Stock market rollercoaster – WTF Happened?


Ever thought about becoming a share trader? Ever heard of the stock market rollercoaster?

The stock market can be a nerve wracking pastime.  In this Blog, Fran shares her recent experience with the highs and lows of share trading!


Monday :

As usual I logged on to our online share trading platform and checked how the numbers looked. It is early August, so I had a quick look to see if there were any opportunities to sell calls but found none I liked. Logged off feeling happy because the bottom line under the “Change in Value” column was a green one. This often is not the case as most of our shares pay good dividends and have some volatility so I can sell calls. Having our SMSF portfolio worth more than we paid for it feels great.


Tuesday :

I was busy so I didn’t log on.


Wednesday :

I logged on and almost fell off my chair! WTF happened? That green 10% profit figure has changed into a red 10%, so 20% of the value of the entire portfolio has vanished in a day. Is this another GFC in progress I wonder, or has Donald been tweeting more alarming stuff than usual? Is this what they mean by the ‘stock market rollercoaster?’.


It doesn’t take long to find the cause, one stock in our portfolio – RFF – has plummeted almost 50%. I’m feeling pretty sick by this point. I had been the one who did the research on this stock and recommended we put some money into it. RFF is a REIT, that’s a Trust that owns real estate. In this particular case the real estate is Australian agricultural land. With interest rates falling we were keen to find a home for some money that was in a term deposit, where it would still be safe and give a better return. A REIT isn’t guaranteed like a term deposit, so it is higher risk. But there are very real assets backing up the value, so we felt comfortable with the risk. There was also a good history of regular distribution payments close to 5% per annum.


Not smiling now, that’s for sure!


Having abandoned my plans for the morning I soon found out what had happened. An American organisation – Bonitas – which calls itself a “Short Seller Activist” has published a rather damning report on RFF calling into question various figures in the financial reports. There’s been a bit of crazy trading on the ASX and a trading halt has been called. In a way that’s a good thing, I can’t follow through with a “knee jerk” reaction and hit SELL.


Every course on Share Trading includes a discussion of the premise that these markets are driven by FEAR and GREED. Even in this advanced age, when you would hope research and statistics and verifiable analysis would play a much bigger role. Now I find I’m living in the FEAR zone and feel quite prepared to join all the sheep leaping over the cliff. I may have to resort to chocolate with morning tea to get the endorphins back in command 😊


Once the panic subsides, I slip into analytical mode.


I’m having a look at Bonitas first. What could a “short seller activist” actually do, I ponder. Short selling relies on a share price going down to be successful. An activist by definition takes action to achieve something. Hmmm, so their stated purpose is to take action so that share prices go down. Someone selling short will make a profit if the share price goes down – there’s the GREED angle coming into play.


To be fair, there are more altruistic aims quoted on the Bonitas web page. They also have a (short) history of calling out a couple of Australian companies that actually failed. Certainly, there’s some trading action that suggests some shareholders are concerned. But are these regular folk like me or are they there to be part of the action of those activists?

Taking a look at the research section on my bank brokerage platform I see Morningstar has RFF a STRONG BUY recommendation. That seems to have been the case for some time. No red flags there.  A quick check of the trading depth reveals it is very small numbers. So, although the price plummeted it has the appearance of an orchestration more than widespread panic.



By now the rebuttals have started appearing and before the end of the day I have an invite to a webinar next morning from the managing entity. Do I sleep well –oddly I do! I learned early on that I love to gamble as long as it is within limits. This amount is pushing the envelope a little on what I define as money I can afford to lose, but it won’t put me on the streets. This is such an important thing to understand about your own mindset. What level of risk are you comfortable with? How much of the stock market rollercoaster can you handle?


Thursday :

I manage to get out of bed early enough to listen to the webinar. I’m in Perth so everything that happens in Sydney early morning is before I’m usually coherent. The webinar tone hardly reflects panic, more a measured and standard assurance.  There will be an independent audit done and specific responses to the allegations in three weeks. About the time the annual financials were going to be released in fact.


By Thursday afternoon a good part of the value has been restored, the price is still down around 15% so that annoying red colour is still at the bottom of our portfolio. Three weeks to the audit result and counting down…….stay tuned.


(time passes….)


It has been 3 weeks with an extra edge of nervousness each time I have logged on. Now the report has been produced and loaded up for all to see. It effectively and quite thoroughly refutes the claims of Bonitas and has (oddly) been received with very little price reaction. Despite advice from one stock checking service that we belong to, to reduce our exposure, we have held on. Some of the fear was allayed when one of the Directors bought a very large number of shares.

A definite positive today is the notice that one of the largest investment fund managers in Japan has become a substantial shareholder. I’m thinking they may have slightly better analytical skills than I do 😊

This is an excerpt from the trading history – showing how many shares have been traded daily in RFF. Fascinating I think, the day after the initial drama 37 million shares were traded at prices between $1.60 and $1.98. In a company where a normal trading day would see under 600,000 share change hands. With the price now over $2 there are a bunch of people laughing all the way to the bank. And a bunch who sold in those early days crying over their losses.



I hope you enjoyed reading about this little episode in stock trading. It seems to have had a happy ending for me although I’m sure not everyone feels that way. If you thought, as I did that a REIT would be less volatile, perhaps knowing that’s not necessarily the case might be handy. If you’re keen to jump on the stock market rollercoaster, ask yourself if you’re ready for the ride.


Happy trading!



