Super Informed Radio episode #18: What’s your biggest money fear?
|Disclaimer: What you're about to read is of a general nature and doesn't take into account your personal financial situation, needs or objectives. We recommend you seek financial advice before making any decisions about your super and consider the relevant UniSuper product disclosure statement.
Lyndon: Well hello and welcome to another episode of Super Informed Radio, the podcast where we help you wade through the complexities of super, the broader world of finance and life's money matters. My name is Lyndon and joining me, as always, is my co-host, Marta. Marta, hello.
Marta: Hey, Lyndon. How's it going?
Lyndon: I'm pretty good. Thank you.
Marta: So, jumping straight into it, what would you do if I told you, you had a big growth on your neck just there?
Lyndon: Well, I know you can be very direct at times, Marta. So, I wouldn't take it personally.
I would probably go, "Huh, maybe I do have the lump," and then, you know, if I was concerned about it, I'd probably go to the doctor. Why do you ask?
Marta: I ask because it would…would it be fair for me to assume that if someone had pointed out something wrong possibly with your financial situation that you'd follow the same course of action?
Lyndon: Logically, yes. I think money is a bit different though because, you know, it's not an immediate medical need.
Marta: Well, that's not always the case for many people. There's this thing that I found on the web called—and I'm going to butcher the term—it's Chrometophobia, or the intense fear of money.
Marta: It means that it's difficult for people who have it to deal with money, see money or even, like, touch it.
Lyndon: Kind of like arachnophobia but for cash.
Marta: Yeah, exactly. Now, that's the extreme side of things, obviously. Like, not everyone who is a bit anxious about money has that intense fear. But it's quite common to be scared or anxious about dealing with money and it can manifest itself in different ways. So, I thought we could dig a little deeper and try and tackle it today.
Lyndon: Yes. Let's not put it in the "too hard" basket. Let's get in a UniSuper private client adviser in the form of Robert Cahill, who joins us today. Robert, thank you so much for coming in.
Robert: Thanks, Lyndon. Nice to be here.
Lyndon: So, as a financial adviser, I mean, I wouldn't think you would get many people coming to you who are scared of money, like Marta describes. But are people scared of money, ever?
Robert: I think they probably are and I think it's a good point that you raise.
I know a lot of people probably hesitate to go and see an adviser because they may be scared of embarrassing themselves or saying something that…you know, talking about the way they handle their money, they may feel that that's not a very wise way that they're going about it.
It's certainly nothing to be afraid of, though. I know that, you know, we never judge anyone who comes in.
And I think the point you raised in the intro, Marta, I've never actually heard that term myself. But I think that it's probably from a financial point of view being able to identify when there is something wrong is the big problem.
People often don't have a great handle on their finances and perhaps have the ability themselves to assess whether they are on the right track or not.
Marta: Well, we thought we'd ask around to see what people's money fears were, if they had any. And I think you guys will find that the answers might be surprising. Should we jump into it?
Lyndon: Let's do it.
Robert: Let's do it.
Second segment – vox pop portion
Lyndon: What's your biggest money fear?
Woman #1: Not having enough money when I retire.
Woman #2: I suppose I haven't really given it much thought.
Man #1: An increase in interest rates and a squeeze on recession.
Man #2: My biggest money fear is having kids. I hear a lot about them and it sounds like a really costly endeavour.
Woman #3: I have two. My biggest money fear would be raising interest rates, which would put a lot of pressure on trying to pay the mortgage.
Marta: And what was the other one?
Woman #3: Probably spending a lot of money on disposable things like eating out, food and wine with friends. It's very, very tempting and very hard to avoid.
Man #4: Yeah. Future for the kids, that's the biggest fear. Everything's rising with the cost of living, especially with hobbies and private tuition, same. That's the biggest fear, pretty much.
Woman #4: I actually don't have any fear about money probably because I'm someone without children, so I don't have to worry about providing for the future apart from myself.
Man #5: My biggest money fear would be not having enough money for retirement.
Woman #5: That I won't have enough money to educate my three daughters in a way that I would like to. Future money fear is that I won't get to Canada and tick that off my bucket list when I'm semi-retired or retired.
Woman #6: I suppose, now that I'm in my 30s, I think about, like, I'll have to buy a house and provide for children and stuff. But I have no idea how I would even achieve that with everything I have to pay for now.
