised through your employer.
"I've always put in an extra $500 per year into super. It's not much, I don't miss it during the year, but I feel good knowing there's extra money invested for later in life. This is one topic where I'd recommend speaking to your financial adviser and getting them to talk through the options in detail, for your circumstances."
I don’t want to pay rent anymore, where’s the best place to start when looking into entering the property market?
"There's a couple of schools of thought on this, and most of them revolve around the kinds of sacrifices you're willing to make, unfortunately. The first thing to think about is where you ideally would want to live. If you have a healthy deposit saved up and can afford to buy a home you're comfortable in, in the place you want to live then great! Jump in.
In the current property market though, that's not most people so here's a few alternative options. One: Buy a home you're not as comfortable in (like a tiny studio apartment for example), in the area you want to live. Two: Rent where you want to live and buy a cheaper property in a different area. Or, three: Withdraw from the bank of 'Mum and Dad' to buy where you want to live, if you're lucky enough that this is an option for you."
Is there a certain amount you need saved for a retirement fund?
"It's very difficult to answer this one directly. The bottom line on this is completely different for each individual. It's all about how comfortable you want to be in retirement, where you want to live, at what age you want to retire, and a bunch of other factors. This is another question worth asking your financial adviser as they can advise you on how best to handle the uncertainty around this."
If I don’t need a credit card, is it worth getting one for a good credit score?
"Credit scores are made up of numerous factors including how good you are at paying your bills, whether you keep up with loan repayments, your age, and where you live (for example). Money Smart is a great resource on credit scores. I generally don't think you need to get a credit card, they can be a slippery slope, so avoid it if you can."
How much should I have in an emergency fund?
"Ideally enough for three months' worth of living expenses if you had no income. This is between $15-30k for most people working in a full-time capacity, with rent or a mortgage to manage."
I know nothing about investing, where should I start?
"It's definitely worth getting a little bit educated on this subject, no matter how you plan to go about building wealth. It's good to know the basics. There's a really easy-to-understand book called The Barefoot Investor, that a lot of my friends are reading as an entry point into building wealth and investing.
If you want to dip your toe in the water, it might be worth investing some of your disposable cash in a passive investment fund like Stockspot or SixPark for a set period of time and getting an understanding of returns and fees associated with these before you decide to be more active about investing, and investing in shares directly yourself."
The best ways to manage money as a long-term unmarried couple?
"Firstly, talk about money early, openly, and honestly. I think one of the worst things that can happen in a relationship is one person manages the money and one person has no idea what is going on. Talking about it and sharing the load around managing money creates a true partnership where both partners are equally invested in shared goals, both partners know exactly how you're tracking towards those goals, and both share in the stress which often comes with trying to manage money.
Also, catch up with each other regularly on how you're going with your financial goals. I think monthly check-ins makes sense for most people. And finally, consider whether it is worth writing down what you've agreed upon, somewhere you both can find it. I'm not talking about anything as formal as a legal agreement drafted up by a lawyer, but a few dot points written down somewhere can save some confusion and arguments later on."
The Mindful Investor by Maria Gonzalez and Graham Byron ( $32 ) ($27)