My wife lost her job and is trying to get another. She won’t get jobseeker as I earn too much. Would it be right to take advantage of the new super policy and access 10k of her super early? We will struggle with mortgage repayments without her working.

Simon from Richmond in Victoria

Hi Simon,

I’m assuming your wife has lost her job because of the coronavirus crisis. Early access to super was one of the first financial reliefs announced by the government to help people in situations like yours.

Of course, there would be some advantages of doing that. However, as with any major investment decision, it's very important to seek professional financial advice rather than acting on your emotions.

Firstly, if you’re in a situation where you’re unable to afford basic living expenses, accessing super is probably the way to go. There’s a little point of discussing the pros and cons of it if you can’t afford to pay bills or groceries. This measure allows to you access two lots of tax-free lumps sums of up to $10,000 each and I know this will be a lifeline in a lot of cases.

If you don’t fall into the above category, there are important aspects of your super strategy that need to be considered. These include your age, your overall retirement plans, insurance benefits, crystallising capital losses, opportunity costs of withdrawing your capital, just to mention some.

People close to retirement may benefit as it allows them to access their super tax-free before reaching what’s called their ‘preservation age’. Under the announced measure, if they qualify, they could tap into some of their accumulation account before formally stopping work and switching into pension mode.

For the rest of us, accessing our super early isn’t such a good idea. As mentioned earlier, you’re likely to crystallise your losses. But that’s only part of the story. The other part is the opportunity cost – how much you’ll rob yourself in the long run. If you have a long way to go before retirement, accessing super now will almost certainly be a very costly exercise. Your super is your future employer. You want to make sure you maximise the opportunities during your working life to build your nest egg. Selling down quality assets in a well-diversified super portfolio (assumption) could hardly be called utilising an opportunity. Both time and compound interest will magnify the gap you cause by the withdrawal (potentially up to hundreds of thousands of dollars).

Being able to access your super simply doesn’t mean you should. There are now other financial relief options on the way that were not available at the time this superannuation measure was unveiled.

There’s the ‘JobKeeper’ payment – if your wife’s previous employer is eligible, they could register to receive $1,500 per fortnight for a period of six months for each employee (full-time, part-time and casuals employed over 12 months). This will potentially allow them to re-hire the employees they were forced to let go earlier. Simon, if your employer/or your business qualifies, you could also potentially receive this payment. The amount of $1,500 per fortnight is fixed and not income tested, meaning some people may end up earning more than they earned before. Most of the work needs to be done by the employer so clear communication between employer and employees will be crucial.

A lot of lenders have announced various mortgage repayment initiatives that allow people pause their repayments for a period of time. As you mentioned you will struggle to pay off the mortgage without your wife working, so it might be a good idea to call your mortgage provider and have a discussion. You might be able to negotiate a deferral of repayments of up to six months.

Lastly, I want to mention that there’s always some good in every bad. This crisis provides us with an opportunity to re-visit our expenses and re-set our priorities. It would be a good idea for you and your wife to sit down over the weekend, have a look at your bank/credit card statement and set up a spending plan moving forward. If you’re anything like me, you will be able to eliminate a lot of unnecessary expenses (some of them will come down automatically due to the lockdown).

One day, when this whole thing is over and your incomes will go back to normal, you may find that you suddenly have a cashflow surplus which you can allocate towards your future well-being.

I wish you all the best. Stay positive. This too shall pass.

Michal Bodi

Life hacks for coping with change in a new year

The entire science behind change fascinates me.  It’s also one of the critical variables in financial planning – without implementing a sustainable change the entire planning process fails to deliver the outcomes we’re after.

That’s easier to say than do. We get busy, distracted and we procrastinate. Procrastination is a real problem for a lot of people, and it’s a sneaky one. Quite often we don’t even realise it’s sitting on our shoulders making itself very comfy. Its level of comfort will depend on how we respond to change and how ‘change hungry’ we actually are.

Different people have different levels of readiness to change and it needs to be measured and respected. It allows a good coach to use the right approach and develop a framework that maximises the client’s potential.  After all, it’s all about the actual process of planning – taking clients from self-discovery to actioning digestible steps of a workable plan, fundamentally connected to personal values and goals.

It doesn’t just happen automatically though. The whole process is underpinned by changes in thought, attitudes and behaviour. And that’s where the rubber hits the road.

Studies after studies show us that if we address our behaviour, the results we're after are inevitable.

