Lights! Camera! Investing Action Plan!

Kerney Whalbury and a waddery woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on a wondery country, acknowledging the elders, the ancestors and the next generation coming through as this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow.

be talking about this topic. That's why today Beck, you and I are going to be giving our little squad some steps to get your investment plan back on track, because I feel like so many of us set really big goals for January, then we didn't do them, and then it was February, and I don't know where the year is going, but I know that so many of you want to be investing amazing. Well.

So when we're setting goals, I like to have a good idea of what your short, medium, and long term goals are because I'm kind of an instant gratification girly back like I need the short term goals to keep me motivated so that the long term goals actually happen as well. Because if I only have long term goals and we're only talking about like retirement, I'm just going to spend all my money now, like I can't wait.

I am impulsive if not anything else. So when it comes to long term goals for me, a good example of that would be like retirement planning or planning for your larger investment portfolio to create a passive income so

that you don't have to work full time. Timeframe on this would be more than seven years, because we know, because of the rule of seventy two Beck, that money is going to pretty much double every seven years, but also a market is going to do more than a full circle in that time, so we're minimizing our risk when we're setting long term goals for more than seven years.

When we're talking about long term goals, this is where you can comfortably go, all right, well, I am going to invest in a property or I am going to potentially invest in the share market, because there's less risk. Obviously when it comes to like that short term goal, let's flip to that these are things that you want to achieve in like one to three years. And if you said, v I really want to buy my first

property next year. I've got my home deposit sitting right here, I'd be like, one, beck, where the heck did that come from? Like you've been hiding this from me. I'm excited. But two I'd be like, please don't invest it. It's too much of a short period of time and we don't know what the market can do in twelve months. And if the market went off like your goal of purchasing a home in twelve months, it's not going to happen. And I would hate for you to be in that situation.

And even if you were to invest for twelve months, because you go will be I'm willing to take a risk, And then you want to purchase, then well, are you actually going to pull all your investment out when it's worthless. That's a bad financial decision, and I don't want you to be forced to make one. Like if you and your partner who's already a homeowner, I mean, good pool

with that one. But like if you and your partner wanted to purchase property together and she was super ready in twelve months, you'd be like, oh, maybe I do have to pull my money out and cut my losses a bit so I can still achieve this goal that she's ready for. We don't want to do that. We don't want to back ourselves into a corner. So investment types for short term goals would be things like your

high interest cash accounts, your term deposits. Potentially maybe you've got an offset account if you have a mortgage in this economy, not man air if you will, or even short term bonds. But I wouldn't be looking at, you know, investing your money or purchasing a property in the hope of selling it in twelve months. Like those things just don't make a lot of sense for short term goals.

When it comes to short term goals, though, beck those are things like buying car, going on a holiday, A short term goal could be something really large if you've already been working on it, like buying a house, but not usually for me, short term goals are quite small things, and these are the things that often keep me motivated along the way, So like I know that it's not going to happen next year because beck, while I was very willing to travel with a three month old, I'm

not that willing to travel with a one year old. No, Like they can move, they are on the move, and can you imagine trying to control a one year old on a plane. I'm not willing. Could I'm willing, I'm not able. Do not put me in the exit row, like it's just not happening. But for me having a holiday or something to work towards, or Meredith festival tickets or something, yes, that is for me motivating in the short term, so that I can set and forget my

bigger goals and know that they're happening. When it comes to medium term goals, though, these are things like more education, like you might go, I really want to save up some more so that I can, you know, do this three year course or buying a home could be a medium term goal because it's all going to be different for every single person. Like you could be a long term home buying girly. You could be I'm actually ready

in twelve months, girly. Or you could be someone who's like in the middle and you're like, all right, well in the next three or five years, I could probably purchase that's fantastic. But when we're talking about the investment types there, this is where we could potentially have a bit of a mix. So we could be doing things like the cash and fixed interest options that we're talking about before. You could also maybe do some more defensive shares or some bonds. But this would be where I'm

being really cautious. I wouldn't be going and investing in an emerging industry with a medium term goal because you just want to be in that stuff for the long haul back.

So there are about six different risk profiles. But if you were sitting down and you were going to do your risk tolerance and you survey and there are lots online so you can look up risk tolerance questionnaire and do one online. But it will go from anything from cash stable so it'll be called capital stable all the way up to high risk. Now high risk is sometimes

also called an aggressive portfolio. And we've done whole episodes on risk and how to assess yourself, and we've you know, even got a free risk tolerance questionnaire on our website, which is I think pretty slay, So you can do ours, you can do anyone, so I don't care, just do it.

