Retirement is not an age

Foreign money, where we show you how to pay your home loan off in up to half the time of a normal bank loan. Welcome to the Crown Money Podcast. I'm Jessie Urch and we're joined by CEO Scott Parry. How you going?

Awesome. Jay Jura. How are you tracking?

Yeah, good. Really good. The sun is shining and so I'm feeling good.

Bingo bango. Well, today we are going to have a quick chat about retirement. Everyone is always answering my question, when do you think you retire? When do you want to retire? Every single person asks, says an age, 67, 65, whatever it may be. And that's not true. Retirement isn't an age. It's actually a number in an investment account or in your super or your net worth that basically allows you to retire because you've got enough money to pay for all the stuff you want to be doing in retirement. And so let's run through some ideas or tips on what you can be doing to make sure that that number in your investment account or your super fund or your net worth is as high as possible so you can stop work as quickly as possible.

Right. I would love to stop work in the next year or two. That'd be great. Thanks, Scott. If we could just arrange that sounds wonderful.

A little bit more debt, I feel.

So.

I think the number one thing which I'm seeing, especially with these rates going the way they're going, is the housing risk. And when I say housing risk, it's people who overspend on their houses I think are in for a huge uppercut. And when I say overspend, for the last few years, people been calling me up saying, scott, I'm ready to invest. How much can I borrow? Scott, I'm looking to buy a home. How much can I borrow? And whenever they ask that question and I return their borrowing capacity to them and say, hey, the banks will lend you a million dollars, for example, do you think Mary or Trevor or Bill or Bob come back and say, scott found something for 800 grand, we're good to go.

We always spend what we have access to. We spend what we have access to. It's as simple as that.

Truth, Total truth. So everyone has spent exactly the amount to the dollar that I said they could borrow. And this was back when rates may have been down at 3%. And so unfortunately, these people didn't take into account the fact that all their other shit, groceries, electricity, gas bills, etcetera, were going to increase with this inflation. They probably thought that the rates were going to go up in time as they, what goes down must come up, we know that, but they didn't think that they were going to get the double bang of the two pronged attack with rates going up so quickly and inflation just skyrocketing. So a mortgage that's took, I can obviously lead to people foreclosing or defaulting or going into foreclosure. And so your home should be a source of stability, not a risk to your financial wellbeing. And I feel for a lot of families out there where it's super tight right now, where they have overcommitted, they have overstretched and I just didn't factor in the cost of their living exploding like it has.

Absolutely. And it's, it's such a, like a, it's ingrained in our culture as well that you've constantly got to be upsizing your house. It's all about what's the next bigger, better house that I'm going to live in. And you look at some of these, you know, older people that have been in the Same House for 30 years, it's completely debt free. They live a just, it's just such a stress free life because you just, you don't have a mortgage repayment, you don't have a rent repayment, you've got nothing left. Your house is secure, it is absolutely a place of safety and you never need to worry about losing it. It's an incredible feeling.

The Australian dream. Every 23 days we get to call a client who achieves that, yeah, absolutely. The best job ever. Call someone every 23 days and say you now no longer have a mortgage payment chewing 30 to 40% of your income every week or fortnight or month. That just changes the whole world, which is phenomenal. Let's talk about.

Well, can I just quickly jump back into that one for one second? You know, a big part of that is, yes, paying down your debt, but also being happy where you are, like finding contentment where you are in your local community, in that house, like doing what you can to that house to make it feel like a place that you want to stay in long term. Because it's always this constant upsizing. It's every 10 years I've got to buy a bigger, better house because it's the stamp duty, it's everything else that goes into it and you've chewed into all of that debt reduction that you've been able to achieve. So it's a, it's a cultural thing, a social thing that we need to kind of change as well as a financial decision yeah.

So the stats are coming out that the average Australian shifts or moves every seven years. And every seven years that's costs. There's agents fees like that transaction to swing on, that's probably 50 grand. For most families they're losing 50 grand in equity just because of those transaction costs. I saw this great quote the other day. Try the aim of the game is to hold these things for as long as possible. Well, basically not upgrade first with the car, your home, your investment and your wife or husband.