Do you need a Self-Managed Superannuation Fund? (SMSF)

Do you need a Self-Managed Superannuation Fund (SMSF) …or do you just WANT one? 
SMSF’s are an absolute boom industry in Australia. There are around 600,000 of them operating and well over a million members involved in them.
So, are they a good idea?

Fran looks at the pro’s and con’s to help you make the right decision.

Reasons to have an SMSF

There are four reasons you may find a Self-Managed Superannuation Fund is for you:

1. Control is the big one.

That superannuation fund is OURS and no-one is going to care about it as much as we do. We could do better than the faceless minions toiling away in the cubicles of the business and banking world, right? We’re financially savvy and every investment decision we’ve ever made has been great, right? Well, maybe not but it’s our money and if we’re in control of it we’ll know exactly where it is and what it is doing. We get to choose the assets we buy, not just selecting “balanced” in the offered fund alternatives.

2. Reducing fees.

If you’ve got a few dollars in superannuation and the fund managers are pocketing 2% every year to manage it for you, it can look appealing to take over. This would mean replacing management and the ‘variable balance-based fees with ‘set fees’ for only doing the required tax reports and audits. There is a bit of a tipping point where this makes sense. If you’re paying fees above $4000 (2% of $200,000 being $4,000) you might see an advantage in having an SMSF where the annual fees could be well be under $3,000.

3. Keeping it in the family.

An SMSF is a good option for family units. They can become like a family business and build towards common goals shared by family members.

4. Loans.

You can now use your SMSF for asset loans. This has opened the door for investing in real estate even if your fund doesn’t have enough to pay for the asset in cash. However, it’s important to note there are strict guidelines to follow. 

Reasons not to have an SMSF

There are six reasons a Self-Managed Superannuation Fund might not be right for you:

1. Have you got the time?

There is a significant amount of time required for managing the fund and doing administrative tasks. A third of people quizzed about this aspect said it took much more time than anticipated. The time required will depend on how active the management needs to be. You’ll need to watch the investments and discuss strategies with other members. You’ll also need to liaise with accountants, property managers and bankers.

2. Performance is key.

To justify the cost, time, and effort required your fund will need to out perform industry standards. The net earnings should be level or above industry offerings to justify the effort. Keep in mind you’ll be competing with trained and experienced investors. It is important for members to discuss whether the effort is worth the reward.

3. Keeping it in the family.

We all know family and business can be a difficult mix. Conflicting views on investment strategy, relationship breakdowns, and uneven commitment. For example, if one members feels they contribute more than another, they could feel disadvantaged. These can all have a flow-on effect interfering with the performance of the SMSF. 

4. Insurances.

Commercial or industry funds can offer well priced group policies. Unfortunately, in an SMSF you won’t have access to these and would need to organise your own insurance.

5. They keep changing The Rules!

Superannuation is a pot of gold that the government is trying to tap into by changing taxation rules. The Government have set new limits on how big a fund can be to remain on lower tax rates. The recent threat of removing refunds for input tax credits would also have an affect on SMSFs. Although, making long term plans when the rule framework is uncertain may not be something you want to do. It means keeping up with changes that may impact your decisions down the track. It’s important to include this in your regular maintenance.

You can read more about the Input Tax Credits threat HERE

6. Liability.

The trustees of the SMSF will be responsible for actions taken by your SMSF. It is important to follow the guidelines you’ve had written into the Trust Deed when the fund is set up. There are strict laws and taxation rules, and ignorance is no defence if they’re broken.
As you can see, there is a lot to think about if you’re considering a Self-Managed Superannuation Fund. Before steaming ahead, talk about these points with the people you’re going into an SMSF with. It’s important to have good communication and understanding about these topics before proceeding.
If you’re re-thinking the idea of an SMSF, there are some alternatives to explore. Consider the “do-it-yourself” style of fund offered by some Superannuation Providers. These allow you to make detailed choices about your investments.

Here’s some excellent general information from ASIC to read through:

5 Simple Steps to Understand and Review your Superannuation Statement

Oh yay I’ve got my Superannuation Annual Statement!  

Fran’s put together 5 Simple Steps to help you Understand and Review your Superannuation Statement:

Firstly, pat yourself on the back. You’ve kept your contact details up to date and your fund knew where to send the statement. Secondly, you opened the envelope.. that’s a good start!

You’ll need to resist the urge to file it away, and make some time for a basic review.  The ‘Productivity Commission Report on Super‘ presented in November 2018 is full of reasons why you need to give this document a look over.

There’s lots of information laid out for you and this is a great time to review your decisions.

Why your superannuation statement is important

This little pot of gold must grow to maintain your lifestyle for 30 or 40 years after you retire!

The report uses an example of an employee starting work at 21 and retiring at 65. On a constant salary of $50K per annum, they will have $100,000 less (12%) in their fund if they paid just 0.5% more in fees each year. Your money is in the fund for a LONG period of time and small charges can have a big impact over the course of those years.

Understanding your superannuation statement

Here’s a step-by-step process to help you review your superannuation statement:

1. Check your details are correct.

Address, contact information, date of birth, tax file number and so on.  If you think you’re missing a statement, the address is the most likely problem.

You should also jump on the ATO website and check for any superannuation you may have lost track of.

If you have a MyGov account, check there first (here’s some instructions from Lacey on how to do that), or click on this link for a form to request help with locating lost superannuation:

2. Locate the summary

This shows your opening balance, benefits paid and deductions.

Opening Balance

If you have your previous report, the opening balance on your new superannuation statement should be the same as the closing balance on the prior one.

