Season 2 Episode 6: It is not what you earn
IN THIS EPISODE
*Content warning, this episode discusses mental health and the link to financial health, mentioning suicide.
Mel and Darlene dive headfirst into a candid conversation about navigating work you're not passionate about, the emotional journey when parents retire, and preparing for that transition.
The core of their discussion centers around the unconscious biases and judgments people face regarding money, regardless of gender, income level, or family roles. They shed light on the tendency to match spending to income and lifestyle, regardless of earnings.
For those with higher incomes, Mel and Darlene stress the importance of managing social expectations and comparisons during financial strains, emphasizing the value of being open about financial challenges.
They also address the societal pressure of being a breadwinner and its impact on mental health and family dynamics. They highlight the strain that keeping up appearances can create, leading to additional pressure and stress.
Throughout the episode, the hosts emphasize the importance of recognizing personal biases and initiating honest, open, and vulnerable conversations about money within one's social circle. They encourage leading by example, showing that it's okay not to have all the answers when it comes to financial matters.
Additionally, Mel and Darlene delve into the complexities of selling a home to purchase another, discussing the concept of bridging finance when deciding between buying or selling first. They offer insights on assembling the right team of professionals, effective communication, setting a settlement date, and evaluating offer clauses, such as making the purchase contingent on the sale of your current home.
RESOURCES IN THIS EPISODE
Take a look at your buy and sell numbers to see what the costs might be: https://www.themoneycollective.com.au/buyingandselling
Know your cost of living by listing your expenses with our handy spending review spreadsheet: 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.
0:22
Hi everyone. I'm Mel. And you're Darlene. Yeah, hi and welcome back. And we're happy to be here for another podcast episode today. Lots to talk about today about how we think about our money. But yeah, as always, I wanna kick it off with a personal truth.
0:42
So I thought I'll just get stuck into that. Yeah, let's go. Yeah. So at the moment we're mortgage brokers by the way, if anyone wasn't aware of that, we do several things and mortgage broking is one of them. And it's actually been a bit slow out there for us being mortgage brokers in that service industry. Well, the mark of contracting quite a bit because not as many people are selling and buying houses at the moment and even from the refinance
1:12
be hard to refinance. It can be do tricky for some people cause rates are up high, living expenses are high and the banks are just making people stay put at the moment. Yeah, if you haven't got that feeling already. So as you know, if you've listened to some previous podcasts, we are saving for a big family trip to get to Canada because my brother's getting married in July next year and my husband started here. We sat down this week and he goes, oh Gee,
1:43
if you're a bit slow at the moment, does that mean I have to work harder? And I'm like, oh Gee, I hadn't even thought about it like that. Yeah. His brain had obviously shook into that gear. Yeah. And the conversation went along the lines of his brain was obviously ticking over and I wasn't prepared for it. But he has got this job. He's a contractor. He's in Earth moving and
2:11
he loves his job. But the people who that he contracts, who have asked him to do a bit of a different job, which is a different skill set and something that he doesn't really want to do, but it's lucrative. And he would be paid more money to do that job, which would be over the warmer weather. And you know for a few, quite a few months, it'll allow him to earn some extra income. But it's something that he's always said no to. Yeah. And
2:41
doesn't want it to do
2:44
so. I found that really interesting, you know. So for me, my immediate reaction was, no, we'll be fine. Like I've we've got a plan. We'll get there in some shape form and I didn't. I was really trying to be protective of him. Like, that was my gut instinct to say, no, don't do it. Like you really happy doing what you're doing.
3:05
Yeah, because I think that he worries about the risk of the extra responsibility doing letting that new skill set that he hasn't had to do before and not enjoying the work as well because yeah, he's happy doing what he's doing at the moment. So I'm like, Oh no, it's quite evident you don't want to do it. So my, I'm like, don't do it. Don't do what you don't want to do.
