Finance, But Neat

Pour Decisions - With Riley Jan

• Alex Watson • Season 1 • Episode 6

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Pour decisions with Riley Jan, Hosted By Bindi Holland - where we discuss our Pour Financial Decisions and  get to know our guest - all with a whiskey that Alex has chosen specifically for the guest!

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🎙️ Stick around for Pour Decisions tomorrow, where Riley tees off on a few questions over a whiskey.

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Finance, But Neat is hosted by Alex Watson, an accredited mortgage broker and director of Funded Finance. 

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SPEAKER_02

The show after the show, poor decisions, where we get a little bit honest around our poor decisions, and I really hope the ongoing theme is not the stupidity of how I've spent money over the years. That is my uh yeah. That is my really, really, really big goal. Um but uh I want to introduce this whiskey that I chose specifically for yourself. Um my wife actually bought this for me a few years ago, so I'll obey. Please sponsor us. No. Um I actually bought myself another bottle today, uh, this morning, because I needed to buy for I've got a special bottle coming for another episode soon because I just couldn't figure out what I want to this next person coming. I was like, I know I know what's going to be you so perfectly. I didn't have it, so I've gone out and bought it, but I was like, I'm gonna get another one of these. It's called Sweet Smoke. And so William Grant and Sons, do you know who they are? No, they're the Glen Fittick guys. So Glen Fitdock is owned by a company William Grant and Sons, the largest family-owned company in the world, I believe, is the story. Well, uh, my understanding may or may not be true, is that the distillers around the place at Glen Fitdock were getting a bit shitty with their reputation. Glenfit, spacide, boring, nothing crazy. They owned Isles at Bay uh as a distillery and they went hold our beer. And so that what they did is they got the sweet smoke. So you've got specifically a scientifically controlled process around sweetness and smokiness combined to make this incredible bottle. And the reason I chose it for you is the analysis and intelligence behind it. I was like, this is Riley all day, every day. Uh, and then just the I think the uh family-owned nature of of finances and Glen Fitdock and everything. I was like, Yeah, this is this is the Riley episode. Poor decision. So I this is legitimately one of my favorites because you get very boring whiskey sometimes. Absolutely. Um bought me some Japanese whiskey, so I'm not going to poo-poo that because it is a delicious one. But there's a lot of stuff for everyone. No, but there's a lot of kind of I think Irish whiskey does this a little bit where they just get a little bit kitschy and kind of too pure. They're like all just about the perfect distill distillation process. And it just kind of doesn't hit. I'm like, all right, it's whiskey. It all just cool. It tastes like ethanol. Yeah. Like that really over and like it doesn't, don't hate me. But yeah.

SPEAKER_01

And I think uh while you pour that to let you know, I at the time was a really big fan of uh Japanese whiskey. I was drinking Nikki by the barrel, I believe. Um and anyway, I went through that fad and now I have come back to my origins a bit more. Um but this I'm I'm excited for this. It's it's a treat.

SPEAKER_02

And Bindi, uh you are offshot. Say hello. Uh you're having some too, I believe. Come on, you gotta taste it with us. It is the sub goal. Bindi does not like whiskey. This I was gonna be very interested with it.

SPEAKER_00

I really like that.

SPEAKER_02

Yeah, I I went in I mean I did pick that one for you last week, which is actually coming out after this episode, but yeah.

unknown

Um It also could be that I don't have ice. Maybe ice is there.

SPEAKER_02

Oh, do you not have ice? No, you definitely need ice on this one. Maybe a bit of water. I so I went the Glen Kern because I can add a dash of water. So I have a taste, nose it, smell it, add a dash of water, weaken it. Like a little straw to add like a pur pur thing or whatever they're called. Yep. Um I'm so glad you weren't listening when I said that then.

SPEAKER_01

But yeah, that's unbelievable. Yeah. Unbelievable. You like it? Yeah, and I normally go without the ice, it was purely just I saw the beautiful cup as well, and I went, no, I think and I saw you making the big the big squared ice.

SPEAKER_02

Mate, man cubes is what I call them. Yeah. Um I actually need to bring I've got some spherical ice makers. Yep. Not all of us have fancy uh fridges who make spherical ice, but definitely not. Yeah. She's got a microphone, she's not you you're sorry, I'm trying not to bite at everything. Yeah, no. I'm get I'm trying to get you to bite at everything I say.

SPEAKER_04

Raleigh, I have a fancy fridge. My fridge makes whiskey ice and I don't drink whiskey.

SPEAKER_01

There's absolutely nothing wrong with that. It's um it's all about balance.

SPEAKER_02

What do you think of the episode, Bindy?

SPEAKER_04

Uh I really like it. Um my first thought uh probably 30 seconds in is that Riley's very smart. Very, very smart.

SPEAKER_02

Um is that directly after I stopped talking?

SPEAKER_04

I really I think it's fascinating. It's been it's just been so great to sit here and watch um Riley just explain concepts that are so outside the box, um, but in a way that's so clear that you know I can sort of keep up with it as you're speaking. So I've never seen a financial planner be so engaging. Um my experience with financial planners has been very different.

SPEAKER_02

So have you just on that, have you dealt with any since leaving branch land? Yeah. I'm very yeah it was an it really opened my eyes post-bank that yeah, there weren't the boring people that sat at the back of a branch. Yeah.

SPEAKER_04

Um and and personally, I mean I I really love approaching life with sort of set out deliberate moments uh and then a lot of time in between that just just living. Um I think your you know the couples exercise that you went through uh that you do with anyhow, I think that fits so effortlessly into you know the way that I like to live my life, but has a huge impact on you know how you work as a team, as you said, and I think that's so important. Um, but also you're really focusing in on that compromise, uh, and it's almost like a calibration, which I love. Um, so yeah, that was that was really, really good to listen to.

