Season 2 Episode 4: Financial Hardship
IN THIS EPISODE
Mel and Darlene kick off this episode by sharing personal insights, discussing the importance of setting goals with your partner, and the concept of paying children for household chores.
The focal point of the episode revolves around the often taboo topic of financial hardship, emphasizing that it can affect anyone and is frequently not openly discussed, even within the financial industry. Mel and Darlene provide detailed strategies for managing financial challenges before they spiral out of control. They stress the importance of assessing your current financial standing, educating yourself on available options, resources, and support networks, and planning your next steps. They also highlight the value of building a support network of experts to help you navigate your financial journey.
In addition, the hosts address a common query from first-time homebuyers: how to organize their bank accounts after purchasing their first home. Darlene discusses the importance of aligning your account setup with your and your partner's money management style, emphasizing the benefits of paying extra towards your new home loan. Mel recommends automating your financial setup from the outset and emphasizes the long-term advantages of good money management practices and being intentional with your finances.
Key things to consider when you’re experiencing financial hardship:
· Don’t react immediately
· Understand your current position and think it through – get the facts before you act
· If you’re with a partner - make sure your partner is aware of the position too
· Share it – Get the right people around you – engaging experts here; mortgage broker to discuss your options, mental health support ie beyond blue, a trusted friend for emotional support
· Look for ways to reduce your expenses
· Look for ways to increase your income – noting how long will this take
· Sell something - Investments, house, car, bike, hobby equipment, furniture, etc
· Set SMART goals and move forward on your terms, don’t wait passively for others like the bank to act first
RESOURCES IN THIS EPISODE
Get to know your number with our handy Spending Review template in our website resources: https://www.themoneycollective.com.au/resources
Money can bring up a lot of emotion. If you felt triggered by some of the things we discussed in this episode please reach out to us or see some supports you may wish to reach out to below.
Lifeline Australia: 13 11 14 or SMS 0477 13 11 14 https://www.lifeline.org.au/
Beyond Blue: 1300 22 4636 https://www.beyondblue.org.au/get-support
National Debt Helpline: 1800 007 007 https://ndh.org.au/
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Welcome to the Money Collective Podcast. We're here to uplift your financial wellbeing. Your hosts are me, Mel Pearce, and Darlene Neu. We are the cofounders of The Money Collective and together we have over 50 years of finance and banking experience. We provide the tools, information and guidance to better understand your money and feel confident making money decisions.
0:21
Welcome back to another podcast episode
0:26
to uplift your financial wellbeing. Yeah,
0:31
yeah, alrighty. So I'm going to get stuck into my truth for today. So mine is all around just this resilience planning, goal planning, setting priorities for us as a family, just because everything has not, I suppose, being as smooth sailing for us as it has been in previous years. So yeah, because Percy, he needs to have an operation and we're still planning our holiday away.
1:03
And yeah, it's made me think a lot around. Yeah, when you have all of this back to back.
1:10
Yeah. What? What happens in the future when things don't go to plan? So yeah, whether my resiliency plan was good enough, I suppose because I'm one of those futuristic thinkers who thinks everything's rainbow and sunshine all the time. So, um, yeah. Whether I need to be a little bit more conservative cause we didn't have
1:35
private hospital cover and I cancelled that. So yeah, we've got to sit down on the weekend and work out whether that's something that we continue because it's something that I've signed up for or not. And if we don't then it's like having a really good solid plan around that, you know, and making sure that our backup money is enough to cover things like that for when we need it. Yeah. So yeah, just setting those priorities for the year ahead really for us as a family, you know what comes first. Yeah. Yeah cause there's a lot on in the unknown for us too. We don't know the timing of the operation
2:07
and then how long we're going to go away for. Still haven't booked those tickets. So we just really need to have a good plan. Yeah. For 2024. And then beyond that, it's like, what does life look like beyond that? Yeah. Yeah, I think that's great. It's like that. It is that real planning session with the family too. I mean I think that would be awesome conversation and gonna you know yours and Percy's point of view and yeah and yeah we've done it before but maybe I haven't really put that
2:38
much like I got a stick more to goals rather than resiliency like that back up stuff So really get our heads what happened to that what happens if what happens well and you've got like you said you know when you know throws you spinner you know I'm gonna do yeah I think we're kind of heading into a different phase because Willow is in year 12 next year so he's finishing high school. So beyond that we and Tillys at a public school so there's not really much
3:09
education costs like we're pretty much. So it's like really that's forward planning. Forward thinking really is I guess the next day I hear you cause I like to think of the way my head works. I compartmentalise, you know it's like those life periods. So I've got you know for me if I, you know compare so Lily's 12 and she finishes school in six years. So for me that is the plan when I think of now. Yeah. And then it's after that
3:39
will be the next mile stones and then Dennis turns 60, right. So then I'll think about that and I'm.
