What is a FLEX?

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 Edge and I'm joined as always, by our legendary CEO Scott Parry. How are you, mate?

Jess, Doing great. Couldn't be better. How are you?

Yeah, go well. Going well. The sun is shining a little bit through some clouds, so I'm feeling optimistic about the summer ahead.

Should be. You should be. And I just want to say a quick shout out and congratulations to you. You've just finished your mba, so.

I have, yes. Thank you. Thank you so much. It's been a interesting three years.

Those of us who don't know an MBA is a master in business, it's the highest of highest degrees you're going to do in terms of business. And you did that full time. You work full time, you're full time mom. Like how you got it all together. I just am super inspired. So congratulations from all of us at Crown and our listeners. That is you. You are the smartest kid in the room.

I doubt that, but I do have. I'm the only one with a qualification. Let's say that we were joking about it, though. We were saying that, you know, all the team that we have, we're very fortunate. They're actually a part of the, what we call Crown Money University. Just as much as all our clients learn so much about finance, we too, over our own journeys, have learned so about our own lives. So it's been. It's been phenomenal. It is really phenomenal.

Yeah, it is. So let's keep trying to help out our audience out there and what are we going to run through today?

Yeah, so we're going to talk about a concept that we've been using at Crown now for a couple of years, and it's something called the Flex. So F L E X Flex. So what is a flex, Scott?

It's obviously when you go to the gym, get the biceps popping and mirror. Just give it an old one, too.

Oh, too funny. No, it's not that. So the Flex. The Flex is all of our clients have what's called their weekly spending amount. So that is for their food, fuel and fun. And that goes out to them every single week on the day of their choice. And they know their job is to go and spend it. What happens though, is we have one off expenses that pop up. So things like I've got a party this weekend or I want to go blow it all at the casino, it's going to Be super fun, whatever it may be. So they will give us a call or send us an email, let us know this additional amount that they need, and we will send it out to them within 24 hours. Now, what we found is that additional one off redraws that the clients were doing. It's a little bit kind of. You don't know how much you're actually spending. It's just kind of, you know, they're requesting the money and it's going out, and they're not actually keeping consciously aware of or track of that money that's going out. So we introduced something called the flex. How would you describe the flex, Scott?

So flex is something where we give you a. Well, you basically agree with us on a certain amount of money which you feel is comfortable for you to be able to spend every month over and above your weekly food, fuel, and fun and bills. And so for a lot of clients this flexible, it could be $2,000, it could be $3,000. And so it's that amount of money over and above your everyday expenses that you may need throughout the month. And so how it works is you got a $3,000 flex, and every single time you take funds out of your home loan account to pay for a birthday, and that birthday, let's call it, was $600, that means that that $600 comes off your flex, and that reduces the amount. We literally report you of exactly how much flex you've used and how much flex you've got left. And so once you are getting down to only 100, $200 of flex left for the month, and you say, I need $800 for a holiday, wherever it may be. We're like, what about next month? Because you've exhausted the flex this month, and so we're just really keeping you consciously accountable to exactly where all your money is going throughout the month.

Yeah, I actually have a really fantastic description from one of our head coaches. Many people may have spoken to him, Adam Santangelo. So big shout out to him. The way he describes it is a flex is simply a goal to keep your additional redraws at or below a certain amount each month. This will build accountability, discipline, help you track your progress, and ultimately help you reduce your debt. Plus create equity as fast as possible. Clients that are getting the best results are those that have set and committed to a flex. So I love that description. Well done, Adam. And basically how we work out the flex is we say, what is your debt reduction goal for the year? How much do you want to pay off and that would be different for every single client. And then we just work backwards from there. We do the numbers and we say, well, you've got this kind of buffer each month that you can spend on top of your weekly spending amount and still hit that goal that you've set for yourself and that amount becomes your flex. We find a lot of clients find it really comforting because, you know, every single redraw you send us, we, like Scott said, we'll let you know how much you have left of the Flex. So it's kind of like keeping you aware of that amount and just, just full transparency, like really conscious of where your money is going and how much you've got left. So yeah, really effective tool.

It is. And you said something really important there, which was, it's actually freeing. A lot of people think budgets are restrictive, which is true. And what a flex is, is saying give us a goal gives a sort of yardstick that we want to try and stay under. And obviously some months you go into go over the Flex because Johnny's birthday was the same time as the Car Ranger, which is the same time as the rates, for example, which is okay. And so it's just really just a goal which you're setting every single month. So I want to try and keep my expenses below this level so I can achieve that debt free date of 13 years. And it's just a real sort of a yard marker or a milestone or a checkpoint that we just need to continually update you on how much of that's left. Because the problem with most people is everyone knows how much they earn, nobody knows where it goes. And so what this does is just consistently check in with you, say, hey, so far you've actually used $600 of the $2,000 Flex. You got $4 left. And so as that starts to reduce and you're getting reports back, you've got $400 in flex left, you got $100 in flex left. That then gets you consciously spending. Do I really need it this month or do I actually want it this month? And so if it's a want, we just basically bump it to the next month where you've got a fresh flex ready to rock and roll.