SPEAKER_01

No, I I appreciate that. Um I didn't say this uh after the the the podcast, but I'll obviously just say it now. We actually had a client once email us after that session and say that they were breaking up. Now I know that's a really tough thing, it's not a nice thing to have. Um this was uh many moons ago, but sometimes that actually could be a good outcome because we're just floating through life. But what you're saying there and setting goals and um working with partners and all that sort of stuff, our greatest asset is time. I'm never gonna get yesterday back, and if we just kick the can down the road for another 10 years, you're not gonna get it back. If I'm lucky, I'll have 50 years with Danielle if I'm lucky, right? So if we want to waste the next 25 and and the next 25 is gonna be in good health, right? I'm not gonna get it back. So, and same thing for everybody that's listening in. Make the most of it while you can, yeah.

SPEAKER_04

Um, and just last thing, I was dying at that makeup sale story. I was like, everyone rather I got all the wrong colours.

SPEAKER_01

She like I I brought it back, and she's like my see-through. One see-through, the next one she's bright orange. So we had to take them back, but it was the thought that counts.

SPEAKER_02

Yeah, I definitely start bringing random makeup homes. Oh goodness, the whole team, my whole all the women in my team rock up there. It's the thought that counts, guys. I bought you, you would kill me. I don't think I would survive how much crap Bindy would give me if I brought the business everyone. Oh goodness. The yeah, I I think honestly, best outcome if you can't have that goals discussion. It's obviously like I think don't break up, but try and figure out what the thing beneath the thing is. Like, is there something that's killing you? But if you just going, hey, we there's no not even compromise, it's like we I don't want kids, I want kids.

SPEAKER_01

Like lay it out now.

SPEAKER_02

Yeah, it's like let's live life with people we want to do the similar things. And Anna and I don't have the same interests, like neither do we, yeah. And I don't think that's necessarily important, but being able to have discussions around goals and things that you want to experience, and that's important.

SPEAKER_01

So yeah, val the long-term values and rough idea of what you want life to look like in ten years, if if they're even closely aligned, you're all good to go. Yeah. In the short term, yeah, you're gonna want to do your hobbies and your career and and vice versa. It's just getting it out on the table so there's no surprises for your partner when you say, I want to start doing podcasts with Alex, for example. Like, what do you mean you want to do that? So, yeah, it's important. Anna was not surprised by this. Neither was Danielle. No.

SPEAKER_04

All right. Well, in the spirit of four decisions, uh, we'll start with uh what was the worst financial decision you've ever made?

SPEAKER_01

Yeah. Uh I'm very, very lucky, and you didn't ask me this in the podcast. I didn't really go into my my childhood, but um, I'm very lucky that I got punched in the face with this sort of stuff when I was 10, 11 years old.

SPEAKER_02

So I missed you going childhood or not. I I clicked after we'd moved on that I should have, yeah, I should have said childhood because that was the origin story.

SPEAKER_01

So yeah. I'm I'm a bloky bloke, so I'd prefer just to bottle that up until it explodes one day. So that works well. Um that's just wisdom. But in terms of uh biggest financial mistake, been very, very lucky that I haven't made humongous ones. Um there were things that I wish I did better, like spend more on property and things like that. Um, but I would I'd categorize it into two. The first one, and this is just joking because I'm sure everybody can actually relate to this. When I was 16, I had a girlfriend who I thought I was gonna marry at the time. Sorry if you're listening. Um, and as soon as I got access to my bank account, I emptied the whole thing. Because I I was the dork that mum and dad brought the clothes for, so now I emptied the whole thing, went to Rabina Town, said I and spent every single dollar on doing that wardrobe. Obviously, the impacts of that are extremely small at the time, but when you've got your heart set on it, you're just gonna go.

SPEAKER_02

I had another one, so it's good that you're bringing up another one because I'm gonna run out. I probably won't run out. Um I've got a lot. I will. I will all for the content. Babe, look what I bought. It's a Chevy Silverado because I need it for the podcast. I'm a mortgage broker that drives four minutes, but I can't not have a V8. Oh goodness. I would love an electric vehicle at the moment, actually. Um I'll buy Mustang. No, actually, it's out of warranty, yeah. Um no, my so I got access to my Dollar Mites account. It's good. I'll save my card first. Yep, I know. Uh we all everyone in this room had a Dollar Mites account. Um some of our uh sad parents that worked at Combank. I would say, sorry, I I Bindy, I wish this was on camera. Uh so I put, for everyone playing along at home, I put the ice, and as I was doing this, I was thinking in my head, we need an ice bucket or like some sort of fridge in here.

SPEAKER_04

This is getting out of hand for whiskey science.

SPEAKER_02

Uh and so I Bindy wanted some ice, but the ice being ice has melted and fused together, which I knew because I put uh Riley's in there, it was really hard. Yours is directly under the aircon as well with air movement, so she's just picked up two pieces of glass, a piece of ice, and dropped it into a glass. So the whiskey to glass ratio is horrendous right now. Um, but no, I got access to my Dolomites account. Uh because, like I think I was actually 19, I just didn't know I had access to or could get access to it. And it was 2,000 bucks in there. Holy crap, I had a good weekend.

SPEAKER_01

Yep.

SPEAKER_02

Yep, yeah.

SPEAKER_01

We live and we learn. Yeah. I'm sort of excited for one day when my son does the same thing. Oh man. Yeah.

SPEAKER_02

It's gonna be Rony. Yeah. Poor Rony.

SPEAKER_01

In in all seriousness, though, to give you a proper example, um, because it does actually have a bit of a lesson in the story. Uh, it would have been two years ago, actually. It was in uh May, which is coming up in a couple of days.

SPEAKER_02

Um Can I just say we have got other questions coming? I think Yeah, no, you're fine. I'll I will. This might be answer number three, though. Will it? No, go ahead.

SPEAKER_01

I was just gonna say, um, yeah, we uh long story short, it was pouring rain. We're going out to dinner with friends, and my car was about seven years old, Danielle's is probably five. We I was having some issues with my car coming home from around a golf that day. It was a Saturday night, and I thought, oh, let's just take your car. It's pouring rain. Imagine if mine broke down. We got to the other end of town, Danielle's car, boom, engine goes. Five-year-old car, not gonna name the brand because I don't want to get in trouble. And I don't care.

