This week, we are very lucky to have leading financial advisor, Adele Martin on the show.
We discuss Adele’s tips to get that initial deposit together when you’re saving for your first or next home.
Michelle May – Sydney Buyers Agent
Marcus Roberts – Mortgage Broker
Adele Martin – Adele Martin
Marcus: Hi and welcome to the Sydney Property Insider podcast, the show where we talk about the things that affect you as a Sydneysider investing in, looking to invest in, or looking to maximize your returns from the Sydney property market.
Today Michelle and I are very thrilled to have leading financial advisor Adele Martin, money mentor, on the show, and we’ll be speaking about ways that you can get that initial deposit together for your first home.
Adele, as a brief intro, Adele Martin, money mentor, is multi-award winning certified financial planner. She is the 2016 award winner of the Independent Financial Advisor Excellence Award and Best Client Servicing Advisor, and a 2017 finalist for the Women in Finance Awards. She is Australia’s leading authority for financial advice for Generations X and Y, having been featured in the AFR, Sydney Morning Herald, The Women’s Weekly, Sky Business, Triple M, and Sky News.
Adele, what a resume that is, and welcome.
Adele: Why, thank you so much for having me.
Michelle: Adele, thank you. Thank you for coming today. Now, let’s get cracking straight away with the first question. How would you recommend people approach their saving needs? Is it best to go by a set amount per month, perhaps a percentage of their take-home pay, or a reduction of discretionary expenditure? Run us through what you think.
Adele: Yeah, well I’m a big fan of having a percentage base because what I find is something called lifestyle-creep happens, where it’s really easy as you earn more to also spend more. To go from passion pop to Moet, and so that’s why I always try and have a percentage that we aim towards. Certainly there’s other financial books that also support that. So one of my favourite financial books is The Richest Man in Babylon and one of the first books we read in our financial book club, which talks about putting 10% away. So, I like that as a starting point, percentage based, and because of that lifestyle-creep that happens. And certainly for us, it’s definitely something that we benchmark with our clients, is how much you save compared to the average Aussie, and making sure we beat that benchmark.
So, the average Australian, if we average the last year, they averaged saving around 4%, so our savings as a whole is dropping as a percentage. So last year, we averaged 4%, whereas we’re always trying to make sure we’re at least beating that with our savings. I think 10% is great as a starting point but we want to try and get toward that 20% if we can.
Marcus: And certainly it’s an easy number to work towards being that if you’re making for say for example $3,000.00 a month, $300.00 goes to savings.
Adele: Yes, exactly.
Marcus: Easy to get your head around as the initial starting point.
Michelle: No bargaining with that either.
Marcus: No. No.
Michelle: You know you have to do it, just get on with it.
Marcus: It’s harsh.
Michelle: So, if the goal’s say $20,000.00, do you break these down to more manageable chunks, or as an overall savings goal?
Adele: I’m a big fan of breaking it down into little goals, and there’s a couple of reasons for that. You get to celebrate along the way. If you’ve got a big goal, it can seem like so far away, and so we want to have little wins to keep us motivated. So the best analogy that I can give is a like me when I’m doing parkrun. For those of you who don’t know, parkrun is a timed 5K run that is done on a Saturday all over the world. When I first started this year, my aim was, I was 41 minutes the first time. So, my next week, I just wanted to get under 40. Eventually, I knew I wanted to get under 30, but I knew that was probably going to be some time away. So, for me, that helped kept me motivated. Let’s get under 40, then let’s get under 35, let’s get under 30. And so having those to work towards and then for me, helped keeps me engaged, helps keep me motivated, and otherwise, it’s 30 minutes seems so far away. I don’t feel excited about that.
So, yeah, definitely breaking it down. We recommend people do that, whether that’s savings or paying off a credit card debt. Sometimes if people have a big credit card debt, they’re trying to pay off, you’re thinking about how much debt you’ve got to go, it can seem overwhelming, so breaking it down really helps people to feel connected to it and keep motivated.
