Hello, my name's Santasha Nabananga Bamblet. I'm a proud or
the Order Kerni 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.
Let's get into it.
She's on the Money, She's on the Money.
Hello, and welcome to She's on the Money, the podcast annials who want financial freedom. If you listen to us a lot, you know that one of the best ways to achieve financial freedom is through investing. But we do know that world can sometimes be confusing, So we asked you, our incredible community, to send in your burning questions about investing, and boy, oh boy, there were some goodies and a lot of them, a lot of them. I feel so seen by this.
I feel so overwhelmed. So I'm glad that we're on both ends of the spectrum. I'm like, holy moly, I thought I'd done a heap for financial literacy, yet there are still six billion questions to answer.
Yeah, I mean I get it, like there are so many things that maybe we don't even think about because we're in this world.
If you guys hadn't replied, I wouldn't have a job anymore. So thank you for keeping me influenced, Thank.
You for keeping us afloat. As always, we of course have Victoria Divine herself the expert, to share who we see.
And thanks for introducing me. I just jumped into your intro before. Hey, you know that's okay, it's elicited introduction, just.
In case this is anyone's first time. Victoria Divine is the expert, and the one and only and the host of this podcast.
Way, all right, well, let's dive even further in. I feel like today is going to be a good.
E bec if you've been wondering how to get started on a tight budget, how to work out how much you need to invest for your retirement, or just trying to figure out what the heck a franking credit is? Stick around the Are you ready to dive in?
You want to talk about franking credits.
Do you Yeah, I've always been curious about what the who's frank? Why are we giving him credit?
Exactly?
What did he even do?
All right, well let's go. I'm really excited.
Okay, So this is a really good one to start with. How do you work out how much to invest for your retirement goal?
I feel like retirement is a bit of an icky word. I don't know about you, Beck, but I feel like if someone says, oh, like, have you been planning for retirement? You immediately just think gray hair, old age, You're not enjoying life anymore. Maybe you're thinking caravans, like the gray nomad vibes, but like you're not really thinking financial freedom. You're not really thinking rich, You're not really thinking like I can set myself up financially. You're kind of just
thinking about the wind down. I feel like there's such a stereotype associated with the word retirement that our generation just doesn't resonate with. Do you resonate with that?
I see we say. Actually, when you said the wind down, I was like, that sounds so cozy, I'm so ready to.
Wa It does, but like that's what we associate with retirement, and I mean it should like, when you have financial freedom, you've got choice, and if you've got choice, you get the choice to not do anything anymore. And I mean the entire premise of creating a retirement fund, the entire prements of superanuation is to create a fund that pays for future use lifestyles so that you don't have to go to work anymore. And I think that's really sexy.
I'm actually sitting on a round table, or did sit on a round table with Acik recently to talk about how to get more millennials engaged with their superannuation. Honestly, an honor like me being asked by ask to come and sit on a round table to help guide them in how to get people our age more engaged with their super one topic of my dreams. I am here for it. Like it didn't matter. They were like, what day are you free? And I'm like, I'll make myself free.
I'm here for this. I'm so excited to be involved.
Good for you.
Also, we discussed a lot about language and the need for language around retirement to change to get us more engaged. So like, yeah, obviously that's not answering your question, but I think with answering your question, we need to remember that what we do today does impact future us. And as much as living in the moment and the journey is so important, we also need to think about future us. And if we are going to plan for retirement, it can start now, and it means smallest steps need to
be taken. And I think that's really really attractive, not just because it's like an attractive thing to do, but like, I'm creating less work for future me by focusing on
this right now. So if you want to be saving for your retirement, you don't actually have to actively be doing anything, but like do some of the hygiene factors along the way of checking in on your super making sure that you don't have a heap of multiple useless accounts, make sure that you are invested in the right risk profile. We've done entire podcasts on risk profiling so that you know how to do that. But I think it's really important that if we're going to talk about retirement, we
have clear goals. And in that session, in that roundtable, we spoke about getting a clearer number on what we need to actually retire. So let's start with the numbers that are accessible to me. And to you that we can.
I guess us as a start point, because Beck, if I think I flipped the table and said, well, how much do you need for retirement, You'd be like, I don't know, Maybe I should do a budget, Like maybe I should sit down and work out how much food is and then you end up overwhelmed because of the time value of money and how much inflation might impact
what you need to save. Right So, at the moment, according to the ASFA, Beck, to have a comfortable retirement by the age of sixty seven, you need to have approximately six hundred and ninety thousand dollars saved or as a single, five hundred and ninety five thousand dollars in your super How does that feel as a number?
I guess I'm just like trying to calculate you're alive for maybe, let's say, like thirty years after retirement. Yeah, if you retire the retirement age, I think that's making sense because you're keeping it somewhere and it's still getting interested. Is that correct?
Yep? Ideally Ideally, I like that you're doing some serious maths here. H's I feel like that's.
A I feel like, you know, definitely just looking for like a quick yess or.
No, no, no no. I think it's really important, But we also want to talk about how at the same time we don't have that amount. Let's just use the couple as an example, because I feel like that's the most common and you can come to your own conclusions about what that means for single people. But if you have that income of six ninety thousand each year, and you've done your maths, like right now, Beck, I'm assuming
you earn above minimum wage, right. I know you do because you know your tax bracket and she's rolling in it. She's fine, she's just spending out the kazoo. But if we did some maths around this, so six hundred and ninety thousand dollars fantastic at a draw down rate of five percent. Now I use five percent because it's a really conservative number. We know that the Australian share market over the last thirty years has returned more than nine percent each year, but we don't want to use that.
