Dwelling values fall + Gen Y grows up + SA should not be ignored

Dwelling values fall + Gen Y grows up + SA should not be ignored

Highlights from this week:

  • Gen Y enters the family phase
  • Dwelling values fall further
  • SA property not to be ignored
  • Movers and Shakers who shape the property market
  • 7 steps to making money simple

Transcripts:

Gen Y enters the family phase – Angie Zigomanis

Kevin:   Demographic changes over the next decade are going to drive a shift in demand as Gen Y, now aged between 20 and 35 years old, begin to transition into family phase. What does all that mean? Joining us to discuss that, Angie Zigomanis, who is the senior manager of residential property market research at BIS Oxford Economics. Angie, thanks for your time.

Angie:   Yeah, no problem at all.

Kevin:   Tell me what’s happening with Gen Y as they enter this family phase? What are we seeing, and what sort of impact is it going to have on the market, do you think?

Angie:   Well, look, at the moment, the two really big sort of bulges in the population, the first are the baby boomers, and we’ve talked about them. The next one behind them is Gen Y. They’re really the children of the baby boomers, and a bit of overseas migration falls into that category as well. Most of them at the moment, the ones that aren’t living at home are living in rental dwellings. And they’re aged roughly 20 to 35.

Angie:   The next decade if you follow previous generations they’ll start coupling up, having kids and entering into family like and if you also look at previous generations that is often a trigger to move from an apartment and from renting to a new house and owner occupation and so they’re looking for something that’s more spacious.

Kevin:   So I understand too the research is showing us that more than a half of Gen Ys were renters in 2016 which is up a little bit from 43%.

Angie:   Yes. And that’s just a function I guess of housing markets being a bit more difficult for ownership but I suspect there’s probably an element that do prefer to rent where they’d be preferring to lease for a longer period.

Kevin:   What about Gen Ys in terms of incomes and savings, Angie?

Angie:   Incomes are, I suspect they probably wouldn’t be that different from previous generations in relative terms. But I’d suspect you’d find the fact that there are more are living in rentals suggests that their savings perhaps aren’t sufficient now to achieve a deposit compared to previous generations.

Kevin:   And what about houses and townhouses or units? Are they showing a preference for anything in those areas?

Angie:   Well increasingly it’s towards high-density dwellings so it’s townhouses and units. In the good old days, I guess, people used to have kids and move out to a new housing estate and a new house out in the burbs. Whereas now many of them have gotten used to living life closer to work and closer to higher amenity areas. And now, when looking for something, when looking for a dwelling to buy they I guess need to make a trade off between location, being closer to that work amenity, but also between price and size because at the end of the day most of the inner and middle suburbs of the big cities are fairly expensive and out of the reach for people on the Gen Y income.

Kevin:   Is that more acute in areas like Sidney where we’re getting the need for lots more density as opposed to say like Brisbane or Adelaide and Perth.

Angie:   Yeah definitely. It’s most pronounced in Sydney and it’s evident in all the sort of high density dwellings that you’re seeing built in Sydney and affordability is a function of it. If you look at the order of the cities it’s the most pronounced in Sydney followed by Melbourne, Brisbane and then Perth and Adelaide.

Kevin:   Angie in fact has written a really interesting article that’s in the latest Your Investment Property magazine. Which is out right now.

Kevin:   My guest has been Angie Zigomanis from BIS Oxford Economics. Make sure you pick up YIP Magazine and read the article. Angie, thanks very much for your time.

Angie:   No problem at all Kevin.

Dwelling values fall further – Geoff White

Kevin:   Well, dwelling values continue to fall across Sydney, Melbourne, and Perth in October, pushing the CoreLogic National Hedonic Home Value Index further into negative territory. We’ll have a look at each of the capital cities and look at the regions as well in this report. Welcoming in to the show, Geoff White from CoreLogic. Geoff, thanks very much for your time.

Geoff:   Thanks, Kevin.

Kevin:   Some sobering news for the cap cities, particularly Sydney and Melbourne, but Melbourne seemed to be suffering a little bit, oh no actually yeah, Melbourne a little bit more so in the quarter than Sydney.