3:50
Yeah. So yeah, I think it is, yeah, really good to, you know, and that also helps you think about the now that you want to deal with. But also the future and future can be, you know, what we want. But also what if? Totally. And I think I have a bit of fear because we haven't done the planning and that's what this is all about because you sit down and then you can move on and go right. Gotta plan for it but the plan still is
4:20
need to take effect you know. So it kind of takes time. If you're not in cause I think that we've got work to do to get into that place. Where Cause I think we've always been in that place where ohhhhh no everything's OK. But now we've got hang on we've got to rebuild a little bit more because we're gonna deplete a lot of our backup resources this year and there's that. Yeah. Like the safety isn't there. So I just yeah. So the planning is one stage, but then it's actually doing the journey through it. So it would be interesting. Life isn't all sunshine and rainbows.
4:51
I do want sunshine and rainbows through all of this too, you know. So it is good. Yeah. Well, that's, that's why you playing as well, you know. Yeah. And it might not be smooth all the time, but if you plan for sometimes not smooth, then it'll feel smoother. That's alright. It will. Yeah. And I'm so glad that I have a place to talk about it as well. Yeah. I just imagine if I didn't then yeah, I think that conversation could be so great. And when I've said
5:21
this before, when I do goal planning in my with my husband, that's the bit he likes and he feels like he's part of what we deciding and conversation. And I actually think it helps us connect. It does. So yeah, that will be, yeah, good luck. I think that will be great. And then you can. Yeah. And and the other thing is, it's really good just to think about, you know, like you're 40,
5:53
not very old. OK. You. Yeah, I know. I reckon the best years are all ahead of me. Yeah, that's right. You know, wisdom. But what you can, you know, all those. You've got plenty of time to build that back up. Here's what I'm saying. Yes, yes, yes, yes.
6:10
Very good. Cool. My truth today is an update on a prior podcast I talked about a weak moment I had and I purchased my daughter everything that was actually a fridge for makeup and it cost me $28.00 Kmart and I bought it and she promised she would do the chores and pay me back so that was months and months ago. Anyway, I took the advice from this chat on the podcast
6:47
sometime back and I didn't let her off the hook. OK. So every time she wants something I'll say I'll but you know the $28.00 has to come off first. Yeah? Anyway, so rubber hit the road because she's run out of cash.
7:03
So anyway, I said to her a couple of weeks ago, definitely no pressure. I said to her over the holidays, if there's, you know, there's a few jobs like spring cleaning jobs that could, you know, you're welcome to do at home. And if you do them, I will pay you, you know, $30.00 for each one.
7:24
And they were things like cleaning out the linen cupboard. Um, I had a freezer that needed defrosting and cleaning out like the bathroom cupboards and things like that. So she has been a machine this week. She has got all of those three jobs done. OK and then she said because and I said if you do them all then I'll give you a bonus. So I said $100.
7:53
OK, so then I said to it, but remember, the $28.00 has to come off the 100. You've incentive guys an incentive. I love this. Ohhhhh. Yeah, I haven't. That triggers me so.
8:05
But you really want this, the system. Yes. So. And look, it is her driver. So two things out of the exercise that understanding your individual children, if you're doing this is really, really important because what works for one will not work for another, or even people in general. It's not just kids, she, but she is.
8:32
She is motivated because she probably wants to spend it all at Mecca, but she's motivated to put some money back in her. That's a driver for her. That's how she's wired. So it works for her. The $2.00 or the few what I was trying last time, you know, doesn't work for her because it doesn't grow fast enough. Yes. Tell me the big dollars. Yeah. So I can actually practically do something with that. So.