3:27
And then I kind of brought it back in and I was talking to the girls at work about it, and it challenged me a little bit. Maybe he should do it, you know? I don't know. So what was your what's your advice? Yeah, I don't. I'm not sure I have advice. But, you know, some of the thoughts were that
3:46
the reasons for him wanting to do it? I think this comes back to money, relationships sometimes in our household, Hmm's. And, you know, maybe he really wants you to have the Canada experience and he'll do anything to make that happen. Yeah. And what's, you know, maybe it's not your choice to say yes or no to that. And maybe outside of all that, maybe he's contemplating. I mean, he's obviously good at what he does. And maybe maybe
4:16
he's thinking, can I actually do the thing? Is this an opportunity? I think that's true… to do it. And is it really linked to, you know, totally the money primarily or not? I love this. I'm so glad I can talk this through.
4:34
It’ll help my relationship when I get back home and I can give some good advice. Yeah. So I think it will kind of just play out in some way, shape or form, but it's good. Thank you for that.
4:48
And we'll see what happens. I'll keep you all posted to see whether the dollars start rolling in from him. Yeah, yeah, yeah. And then he's OK That's it. I think, I mean, I think sometimes, you know, maybe our partners do wanna contribute or not and it's trying to have that like financial wellbeing feeling is feeling good about it too. So it's like where is it actually coming from? Sometimes a burning platform, and we've talked about this before, is really, really good because it actually makes us do something that
5:18
we might actually
5:20
maybe you'll want to do a little bit but not not game to actually go there and maybe for that goal it's a good thing to do. But it is worth exploring and having that conversation for sure, and having you go, yeah, alright well I kind of feel like this might be happening then it might be. Anyway, it's not up to me. That's right.
5:42
I’m not doing the Job. Otherwise, it's fine too. As long as as long as he doesn't have that responsibility. If he doesn't do it, then all the guilt that if I don't do it and that's going to impact. So as long as, you know, yeah, it all comes back to open conversation, Yes. And either way, we'll be totally fine. And yeah, yeah. And just so funny too because like, I am the type of person who just goes for the new experience. I'm like, oh, there's a challenge there. Somebody's asked me to do it. They can see that I have the ability to do it.
6:13
I would just have a crank up my personality and he's like totally stepping back going because he doesn't, I don't think he cares what other people think he's and I think he's so dislikes the status quo he likes what he's doing. So it's fascinating that that personality difference. Well, I think it's also good to explore because you know some of the other things could be, well, if I actually go and do that job does that mean I can't come back and do the job I really feel and comfortable in doing? Yeah. You know, is there any
6:43
cause and effect or consequences? Actually, if I do it. So sometimes it's looking past that as well. And actually, you know, yeah, if I stay in my understanding, if I my safe zone, will everything just be cool? I just keep the status quo. Yeah, well, not have you got to see yesterday? My truth today is my mum is retiring. My mum is actually 73 and she's worked full time since we've been grown up
7:11
and finally she decided it's time to retire and so we have been working through. So she wants to move down to be closer to my brother. And so, you know, that huge money change that's coming
7:31
is really is really huge, let alone all the emotional, you know, energy. So she's leaving the family home. So we're all going home, back to Tasmania for Christmas to experience the last Christmas at the house. And then, you know, it's all the practical stuff of leaving. But it's also what next year holds. And that, you know, when you retire, you know, what do you do with your time? Do I have enough money, You know, And what does that money situation look like? And you know, trying to work out the right amount to have in reserve
8:03
for your backup and then how much you can have to spend every day and how to optimise that. And that takes quite a lot of planning and working through and all different scenarios. But coming back to what we do, you know, it's coming back to the basic fundamentals, it's doing your budget. How much do I need to live on?
8:25
and how much income I've got, what's the shortfall or the surplus? And then out of all my lump sum that I might get from selling the house, you know,
8:35
how much do I really, you know, need to use of that for today and put away for things like I might have to go into aged care, you know, when she's older, hopefully, you know,
8:46
that never happens or you know, but it might do. So it's planning for all those scenarios, which is what we call resilience and working through what ifs to make sure you've got the balance of the money to live and the balance of money in case we need it for health and looking after us when we can't look after ourselves. So, you know, certainly as a daughter
9:09
they go through life stages, but having a mum that's retiring and now getting to that stage, yeah, it's yeah, yeah, it's been quite emotional I think, but I am excited for her in the next stage of life. What are those emotions?