Yeah, their partner was going to be there for sure.

And the longer you can hold those four different things in your world, the richer you're going to be. That whole, I mean that takes by a whole to another level. But it's so you so right. I think outgrow houses with obviously expanding families and there are sort of certain milestones for life events where they can't stop or change that. But if you're just doing it because you feel that you deserve it or you can, that there is costing you a lot of equity over your lifetime.

I often think about if you're going to consider upgrading your house or moving or whatever it may be. Have a look at the house you're going to buy. What would the stamp duty be? And it might be 30, 40, 50 grand. And ask yourself, if I could use that money to renovate a part of my house, how much more time would that buy me in this house? Because that's a really good way to say, okay, if I could renovate that kitchen and make a dream kitchen, I'd be stoked to live there for another five years. So you're buying yourself more time in that same place and you can appreciate in value and pay your debt down and all that sort of stuff. So something to consider as well.

Yeah. I also add the agent's fees on top of the stamp duty costs. So yeah, good calling the cost. Let's say my agent's fees are going to be 25 grand to sell and then I've got the 30 or grand in SAM duty. So that 55 grand, what can I buy as a rental in my current house? For that we need gas.

Cool.

Let's talk. Oh no. I love brand new cars. Footnote. For those of you out there who haven't heard me rant before, you should never ever buy a brand new car unless you are a millionaire. That's the only time you're buying brand new. If you're a millionaire, you do you babe, like I totally think you've earned it. You've got enough Net assets, of course you can afford a brand new car, but if you are not a millionaire, you should never be buying a brand new car for all the reasons I've said that. They lose 30 to 40% of their value in the first three years, et cetera, et cetera, et cetera.

Anyway, can I quickly ask the question though, because we have seen a shift in this in the last kind of two, three years because of supply chain issues where new cars are very hard to come by. So second, the secondhand car market became incredibly hot. What would you say to that?

I. Yeah, I've been hating a little bit of humble pie for the last few years because up in value, that's an anomaly. That is not normal. I think this recession that we're just about to launch into will totally switch all that. All the, the guys out there and girls out there have got the brand new Ford Ranger Raptors or the utes or whatever. They, they financed it obviously. And those car loans go up. So it's not just your home loan rate that up, that's your car loan. Right. Goes up, that's your credit card rate that goes up. And so all these factors are squeezing the everyday Australian and their money. And so I think there's going to be a lot of supply come onto the market where people just don't, can't afford to, to pay that car loan, especially with redundancies and people being made redundant to their business that they've worked for has obviously gone liquidation or gone bankrupt. The last thing you're doing is paying a car and payment when you don't have a job. So I think that'll come back. And I have been astonished. I just never in my wildest dreams thought I'd ever see the day where secondhand cars would go up in value. But we've all seen last few years.

Yes. Yeah. So putting that aside. Yeah. Our normal rule is we don't buy new cars.

Jesse's just one of those people who likes to point out where I roll a lot.

That's one of my favorite parts.

Yeah, just like fascinating. She decides to bring that up. Yes, you're welcome.

It's just a conversation. Just having a conversation. It's fine.

So cards normally depreciate. That means they lose BO over time. And purchasing an expensive car is dumb. And if you're taking out debt for an expensive car, that is dumber. Why would you ever take out a loan for something that goes down in value? Like, it's just crazy. The only time you want to take out any Debt for anything except for your home is to buy investments. They go up and go appreciating assets. And so rule of thumb, I always sort of look at this and think, okay, well how I should be. You be spending on a like car. I've always sort of land about the 33% of your gross salary. So what's that mean? If you're on a hundred a year, you shouldn't be driving a car worth more than 33 grand. You just shouldn't if you're on 50 grand. Man, if you're driving a car worth More than 15,000, it just, it's out of balance. You know, it's crazy. It's just dumb. Like you need to work up to it. And that should inspire you to earn more money because once again, the more. That's why the whole millionaire thing, you're a millionaire. 33% of that 330. Well, you could buy any brand new car for 330. Not saying that you're earning that, saying you're earning a million dollars a year. But from that perspective, a third of your income, whatever that figure is, is a ceiling. Don't go to the ceiling. I'm saying that's like where things start getting red line, crazy, reverse. Undo what you've done. Sell the car, pay off the loan and just be humble. Drop the cheapest car ego can afford.