Man #6: I think I'm pretty much safe, so I don't really have a lot of fears around financial things. I think it's more a combination of the fact that, number one, I don't really have very strong long-term financial bills. I'm happy with just things the way they are and also quite happy with my career and the way it's progressing. And the ability to earn income is quite strong, I think.
Lyndon: Is that something that worries you?
Woman #1: Definitely, because I have to…I don't have children and I don't plan to have children. And, obviously, it's myself that I need to make smart choices in terms of my superannuation and investments.
Marta: Have you done anything about that proactively?
Man #5: Yes. I've actually met with one of UniSuper's on-campus consultants, which I found very helpful. And he really explained what my current fund offered and what UniSuper can offer. And I made the switch and moved all my money across and changed some of where my money is being invested.
Marta: Very good. So, the fear is vanquished.
Man #5: The fear is vanquished. Although I'll have to keep working on it.
Woman #4: Having been through a significant life-changing event, I'll probably become a little too carefree when it comes to spending money.
Lyndon: Is that something that causes you stress?
Woman #4: No. No stress. Actually, I pay my bills on time. So, there's a saying that you should save your pennies for rainy day, but I believe the opposite; that you should be out spending especially when it is a sunny day.
Marta: And is this something that you think about regularly or that causes you any stress or anxiety?
Woman #5: Not really. I just…you know; I've got it in the back of my mind. So, I'm just…every decision I make presently is around the children and their education. And hopefully, there'll be some leftover so I get to Canada.
Marta: What would it take for you to vanquish that fear?
Woman #3: I feel like some form of budgeting would help, but I'm not really a fan of budgets.
Lyndon: And is that something that worries you?
Man #3: We do think about it from time to time. It comes up as a dinner conversation, but yeah, you can't get away with it.
Man #2: Maybe I should really start thinking more about finances and how to use my money.
Second segment with Robert
Marta: So, there was a wide range of responses there, Robert. Was there anything that particularly struck you?
Robert: Yeah. There were a few points that came through. There were commonalities.
I guess the retirement theme, interest rates and mortgages, which is not surprising, given the amount of debt we have in Australia.
Kids, again, not surprising because it's such an emotional topic. And also, budgeting, you know, balancing the day-to-day expenses with the need to save for the future. So, there was a few definite standouts for me.
Lyndon: As an adviser who sees, like, people coming in, seeing on both sides of the fence, you know, I plan to have kids or I don't plan to have kids, how do you manage that? What do you say?
Robert: Well, it's not a specific service that I offer, guidance on whether to have children or not. But certainly, it's a big decision because there's a lot of costs and lifestyle changes that come with it. So, really, if people are looking for some guidance around whether they can afford to save a certain amount for education, for instance, which is a big one — the cost of private education in particular can be expensive—that scenario we can help in.
We can also help with longer-term financial projections to see the impact of things like retirement goals if that's important.
But I think the decision to have children is a very personal one and certainly, it's normally well after the fact that people have had kids that they would come to us asking for some sort of guidance on specific factors relating to their kids or relating to their own retirement goals.
Lyndon: One of the other things that came out also was, I think a couple of people sort of said, "I'm pretty comfortable with my current situation," or you know, "I don't have sort of fears about money," or in the case of one person who said about the life-changing event and every day is, you know, a bonus in a way. What are your thoughts on that?
Robert: I definitely see that a lot. I think it's healthy, in a way, not to worry about money. I think that's great. I also think that it can be unhealthy as well because if you're not… I mean, I always say to clients that it's not my role to dictate to you how to spend your money. It's not what I'm here for. I'm certainly here to help you make informed decisions.
I think it's really important that people understand the impact that spending decisions now have on their future and whether they can afford to continue to do that and then also achieve the goals that they may have for their future.
Lyndon: So, for example, maybe to someone like that, you might say, "All right. Let's put a plan in place so that you don't ever have to think about money and worry about money if that's something…if that's how you like to…"
Robert: That's right. We spend a fair bit of our time trying to uncover what it is that clients are trying to achieve. And that's not an easy thing. Most people don't have that now.
By the time they come in to see us, it's a matter of asking deeper and deeper questions to understand what is it that's really important to you, what do you want to prioritize, because we can't prioritize everything when we're looking at setting a plan.
So, once we've been able to identify the goals, then we can really start working towards the achievement and the attainment of those goals.