Geoff:   Yeah, such right Kevin, over the last quarter Melbourne pipped Sydney by point one, so a negative 2.1% in Melbourne and Sydney negative 2.0. But over the course of the last year Melbourne is negative 4.7 compared to Sydney’s negative 7.4 so Melbourne’s sort of had a bit of a delayed reaction to this adjustment in the market and these statistics seem to show that.

Kevin:   Even more sobering for investors too if you look at total return, coming back by 4.2% in Sydney. It’s interesting to note, too, that the Brisbane market still, while’s no real growth reflected in these figures, it’s probably one of the most stable markets in Australia.

Geoff:   Yeah, that’s right. Brisbane really hasn’t changed all that much even over the year, I mean .4% but bearing in mind what’s going in Sydney and Melbourne, that’s pretty good. Also, Adelaide’s done very well as well where there’s been some growth but nothing tips what’s going on in Hobart, it’s just going from strength to strength with annually a 9.7% increase in Hobart.

Kevin:   While we had a good increase in Canberra for the quarter, it’s still annually it’s been about 4.3% but the other interesting point I wanted to pick up on and it’d be interested to get your take on this too, Geoff, is Hobart. We’ve heard a lot about the growth in Hobart and certainly in the last twelve months this report says 9.7% but I notice that’s starting to slow down a little bit.

Geoff:   Yeah and I think that’s probably in some ways that’s a good thing because unsustainable growth, and it could be argued that it has been that over the course of the last few years, but certainly it has slowed in recent months. So we are not seeing the growth that we did see say six months ago on a month by month basis, so that’s still showing positive and even in the last month it was .9%, so there’s still growth in Hobart, but it has been slowed. And I think that’s not a bad thing, to be honest, Kevin.

Kevin:   Continuing to look at the front page of your report, the highlights over the three months to October 2018, we’ve already said that the best performing capital was Canberra, 1.5%. Give me the weakest and other highest showings in the report, Geoff.

Geoff:   Yes, the weakest performing capital city has been Melbourne, as we said, with a negative 2.1%. On the yield side, we’ve seen Darwin showing the best yield and rents have been quite strong in Darwin and values haven’t been as strong so the rental yield in Darwin 5.7% and the lowest yield, Sydney, 3.2%. Sydney and Melbourne are very close in terms of yield and they are quite low so that’s sort of the highlights over the last three months. Three months is a good yardstick to look at these because you start to see some trends. That’s in the latest report there, Kevin.

Kevin:   Yeah, and looking at Darwin you mentioned the best return, highest improver, that’s on the back on the fact that it has the lowest median, I think one of the lowest medians, just slightly ahead of Adelaide, in Australia actually.

Geoff:   That’s right, median value in Darwin is 433,000 so rents are pretty good in Darwin if you’re an investor. You’ll get some yield there and your investment to buy into Darwin is not anything like the likes of Sydney or Melbourne or Brisbane.

Kevin:   Yeah, and you’d have to look at units if you’re looking at Darwin of course with the median there of 312,000 and a return of 6.4%, that’s a pretty good return.

Geoff:   Yeah it is, that’s right, exactly. If you’re chasing a good return on your investment you couldn’t overlook Darwin as being one to look at and the capital growth probably will start to turn once there’s more demand.

Kevin:   Absolutely, for sure. Let’s have a quick look at the regions, some outstanding regions, and you and I’ve talked in a separate show about Latrobe in Gippsland, and how that’s a fairly consistent performer in the growth stakes. If you look at the regions overall, the top ten and the bottom ten, it always seems to come in the middle there with growth of around 9.2%.

Geoff:   Yeah, that’s right. So the top ten range from 4.7% right up to 11.6 and Latrobe Gippsland sitting pretty much in the middle there at 9.2. That’s a good region and Geelong has also been very strong and that’s had a- we’ve spoken about that market at 10.9%. Also, some would argue is not so regional nowadays, but Tasmania very strong in the regions as well. That’s just generally the demand in Tasmania. It is a lot of good news in terms of Tasmania, Victoria, and particularly some of the regions in New South Wales with the Hunter Valley and Richmond, Tweed, New South Wales, where there’s been 4.8 and 5.1%. So yeah, there are some good stories there but we’ve also got the bottom ten, that don’t look as pretty.