If you have only one fund, the contributions should equal the compulsory rate of 9.5% of your income.  So if you’ve earned $80,000 according to your PAYG Statement, the contributions should be at least $7,600. Some companies pay higher than the minimum. You’ll find a transaction report included in your statement to show the deposits made to your fund. If the amounts don’t look right, look into it in more detail.

Benefits Paid

Next, look for the summary of benefits “paid” to see what has been paid out of the fund. Generally this will be pension payments and other deductions such as fees, tax on your contributions and insurances. We’ll go into more detail with these in the next steps.

Now let’s look at your net earnings.  This will show you how much your super fund earned.  It could be from interest or successful investment. After deducting the expenses, your fund will deposit the net earnings into your account. This amount should be positive and somewhere between 2% and 10% of your account balance.

Closing Balance

Lastly there will be a closing balance on your superannuation statement. This is the net value of your fund at the end date of the report.

Your balance will be divided into 3 sections:

  • Preserved – money you cannot access until you meet a condition of release, most often this will be reaching your preservation age (somewhere between 60 and 70 depending on your birth year)
  • Restricted non-preserved – some amounts paid in before 1/7/1999
  • Unrestricted non-preserved – amounts you can withdraw without meeting a condition of release (generally after-tax contributions you have made)

Hopefully the balance gives you a reason to smile!

Although it may be locked up for now, this is your money, and some day it could make a huge difference to the quality of your life. It’s important to keep track of it and do whatever you can to make sure that balance keeps growing.

3. Review your current investment choice.

Most funds offer a range of different investment types. If you don’t make your own selection, you’ll be placed in a default fund based on general criteria such as your age.  These funds may be called “balanced” or “growth” funds or they may also be comprised of a single type of investment like “Australian Shares”.

The investment choices are categorised according to the degree of risk associated with them. Funds that have their money in bank deposits and bonds will be low risk. Funds that have invested in shares will be high risk.

Risk ‘Rules’

The general rule is, younger folk (whose money will be in the fund for decades) are allocated into higher risk investments and older folk (nearing retirement) are allocated to low risk investments.  It makes sense, but this is certainly an area where your choices could effect the growth of your nest-egg.

Most superannuation funds allow you to allocate your funds by percentages. For example, you might specify 80% in balanced funds and 20% in growth funds, or you can select from the particular offerings with this provider.

No doubt about it, this is one of the most confusing and difficult matters when thinking about your superannuation.

We have approximately 40,000 different Superannuation Products in Australia to choose from, and no comparison website is going to cover more than a handful of these.

Add to this the overbearing reality that past performance really is NO GUARANTEE of future performance, and you could be forgiven for deciding you’ve heard enough!

The truth is, we’ve had a long period of good economic conditions and it’s been 10 years since the GFC and the horror stories of superannuation balances disappearing overnight.

Don’t Panic!

Don’t panic about which individual investments to choose, instead check which type of investment your money is in and whether you can sleep well with that selection. If you’re not comfortable, contact your fund, change it, and move on.   You could change the percentages each year, or every few years, or perhaps you’ll start out with high risk funds and move it down to lower risk as you near retirement.  You can get as technical with this decision as you like by looking into detailed reports on the performance of each option, or you could choose on the basis of risk levels.

The people whose funds didn’t take a big hit in the GFC were those who reacted by moving their superannuation into a “cash” option. Most superannuation funds allow you to move your money from one investment choice to another without charge, several times a year. So if you are worried about the possibility of a severe economic downturn, contact your fund and move your money into “cash”.  It won’t grow very fast, but it certainly won’t disappear.

You’re almost there …

4. Review those deductions.

There are some you can’t change (contributions tax and fixed fees for example) but other deductions, such as insurances and variable fees, can be substantially affected by your choices.

Fixed Fees

You will see a ‘fixed fee’ which is a management cost charged at the same rate to each account holder. This fee is often left out when superannuation funds publish their results because it cant be converted to a percentage. For example, a monthly fee of $30 will be 3.6% per annum of an account of $10,000, whereas the same fee charged on an account of $100,000 will be only .36% of that account.

Variable Fees

Variable fees relate to the type of investment and will be higher where more administration is required. If you choose an investment option that requires frequent buying and selling of assets (like shares) it will require more hands-on management and fees will be higher. It’s also likely to be higher risk and would be expected to have higher returns.

Total Fees

Add together any fixed fees and variable fees and divide by your account balance. You’re looking for a figure between 1% and 2%.  If your balance is low ($20,000 or less) the figure will be higher. If you’re in a fund with fixed fees, they’re usually in the $hundreds per annum.

Industry funds are generally not geared towards profit, meaning they have lower fees. The flip-side is, the funds that ARE set up to make profits do so by increasing your account balance. If your account goes up as a result of better returns, it’s a win for you!

Keep an eye out for one-off charges like ‘advice’ and ‘exit’ fees. These relate to events that occurred during the reporting period.

Since increased competition has bought fees into focus many have been scaled down and ‘switch’ and ‘exit’ fees are now rarely charged.


Paying insurance out of your superannuation account is quite common and often makes good sense. You should make a point to review this regularly to ensure it suits your current circumstances.

Do the types of insurance you have cover what you need covered? If your family situation has changed maybe you need to adjust levels of life or TPD insurance? If your employment has changed, perhaps you need to change your income protection policy? Get a quote from a different insurer and check the amounts you are paying seem reasonable.