Maybe we should be telling people it's 25% of your income. Then not 33 people will spend the max 100.

That's a really good point. So compound interest, we keep ranting about this. It is the best money hack. It's getting interest on not only your original investment, but also the accumulated interest over time. And so it's reinvesting your returns. And so if you've got a thousand dollars, you're getting a 10 cent return. That means you got $100 in interest. But now you got 1100 the next year and you're getting 10% on 1100. That snowballs like your super fund. Like everyone sees their super fund, same goes up, like, oh man, that keeps going up. Why does this keep going up? Because you're compounding. Not only that your employees putting in their contribution, but your interest that you're returning off those funds is going back into being reinvested. And so compound interest is the best money hack. That's why your super fund is and will be your best investment that you can make. However, your mortgage is compound interest in reverse. And that effect of the getting interest on interest is exactly the opposite. Where every Single day, you're paying down your principal, you're paying less interest, and you're paying less interest means more coming off the principal. And it snowballs in exactly the opposite direction. So your mortgage is compound interest in reverse. That's why you should be having your whole entire salary, every dollar you earn being back directly into your home loan account. So it's sitting off the balance and offsetting interest.

Love it. Absolutely.

So let's talk about the price of love.

Oh, hello. Well, if you go down to the corner.

So marriage, we all know, has a super significant impact on your finances. I think everyone knows someone where that person's marriage did go the distance. And it's very rare that it's sold or solved amicably where people can say, hey, let's just split everything and you go your way, I'll go my way. What happens here? And unfortunately, over 20 years of doing this, I've had clients who have divorced. And I say the same thing to him every single time. Please, whatever you do, do not get lawyers involved. And all of a sudden, Mary or John goes and speaks to a lawyer just for some advice. And then their partner finds out they've spoken to a lawyer, they panic, they lawyer up, and now we're in the shitstorm of lawyerville. And if anyone doesn't understand how this works is the lawyers are pretending to be absolute bulldogs going at each other. However, what you don't know is they are having lunch with each other behind your back, talking about how much money you guys have, how much they can exhaust out of you before they come to some sort of agreement. I personally believe that every single lawyer should be paid on a flat fee. So here's your 10 grand. And you trust me, they'll get the job done in the day if they didn't have any motivation to push this out and get paid. The longer the legal battle goes, more money the lawyer makes, the less money you and her or her and you end up with. And so choosing the wrong partner is going to cost you a lot of money. It's going to cost you legal fees, going to cost you time and peace of mind. Getting the right partner will help you build and keep an empire. And so it's, it's really, really important.

Yeah, I heard it the other day where it was like, the biggest financial decision you ever make is the person that you marry and it's all partner with and it's just about, you know, not only, you know, so that you don't have to face the challenge of breaking up and dissolving your finances and pulling it apart in half, but also just so that you're on the same wavelength. You're, you've got the same financial goals. Like, you've got the same purpose and values and so you can work together towards that ultimate goal. You know, it's, it's interesting how we always see there's this spenders versus savers and they always marry each other. It just always is the way and you're always going to have those little differences, but as long as you've got that, that common, strong goal towards, okay, yes, we know we want to buy investment properties. Oh yes, we want to be able to afford to send our kids to private school. Oh yes, I would love to be able to retire by the time I'm 55. As long as you're on the same page and working together, you're always going to have a partner in those, in those financial things that you need to achieve. And that's incredibly important.