And that's a matter of coming back to some of the other things that were mentioned in the recordings there, which is prioritizing the discretionary expenditure today and balancing that up against the amount that you need to save to achieve your other goals as well, trying to find the balance.
Sometimes people have the income to achieve both of those things in a way that they're happy with and other times, it's a matter of having conversations that help people make some changes whether they change their goals for the future, in their expectations or whether we do something to the way they're spending their money now and set some framework and some processes in place to help them manage the expenditures they're doing today.
Marta: Yeah. And a couple of people mentioned interest rates and the effects that can have on paying mortgages and stuff. Do you have any particular concerns, or what are your thoughts on that?
Robert: Interest rates and the level of debt that we have in Australia at the moment, I think if we look at some figures around the percentage of net income that goes towards debt repayment, it's quite high and possibly higher than it's ever been in the past. So, that's certainly understandable that that theme has come through.
And we are at record low interest rates in Australia. And the talk in the media at the moment around rising interest rates, some of the banks have increased interest rates outside of the reserve banks, board meetings and decisions. So, in a way, the interest rate normalization or increases are starting to come through already and that can have an effect on budgets, given it is probably the largest component of household expenditure at the moment for a lot of families.
Marta: Would people come into you in those kinds of circumstances to reassess and make better use of what they have?
Robert: People would come in to talk about some of the most common strategies we do around debt management and doing some projections to see if we change things like the frequency of repayments or the way that cash reserves are held and whether they can be offset against mortgages.
Strategies around debt can help save a lot of money long-term, but as with financial planning, most strategies are long-term. Most of the benefit comes through the discipline of implementing things over a long period of time and it can be difficult.
Lyndon: Just going back to the theme of people's fear of money. I mean, none of the people that we spoke to had, like, Chrometophobia or whatever your term was, Marta.
Marta: No, it didn't sound like it.
Lyndon: But, you know, there is that thing of…and you mentioned this before. People always think, "Oh, yeah. I'll do that. I'll get around to it. I'll go in." And then by the time they get to you, it's…or not too late, but if only they had done it earlier. What's a first step that someone might be able to take, an easy step, a simple step rather than something that's maybe too terrifying?
Robert: Well, I think one of the people in the recordings there mentioned it themselves, which was they'd been to see an on-campus consultant and that had highlighted to them a few things that they weren't aware of and gave them a bit more confidence.
Lyndon: Would you mind just covering for us what exactly an on-campus consultant is, for the listeners?
Robert: Certainly. Our on-campus consultants are based…as the name sort of implies, they're generally on campus. And basically, it's guidance and factual information. There's no personal advice that's able to come out of that.
So, if you're looking for something that is very specific and related to the attainment of a goal, for instance, that you have, you may need to go another level up and receive personal advice.
But the reason I say it's a good starting point is because they can guide you as to whether you do need to go and get some personal advice or whether there's something that you could be doing different or that's available to you through your super fund, for instance, that can help you with an issue that you might have at the moment.
So, it's a general advice service and it's a good sort of triaging, I guess, as to where your next step might be.
Marta: Even, like, you know, busting through some of the confusing terms and…I know that I sometimes find certain phrases and certain things confusing and they can just help break it down in a factual way and then go, "Oh, yeah. That's what that means."
Robert: That's right. Demystifying things is a big part of what we do. It's trying to get rid of the smoke and mirrors, and make sure that people understand what's available to them, what they can be doing, in plain everyday language. Because once people feel that they're in control or in power, they're more likely to engage in something.
Lyndon: People fear what they don't know.
Robert: That's right. Definitely.
Lyndon: Have you seen people who have come in maybe where it is a bit late?
Robert: I'd always encourage people to go and get advice as soon as they start thinking about it. I think that fear that we spoke about earlier perhaps causes people to hold off on seeking advice. But I've too often seen people who come in and say that they're retiring next year or this year and it's the first time they've gone in to see an adviser.
And unfortunately, I don't always point it out, but it's often obvious that if they had have come in a few years earlier, there was a lot more value to be obtained from the process of getting advice.
There are a lot of legislative changes that have occurred in the past and have been deliberately set up to try and help people save more in the later years when they are hopefully on a higher income and hopefully have their debts under control.
And perhaps kids have gone through the process of education. And they have more disposable income where they can start really accelerating the rate of saving for retirement.