9:02
So she has. I think currency has changed, honestly. Like, I was thinking about that just this morning because I left my daughter with some jobs, but I said if you do it, I'll pay you. How bad is this anyway? Thanks anyway
9:18
and but I didn't put a dollar figure on it because I just thought I'll thought that out later cause I couldn't tell because like it used to be a theory around paying your age but like I don't think that that flies anymore. I just don't you know what I mean for an hour's work it's not enough they need more or what. So it's fascinating conversation about what is the going rate for child slavery nowadays. Love to hear that in the show isn't slavery is it just pulling your weight. These are all questions. I think it's I think it's again it's you know how much
9:48
is, um, extra and how much is it just to live in the home you know, and be part of the family right. So anyway so Long story short she has done great. She so for the extra she's gonna do my bathroom cupboard. Yeah. So I'm looking forward to that. She's done a fabulous job with all the rest and it would have taken her hours. It took her issued over two or three days. She paced herself awesome. But I've been, you know,
10:19
definitely impressed about her activity and her execution and the quality of my money spent. So I feel like I've had definitely value for money. That's good. I want that.
10:31
Alrighty. So today we wanna talk about hardship. Yeah, it's an interesting topic, you know, that doesn't come up a lot, I don't think, though we have mentioned it before because I'm sure everybody just like me who hopes that everything goes great all the time. And, yeah, that's the ideal situation. And it's just a really fine line between going really well and the wheels falling off
11:01
the wagon financially. And that can happen on a dime. You know, you could feel a change in circumstance. It could be a health issue. It could be a loss of a job. Yeah. Something significantly, Yeah. There's many interest rate rises and, you know, being overcommitted. Yeah.
11:20
Really have impact and you think you're going along OK and then maybe you're not. So and it's certainly coming up in conversations. I feel like there's a lot of people out there in financial stress right now. So it's timely and talk about we want to talk about it too, because people don't talk about it like we are in finance. We go to a lot of finance events and we know that 2023 was a really hard year for people financially so
11:51
and people don't talk about it even in those events. So we've got industry bodies who are not representing this and are brushing over the fact. But I suppose in our mortgage broking world, we know that our colleagues are coaching people everyday on, on strategies on how to deal with it. Yeah. And so if you are feeling the burden of things getting on top of you with finances, we hope that this podcast episode is helpful for you. And even if it's not for you, then
12:21
or maybe someone around you to help strengthen a conversation because we need to learn how to talk about this topic. It just goes with money in general. You know, people don't want to share when money is tough and it's hard, and then if you're not doing that, then you feel really isolated. It's super important if we're ever going to change the stigma about money in our society. People have to talk about the goods the bads share, education, not from an ego perspective, the whole lot. And we're not talking
12:52
people who you might think are already on the bottom of the rung. You know, this is everybody like, because if you once we start living our lifestyles and we start committing to things, it's really hard if something comes unstuck to maintain that. So it could be, yeah, the wealthiest person that, you know, could end up in a situation. What are you dealing with? Financial hardship. What you see on the outside might not be what's going on really for them. So
13:21
yeah, So the more conversations you can have in a supportive environment or for friends or yourselves, you know, find those people, have those conversations and see where it takes you. Because if you start, they might also be feeling the same way. Yeah. So do we want to start about off about how many, how this actually happens? How does somebody get into financial hardship? Yeah. And what does financial hardship mean? So
13:48
and when we talk about that term, it's a very finance related term. It is financial hardship. So there's you call a bank and they have a hardship department. They do, yeah, exactly. So that's what they call it. So that's why we're using that term. But understanding it from a bank perspective is really a good thing because
14:11
you need to know. Again, this is resilience planning, totally what you're saying. So even if you're not there, but it's good to be educated and understand how banks are going to deal with stuff if and when and when you should engage to ask for help
14:28
or not. Because I think that is one of our key barrier for people. Yeah, gosh, if I ring my bank and tell them that I, you know, might not be able to pay my mortgage in a few months time, then what are they going to do? And that's the true definition of what hardship is. Hardship is not being able to make the repayments on a loan that you have. Yeah. Not being able to. From a bank perspective. That's right. You can't meet your commitments or the commitment you've made in the loan contract. That's right. And that could be any
14:58
could have learned, it could be a credit card payment. It could be a home loan repayment, an investment home loan payment, anything. A car loan, car loan. Sorry. Yeah, yeah, exactly. So you need and just to put this one to rest, there are lots of regulations that support you.