SPEAKER_02

Can I name it? You message me.

SPEAKER_01

Yeah. No, uh anyway, we walk home in the rain, uh, outfits ruined, get in my car, go to dinner at Burley, come back. We're driving. Like I live in northern New South Wales, there is no street lights, and there is cane fields after canefields, we're driving through there, and then boom, my transmission goes two cars blown up in one weekend. Her car was about four months out of warranty. If you don't have an emergency fund, you can't fix this. But we were lucky we had an emergency fund and purchased a car for her, but we didn't have an emergency fund to buy two cars, so I did have to take out a car loan at the time and um yeah, sort all of that out. So um that would be the worst decision, taking out a car loan, but it was by force.

SPEAKER_03

Yeah.

SPEAKER_04

Yeah, good one. And I mean that's kind of what they're there for, right? Like that, like it's it's great that you have an option that you can lean on. Um, cool. Now, uh one, I guess, uh rather specific one for you, Riley.

SPEAKER_02

Um just to clarify from the main episode. Yeah, yeah.

SPEAKER_04

From the yeah, so you mentioned in the main episode uh that you're not a fan of ongoing advice fees. Uh, why don't you agree with that?

SPEAKER_01

Yeah, so it's it is a mass generalization for everybody who's yelling at the screen right now. Um I'm not a big fan of it for a number of reasons. Now, um the main reason for that is I think it's actually given advisors a bad name. So I've been sort of branded with the same uh label. Um I actually saw a comment on a a friend of mine's um another advisor's post recently that advisors are only good for leeching out ongoing fees, which I think couldn't be further from the truth. But yeah, the issue I have with ongoing fees is I'm a firm believer that if I'm not going to do something for you this year or in the next couple of years, why should you pay me? Right? So on in all seriousness, like if I'm working for you, pay me. Pay me what I'm worth and let's sort it out at the time. But I I hate the idea of somebody who is in that stage of sticking to the plan. Okay, hey, we don't need to change anything for the next few years. Why do I need to leech on and take a percentage-based fee um of your assets or whatever it may be at the time? So not only am I against ongoing advice, I'm against percentage-based fees. Now, don't get me wrong, I get to the end of my 12-month engagement with plenty of people and they see a lot of value in the service I provide, whether they need a consultant, um, whether they need someone like a PT to catch up with them every month to make sure that they're on track because the stakes are high and they're in a very profitable business or whatever it may be. Um those situations are completely different, right? If someone needs you there or wants you there, fantastic. But latching on and pretending like you're busy, that's what I have a problem with.

SPEAKER_02

I think that's a like we have a mutual client, I think, does a certain arrangement and to take their language that they've kind of told me uh they enjoy having that accountability of you ongoing to push them to make the moves that they want, and it sped up a lot of the timelines of things that they were working to achieve, created a lot of clarity, uh, removed a lot of anxiety around that conversation. And so I think there's a certain income level that that ongoing, like it makes sense, you know, self-employed people, growing company, all that kind of stuff, and even not like if you pay out there are uh situations that make sense. I think the really cool thing from my perspective is you're driven by your own integrity on this situation, right? And so to hear like that is you know, I'm sure if we spoke to three advisors, we get three different results. You would absolutely uh I know if I speak to three brokers, I get 20 different responses. So the reality though, I think, is just seeing that your integrity has led you down this position and it still has allowed you to be successful, help more people, create this stuff. Um I've seen, I think I said before in between, like I've seen uh advisors who only do ongoing, they don't do one off. And that's you know, some parts of business decision, some parts an advice decision. The cool and then on the flip side, we've seen other advisors go, I just really love the one-off where we've got a big you know thing that we've got to do a big cash injection, like you know, like that's a lot of fun, so I love doing that. Different, there's all different reasons, and uh it's just for me when it comes to getting the right team around you, it's about hey, who resonates with how you're trying to go about your life and is teaching you a little bit thing, not just trying to take money off you.

SPEAKER_01

That's it's exactly yeah, you hit the nail on the head there. Um, there's really not much I could add to that.

SPEAKER_02

Yeah, good, Bindi.

SPEAKER_04

Um Raleigh, we spoke uh offline a little bit about cost of living and that kind of stuff, and I think that's where you're gonna go with this question. But um my question is what's the boring and unglamorous decision that you wish was the default?

SPEAKER_01

Yeah, well, outside of planning, which we covered on the main episode, which everyone should tune into, um, it's without a doubt just sorting out your budget. It really sucks. It does highlight to you how much you need to earn and spend just to put a roof over your head, which isn't fun. Um I saw a person with the actually the average salary written in ten thousand dollar increments on a piece of paper, and what they did was they snip the piece of paper and goes, There's tax, there's the average mortgage repayment, there's the average school fees, this is what you're left with, and it was this tiny little piece of paper. That's a great example. But it's such an oversimplification. It is an oversimplification, but it it at least gets the average person to go, oh, I should probably look at it, because a lot of people just don't bother. Like I honestly, eight in ten clients that I would meet with, comfortably eight in ten, whether they're high income earner or not, they don't know what they can save and what they can spend and just all these fundamental numbers. Now you don't need to know it like the back of your end, you don't need to stick to it like it's a chicken and rice diet. But your ability to create wealth is a function of what you can save. If you can't do the first thing, which is save, you can't invest, which means you can't create passive income, which means you'll be relying on your superannuation and the age pension to retire, which for generations that are retiring at the moment, that's all they had. So there's nothing on them. But for my generation, our generation, we've had super paid since you were 14. So for us, there's really we have our other challenges in our demographic, but we need to get a hold uh on this. It's very easy to bury your head in the sand and just go, oh, it's too hard. And as I said, eight and ten people probably do. They go, too hard, too much budget, blame cost of living, read the paper, houses are too hard, whatever it is, right? But just doing something, even if you feel hopeless, just doing something is better than doing absolutely nothing. It really is.