I'm very much a believer of like underpromising and over delivering, Like I'd never want you to go through, you know, economic hardship and you're not being able to draw down what you need to from your super and therefore your lifestyle is completely whacked. Right, So we always budget when it comes to retirement predictions on a really low draw down rate. And I don't say really low, like it's quite conservative. In the financial advice world, most financial advisors
use five percent. So we're going to use five percent here. So if you got to having six hundred and ninety thousand dollars across two people, and you drew down five percent each year, which means you're taking five percent of that amount Beck to live your life, because that's what the ASFA has said is a comfortable retirement that is an income of thirty four thousand, five hundred a year. Oh is that enough? Well, no, exactly, no, no, no, it depends.
And don't get me wrong, that's thirty four thousand, five hundred dollars that you didn't have before that. But that is less than minimum wage. And we are seeing people now retiring with mortgages. We're seeing them retiring not owning property and having to pay rent. That comfortable retirement figure that the ASFA is using assumes Beck that you own your own home and you don't have housing costs. What we need to do is actually find our own figure.
And so the best way that I can say to do that is work off the five percent rule that I've just invented right now. Right, So, if I said, all right, well, what do you want to earn? Like right now, let's pretend you have an income of seventy thousand dollars per year, and I go, Beck, is that comfortable? All right? Like I could probably live on that. Yep, no worries. That makes sense for me. Between a couple. Do I want more than that? Like there's two of
us now I'm currently in a dual income situation. Do I want seventy thousand dollars for me and my husband? You might go, yeah, that's fine. So if we go you want to have seventy thousand dollars as in income in retirement, we need to go to our calculator app and we take seventy thousand and we times it by twenty times in it by twenty beck will effectively mean that you're using that income as five percent. So five percent of one point four million dollars is seventy thousand dollars,
So that becomes your retirement goal. So that's the maths that I'm going to tell you to use so beck to work out what you want to retire with. You need to work out what your retirement goal is, Like what's your lifestyle? Is it that comfortable lifestyle that everyone is talking about in media or is it something different? It's so okay to have something different, But if it's one point four million dollars across you and your partner,
what does that actually mean for you? How much do you have to save each and every single month to achieve that? Have you gone and looked at your current SUPER contributions with your partner and worked out okay, well, you know, my partner's employer contributes eight hundred dollars a month to his SUPER and my employer contributes nine hundred, Like, is that amount going to be enough to sustain you in retirement? If it is, slay, you're well on the way.
Anything you do is above and beyond and that's really attractive. If not, what are we going to do about it? Are we going to be planning to contribute more to super? Are we planning on investing outside of superannuation? Are we just in the middle of a chapter of our lives that is not possible and we need to put that idea on the shelf. Do our hygiene, make sure we've got a good super fund, make sure that it is performing well. But no, I do not have the funds
right now to contribute extra. But I know that one day when that comes, I'm going to change it. Like, we need to have a plan irrespective of what our current budget is. Does that make sense? I feel like a maths figure is going to be the best way to calculate it. I feel like I could tell you
to budget until the cows come home. And don't get me wrong, a lot of people are going to listen to this who are a lot more technical than I am right now and say, Victoria, you haven't calculated for inflation, Victoria, you haven't calculated for the changing rate of compound interest Victoria. What about taxes, Victoria, what about the superannuation tax back? I don't care about that in this moment. If this math's calculation gets you off to a clean start. So
we want to do our hygiene. We want to make sure that we're in the best possible pause, But then we also want to do some maths and go, hey, in my head, I've just worked out that a five percent draw down is about seventy thousand dollars, Like, that's what I want to earn, and that means I probably am aiming for about one point four million dollars in super We can work with that, We can go from there.
Do not get me wrong. Stuff is definitely going to cost more in the future, because like a basket of goods today, beck costs a lot more than it did last year. But over time, inflation will hopefully be much lower than the compounding interest that you achieve, so it will work out in the end. Sure, But I feel like that's a really good place for you to start. So you've got a lot of clarity on your goal, Like that's a very clean goal.
I just have it in my head. I imagine that I'll be single when I'm older, and so I do want to ask you like that doesn't necessarily have to be romantic. You could be like, oh, I'm shacking up with a housemate after I retire, you know what I mean? Like, there could be other ways if you are single, you can find that extra of like helping hands or whether it's share housing or whatever it is.
It's an interesting conversation, right because I was having a chat over the weekend with my best friend who is currently single. If there are any hot chicks out there who are interested in my best friend, let me know. I'm happy to hook her sister up. But I was talking to her about it, and she is the same age as me, or she's a year younger than me, and we were just talking about how she's just like
sick of this like share house life. I don't want to share my living quarters with someone, Like I want to go home and know that my stuff is left where my stuff is left, and like I totally get it, but I also just think, how can we make this possible and feasible for people who just want to be single by choice? Like what if you just decide you're not interested in a relationship, Like that's not for everybody.
No, I don't feel like there's this.
Cookie cutter idea that you have to live with other people. But like I don't know, Like if I was single, I feel like I would want my own space at this age, like she was right, Like if I left something on the bench, I want it to be there when I get back. If you know I cleaned the bathroom, I want the bathroom to be clean when I get back. I totally resonate with that because I can also empathize with you, going, oh yeah, like you could have a whole heap of options to support you, but like why
should that be the outcome? If that makes sense? Like, yeah, as a choice, I also same best friend if we're both single when we're older, we're moving in together and we're going to live our best life. It's so flat we are convinced that we're going to be the old ladies on the scooters going around the nursing home getting in trouble, Like that is my future, yes, but what if you don't want you have to rely on another
human being to sure if your lifestyle. Yeah, and that number of five hundred and ninety five thousand dollars back at a five percent draw down rate is about twenty nine thousand dollars, right, that's less than a couple's amount, But it's still not enough to pay for rent. Even like let's just be really modest outside side of a city. You're still paying like three hundred dollars a week on average, I would say for a one or two bedroom apartment.
