Welcome to the Friends with Money podcast, brought to you by Money Magazine, creating financial freedom for Australians since nineteen ninety nine.

Hello and thanks for joining us for another episode of Friends with Money, money Magazine's podcast to help you earn, save, and achieve your financial goals.

My name is Tom Watson, a senior johnist here at Money Magazine, and as always it is a pleasure to be with you.

We are back on the property train today and we've got a plenty to discuss along the way, dear listener.

On our journey, we will be chatting about building strong financial foundations, about purchasing a home to live in versus an investment property, about opportunity cost, and about the importance of property when it comes to retirement and retirement finances.

Why are we digging into these points in particular, Well, they are just some of the topics that today's guest has tackled in home new book Money for Life and How to Build Financial Security from Firm Foundations.

So I'm very pleased to say that joining us on the show today is surprise sobrisese.

The author of that book, Financial advisor and friend of the podcast, Helen Baker, Helen, welcome back to our friends of money.

Thank you lovely to be back.

Hi to everybody.

It is lovely to have you back on board.

Helen.

It seems like it's been a while, but yes, good to have you back on First of all, on this isn't your first book, So what made you want to write Money for Life?

And I guess really tackle the subject of property in a big way.

Well, I think people might be surprised to know that there are forty thousand plus women living out of cars in Australia, and when I talk about that overseas, people are like in Australia.

In Australia, it's like, yeah, we're a lucky country, but we have problems and for men as well.

And then combine find that with the fact that many people now are not able to get financial advice, and it's really these people that have lower super and so on that we really should be helping because that makes the difference between the lifestyle that they have in retirement versus the one they'd like to have.

So getting on the front foot as early as possible.

So it's about getting the message out to everybody really, because you know, a book is nowhere near as expensive as financial advice.

That makes complete sense to me, and I think you set me up for the very first question that I wanted to get into, about what people can kind of do a little bit earlier on.

So before we get into property, at the beginning of your book, you talk about building strong financial foundations.

What kind of foundations are we talking about here, Helen, and why in your opinion is it so important to get these in place early on?

Well?

Interesting, I often link it back to property and say, you know, when you're building a property, you put a lot of money into the steal and the concrete to hold it up.

When cyclones and things comes, it doesn't get knocked down.

And often what we find is when people are investing, whether it be in property or other investments, they don't have those foundations in place, and then when something goes wrong, they're forced to sell that investment that they struggled so hard to get to in the first place.

So fortunately, no one has ever passed my five foundation test, so there is always something that people can focus on.

It starts off with number one being an emergency fund, and we saw the difference between how much we needed when COVID struck versus how much we had.

So that's one in case we lose our job, for example, or something significant happened.

The second ones what I call a spending and an investment plan as opposed to a budget budgets that feel a bit restrictive and handcuffed.

So we want to spend, we want to have life, we need to make sure we've got some extra.

And then the investment part is, well, do you put it on a home, do you put it an investment probably, do you put it in super and all of that needs analysis.

The third one is insurances, so that combination between private health, general insurance and the personal insurances, and often that's a big area where people don't have that quite right to either over insured or underinsured.

Forth being superannuation and all the bits around maximizing that not consolidating, and you'll find out why if you check anything out from other articles.

And the number five which is a state planning, which is around the wheels and things that I'm a big fan of, like testamentary, discretionary trusts and so on.

So if you get those right, then you can build things on top.

Because if you lose your job, you've got the emergency fund if you get sick and can't work, you've got the insurances to fall back on.

So that's probably the best you can do in terms of propping up all these things that you're trying to build for your wealth, for your lifestyle now and long term.

I really like the kind of building analogy in the foundation analogy with property itself.

I think that's really useful.

So that brings us very nicely onto the subject of property kind of in full.

Now, Helen, I'd like to ask you a broad question to Starn't with though, why do you think that home ownership matters in Australia?