Amen. Couldn't have said it better myself. That was, yeah, it's so important. And it's, yeah, unfortunately, I don't know too many people getting prenups and like as a result of that, it's just this, well, you getting this and then also why I've been paying the mortgage and just honestly, it turned to such a headache. And the easiest way to solve it for any new people out there who are looking at lawyering up is to simply ask your partner, ex partner, what do you think is fair? What do you think is fair? And so let's say, for example, if we've got a million dollars in assets to divide up and your partner says, oh, I think that I should get 60% because I've got the kid or kids. And then they then ask you, what do you think is better? So I think it should be 50, 50 because I've worked and I've done all this. At that point, it's just so smart to go, why don't you go 55, 45. And so meet halfway. And you thought 50 was fair. She thought 60 was fair. Or vice versa. Let's just say 55% is fair. So we're meeting halfway. We've saved tens of thousands of dollars in leading fees and none of you've had a win, but you've optimized and you can just move forward and actually start rebuilding a brand new chapter.

I saw this really interesting thing where it was, you both get a piece of, you get two pieces of paper and you split up all of your financial assets. Across the two pieces of paper, but you don't know which piece of paper you're going to get. So the end of the conversation, you fold the bits of paper up, put them in a hat, and each of you pull one out. And so of course you're going to make sure both halves are as fair as possible. I mean, it's a bit more challenging in reality, but such an interesting concept to think about. If I was going to get like the other either piece of paper, would I be happy and making sure you are.

Yeah. Or you could just be a dick about it and just lowball the other person. Just go, I'm on a 50, 50 bet here. I'm just going to play the odds and hope that I pull out the winning ticket.

Just put a little crease in the side of it. I think you fold over in a corner.

Yeah.

Wow.

Wouldn't believe it. I get 95.

I think, I think the other part of it is, and it's very hard to do, but having financial conversations at the start of relationships, like having a common ground and an understanding of where the other person is at right from the beginning. Because so often we just don't talk about it. It's not romantic to talk about your finances, I get that. But it's such a big part of a partnership over your lifetime that it's worth, it's worth risking the romance to have these conversations from the beginning just so that you know you are going to be on the same page.

Yeah. We see people where they hook up and then all of a sudden one partner's just secretly got three maxed out credit cards that they have never talked to their partner about and sort of deceitful, but they say to us, well, they haven't asked. And so Ricky situation to be in this. I mean, honesty is always the best policy. But like imagine you sort of settle up on date number four or things are going great, this could be the one. And you say, I've got three max credit cards come at me and this person's looking. It's one giant liability. Like, it's like totally igville.

You know what, though? Like, I think that if it would be worse if you, you know, had gone all the way down the relationship. You've been together for a year, you're getting, you got married, now you're buying a house and all of a sudden you find out about these undisclosed debts. That's, that's, to me, is, we've talked about this before. Financial infidelity is, is, is not being upfront about it. I don't think you should ever be. Look at so many people we've seen in the past have gotten themselves into a shit situation. They've gotten themselves deep into debt and they're going, oh crap, how do I get out of this? And it, it is a tendency to put your head in the sand and pretend like it's not happening. If this is a true partner, someone that's going to be with you on the journey, then have those conversations, say, look, this is the shit I've gotten myself into. This is how I plan on getting out of it. And you work with them. It's not an expectation that the partner is going to pay off the debt for you. They've got the savings or anything like that. But it's just a. We're on common ground. I know what's happened. Let's, let's dig into the source of the issue. I have, you know, I have spending habits I want to change or whatever it may be so that you can work on it together as a partnership. And I think that's totally okay.

Absolutely. Yes. Love it.

Yes, yes. Preach.

Hey, let's just wrap up here. We always talk about frugality, penny pinching, and we're not advocates of that. We're about enjoying the journey. And we feel like our clients are getting 300% better results on a structure that gives them some accountability. And that's not about penny pinching. It's just basically getting your income working a lot harder for you. They're saving two to three times more every year with that system structure in place. And so we're not about living on bread and water so you can be debt free faster. What we are about is a balance of consciously spending. But more importantly, I think our superpower is stopping what I call the bigger dumb purchases, which impulse buyers probably come under this, but they're sort of a little bit minor. But like saying $5 on coffee is not going to help you retire much earlier. But choosing an affordable home rather than going for the million, getting an $800,000 home or downsizing to a smaller space or a cheaper car, they're the ones that are going to save you so much money and build more wealth. And so overspending on big ticket lifestyle decisions is what matters the most. The $5 coffee is not a like move the needle.

