She's On The Money - FRIDAY DRINKS: What's going on with inflation?

Episode Date: February 3, 2022

HIYA FRIENDS! Happy Friday! This weeks been a wild one, we had an epic money diary, a very topical discussion on Wednesday about relationship equity AND Victoria is about to dish the dirt on what's going on with inflation - what does this mean for your savings? Investments? MORTGAGES?In other (very exciting according to Victoria...?) news, we have a very new, very shiny and VERY legit disclaimer for you - and we are counting down the days till G King is able to memorise these digits and read them without looking at the script. The advice shared on She’s on The Money is general in nature and does not consider your individual circumstances. She’s on The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. Victoria Devine is an Authorised Representative of Infocus Securities Australia Proprietary Limited ABN 47 097 797 049 AFSL - AFSL 236523.See omnystudio.com/listener for privacy information.

She's on the money. She's on the money. Hello and welcome to She's on the money, the podcast for millennials who want financial freedom. Today is Friday. which means it is time to sit back with the girls with a bevo in hand and unpack our favorite moments of the week. And of course, to celebrate the amazing She's On The Money community. As always, we're going to be sharing our favorite money wins. We're going to be talking about what's

making news in the finance world. And we're going to be helping answer a juicy money question, which this week is all about inflation. But first, it is time to recap the week that was Jessica Ricci. Talk us through Monday's Money Diary episode. Monday's Money Diarist was an absolute delight, but it was definitely a heavy episode, a little content warning for everyone. We discussed mental illness, specifically eating disorders, and she was very, very open and honest. And V, so were you as well about your past experiences and how that has continued to impact in the way that mental illness so often does um so it was really insightful and inspiring and we were so grateful that she was prepared to

share so much of herself with us particularly because she said that a lot of her friends and family didn't know that she had gone through this process and these struggles so for her to be so open and comfortable was incredibly on a podcast yeah to so many people which was really really inspiring and she's just kicking dreams she started her own business she studied she's done at all. It was a really, really fantastic episode. And if you're in a place where you can hear that kind of content, I would highly recommend a listen. Honestly, it was incredible. And Jess, the other thing, obviously all of our money diarists are engaging and we're so excited to talk to them, but I feel like this diarist was on another level. She came with practically an

essay. She's like, I've written out my money story. I'm ready. I don't even need you guys to ask me the questions. I've got them all written down and I have responded to them. And I was like, oh no, like thinking that maybe she'd sound super scripted, but oh my God, this woman was a powerhouse. And to know that she had gone through so much and that it was such a significant part of her life. To Jess, being a business owner and having saved up enough money to buy a house, she had a hundred grand in savings. She was only 28 and she felt like she was behind. I was like, girl, you're going to sling all the way forward. You are on top of this. she was honestly such an inspirational money diarist like I say this every week though don't

I I'm always like oh that was my favorite and then a new one comes I'm like no that's my favorite I suck they're all so special and so great but yeah I definitely felt like we could totally be best friends I'm pretty sure we are so there's that moving on though Georgia King what did we discuss on our Wednesday Deep Dive. Hello, ladies. This week, it was a super juicy topic, actually. And it's one that we spoke about a few weeks ago on the podcast very briefly. And that is financial equity in relationships versus financial equality. Yeah. If you're unfamiliar with what that actually means, basically, equity is what is fair, whereas equality is what's even. So, that's kind of like a neat little way of thinking about it. Essentially, it means that the higher income earner in the

relationship will perhaps contribute more to the bills, to the rent, to the mortgage, whatever it may be, as compared to what the lower income earner contributes. So, it was super interesting and gosh, I popped a thread in the Facebook group and it's like, it's quite a controversial topic. Oh, it's so spicy. Yeah. This came off the back of me posting on Instagram and I feel like over the last few weeks i've been posting some what would you say opinionated instagram stories yes and i made a reel on uh financial inequality and maybe considering splitting bills differently and oof to the amount of men in my dms guys telling me oh women just want a free ride or she won't work as hard anymore or oh my gosh you wouldn't want this if it was flipped to the other way like