SPEAKER_04

Yeah, I think what you said in the main episode, you said something about um, I think it was in the couples exercise bit around um understanding what you can save and then what your goals are and how they marry up to each other. It's it's actually really cool because it like puts into perspective if you can't do all the things that you want to do because your saving your savings ability is not where it needs to be, you have the options of compromising or increasing income, like focusing on increasing income to be able to achieve all of those goals. And by just realizing that one thing, you can stop yourself from going into debt unnecessarily, right? Because people If the goals are all the priority and the income's not there, they will fall back on personal debt.

SPEAKER_01

That's right. Yeah. I literally read in the uh the Australian, which I only get that because I have my Amex, I don't actually subscribe, so apologies. But read in the Australian yesterday. Humble brag. No, no, no. It's a work one. It's a work one. But the the amount of people like we all know you don't even need to read a news article to know that uh after pay, zip pay, whatever is around at the moment, I can't keep track of them. They're through the roof, but they're actually now through the roof paying for fundamental things like insurance payments. Like people aren't even paying cash for basic things like insurances and and stuff. It used to be lounges and golf clubs in COVID, it's now I need this to get by. You touched upon a really, really important thing. And I I actually didn't learn this lesson in terms of someone telling it to me until about, I don't know, five years ago. Okay. With what we spend, like if I was to draw a line and go, this is your base level of expenditure that you need. And over time with two to three percent inflation, it's closer to four at the moment, that's gonna go up. You need that every single year just to eat. But you can't really go below that. And for the everyday middle class, low middle, whatever you are, you can only cut expenditures so much. Actually, your best bet, it's so hard to do, but your best bet is to try and increase your income. Because your income can go as high as it wants. Don't get me wrong, tax isn't fun, and they need to do something about the tax brackets. But it's a lot easier to increase your income than to be on the poverty line and trying to cut expenses, and it's just a mentality change.

SPEAKER_02

Yeah, I I I think you gave a much spicier response to that question when we discussed it last week, which was a lot of fun. But for me, it's it just comes down to three things analysing your spendings about needs, wants savings, like 50, 30, 20, I think is the rule, and actually go what part of our kind of regular check-in around finances and cash flow is what is a need of what is a want, and am I trying to use my children as blaming to turn that want into a need? That's gen genuinely the question we ask. And I I honestly think like if you look at spending to your point around afterpays, it pay everything there. Uh I've done living expense analysis more so when like we just attract a different client at funded, right? When I was in bank land, anyone and everyone would call up, can I get a loan? And Bindi will be able to talk to this as well. But like we would we I just look at them and go, there's 15 transactions this Wednesday like last Wednesday from afterpay. Yeah. And it's like $3, $2, $8, and they've just afterpaid 20 things uh the day after pensions, you know, parenting pensions come in, they've gone after paid everything in target because it means they can at first they could buy 10 things they couldn't afford. Now they're in this cycle of that they can't get out of it. And to your point around reducing expenses, you can't go, well, I earn a thousand dollars this week, I'll just dump that all onto that, because then you're gonna snowball into collections on you know defaulting on rent, or like it's you've got to be just really, really honest with yourself around these expenses, and the cost of living, I feel if it wasn't for Zip Pay, and I'm I will be on record saying this, I legitimately think things like Afterpay ZipPay have increased the cost of living artificially because retailers have to cover the cost of those things, and so products have become more expensive, we're using it for more things, and it's accepted in more places than ever before, so more retailers are having to increase their costs, and that's snowballing, and it's just this cycle that we're just stuck in. And if we're more circumspect around how we use because those are debt facilities, if we're more circumspect into that and going, actually, you know what, this I will just forego the card and a beer and not go and bet the hundred bucks I don't actually have spare at the the pub this weekend, that's right. We'd be doing much better. Like it's such small little margins we're playing with.

SPEAKER_01

Yeah, and we've we've there's probably a hundred nuggets of gold in what you just said there. But we talked earlier about a bucketing cash flow approach where you have different accounts. If you don't have those different accounts and you operate with one account and you just got your monthly pay and you're like, I'm rich. You know what I mean?

SPEAKER_02

I tell all my clients quite often that Anna and I have uh for years actually we did three accounts cash, which is our weekly, monthly, which is our bills, and yearly, which is our like big rejo savings kind of account. Since having kids, and we've had a few circumstances where we've got a bit extra cash and stuff, so we opened up a another kind of yearly, like a big emergency fund savings account to get that. And then just one of the big stresses with me starting a business was how do I pay for groceries this month? Like that was a big thing. So we just opened a groceries account and that like we transfer, we pay each other both ourselves twice a month. Yep, transfer money to that, said and forget, done. Like, don't rob Peter to pay Paul elsewhere, just like it's just easy. Use bank accounts as a tool.

SPEAKER_01

Yeah, it's it's unfortunate. Uh, but as society's got more and more complex. Uh you you said it on the main episode. People just want and want and want. And if you're so used to clicking your fingers and just getting whatever you want at that point, and I'm not approaching that conversation from a high horse.

SPEAKER_02

Bindy knows what comes into this office.

SPEAKER_04

We um we spoke about a little bit last week. Yeah. Um, did you have an unglamorous thing to add, Alex, or were you happy with?

SPEAKER_02

I I think I just yeah. I just echo that.

SPEAKER_04

Um, Raleigh, in the main episode you spoke about the the chessboard, um, which was such a good I don't play chess. Um, it's actually on my list to learn. Um, but I I don't know. We're gonna do it this other baby. I followed along with that book. This is a brilliant analogy for life, like I really, really related to it. Um the pawn goes backwards indie. You mentioned there are two pieces that people play with regularly. Um first part of the question is what are they? What's the low-hanging fruit that everyone can sort of understand? And then what are the sneaky pieces that people overlook?