Consider the effect of having these policy payments coming out of your superannuation fund. Remember these are reducing the amount you have in your balance.  If you have a small balance do you really want it used up on insurance?  Especially if you are off work for some un-insured reason and there is little or nothing going into your account.

5. Check your balance.

There are new rules governing inactive funds of $6,000 or less. These rules allow your Superannuation Fund to cancel your insurances and transfer your balance to the ATO for management.

If your balance is under $10,000 make sure you understand the implications and don’t get an unexpected surprise. Your fund should give you adequate warning, but you’ll need to make sure they have your current contact details. Probably best to give them a call if you’re unsure.

Your Turn

Hopefully these 5 simple steps have helped you understand and review your superannuation statement. We encourage you to take an interest in the management of your super and to ensure you’re on track for a comfortable retirement.

If you liked this article, you may also enjoy:

The Financial Side of Breaking Up

Relationship breakdowns can be devastating emotionally, as anyone who’s been through it knows. Then, just when you’re at your most fragile and vulnerable, you have to deal with unravelling your finances. This is where we learn that 1÷2 ≠ 0.5, even though we wish it would. Divorce generally means losing money thanks to transaction costs and the need for speed.

No wonder divorce ranks in the All Time Top Five Greatest Hits on the ‘Life’s Most Traumatic Experiences’ Charts!

It’s something I’ve seen play out first hand when my parents divorced. The financial decisions they made as they split rippled through the following decade. Indeed occasional blips are still felt 29 years later by both of them. As a financial educator, I am often asked for suggestions on dealing with the financial side of divorce. (E.g. this 45min segment for Focus on ABC Radio with Jessica Strutt). Read more

Tax Imputation Credits: an election dealbreaker?

We try to stay away from politics and religion. We are agnostic in every sense of the word in both categories. They distract from our mission of independent financial education.

But we’re jumping in on an issue which is certain to impact voting in the upcoming Australian Federal election – Tax Imputation Credits. This post is therefore somewhat political. Sorry-not-sorry.

We’re jumping in because:

  • it affects Fran’s own situation.
  • it’s entwined so intricately with superannuation growth, the subject of a lot of our education.

If you don’t understand how this system works, you’re not alone. The leader of the oppositions’s recent Sky News commentary suggests he doesn’t understand either. Read more

Our TEDxUWA talk: why you should think about financial independence and mini-retirements

We’re thrilled to share the TEDxUWA talk Lacey delivered on 13 October 2018 to over 400 people at UWA’s Octagon Theatre:

Prefer to read? Here’s the transcript:

A decade ago, I was the definition of time-poor.

I was on the fast track to a VP role in a major mining company and I thought my work was so important that I could not afford to take even a single day off. So I didn’t, for 18 months. I was working my butt off. Sadly only in the metaphorical sense. In the literal sense my butt was expanding thanks to my neglect of everything not related to work.

That all came to a halt when I fell ill and not just a little bit ill. I was bedridden for five weeks.

If you’ve ever had an experience of being ill for longer than you thought of, you know, like a common cold you think’s going to be one week, drags into two, drags into three. Some of the feelings I experienced were things like helplessness, like I had no control over my body, like I could do nothing to get myself out of bed, like all that motivation and ‘get up and go’ that had got me so far in my career was going to be no use to me.

I also felt hopeless, like that bed was going to be my future. I was just going to be surrounded by tissues from crying my eyes out for the rest of my life and it got so bad that in week four I stuffed myself full of every drug they’d given me and got myself on a plane and flew 4,000 kilometres home to my mummy so she could look after me.

It turns out that it was a virus that sent me to bed but it was my poor health choices and my lack of energy reserves that kept me there.

As a result of that sickness I’ve lost half of the hearing in my right ear and I now have gold crowns which I call my ‘mouth bling’ on my rear molars because I split my teeth in two grinding them in my sleep from the stress. Having your health irreversibly damaged when you’re 26 years old is no fun at all. But it was the wake-up call that I needed.

I decided to take leave without pay and went travelling to South America with my partner. And having now seen it I can say there’s nothing quite like a man-made marvel such as Machu Picchu to put the insignificance of your work into perspective.

Adam and I getting some perspective around Christmas 2008

Three months later I had seen six countries and my eyes had been opened to a world beyond work and beyond Australia. And I thought about why I had made work such a big part of my life when there seemed so much more to be discovered.

Alas, all good things must come to an end. I flew home and back to work. When I got back to work, it was a bit of a shock but I soon fell into my old routine.

Until three months later, my little sister Megan committed suicide. She was 24 years old and I thought she had everything to live for.

Megan Image for Courses Money School Page

Megan’s death brought that idle pondering into sharp focus. I became consumed with questions about why we work ourselves to death, why we spend so much of our time at work not enjoying it, and sacrificing so much. My life to that point was an example like a textbook. I had allowed myself to be worked to the point of physical and mental collapse for a company that would have replaced me within a week if I’d gone under a bus.

It seemed like a waste of my time and like most people in personal crisis I went looking for help and I started in the self-help section of a book store back when you used to, like, actually go into a bookstore. And that’s when I came across Tim Ferriss’s 4-hour Work Week and it was a revelation particularly on the topic of time.

It’s no surprise that time-poor is the catch-cry of our era because it’s our most precious non-renewable resource.

We lament the lack of hours in the day to do all that we could want to do never mind that you and I have the same 24 hours a day as Beyonce or Barack Obama. It just never feels like we have enough time and that’s over the microscale of a single day.