what i really resent that because those comments just inherently assume that the higher income earner is always men and if you listen to when we tell you this yeah i mean i know statistically that's the case but if you listen to the episode where we discussed it friday drinks i think we called it getting the band back together but i shared that in my relationship currently i'm the higher income earner and so you bougie lady absolutely but i think that that mentality as well of like, even if it is your partner that's earning less, even if the male is the lower income earner, what we're discussing is still absolutely applicable. We're not saying just because you're a woman, you should pay less. We're saying that consider the option of ensuring that everyone's

in the best position that they can be. 100%. And I think it's so aligned to the she's on the money values as well for us to be talking about this stuff. If we're telling you guys to be open about your income and talk about this more and then Jess and I are on the podcast being like oh yeah but like let's not talk about our personal situations like Jess I saw your TikTok the other day which you've been going ham on like I'm trying to become TikTok famous I know you are because your content is absolutely pumping out and oh my gosh the amount of times I snorty laugh at your content If you guys don't follow Jess yet, obviously Jessica Ricci on TikTok, but you sitting there with your smug little face being like, ha ha ha, my mum said that I wouldn't earn a good job being

creative, but now I earn six figures making content. I'm like, get it girl. 100%. Celebrate the wins, you know, Jess.Ricci on TikTok. If you want to give me a follow, wouldn't be mad about it, but you're like, I'm going viral through She's On Money. 1000%. What am I here for if I can't write off your coattails. But that's literally it. We just want to be talking about this. And I think something else to preface, and we talk about this on the episode, this might not be right for you. And that's totally okay. It is just a suggestion. It is just a thought. It's not, Georgia, you have to do this because equity in your relationship might be completely different. You might not want that. But I really wanted to break down this stereotype is maybe the word I

want to use that women have to be 50 50 to be independent and i just don't believe that to be true like you aren't a not independent woman because you and your partner have decided to split your bills in a different way and you're only paying 30 of the bills and your partner pays 70 because he owns significantly more than you like you are still strong and independent and an epic human regardless of how that splits a strong independent woman stands up for herself and wants equity, not equality. So I think that it is just so important to know the difference because I've been having this conversation for the last few weeks in my DMs, people being like, oh, I just thought that if I asked that I wouldn't be empowered or I'd be going against feminism or

I'd be, you know, maybe not putting my best foot forward, but that's not it, is it? And I'm like, no, it's not. We need to be asking for equity in relationships because sometimes your partner is going to earn five times more than you. And that's totally okay. But that doesn't mean that you can afford the same lifestyle that they can. And if you turn around and go, you know what, I want to pay 50% of everything. Well, that means the other person has to make a bit of a lifestyle compromise. And even though they could pay significantly more rent, they don't because they're living within the means of your income. And that's fine too. But yeah, there was a lot of spicy content. If you want to go to my Instagram, read the comments. It is a wild ride.

am i right in thinking as well you guys did a little role play action in this episode right to kind of give people some examples of how they could maybe have these conversations if they're not sure how to bring it up it was interesting that's a whole new kind of spicy it was different it was it was unusual i felt like that was something that was really necessary for this conversation because too often i feel like i say bring it up with your partner and you're like yeah, but how? Yeah. Or yeah, but my partner says that that's not fair and that he works the same amount of hours as me. You go, okay. But sometimes you just need to hear a little role play. And as someone who has a couple of degrees in psychology, I'm not shy of a role play. I spent most of my

university degree role playing in class. So I was ready. I don't think George was though. Hey, I was in the year 12 drama play. Oh, you're right. We are visions. It was fun. You both deserve an Oscar as far as I'm concerned. Thank you, doll. Thank you.

Thank you. But speaking of deserving Oscars, Georgia. Hello. The She's On The Money community. Let's do it. What are your money wins of the week? Some rippers as usual. Gosh, that thread always pops off, doesn't it?