SPEAKER_01

Yeah, all right. Three questions in mind. I'll start with the first one. I like it. Um the let's keep it, you know what I mean, property and and debt related. A lot of people that are listening in um have an affinity or an interest in property, whether it's the family home or they've gone on the investment property journey. So, and I I work a lot with property investors, like 80% of my clients have either created wealth through property or are on that journey. Um for those quintessential property investors before they've got me in their corner, they've they play with those two pieces. It is property, property, property, and then when once they can't get any more property, they just sit there on their hands and just call the broker every month and go, I knew what was coming. Run another valuation. It's just like an addiction. Run another vow. I need I need the equity. Let's go, let's go. And then they go, and they let's say with their numbers they could save 50 grand a year before they started this journey. They can now save three, and then they go, We haven't had a holiday in 10 years. Um, birthday presents are a struggle. I can't, I've got 10 days worth of sick leave. So if anything actually happens, the bank doesn't care. Like all those dominoes are gonna fall, and you're not interested in sure in insurance and you can't afford insurance, which is a topic for another day, but it's it's really just going, all right, even if you're on that journey, I can guarantee the two chess pieces you're playing with, we just want to think about them a little bit differently. How does each one of those chess pieces have their own plan? But how do they fit into the holistic plan? Like a lot of the time, if you think about it from a holistic view before you go on your property journey, just to keep the same theme, if you do the goals-based exercise that we talked about in the main episode, you'll realize that three years' time we said we wanted to go to Japan and that's an eight thousand dollar holiday. Well, if you go and get that next property down in Hoppers Crossing, there's no more holiday in two years' time. So it allows you to think about that and have the conversation with your partner beforehand. Um I would also say, from a chessboard perspective, in terms of what gets neglected, which is sort of along the lines of your question, once you become obsessed with one or two pieces, you really do throw like to use a race horsing analogy, like the blinkers are on, you're not seeing what's around you. So if your budgeting's good and you're starting to create wealth, then you've got property, then you've got debt. The last thing a property investor wants Riley to talk to them about is their super, which is tax free once you're retired, by the way. Your properties aren't gonna be tax free, they're gonna be even less tax efficient once all this stuff goes through. And then your wills. Nine out of ten property investors I speak with. I'm like, Do you have your will and your power of attorney? They go, Well, what's a power of attorney? Well, like, I don't have a will. And I go, Well, what's your three-year-old gonna do when they inherit four million dollars worth of property? Yeah, nothing, right? So, yeah, that holistic view is really, really important. But unfortunately, you uh and you you use the analogy in the um in the main episode, you actually need to have a bit of knowledge in every single area. Lucky for me, I do have a bit of an academic background in a few different areas. But if if your advisor doesn't have that circle of competence around the estate planning, you need to go and get the advice elsewhere.

SPEAKER_02

I'm really enjoying how he remembered what I said because I don't. I was like, that's just I was like, Yeah, I was legitimately just like oh yeah. Thank you. I'll listen to you. Um Cheers, I don't listen to myself, so it's always a surprise. Yeah, cool. Um I think that's interesting, right? Because one of the things we do, and I I readily will acknowledge that it seems some property investors are just addicted to it and they're just like bam, bam, bam, bam, and you and I have independently like on clients' portfolios looked at it and I've looked at it and gone, this is an odd portfolio, and let your expertise like I'm not the expert judge on how good a portfolio is, but sometimes I've looked at mutual clients and just gone interesting, some interesting decisions there. Yeah, you're like, oh yeah, it's just always like sometimes I've got a quick win elsewhere, let's just get like snowball this very quickly. One of the things we try to do, I'd love to get your thoughts on this, is we've got a strategy for property investors. I don't know if I've told you this. We look at this, so if someone's borrowing capacity is set 1.5, right? They've got total borrowing capacity. I'll look at that and go, actually, if we buy two well-performing assets at 800, we can fit that, we can extend that to you know 1.6 total because above a million, you're probably getting poorer yields. There's a whole, you know, actual rationale that isn't professional opinion, it's personal knowledge, just need to clarify. Um we had a meeting with our risk guy from our aggregator. Uh, and so it's really interesting from my perspective to see those. And quite often there's always, you know, a hundred, like once you do that activity, there's a hundred thousand or so borrowing capacity that can never be leveraged into anything, right? Um, and sometimes I'll put a bit of note like you might be able to work with a financial advisor around debt recycling long term. There's a lot of buffers in borrowing around hem household expenditure measure. Uh you've got things like interest rate assessment rates are higher, two and a half percent higher, all that kind of jazz.

SPEAKER_03

Yep.

SPEAKER_02

But you as a financial planner, are you looking that is access to the emergency fund? Like, is that your like that's how we're going to build your cash flow buffer over time, or are we going, let's utilize absolutely everything that's available?

SPEAKER_01

Well, my preference is to keep the emergency fund for emergencies.

SPEAKER_02

Um and I guess the main point, just to elaborate a little bit, a borrowing capacity in my mind translates into a cash flow buffer in your personal budget. 100%.

SPEAKER_01

Yeah, yeah. And the and the more debt you take on, the more you use leverage, the more um of a buffer you need. Yeah. See property investors with 10 10 grand in the bank, and I go, oh, like you lose your tenant and you you're in trouble here. And they go, Oh, am I? Like, yeah. But um, you touched upon some really, really good points there. Like at the end of the day, I want to see the cash flow buffer stay a cash flow buffer. If you've got to dip into it a touch to get the deal over the line, so be it, right? Um, but normally as well, once somebody's gone tick, I've got three to six months' worth of living expenses in their cash flow buffer, and then whatever they were putting into that, if it's four or five hundred bucks a week or just whatever the number is based on that household, they normally don't need to if they really thought about the future. You made an amazing point there around borrowing capacity, and so many people are just like, blinkers on. What's the next property with them? What's the next property and what's the next property? I get so many people that are sitting on their hands because the broker came back and gone, borrowing capacity is 300 grand, and they go, I can't buy property, so I'm just gonna sit here and sulk. I'm just gonna sit here and wait. And then if their value, like if if they owned all their property, like let's say they they own a property in I don't know, Tassie and Adelaide or something, and they haven't moved in terms of vowels for whatever reason, they might sit there for five years and then go, oh, I think I should sell this. Whereas there's always something we can do to bring it back to the original question, like if you're taking that chessboard view, okay, well, maybe while you wait, rather than paying down your investment loan, which is completely inefficient, maybe we make a tax-deductible super contribution. Like you're earning 135 grand. If I put money in super instead of paying 32% tax, you're gonna pay 15, that's a 17% return. There's something I can do this year.