Over the macroscale of our lifetimes, we spend 40 plus of our best years grinding away – sometimes our teeth – at work and then finally we reach the official retirement age and we get to stop. We finally are time-rich instead of time-poor. We can do whatever we want with our time. We could travel, we could volunteer, we could spend time with our families. Only now we’re old. What we wouldn’t give at that point to have some of that time-rich feeling when we were young.

The thing is, we made end-of-life retirement up. It’s not compulsory. Retirement was invented in the 1880s in Prussia in response to socialists demanding more for the public. And at the time they set the retirement age at 70 years old and that was the approximate lifespan in that era. So not everybody got to retire. They didn’t actually get to have what we get now. And when they did retire they probably only got a few years.

Retirement became widespread in the work scarce times following the Great Depression when it was seen as a way to get older members of the workforce out of the way so that younger people could come through because they needed that money to raise their families. Times have changed, lifespans have increased, and yet end-of-life retirement remains. And the retirement age is pretty comparable, around the mid-60s for most developed nations. So now instead of having a handful of years for a handful of people to look forward to, most of us are looking at two decades of that time-rich feeling when we’re old.

From 1880’s to 2010’s

In the book, Ferriss asked the question what if we could take some of that end-of-life retirement and bring it forward into our youth in small chunks so we could have that time-rich feeling when we’re young and healthy? He called these small periods of respite mini-retirements.

My trip to South America had a new name. It wasn’t a holiday, it was a mini-retirement and I was thrilled by the idea of making them a regular part of my life so I set about redesigning my lifestyle and my work. I promptly quit my job and in five years I took five mini-retirements totaling 22 months off. In between those periods of mini-retirement I would do consulting gigs in the mining industry and I’d also tinker with my startup which later became my business.

Now, the question that might be rising in your minds right now and it’s a logical one is how does someone in their late twenties afford to take more than a third of their time off work? How do they afford a roof to sleep under or a car to drive? How do they afford to eat?

It’s a really important question.

In the book, Ferriss talks about a muse, an online business that can be used to fund your mini-retirement so that you can be off sipping cocktails on the beach while money is pouring in from the sky from the web. But that’s just one way to make mini-retirements a part of your life. There’s another alternative and it’s called FIRE. And what does FIRE stand for? Financially Independent Retiring Early.

It’s a term coined in the mid-’90s by Vicki Robin and Joe Dominguez. And it’s a very simple, which is not to say easy, concept. Basically you stop spending so much on stuff. You take the money you would’ve spent on stuff and you save it. And once you’ve saved it, you then buy assets with it. Assets are things that pay you, things like property, shares, bonds, index funds. And you keep going like that through your working life and eventually you reach a point at which the income from your assets is enough to sustain your lifestyle. At that point you don’t have to work anymore because you don’t need a wage to survive. Working becomes a choice.

Let’s use an example. I’ll talk about Fred. Fred’s a software engineer. He graduates from university and gets his first job and he does not make the mistake that most of us make which is going out and spending every cent he then earned because he was so excited to finally have an income. Instead he keeps living like a student, you know, baked beans on toast, that kind of thing. And he keeps going like that and he manages to save 60% of his income. Think about that for a minute, living on 40% of your wage.

He keeps that up for 10 years. He takes the money and puts it into an investment property and into some index funds. And then at 30 years old suddenly the income from his assets is enough to meet his living costs which are about half of those of his peers because he hasn’t gotten into the habit of spending so much money. At 30, he can choose to stop working, he can retire.

Fred’s a real person. His name’s actually Pete Adeney and he goes by the moniker Mr. Money Mustache. And he’s one of a slew of bloggers out there who’ve been through this experience. They’ve had the chance to reach FIRE and now they teach other people how to do it.

Lucky for me, I came to FIRE, and my beginning of that journey, much earlier. I started when I was 10 years old. My mum taught me the importance of saving and taught me about the power of compounding. And as a result I saved half of every dollar that I ever got from that age whether it was from pocket money or birthday money or the profit from my first business which I started at that point.

When I was 14, I was old enough to get a job, I got two. And I kept saving. And then at 19 years old I was in the second year of my degree in chemical engineering and I had a pretty impressive bank balance and I was going to buy a car with that bank balance and it wasn’t going to be a crappy old bomb like my friends were driving. It was going to be gorgeous. It was at least going to have air conditioning and power steering and I was very excited about the fact. So I showed my mum. I said Mum, look what I’ve saved. I’m going out to buy this car.

And my mum said one sentence that changed my life. She said, “Lacey, that could be the deposit on a home.”

My mind was blown. It planted a seed which took root and within a couple of weeks we were out apartment shopping. And a few months later I was the proud owner of the ugliest, brownest, crappiest tiny apartment you have ever seen. But at 19 years old that was pretty exciting.

A couple of years later I graduated from university and I flew 4,000 kilometres away to the wild west of Australia to join the mining industry. And because I did a bit like Pete Adeney, I didn’t extend my living to the income that I had, I was able to save quite a bit of money. And so I bought another property when I arrived. Couple years later I bought another property.

Then my employer introduced a share scheme and so I started learning about shares and I got interested in that. So I started trading in shares as well. And I kept going with property and shares and so by the time I was 26 and I had that experience of the health breakdown, I was actually well on my way to financial independence.

And that’s a point that I reached when I was 31 years old which was fabulous timing because that’s when I had my first child and I had the luxury of being able to stay at home with her and not have to think about how I was going to earn an income because my assets were paying my living costs.