Coached investor behaviour can literally stop you from booting away your fortune. Up to two thirds of investor returns are lost annually, due to expensive mistakes because ‘human nature is simply a failed investor’ (annual Dalbar/Lipper analysis).

People’s improved behaviour can increase their savings by $90,000 after working with a financial planner (Saving Study by KPMG Econtech for the FSC).

Our behaviour and our decision mechanism is the dominant determinant of our financial outcomes. And managing the process of change forms a big part of what a behavioural coach does.

New Year’s Day is the single most popular trigger in our calendars, when we tend to think of change and how we can improve our lives. Without successful implementation, however, change won’t be sustainable.

So what can you do differently this time? The secret to getting ahead is getting started. These three, simple and practical life hacks might be the way to go:

- Don’t think (too much)– we tend to overthink things. Our minds love making excuses about the ‘right time’ and ‘perfect conditions’. These never happen. The best time to start was probably years ago. The second-best time is now. Often, it’s just a matter of starting and working out details later.

- Create external tension – if we tell other people and make our plans ‘official’, we subconsciously create a guilt trip if we stop. Sharing our goals and plans with friends fools our mind and holds it accountable.

- Start for 10 – break down the change into small bites you can introduce daily. Then, every day, practice the new habit for just ten minutes. Once the time is over we tend to continue as we already created a momentum.

Financial coaching can also reduce the anxiety about the irreducible uncertainty we all face. It provides a holding hand and objective point of view, that helps build our confidence when dealing with change.

Michal Bodi

Senior Financial Planner & Financial Coach

mbodi@sydneyfinancialplanning.com.au

My TOP 5 financial predictions for the New Year (and let's face it, every year after)

Predicting future can be difficult and mostly impossible. Especially if one’s trying to predict things which are completely out of their hands. Like, entirely! But guess what, surprisingly (not really that surprising to the scholars of human behaviour), most of predictions are made about exactly those.

We’re in the second week of the New Year and the mainstream media are already saturated with headlines about market predictions, interest rate predictions etc..

So I made my own list. However, the difference is, that these are about the one thing we can all fully control, if we choose to – our own behaviour.

I’m almost certain that my forecast won’t make the headlines because it doesn’t contain the information ‘the people want’. It’s not the sensational news or ‘the secret’ information that will bring them wealth. Well, actually it will, but not in the immediate form as they all expect.

So without further ado, here are my top 5 behavioural predictions for this year (and in fact every year thereafter, since human behaviour just doesn’t change):

1 . We will keep looking for ‘the right’ product that will ‘save’ us

Most corporations spend ridiculous amounts of money to employ top marketing agencies to sell their products. These behaviour wizards understand too well how human brain works and create wonderful campaigns that simply fool us. They play to our basic emotions - fear and desire, but lately also pride, frustration and self-esteem. And vast majority of population will follow and buy whatever they’re selling, not realising, the new product won’t make any difference in their long term well-being - financial or emotional. They will happily keep chasing it, year and year again, with their super fund, insurance company, mortgage provider…

2. We will ignore the behavioural (please read boring) issues that actually make all the difference

After over a decade of my professional practice, I’m yet to see a prospective client who will come to me asking for assistance with their patience, disciplined spending or emotional decision making. They all come asking to check if their super can be ‘’invested better’ (whatever that means) to deliver greater returns, for mortgage with a better rate or a cheaper insurance.

When I start explaining to them that it’s not the product that will deliver the outcomes they’re after and that it’s actually themselves who can do that via better money habits and mindful consideration of how they go about things, they get disappointed. Many don’t believe me. And subsequently leave and they continue pursuing the ‘whatever other crazy issues they’re convinced are important’ as everyone else and which will eventually drive them to the ground.

3. We will continue focusing on (out)performance

The ‘timing and selection’ culture we live in is obsessed with being better than average. We were told by our parents we can be the best so we expect nothing less from the results of financial products we buy. Not realising that the consistently best performance can’t be delivered year in, year out, we allow ourselves participate in the rat race we can never win.

Most of us will not want to see that it doesn’t have to be that way. That the best product performance (or the outperformance) isn’t required to pay off our debts fast, educate our kids or retire early (whatever that means).

Most of us will not accept that the only real outperformance is the one we can deliver ourselves via long term and disciplined plan, with a help of third party coach, keeping an eye on our vulnerable money behaviour.