SPEAKER_02

Oh, I can if you're self-employed, I can use that income long term. Like I can actually add that back from financials. And I think that's gonna help with that. Like, yeah, there's this whole like actually long term, you've done something with your money. And back to a concept Bindy and I have been unpacking a lot around stewardship. Uh, I think it's a really important concept. For me, I don't like sure, there's new new things always under the sun, but there's a lot of old concepts that are a reminder of ancient principles that I think are really important. One of those things is stewardship and actually taking that step back and going, how do I manage this money and this business income that is coming through? The reality from my perspective is you've got this money coming through. I'm doing what I can with it now before the borrowing capacity is right there. At the same time, I'm looking to your earlier point to increase my income and take that to the next level. And when it's at that next level, the borrowing capacity is preserved, the business, income, everything's taken that next step, and it all just works out.

SPEAKER_01

Yeah, right. You you made some great points. So um on the ancient principles, for anybody that's listening in, there's a book called The Richest Man in Babylon. Um, it was quite literally written like a hundred years ago. It's a very small book. It is one of my favourite books. It is I really need to read that, actually. Unbelievable book. You can read it on a plane flight. It is like ironically, mine was a Bible reference. Yeah, so like well, this is like the you know what I mean, the Babylonian Bible of making money. Um, but that's that's an unbelievable book. Um, but you made a great point, like just to to piggyback off you there. Borrowing capacity is gonna run out for every property investor, every mum and dad, whatever it is, your borrowing capacity is limited, and it depends on the bank policy at the time, and we'll take second-tier lenders and all that stuff out of it, but it it's it's capped. Yep. A really good thing about taking that bird's eye view is going, I've got the team around me, and Alex has said that my borrowing capacity is 1.5. I'm buying two properties with my buyer's agent in the next 12 months. What do I do after that? Because so many people, it as I said, it just punches them in the face and they just rattle. They couldn't fathom that they can't get more property. But at least if you know, hey, that's coming in 2027, you're starting to get over it and thinking, all right, super contributions, maybe I'm investing in my trust or in my partner's name who earns less. Maybe we sort the wills once we buy the properties. Yeah. Yeah.

SPEAKER_04

Yeah, good answers. Um, what's the financial behaviour that looks smart but isn't?

SPEAKER_01

There's so many, and they actually go with fads. So we had a little bit of a rant about like following trusts and things like that. Uh, the financial behaviour that is timeless is just I won't hash it on it too long, but it is basically living above your means or or lifestyle creep kicking in. I got the pay rise, so now I've got to do it. Keeping up with the Joneses, it keeps coming back. It's just common sense. Like at the end of the day, as I I joked about Alex's car, like Danielle's the same. We we ask ourselves, is it a want or is it a need? A Mustang for her, uh being 38 weeks pregnant is a want.

SPEAKER_02

Um, but can I just say I take twins to daycare every day in that car? It is a little bit embarrassing opening up the and just watching these two curly haired little girls just jump out.

SPEAKER_01

That's the cool dad. Yeah. Um but in in all seriousness, it's it's a combination of things. I would say it is like it's genuinely following just podcasts and social media advice. I am seeing blindly so blindly.

SPEAKER_02

The right podcasts, we're here. Yeah. Listen.

SPEAKER_01

At the end of the day, we're not here giving advice as well, with just just giving a two-second disclaimer and then just basically giving advice. But I I am seeing so many people come to me, and when I say so many, it's not like every second person, but it's a lot more than what it was five, six years ago. People just opening SMSFs. Like I'm I'm a specialist, a couple of our uh advisors are specialists with the SMSF Association. There is a time and a place for a self-managed super fund. It's probably one in 100 people that it actually is in your best interest at that moment to go and open an SMSF. It is not just because you ran out of borrowing capacity, and like that's that's what we had discussion recently. Yeah, yeah. So don't follow the fads would be my answer to that.

SPEAKER_02

I think for me, it like the it's just it seems every year there's just another thing popping up around this is how I got rich and I owned, and like there's a there's I've got some books over there where it's like this is the pathway, and really the reason like the pathway and how I bought 25 properties and da da da da da da da and I'm like okay, they're all in Broken Hill, move on. Uh and I bought it because I legitimately wanted to read it to understand where the holes were and where a lot of this thinking was. And those guys, I think they're probably about 10 years old, where you know they hustled really hard, they bought a bunch of cheap properties, they've ridden a wave that no one saw coming, and like host. Now I'm an expert. And I think that that whole kind of bro finance is literally why this podcast exists. It's because I saw a lot of people out there watching what was happening on the internet, reacting, FOMO, all this kind of stuff. And this market we're in at the moment, um, like to context, we're recording this in April, late April with fuel, you know, the war in Iraq, post-Easter, like there's all this kind of noise, politics is starting to ramp up for the next like it's it's all this noise, and the fair weather investors are the first that like freak out. The guys that have a plan or disciplined around stuff are the ones who just execute, calculator groups, yeah, yeah. And it's like, hey, I'm in this for 20 years, why do I care what's happening around a CGT thing that may or may not happen at a budget event that's probably going to be white light changed when Pauline Hansen apparently becomes prime prime minister, which is a whole nother discussion, which we're definitely not going to go through in this podcast because I do not want to scratch that. But like there's just all this noise to kind of and it's like, hey, let's just do the basics well, let's look at cash flow, make sure we can afford it, add a buffer into the situation. You can create generational wealth by investing into super well, paying down your home loan, paying it off, buying one or two investment properties, and you and the next generation is set up. Like it doesn't have to be I'm the next Jake Paul. It's not rocket science, you don't need to do a crypto dump to like yeah, it's frustrating.