15:21
Banks have to treat you well, they're not going to sell the house from under you as soon as you let them know. In fact that's the last thing that a bank would wanna do because they might not get their money back. So even commerciality, they, they don't want to do that because it's not good business for them. Also not a good look for them if they are doing fire sales and foreclosures, definitely, no, definitely. It means that everything's exhausted and that would take months and months and months and, you know, maybe years before you would ever get to that
15:52
point. So the best thing that you can do if you think that you're not going to be able to make a mortgage repayment, is not wait till it happens and get ahead of the curve. And if it's beforehand, then I would recommend
16:12
if you absolutely know that it's going to happen and it hasn't happened yet, you ring your bank and they have as Mel said, a hardship team and you would make contact with them and start talking with them about what you need. You're going to be much better placed in that conversation too if you've already done your numbers and you know what this means and if you've got a bit of a plan for the future. But it might take a little bit of time to implement. So coming back to our eight steps
16:43
on the previous podcast, if you haven't listened to that, just to get an overview of how to go about it, that might be helpful. Yeah. Hmm, definitely. But it's this resilience piece. So like before you get to the stage where you're ready to call the bank, you need to have done all that planning that you said and mentioned about and what other resources have you got to draw on? So you need to really understand your full asset and liability position. So like assets, liabilities, income and expenses, that is your financial position that you need to really understand in this stage,
17:14
we don't want to just jump to conclusions and go to call the banking and say, oh, no, I can't do it. We really need to fully sit down, understand that position that we have, what resources do we have to draw on? So we need to look at internally within your own financial structure what you've got to draw on. So you might have other backup resources available to you and you might be able to sell something or you might be able to increase your income, you might be able to go back to work. So what are the things that you can influence in your sphere of influence
17:46
that can change this situation? So we want to be doing all of those things first and changing the current situation. Yeah, so that you can either reduce the debt, get rid of it altogether or increase your income or reduce your expenses. So you want to be looking at all four of those areas to see what it is. And that's how you build the plan. So once you've got a really good picture of your situation, what you can and can't change that is going to show you how long your money's going to last for that.
18:16
That's the plan that you go and take to the bank if you need to. If you realise that at this point in three months time I've exhausted everything, you wanna be calling the bank now and making those plans and arrangements with them and then wondering what is the longer term plan beyond that because we never want to leave it to a bank to make those decisions for us. We are if it came down to selling a house or a car. A car is easier than a house, but it still could be your motor transport or getting to work which could open a whole range of other problems. If it came down to selling your primary house,
18:53
then you still want to be doing that before the bank does it and making other strategic plans. You need to be talking to real estate agents, but I know I’ve been doing, sorry a lot of talking here. The other thing is that is so there all the things that you can influence yourself, but what about your social impact around you, like who is in your wider network, who could support you through this? Because you could have family or friends who are more than willing and in a position to assist you, particularly if you can
19:24
treated them with the plan to let them know where you're at with life and even if they can't financially help you. Just talking your support, emotional support is very important everything. But even having somebody else look at like you've come up with your plan or you might not even be able to come up with a plan but sharing it with somebody to go, this is the situation because these are just numbers
19:49
at the end of the day. I know we all need things to live in this life but there's creative ways to kind of get yourself in and around a situation. So and there's professionals that can help you if you don't have anyone within your life. So you know, coming back to summarise that, so the very first thing is to take stock, understand your numbers. You know, if you can reduce your expenses, do that first.