It goes from capital stable, which is basically where all your assets are in cash and you don't like taking on any risk at all, beck because that's terrifying, and like no shares, no property, no bonds, no fixed interest, no high interest savings account all the way up to this, I guess aggressive portfolio where most of your assets are actually in more risky assets. So I've spoken about this before and please go listen to our podcasts on risk

tolerance and investing. But just because you you have a high risk profile or an aggressive portfolio, doesn't mean you're investing in riskier assets. If we look at like a conservative portfolio, which is like on that lower end, so it often goes capital stable, conservative, moderately conservative, then goes growth, moderate growth, and high growth. So if we look at that scale, they actually invest in all the same things, they just have different amounts in each bucket. So a

conservative person might go, I'm pretty conservative. I'm only going to put twenty percent of my assets into a share portfolio, whereas someone with a high growth risk tolerance might actually have ninety percent of their assets in the same shares Beck, So it's not having riskier shares, it's actually having more exposure to an asset, which increases your risk. So that

makes sense a little bit. So like if you had a pie chart and you cut the pie chart up, you take a small piece of the pie for the conservative person, Yeah, but you take a really large piece of the pie for somebody who's high growth. But the pie is still blueberry pie. Like it's the same pie, Beck,

it's not different. So like they might have the same etf as you, they just own less and you own more and more of their money might be in a bank account because they're a bit conservative and they want to just keep their money in a cash savings account. Or is someone who's like high growth they just really like pie and don't really want all of their money in a cash account.

It means that if we want to invest, we know that we want to make up a portfolio to have some shares, and we know we're a growth girly. We're not that aggressive, like we don't want one hundred percent of our assets inside shares, but we know from the pie chart that will come out of that questionnaire that we can do for free. We know, okay, well, maybe fifty percent of my portfolio is going to be in ETFs.

I'm going to have twenty five percent of the cash that I have inside a savings account, and I might get a bond with the rest of the twenty five percent. So if you've got and just for number's sake, not that I expect everyone to be starting with ten thousand dollars,

because that is not truths just a good number. But if you had ten thousand dollars and you're like, well, I've got ten grand and I'm going to go do my risk profile and get my pie chart, five thousand dollars would be invested in shares, two thousand, five hundred would be into a savings account so that you've got your your cash component, and then two five hundred dollars

would go into a bond. So I've now given you a formulation of how you're going to invest to make sure that you're meeting your risk tolerance, which is really important because it means that in the future we're not going to freak out. You are protecting yourself against the markets turning. You might have come out as a high growth girly beck, in which case those percentages are going to be different. But you might also want to be adding an international option into your mix because you want

to take on a little bit more risk. Does that make sense? So I'm kind of giving you the blueprint of Okay, here's your empty pie chart. Beck, you've got a fifty percent, you've got a twenty five and a twenty five. What products are we now going to put into our pie chart to make up that pie and.

I feel quite confident. We don't want to start our financial literacy or investing journey once you have the cash for it.

less because you're making a decision that is best for you. However, that is not a recognized asset here in Australia. It's something that we're working towards and hopefully it will be recognized soon. And the reason because Beck, you know that I'm not that positive about cryptocurrencies because I just go they're too risky. Like for me personally, I get anxious investing in something that is far more risky than anything

else on the market. It gives me anxiety to think that people are willing to invest in cryptocurrency yet not play with the Australian share market. Somehow, the marketing for cryptocurrencies has been a lot more palatable than the Australian share market, when in reality, if you take any thirty year period of time here in Australia, the share market has never not yielded a positive result for someone like cryptocurrency. Cannot say the same. One it's not been around long enough.