Marcus: Just to expand on that with credit card debt because I know of Australians certainly do have problems with credit cards, and problems with paying off balances with credit cards every month. When you have sort of three credit cards, four credit cards going at one time, you’re only paying the minimum balances, there’s a few schools of thoughts. What would you suggest in terms of how you would pay those credit card facilities down?
Adele: Great question. So, we definitely do have credit card debt. We have 32 billion dollars worth of credit card debt in Australia.
Marcus: Horrifying, truly horrifying.
Adele: It is. So, it definitely is a problem, and so for me the first thing I do with clients is we try to roll it to a credit card that doesn’t charge any interest. So, let’s have an interest free period. So, let’s have any months when we’re not paying interest, because often they could be paying 18% or more in interest. The worst one I saw was 34% in interest, so you just never get ahead with that. So the very first thing we do is try and roll it to an interest-free period.
And then there’s a couple of schools of thought. Do you want to tackle the one that’s the smallest one, so that you can have some room to get that off? Because we can’t always roll them. If we can’t always roll them to interest-free, we try to, we can’t always. Maybe they had a default and maybe they can’t roll it or maybe they’re not working, so you can’t always roll them to an interest-free. So if that’s the case, then we do then tackle the credit card with the biggest interest or the one with the smallest balance? So, personally, I’m a big fan of tacking the one with the smallest balance and having that win.
Marcus: It’s nice, because you get that feeling of winning in there, so if you’ve got four, you’ve knocked one off in 6 months, within 4 months, you’ve achieved part way to the overall goal, and can celebrate those quick wins along the way.
Adele: Exactly. So, I’ve worked with people with in excess of, worst one with a hundred grand of credit card debt, where we’ve helped them tick that off and save it. And definitely it’s a lot psychological with it, and so we want to make sure firstly break that nexus with the credit card, so we stop using it.
And, so one of the very first things that we do with people with credit card debt is build up our thousand bucks in cash. So that I don’t care what they have to do get that $1,000.00, sell stuff around the house, whatever they have to do to get that $1,000.00 quickly and then we start to tackle the credit card debt.
Because what I find happens is, if we don’t get that buffer, that emergency buffer to start with, they then reach for the credit card if something unexpected happens. And then we get that cycle where we just go round and round in circles and we don’t break that nexus.
So, one of the very first things we do with people with credit card debts is to make sure they’ve got $1,000.00 so they can actually stop using their credit cards, then we roll it to the interest-free, and then we have a plan that can actually pay them off. And often that starts as the smallest credit card first, get that gone, so they can have those wins.
Michelle: That’s excellent advice.
Marcus: Absolutely. So, Adele, now that you’ve reached that first plateau, you’ve had that $1,000.00 in emergency savings, you’ve built that buffer for yourself, and through conscious efforts, you’ve paid down those credit card facilities, we’re now sitting at a negligible balance. We’ve got $1,000.00 is savings. What are some of the quick wins that you see for you to start saving money?
Adele: Lost of ways. We could do a whole podcast just about this. Definitely through meal planning, and for me meal planning is a big way that clients save money. One in five bags of groceries in Australia goes in the bin. And so by meal planning, by being a little organized then you can definitely stop throwing money away. On top of that for me meal planning also means that I’m not waiting for take away. Meal planning is definitely a way that I see.
The other way is just to go through your subscriptions to see if you’re still getting value from them and to see if you can swap it for something else. Foxtel as an example, could you switch it to Netflix, or, if you’ve got a gym membership as a subscription, could you really just watch YouTube videos at home?
I’m always looking at my subscriptions to make sure we’re getting value, because for me when I looked at Foxtel and what it cost me, the length of time we had it, which was 11 years, it ended up costing us over $14,000.00 for Foxtel over that time. When you look at what it’s costing, are we getting value from that? I think always questioning subscriptions is definitely one.
The other way I would suggest is picking a bill and re-negotiating it. I had one recently where we had someone, one of our clients who rang up and negotiated the mortgage, got an extra 0.7% off just by asking, and all of a sudden she’s several thousands a year better off, every year.