20:20
And see what you're leftover money is like, or the shortfall of your leftover money. Then you can forecast out. You can forecast out how long you can last or not last
20:33
depending on, you know, any savings or money in the bank and then you'll know that position and you can have a really good, you know conversation with the bank. But before you even do that, as Mel said, work out, have you got a way out, have you got a way forward, you know, thinking about, you know all those things at that your financial position is really good, so your assets, your liabilities, your income and expenses. So if I've first thing is I've optimised my expenses. I can't squeeze
21:04
anymore out of reducing my expenses. The next bit might be to look like look at you know what are my skills, can I increase the income coming in, is that an option And then know how long is that gonna take? Because you need to factor that in. But then once you've exhausted that you really you know what is your asset position, how liquid, you know how quick can you get your hands on money if you are going to sell something. So again and factor that into that time frame,
21:35
that forecast, that's right. And this is like we said at the beginning, that resilience planning because if this has happened then essentially you're living beyond your means. So your current income and lifestyle can't support what can't support your lifestyle basically. So something has to change and we need to come to terms with that. And that sometimes is just like an emotional pride thing, when really the people who love you really just want you to be happy and safe, really, and be out of the struggle. So
22:05
whatever that means, sometimes we have to
22:09
put the pride aside and make the essential changes. Yeah, yeah. So what we might do is put, you know, some key steps in the show notes so you could follow a path. But
22:22
yeah, really what I would also say is don't react immediately. Understand your current position.
22:32
Sit on it a little bit, think it through. Definitely share it with somebody because your lens might be, I think it's much worse than what it is or it might be not great. That's right. We don't know that yet. But it is good to have another lens over the top of it and then, you know, decide because we don't want you to just have a look at it and say, oh, my only way out is to sell my house, right. And unless you've really thought that through, because there could be so many other things you can explore
23:03
before you get to that, one of the other things, though, is to seek advice. So if you're sharing it with somebody, that would be good, that somebody that knows you that can do that. But I would also suggest talking to an expert because there are other things that you might be able to do in restructuring your loan. You might be able to change it to an interest only loan for a period of time, extend the loan to extend the loan debt, consolidate those things. So you really also need to see what that can do.
23:34
And a mortgage broker is the right person to speak to in that space. Yeah, yeah, yeah. So there's lots of things you can do, Understand your position, seek an expert out and then make the way forward and you know, talk to the bank if you need. And then this comes back down to goal planning as well too. Because if this happens, then it is a means, you know the previous goals that you may have had need to be. You need to go back to the drawing board and reset
24:04
and set more realistic goals for yourself. Because we still need to have optimism for the future. Yeah, we still need to have that forward view of life and how you know you want it to be and how you're going to get on track in the long term as well. So you've got the immediate fix that required, which could be easier than what you think. But if reality is hard, whatever that is, we need to reset. And we always talk about having SMART goals. So they need to be very realistic and time bound.
24:34
Yeah. So we don't want to be setting crazy things where. Yeah, exactly. That you can't because it's not going to be good for our mental health and financial wellbeing is completely connected to our mental health. Absolutely. It's the number one link right now because people are feeling financial distress. And yeah, so I would just like to leave you with a thought. Mel touched on it already. But if you do this, then you're doing it on your terms and there's nothing for that self esteem to be able to manage when things are tough,
25:06
that it's really hard to keep up your self esteem. So if you are doing it on your terms and thinking about it in a factual way and being able to see that way forward, it will make you feel better about the situation and yourself. Yeah. So I know that's going to be hard to do, but I would absolutely, you know, do it on your terms. Yeah. And but when we say this we don't mean do it completely on your own like as in if. It doesn't mean it's like we
25:36
the if you're in a partnership definitely involve your partner. Do not hold all of that burden because that could be really
25:44
lonely place to be in and you don't want to be lonely through this. And being in hardship can come with feelings of guilt and shame. So yeah if you need to reach out, if you don't have those supports people probably don't know how you're feeling too. So just opening up and being honest and also use the services around you like if you need to call Lifeline or beyond Blue use those services. But the best thing you can do is tell those that are closest to you about the reality of your situation.
26:14
You'll be so surprised. It'll be worse than your head. Definitely. And also get that support team around you. Yeah. So when I say do it on your terms, it's not do it alone. I'm, you know, I'm with Mel. It's find the team. You know get the people around you. And that could be family friends, mortgage brokers, us, you know, get the right people around you that can help you, that you've got the sounding board and that can actually work through this detail to put you in the driver seat. Yeah,
26:43
yeah,
26:44
cool. Anything else that you want to add to hardship? No, I think that's enough. And you might be really overwhelming for people. So if you want to talk about it individually, please reach out. Yep, absolutely.