SPEAKER_01

And to to elaborate on that a little bit, um, I talk about it with my clients. There's for the average everyday person who's not a business owner, there's four pillars of wealth. And if you do any of the if you do all four right, put your feet up and enjoy life. First pillar is a family home. Completely CGT free asset, completely exempt once you get to the the ta the pointy end of things where you've got government benefits and age pensions. You can have a $10 million home, no other assets, you'll get a full age pension. It's crazy. Family home, debt free by retirement. The next thing, um, using leverage in some way, shape, or form. So let's just say that's a couple of investment properties to keep the theme there. You know what I mean? You live in New South Wales, you maybe got one up in Brizzy, you got one down in Melbourne, you've got Three main capital cities. Yeah, Melbourne's in the toilet at the moment. Brizzy's doing really well. Fine. The next one from there is liquidity. You know that you cannot access your super and you can't sell the garage on your investment property when you need 100 grand because of whatever happened. So maybe you've got an investment portfolio that you you got your emergency fund, so your 400 bucks a week or whatever goes into there. That'll take ages to build compared to property, but it will get there. You get to 57, you got 500 grand, put your feet up, all good. The last one is your super. That's not sexy, it's locked away. It for most people they just switch the brain off when it's there, but it's there for everyone and it's there for a reason. That is tax-free when you retire. If I'm retiring as of 1 July, myself and Danielle, if we're a bit older, can have $2.1 million in that tax structure tax free. Between $2.1 and $3 million, that gap there is 15% tax. If I've got $4 million, I get a little 15% tax on the earnings on top. But 99% of households aren't even getting halfway to what their super could be tax-free. So like Alex said there, if you're just playing that chessboard view, a lot of the time if you've got four or five properties with debt and you're about to retire, sell one, two, the worst ones, pay off the debt, put the money in super over a staged process. And on two million dollars in super, if you're getting a 10% return, 210 grand tax-free, seven and a half percent return, you've got three grand a week coming in your pocket and like with no headache. So you just need to take that sort of uh staged approach.

SPEAKER_02

And that's without arguing whether you're going to draw down a pension I seven or three percent. It's exactly right.

SPEAKER_01

That's just yeah, yeah, exactly right. So yeah, simple, timeless concepts. Um, a lot of people um like you use the crypto uh example there. I talk to my clients about building a cake, it's really simple, but we've all built a cake. You build the cake first, then you add the icing, then you add the decorations. The decoration is crypto and then your gold and silver and all that sort of stuff. If you're coming to me and you've got no other assets, but you've got 40 grand worth of gold bars in the wardrobe. I actually had a client with six figures worth of gold in the wardrobe, didn't own another thing at all. That's not good. You've got heaps of decorations and no cake. We need to build the cake first.

SPEAKER_02

Yeah, I when I was 18-19, I had a friend trying to convince me uh to start buying pocket watches off eBay, like his dad or father-in-law was, I can't remember which one. Yeah, and I never did because I just couldn't figure out, but he's like, Yeah, I'm buying pocket watches to tear the silver out of them and break them down, so I'm going to be investing into super. And that's the type of stuff that crypto guys are doing now. Like, that is the same linear thing. Like, that's it's crazy. Yeah, the whole thing. I completely forgot about that. I'm gonna text Matt after this. Your name drops as well. Yeah, whack.

SPEAKER_04

Alright, um, you mentioned in the main episode um that multiple offset accounts are a huge win. Um, and I totally agree, I'm someone who uses so many offset accounts for my my budgeting. Um, and I think part of my strategy at least um is that I'm happy to pay slightly higher interest for a banking platform that works really well for me. Um, is there other things in your world that you see that sort of trade-off, like whether it be super insurance or all that kind of thing, is there is there trade-offs like that that come up in your world as well?

SPEAKER_01

Yeah, well, in most of your sort of chess pieces on the board, there's going to be trade-offs in some way, shape, or form to keep the theme property focused, uh, given it's sort of the theme of the day. Um, a lot of the time I'm seeing LMI become more and more of a discussion piece. Like deposits are percentage-based, and when you're chasing a very fast-moving target, a lot of the time it's pretty hard to get to a 20% deposit compared to um your parents' day where the house was 70 grand, you could get to the deposit. Like if you're looking at a $2 million purchase in a capital city, pretty hard to get a 20% deposit, right? So uh LMI is becoming more and more of a discussion, and um, I have seen um not so much in the last couple of years, but traditionally I was seeing a lot of people there who were just obsessed with saving the traditional 20% deposit because that's what mum and dad said save your 20%. That's what Scott Pape said, yeah, and and and yeah, I won't name drop. Uh but you already did a lot of places, yeah, yeah. A lot of places um and just people in general have said do that, save your your ten thousand dollar LMI, but by the time you've saved your ten thousand dollar LMI, that house with the 40 people at the first open homes up 50 grand. Now, um that's a philosophical discussion for another day, but a lot of the time ripping the band-aid off, um, just cop the LMI, get into the property, it's gonna provide you with more security, or if it's an investment, investment growth, like working with your broker to figure out the optimal deposit's gonna be the best way to go.

SPEAKER_02

I think there's a couple interesting points in there because you and I, Bindi, we learnt to lend with someone as our leader who was not afraid of LMI and just awesome. But the five percent deposit has kind of made us forget the government schemes, the Australian federal government, whatever they call it now, the first home bonus guarantee scheme. They'll relabel it. Yeah, yeah, the political boy. Yeah. Uh they like that has kind of made us forget about LMI a little bit, which has been interesting. The fascinating thing from my perspective is like in Queen, let's just use you know Brisbane as an example, million dollars the cat was raised to, suddenly everyone was offering up to what they could borrow up there. It wasn't so much that people were afraid of borrowing a million dollars and paying LMI, I think. It's just the LMI costs more and it robs your borrowing capacity because the interest rates go up, which is very different to how we entered or the environment that we entered lending into. Like it was all the same rate up to 95 90%, and then it was slightly higher. So it's just interesting the perceived higher risk of an LMI deal, whereas everyone's pretty much doing LMI deals with the government guaranteeing it now anyway.