And you've touched a little bit about that on the subject in the answer to to your first question, but it'd be great to expand a little bit more well.

I think the obvious reason is we need to roof over our head to live, so that's kind of the given.

But I think as well, if you have property, it gives you the opportunity to borrow against that property in order to do other things such as investing maybe in shares or managed funds, or an investment property or a business.

The banks are always looking for that certainty and that security, and we want security ourselves.

It's important to have that, but it's also that opportunity to build.

And you know, when you look at people in retirement, they're already behind just on the age pension, so they need super and other things to top them up.

But the assumption is that you already own your own home.

It doesn't really consider the amount of rent that you'd have to pay or having to still pay off a debt.

So again, these things that we're trying to do on the front foot to get us in the best position for now and long term.

I'd definitely like to pick back up on the topic of a property and retirement a bit later on he because I think it's so important.

But to kind of continue on, I'd love to get your thoughts on buying an investment property versus buying a home to live, and what you know people might want to think about with either option.

So what are your thoughts there.

It's a classic case of that it depends whether you should do this or not, so you goals, it depends on what your financial position is like.

But I think what is great is a lot of people want to retire somewhere different to where they currently live, so there's opportunities for people to buy in those places, rent that out, then they've already got a fixture in that market, something that they can move into later, Whereas for now, their lifestyle might mean they need to be maybe in the city for work and managing transport costs and time getting to and from work and so on.

So I think it's an opportunity for people to consider, do I want to buy a home now knowing that all the debt, all the mortgage that I'm paying is non tax deductible, or does it make more sense to rent somewhere that's probably cheaper and buy somewhere else, get an anchor into the market, and then use the interest and so on as tax deductible interests.

So you're considering tax, you're considering income and expenses, all those sorts of things, and the affordability factor, and also just timing, because I think sometimes nowadays people want to do some travel, they want to have some a bit of flex in their life, so it may not make sense to have a big anchor in the perfect home when they might look at other strategies and bringing it all together for the longer term, when there's more consistency or wanting to be more stable in a particular location.

So the good thing is all of them work.

It's about what's right for you and when and how much and all of those bits and pieces that work together.

And listens, we've done a full episode on rent vesting if you are if you search for it in our feed, you will be able to find that because I think it's a really interesting idea and obviously obviously one to a lot of people, especially younger people kind of looking at at the moment.

Helen, you have a whole section in your book on financing, which I love, and I think it's a really important topic.

You know, given the sums of money involved with property bochases.

So what are some of the major tankaways that buyers may want to know about financing that they might not I guess appreciate already.

Yeah, it's a great point on financing because it's a big amount of money that's being borrowed.

So anything that you can do that's really smart is going to stretch your overall money further, which is great.

So obviously considerations around you know, do you fix, do you do variable?

Do you combination of both?

One of the other things that's a big issue is loyalty tax.

Often we stick with the bank that we're with, But just like super if you go to that organization, they cannot recommend, oh you should go down the road to that bank because they've got a cheaper deal or so on.

So I'm a big fan of the use of mortgage brokers, but also because I find certainly with mortgage brokers I work with to do some scenarios.

So just because you might be able to borrow an amount of money, the question is should you and what does that look like over the long term, and how do they make things work?

So they can think sometimes a little more strategically than just just straight borrowing for this amount of money.

So you're looking at can I get the best deal or a smart deal, Should I have an offset account or not?

Should I just do a line of credit?

All of those bits and pieces, but also about what does that kind of look like for me?

And then what happens if some things change, and how do I bolt on other property or other investments, So really having a look at the strategy around it rather than just straight borrowing.

What's the best finance rate for me?

Or what would the finance rate be?

I think we want to think more about strategy as well.

Yeah, I thought that bit was really interesting, Helen, and you know emphaside in the faith as you said that mortgage brokes are a lot more than just you know, comparators of loan rates.

They can provide a lot more in terms of the services for borrows, which are I found out personally more recently.