Michelle: That’s huge, isn’t it?
Adele: Yeah. I’ve done it with my car. I do it regularly with all my expenses, make sure I’m getting the best deal.
Marcus: If you’re starting out, it doesn’t need to be all this in one day?
Marcus: You can break this down into a month project?
Marcus: So, you can say, “Okay, first one. January 1st, we’re going to call the bank.”
Marcus: And we’re going to call about seeing if we can get a reduction in our interest rate. January the 5th, might be looking at gym memberships. It might be looking at Foxtel subscriptions. It doesn’t need to be all in a 24-hour period where you’ve gone from zero to hero.
Adele: No, no.
Michelle: I actually put things like that in my calendar as on my to-do list.
Michelle: So, this week for example, I realized that my phone subscription had run out, and so therefore I was up for renewal for a 2-year commitment or whatever. Actually turns out that I now get more data than previous, and I’ve cut my bill to a third of what it was previously. I mean, that’s ridiculous, and that’s just for me going into the shop and going. “Hey guys, what else is out there?” And the guy in the shop was very helpful, and he said, “Look, I can’t offer this to in the store, but however, online we’ve got these offers, so go and make use of them.” That’s wonderful. That’s just saving all that money and it’s putting it back in my pocket, which is a great win I thought.
Adele: It’s just asking. So, one of the things, you know Marcus’s point there was making sure you’ve got that time regularly scheduled. So for us, we have a financial date in our household to make sure that we are looking at this stuff. And also, if you do have a partner, making sure that it doesn’t just doesn’t just fall on one person’s responsibility, that the financial load is shared. For us, financial dates, 15, 20 minutes on a Monday, I like weekly because if we miss one, it’s not the end of the world, and that’s when we’re checking in who’s ringing up on what bill? What car rego is due? How are we tracking against our budget? Are we still working on the same goals. So, I think that financial date is great that you’ve got it scheduled in your calendar, which is sort of the same thing. Scheduling to actually look at it, otherwise 10 years can go by, and you’ve missed it.
Michelle: And especially with things like medical insurance, private medical. It just keeps going up and up. I have never seen, “Great news. It’s coming down.” So, if you don’t pay attention to that, all of a sudden you could be ending up paying hundreds of dollars every year more on just by not changing. So, yeah, great tip there I think.
Adele: And the other ways too, if you want some quick wins to save money is, yes, definitely you can look at the expense side, but the other side is I look at, well, how can I generate extra income? And so particularly for the clients that I work with we’ll get them to negotiate a pay rise. So, particularly women, I don’t want to be sexist, but particularly women have trouble sometimes asking for a pay rise, knowing what words to say. “What do I do if they say, ‘No?’” I had a client recently, we were able to ink, have a 20% increase in her pay rise, because we go over the steps so she could negotiate it. So I think when we’re saving, we should always look at the expense side, but not forget the income side as well.
On the income side, some of other stuff we do is we have a side hustle. Is there extra income that you can generate to help toward your savings? And so I love this week inside The Savings Squad we have, which is our Facebook community, we have a Tight Ass Tuesday, where we share tips on how to save money.
Michelle: I like that title.
Adele: So, our Tight Ass Tuesday tip this week was some great ones around having extra income through AirTasker, but using that to do an odd-job for someone to have some extra money. We also had this week people selling stuff around the house they didn’t need on Gumtree. I love that we should also concentrate on savings, but the other side of that equation as well.
Marcus: Absolutely. It’s certainly almost an easier way of doing things if you can’t find expenses to go down, you’re going to have it find somewhere. So, if you can find that side hustle as mentioned, if you can find something to earn that little bit more income, if that’s asking for a raise, or negotiating for a pay rise through work, absolutely. Why wouldn’t you attempt to get that done?
Adele: The other thing I’ll just say with saving money is I think for me the most important thing is, and why some people fail when they save, is they haven’t saved for a goal that’s important to them. They set a goal, saving for a first house, without really assessing whether it aligns with their values. So, for me, sometimes people have, if they’re saving for a house they might have failed because they don’t really value security. That’s not really important to them. They find it easier to save for a holiday because they value adventure and exploring.