9:26
I suppose, being when you get to having parents that are older and starting to retire? It's how can I look after her? That feeling of we want, you know, our parents have looked after us
9:44
our whole, you know, life and our childhoods and then you know you go on and live your own life and then know when your parents retire depending on you know, their situations, I guess is how I can support her
10:01
have a comfortable life and that she's doing it on her own terms and she's independent but there to really support her through that transition and what that looks like. So yeah, it definitely, you know, for anybody out there that their parents are starting to retire, you know, I'd love you know, your thoughts and your input. So please let us know of how to get through that that money journey in life and how that's impacted you. And it can be impact
10:32
people financially or just emotionally in that shift because you know when your parents can't look after themselves potentially the next stage, if that comes to that, then children really step in
10:46
to you know, work out how people get into aged care, how they're looked after and so everything is good for them. So it does come a time and I suppose it starts to, you know, we start to have those thoughts about when that happens and we don't want to live without a parents, but it's also how do we have to take care of them and how does that financially impact us as well, you know, And we start having to put that into our goal planning, you know. So it's all of that
11:17
because I certainly want to make sure that my mum's taken care of, you know, till till she's not here anymore. Yeah. And did you help her with those numbers in that planning? Yeah, well, I'm in finance,
11:30
so absolutely. So working through those fundamentals with them and how much they need, what they're, you know, so they're independent and empowered to work out where they wanna put their money and how that works out to be really involved and have open communication. And I think the more you're involved in open communication now then even later when it can't be happy, all those things are planned out because they've talked about some scenarios and the what ifs. And if this happens and if that happens, we've got a good case scenario,
12:01
a medium and a worst case, you know. Exactly. And I don't know about you, but when I'm old and I'm there, I don't wanna be a burden on my children. And I feel like that and my mum definitely doesn't want to be you know reliant on us, you know. So I think it really is having those open and empowered and you know clear you know communications together. Yeah. Yeah. So it's really huge, that stage of life. And I feel like I'm just entering it, starting to, and it just really is a sign of
12:31
like our Western culture or how we do things as family units in Australia. Like we still wanna be islands like in responsible for our own thing. Yeah, and we talk a lot about this, like in our earlier podcasts about people and our children being independent for themselves, you know? So it's still that push and pull between
12:52
independence versus care and making sure somebody's looked after. Yeah. And the different stages of life cause like we've advocated and pushed a lot for people like our children and our young adults to have that independence. Yeah. And then it's interesting when it comes back around it's stages of life and then you reflect back on all the time. And yeah, but I something that you mentioned, Mel, you know, I would also love to hear from people from different cultures because
13:23
it's such an interesting one. We, you know, in our Western society want to build enough wealth to look after ourselves, you know, for our lives. But in other societies or cultures it's not like that and it's more a community and you know together and how we go about that. So we're certainly love to hear from people that do it differently. And we can have some guests, you know, in our future, podcasts that can share a broader view than just our Western view
13:57
because it's always, you know, things to learn. Yeah. Well, thanks for sharing. Today, we wanna talk about what earning a certain dollar figure means to people, particularly if it's a lot of money. How does that make us all feel? Yeah, Well, being in finance, you know, for ever, I think you become, you know, to start with, you become really complacent about numbers because we do,
14:28
you know, mortgage broking and we work with people on money. It becomes like the numbers on a page for me. I've disconnected that
14:38
with reality. And when we work with people, it's really channelling. I feel like when we're looking at numbers, we are looking at it in real terms, not in emotional terms. Yeah, maybe that's a better analogy. Yeah, it's not. We're not linking it and going, Gee, that's good, that's great. Somebody's earning $250,000. Wow, you must be doing so great. Oh my God.
