The One Thing You Must Do Before 2018!

When we are young we get taught how to identify numbers and count. As we progress through primary school we learn how to add, subtract, multiply and divide. When we reach high school we are taught algebra, geometry and calculus.

Typically, we are not taught about the power of compound interest in school. We don’t learn about the difference between good and bad debt. We are not given examples about the dangers of excess credit.

The lessons you learn about money will come from your parents, your siblings, your friends or your own experiences in earning, receiving, saving or spending money.

As an adult, you have a responsibility to educate yourself about how to manage your money. Just like you learnt to read (became literate) as a child, you need to make yourself financially literate as an adult.

A recent study from Standard & Poor’s found 36 per cent of Australians were not financially literate. Another survey from ME Bank found that 42 per cent of us do not understand compound interest and another 38 per cent have no understanding of how an interest-only mortgage works.

So ladies – get educated

Watch a TED Talk on money.

Read a personal finance book.

Google a finance topic you have never really understood or bothered learning about, and read up (try ‘how to start investing’, ‘how to buy shares’, ‘how does compound interest work’).

Start a conversation with your friends or family about how they manage their money.

Do one of these things right now, so you can go into 2018 knowing more about your money and how to manage it than you did in 2017.

All the best, have a safe and happy New Year.


Her Money Matters.


That Time I Bought a Sports Car…

Ladies, I am not one of those people who dishes out advice on female finance but also says things like ‘I’ve never had a credit card!’ (yay me!).

Or ‘I paid off my home loan by the time I turned 28!’ (yay me again!).

I have made every single financial mistake in the book. Some of them I have made more than once. As my mother likes to say, I do learn from my mistakes, but sometimes it takes more than one lesson.

I have had many, many credit cards. And I maxed out EVERY SINGLE ONE.

I haven’t paid off my home loan.

And – my favourite financial lesson – when I was 26 I decided to go out and buy myself a sports car.

Like all bad financial decisions, it was a spur-of-the-moment, impulse, ‘I deserve this’ purchase.

I had graduated from Uni and was finally working in an adult-job with an adult-wage. I had minimal savings but managed to go and get a car loan from the bank for an Audi TT. It was the cutest car ever, it even had personalised ‘TT’ number plates.

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My Biggest Financial Lesson

In fact, it was so adorable that after taking it for a test drive, I offered to buy it immediately. I didn’t organise a road worthy test.

I didn’t have my dad look at it (I knew he would tell me not to buy it).

I didn’t do any due diligence at all.


When the car got signed over into my name, I was so excited. I felt like I had made it.

I can remember driving around, listening to Just Dance by Lady Gaga on loud and thinking I was the hottest thing in town.

But then the repayments started. I can’t remember exactly how much they were, but I didn’t negotiate my rate or shop around. I just went to the bank I had always been with and asked for a car loan.

This was at the beginning of 2008, so we’ll say 15% but they were probably higher. Over a five year term, that is $274 per fortnight. At that time, I was on about $50,000 gross (before tax) per year or $1,500 net (after tax) per fortnight.

I was spending nearly 20% of my net wage on this car!

Just in case you don’t think this sounds like a lot, you shouldn’t be spending more than 10% of your gross pay (before tax) on vehicle expenses – and that’s everything. Car loan repayments, insurance and registration.

Earning · Investing · Saving · Spending

Why You Need to Stop Say This Phrase…

Once you have set your Financial Destination and you start driving towards it, slowly but surely, using your Financial Roadmap you will inevitably hit some roadblocks, or maybe miss a turn on your Financial Journey.

That’s okay, because if you are really committed to reaching your Financial Destination you will get back on track.

After all, you have decided that your Financial Destination is your priority and you have committed to getting there. That is a choice you have made.

If you wanted to, you could stop saving and instead spend your money on whatever else you want to. Splurge on that bag you have been eyeing off. Take that holiday. Have more nights out.

That is your business. It is your money and your life. It is your choice.

But you haven’t chosen to do these things. You have chosen to travel to your Financial Destination.

So I don’t want to hear you using the words ‘I can’t afford that’. You could afford it. But that is not how you are choosing to spend your money.

Stop saying ‘I can’t afford it’.

Start saying ‘I have other financial priorities right now’.

It seems simple, but it is a huge shift in your mindset. It will empower you, because you are making the choice on how you spend (or save) your money.

You are in control of your Financial Journey, so own it!

Earning · Investing · Spending

Do You Know Your Net Worth?

Have you ever read those articles about people who have lots of investment properties? You know the ones, where the headline screams ‘How I bought $4 million worth of property in 2 years’ or something equally click-baity.

The focus of these types of articles is usually the asset value (the value of the houses) rather than the investor’s net worth.

They may have $4 million worth of property, but often they also have $3.8 million in debt. If they had to sell all that property tomorrow, they would be left with $200,000 – less once you include selling costs.

This difference between the value of their assets and the cost of their debt is their net worth.