And so that’s one thing I’ll say, is make sure if you are setting a goal, if you’ve failed at saving for it, just have a think about whether the goal you’ve set is really important to you? Because you could be working toward something that doesn’t really matter to you, and then you’re never going to stick it. So it’s much easier to save for a goal, to say, “No,” to that new pair of shoes or that extra night out, if you’ve got something that you’re saving for that’s really important to you.
Marcus: That’s a great point, Adele. One of the things I always ask people when they talk about their savings account, what’s the saving account actually named? So, it’s not as simple as just going on internet banking and saying, “Yeah, okay, there’s my transaction account.” There’s saving account. Almost all of your major banks in Australia will now allow you to rename your accounts, so if you’re emotional, if you had that huge goal of going to Greece next year for a holiday, why not name that savings account, “Holiday to Greece 2019?” Make it something that resonates with you.
Adele: Make it your screen saver on your phone, on your computer at work. I think that’s a great idea.
Marcus: So, Adele, what if you’ve never budgeted before, because budget is such a dirty word in so many people’s minds. I know when I mention the word budget, I can just see people, their eyes just rolling back in their head and thinking of the good old days when they were learning classic literature.
Michelle: It’s like “diet.” It’s not a sexy word.
Marcus: Almost like when you mentioned your times at parkrun. I was thinking to myself, going, “No, my goal would be just getting there.” But what if you’ve never budgeted before? So money comes in, money’s going out. How is it that you start keeping track if you’ve never done that before?
Adele: Firstly, I totally agree. I hate budgets and I think because a budget feels like a straitjacket that we can’t spend money, and so the very first thing we do is actually don’t call it a budget. We call it a spending plan. So, because it does have a negative vibe about the word budget, so the language we use is really important, so we use the word spending plan.
And for us there’s three main areas that we do when someone’s working on a spending plan. The first thing is we help them set up the budget, and make sure it’s realistic. So, I think that’s probably one of the biggest mistakes people make when they try to do it, is that they haven’t allowed enough for fun stuff. If you don’t allow enough for fun stuff, then it’s not really steep. It’s a bit like being on a 1,200 calorie diet. Well, that’s okay for a little while, but long-term, that’s not sustainable. You’ll have a blowout and then you’ll all…
Marcus: Absolutely. Day four’s going to roll around soon enough.
Michelle: Day four!
Adele: Yeah. Exactly. So that’s we do, is make sure it’s realistic. It allows for fun. Even with the people that I’ve worked with, credit card debt, they still have a holiday account, because we have to make something that’s realistic that they can actually stick to.
The second that we do to make having a budget easy is we help them change their banking structure. We would have a bit like what you just said with the goals, is you’ve got a goal, name it. So, for us, we would have discretionary spending, the fun stuff that we tend to blow money on in separate accounts. So, for me, we have a joint entertainment account that my husband and I both use. We’ve got a looking good account. So, it’s separate. We’ve got our own play money.
So, we’re actually putting our discretionary spending, the stuff that we tend to blow money on in different bank accounts. Now the reason why we do that is that it helps change our behaviour. It helps make us stop and think. “Have we’ve got money to go out? Is there money in the entertainment account?” It makes us conscious of what we’re spending, and that’s what we really want. We want conscious spending, because we all work hard for our money, and we want to make sure it’s going where it matters. So that’s the other thing that we do, is we use our bank accounts to help change our behaviour.
And then the last thing we do with the spending account is we make sure we’re getting regular feedback. So we see how we’re tracking, because that way, a bit like parkrun with getting your stats and running. This helps get you motivated. But if something’s not working you know why and then you can correct it. We’ve had all sorts of people, apart from regularly looking at your numbers, we’ve seen people pick up fraud, we’ve had two clients that have picked that they were paying for a house insurance they no longer had and a car that they sold two years ago from looking and getting that feedback from tracking.