27:00
So today, just to finish off, we've got a final question and it came from a first home buyer who asked us how, you know, cause I've just moved into their first home. Everything is brand new. It's the biggest commitment they've ever taken on.
27:15
How should they set up their bank account? What advice would you have for that? It's a great one, isn't it? And I love that they're actually asking that question. So, you know, for people out there, you know, you've got a clean piece of paper, you're a first home buyer, you're buying your first home. Absolutely. Set your structure up to set you up for success, That is. That's brilliant. So it depends on your personality and your part. If you're with a partner, you're partners
27:46
personality, but setting up a structure in general terms is to separate your fixed expenses, your variable mandatory expenses, maybe some spending money and the money left over, being deliberate with putting it towards your goal. That could be paying down the mortgage faster. There could be something else that you want to do and automating your system like that. So you really, yeah. Need to look at your past spending, work out where it's going to work out. You know what, how, how much money
28:16
actually goes into all of those accounts and set it up, have a go. And it's the best thing you can do for your future to actually start like that with an automated banking account system. Everyone's gonna be slightly different with exactly how many accounts they need and how they're going to operate them. Yeah, yeah. But the benefits long term, especially starting as a first home buyer, a huge it's just like money hygiene. It really is. It's something, you know, looking after your money, setting the right foundations.
28:50
It's just something you have to do for life. And if you do it sooner, you get this compounding impact because you're very deliberate with your money. You're not
29:01
people, you know, raised this before. When people think of a budget, they think they're gonna deprive themselves, but it's actually not. It's actually just been very deliberate and building up that little bit over time that compounding gives you choice later. That's it. Everything is so linked today in these conversations because if you can start making additional repayments that you know just there is a safety net and then you set your accounts up right from the get go. So your goal planning and you've got the things that you're going for happening
29:31
you can deal with, you know those challenges that might change lot easier. Yeah. Yeah, exactly. You raised something. So the second thing, most importantly, yeah, to do is
29:45
automate. Yeah, definitely automate your system. But I was gonna say pay more on your home loan than the minimum repayment, go, yeah, you know, log on to a calculators one on our website, work out what your repayments are. Say it's 6.5% if it's a home loan and maybe 7. And actually make your direct debit that amount. And if it never happens, happy days. That's right, you're building up some more savings because you can always get it out of your redraw later.
30:17
And it's all about knowing your number. So once you know how much money you've got leftover, it's easier to set those goals up to go right. Well this much is going into the home owners extra. This much is going towards the goal. So knowing your numbers is gonna
30:31
set the whole system up. I know. Great question. First time buyers, But yeah, first time buyers. Yeah, set it up. Know your numbers from the get go. Yep. Cool. Well, congratulations on buying your first house. Yeah, too.
30:45
You've got this, guys. And thanks. Today's been a bit of a tough conversation, but that's what financial wellbeing is all about. It's about the good times and the bad times. It's really how you feel about money. And we've got to face all facets of that. So break down those onion layers. Let's be real people. All right, Well, we look forward to talking to you next time. See ya. Bye
31:11
At The Money Collective we provide financial wellbeing, premium coaching, mortgage broking and workplace financial wellbeing programs which we couldn't do without the seamless support of our fabulous team. If you'd like to find out more, head to themoneycollective.com.au or our socials to take action and engage our services. In our Facebook group join the conversation and help us break down the taboo around money. All content in this podcast is for educational purposes only and is generally nature. For tailored personal advice, please seek out a professional.
This podcast provides general advice only. It does not take into account your objectives, financial situation or needs. Before acting on any information provided, you should consider the appropriateness of the information and the nature of the financial product in regards to your objectives, financial situation and needs. We recommend discussing your personal situation with a financial professional.
Podcast by:
MEL PEARCE & DARLENE NEU
Co-Founders, Financial Wellbeing Coaches and Mortgage Brokers
The Money Collective
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