But we're not talking about having a house with heaps of land. That's still three hundred dollars a week, and three hundred dollars a week over a year is still half of what that income is. So that person is paying fifty percent of their income to rent. And then what groceries. Groceries right now are three hundred dollars a week, whether you're single or a couple. Families are even worse.
It's not just scare.
You start breaking it down, and that's really grim. And I mean, this is a Q and A. So we'll get off this because I've probably got another podcast in me to rent all about the renuation and retirement savings and whatnot at some point. I mean, we've done it before, but I get so passionate about this because if you're
not planning for retirement, you're shooting yourself in the foot. Sure, like, there is small things that you can do today that put you in hundreds of thousands of dollars of a different position in the future that don't cost you a dollar today, Like go do that. Go check your superanuation and consolidate your accounts. Beck, when I checked my supbranuation way back in the day, I had like five different accounts,
and I calculated that over that period of time. Had I not consolidated my super, I would have spent an additional seventy thousand dollars on superfees.
Oh, don't think about it. Do you think about it? Don't think about it.
No, do think about it so much yourself from doing that, because there are people that didn't make that change. There are people right now that are exactly like you and me. Had a heap of hospital jobs, we worked retail, you know, we then got our big girl jobs and we like didn't think about it again because super is icky and it's not very sexy, Like, just go consolidate it. It's the light at the end of the tunnel right now.
If you don't have anything in your budget right now to put towards future, you at least make sure her house is clean, be for real, Like, go and set that up so that when future you can contribute more money. She's not starting from scratch. Take care of a Oh anyway, ask me another question, because otherwise this is going to become a massive rant about zuperannuation and retirement and that's not what y'all came for.
Okay, let's go to the next one. So what is the rule of seventy two that I hear Victoria talk about.
Oh my gosh, I love the rule of seventy two. I heard you talk about that now. I say it all the time, but you just tune out, you don't.
Listen, Sugar, I'm sorry.
I feel like it makes sense though, because it's really boring. So it's a resence that I first heard growing up from my dad, who's an accountant, and he was always like the rule of seventy two is very important to understand, and like, as kid, I'm like, bor But it is actually a really nifty little tool that's going to help you to figure out how long it will take for
your investment to double. That's more attractive than just hearing the rule of seventy two, right, Like, it's a formula that helps you work out when your money is going to be worth double. Attractive. We like it very demure.
So it's actually quite simple. It's a maths formula and it's based on a fixed annual return, which I often calculate at either five percent, which we've just discussed on this exact podcast, or I talk about seven and a half percent, because I like to be consistent across the content that we put out, so all you need to do is divide seventy two by your annual interest rate. So for example, Beck, if you're earning an eight percent interest rate, you're going to divide seventy two by eight.
I've done the maths for you, and you'll find out that it will take about nine years for your money to double. Ah, very sexy, very mindful.
We like, so if your annual return, if it's like five or yeah, and or it would be different than.
Yeah, yeah, And we know that the average rate of return for the Australian share market is just over nine percent, so you could use that. But that's why I often say on the podcast, Beck, your money will probably double within seven to ten years, because that's the average timeframe of the average rate of return across the Australian share market but also the international share market and all the assets that we talk about on the podcast. So it
works the other way around as well. So you want to double your money in six years, Beck, you divide seventy two by six and then you'll see that you need a rate of return of twelve percent to hit that, and you can work out if that's reasonable or not.
Where does the seventy two come from?
It's just the magic numbers, and you don't need to understand the number, because if we were to explain exactly how we get the seventy two number, it would be an entire podcast in itself. But what you need to understand is seventy two is the magic number. We love seventy two, and seventy two is going to be the
number that tells you how to double your money. But the rule of seventy two is basically a super quick, super handy way to set really really stick investment goals and understand how your money can grow and work over time. And the thing I want you to keep in mind
is it's just approximate. It's obviously not set in concrete, but it's an approximate and it works best with interest rates between six and ten percent, which often in our market at the moment, and historically that's what they've returned.
At Sure, and I guess we can all find comfort. Just don't worry about where seventy two comes from. Just know that experts and scientists and all these people.
You can goog You could do a deep dive. There are a lot of really nerdy people who have done a lot of very good YouTube content on the rule of seventy two. Go look at that. It's not for today. What I want you to understand is that seventy two is the magic number, and it's gonna teach you how your money can double.
I love that.
I love money. I love it doubling.
I don't mind it wouldn't say no. Okay, here's another one. Does chess matter? I'm thinking game of chess. I love a game of chess.
I love chess as well.
Is that what you're thinking.
No, it's not. It's investing chess. Do you know what investing chess is?
I know that you've probably told me, but I've gotta be honest.
I don't know if I have. I can't remember. I did it on an episode with Glenn James, Like we're talking about chess and we broke down absolutely everything you need to know about chess with him. So go back and listen to that episode. But pop, quiz, what does chess stand for? If we're talking about it in an investing perspective, so it.
Is actually an investing term?
Is that?
Okay? I'm going to guess it's.
Not a game currency.
Nope, We're going to be here for a few hours you want to tell you yes, please, Yeah.
So it's clearing house electronics sub register system. That was what you were going to guess next, actually your next guest.