15:02
Better with all of this money. So when we're doing numbers, we don't look at our sheets and our numbers like that. Yeah. And then start party planning or putting an overlay of how we think or feel about that number. Yeah. And that's what we want to talk about today. But when we do do it, I think that's what I was trying to say is that we're looking at it from
15:26
the individual or the couples perspective. You know, like it's not an overlay of our views or our stories or our over the top of it which you know from you know can be possible. And I think it's just you know from the work we do. But you know leading into the topic today, you know sometimes we have a broader view as society that if I'm earning $250,000 that I must be doing really well financially. That's right. And I think it's individually individuals. We all think really currently what earning that much money means,
16:01
yeah, And we have these overlays and I think the way that we've been able to maybe detach ourselves from it is because we have worked with so many people over so many years, it does just become numbers. And what we realise is that people are running their own lives, they've got themselves in a financial situation because of all the things that have led to that point. Everybody's going in a slightly different direction and what we're trying to do is just help them, you know, with the vision that they've got for their life and move forward
16:31
those next steps. So it's a little bit more clinical, but it's interesting because when we participate in conversations outside of this, the work that we do and then you hear how people talk like we there was a conversation that's you know, we've ever heard recently and it's like, oh, imagine earning $250,000 and somebody just bangs it.
16:54
What would you do with $250,000? How could you even spend it? How could you, Yeah. What would you do with it? And I'm like come on, that's yeah, I reckon I could do that. You do say, yeah. And then so that was that perspective and I would say that that person is
17:10
probably coming from a scarcity mindset. Yeah, that's right. And like maybe, you know, if you're on a people who are on a lower income, maybe, or people who are
17:22
operating off a less, can't imagine earning that much or having a high, high number. What we perceive to be a high number is unrealistic. Like it's not even in the mindset or the mind frame of ever having or operating with that much money. Yeah, that's it. And that's
17:39
you know the point being is there's no right or wrong that it's and maybe if I can bring it back to even how banks, you know assess your expenses for example, because basically the fundamental belief and this is the algorithms that the bank use when they're looking at loans, the more you earn, the more you spend and you live different lifestyles. That's right. You've got to you know you're expenses I'm sure
18:10
higher or who we perceive to be earning high incomes are feeling as much pressure as people on their low incomes. So what we do is we tend to commit our lives to the amount of money that we've got come in And so people who are on higher incomes, whatever that may mean for you, whatever income is, we commit ourselves. So we might have loans or a lifestyle that and our social life is actually very entwined and the choices that we've made over the journey have led us
18:41
to exactly where we are and when we get pay rises we allocate that money we it all just gets gobbled up. And so the financial pressure that people in higher income brackets are feeling is real. So they're on could be paying higher taxes depending what their structure is and the cost of living has gone up for everybody and if they've got loans they're interest rates and repayments have gone up as well And the pressure it could be a House of Cards is what I'm saying that could fall and crumble and that pressure that
19:11
those people are feeling Hmm could be extreme exactly. And it's not to take away from low income owners because the cost of living hits really quickly, really fast. And that is also, you know, you know,
19:26
challenging and stressful and you know you're just trying to maintain food on the table and keep a roof over your head. But you know, I suppose what we're saying, it doesn't matter whether you're a low income earner or a high income earner from your perspective, your financial well being might be, you know, quite low and stressful because it's all relative to your own situations. Relative. And they're just numbers. Yeah. So when they're just numbers and essentially we're all the same people with very similar needs and wants.
19:59
But for those high income earners, for them a lot more could be at stake in their in their perception. Like, I've built this life. What? What does it mean if I can't afford the cars or the house or the lifestyle? We can't go out on the holidays anymore. What does that mean for our friendships? Well, yeah, the people that we mix with and also from the perception of what are they gonna think of me, right? That's right. I'm the person who has the.