Kevin:   Yeah, well outback Queensland coming up by 11.1%. But just getting back to Tasmania for a moment, we mentioned earlier in this report that the Hobart market seems to be slowing down a little bit but it’s rippling out to the regions. If you look at the best performing regions, the top three are out of Tasmania.

Geoff:   Correct, that’s right. And I think that’s because capital cities just generally seem to push people into the regions based on affordability and the rest of Tasmania excluding Hobart has had 11.4% growth over the last twelve months. That’s a very strong number and Victoria second at 7.1%. They’re the two regional areas of Australia that seem to be performing very well.

Kevin:   Well, there it is, that’s the National Hedonic Home Value Index from CoreLogic and you can get a copy of that. We’ll make sure we publish that below this interview so jump down, have a look at that. Geoff White from CoreLogic, thank you so much for your time Geoff.

Geoff:   Thank you, Kevin, talk again soon.

SA property not to be ignored – Bushy Martin

Kevin:   Well, as we like to look around Australia at what’s happening with property markets, it’s so easy to get clouded in the shadow of what’s happening in Sydney and Melbourne. And there’s a market I want to talk about now. And that’s South Australia, which I think has been heralded as a market that’s not really going anywhere, but I think that’s grossly unfair.

Kevin:   Joining me to talk about this, Bushy Martin. And Bushy is no stranger to the show. Good day mate, how are you doing?

Bushy:   Yeah, how are you going, Kevin, it’s a real pleasure to be here again, mate.

Kevin:   Yeah. I want to talk to you about a couple of things. One, I want to talk about the South Australian market. I know you’re there, and you’re deep into it. So, I want you to tell me about that market.

Kevin:   But I also want to talk to you about something that really concerns me, and that is these proposed Labour changes to negative gearing and capital gains tax. But let’s firstly talk on about South Australia. What’s happening there?

Bushy:   Yeah, look, Kevin, I think there’s, in a world where the mainstream media is willing to paint a picture of gloom and doom, particularly focused around Sydney and Melbourne, the picture here in good old South Australia continues to be stable and strong.

Bushy:   I guess I’ve always felt, Kevin, having lived here for a long time now, that we’re almost like the solid achievers in the property market, because it’s a very safe, consistent, and very affordable place. And if you look up over the last five years, we’ve seen progressive growth of around about four percent, year on year.

Kevin:   Yep.

Bushy:   And I do a lot of research, dipping into independent studies by the likes of Riskwise, CoreLogic, and a number of other groups. Tending to focus on those that don’t have a vested interest in pushing a certain ballet. And I’ll back that up with some chats to the Real Estate Institute here, I’ve had a good chat to Greg Troughton, who’s the CEO. And I always talk to a number of the agents that are active on the ground, just to get an anecdotal feel for what’s going on.

Bushy:   And all of them are saying the same thing, that, moving forward, we’re likely to see continuation of that growth around the four percent mark, at least in the foreseeable future, over the next three years.

Kevin:   This is for South Australia, Adelaide, you’re talking about?

Bushy:   Yeah. Yes. And predominantly, there’s a little bit of a distance between houses and units. Like most other capital cities, there’s an oversupply of units here in Adelaide, in particular. But on the housing side of the market, and, as you know and you’ve said before, there’s always a danger in focusing on the median price value.

Kevin:   Yeah. That’s right.

Bushy:   because it sort of tends to belie what’s happening in certain precincts. Now, if we look at some of the high-demand and blue chip areas here in Adelaide, and they’re a bit higher-priced, but let’s say the premium in Adelaide, would you believe, is up around the sort of million-dollar mark. We’ve been seeing capital growth in those locations of double digit up to sort of 20 percent. So, and that’s despite the last twelve months we’ve been seeing very significant credit creeping around lending policy.

Kevin:   Mm-hmm (affirmative)-

Bushy:   So, there’s some hidden gems there, mate, that people aren’t making too much noise about.

Kevin:   Yeah. Well we do a study every Monday morning we look at the auction results around Australia, and always commenting always about the value that you get in Adelaide and also the value in Brisbane.

Bushy:   Yeah.