SPEAKER_01

So yeah, that's right. Yeah. And even people that are uh, you know what I mean, building out property portfolios and things like that. I've worked with plenty of clients over the years that have multiple investment properties, and um they this is a little rant, they come to me for advice on whether it's terricy or whatever it may be, right? They are a doctor with extremely low financial literacy and they get an LMI waiver up to 90-95%, and then myself, who's the advisor that's legally allowed to give advice on these strategies, I don't get the LMI waiver, so that makes me a little bit sad. Just a little drop in there, little rant.

SPEAKER_02

So I have to pay the LMI, but put your hand up who didn't use an LMI waiver to buy a property in this room. Bindy for the record is not putting her hand up. We we're bank staff. Yeah, but also like Anna Anna, my wife is a physio, she gets one up to 90. So yeah.

SPEAKER_01

So we need uh I think we need to, for anyone that's listening in that has pulling power in this area, we do need to really revisit that. I advise lawyers, doctors, surgeons.

SPEAKER_02

I really hope no one in this area is listening to it because then we're in trouble with our just tune out. Yep. Um yeah. Is LMI tax deductible if you use it to purchase an investment property?

SPEAKER_01

Uh as far as I'm aware, it's not tax deductible off your income because it's a capital expense. So as I said, I'm not an accountant, so if I'm wrong here, but what can happen is any expense that you incur to buy the property, whether it be uh buyer's agent, LMI, it'd actually go on the cost base. So if you buy 500, you spend 30 grand in cost, you'll 530 later. So uh, but some people fall into the trouble, and uh, I do see things that are a bit misleading where no, you cannot go and claim that $12,000 expense against your income that year. That's definitely not how it works.

SPEAKER_02

Uh one of the fascinating things, we did this with a client recently, we actually had a 50% reduction at 12 months mark because we were able to value it at a point when refinance it out. Yep. We got them 50% reduction on their initial LMI because it had gained enough equity to get out of that. Did that just come off the loan balance? Or how did that work? It was refunded to them in cash. Refunded, wow. Yeah, because we refinanced elsewhere and then that was the vehicle. So normally I think it would be off the loan balance of the principal, but yeah.

SPEAKER_01

And this is the importance of having a team. Um I'm not a mortgage broker or a debt specialist, so that's why we have you.

SPEAKER_02

That's not something I promised them would happen, but it was something I was aware of. Um, and I think it's the only time we valued a property under 12 months, like out of our normal six-month cycle that Bindi does reviews for clients, because I was aware that could be a possibility. Roger. Yeah. It's a very Queensland-centric thing at the moment, though, with capital growth. Yeah.

SPEAKER_01

Well, you're experiencing it. Yeah.

unknown

Cool.

SPEAKER_04

Um, Riley, I feel like this might be an easy one for you because in your business you're very um you know, structured around longer-term wealth for people uh and and looking into the future. And I feel like whenever something is so far away and we move out of that instant gratification space, it's emotionally difficult for people to do. Um, but what's what's a financial decision that's technically right, but almost emotionally impossible to make?

SPEAKER_01

Yeah, there's a lot, to be honest. There really is. Um everything. Yeah, yeah, there's a lot, and you've really got to separate emotions from uh rationality, and that's sometimes while getting a second opinion can work. Um with the the theme of the main episode, I would say uh it's actually getting rid of the first home a lot of the time. I see a lot of people, if they're upgrading from their first home, which was the three-bed, one bath place that there's they have this extreme sentimental value with maybe they had their kids in it and they, you know what I mean, like, oh, I just want to keep it, I want to rent it out. No, like unfortunately, one day someone's gonna live in that property and just rip the band-aid off, and maybe that's the right thing to do if the numbers stack up. Um sometimes as well, particularly for the generation that is uh sort of 65 to 75 at the moment, they didn't have a lot of super as well. It wasn't around for the vast majority of their life, and it also wasn't necessarily policed if their employer didn't pay it. So for them, a big strategy is downsizing, and uh, sometimes it can be really hard to let go of that forever property or the property that you thought was a forever property that you raise your family in to move to something that suits your needs, and mathematically it's exactly what you need, but emotionally you just can't bear it. Like my mother said that we're taking out of her taking her out of her house in a cardboard box. They live one street away from the beach in something that they brought for three hundred thousand dollars that's worth millions today. She could at least say pine box. Yeah. Won't spend that much on her.

SPEAKER_02

Oh goodness. I know my mum's gonna listen to it, so I won't make a similar joke because she will take it seriously. Uh yeah. I honestly think it's just telling your kids no these days.

SPEAKER_01

That's a huge one. Yeah. Massive one.

SPEAKER_02

Yeah. It's and it's hard. Like Yeah. Yeah. Yeah. And like we quite often we've got a hack, Anna and I. It's not a hack, but what we've learnt is we don't need a full Macca's meal, Anna and I, to be full. And so we will the girls will just want chips, and then you'll get, oh we'll just get you a happy meal, and you'll get two happy meals, and then you get two meals each, and suddenly it's 60 bucks. Like it's so expensive. And I think for us, what we've learned is like if we're genuinely hungry, and that's a legitimate question, we're like, if we're genuinely hungry, we will share a big arch meal. That's kind of what we're enjoying at the moment from Maccas, a little bit behind the peak on uh the Watsons. And the girls will get chips, little small chips each. Maybe if they've been really good, which is not often, they will get a happy meal. But like it's just we could spend 60, and if you're doing that four times a month, like what is that snowballing into over an hour? Like it just all adds up. It's no longer a treat. No, yeah, it's a habit, yeah, it's a real yeah. So I just think honestly, these days, just how do you breed resilience and long-term financial well-being if nothing's ever said no to your kids? And I say that with all the authority of four-year-olds. So we'll see. But also actually, with someone who had horrendous financial habits, not for my parents' blame, just to clarify, because again, mum will defend herself if she listens to this. I will get text messages. But it was just like I I was like, I've got money to our earlier Dolomites discussion, let's go spend it like on a weekend. So the GPO was uh very expensive that weekend for Alex Watson. Well, mate, thank you so much. Uh it's been poor decisions.

SPEAKER_01

Thank you. Thanks for having me. It's been a privilege. Brilliant.

SPEAKER_02

Let's go.