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Welcome to my career journal. These articles are my learnings and thoughts on my experiences in the workplace. I hope you find them insightful, if not at least entertaining!

- J

Steps to being a financially independent woman

Steps to being a financially independent woman

Many women around the world remember the awe and wonder they felt over Carrie Bradshaw’s wardrobe (and that bankruptcy inducing shoe collection). What some of us may not remember is the brief conversation the four friends had around their approaches to their finances, and how apart from Miranda being the corporate lawyer and therefore the most financially savvy (a completely inaccurate stereotype in my humble opinion), the women did not appear to have any strong engagement with financial planning into the long-term future. The women of SATC were smart, independent, sophisticated individuals advocating the power of womanhood #girlpower. And yet they all appeared to spend quite frivolously on designer wardrobes and live extravagant lifestyles, without giving much airtime to how they did so in a financially responsible way.

For many women, financial planning isn’t sexy. And long term investment of savings is a daunting and likely boring concept. Add the additional layer of the “live in the now” millennials, loud and strong advocates of the #YOLO and #FOMO lifestyles, and it’s no surprise so many people carry some form of short term debt.  These are the lifestyle choices that Bernard Salt and his Middle Aged Moralisers are really making digs at under the guise of avocados.

Regardless of whether you identify with any of the glamorous characters of SATC or not, a vast majority of us do aspire to being strong, capable and independent women. That means not just being comfortable in the now, but ensuring you can also be comfortable in the future – independently. It’s important to take the time to think about what level of financial comfort we want to see ourselves in when we’re in our 30s, 40s, 50s and beyond. I will be honest and admit that I have previously been guilty of complacency too but am nowadays more attuned to thinking about and nurturing my financial health.

These are some handy areas I think are useful to understand, and start you on a learning exercise so you can begin asking the right people the right questions to look after yourself:

1.       Cash Savings

My comments here are nothing more than a reminder of the premise that should serve as the foundation for how to approach finances – don’t have regular negative cashflows. Because it is having positive cashflows that will allow you to engage in the various mediums through which you can grow your wealth which I outline below. Don’t stop having smashed avocadoes at your favourite hipster café, as long as it comes after paying your fixed costs and putting away some savings. Those pay day loans or credit card cash advances? They come at a lofty price of extremely high interest rates and are a costly means of trying to replenish your cash bucket rather than helping it grow.

2.       Superannuation

I can’t advocate this loudly enough – if you do nothing else, take some time to get to know your superannuation fund and understand your account because at least 9.5% of your pay goes straight in there. If you earn $10,000 per year, that’s $950 – if you had $950 cash lying around on your coffee table would you ignore it? Obviously not. You would pick it up think about what you want to do with it, and perhaps decide to save all or some of it for when you need it. Retirement is when you need that superannuation saving. Because relying only on the social security that policymakers afford retirees is just not going to be enough for your golden years.   

Many people have multiple superannuation accounts with different funds. This means you are paying for multiple account keeping fees as well as doubling up on insurance premiums paid because unless you have opted out, chances are you have been afforded default life insurance as part of your superannuation. Every fund will have different insurance options with various types of coverage, for example death, terminal illness and income protection. It’s a good idea to do a bit of research on superannuation funds and their offerings and then choose one to consolidate all your accounts into. This ensures you have your money invested with a fund that best serves your interests both from an investment perspective but also with respect to insurance coverage.

Most superannuation funds will have dedicated advisers who can walk you through some general information about your options so you can make an informed decision on where you want your money to go and how your fund invests it for you, etc. You can also do some desktop research and make some apples with apples comparisons, by going to a fund’s website and looking at their MySuper product. This is the default investment option that your money is invested in, if you joined a fund without making a conscious choice about how you want your superannuation invested. Product information about MySuper products must be disclosed in a standardised way for transparency and ease of comparison, so is a good starting point for understanding your super fund and what it offers.

3.       Property

If you are going down the path of property ownership or even if you’re already in the mortgage club, take the time to understand the bank loan you are signing up for and what fees, charges, interest rates and facilities the loan offers you. It’s a huge long term commitment so take the time to do thorough research. It is helpful to speak to a good mortgage broker to help fast-track comparing what’s available because they will help navigate you through the different types of loans available across all the banks. You can then find one that suits your needs, because it’s not all just about the interest rates on offer. Keep in mind that whilst mortgage brokers are more independent than if you spoke to a loan adviser within a bank, brokers do get paid upfront and ongoing commissions by the banks that they sell a loan for, and some lenders may pay higher commissions than others.  

If you already have a mortgage, it is good to get into the habit of reviewing your loan product every few years just to see if there are any better products and deals that have since become available. Sometimes it’s as simple as asking your bank to match an interest rate on a comparable product you have identified with another lender. Reviewing your mortgage product is where you could save thousands each year if interest rates or product offerings have changed (which could fund a mini Bali holiday!), so it is always worth investigating whether you should switch lenders. If you used a mortgage broker in setting up your loan, you can go back to the broker and ask them to see if they can get a better deal – they will want to help you because if you do switch lenders without them, they will lose their ongoing commissions for the original loan they established for you!

4.       Stocks

This is perhaps the most advanced item on this list. For the beginners, companies may decide to allow members of the public to buy portions of ownership in it as a way to raise cash to fund its major projects and operations. Companies do this by becoming listed on a stock exchange – for example the Australian Stock Exchange (ASX). These portions of ownership are shares or stocks, and are sold via the exchange so when you buy a share, you own a portion of that company. Prices for shares in companies fluctuate in the short term, however generally speaking a company with a strong business will increase in value as they grow over the long term. This means the price of its shares will increase. When Nike first decided to list on the New York Stock Exchange (NYSE) in 1980 its selling price per share was $22 USD. If you had bought shares at that time and held onto them until now, your shares would be worth roughly $55 USD today.

For beginners though, the difficult task is working out what companies to buy shares in given we do not have the benefit of seeing into a crystal ball and identifying the next Nikes and Facebooks. There are other options that will allow you to still have some exposure to the stock market. You can buy shares in funds that track what’s referred to as a share market index, which is the average of all the stock prices traded on a particular stock exchange. An index fund buys shares in all of the companies listed on a stock exchange so in essence it tracks the market index as it peaks and falls over time and aims to replicate the performance of the index. One example of these funds is Vanguard Investments.

Another option to consider is investing with a fund manager – you give a fixed sum of cash to these managers and they will invest your money on your behalf for a fee. There are many types of fund managers so you will need to do your research and perhaps obtain further financial advice. One example of a fund manager that invests in shares (this is a shameless plug for my husband’s fund) is Truslam Investment Management, which invests client funds in international and Australian shares.

The above is strictly food for thought and, is by no means me providing financial advice. It is however commentary on a few areas that I myself have learnt and observed my friends asking questions about. Over the years I have really come to appreciate the importance of these financial topics, in assisting with my financial independence into my old and greying years.

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