It's my favorite. It's a joy. Okay. Our first win today comes from Ashley. money win i have a full-time job and have been thinking about getting a second casual job just for a couple of nights a week a local restaurant posted on their instagram that they were hiring for delivery drivers and front of house staff so i dm'd them and started the next day oh cool all of that extra money will be going straight into my savings account and i opened a spaceship

account great time to do it uh and put a bit of extra money in there too actually no george it is a really good time to do it. It might not be a good time to have previously invested in it because the market's a bit off at the moment. Correct. Correct. But seize the opportunity when the market is low. Aren't you, Ash? Okay. Next win is from Ange. She just did her first no spend month. And even with an unplanned motorbike service, she saved $950 from the month before. Impressive. Oh, I had to really consider that. I'm like, what's a motorbike service is that facial like i had no idea she got her motorbike service victoria i still have covid brain you've got to forgive me honestly and speaking of uh no spend

months jess i believe you're going to tell us what's going on with frugal feb in a little bit absolutely we have something very fun coming up i think we're going to chat about that after the break so we are we are so i'm just like dropping it so that they stay here jess thanks george back to you. So, the next win, gals, is from Emily. So, she's starting her last semester of uni and remembered that she needed to buy two textbooks for a subject. As we all know, textbooks are so expensive. And they're always outdated in like five minutes. Exactly. And they tell you which volume you have to get because like one page might be significantly different. You're like, is the theory not the same? And like who does their uni readings really? I don't know. Don't

we all just like skim it or like look over to our partner that sits next to us and go did you do the readings and they say yes and you're like oh thank you who would do that so both of the text both of the textbooks were between 115 and 145 brand new but she managed to score both of them second hand for 155 uh which is just over the price of one so you know still expensive but still expensive but that's so much money for a textbook for a pile of paper that you use for 12 weeks really i mean honestly use them beyond but hypothetically if i went to university i would find ways to hypothetically download them for free and keep them on an ipad but that's you know hypothetically if i went to university yeah not speaking from experience no i've got none

The next win is from Aisling. So, she picked up $800 worth of clothes at the op shop for $65. Oh, my God. Money win. How good's an op shop money win though? You just feel unnecessarily entitled about it too. You like want to tell people. For sure. And the She's in the Money community is the place to do that, I would say. I feel like you do this, Jess, as well. Like when you've had like a good little Depop win, I'll be like, oh, Jess, that dress looks so good on you. You're like, oh, my God, have got on Depop for 20 bucks. I'm like, okay. You have to share the price. You have to be like, it was so cheap. No, I'm all about it. The next win is from Gemma. So, money win in progress.

I booked myself a little European contiki on a boxing day sale and decided that I was going to do all of the optional activities. She worked out that she would need roughly $800 to do all of those activities. And as of today, she's sitting at 80% of that goal. With my tour not starting until May, I'm excited to see how far I can blow this goal out of the water. Oh, so will we. Please check back in. But is Contiki a EuroTrips a thing again? When did this happen? Why haven't I heard about Contiki tour? Oh my God, she's on the money in Europe. She's on the money on tour. I'm just throwing it out there. We could record the podcast Seaside

from Italy, right? It actually makes sense because less than 1% of our audience are actually international listeners. So I just feel like it would be a no-brainer to visit them. It's time to go global. Okay. The next win is from Ellie. She uploaded a ton of stuff onto Gumtree during lockdown and genuinely forgot that she had done that as it's been a while since she's been on there. And then yesterday she got $220 in one day from a bunch of people buying stuff. oh just like randomly like she just forgot that people were messaging her being like is this still available reply to me how does this still work like is it just similar to facebook marketplace yeah it's like an internal message but like it sends it to either your phone or your email yeah

surely so like maybe you had one person who just wanted to take the lot that's the dream right yeah that's a good money win low effort we like the low effort money wins uh okay i've got two more wins, gals. Second last one is from Lisa. She hasn't used Afterpay or PayPal for a fortnight. You legend. Yeah, we love it. The final one here, ladies, is from Imogen. She is classing it as a money win, even though it sucked. She got COVID, didn't we all? Literally. Same. So, she missed her friend's hen's weekend, which- Should have done it on Zoom. Honestly, we're recording on Zoom. shizra apparently they're very expensive hens are super expensive yeah yeah so she missed going to the wineries and she thought that was a good thing because you know she would have drunk purchased a