Like, I get it. What does that mean?
So basically, if you're curious about how chess works, obviously listen to that episode. But it's a computer system that is used by the ASX to manage the settlement of share transactions and to record who owns what and TLDR. To me, as an individual investor, there is personal opinion, not advice. Beck, I could not give a flying bleep sound about chess. I don't care if I have chess. I care obviously if my investments are registered through the ASX. But I own ETFs and an ETF. The chess does
not sit with me. Chess sits with the underlying owner or the founder of the ETF, and I'm quite comfortable with them having that. Because we are a very secure country. I don't need to worry about chess. I feel like it's a very hot topic in our community at the moment.
If you are a bit more nerdy, which I am, and you spend a lot of time on Reddit, and you spend a lot of time you know, reading forums about investing, lots of people get really heated about like having to have it be chess and having to have access to it and having your very own name on that share. But from my perspective, it's actually about the legitimacy of the asset that you own, and an ETF
is a very legitimate asset to own. I don't need my name on every single individual share because when I buy into an ETA, if I become an underlying owner of that asset, does that make sense? And it's all registered very legally, and I'm very comfortable with that. I'm not going to lose my investment because I don't have it chess sponsored. If that makes sense. Yeah, that's but I think that it's one of those questions that people start to ask when they're getting analysis paralysis, and we
did an episode about that recently as well. You are diving deep and you are so excited to invest back, and you start doing all of these googling and you're like typing away and typing away and working out what's going on, and then chess comes up and you're like, oh my god, I didn't know anything about chess. I better google that. And then you read all these people who are really passionate about it and go, oh my god,
all the investments that I shortlisted, they're not Chess. Oh now I'm gonna have to start again, Like, what does this mean? How does this? I feel like it is a semantic that matters to a very small handful of people but does not matter to the masses.
Is there a benefit to chess?
I mean, yeah, you get your name on the individual.
Share okay, and that's like maybe more secure in some circumstances.
I don't believe it is more secure. I believe it is more about having direct ownership.
Of that share.
I understand right now, the ETF that I own owns that share certificate and keeps it very safe. I've trusted them to invest with them, and I am as an investor of that ETF and underlying owner of that trust that owns all of those share certificates. So I don't mind. Okay, I think I get that, And I feel like it's a personal question, right, So you might still save all v it does matter to me, yeah, And I go, well,
that's absolutely fine. What I want you to be is as educated as possible to make the right decision for you not the right decision for me, So go and do your research. But personally, as an ETF holder, don't mind.
Don't mind.
It's all good.
Do you feel satified?
You feel I feel satisfied. I love chatting about this. So what's the next one?
Okay, this question is actually something I haven't heard before, but I should have asked you this already. What is the difference between market buy limit by.
Ah, you want to talk investing with me? All right, let's break down the difference between a market by order and a limited by order in the super simple terms. So when you place a market by order, you're saying, all right, get me those shares right now at the current price. Like I want to put an order in and I want it delivered today. I want to own those shares when the share market opens, Beck, I want to own those shares and the share market is open
in Australia. I bet you won't guess this between ten and four ten am for BM. Yeah, it gives you time to get into work, get across your admin, and then the share market opens and it goes wild, and then it closes it four and then you can do some admin and go home. Work life balance, I suppose I love that, but that's interesting. That means that if last night you put a share order in and the market wasn't open, it would be fulfilled at ten am this morning when the market did open back up, or
you could just log on right now ten twenty four am. Technically, I mean not for the people listening, but for you and I it is in the past. But that means that you could go and buy a share right now for that current price. So it's all about speed.
It's all about.
Getting the share as quickly as possible, but the price might fluctuate slightly by the time the order goes through.
Ah.
The downside is that the market jumps up before your order is filled. So you might put in an order last night the market opens, it's actually at a higher rate. Now you might end up paying more than you'd anticipate it. So a market buy order is basically give me that, don't care how much it costs, and I mean the market doesn't fluctuate too much, so don't want to be too dramatic about going give it to me at any price like you're buying it and it might fluctuate a
few cents. You're not going to see a share jump astronomically and then it absolutely financially screw you. But the other one is kind of like the cool boy way of investing. So a limited buy order is basically when you're like too call for school, and you're like, I'm only paying x amount and if it goes up, I'm not interested. So you set the price that you are willing to pay and the order will only go through
if the market hits or drops low that number. So it's perfect if you've got a specific price in mind, but you don't mind waiting. The catch is kind of that if the market doesn't cooperate and the price doesn't hit your limit that you've set, like your buy price, you might not actually end up purchasing the share at all.
Yeah, okay, Yeah.
And I think that this is a good one where I'm a bit petty, so like I don't want to overspend on something, and if I see the market fluctuating a little bit, so like, there's been a share that I've recently been following, and to be honest, it's probably a little bit of a gamble, so I'm not going to share it, but I've been following it a little bit and it's going up and down by a few cents here and there. And this is just me being
investor Victoria. This is not me being Victoria creating retirement fund Victoria. This is me having a little bit of fun because I really enjoy investing. I've set a buy price for that because I'm like, no, I've seen it drop to that a couple of times over the last you know, few months, and now I've finally decided that I do want to invest in this asset. I don't want to pay more than what other people have paid. Yeah, I want to see it drop back down to that
because it's a bit of a risk. It's a bit of a punt, so I'm not willing to pay that even slightly higher price. But the same is true if you're budgeting for a share right, like you might go, I really want to, you know, get.
X for X.