Marcus: Because it’s amazing how many people don’t look at even their bank statements, or don’t look at their credit card statements. They just see the bill at the end of the month and go, “There’s a whole lot of transactions in there.” They never actually looked at what’s in there.
Michelle: And banks on their own are helping you, being able to track things better now. I think I saw an ad on TV the other day where this couple was trying to order take away and then realized, “Actually, we’ve already spent this much this month in takeaways this month.” Is that right?
Adele: There is different some banks, usually you have to have all your banking with the one place.
Michelle: Right, yeah.
Adele: There’s definitely some ways out there that you can track it. What I find is that tracking by itself doesn’t change your behaviour. So, it’s always I think great to have the tracking, but if you haven’t adjusted your behaviour by changing your banking structure with the two, for me go hand-in-hand together.
Michelle: So, how many bank accounts of you recommend as a minimum then?
Adele: So, everyone’s a little bit different and this is a question I actually get asked, is, “Oh, what about all the bank fees? What about all the EFTPOS cards?” Not every account has to have a EFTPOS card. And with the bank fees, I would often encourage them to go back to their current bank to see if they’ll get them waived, because a lot of the time the bank will waive them. They’re wanting to retain the customer. Or, to go somewhere else that will offer you those fee-free accounts. But not all of them do need EFTPOS cards. And every client is different. How many bank accounts do they need?
So, I often say for some clients that come in, this is, I get a lot of these, “What about my credit? I want to use my credit card for the points.” That’s one that I get a lot and with our credit cards I say, “Well, we’ve got a license system where you’re either on your Ls, your Ps, or on your full license.”
Michelle: I like that.
Adele: Your L plates are if you’ve for credit card debt, if you haven’t paid the balance back, if you’re getting charged interest, we don’t use the credit card at all for anything.
Your P plate system, which is what I’m, I’m on my Ps, if I know that I have to pay that bills or by my credit card, I know that I put my looking good and my entertainment on the credit card, I would tend to go over my budget, what I’ve set for myself. So, for that reason, I put my bills on my credit card and still get my points, because I can’t control them anyway.
And then the last system is, the last license system is you’ve got your full license. People with their full license may not need those extra bank accounts. Maybe they just need, they can put everything on their credit card. Those people stick to their budget, very rarely ever go over, and have never had a credit card debt.
So, they’re the three systems that I use if people are trying to maximize points on their credit card, but also to minimize the number of accounts that they have.
Michelle: And so going back to the rewards system, you say it’s not sustainable staying on a 1,200 calorie for a long time, do you have like a system for that in terms of, if I save $2,000.00, how much do I get to spend as a treat on myself then, or something free to do? Do you have a system in place for your clients?
Adele: Well, I would say I’m very careful to make sure I’m not emotionally spending. So, just like emotionally eating, that can be dangerous. So for me, emotionally spending, spending when you’re happy, mad, or sad, can really derail someone’s savings. So, for me it’s always making sure, I actually try not to do emotional spending. I can put my hand up and say I’m definitely someone who spends more when they’re happy. When I’m in that excitement space, all of a sudden I can spend double, triple the amount on someone’s present because I’m in that excitement space. And so that can sometimes sabotage a month, two months, three months’ worth of savings in one time. And so I always try and have or I’ve seen it happen with clients where they’ve had a bad day at work, and they’ve put $6,000.00 on a holiday on a credit card without talking to their partner about it because they’ve had a bad day. I’ve definitely seen emotional spending both ways. So for me I try to have other ways that we can reward ourselves that don’t necessarily have to have something money oriented with it. Just like we try to break emotional eating, I try to break emotional spending.
For me I try and have a list of things that are rewarding but necessarily cost a lot of money. Might be for me it could be buying a new lipstick. That’s $20.00 or under, or it could be that downloading a new song from iTunes, or something that’s little or all three. Going for a walk or something like that.