Kevin:   Compared to some of the other markets, and it is quite amazing what you can buy in Adelaide for a million dollars. And I think if there ever was a down turn, you look at a market like Adelaide. And I know where I’d much rather have my money, in Adelaide or in Sydney. If it was going to be a bit of a rough patch, that’s for sure.

Bushy:   Yeah. Absolutely. I totally agree with you that the two areas that I think are consistent performers. We are the quiet cousins, and we don’t have the peaks and all the troughs for that matter, but as nice consistent growth, Brisbane’s certainly top of the pops and Adelaide’s not too far behind.

Kevin:   Yeah. I agree.

Bushy:   Yeah.

Kevin:   Now. Can I take you to the other subject? And this is I think one of the most burning things we got in front of us right now as we head towards a Federal election probably sometime next year. Well, no doubt, next year. That is, if Labour do actually win power, their promise to change negative gearing. We’re already seeing the impact of just talking about it as to what it’s doing to the market. I’ll say again that I think the market is all driven by how the consumer feels. It’s got a lot to do with supply and demand, but also if consumers aren’t confident, they don’t buy, you’re going to see a lot of problems with the market. Now I believe we’re already seeing it.

Bushy:   Yeah. It’s the old story, mate. If in doubt, sit it out. And what is interesting, I had a look at a number of studies again done by well respected independent research houses, and Riskwise in particular have done a very in depth study on this. And the clear correlation between the leadership spill with the liberals when Scott Morrison came in, which then led to predictions of a 90 percent chance of Labour getting into power and as a direct consequence of that, and let’s take Sydney as the easy example. Sydney has been falling at about half a percent a month in recent times, that’s actually accelerated since that date to about .75 percent. So, we are seeing in effect a 50 percent increase in the rate of fall as a direct consequence of the fact that the uncertainty that’s now flying around this.

Bushy:   It means that investors in particular are cooling the jets and sitting out of the market and then talking on the ground to agencies in South Australia. They’re reinforcing that demand, which is often driven by that percentage of investors around the sort of 25-40 percent mark whereever you are, is really starting to effect the number of buyers in the marketplace. So, we are seeing some immediate impacts, but I guess the scary thing to me, Kevin, is that we’re also seeing the fact that moving forward we are likely to see the projections of anywhere between 6-9 percent drops in property values across the board. And this is not just investors, we’re talking every other house holder,

Kevin:   Yep.

Bushy:   And if I look at the South Australian situation, and I apply a six percent drop in property values that means I’ve just kissed goodbye 30 grand.

Kevin:   Mm.

Bushy:   If you’re in Sydney, they are projecting nine percent there, that’s 90 grand you just wiped off the value of your home. So, very concerning. I find the biggest concern to me Kevin is that the Labour party don’t seem to be listening –

Kevin:   That’s right.

Bushy:   To all of these independent studies that are saying exactly the same thing.

Kevin:   Yeah. I agree mate. And I just want to make a point here if I may, and that is that I’m not suggesting for a moment that Labour don’t have a right to win in the next election. What concerns me, is their blindfold attitude toward negative gearing. They are just not listening to the evidence. It’s very much low hanging fruit and I think it’s totally driven by what’s going to win the most votes. And I just, I’m really afraid of the impact that it’s going to have. I implore them to listen to all of the information that’s coming forward and take it into consideration. Then you got to look at what happened last time when they played with it. How long did it take them to reverse it? Was it a couple of months? Six months or something?

Bushy:   Eighteen months.

Kevin:   Was it eighteen months?

Bushy:   Kevin.

Kevin:   Yeah.

Bushy:   Mid 80’s. And I lived through that so I get –

Kevin:   Yeah, so did I.

Bushy:   Yeah. I’ve seen the downside and it’s the old story. My biggest concern is we’ve had a number of pressure points that are tightening access to money which has a direct flow on to property values. Now it doesn’t take much once you started to lump this together, or it can create the perfect storm. And my biggest concern is those quite significant tax changes to negative gearing and capital gains tax could be the straw that broke the camel’s back.

Kevin:   Yeah. Well we know how rapidly the market changes and unfortunately Labour are really basing all of their thinking on the modelling they did two years ago, Bushy, and its …

Kevin:   Mate, we’re out of time, but I got to go. Thank you so much for your insight.