After about 18 months at home I finally got some sleep, as you do, and I started thinking about the meaning of life and what I wanted to do, which is also what you do when you’re at home with the toddler it turns out. And I was growing increasingly frustrated with my friends who had been making terrible financial decisions, getting into bad debt, paying way too much for things that they really wanted like cars, and not saving and not investing.

And I looked back on our school system and realised that we are not getting taught about money. We’re not even taught that FIRE is an option at school. I’d never even heard the term. And so my life became about teaching young people the skills they need to become financially independent so they can have what I’ve had.

At that point, I moved full-time into my startup, Money School. And a couple of years later I started a second business, Maker Kids Club, which tackles the same problem from a slightly different angle. And those two businesses plus being a wife and a mother and a handful of volunteer roles are where I spend most of my time.

Now, that doesn’t sound too much like retirement, does it? And here’s where FIRE falls down. Sipping cocktails on a beach gets boring eventually. You’ll have to take my word for it. Young people when they reach FIRE don’t actually retire. Just read their blogs. These are not the kinds of people who sit around twiddling their thumbs or doing nothing or watching endless reruns on TV. They’re out changing the world.

The difference is that their work is not motivated by money. It’s motivated by other rewards. They aren’t retiring early. They are in fact time rich.

This point is so important I’ve dedicated an image to it.

They get to choose how they spend their time. And that’s the point of this exercise. It’s to be able to choose how you spend the seconds, minutes, hours, and days that will make up your life. You choose if you work, when, where, how, on what, and perhaps most importantly, with whom you work. You get to choose when you stop working and you get to choose when you start again. You get to choose because you don’t need a wage to support your lifestyle.

So if you’re thinking this FIRE idea sounds fabulous, don’t make early retirement your goal. Make your goal time rich.

And if you’re still not convinced, here’s why we all need you to be time rich.

Humanity has pressing problems, overpopulation, pollution, homelessness, war, food production, the list is endless. If we can’t solve those problems, all of our time will be meaningless. We need our brightest minds focused on solving these problems not working out how to get us to click an ad. So I implore you, save and invest. Catch FIRE Become time rich. Discover the joy of work that is not motivated by money and start solving those problems that fascinate you.

We, humanity, need you to. Thank you.

How to get your mortgage interest rate dropped

Last month, a reminder in my phone told me it was that time of year again: time to ask for a rate reduction on my mortgages (I have three). I got to work.

Yesterday I got a call from the bank, telling me I’d received 0.25% drop on all rates. On my home alone, that’s worth over $26,000 over the life of the loan. It took me an hour in total to get it done.

There aren’t many places you can make more than $25,000 in one hour with your clothes on and your dignity intact, but your mortgage is definitely one of them.

After sharing on social media last night, I’ve had a deluge of shares from people who’ve done the same, and a pile of questions about how to do it. This post is for the latter group, particularly those who want to stay with their current lender (I’ve excluded the option of changing to another lender, though of course that’s a feasible option if your bank won’t move).

I’ve included my personal scenario as a worked example throughout this post so you can see the process in action.

Step 1: Find your current rate

Do you know what rate you’re currently paying on your mortgages?

I’m surprised how often the answer is ‘no’.

That rate determines how much your monthly repayments are, and how much you’ll pay back on your property over the life of the loan. The lower, the better.

But you won’t know if you can do better until you find out what you’re currently paying.

You may find your rate is competitive and there isn’t much rom to go lower. In that case, you can say: “What a pleasant surprise!” and carry on with your life.

You may find you rate is not competitive. In that case, read on.

How do I know what’s competitive?

Google is your friend. Look up comparison sites. Head to the home pages of the major banks and see their advertised rates. Call or email a mortgage broker and ask that they can do.

Worked Example: My rate was not bad, but not great

I’ve got three loans, all with the same bank:

  • $44k balance on 4.12% (set as owner-occupier)
  • $149k balance on 4.70% (set as investment)
  • $607k balance on 4.12% (joint with husband, this one is our home)

Two months ago, the 2x owner-occupier loans started with a three, but thanks to an out-of-cycle rate increase (read: the Reserve Bank of Australia didn’t put the rates up, the bank did that of its own accord) they now started with a four.

A Google search revealed 3.59% offers, and I could see some Big 4 banks with 3.8 – 3.9% advertised.

I got in touch with a broker to see what he thought might be achievable to keep the homeloan with a Big 4 bank, with an offset account and no fees. His opinion was 3.84% was possible with the same lender, and we could do some restructuring to get the investment down to something comparable if I was keen.

Which I wasn’t – restructuring means paperwork. I detest paperwork. In this case, I’m taking the lazy tax hit.

3.84% became my target, with a matched drop on the investment loan.

Step 2: Choose your course of action

Having identified an opportunity to drop your rate, you’ve got two choices:

  • Do it yourself
  • Get someone (usually a mortgage broker) to do it for you

People often jump to the second option because the thought of asking for a discount is enough to make them squirm. I went with option 1 and it took less than 10 minutes, all of which were pleasant. So don’t immediately think you must get a broker on board.

If you’re on the fence, here’s some advantages of each option:

Advantages of using a broker

  • They’ve got volume on their side – having lots of clients with one institution gives them power to push for a better deal than you might achieve alone.
  • They do this for a living – if you find bargaining icky or it scares you, delegation is likely preferable. These guys will get it done cleanly and with minimum ick for you.
  • They know the market – this was much more useful pre-Google. It’s a marginal benefit now.
  • They’re a good testing ground – if you’ve got concerns, for example your income has changed and you don’t want to draw attention to it with the bank, a broker can help you work out what’s the best way to approach the bank. This tends to be a consideration if switching banks or restructuring, not important when it’s just a rate reduction you’re after.