Yeah. I mean my only comment would here would be, I like, we're very much about, you know, getting the most value out of your money. What do you enjoy and spend your money on that some People love coffee. Go and buy the $8 coffee from the your best favorite cafe on somewhere in Melbourne. You know, like, do whatever you need to do to get the most enjoyment out of your time on this planet. But understand, yeah, it's the big ticket items that have the biggest impact and the most far reaching impact. But that doesn't mean that you should blow the little items either. Because I think it's all about our psychology around money. It's not just about the dollar figure, it's about our approach to how we spend and it's about being conscious. That is the number one thing. If I'm going to spend, you know, $8 on coffee, as long as I'm conscious of that decision, and I know I have made that decision based on what I get value out of with my money, then that is completely fine. It's when you go and blow $80 at Kmart and you don't even know what you bought. Like, you literally walk in, I went in for a, you know, a bathtub plug or something like that, and you come out with $80 worth of shit that you don't need. And it's completely unconscious. So what we're talking about is, you know, really think through those much bigger decisions. They will have a huge impact on when you can retire. And that's what we were talking about right from the beginning is when can I retire? It's not an, it's not an age, it's a number, it's a bank balance, it's a debt balance, all that sort of stuff. But, but also, you know, really think through the big decisions, but be conscious of the small decisions as well. All of the decisions matter, basically.

Yeah. Even your grocery shopping. I mean, we all know if you do grocery shopping at Coles or Woolworths and you do it online, you will usually spend less than if you go into the shops. And then more importantly, if you don't go into the shops throughout the week to get those little bits of pieces, like, no one just walks out with one thing when they go back in, all of a sudden $82 is on the sort of cash. I'm just here to get the bananas. But it's crazy. It just creeps up. So like that, that whole sort of way you just talk about that really even applies to the weekly shop. And just being conscious of that and trying to set yourself. This is all we've got for the week for groceries. And if we don't nail it, then we just need to make do. We don't just keep going to the shop every few days to get top ups because that's where it starts to unconsciously evaporate and we've got cash flow just coming out where we just normally wouldn't have had it if we just got that right. So yeah, finally, time is money, precious money. I think time is the most precious resource we have. We always love this quote, when I was 20, I want to be a millionaire. Now I'm a millionaire, I want to be 20. And so yeah, from that, if you are looking at any sort of larger purchases that we just talked about, what we do is we try and revert those into how much time it's costing you. And so for example, if you're looking at a brand new car and it's $50,000 and you're $40 an hour, it's 1,250 hours of work. That's six months, every single day of working for a $50,000 car. And if you frame it in time instead of dollars, you're just going to make better decisions with your hard earned money. Because the end of the day we always sort of look back in our past, oh yeah, I shouldn't have done this or I shouldn't have done that. And if you look actually reference those decisions to how much money you're spending versus the time or taking to earn that money that you're spending, I think it's going to get you to think twice.

If we're talking about retirement and you're saying, you know, it's about a bank balance, whatever, okay, this, this is going to cost you an extra year that you'll have to work at the end before you can retire and like it. Sometimes that seems like a long way away, but I bet when we're creeping towards 60, we'll be thinking about it, going, crap, I wish I hadn't bought that really expensive car. I'd love to be retiring right now, like because it is time. That's what money buys you above anything else. It buys you time.

100%. 100%. Well, there we go. Covered some brown. Hopefully you guys got something out of it. One or two nuggets, but yeah, we'll be back again with some more intel on what you can be doing to stop working faster.

Nice one. Thanks so much, Scott.

Consoir.