Bushy:   Appreciate the time, Kevin. Talk to you again soon.

Movers and Shakers who shape the property market – Louis Christopher

Kevin:   Well, here’s some exciting news for you because in a couple of days time, the annual Boom and Bust report from Louis Christopher’s SQM Research is about to be released. It’s only a matter of days away. I’ll tell you how you can get a copy of that in just a moment, but Louis joins me. Good day, Louis. How are you doing?

Louis:   Good day there, Kevin.

Kevin:   This is one of the outstanding reports of the year. One that we’re very proud to tell all of our listeners about because I think it goes into great depth about where the market’s been and where it’s going. Interesting to note, this year, that you’re also going to feature the Movers and Shakers. These are the people who actually really do influence our property market, Louis.

Louis:   That’s right, Kevin. Over my 18 years of professionally covering the housing market, I’ve just generally found and observed that we don’t have a standard seven-year cycle. What we have, though, are some interesting and very powerful people who make decisions that affect the market.

Louis:   Now, often these people are reactive to events, but some of them can be proactive to events. Ultimately, these people’s decisions, which can change the direction of the market. And because of that, I think it’s worthwhile having a little bit more scrutiny on these people. How do they make these decisions? Why are they making these decisions? Are they making it in the best interest of the community? Hence, the reason why this year, we’ve decided to list down the top 10 most powerful people that have the biggest influence on our housing market.

Kevin:   I guess not surprisingly, the Prime Minister is in there. There are two State Premiers in there, the state Premiers for Victoria and for New South Wales, as well as the opposition leader, although he’s down towards the end of that list. I do want to pick up on one mid-range through, and I’ll come to that in just a moment. But interesting to note that number 10 is a developer. Mark Steinert from Stockland.

Louis:   Yes. That’s exactly right. Now, Mark has been, for a lack of a better word, throwing his weight around in terms of his views on what negative gearing … What should happen to negative gearing. He’s actually in favour of changes to negative gearing. I don’t think we should be too surprised by that because if Labour does get up and they change negative gearing in the way they said they would do it, this will be a … potentially a boom for property developers and stocklands who Mark is CEO of would benefit tremendously if it goes the way that Labor thinks it’s all going to go.

Kevin:   Well, interesting. On that point, if I could just pick up on it. I did an interview, I think it was last week in the show with the Master Builder’s Association, or Master Builders of Australia and they’re saying that if this actually does happen, they are predicting some pretty dire outcomes, particularly for builders.

Louis:   And I’m not surprised because our view is that we don’t think we’re going to see a major pick up in construction activity if negative gearing comes in, just a reminder for your audience, labour has said that for new building, the negative gearing benefits will still be there. But we take the issue with this that. Okay? Can you imagine you’re an investor, you buy an off-the-plan development with a view? Okay. You’re going to get this negative gearing benefit, but you must realise that the secondary market, when it comes time to sell, the next buyer doesn’t get the benefits and so they are going to demand a discount. They will have to. And so the resale of these off-the-plan developments, which I’m sure you’re well aware, can be tricky at times …

Kevin:   Yes. Yeah.

Louis:   … could be even more trickier because we think that the secondary buyer is going to be demanding some type of discount to offset the fact that they don’t get the negative gearing benefits.

Kevin:   Yeah. Yeah.

Kevin:   That’s a really interesting insight, Louis, one that I certainly hadn’t thought of. I want to take you to midway through that list of the top 10 and talk about Donald Trump. You’ve mentioned him there as number six, the US president, of course. What impact do you think he will have or could have on the Australian market?

Louis:   Yeah, I have no doubt some people will think that I’ve thrown in Donald Trump just to get the eyes and look, I can assure you we haven’t …

Kevin:   Well, it worked.

Louis:   Look, we haven’t done it for that reason, that the reason why we have, is because Donald Trump, of course, is our president of the world’s largest economy. And earlier this year, in fact, the beginning of this year, Trump managed to get through some of the biggest company tax cuts ever seen with a view that he wanted to get the US economy into boom times, and he succeeded in that. Now, as a fallout from that, interest rates have been rising because the reality has been, is that the US now is running a record budget deficit and that has pushed up global interest rates because they have had to borrow money to fund the deficit. And since it pushed up global interest rates, that’s affected our major banks cost of funding.