20:28
What if we taking turns buying dinner for a group of friends or go out you know you know higher and then it comes your turn your shout. You know how can you know there's, I think there's can be quite a lot of saving face in those And because those expectations from the outside in and their perception that you're doing really well. Yeah, I think the bravest thing you can do and it doesn't matter what income you're on is to be honest and say, hey, times are tough, I can't do it or we need to make changes
20:59
because, um,
21:01
chances are that there's other people around you who are feeling in a very similar way and actually empowers them. And you actually have look relating it back to mental health. You know, financial distress right now is the number one cause and correlation to mental health challenges right now. So And the studies are showing that. So if you could be really courageous and share your own situation with someone, it'll probably help them open up and then you, you know you feel more
21:32
supported and then you won't feel as much pressure to keep up with your friends either. And the less judgement we can show each other. Like if you're in a low income, low income and you've got high income earning friends to show compassion for them regardless. Like, yeah, because what you are, if we coming to them with our own judgments, that's just our beliefs. That's coming from our own money stories, our own money. And they've got their own belief, their own money personally, their own stories, their own stresses. And so
22:03
money is nothing, guys. Money is irrelevant in these. We just need to treat each other as humans, yeah, and have care. We've all coming from different places and we love to talk about gender differences. If you haven't
22:20
and we know that it's mainly men who are earning the big bucks. You know if the big bucks are most likely going to the men and that's coming from those traditional beliefs of men needing to or believing that they need to be the main income earner for a family or the wife or the mother. I'm talking in a very traditional sense. We love all types of non binary or whatever relationship you wanna be having.
22:45
I'm just talking on a very traditional sense of men holding the stress of earning the money. So if things are crumbling, that responsibility can go to them and they're big risk and we know this and their mental health can be at risk. You know certainly coach people where I see that and where they're just exhausted you know
23:08
you know a little bit later on in life just exhausted about doing that but they feel so tired and obliged to be you know be that provider and you know keep up the picture or whatever it is for the friends and the family and sometimes I think men do her hold that possibly more than women. I think they absolutely do and I think maybe it doesn't matter who the main income earner is of the family. So you're dynamics, it doesn't really matter what gender you are, but that's
23:38
that's the role that we're placed on men in our society a lot and we're trying to grow out of it. I can see us trying to break free out of this. You've got a lot of work to do though and that requires that compassion definitely. And you know what's the answer Mel, it's it's sharing, being open definitely with your partner and having those conversations and then with your friends and your family. Well, first of all, being honest about relationship, you're being honest about your position, right? And
24:09
being able to start breaking free and having some just testing the water and having some of those conversations. And trust me, there's less judgement out there. We hold more judgement internally ourselves then. And you will actually find that there is so much support from the people who love you. There will be so much understanding, recognition, and people will actually want to help and support you. And the scariest thing is not talking about it when we're holding it all in, ourselves. And if you're viewing somebody, you know now and they've got the fancy car and they've got the fancy
24:40
house and they're going on, you know, holidays with people, what you might perceive on the outside of where they are financially may not be what's going on really for them. So I don't know, maybe think about it from a different perspective. That's,
24:57
yeah. And even if things are flying and there are no financial stresses, it doesn't mean our friends don't have mental health issues as well, because they're disconnected and people aren't relating to them. Yeah. Definitely. So yeah, I think and this is a
25:14
so dear and where we think of I'm gonna say I'm putting back to men and then it's not just specifically men, but men and suicide and things like that. There is a whole bunch of pressure and that can happen to people when they feel like not living up to those expectations. So you know, really the more we can have these open conversations and breakdown, these barriers around money and finance and the way we're living our life and and comparing to others,
25:45
it's just so, so important. And that's the message. And you know, one of our really strong, you know, philosophies I guess Melani and the Money Collective, because we need to be talking and we need to be communicating differently and supporting each other in a different way and money's money numbers and numbers. But life is life and feelings are feelings. Like, they're two different things. And like, if you are really feeling the pressure, sometimes that means you have to make some really hard decisions and choices.