Absolutely. And we will also really kind of review the flex with the clients at least every six months and kind of say, is it working? Is it feasible? Like, is this achievable? Have things changed in their financial situation? Sometimes we'll have to reduce the flex. We of course be in conversation with the clients. We just say, look, you're going through a bit of a tough time. We need to pull this back a little bit. We're going to go harder on the flex. And so we're going to, for the next couple of months, we're just going to drop it down by $500 just so we can keep you and get you back on track. And like Scott said, absolutely. You'll go over your flex some, some months, I mean, December, everybody goes over their flex. That's what we expect. But you know, you're going to pour it back in some of the other months throughout the year. And you know, sometimes we actually run what's called the boot camp, and that's the beginning of each year. And what it is, is the flex tightened and more strictly, Strictly. Strictly. Can't even say that word. Strictly enforced. So that just means that for how long do we run it for? Do we do it for one month or three months?

90 days.

90 days, yeah. And so we will, if you, when you're asking for money, we will let you know how much you've got left once you get to the end of your flex. We will not allow clients to go over unless it's an absolute emergency. So that's something that clients will opt into a really powerful kind of reset for the new year.

Yeah, and it is something where the flex is there to help you get out of your debt faster. And that's something which we always like to remind people of. So our job is to help you achieve your financial goals. You told us your number one financial goal was to be debt free, own your own home. And so what this is, this is a tool that we found to help you get superior results to what you're getting by yourself on your cheap offset account, where you're in debt for 30 years. And so this is something which we're always saying, clients, we're on your team trying to help you get out of your debt. And these are some strategies which have helped thousands of other Australians over the last two decades achieve phenomenal results. And so our clients on average get a 200% increase in their debt reduction when they join us, as well as a 200% increase in their savings rate. And what that means is what percentage of their income they're keeping every month as opposed to what they're earning, which everyone. So focus on how much they earn. Irrelevant. It's what you keep of what you earn. That's everything. That's why we like to measure that and make sure that you kept accountable. And we're increasing that savings rate so we stop what we talked about in a previous episode, which is called Lifestyle Creep, where everyone's getting pay rises eventually. And what happens is with that pay rise, they just increase their living expenses or they cost and don't have any surplus left. And so the flex doesn't increase just because you've got a pay rise. Which is why our clients are basically quarantining that extra surplus because of the pay rise. And that results in accelerated debt reduction.

I think the other benefit of the flex is that, you know, some of our clients actually feel guilty about asking for money. And to remind them, at the end of the day, it's your money. It is your money. We're here to help you. We will like it. It's just, it's just another tool to help you achieve your goals. And by having the Flex, you can comfortably know that you're allowed to ask for more money. And we'll just keep you aware of how much is going out. So it's kind of like giving people, you know, for certain personalities. We have so many different personalities when it comes to money. It's so fascinating, all the different clients and their approach to everything. But for some of our clients, they have a real guilt around asking for additional money on top of their weekly spending amount. They absolutely should not. One off expenses come up. That is normal. And this is just a tool to allow them to know, yeah, that I am allowed to spend this amount. This is, this is what has already been factored in. It's in alignment with my goals. I'm still going to be able to achieve what I'm here to do. And it's okay to ask more. More money?

Yeah, we're all about enjoying the journey. No one here at Crown wants you to be living on bread and water. Just so it can be debt free in seven years is not the game plan. We're about just utilizing your money, making it work for you a little bit smarter and actually having you enjoy the journey because you're so far ahead of the curve. But we've taken you from a 30 year loan to a 14 year loan. We'd much rather you enjoy those 14 years rather than take you to a 7 or 8 year loan. And, and you're just living in misery. And so we're all about experiences. Buying those quality memories with your family, whether it be overseas or going camping, or just buying experiences and quality time, we're always about that. So if we have a client say, I want to take my family to this destination so we can experience that, we're never, ever said, no, you can't do that. That's what we're all about. We want you to do that because that's really what matters. And as a result of that, we're not about penny pinching, especially when it comes to holidays. I love to holiday, Jerry. You love to holiday. We love you to holiday as well. And so this is just about being smarter with your money. You're 14, 15 years ahead of where you would have been. So you can take the frothy. So still enjoy the journey and still be ahead of the curve.

Yes. Yes, you can. So that's the flex. So thank you, everyone, and thank you, Scott, for joining me. Always wonderful to have a conversation with you. And yeah, looking forward to seeing you next time.

See you soon. Bye.