Louis:   The reality is, is that our major banks borrow a significant amount of money from overseas to lend here in Australia. And, to tender this year, they’ve had to lift their rates out of step with the RBA, by between 15 to 18 basis points. And that couldn’t have come at a worse time when we already knew Sydney and Melbourne, at least, were in a housing downturn. And I think that’s accelerated the downturn. The reason why we’ve got Donald in there, is because we think there’s a risk the banks may well have to lift again next year if the US remains in boom times. And hence, the reason why I’ve got him there.

Kevin:   Yeah. Well, I think we’ve got to remember, too, that every time the RBA do in fact raise rates, it’s a sign that the economy’s going reasonably well though.

Louis:   That is correct. Now, keep in mind, we don’t think that the reserve banks actually going to lift rates next year. In fact, I think there’s every chance they may well have to cut. And, it’s one of the reasons why I’ve got Dr Philip Lowe in there as number one. He’s got the biggest say in terms of the movement in the housing market. He can, at any time, cut rates, lift rates and we all know that that has an impact upon housing. Our view is that the odds are that Philip will keep rates either stable or potentially cut if he starts getting worried about the Sydney and Melbourne housing down turns.

Kevin:   Yeah. Number one, Dr Philip Lowe, as Louis just mentioned from the Reserve Bank of Australia. Number two, Wayne Byres, the APRA chairman. Look, it’s a really interesting list. I strongly suggest that you get in now and book this report. There is a link just below this interview to take you straight to Louis’ website to make sure that you get a copy of it.

Kevin:   The key features in the Boom and Bust report will include Louis’ personal take on the markets, the capital city forecast, the main drivers of demand and supply, where they’re occurring, all the leading indicators such as stock on market, vacancy rates, special reports on Gold Coast and Sunshine Coast. How the top 10 Movers and Shakers will move the markets in 2019, which is what we’ve just been talking about. All the possible scenarios that could play out next year, so, if you want a really comprehensive look, the best look you’ll get this year and next year into the 2019 market, make sure you have a look at the Boom and Bust report. There’s a link below. Hey Louis, always great talking to you, my friend. Congratulations on a great report and I look forward to talking to you again soon.

Louis:   Oh, thank you very much, Kevin. It’s a pleasure and an honour to be speaking with you and your audience.

Link:   http://sqmresearch.com.au/boombustreport.php

7 steps to making money simple – Kingsley and Holdaway

Kevin:   A few weeks ago I had as guests in this show, Bryce Holdaway and Ben Kingsley, who have written a book called Make Money Simple Again. They join me to talk about just how simple it can be. Good day gentlemen, how you doing?

Ben:   G’day Kevin, how are you?

Kevin:   Well, thank you. Good to be talking to you again, both. Inside the book, you talk about how easy it can be, and you actually make it easy by giving seven steps. Can we quickly walk through what they are?

Ben:   Yeah, sure Kevin. What we’re talking about here is making it really easy by breaking it down into those steps. So the first step is gather, which means if we’re going to understand our money movements, we need to understand where it all is. So that’s sort of grabbing the bank statements, the credit card statements, and then step two is sorting it out, right? So categorising it and making sure we’ve got it all in easy to understand buckets, or jars as we call them. Then calculating what those numbers come up to is number three. Then we set up our banking, to support our money management system, so we like to have an offset account with these virtual jars sitting inside.

Ben:   Step five is a monthly check-up, where you’re analysing how you’re progressing to your annual target. Step six is if there’s a little tweaking that you need, you simply just look at those tweaks to get the balance right, and step seven is rolling over that annual number so you plan out the following year.

Kevin:   Okay, well let’s go back to sorting, where we’re talking about putting it into lots, or into barrels. Can you give me an example of how many you’re talking about here? What sort of barrels?