This is a really good way of doing that. But I also think it's important to understand that it's about balancing urgency and price control, but then also remembering that there's no such thing as timing the market. So when we're talking about this, it's so nice to be able to set a limited by order and go I only want that asset if it comes in at X. But there's never going to be a good time to invest, Beck, because I can't predict it. Like the best time to
invest was twenty years ago. The second best time is to get your shoe in the door today, because we know, based on the rule of seventy two Beck, that your money should double after a certain period of time. And like, starting now means you're not starting tomorrow, and you cannot predict that the share is going to go back down. But for me, I don't want that share in my portfolio if I have to overpay for it. I only want it if I kind of get it for a
good deal. Yeah, it's like that top that you would only purchase if it was on sale.
Totally.
You're like, I wouldn't pay full price for that. There are some stores that I'm literally convinced I will never purchase full price. I just know they go on too good a sale.
I know I'm at the same house back right now, I'm always on sale.
If you're paying full price at that store, what are you doing?
What are you doing?
What are you doing with your life?
Wait? Literally three seconds, it'll be on sale again, exactly all right, let's go for a quick break. I'm just need to check out the house website and see this on side. Yeah yeah, fair be everywhere. Okay, guys, we are back and we are doing a bit of a Q and A today. So V, I don't know how you feel.
I'm ready. I'm sad that we checked the house website and they were still on sale. God, I thought they'd gone like super sale or something. But I really want to answer more investing questions. This is my bread and butter, Babe.
You're in your element right now.
Yeah, living, live, love, laugh or something.
Yeah, something like that.
All right.
So the second one is how do you collect revenue from investments? Oh?
Yeah, beg, you're investing now, you're an investor.
Actually, all these questions of mine.
Yeah, how is it going to make you rich?
I'm not ready for that.
Let me tell you. So. There are a heap of different ways that you can make money from shares. Investment increases in value over time, and then you potentially sell it for a profit. Money win. The other one is that it pays you for the privilege of owning it. I love that, Like imagine something just being like, hey, Beck, thanks for coming here's some cash. Oh, thanks for still being here. There's some cash. Literally, your share portfolio is
your sugar daddy. Now that's so good, Like start referring to it as daddy.
Yeah, ideally they like that you like it more.
But there are a few things. So increasing in value is the most widely understood way of making money in the share market, right, Like you bought a share for a dollar and then in ten years Beck, you sold it for ten money.
Win.
But for me, I am greedy. I want my shares to increase in value, but I also want them to pay me for the privilege. So we have talked about it on podcasts before. Dividend yielding shares. So a dividend is a payment that a company makes to you because you are technically a part owner in the business, and as a part owner, you are entitled to part of the profit. And the percentage of which you own shares
is the percentage that you get paid out. And I always use NAB shares for some reason on the podcast as an example, So let's keep that consistent. So say you which is a NAB share, Beck, and a NAB share is probably today about thirty seven dollars per share, and we're just going to keep it clean. You just
purchased one. The dividend yield over this year four NAB has been a dollar and sixty eight cents for the entirety of the year, so it pays out twice a year, and it pays out in July and December, and it gave in December about eighty four cents and also gave eighty four cents in July, so that brings you up to a total of one dollar and sixty eight cents. Which you go, oh, one dollar and sixty eight cents for a NAB share, didn't you say it was thirty
seven dollars. That doesn't seem like a good deal, but is a good deal because you end up with a dividend yield of about four point five five percent, which in the grand scheme of things. You know how we said that the Australian share market returns about nine percent each year. It's obviously significantly lower than that. But NAB is consistent. It is a blue chip share. It is a share that is tried and true and tested. It's like that consistent friend that is always there. So I
love to see that. Also, it increases in price over time. So I'm being paid eighty four cents every six months for owning an AB share. Again, not a recommendation, just an example, but these are companies that are paying percentages of their profit to you. Beck that right now don't seem really big, but can either contribute to your share portfolio. So you can pick what's called a dividend reinvestment plan and it's just a box on your SHARE's 's account.
Oh like, this is just side note for you. Obviously anyone listening, you can hit dividend reinvestment plan and every dollar that your share portfolio makes will just be reinvested for you, so you don't even have to lift a finger. But then when you get to retirement, Beck, that eighty four cents will be put into your bank account instead of your share portfolio, and that becomes your income instead
of you going to work. So over time, when you have more and more shares and more and more profit, that eighty four cents becomes that, you know, forty thousand dollars or that seventy thousand dollars of income that we were talking about at the start of the episode.
If you had, for example, one hundred shares, yes, then there we go, we've got.
To start coming. And this is say it can be so disheartening at the start of an investment journey because you're like, oh, gung ho, and you're so excited, and I just don't want you personally to fall in this trap of like, I've invested thee and I'm so excited. And then it comes to tax time and you get your tax statement, which is probably one of the first times that you would just see on a statement of paper how much you earned the previous year on your investment.
You'd be like, wait, what it was like four dollars?
What the hell? Right?
All of this for that? Like yes, because at the start, compounding starts off really slow, and it really starts to kick into gear at about seven years. And that goes back to our rule of seventy two where you usually if you have a rate of return between six and ten percent, it will usually be seven to ten years. So compounding starts to take effect once your money starts to double, and once it starts to double, compounding just turbocharges,
which is so exciting. But that's why we talk a lot about delayed gratification on the podcast, because you need to be in it for the long term, you can't just go, oh, it was four dollars v it wasn't worth it like that. Four dollars. Next year is going to be eight, and after that it's sixteen, and after that it just gets bigger and bigger, and it's so exciting. Beck. So that's cash dividends. You mentioned frank and who's giving him credit earlier? And you want to know about that.