26:14
And we kind of have. And again, it's scarier thinking about those changes that we need to make. But sometimes we need to make significant changes in our life. And that's OK. It is OK to downsize. It's OK to say I can't afford the house and the car and I have to let them go. And potentially the children's premium education, I don't know. It depends on what your values are. But sometimes these things all need to be put on the table and thought about. And I tell you what the hardest part will be before you
26:45
like any of those decisions. And once you start rolling out some of these things, the relief and you go, why didn't I do this earlier? You can start making different choices from yourself and you'll start having self belief again. And you'll, the people around you will still be there, The ones that matter. They will not go anywhere. They're not going anywhere. That's right. They love you for more than that. Yeah. And sometimes it takes hard choice, hard conversations. And that's OK because my experience of life is that we don't get any
27:16
personal growth happens through change in heart ohe hardship. We can't avoid hardship in our life. It's gonna come at us from whatever way that we're meant to experience it, definitely. And we have to go through it. And the longer we avoid it, the longer life is going to keep throwing the lessons at you. But definitely. And we, you know, we, we might coast or we just might try and find other ways to,
27:45
you know, not show what's really going on. But absolutely, we learn more about ourselves and I think grow into, you know, better human beings, the more honest and vulnerable we can be. And, you know, you know, and it's actually, yeah. Helps us grow and be happier within ourselves. So, yeah. And it takes a lot of courage and it is hard, but by doing it, you know, it's the start of something new. Yeah. So
28:16
I just want to say that we to be aware of the judgement that you're putting on others
28:22
and because it's coming from your own belief. So if you think that somebody who earns $300,000, like if you know someone who's earned a lot of money and they've done something bad, doesn't make all people who earn a lot of money bad, doesn't make them all lying, dirty cheats.
28:39
It's certainly… so. And I think we do that, and we hear that and we go, oh, you know, this is what those people do. I don't. And that prevents people from actually wanting to earn more money cause they don't want to be that person. They're like, I don't want to chase the money, definitely. And there's nothing wrong with chasing the money and earning more money. But it’s the overlay we put on everything and the judgement not good or bad. It's not and it's you know and it is a lot of unconscious bias
29:11
about how we judge society. The haves and the have nots and everybody's got challenges and not one is better than the other And everybody needs the right, you know, support and being open and commutative and breaking down these barriers so money doesn't cause the stigma of where you are in life. That's right. It's about you as a person and kindness and having a loving home. Compassion. Maybe. Not a big home or I don't care what side of your house. Yeah. How much love you,
29:41
How do you drive or yeah, you know who you are as a person. And I think to like money. We see things, you know, when we push hard to those upper limits to keep hold of those things. And that's where maybe love can be lost in homes. Yeah, because it's that. And that's where we have to reconnect and go, hey, the love is more important than the chasing and it's not serving me anymore. And I need to make change. Money has too much influence in our worlds. Let's let's not, you know, base it on money. Yeah,
30:11
it's really, really hard if it's really hard because we're here to earn money and I go out everyday and I think that's where purpose is really important too in your life. So I'm thinking if I don't, you know, make $1,000,000 this year, which is unlikely anyway, might be making am I happy to go to work anyway? That's right. But if I do make 1,000,000 bucks, then I'll give it a red hot crack. Yeah. And I think though, you know, and I often say the people that I work with, you know, I just love them. You know, it's the people in the
30:42
you mean the relationship. Are you happy to go where you're going everyday? Yeah. Yeah. Cause life is short like what you said with your mum. That's right. It's gonna get to the end and we are happy with where what we're doing. Yeah. So just to summarise in that the key message we want to leave you with, it doesn't matter what you earn or don't earn. That's not a basis of whether you're doing well or not doing well. And you know, be compassionate and maybe ask those around you how are they going,
31:13
um, and open that conversation and if you wanna and be aware of the judgement that you do have. Yeah, it's unconscious. Yeah. So it's OK. But if you start thinking these things and thoughts about people, just step back and go, well, hang on, that's come from myself. That's got nothing to do with the person. And treat everything at face value. Yeah, definitely.
