Moira Geddes from News Corp chats with independent financial planner Claire Mackay about getting the right financial advice.
Transcript of interview
Moira Geddes: The end of the financial year is the perfect time to re-assess how you manage your money. From the simple stuff like household budgets and paying off your credit cards to more complex investment strategies, the reality is most people won’t achieve their goals. But there is a way around that and it all has to do with getting the right advice. Financial planner of the year Claire Mackay, knows too well the traps people can get into and she joins me now in the studio. Claire, a warm welcome to you. What should be on the top of everybody’s financial year goals this year?
Independent financial planner Claire Mackay: Well, I would say, “Get organised.” Start with getting your paper work sorted and writing down some key goals for the year. Because if you don’t write it down, you’re never gonna put a plan around them, and you’re never gonna achieve them.
Moira Geddes: Do you think the people really stick with their goals, if they wanna say, “I wanna become a millionaire this year”, or “I want to save $10,000”. You’ve gotta look at the numbers, the numbers don’t lie.
Independent financial planner Claire Mackay: Well, I’m all for stretched goals but some realism also helps, because the other thing is that we want to know that we can achieve them. There’s no point putting up a goal that you never gonna get close to, because it’s just demoralising. So, set goals that… Stretching yourself but you know that you can monitor it and you can see that you’re getting closer and closer to it. That’s the exciting thing.
Moira Geddes: Even little things like saving $20 a week here, or maybe not taking your lunch or buying your lunch when you’re at work. Or paying off that credit card within a month earlier than you had planned to.
Independent financial planner Claire Mackay: Exactly. I cut out a coffee a day. Now I have a lot of coffees so one coffee is a huge, huge impact. And it sounds like little but it all adds up. And it’s about weaning yourself and developing goals, and when you say, “Oh, that’s an easy one”, then moving onto the next one.
Moira Geddes: So, if you’re at that stage where you can start saving say $100 a week, $5,000 a year, for some people it’s not a lot of money, for other people it’s a huge amount of money, where’s the best place to invest them, that money right now?
Independent financial planner Claire Mackay: Well, it depends on what you’re saving it for. So, if you know that you’re saving it for a fabulous holiday then put it into a high yield cash account and start thinking about how you gonna budget for that holiday. If it’s a longer term, so the beginning of a deposit for a home, then again putting so it’s safe and secure. If it’s a much longer term plan, and so therefore you’ve got time on your side, then you potentially can look at taking some risk. But again it depends on your overall situation. For some people paying down the debt quickly, like your mortgage, is absolutely a great way of using that money.
Moira Geddes: Property is a huge contender right now when it comes to long-term investment, should everybody be jumping into the property market given low interest rates, negative gearing the pluses their plus, I guess that market that is really surging in and giving great return.
Independent financial planner Claire Mackay: Well, there are property markets and they go up and they go down and the key thing is right in your circumstance. So, the problem is at the moment that with low interest rates people are over-extending themselves. So, if you are gonna go into the property market, don’t budget on having low interest rates forever, look at what are the interest rates on a long term average, and pretend is if they’re already there now, and can you still afford that property.
Moira Geddes: Post-GFC a lot of people got scared off from the stock market with what’s happening in Greece at the moment, our market’s taken a little bit of a heat, should people put a little bit more trust back into the corporates?
Independent financial planner Claire Mackay: Well, it’s all about understanding what you’re doing with your money and what its purpose is. If you’d need it in a six to 12, 18 months time then you don’t want it at risk at all. If it’s a longer term play then we know that on long-term averages if you’re not looking it at everyday, then your money will grow. But you need to look at it in the context of your overall financial situation.
Moira Geddes: I see a lot of adds on daytime television, when I’m resting up, [chuckle] and all of the side of buses that offer great financial products out there on the market, can these be trusted?
Independent financial planner Claire Mackay: My dad told me a long time ago, “Never trust anything that’s advertised with a pretty girl on the front cover or on the side of buses, daytime TV, late night TV”.
Moira Geddes: That says it all, doesn’t it?
Independent financial planner Claire Mackay: Well, they might be a good product but you might be paying on all for a lot for them might be better alternatives out there. So, do your research before you invest in any financial product.
Moira Geddes: For people that don’t have the time to do that research and that maybe don’t understand the options out there, is it imperative that they do get financial advice?
Independent financial planner Claire Mackay: Well, I believe that everyone needs a financial plan and whether you do that on your own and you do your own research, or whether you partner with an adviser, it’s up to you. But making decisions based on emotions without doing your research, whether you involve a third party to help to do that, is just foolish. So, this is… You work so hard for your money and if you’re paying for advice, we pay for our personal trainers, we pay for our cleaners, we’re all capable of doing our own exercise plan, we’re all capable of cleaning our own house, but if we value the advice and we can see that we can get more value in our financial situation than the fees we pay, then that’s good money.
Moira Geddes: And what’s the biggest mistake that you think people make when it comes to managing their money or money mismanagement?
Independent financial planner Claire Mackay: I think everyone thinks that if they got a little bit more of the pay rise they’d be better off. And the truth is regardless of how much you earn it’s how much you spend or how much you save, that is actually gonna make you wealthy and financially secure. So, if you can put a little bit more into your mortgage and a little bit more into your savings you’re actually gonna be more confident about your financial security going forward.
Moira Geddes: And you’ve always gotta start small.
Independent financial planner Claire Mackay: Absolutely. It’s never too late, it’s never too small and it all adds up. Compounding interest is the eighth wonder of the world.
Moira Geddes: Claire Mackay. Thanks so much. Appreciate it.
Independent financial planner Claire Mackay: It’s a pleasure.