I try and make sure that I actually, I don’t encourage emotional spending, because it’s a bit like emotional eating. You’re always going to have that, “Ah, win …” You know, spend. But we just try to make sure that people have enough money for the fun stuff. So that’s the most important thing, and fun is different for everyone. Some people need more, have stuff week to week is more important than how quickly they’ll pay off debt or how quickly they’ll save. So, everyone’s version of fun is a little bit different. We want to make sure that they’ve got enough fun so that saving money doesn’t feel that hard. It’s something they think about, but it’s not hard.
Michelle: So, in terms of, it’s all great getting started, you’re enthusiastic, you’re getting help in the background, but in terms of accountability, how do you remain and keep that focus going for the longer term? Because effectively this is something that you’ll be doing for the rest of your life, hopefully.
Adele: Yes, hopefully, I agree that’s it should be something, or done. But for me, the large majority of the population, myself included, needs external accountability for things. I know, I think of the gym membership. When I had a gym membership by myself and I had to prepare by myself, I wasted thousands of dollars on gym memberships when I don’t go. However, when I played soccer, when I’ve got a team, when I have someone else to be accountable to, I turn up. So, for me personally, accountability to somebody else works, and the large majority of the population works the same way. That’s why I think when someone’s trying to save, it’s a really good idea to have some other accountability.
For us, we’ve got the Saving Squad’s Facebook group, which helps people with their accountability, we’ve developed the My Money Buddy program, a buddy, you need a buddy, someone to help you to save. And so for us we’ve developed that accountability and that’s what we help clients with. But for me having that someone else for accountability means that you’re more likely to stick to your plan, then if you’re just accountable to yourself.
On that you are actually 42% more likely to achieve your goal just by telling somebody else that you’re working on it. They’ve done a study in the States that says you’re 42% more likely to achieve your goal just by telling somebody else and writing it down.
Michelle: That’s huge. Well, Marcus, I’m going to increase my savings!
Marcus: So, Adele that’s great. You’ve mentioned some of the ways that people can get in touch with you. But not just having a buddy and having the accountability of talking to someone else, but it’s also having that expertise of someone who does this on a day-in and day-out-basis. What are the professional benefits of working with someone like yourself as a money coach, money mentor?
Adele: For me I think of it like having, you know, Olympic athletes have multiple coaches to help them and the reason why they have coaches is they want the best results, but also they want results faster, and that’s what a coach can have with your money. He can get you those results faster.
Plus, to me, you just don’t know what you don’t know. So, as an example, I’m constantly surprised by the fact that people don’t know that you can now use superannuation for first-time buyers to help them save. There are considerable tax benefits now out there to help people save for their first home. But it’s not something, if you don’t know that, you don’t that.
There’s some of the benefits that come from having a coach is that a financial coach, they keep you up-to-date with changes. Every year we’ve got the federal budget that happens in May. There’s always stuff that changes in the money space. Having a coach to interpret those changes and what they mean to you could mean you’re thousands of dollars a year better off as a result.
Marcus: So, Adele, thank you so much for that. That’s all wonderful, very insightful information that you’ve provided here and share with us all today. What’s the best way of getting in contact with yourself. So if we’ve got listeners out there that want to ask further questions and maybe interest in say The Savings Squad or money mentor, what’s the best way of getting in touch?
Adele: The best way is to go to adelemartin.com and on there you’ll see a link to join The Saving Squad. So, The Saving Squad would love to have some of you guys in there nerding-out with us. We have money challenges, we have a financial book club, we do as we spoke about Tight Ass Tuesday, so that’s that best place. That’s a free community where we, you know, sharing, ways to save money and to get ahead. So the best place to join is to go to adelemartin.com and you can, you know, come nerd-out with us in The Saving Squad.
Marcus: Great. Well, thank you very much of your time today. It’s been a fantastic episode. I’ve learned a load.
Michelle: Yes, absolutely. I’m going to go home and join that Facebook page.
Marcus: That’s all for us for this week. If you do have any questions, either for Michelle, myself, or Adele, please let us know. You can contact Adele at adelemartin.com or you can get in touch with us at [email protected] That is [email protected] Have a great week everyone. We look forward to being with you, same time, same place next week.
Michelle: Until next week.