But two there's way too much up and down. The volatility in that is insane. But the reason I want cryptocurrency recognized here in Australia is regulation because the second it is recognized as a genuine asset class by the Australian government, it will be more highly regulated and that will lead to safer outcomes when we are purchasing it. And I like that, so hopefully that happens soon. But right now we only have four. The first, you know

and love cash. We all understand that cash is things like your high interest savings accounts, it's your regular savings accounts, it's term deposits. I feel like we all know and love cash because it's the one thing we all have pretty good experience in. The Next is fixed income. So these are things like government and corporate bond. So government bond beck, I feel like it's a little bit confusing, but the best way to understand a government bond is

kind of like an IOU. So the government they put their hand up and they say beck, we really want to build some roads. We need one thousand dollars to do that, obviously at scale. And you go, mate, I've got one thousand dollars. I want something for it. And they say, Beck, we'll give you five percent of your thousand dollars, plus we'll give you your money back once we're done building the roads and got the cash back. So over five years, we're going to hold on to

your thousand dollars. We'll give you five percent return, so you get some money along the way, and at the end of that five years, we'll give you your thousand dollars back, and you go, that's a pretty good deal. So my favorite way of viewing government bonds or even corporate bonds is it's like an IOU note. So you give them your money and they give you an IOU note and you can then cash that IOU note in when the term is finished. Does that make sense?

So there are other countries that issue bonds to their citizens and they don't return the money, so there's a lot more risk, whereas in Australia, government bonds are seen as being a pretty stable return and are considered relatively low risk.

So you might have your primary residence. And obviously I could have a fight with you right now about whether your primary residence is an investment or not, because I believe that your primary residence is not an investment, because beck if you go and buy your first home and then you live in it, you're like, probably you're pretty motivated to pay off your home, right, because then you don't have to pay rent, you don't have to pay your mortgage. It's only an investment if you're willing to

sell it. Are you willing to sell your family home? Yeah, as much as it's an asset, And if the proverbial hit the fan, we could sell it and rent again. And you know, it's a security blanket. I wouldn't want you putting that inside your investment portfolio as an asset, because anything inside your investment portfolio we should be looking at as being able to dispose of or being an asset that generates income, and your primary residence doesn't do that.

It does a lot to save you money because if you've paid the whole thing off, you're not paying rent, you're not paying a mortgage, and that's pretty sexy. But on the fleet side of property, you've got investment properties, and that's obviously like very sexy. I mean, I must be nice if you have investment properties. But inside the property asset class BECK, you've got investment property, so you could buy residential or commercial properties and lease them out.

It obviously requires a lot of capital. You have to have a lot of cash al or to start. The other thing you could purchase if you're like super into property BECK, but don't have a heap of cash, is what's called an ARIIT. So that's a real estate investment trust and they're actually a share that you purchase on the share market that hold property, so you get returns that have come from property. So you're able to invest

in property indirectly through the market. So if you've done your little pie and you were like, oh, I really want property in this twenty percent, but I don't have the cash to buy an investment property, or maybe you don't want the responsibility because being a landlord means you know, if they want a heater breaks, you've got to fix it. You've got to have all these overheads. Maybe you're talking about positive or negative gearing. Maybe you don't even want

to have that conversation. You could go buy anriit and have exposure to property in your portfolio and have returns from the property market without all the overheads. That's kind of sexy. That is really cool it that's kind of fun. And then the last thing, Beck, the fourth asset class recognized in Australia. I think it's very sexy and it's my favorite asset class BECK because not only should they overtime increase in value, yes, most of them pay you

for owning them. And that is the share market. So the share market is it's not a secret that it's my favorite type of way to invest, and it's my favorite type of way because it's so accessible, Like you can today invest for as little as one cent Beck. You were saying before that you have twenty five bucks in shares's and then you're like have I started? And

I was like, yes, that's a legitimate investment. Isn't that cool because go back twenty years you wouldn't have had that option because we couldn't purchase shares with twenty five dollars. We had to have lots of cash to begin which is a stereotype we are still trying to break down. So many people still believe that to be able to invest, you need to have a lump sum of cash. Ye, you don't even Beckx doing it. She didn't even know she was doing it exactly. But when we're talking about

shares here in Australia, we have Australian shares. So this is a share that is listed on the Australian Stock Exchange or the AX as we often call it. On the ASX, you can purchase shares directly. You could purchase your bonds that were talking about before, You can purchase ETFs and managed funds. This gives you access to all your investing options, right, so even those ariits that we're

talking about, you can purchase through the AX. If you've got analysis paralysis and you're like, I want exposure to the Australian share market, but I didn't realize there were going to be so many options. You could go for an asset like the ASX two hundred index, which actually takes beck the top two hundred companies listed on the AX, puts your money in that and calls it a today. So that's kind of helped full to know that options

like that exist. And then obviously if you're a little bit more risky and you want to diversify even further, you've got the option of international shares. So there are so many different stock exchanges around the world. So you've got like the New York Stock Exchange, You've got the New Zealand Stock Exchange, You've got literally so many I won't give you examples because I could go on and