31:34
So we have a bit of a question. This is very relevant being mortgage brokers and as we mentioned, Oh I did up front at the beginning about the property market being a bit slow and mortgage broking being slow
31:52
because people aren't selling and buying, right. So there's not many properties on the market. So what is happening and I think the well the, the actual question is should I sell or should I buy. So if you're looking at moving your house
32:06
and in this property market right now when there's not much to buy and not many people wanting to buy your house, what should you do? Should you buy the next one first and then sell yours as quick as you can or sell 1st and then buy? And that can be tricky in itself. So I think this is where the market is right now and this is what's holding people back because if I buy
32:36
1st and you, some people can do that and you can take out what's called bridging finance. We're talking about buying and selling houses to be sure, to be sure. Just to be very clear, we’re selling a house or buying a house. That's right. So it's one of the most common questions we get. You know, I wanna move, can I buy before I sell so I don't have to maybe rent before I find that place or put pressure on me to buy or you know, what are my options and what are the risks involved with that. So one option is to
33:07
buy something 1st and then sell later. And then if you do that you you might be, you know, you might be able to take out what's called a bridging loan. And that means that you borrow enough to buy the next house and then you've got normally 12 months to sell the house that you lived in previously,
33:30
you know and then you know hopefully end up with a loan or no loan that you can manage. So in this market where interest rates are high and property is starting to not sell as quickly and for those high prices that they used to, maybe, there's a risk. So the risk is that you buy something and then you can't sell your house for what you need to sell it for. So, you know,
34:01
that's right. What do you do, Mel? How do you decide that? You know, like, yeah, am I willing to take that risk? And this is, you know, working with clients right now. We've got quite a few number of clients on that are trying to weigh up this scenario. Yeah. Well, definitely buying first is the riskier way to go, right? Because you don't know how much you're going to sell for and how long it's gonna take and what the property market's going to do. So
34:27
about what you've done is secured a house and the right house for you. So there's pros and cons. So allows you to go and buy the house that you want, that you you're not gonna compromise for. Hmm. But there's cost involved in that doing that. So if you buy a house first, then you've got you're holding two houses for a period of time and that could be firstly not an option for a lot of people at the moment. It's just plainly not an option because you can't afford that situation
34:58
to happen because the interest accrues during that period of time and also you might not have enough equity or in your in the two properties. So the banks need to see a lot and equity is how much of the property you own versus what the bank owns because the bank needs to feel very safe and secure that you're going to be able to get out yourself out of the bridging situation. So you need to give the bank a lot of comfort. So first of all, you that might not be an option for that reason or the affordability reason.
35:29
Yeah, yeah. So if you, you know, so my my tip would be to work out. So say the bank says, yes, you can do it. So you've gone to there. But just because the bank says yes, you know, is it within your comfort level? So what I work through with people is actually to play out the worst scenario. So what's the lowest amount that you think your house could sell for and could that scenario work or not? like we're talking bad. Like,
35:59
yeah, a bad situation. Because what you've done in this situation is you've bought the next house and you have to sell. You have to sell. You can't. It's not a possibility to not sell at. What is the lowest number that your house would sell for, right? And I'd be taking 20-30% off the top and you know like you know that but what's what's an extreme number you know and that what's the bottom number you can afford to sell for And
36:24
are you happy to take that risk? to do that? is that you're like that's fine. That won't happen. Or if that happens, am I OK with it? Yeah. Everybody has a different risk tolerance definitely. And you know what I've seen and what does affordability mean to you at the end of the day that happens. Can we hold on or if I just messed up right and now we might come to is how much backup money I have. You know what would be how long can I hang on for before I can sell. But the banks would be expecting you to sell that within 12 months and you need to look at the lowest amount you would
36:55
sell it for, and whether or not how realistic that looks like for you. But that is definitely what you need to do before you would enter into you know going and buying first before you sell
37:10
in that scenario. And the reasons in the times where I hear like where people are more likely to do this is when they're very set about the type of house where they don't want to compromise on the House where that's that's one at their highest values or what they're going for the and outcome. Because the other way is that you sell 1st and then you buy something. That's right. It's safer,
37:37
feel better, I know. So there's a couple of things though on that. So you could sell 1st and you could ask for a very long settlement. So normal settlement timeframes can range between 30, 60, 90 days depending on which state you're in or what you negotiate. But you could try and negotiate with the person that's buying your house for along the settlement, so maybe six months or something like that. And then that gives you a longer period of time to find
38:08
something you like. The risk is that you don't find something you like and then you have to settle. So you really need to weight that up. So where are you going to live as well? What are you going to do with all of your belongings? Exactly, yeah. And what happens if the market takes off? You've sold your house and then you price yourself out of the market. So buying quickly if you sold is really important.