So, I think if there was a message there, it would be just like the intro where you mentioned going to the doctor. If you go with a financial adviser and just ask, "Is there anything I should be doing," if there's nothing that you can be doing right now that's any different, that's the information you'll receive and there's no harm in having sought that guidance. But if there is, you will have been in and you'll be able to get as much value out of the process as possible.
Marta: Now, sort of flipping the question around a little bit. Robert, do you have any fears about money? What's your biggest money fear?
Robert: That's a good question. I guess I spend so much of my time trying to help others that sometimes I don't give my own finances the attention that they deserve.
I've got a young family myself and I would agree with the theme around kids that came through in the recordings that, you know, that is such an emotional topic you want to provide everything you can for your children. And despite your best efforts, perhaps…I guess my fear would be that I'm not able to provide the future that I would like to for my child. And that's not realized until it's too late.
So, again, that's where the planning comes in and understanding what it is you're trying to achieve. And having some sort of process and regular check-in where you can identify when you're going off-track.
Marta: Robert, one of the people mentioned that her fear was budgeting. Now, it seems really basic and everyone is like, "Set a budget. Set a budget." But it's actually really confronting to look at what you're getting and then look at all your expenditures and put it all together. I know, I only just did it recently.
But having done that, I feel more excited about money. And I've been optimistic about managing it and putting money away for my financial futures. What have you come across or what are your thoughts on that?
Robert: Budgeting is definitely the key to anything that we do. I spend a lot of time talking to members and clients around the importance of budgeting and the importance of understanding where your money is going. I think there's two components to that if we break it down. Most people are…when they think of budgeting, are thinking about allocating a certain amount to each type of expenditure and having to try and control it. It is a very difficult process and I understand the fear that comes with that. I don't actually do that myself either.
But the other part to it is really more informational. Trying to understand where your money is going. I think, is the first step. And once you understand where you're spending your money, you have power then to control and change the way you're doing it in the future. And that's probably…I'm guessing here, that might be where some of the happiness that you experience, Marta, came from, that sense of control of understanding where your money's going and then perhaps making some changes as well.
Marta: It's like…it's remarkable. Like, when you just pay a little bit more attention, like, many banking apps now break that down for you so you can actually see without having to make up a spreadsheet yourself and going, "Okay. In two weeks, this is how much, shockingly, was spent on coffee" and what can I do to reel it back a bit.
Marta: And just being able to then direct whatever I've been able to save to a holiday or whatever instead.
Robert: That's the power of it. It's understanding and seeing in front of you. It's summarized — how much you're spending on these discretionary items and then you have the ability to make the change if you want. You have the ability to decide whether that is something that you want to continue to place a value on or whether there's something else in your future perhaps that you value higher and therefore want to carve out that expenditure towards the attainment of that goal.
And as you mentioned with banking apps and so forth, the development of financial technology companies is making budgeting so much easier now. We have open banking coming next year, I believe. And what that's going to allow is for people whether they have all their banking with an organization or spread across multiple organizations as most people probably do.
The ability to draw all that transactional data into one place and have a single source of truth for your expenditure. And I think that's really going to make it a lot easier going forward. And once people have that power, it's hopefully going to take away the fear of budgeting.
It's not going to be this very difficult laborious task of downloading information into a spreadsheet and then trying to summarize it all yourself, which is what I've done in the past, unless you actually enjoy that. I understand why no one is doing it because it is a very difficult task.
Lyndon: I had no idea that was on the horizon. I think maybe we could revisit that topic in a future podcast, Marta.
Marta: I reckon.
Lyndon: Well, Robert, thank you so much for coming in today. We appreciate so much your expertise and your thoughts and sharing all of that with our listeners. So, thank you, once again, for joining us on Super Informed Radio.
Robert: My pleasure. Thanks, Lyndon. Thank you very much.
Marta: Robert Cahill, a private client adviser here at UniSuper. I don't know about you, Lyndon, but having sort of spoken to Robert for the past few minutes, I would feel quite calm and reassured by him if I had any deep, intense money fears.
Lyndon: He's cool, calm and collected, Marta. I would feel the same way. And that brings us to the end of another episode of Super Informed Radio. Thank you for tuning in.
Marta: As always, you can catch up on past episodes at unisuper.com.au/podcasts or subscribe to us through any good podcast app. See you next time.
Lyndon: Bye for now.