So some dividends come with a franking credit, and I think a franking credit is best viewed as a tiny flag that they put on their heads. So your dividend comes in and it might be a unfranked dividend, no flag, franked dividend. He's got a fancy hat with a flag on it, right, and it means that the company he has come from has already paid the thirty percent tax at a corporate rate and you get a credit for it. So he's really attractive. So the flag on his hat
doesn't make him look silly. It makes him look more attractive, and it represents the tax that the company's already paid on the profits that have been distributed as dividends, and those credits they can be collected. So you want lots of little men with lots of little hats, because it's used to offset your personal tax liability.
Oh so for example, if you got a dividend, like a one dollar dividends from NAB and they had not paid tax yet on this difference.
You'd pay four takes on that dividend if.
They had the tax has been taken out.
Yes, but maybe no. So it depends on what your marginal tax rate is. So if you pay tax that's less than what your franking credit is, it's not as attractive. But for most of us, we have a tax rate of thirty nine percent or more. And I say most of us because that's just how the Bell curve falls. Not a good or a bad thing. It just is the state of the economy. Most people fall into a thirty nine percent tax bracket, and because of that, you're
nine percent on average better off. Ah, because the corporate tax rate is about thirty percent. Yeah, and he's got a thirty percent flag on his head.
So even if you make more or less, or you fit into a different tax bracket, you don't have to pay any more tax.
Well, you might have to pay the difference, so you might have to pay the nine percent, but that's instead of thirty nine yer cent.
That's very sexy, really good.
Yeah, so tiny Dividend has a hat and the hat is a flag. I don't know if that's how every other ex financial advisor used it, but I've always just thought as Frank as a dude who has a red hat on and it's got a flag on it.
I'm also curious for anyone listening what their little man with a flag looks like. Mine is a white ball with a red hat, and I wonder what yours looks like.
It's a MEDIOCM middle aged white man, ah with a bad fall cat like you know, like the cap that you that has the like fan on the top of it.
Yea's like a colorful hat really called propeller.
I don't know, propeller hat. Yeah, so that is Frank. Let's get on to some more questions.
All right, let's go. So this next one is an important one. What type of reporting do I need for tax time?
Oh? You need all of it. Thankfully we live in twenty twenty four, so a lot of investing platforms and a lot of your employers actually have data feeds that go straight to the ATO. So if you don't log in on the first of July, which I don't recommend anyone does their tax on the first of July. I know lots of people are like so gung ho about like getting it done. Oh my god, I get my return.
I know that that's you, Beck. But if you wait a little bit longer, it gives time for your employer to upload all of your tax information, It gives time for all of the investing platforms to upload it, and it might already be on the portal. To make your life really, really easy. But when it's time to do your taxes, you need to make sure that you're as
prepared as possible. In Australia, this includes understanding and knowing the dividends from your shares, the interest from your savings account or your bonds that you own, and any rental income that you have received. If you are a fancy pance and have an investment property, if you've made any sales like you've sold some shares or some property, you need to report any capital gains or losses and remember that there is a potential CGT discount if you've held
the asset for more than a year. If so, you're in a good position because yes well, you'll still have to pay capital gains tax on that. The profit will be taxed at fifty percent your marginal tax rate. If you own an asset for less than twelve months, make a profit and then sell, the profit will be taxed at your marginal tax rate, and we pay tax on money that we earn. That is just a reminder that there are potential CGT discounts if you own it for more than a year. I have more term holdings. Now
they're moving back into reporting. You can also deductions related to your investments, which is important to track as well. So if you've got interest on loans or property related expenses or like management fees, keep all your paperwork, your receipts, your bank statements, transaction histories, and keep them in order because the ATO might want to check your claims, you
might get audited, but stay on top of it. Not only because obviously we want to comply with the ATO and not getting any trouble or strife, but it optimizes your return, Like you're going to get the best possible return if you track your expenses. Yeah, smart girl, things.
Smart girl, God, you're smart.
No, not me, Just people who track their expenses are smart. Ten out of ten.
Okay, so this is going to sound like me, but it's not me.
I feel like all of them sound like you.
They all do sound like me. Actually, you're right.
I saw them come in from the community. That's literally your only saving grace. Otherwise I do questioning whether you just keep this episode in so that you got investing advice. Now you started, I've got receipts, so do I.
I want to try a budget. What's the smallest amount I can invest with?
One cent?
That is so true, v I was gonna say, I was actually about to screen this from the rooftops.
Yeah, one cent.
That you say, start with as little or as much as you like.
Yeah, but like you are investing on Charesy's right now, you can literally invest for one cent.
I've got nine dollars in there.
See exactly. That's a lot more than one cent. So let's hold on. Let's flip this Beck. You started your investing journey, how much did you start with?
I started with ten dollars actually, and it has gone down. But as you say, it's the long game that we're playing. Yeah, I think it just feels good knowing that I have some money out of shares. Like it's good to start. Yeah, I feel motivated. It's just like chuck a couple bucks in there every now and then. It's doing some I don't know what it's doing, but it's doing doing its thing exactly.
And to me, that's so exciting and probably even better than me explaining it because I feel like a broken record. But I'm like, you can invest for as little as one cent, like Beck's investing with nine dollars. I feel like that's really a proachable and it's really realistic, Like it's where lots of us start, and it's where lots of us should start. Because Beck, you're dipping your toes in the water. Like if you lost that nine bucks,
you're like, beh, whatever, that's absolutely fine. But if you'd started with like five hundred dollars and you'd seen it go down a little bit, because that's the nature of the market, I think you would have been really stressed.
Yeah, that's true.