One of the other really interesting parts of the book was this idea of opportunity cost in relation to property.

So can you, I guess, explain what you mean by that and what people I guess might want to think about beyond property.

Yeah, so I think you know, particularly in the past, the mindset was, oh, I pay off my home and then I start building my super or I start building other wealth.

And the problem with that is a lot of people will run out of time in order to do that.

When we were investing, we know that time is our friend.

It's our opportunity to keep building and building and building on that.

Even if you invested something at the start and never added to it again, that is still working and growing.

Classic is like a said super investment, if you stopped work, it's still growing over time.

So what we want to look at is what makes sense to run paying off this home and other things in parallel over time.

So a lot of people think in silos.

When I'm looking at something, I'm thinking, how does it all fit together?

So does it make more sense to put some money into super get some instant tax savings there and grow your wealth in a fifteen percent tax space, or does it make more sense to do an investment property or does it make sense to pay more off the home?

And it depends, as always, it's a classic.

It depends, which is where advice comes in.

But you know, you have to think big picture about all of these strategies that are available to you.

Even simple things like if you're a couple and somebody's having time off work, does it make sense to do what's called a spouse contribution or a co contribution.

And it might not be every year, it just might be relevant for that particular point in time that you're going to maximize your wealth more by doing that strategy at that point in time rather than paying more of the home lane.

So it's all of those bits working together, and that's what makes finance so much fun.

Helen, I've left what is perhaps the most important topic for last and it's one that you spend a lot of time addressing in your book.

Why can owning property be so important when it comes to people's retirement.

Mainly because it's a big asset which carries wealth.

But I think a lot of people would like some age pension.

Even if you could get one dollar of age pension, you get the benefits such as reduced rates, reduced electricity, healthcare cards.

Some of those are the benefits that make your overall expenses less and stretches your finances even further.

So getting some age pension is great.

And fortunately the home is not counted for age pension purposes at this point in time and hasn't been forever.

So you know, this is where we see people maybe in Sydney with like three million dollars four million dollar property, but they're getting full age pension because they don't have enough of other investments.

But I think with the luxury you has is that if you already have a home which is probably too big now that kids have flown the cooper or whatever, and you're retiring, and it could be a health decision as well, a mobility decision, could be a location decision, but you can downsize out of that property, allowing you to put some more money back into SUPER, providing you meet all the criteria.

But it's a store of wealth.

If you're downsizing or if you're going into something that costs less to purchase, you then boosted your retirement funding to get out there and live.

And then if you can marry that up with your home, you're age pension at some level, whether it's part or full, and then this SUPER, you're going to have one of the best types of retirement that you could enjoy rather than being cooped up watching every penny because the age pension is already behind what we need to live off from a cost of living perspective.

I feel like we've run through so many topics already today but also barely kind of got into what you get into and the level that you get into in your book on So for people who are interested in learning a lot more, where can they find a copy of your book?

Well, I've always wanted to say it's available in all good bookstores, So yes, it's online.

All your favorite bookstores should have it.

You can also get it through my website, on your own two feet dot com dot au, or via Major Street Publishing House.

As well, so it's out there help you.

I hope it makes a big difference to you, your life and your kids as well.

Brilliant well Helen.

It has been a pleasure having you on the show today, as it always is, so thank you so much for coming on, for giving your time, and for providing us with so many wonderful insights.

And as I said, we'll look forward to having you back on the show again really soon.

Thanks everybody, have a great day.

That's it for this episode of the Friends with Money podcast, But don't forget to jump on our website moneymag dot com dot Au for your daily dose of financial news, or you can go grab yourself a copy of the latest edition of Money Magazine in all good newsagents.

As always, Friends with Money will be right back in your podcast feed next week.

So until then, my name is Tom Watson.

Goodbye for now, thanks for listening to the Friends with Money Podcast.

For credible, independent and easy to understand financial commentary, visit moneymag dot com dot au.

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