If you’re suffering from analysis paralysis or just don’t-know-where-to-start paralysis, a broker is an option

Advantages of doing it yourself:

  • Trailing commissions – the bank will pay a trailing commission to the broker AND have to give you a rate discount. If they can just give you the same discount, they’re better off doing that in terms of profit. You can use this to your advantage.
  • Time saving – this might sound contradictory, after all mortgage brokers do everything for you, right? You still have to bring them up to speed, and they’ll still try to work through all the alternatives. The less scrupulous ones might ‘encourage’ you into something you don’t want to do, that causes headaches later on. I’ve done it both ways, and I’ve found DIY quicker.
  • Practice – negotiation is a critical skill. This is a safe environment to practice that skill. I think you’d be mad to pass it up ESPECIALLY if you find bargaining icky – you’ve got the most work to do.

If you go with a broker, you can stop reading here. Hand over to them for the next step.

Worked Example: I decided it was DIY time.

Step 3: Ask for a reduction

Start with your existing lender. You’ve already got the loan, you’re on their books, and they don’t want to lose you. Unless they’re lazy or stupid, they’ll try to keep you.

Also, changing lender means paperwork. Ugh. So see if you can avoid it first, before going down that path

There are scripts to ask for rate reductions all over the place – Ramit Sethi’s script is a good one, but you’ll have to pay for it (with your email address).

You can ask a variety of ways:

  • In person – visit your local branch, ask to see the loans person, and ask them for a reduction on the spot (if they’ll see you – you may have to make an appointment).
  • On the phone – call the bank and ask to speak to the loans department. Ask them.
  • Via email – this one is best if you have the personal address of a bank employee.

Then it’s as simple as saying/writing:

I’d like a reduction on my mortgage rate please.

At this point, it’s a good idea to have a target in mind. Sometimes you’ll be asked where that came from. ‘A broker’ is a good response and gets you out of the ‘we can’t match that rate because we have better services/more branches/better online systems/better options/to pay our directors more’ (kidding!) debate.

Worked Example: Asking nicely.

My local branch has kindly put the photo, name, email address and phone number of my local loans manager on the outside wall. I took a photo walking past last week.

I went the email route. Here’s the text of that email:

Hi Bob*,

I’m a customer of XXXXX with three mortgages.

I’d like to discuss a rate reduction following an approach from a mortgage broker. I want to see if you’ll match their rate before I sign with them.

Can we chat in the phone tomorrow (Tuesday) after 11am please? My number is XXXX XXX XXX.

Kind Regards,

We spoke on the phone, Bob* asked what my number was. I said 3.84%. He said he’d put in a request to head office because this was more than he could approve locally and get back to me the following day. He was polite, helpful and true to his word – he called back the next day saying he’d got 3.87% and 4.45% respectively, and would I accept that?

I agreed. We parted happy. Job done. Total time on phone for two calls: two minutes.

Same loan. Same bank. Still have an offset. Still have no fees. No paperwork. #winning!

*Name changed for privacy reasons – I haven’t asked for Bob’s approval to share this story, but I think he’ll be OK with it 🙂

This is how I felt when I got off the phone the second time

What if they won’t reduce?

Sometimes you get a call back that’s not favourable, or the person you’re talking to fobs you off (it’s happened to me in the past). Two common reasons/excuses for not reducing:

  • You’re on a fixed loan – because you fixed it earlier, or it’s new/in the honeymoon period. If there’s a financial penalty for lowering the rate, it’s rarely worth pursuing, but run the numbers just in case.
  • They can’t compete – so they’re not going to lower it because betting you can’t be bothered switching. They don’t say that to you, by the way. So now the ball’s in your court: are you annoyed enough to switch? Or are you just gonna stick with the status quo and try again next year?

What’s it worth, anyway?

The answer depends on your mortgage terms.

To help you work it out, I’ve created a simple calculator in Excel. You can download it (no email required), enter your loan info in the yellow cells and you’ll see what it’s worth to you over the life of your loan.

Worked Example: $31,050

For my loans as above:

  • $44k: $697
  • $149k: $3,984
  • $607k: $26,369

Basically a lot. Not bad for a bit of effort.

Now, it’s important to note I won’t actually save that much. I have a whopping offset account against the biggest home loan, so I don’t get charged anywhere near that amount of interest. I do this instead of paying down the balance so I have ready cash to invest with whenever I want (for example, if there’s a swift drop in the stock market or I spot a bargain property). But every little bit counts!

Since I posted about this last night, I’ve had calls, comments and private messages from people who’ve done this, either off their own back earlier this year or did it today in response to my prompt. They all came back with drops of at least 0.25% – the record so far is 0.81%.

So, what are you waiting for? No need to be paying an ignorance/lazy/scared tax. Get onto it 🙂

How do I save money?

How to save money is a popular question, and it’s sad that most answers leave people rolling their eyes and changing nothing.

The problem with most saving strategies is they’re hard work.

You have to think a lot.

You have to change habits.

Far better to have a saving strategy that doesn’t require you to think about it once it’s in place.

Here’s how to do it:

  1. Set your end Goal – why are you saving?
  2. Set your Rate – how much will you save?
  3. Automate paying yourself first – schedule bank transfers
  4. Isolate your savings – make the saving account hard to get to
  5. Celebrate – when you reach a goal, reward yourself! Read more

What is financial independence and why is it so important?