I think you would have been like, oh my god, the I've actually lost so much money, Like I've lost ten percent. And that's what you're explaining to me. You were like, up, started with ten dollars, it's now down to nine. You've lost ten percent, but you're not that stressed about it because you started small and you're going to build it up over time to put yourself in the best possible position. So obviously great news is if you're on a tight budget, Beck, you can invest with
as little as one cent. I just see no barrier to entry anymore except people having cash flow and having an education, because I feel like the education part is the thing that terror fives people. You don't know what you don't know, and if you don't know what you don't know, you're not going to do anything, are you. So I feel like my job is education, and then all these other platforms it's their job to make it super accessible for you to get your foot in the door.
Because I can guarantee Beck that nine dollars You'll blink and we'll be talking in a couple of years and you'll be like, oh, yeah, it's nine grand, yo. But
it is that's the plan, is it? Not Like the plan is not to take the money out, it's to build over your lifetime to put you in the best possible position so that when retirement, as boring as it sound, comes, you can afford to go out for the coffees that you love so much, like, we don't want to compromise our lifestyle, and by you doing this, you're putting future you in the position to not have to do that. Isn't that sexy?
Definitely so sexy.
So obviously platforms like shares is the way they make it accessible is not because, as we said, nabshares thirty seven dollars, that's not that accessible. But they allow you to buy fractional shares, so you can buy a fraction of a share, and the way they do that is by not being chess sponsored. So essentially shares is buy the share and break it up and give you the portion that you want, which makes it much more accessible.
And I'm quite comfortable with that. But it's a really great way to build your portfolio bit by bit, even if you're working with literally the smallest budget known to man, which is one cent and I mean shameless promo here use the code SotM Beck.
What do you get ten bucks?
Actually I think that's what we get ten bucks for free. So your ten bucks that is invested wasn't even your own money.
Yeah, I actually didn't even remember that. I didn't put any.
Money, So you've got free money. And then you've been investing it. Tell me a better money win.
Oh wait, so true, that'll be something one day.
All right, let's move on more questions. What are they?
Okay, this next one? I feel like I hear about it a lot, but I have never had any idea what it is. What is negative geary? All right?
So an investment is considered to be negatively geared when you buy it with borrowed money. And then the expenses so like the interest that you're paying on the loan are higher than the income that the investment brings in.
Okay, but I thought it was a good thing.
No, it can be. Oh so. Currently in Australia, those excess expenses are often claimed as a deduction on your otherwise taxable income, which is why people want that to happen, which might help reduce your tax bill, which we obviously love as investors. And while negative gearing is most commonly associated with investment properties, it's also something that can be applied to your chess.
I'm taking it on.
But also no, no, so I'm going to go back. You know how I do dumb things like Frank who wears the red hat. Yes, like I don't think you're going to forget Frank. Right, Frank has a red hat?
Why Beck, because he comes with a credit comes with Frank is tax already and non Frank is not taxed.
Yet, exactly right. It's like I have all these things in my life that I still do. Lefty lucy, righty tidy. Yes, I know how to set the table because fork has four letters in it and so does left. Thank you, I'm user, Yeah you welcome. But I just have these things in my head that work, right. Negative gearing is negative because I have to pay for it. Yes, that's how I see it in my head. It's not a
bad thing technically. But negative gearing is negative because you're going to take some money out of my bank account to make that investment dream come true.
Right.
Positive gearing is where the investment makes more money than it costs me. So positive good for me. I'm getting money. I love getting money. Neutral gearing is where they just break even.
Yeah, okay. And then if you're negatively geared on occasion.
You're gonna have to cough up some cash back.
Yes, so pay for it, and that cash that you cough up.
Maybe claimable bull a tax. Okay, So it's negative because you have to put money in and we don't want to do that. Like in a perfect world, everybody would just be giving me money, but for me to own that asset, I have to tip some cash in and that's how I remember it.
Hey, in investments and investment, isn't it? Yeah?
I guess. I mean that sounds really silly, but like if it sticks in your brain, yeah, I don't care how it sticks.
That actually is sticking. So thank you so much, so V. Throughout this episode, you've kind of jumped to those two figures it's seven point five percent return and five percent return as like an example when you're trying to explain something, why do you jump to those I feel like.
That's really interesting and I don't think I have disclaimed it before. It's just a good example, right. So, as I said before, the average rate of return of the Australian share market over the last thirty years has been
more than nine percent. But I feel like it's really irresponsible of me, as a finance professional to then use that number as the example, because we always want to underpromise over deliver, Like in a perfect world, you would get more than what your target is by retirement when you are talking about retirement, You've probably noticed that I
always tend to use the five percent example. But if we're just talking about the share market and I'm just talking about average rates of return, I might use seven and a half. Because it's day to day. Both of those are obviously significantly below what the average rate of the share market does actually return. Five percent because I
want to account for inflation. Five percent because I want to account for the time value of money and how things are going to cost a lot more in the future, and I'm taking care of inflation in my head when using five percent. So if I say, Beck, you've got a five percent draw down rate on your investment when you come to retirement, that means that we've got a
lot of wiggle room. Whereas if you looked at the average rate of return and said, well, there it's more than nine percent, So I'm going to use that number to calculate it. What if the market's off, what if we're going through a recession, what if COVID happens, Like what, you just take less than half of what your income is today. Percent a rate of draw down means in economic turmoil, we can still take five percent and not
impact the underlying asset. When the market is doing really well, we still take five percent, but that amount that is above and beyond goes into our investment so that we can continue to take five percent even when the market is off, so that we maintain a consistent lifestyle. So that is something that a lot of financial advisors do because we want to make sure that we can just be consistent. We can use a good example that is lower than the market, because there's nothing better than when
people go, well, where's that number even come from? And I can be like, well, it's actually higher, so you're going to do better, but if you really want to fight me, So it's nice to have a consistent low number. But then also that seven point five is more around predictions of when money is going to double, because if we only focused on five percent, we're not doing ourselves justice.