few too many wines as i did last night um which is why my voice sounds weird today so apologies everyone you're not sorry not at all should we head to a break let's go to a break before we out georgia and her drinking habits all right we are straight back in and jess i alluded to it before and by alluded i mean i flat out said we're gonna talk about frugal feb but you said after the break and i was like okay so it's now after the break jess what are we doing this year for frugal feb as a community ah so we did this last year and it absolutely popped off i think post chrissy post-New Year, we're all feeling it in the hip pocket a little bit. So frugal Feb as a concept, it's essentially just kind of paring back your spending. We've all maybe got a little loose

with the cashola and it's time to kind of reset, get back on top of your budget. So you would have seen if you're in our Facebook group, if you're not, search She's On The Money. We did it on Instagram as well. But on the 1st of February, we launched the frugal Feb challenge. We had some really fun little templates that people could fill out. And the goal is essentially just spend less money. So if you want to go hard, you can cut out discretionary spending altogether, none at all. Track it. We recommend tracking everything that you would have spent and putting it in a separate account. So, oh, I'm going to buy a coffee this morning. Just kidding. No, I'm not. $4.50 into my savings account. And then at the end of the month, you can see all the money

that you saved, put it towards something, put it in your savings, put it in your emergency fund, invest it. Whatever you want to do, you should have a tidy little sum there. but if you're not wanting to go that hard totally get it I'm probably not maybe pick like one area to focus on maybe you don't want to be spending on takeout or maybe you don't want to be buying any new clothes so we've got a few fun little resources that will drop throughout the month on Facebook and Instagram and we're going to be checking in every Friday to see how you're doing share your tips check the dollar amounts you're at if you want to share it and just kind of get around each other I think it'll be a good time we're also going to be sharing it on the podcast

during February, which is going to be super fun. But my favorite part about it is it's super flexible based on your goals. Like Jess was saying, like it's not, hey, here's one goal that you all have to do. If it's coffee, cool, it's coffee. If it's literally no spending, I think great, but I know I wouldn't be able to stick to it. So, I think being really realistic, knowing yourself and knowing your limits, like let's just set realistic goals that we know we can achieve that we can then celebrate and reset because that way it becomes sustainable practice in our lives instead of going, oh, I'm going to go so hard for one month. Like, it's like a crash diet. One, not going to enjoy it in the slightest. And two, you're going to probably fall off the

bandwagon after two weeks because you're not feeling the results yet. And then you'll feel a little bit let down at the end of the month. So, let's pick things that we know we can achieve and then prove ourselves later. I just feel like it's such a good idea. And Jess, I'm excited that you're going to do it with the community and that you were like, V, this is what we're doing. And I made the cute templates. Like guys, she's made a little bingo chart. I can't, it's so cute. I'm going to cry. I think that'll be coming the week next week because it's going up Friday. So. Yeah, I know I'm spoiling it for everybody, but I get to do whatever I want. It's the fun part of being the boss lady, isn't it? Ah, lol. It is Friday, which means it's time to answer your most burning

finance career and life questions. If you need help untangling a naughty dilemma, no matter how big or small, send us through a voice note to podcast at shesonthemoney.com.au and we'll help you find the answer you've been searching for. Now, let's take a listen to today's listener question. Hi, She's On The Money. My question is, what is all this talk regarding inflation at the moment. I've heard that it's higher than expected, but what does this mean for me as someone wanting to purchase their first home this year? Is this something I should be concerned about? Thanks. Victoria Anne Devine. Is your middle name Anne? No, it's not. Is it Mary? No. Is it Louise? No. Is it Louise? No. That's my sister's middle name. So that's a good guess.