We bang on about financial independence a lot at Money School. It features heavily in our blogs, and it appears in our education for kids.

But what does it actually mean, and why should you care?

What does financial independence mean?

We define financial independence as being able to support your lifestyle without having to work.

In money terms: you don’t need a wage to meet your costs. You’ve got enough income (rent, dividends, interest etc) coming in from your assets (cash, shares, bonds, property etc) that you can feed, clothe and house yourself in the style to which you have become accustomed.

These are technical definitions and can seem a bit nebulous. Here’s what financial independence really means (in my personal experience): Read more

Which comes first: giving as a business strategy, or giving as a way of life?

It’s a chicken-and-egg type of conundrum.

Do the people who found businesses that ‘do good’ as a key purpose of that business – rather than simply to comply with a perceived Corporate Social Responsibility (CSR) image – start with people who learned about giving through the example of their families and community? Or, does having a business that gives back once it reaches a sustainable level of profit turn someone into a philanthropist?

Read more

Why is school banking risky?

Parents and educators:

  • Would you let McDonald’s teach your children about nutrition?
  • Would you let Monsanto teach your kids about farming?
  • Would you let Rolf Harris teach your children about consent?

Of course you wouldn’t. You may even be aghast that I suggest such a thing.

…but what if McDonald’s paid you a commission on each item sold in the school canteen?

Read more

Misconduct in Australia’s financial industry: a risk management view

The Australian taxpayer is currently funding the Royal Commission into Misconduct in the financial industry (or in more detail: Banking, Superannuation and Financial Services Industry). Lucky us.

We got screwed by these guys. Now we get to pay millions to find out what we already know:

This is not a ‘few bad apples’ problem.

This is a structural problem.

Read more

Money won’t fix your problems

It’s a common misconception that money will fix all problems. If only it were that simple.

If you’re comfortable (i.e. earning around $50k a year or more) and you’ve been waiting for a windfall thinking it will be the answer to your worries, it might be time to think again.

What I’d like you to take away from this article is:

  1. Money will not solve much by itself.
  2. If you have any of the following problems, stop waiting for money to do something about them.

Read more

Should I pay down my mortgage or use an offset account?

Once every six months or so, my husband brings up paying off a chunk of our mortgage in a lump sum and I argue in favour of the offset account. The discussion that ensues is a well-rehearsed dance:

Me: “But if we pay off a lump sum, if we need that cash we’ll have to redraw, and maybe the bank won’t let us.”

Hubby: “But if we pay it down, we can drop our mortgage repayments.”

Me: “What’s the point in that? You’ll be charged the same amount of interest either way.”

Hubby: “How can that be? Surely I’ll be charged less interest if I pay it off?”

Read more

The gender pay gap: is your Lisa Wilkinson moment here?

Lisa Wilkinson’s refusal to accept a pay packet half the size of her male co-host’s was a laudable moment. I hope I will describe it to my daughter as the point at which the tide turned and the gender pay gap began to close.

Right now, it raises several questions:

Why hasn’t Karl – a man who wore the same suit for a year to demonstrate how much abuse his co-host got for her appearance – resigned in solidarity? Does he condone Channel 9 paying Lisa less? Or does he think he’s worth twice as much as she is, or does twice as much work? Does he just really, really need that pay packet after his divorce settlement? Read more

Bitcoin/ Blockchain Banking | %%sitename%%

Bitcoin, Blockchain and Banking

David Yermack is a Professor of Finance at NYU Stern. He teaches Bitcoin and Cryptocurrencies, including the concept of Blockchain Banking. When the opportunity arose to hear him speak at UWA recently, I leapt. Now, after years of saying ‘it’s just another currency’ and ignoring it,

I understand what all the fuss is about.

I learned a lot from this session, and below are my main takeaways. If I’ve gotten any of this wrong, it’s my fault, not the Professor’s. Apologies for Professor Yermack in advance if I’ve butchered his eloquent explanations.

  1. Cryptocurrency is coming, regardless of whether we want it or not. Possibly, sooner than you think. It seems unlikely there will be an ‘opt out’ available. You’ll have an online cryptocurrency account or you won’t have money.
  2. Employment prospects for future lawyers, accountants, and those considering banking look grim.

So, what did I hear that lead me to these conclusions?

What I learned in prison

Before you start worrying about the validity of my ‘Working with Children’ card… I’m part of the ‘Women in Leadership Driving Change’ group that visits women in prison. We deliver training on re-entering the workforce. The program is called ‘Tall Poppies’. It’s a name the residents (the preferred term for prisoners) selected. We cover all sorts: social media, interview prep, what to wear, mindset and, of course, personal finance. Which is where I come in.

Read more

Should you make more than the minimum repayment on your debts?

Short answer: yes.
This raises a few questions:
  • Which debts should you pay first?
  • How much more should you pay?
  • What if you are having trouble finding any extra cash?
Let’s examine some possibilities.

Short-term share trading: for when you don’t like traditional gambling

I have a confession: I indulge in a form of gambling. It’s called short-term share trading.
It’s akin to a bout of binge drinking after nine months of abstinence while pregnant. Ill advised, and I like it.

Read more

Money and Your Mind: Interview with David Levin, author

If you’ve ever said the following out loud or in your head:

“I am terrible with money.”

“I spend too much.”

“I don’t have control over my money.”

“I just can’t seem to break the habit of <insert annoying/destructive/wasteful financial action>.”

…this post is for you! You can skip to the interview at the end or read on for some background.

Read more