on and on, and that really excites me. But with international markets, it gives you the option to diversify internationally. When we zoom out and we just look at the economy as a whole, like the worldwide economy, we know that when Australia is doing really well, the rest of the world might be slightly off. In Australia, we kind of exist in a bit of a bubble, and that bubble means that we are often protected from things that

are going on internationally. So like Australia is as an investment when we're talking about the ASEX a lot more conservative than America. America they feel the fields. They are dramatic, right, Like if there is a high, they're feeling the highest of pihs and if there is a low, they feel the lowest of lows. That's why I often we'll hear about impending recessions because America is in one that maybe not get hit with it in Australia. Does that make sense?

So we are a little bit protected. But to get diversity. When Australia is not performing that well, often we see the rest of the world having better performance, so we might want to look at you know, let's just really simplify it. You go, I want exposure to the Australian market and to international b and I go, well, Beck, an option is the ASX two hundred, which is going to give you exposure to the top two hundred companies in Australia. And then you might go with a global option,

which is another option. This is just one of many. Like it's not a recommendation, Beck, but like the MSCI World Index, which gives you exposure to a heap of international assets without having to do too much of your own.

steps to get you cracking on creating an investment plan. Right, supernuation is not actually an investment, beck, Subernuation is a tax structure, which makes it sound even more sexy, But it's a tax structure, right. Like think of a clown car. Supernuation is the clown car, right right, and you get to fill your clown car with whatever you want. Like you could go get Bonzo the clown and put him in your car. You could go get like a circus

line and put him in the car. You could get in the car yourself, like you could literally, you know how, in a clown car you can basically fit anything. Yes, that's superanuation. You can literally invest in anything inside the super environment.

now and probably not for the best. But that's a conversation for another day. But I really like thinking of it as a clown car, because you're not going to forget that for one, But to this clown car, it kind of gives you access to the circus. And the

circus is a very sexy fifteen percent tax rate. Right So, right now, most people are going to have a tax rate between thirty seven and thirty nine percent, right, Like, you're not going to be able to make money and only pay fifteen percent tax, Like it just doesn't happen. This clown car gives us access two or fifteen percent environment, and then we can invest inside of that. So we have this asset and it's called super and that's actually the money that goes in, and then it's up to

you to choose where it's invested. Most commonly we use investment funds, so you might have host plus or hester you might have Australian super We've heard of all of them, right, But it's actually up to you to choose what fund reflects your values and reflects what you want to choose. And I think the coolest thing about super especially right now, because Beck, we're in the middle of a cost of

living crisis, we're talking about investment. It is not beyond me that people listening to this episode might be like, v I can't invest. You know, at the start of the episode, Beck, you asked me like, hey, what if we didn't start investing in January? And it was our plan. So many of us haven't been able to even though it's part of our goals. And that's okay. But one way to get ahead is to look at our super because it's not going to cost you a thing out

of your bank account to now actively manage this. To go and have a look at what portfolio you're in. To make sure that you understand your risk tolerance. Go do a free risk tolerance questionnaire. There will be one on your superfund website. Go do that and see what your risk tolerance is and then make sure your investment is reflective of that. If it's too hard, call your

super fund. You're paying fees for your super fund to call these people and answer the questions like it's going to help you be in a better position in the long term, so that instead of feeling really stagnant and like you're not in control of your finances, let's zoom out a bit, look at the big picture and go, well,

I can't really control my budget. I have literally no free cash flow, but I can have a look at my super and make sure that future me is in the best possible position, so that I feel like there is a light at the end of the tunnel, Like times might be tough right now, but this is just a season of lifeback because it's not always going to be like that. Because we're caring about our super we know what's in there, we know what insurances are in

there to potentially protect us. So superannuation is something that we need to talk about and inside your super beck all the assets that we discussed in the first end of the show.