Net worth

How to Calculate Your Net Worth

There is nothing complicated about calculating your net worth — it’s a simple equation. You add up your assets and subtract your liabilities (your debts).

Money Smart has a great net worth calculator to make it really simple for you.

What Does My Net Worth Mean?

If the figure is negative, it means you owe more than you own. If the number is positive, you own more than you owe.

Why Your Net Worth is Important

Focusing on the value of assets is not an accurate measure of wealth. The true measure of your wealth is your net worth.

Many people never bother to calculate their net worth, but it is important because it allows you to measure your financial progress from one month or year to the next. If your net worth grows over time, it shows you are moving forward financially. If it is declining, you have some work to do.

How Do I Improve My Net Worth?

Calculating your net worth can be an intimidating experience, particularly if the net worth number is either low or negative. But net worth is simply a number that exists today, and you can change it in the future.

In fact, the whole idea of calculating your net worth is to establish a baseline from which you can improve your financial position.

There are two ways to improve your net worth:

  1. Increase your assets, and/or
  2. Decrease your debts

You can do this in any combination you choose — building up your assets while keeping your debts level, paying down your debts while keeping your assets level, or a combination of both.

Always remember: your plans for your net worth are more important than where your net worth is at right now.

Do you know your net worth?

Her Money Matters tips:

  1. Knowledge is power. Calculate your net worth using the Money Smart net worth calculator Make a note of your net worth, as at October 2017.
  2. If you have significant liabilities, get laser-focused on reducing them.
  3. In April 2018 (six months from now) we are going to do this again to see how your net worth has improved.  
Earning · Saving · Spending

Is it Better to Spend Less or Save More?

If you are trying to get ahead financially, you will need to consider spending less or earning more. But which one works best?

Let’s start with spending less.

The quickest way to increase your savings in the short term is to cut back on your expenses. You can make this change very quickly and see immediate results.

I know that if you print out your credit card or EFTPOS card statements for the last three months you would find items you could have done without. Taking a long, hard, honest look at your spending habits and identifying what you can cut back can be tough, but you will feel all the better for it.

But you can only cut back so far.

There are certain expenses that you either can’t remove or cut down on. Rent payments or home loan, car loan and other repayments must be made regularly.

Unless you are living off the grid, you need working water, electricity and broadband (I think we can all agree this is now an essential utility!).

You need to eat. You need transport to school or work, whether that is in the form of a bus, train or car – which has all of the associated costs of petrol, registration, insurance and ongoing servicing.

You need to make sure you are looking after yourself. Investing in your health through exercise, healthy food, regular visits to the dentist or the doctor when you are unwell are all important.

And finally, you need to make sure you have a Safety Net stashed away.

I call all of these expenses your Necessity Spend. You need to make sure you are getting the best deals and asking for discounts with all of your Necessity Spend. I also want you to make sure that what you are calling Necessity Spend actually falls into the category of necessity.

You should never cut down on your Necessity Spend, because it will cost you more in the long run. Trust me, it will come back to bite you every time. When I was younger, I would never have the money to service my car when it came time to be serviced. Inevitably I ended up with a much more expensive mechanical problem months or years later that could have been avoided if I had just spent the money on the service.

Your Discretionary Spend is everything that doesn’t fall into the Necessity Spend. This is where you can cut back if you are trying to spend less. You can choose not to go out to dinner, skip the cinema, decline birthday drinks or give up your holidays.  But there is a limit on how much you can cut down. If you are earning $4,000 a month, and your Necessity Spend adds up to $3,200, you are left with $800 Discretionary Spend per month. Even if you save every single dollar (read: literally abandon your social life) the amount you can save tops out at $800.

To increase your savings beyond the point of your Discretionary Spend, you also need to earn more.

The best way to change your financial situation in the longer term is to earn more. Increasing your income will make a huge impact – because unlike cutting down on your expenses, there is unlimited potential.

There are lots of options on how to increase your income so I won’t go over them again here, but they fall into two categories:

  1. Getting an increase in pay – either in your existing job, or taking a higher paid role somewhere else.
  2. Supplementing your income through your side hustle.

But here is the thing. You can’t just increase your income and not worry about your spending.

The classic example I think of is Johnny Depp. He has made more than $650 million in his career but is in financial distress. How is this even possible? Because of his spending habits. Johnny got paid $20 million for his last Pirates of the Caribbean movie, but his living expenses are estimated to be around $2 million a month – meaning he would need to star in a new Pirates movie every 10 months just to sustain his lifestyle!

It is scary to think that someone earning millions of dollars can be in financial distress but it happens all the time. When people increase their income they also tend to increase their spending habits. You need to make sure you save and invest your additional earnings as well as any savings you make from spending less.

Her Money Matters tips:

  • If you want to increase your savings in the short term, cut back on your Discretionary Spend. How to Tell the Difference Between Your Necessity Spend and Your Discretionary Spend. 
  • Over the longer term, you should identify ways to increase your income – 50 ways to increase your income. 
  • Ideally you will do both. Make sure you are saving and investing this additional money – not living like Johnny Depp!