38:35
I always say buying and selling in the same market, which means your money is worth the same amount of money. So if you buy and sell it at the same time, your money gets you something equivalent. Whereas if you wait and you're sold and then house prices go up, then your money is buying a lesser. Like you can only come in with the amount of money you've got, which might buy a worse house. Yeah, yeah, not what you were looking for. That's not the right outcome. Yeah. But mind you, property prices at the moment aren't really doing that. So we're in a very stagnant market way to go, with a less of a risk,
39:08
but you do know, I would say have your backup plan. If you don't buy, you know, can you go and stay with family, you know, and what sort of period of time can you do that for because rental market is, you know, there's not a lot of rentals available at the moment. And for, you know, who wants somebody in a rental for six months, Nobody. See this is the hard thing when you hear and you talk about it like this, it's no wonder that nothing's moving because to me, I hear this and I go, I'll just wait until there's more houses on the market, right. So then I've got more choices. I can kind of come in and go,
39:39
got more choice and I'm a little bit more in control when that happens. Property prices start going up. What we're trying to do, the reason why we're here in this is they're trying to hold property prices and the economy is doing that to us and it's forcing us into this stagnant place. A holding pattern, which is really hard if you do need to make choices. But you just need to know the pros and cons if you do need to, And thank you to those people who are keeping the market ticking over who are making these choices.
40:07
Well, you know what we want this podcast to be is really educational and education and empowerment are highly linked so that the two things that we really care about and it all leads to financial well being. So become knowledgeable, learn about how these loans work, how bridging loans work and a podcast for another day. But you know, understand and learn and work these through what can happen and all the scenarios can help. Finance works well because what I'm hearing there is that if you don't know, you
40:38
could have the information. Then we don't make choices. So you and your partner or you and yourself or whoever you've got that you make decisions with, could be like, I don't know how that works. It doesn't sound good. That's hard. I'm just going to stay here and not move on or not make choices and life stays the same, whereas what you can do is go right. Well, hang on. I've got goals. I want to reach them. I need to empower myself. I need the information. Yeah. So with that, talk about something that's very niche, buying and selling. It might not have anything to do with you, but that could be a message
41:08
that you take out. Yeah. And also if you do know somebody who's doing this, then it might help you have a better conversation with them, yes. Or refer them to the podcast and they can have a listen to reach out, but become knowledgeable about what's possible. The third one, just to close that one out, can be that you can buy a property and you can put conditions in there and you could put subject to the sale of your house as a condition. That is very common at the moment. That's the third thing that
41:39
we are seeing. And that's very common in this market. Yeah. Yeah. You know, subject to the sale of your house. And if your house doesn't sell for the amount you needed to sell it for, then you walk away from the contract and you don't buy the house. Hmm. Yeah. As a vendor, though, you may not, you know, if you're selling a house and might not be a great pretending on what you need to do, it may not be great outcome. I have had two people recently do this where the vendors haven't had a problem with it at all because the market is so slow. There's no other shore buyers and they know that the house is on the market. Yeah. And it comes down to the real estate agent
42:15
through being an advocate for you to does. So those relationships that you're having with the real estate agent, real estate team that you've got, is it really important if you're engaging in that strategy? No, definitely. So if you could negotiate, yeah, you know, subject to the sale of yours and and the purchase with a long settlement that we talked about is the best way to go then. Yeah. And then you can then concentrate and see if you can sell and you know, don't get too in this scenario, you've bought the house in your dreams, right. You bought the house first,
42:46
plus you selling your house. That's gonna settle. And when you sell, the settlements need to match up so that they happen on the same day. Hmm. Yeah. Very important. I have seen it. Where the
43:01
the time in between we timing with the sale after the fact and that's a problem if you can't get the money cause you can't see you can't settle on the purchase. Yeah. And that that can you know have legal ramifications. So make sure you've got all the right professionals around you because that shouldn't happen if everybody knows what's going on. So communication is key and making sure you sign those contracts with the right date. Yep. And you're making sure that you've had, you know, conveyances and you know all solicitors look over those contracts before you sign anything
43:31
and definitely talk to your mortgage broker. Yeah. And that is all the glory and today that we have for you today. And thank you for joining us. Thank you and we'll catch you next time.
43:47
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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