4. We’ll keep buying things we don’t need

A decent number of books, movies and pieces of research has been done on how buying stuff does not make us happy (in the long term). Most of us just don’t want to (?) get the memo. It’s actually getting worse and more pathetic, with big companies now skipping parents and market directly to our children. And oh boy, do we all know what a kid shit behaviour does to a parent who is tired, lacking sleep and just wants to have a quiet moment or just wants to pop in the grocery store to only buy milk. So what do we do? We give in. To our kids, to fashion, to our marketing and social media driven culture. … but it’s so hard to save money these days, isn’t it…?

5. We won’t listen to financial advice professionals

Less than 5% of population has a dedicated financial coach who overlooks their family’s finances and long term interest. How can we expect to get ahead, to live lives on our own terms, to get financially independent, to retire early or whatever the headlines we buy into says, if we choose not to have hard conversations about the way we spend money?

Well, because it’s easier and so much more exciting, to look up stuff online or chat to our friends or read an article about the latest products and hottest suburbs to buy in right now.

Therefore, we will continue to choose to not engage a financial advice pro because we’ll continue to justify it to ourselves – don’t you read the paper or watch a TV report about them? It makes us feel better to say that and we won’t have to look for anyone (and use our brain). So we’ll just continue to Google…

Well, there you go. My top five (although the list goes on). I’ll be delighted to check in again in December to see if they came true. But I’m pretty bloody confident... Because they do every year.

All the best.

Michal 'Misho' Bodi

I've dedicated my career to educating people about what really matters about money, what they need to know and what is just noise. I believe that having practical understanding of what can appear to be a very complex issue and having a clear plan empowers people to achieve greatness.

I make money issues look simple, elegant, easy to digest and practical. I'm convinced it’s the only way to accomplish anything in the busy and dynamic environment we live in. You only need to know what's relevant to you. Everything else is commentary…

My specialty is helping people to open up and have an honest conversation about where they are financially and why. Then inspiring them to get proactively involved in the process of planning their lives by providing practical guidance and ongoing money coaching.

mbodi@sydneyfinancialplanning.com.au

Why pessimism always sound so damn smart...?

Having faith in the future is one of the most common topics I cover with my clients. It’s one of the golden principles of investing. It’s close to impossible to make a good investor out of someone whose outlook on life is (or can become) negative.

Being aware of it is tricky. It may sound like one of those touchy-feely conversations. It may sound easy and not important…it can’t be further away from the truth.

Why? Pessimism is not only more common than optimism, it also sounds smarter. It's intellectually captivating, and paid more attention to than the optimist who is often viewed as an oblivious sucker.

‘Don't worry, stay the course, we'll be alright’ is easy to ignore since it doesn't require doing anything. Pessimism requires action, whereas optimism means staying the course.

Optimism also sounds like a sales pitch, while pessimism sounds like someone trying to help you.

It’s all just our brain playing games with us.

Have you got someone helping you and explain to you how this can impact on your life outcomes? Maybe you should…

Here's a full article from the Motley Fool people - http://www.fool.com/…/why-does-pessimism-sound-so-smart.aspx

Let me know what you think.

Misho

Concerns about the market... Or here we go again.

Should you be concerned about what's going on in the share market/s lately?

The short answer is no. The longer answer would be:

In times of market volatility (nervousness and high emotion) it’s often good to reflect and put things in context. In Nov 2007, the Australian share market was at its all-time high. In 2009 it fell 54%. Since then, the ASX200 returned to almost 6000, recouping almost 80% of the lost ground. Today the Australian share market currently sits around the 5000 mark. 

Ok, so what does it all mean and what do I have to do?

The answer is not much, except remembering the conversations about investing with your financial planner.

These ups and downs (or the volatility as the experts call it) are absolutely normal. They’re organic and we want them to happen. If we didn’t want this volatility in the first place, we’d simply always keep your money in cash. But that wouldn’t be that great either as after inflation there would be nothing left. Therefore, the volatility is good!  It's there for the same reason as the premium returns we get from investing in great businesses in Australia and overseas (also called shares). We have to accept it and appreciate it.

For those people in accumulation phase, still working and contributing into super/investments (let’s call this group – the buyers) this presents a great value opportunity to accumulate more at attractive prices. Just picture going to a fruit market, having same amount of money in your pocket as yesterday and seeing lower prices. As  a buyer, you're getting more value for your money. Happy days.