I don't know. Balanced sounds good because often they have like in little brackets underneath the balanced most common or this is the most popular or whatever, and you go, well, if it's popular, I'm in. But more often than not, people between the age of twenty and forty are not actually balanced investors. So from the research that we've done inside of She's on the Money, we know that most people in our community are growth or high growth investors

like they should be, not they should be. They are actually growth investors. That's what they've come back as. So if you're in that bucket of I don't know my risk profile, but I have a default of balanced, and you're not actively changing that, that could literally cost you hundreds of thousands of dollars in returns over the long term. So by going and checking it and making sure you're

dotting all your eyes and crossing all your t's. It's so easy, I promise, And like this is not condescending at all, back, but subranuation funds service every single Australian that is employed, right, so it has to be understandable. They have to talk in a way that makes sense and if it doesn't, they're doing you a disservice. So

go and have a look at your superfund. Make sure it's reflective of your actual risk tolerance, because the difference between a balanced fund and a high growth fund is often at least two hundred thousand dollars by the time you retire. Even if if you're not able to invest, you know, even a dollar on Chaz's like Beck has, you can go and have a bit of a fix up with your super and make sure that future use in the best possible position. And I think that's really empowering.

the most money. Right, So making sure that if you're going to look for a new super fund, you're not using a paid platform. You're using a government run platform, and beck if it gets too overwhelming, you know, like I don't really know how to use this. My favorite part of your super Tool is they give you the top five funds in Australia and the bottom five funds in Australia, and I would say, as a basic hygiene, please make sure your super fund is not in those

bottom five and you're doing not that bad. Ideally, ideally in a perfect world.

different like risk asset classes. I don't really know.

the water, and I'm assuming that that doesn't feel overwhelming. No, what was holding you back before or what's been holding you back from you know, doing it before?

I'm like, there's five dollars in there? Really back totally, yeah exactly, So I've actually cured poverty all around.

a big decision. And I mean, at the moment, we're in the middle of a cost of living crisis, and I am pretty sure a lot less of us are investing when we actually should be or want to be. And I mean, the only way to grow our capital and grow the money that we currently have is investment. Like it sounds dire, but it's literally the only way beck that you are going to make money without exchanging your time for cash. And that's how wealth is created.

And I guess that's why I am so passionate about it. And I mean cash it's really sexy and I like seeing it in my bank account, but I also want future me to be in the best possible position. And I mean last year, the stock market actually did really well, so if we look at the S and P five hundred, which is an index used in the US, it returned twenty four percent. Bech oh, my twenty four percent.

that was crippling. Everybody was anxious. So, like, I get why we haven't started, and I can also see why so many people feel like keeping cash in the bank is the smartest thing to do. But it was actually a little bit dumb, wasn't it. Like, and our community aren't silly, but in hindsight, the share market had a really solid return. We're missing out on potentially great returns. So keeping your money in a bank is actually, over time,

going to set you behind. I mean, even with inflation, right, Like to make this even more dramatic, it's not dramatic, it's just fact. But like, so we know that inflation last year was seven point one percent, right, Yeah, can I contextualize that for you? So if you just had your money in a bank account and it wasn't returning anything at the moment. We've got some pretty sexy high interest savings accounts that exist, so please make sure you're

considering them. But if you you just had ten thousand dollars sitting in a bank account, you had analysis paralysis, you wanted to invest it, but you didn't because of inflation, that ten thousand dollars today only buys you nine thousand, two hundred and ninety dollars worth of what it could last year. That's seven hundred and ten dollars that you

have lost technically, not physically. You still might have that ten thousand dollars inside your savings account and you might go, but V, I still have what I had last year. But the costs of goods and services last year was seven point one percent less than it is this year. So life is costing you more this year. Beck, you are spending technically seven hundred and ten dollars more than you were last year.

to invest, it's actually not risk free. People think that they're not. You know, they're saving their butts, but it's not risk free. If you leave your money exposed to things like inflation over a long period of time, inflation eats away at it and then there's not much left. And even though you think you're putting future you in the best possible position, you're not. So we need to talk about I guess what's holding us back? And sometimes

that's analysis paralysis. We don't know how to make a decision because we're just overwhelmed with education and there is so much of it today. We might not be in a financial position to make that decision. And that's okay. That's where we need to zoom out, look at things like our super and what we can control. We need to look at our income. Can we negotiate that, Should we be changing roles? What does that look like in a position where we just don't have a solid cash

flow plan? Are we just you know, letting money slip through our fingers, which you were very guilty of last year. And it's not even me going that's a bad thing, But like, how much more in control do you feel today than you did six months ago?

be oh, I just listened to this podcast. Yes, that might have been the trigger, but the motivation came from inside. You decided that enough was enough and you wanted to change, and that has to come from you and to do that you need to understand you. So I understand and all of these things that we've spoken about today, but also sit down and be like, well, why aren't I in the position I would like to be in? And how do I get there? Well, powerful do we think we're done here?