So they are literally just examples that I use to make sure that one I give our community consistency because you are always going to have me use seven point five or five percent, and those numbers are things that I would be really happy if you were away doing your own calculating and in your head you go, oh, V always says five percent or V always says seven and a half instead of you googling and getting six million different options.
Thank you V.
Well they're just two numbers.
Okay, So next one, this is a good one to end on, I think. So what should we read and understand before purchasing any investment product?
Okay, so you hear it on ADS all the time, Read the PDS and TMD before making an investment, or read the PDS and TMD before making.
A decision, right, I couldn't.
Yeah, I read that on ADS all the time, and I feel very grateful to be able to read ads. But what does it even mean? So PDS is the product disclosure statement and TMD is the target market determinate. Yes, so we're just going to focus on the PDS because the PDS basically is all the information about the product, and then the TMD is basically who that company thinks is a really good fit for that product, which I
think is important to understand. So when people say read the PDS and TMD, it's basically saying, read about the product and understand whether you're interested in it, and also check if that might actually align to you and your
lifestyle and what you're after. Because You might go to a TMD beck after hearing that there's a finance product on the radio or something, and you go, that sounds interesting, and then you look into it and they're like, it is targeted towards people ready for retirement in their fifties and sixties, and you might go, well, maybe this isn't actually for me, maybe this isn't something that I'm too
interested in. But before you jump into any investment, I think it is so important to read the pds and do you know why, So, even if it's not to do what you need to do, which is understand all the details what the investment is and what the risks are and what fees are involved. One time a girl read the PDS of some company's product, and in the pds was really fine print that says, if you read this and get this far, message us because you want a cash prize of five thousand dollars.
Wow. Yeah.
And it was because they just knew that no one was going to read the pds and they wanted to reward the person that actually did read the pds. And she contacted them and was like, hey, I know this is really weird, but like I saw this in your pds and they come this way, here's five grand.
Wow. Be for real, right, I'm going to be reading every single PDS.
So like, don't get me wrong. Companies know that you don't read them like, but they are a legal obligation and to be honest, if you want to put yourself first, scan them. They are written in plain English. They aren't written technically, they aren't for technical people. They are written in black and white language that basically says, this is what the product is, this is where our fees come from, this is how we've made money, and this is what
you'll be invested in. And for me, if you're going to invest in anything, I feel like we all google. Right back to the nab share example. You're going to purchase a nab share beck, You're going to google it. You're going to probably see a few forums discussing it. You're probably going to see you a whole heap of different investor websites that give you insight into different shares and what they mean and how they work. Fluff, absolute fluff.
Go to a PDS and read about that asset class, what does it cost, how does it work, what does that mean? Go to any website I'm going to throw Shares's under a bus right here for good reason. Go to their website, scroll to the bottom. The PDS will be right there, and it will explain to you, in plain, very easy English, how they get paid, what it will cost you, how it will work, how their entire business model is structured so that you can be as educated
as possible. Okay, and I know you're not going to do it, but like, obviously it's a good idea. And don't get me wrong. I mean, if it's a company that she's on the money is working for, you, best believe I have not only combed through that PDS, but I've also sent it to my lawyer to make sure I didn't miss a thing.
What if your lawyer finds that little don't.
Work with them? Huh? Like if a lawyer finds something in a PDS no of a different company, I won't work with that company.
Lawyer finds the little statement that says you've won five thousand.
Dollars, Oh, maybe she get Do you know what if she does that and I'd already read it, she deserves the fight.
Yeah, if you missed it somehow, but that's a thing.
Google it, Like woman wins money from reading pds. I promise it's a thing. God, I mean, it's probably never going to be a thing again because now everyone's reading pds. Is like Beck would be so that she can win money. She's not interested in her assets, but she is interested in some free cat Oh yeah, which ironically is what I would get if you just invest it. Oh well, game the system.
We have covered a lot today. If you guys found that helpful, don't forget to hear that subscribe button so you never miss an episode and also really helps us. It does help us. But also if you do have any questions that we didn't get to today, don't worry.
We're always listening is a not creepy way, like in the way that your iPhone is not. Like, we're listening if you actively engage with us, not passively while you're a brunch with your friends.
Yes.
Yeah, disclaim that we're always listening in twenty twenty four is a dangerous statement that I'm not sure why you used. But anyway, make sure you follow us either, make sure you subscribe. Subscribing to our podcast actually makes a massive difference. I don't think people understand that. So we're going to do some more call outs on that in the future, because we really want you to be as engaged with our content as possible. And also, our Instagram has been slappin' recently.
It has been so good. I shouldn't use like gen Z terms like slapin and sleigh and stuff, but my team is gen Z Yes, So they all say these things and then all of a sudden, I'm adopting them, and I feel like that millennial dad on tiktop who like embarrasses his kids by using gen X words.
I think the fact that you said slappin', yeah, it's a bit skibbity.
You know, I'm out to take you home. We are right, but obviously follow us on Instagram because that's where we drop all our call outs for questions for episodes exactly like this, And I'm going to make sure that I put that Shares's code that Beck used that we were talking about in our show notes for you to make it as easy as possible for you to start your investing journey. So have the best day, guys, and we will see you on Friday. Bye, guys.
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