For those people who finished investing new money - in retirement phase (let’s call this group – the receivers ) - we need to remember that the income they receive from their portfolio is not paid based on its value (or what the portfolio is worth) but the number of units they hold. And although the volatility impacts on the first, it doesn't have any impact on the latter. 

It also highlights the importance of maintaining cash (one or two years’ worth) in your retirement income portfolios to help weather the volatility and not forcing you to sell.

Finally, the share market, just like us, is emotional. There are no good or bad markets. There’s just the market. And Mr Market has a bad temper sometimes. The best we can do is to leave him alone and not try to control it. Or as your financial coach will always tell you, let’s take a step back and think about why we're investing in the first place. This is the main reason you hired them - to put things in perspective and to stop you from making bad decisions with your money.

Hope this puts things in context for you. Please let me know if you have any questions.

Story about a coat ... And perhaps something else too.

I don't know about where you are, but it's freezing cold here in Sydney right now. My wife is excited because she can take out all her winter fashion  and as every winter, she tries her tricks to influence me to wear my winter coats too. 

I categorically refuse. Not because I hate fashion, but because I'm originally from Europe. I moved to Australia with a view of enjoying mild and warm weather all year round. At least that was the story I kept telling myself. My silly coat story...

So, everytime the winter comes along, I get my annual talk about wearing warm coats. And every year I've managed to brush it off. 

Until today. 

It was a particulary cold morning and I've decided that I give it a go. I listened to my wife. I put my winter coat on and I walked out of the house. Seconds after I've realised something strange. There was no usual cold wind getting under my suit jacket, there was no shaking, no whinging. I was warm. I was comfortable. And I was loving it! 

Then I thought of my wife. Why haven't I listened to her before..!? Was it my stubborness, was it my pride? Whatever it was, it stopped from having what I ultimately wanted, which was feeling warm and happy.

Funny the human behaviour. It plays tricks on us and it clouds our vision sometimes. 

It's only after we manage to get through it, we look back and think ,wow, why didn't I do it earlier.?! It reminds me what people say in my office all the time. Why didn't we come in earlier? Or I wish I came here earlier...

I know everyone goes through these moments. I hope this example sparks something in one of you... I hope it inspires you to stop delaying what deep inside you may know is right but you've been trying to ignore it for ages.

Please use the comments below to share your own coat story. I can't wait to read about it!

@MichalBodi

mbodi@sydneyfinancialplanning.com.au

image courtesy of freedigitalphotos.net and stuart miles.

Spoilt for choice, or choices spoilt?

I was buying an audio book the other day.  

And I was in the mood for a good book – there wasn't something in particular I was looking for.  I just wanted something on leadership.  

After 40 minutes (!!!), I ended up with five books in the shopping trolley and no idea what to do next.  I was completely stuck – it was like my mind was paralysed by the options I had available to me.

There was a book written by an author I've read (and enjoyed) before.

Two books had names that I found really intriguing.

Then there was a book recommended to me by a friend.

And with the last one, it was the summary blurb I what I found interesting and it made me press the ‘buy now’ button.

They were all fascinating in their own right and they all were what I was looking for.  

But there I was, sitting at my desk, completely frozen with no idea which one to choose.  

It was all going so well – I narrowed down the 25 search results to a shortlist of five, but I couldn’t get any further.

Did the muse leave me there at the crucial moment?

I wanted to pick the best one – the best of the best!!!  With work and kids, I don’t get a lot of time to relax and enjoy a really good, stimulating book, and so that time one-on-one with a good book is too precious for me to waste on the wrong book.

Unable to move any further, I ended up getting distracted by my kids, I turned off the laptop and didn't make a purchase...

It took me a good few weeks before I was able to go back and buy something. 

And guess what, I ended up buying one of the ones looked at previously.  I didn't bother with shortlists this time around – I just went in and bought the one that was recommended by someone I trust.

Because of that, I've got a good read waiting for me at the end of the day.  I’m really enjoying the book, and I'm so glad I went back and bought it.

It seems like everywhere you look these days, there’s yet another choice that has to be made.  Big choices, small choices, important choices, insignificant choices - they all seem to weigh us down and put pressure on us to get it right - to make the best choice.

The concept of the best is clouding our vision. 

It doesn't have to be that way. Once we allow ourselves to have the freedom to trust and be guided by an objective point of view, the weight is lifted. 

A choice made will always be better than the one you plan to make (one day).

by Michal Bodi

Have you had a similar experience? I'd love you to share with me.