Ben:   Yeah, so it’s really simple. We want to go back to the olden days where our parents used to put their money into the money jars or the money tins. That’s back in the generation of our grandparents. And so we’ve got these jars, and we talk about having firstly, the living and lifestyle jar, then we’ve got our credit card jar, then we’ve got direct payments, and then we’ve got loan payments, and then a provisioning jar. So there’s effectively five virtual jars that live inside the primary account, which is the main offset account if you’ve got a mortgage, or if it’s not an offset account if you’ve got a mortgage, it’s a high-interest savings account. Kevin?

Kevin:   So Bryce, we might come to you. In the calculate section where you’ve got these five jars, is there a benchmark for each one as to how high it should be?

Bryce:   No, it’s more about, the approach is a top-down rather than a bottom-up., meaning once you have calculated what you put in each of those virtual jars that Ben talked about, and we wanted to make it so you could still use your grandparent’s era principals, but in the 21st century where it’s digital. Once you’ve actually determined what the number is, then you use that each week. So we have what’s called a seven day float, as part of that calculate.

Bryce:   Which means if you live your discretionary spend on a week-to-week basis, throw a number, say it’s 500 bucks a week, you pay yourself once a week, into your seven day float, and instead of micro-managing everything you spend that on, all you need to do is just make sure that you’ve got enough to last you for the seven days, and it’s really empowering, ’cause it means that I don’t have to have an app, I don’t have to calculate receipts, I don’t have to worry where the money’s going. Once I’ve done the hard yards in the calculate section, I then just go about spending my money in a discretionary nature, any way I see fit as long as I swim between the flags, and that flag is the calculate that you’ve done.

Kevin:   Yeah, it’s fascinating. Hey Ben, with that monthly check-up, or that monthly check that you talk about, I imagine that would work hand in hand with the tweak, because if you’re looking at it monthly, you can sort of estimate where you may be overspending, or where you can cut back a little bit, so does tweaking always mean cutting back?

Ben:   Not necessarily, it just means that because it’s an annualised system, and the idea that the end game here is about tracking surplus cash, right? Ultimately what’s happening is, there’s a lot of slippage in the household, because they’re not monitoring their money, but everyone hates to have to track every dollar that they spend, right? It’s just time consuming, it’s very difficult. So with this system, you don’t have to track every dollar you’re spending, you wanna aim towards that monthly surplus, and then the annual surplus. What we’re talking about from the tweaking point of view is, let’s say your son’s got drumming lessons, and the price has gone up from $20 a lesson to $25 a lesson. So you would then have to, that’s a bill, we just need to tweak that number for the drumming lesson, and then that will automatically adjust the system, and then effectively off you go to remainder of that year. So it’s about tweaking those types of things, but you could also get a pay raise, so that could also mean a tweak to the system.

Ben:   Now, again, it’s about controlling your money over the course of a 12 month period. But just having that monthly check-in, so we always talk about checking up on it. It only is effectively 10 minutes a month, is all you need to do your monthly check-up. Effectively, we only need three numbers, right? We need the balance of your primary account, we need the balance of the credit card account, and finally we just need to know what you’ve spent in the provisonary account. Now, how easy’s that? In terms of being about to look after your money?

Kevin:   In the book you detail, obviously you give a lot more detail about the seven steps, but you’ve put it under the heading of money smarts. I notice there that you also talk about it being a whole of life solution. Can I just ask you then in an environment where there’s a young family, with kids, are you advocating that the kids get involved in this as well, so they learn these skills at a very young age?

Ben:   Yeah, absolutely Kevin it’s an evergreen system, it works at every stage of your life. If you’ve got a part-time job, and you’re at university on casual wages, or you’re a CEO of a Fortune 500 company, it doesn’t discriminate, it works at every stage. And it’s a system that allows you to adopt it from where you’re at. That’s what makes it so universal, and that’s what makes it so powerful, and the fact that you don’t have to be on big bucks to do it. You can be on wherever you’re at, you can start wherever you are, you don’t have to wait to the beginning of the financial year, you get it done straight away.

Kevin:   Yeah, wonderful stuff guys. Thank you very much for your time, my guests have been Bryce Holdaway and Ben Kingsley, and the book is called Make Money Simple Again, so check it out for yourself. Gentlemen, thank you very much for your time.

Bryce:   Terrific, thanks Kevin.

Ben:   Thanks again Kevin.

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Kevin Turner
kevin@realestatetalk.com.au
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