and ann is actually my mom's middle name so also good guess you're gonna ask me what street i grew up on and what my first pet's name was as well is that where we're going with this piece of conversation look i didn't mean to take it to this tangent um jess do you know my middle name it's not like it's a secret it's literally on the financial advisor register like it's sadly not a secret it's katherine yeah exactly i only know this because i am basically victoria literally jess is like did you actually want her first pet's name uh also do you know her pin because sexual security number whatever you need she's got it all yeah she's got it all victoria

catherine uh talk us through the answer to this question because i have no idea what's going on with inflation oh my gosh everybody is being so dramatic about inflation and i'm saying it all over tiktok people like it's out of control what this means for you how this means you're never going to buy property as a millennial, as if it's some joke that millennials somehow can't afford property at the moment. But I think it's a good conversation to have because it seems after COVID, and I don't know if you guys are seeing this either, but we didn't used to have conversations like this as a demographic. We didn't used to, you know, when inflation changed, have deep conversations about what this means for us. But now it seems to be that post pandemic, we're having

these conversations that are like, oh, inflation increase. What does this mean for us and our, you know, our goals and stuff? And I just think it's, it's a very cool shift in mindset and conversations that we're having. And I know historically when like the RBA changed interest rates, everyone was like, yeah, interest rates have gone down. Like that was pretty much it. We didn't really understand the crux of it. We didn't ask those questions. And now people are like, hey, what's this mean? How's this work? I don't know. I just get really excited about it. So, let's talk about inflation, Georgia and Jess. Are you excited? I'm so excited. Tell me, what does it mean?

All right. So, let's backtrack a little bit because I think this is a really good conversation, but I want to make sure everybody else is on the same page. So, inflation to begin with is actually, the definition of it, is an increase in the price of goods and services that are typically purchased by households. So, we're talking bread and milk and cheese and all of those exciting things. And inflation is actually measured as the rate of change of those prices over a period of time. So, if we go back a little bit, you've probably heard me talk about it, that 50 cent cones aren't 50 cents anymore. And whenever I talk to my parents about that, they're like, Victoria, they used to be like 20 cents. I'm like, I don't remember that. But essentially,

inflation is just how much the cost of things on average grows over time. And it goes back to the theory as well, and this interlinks really well, of the concept that a dollar today is worth more than a dollar tomorrow. And the reason for that is if you purchased it today, it's going to cost you less than what it would in the future. So, if we looked at what goods and services cost even in 1990, so the year before I was born, so like ages ago, 31 years ago, in fact, goods and services that cost 10 bucks then actually in today's dollars would cost $208.17. And if we went back to 2010, goods and services that originally cost $10 in 2010 now cost $124.56. So I think it's important to understand that before we go. What does that mean for your home buying journey and

how that's going to impact you? Summary, goods and services are going to increase in price. And that's why, hopefully, each and every single year, your employers give you pay rises in line with CPI or inflation, which they should be. It's a bare minimum from my perspective, although some employers don't do that, which I just think is borderline rouge. But inflation seems to be making news throughout our community, throughout TikTok. Jess, you and I were talking about videos we'd seen on TikTok and Instagram recently about energy inflation and food inflation and fuel has been inflating recently. Like guys, do you put petrol in your cars? Is it more expensive at the moment? Yes. It's cooked from my perspective, but essentially the cost of things is increasing

and rising and it's very likely that it is going to stay there. So when it comes to what's going on in Australia, because I feel like lots of these videos are very American, according to the most commonly used measure of inflation in Australia, because there's a few, the consumer price index, which I referred to before, is CPI. Inflation increased by 0.8% in the July to September quarter, so the third quarter of last year, and it increased 3% over the 12 months all the way up until September 2021. So, interestingly, that has obviously increased relatively significantly. That was actually not what people were predicting. We were expecting it to be much lower than that. So, I think that because it was 3%, people are like, what does that mean for interest rates?

What does that mean for me? And there are actually two main reasons inflation happens. The first is cost push inflation. And this is where the costs of producing the goods and services go up so that price rises are then passed on to customers. Jess, you are currently talking about building a house. So, you would know the conversation around, oh my gosh, house things are so much more expensive, like wood and labor is just so much more expensive at the moment because of the demand and that shortages yeah it's actually really frustrating as somebody who's planning a renovation literally talking to our builders and what we're doing at the moment he's like we need to add 30 to your budget so we haven't just added 30 we've actually had to

rejig the budget and change what we're doing and change quality of a few things so that the increased costs of goods and like wood and stuff that we are having brought in is going to be accounted for. Cause I'm like, well, that was our budget. Like I can't just add 30% to a renovation. Like I just don't have that. Not when it's already a really like expensive thing. Exactly. Just like tack an extra thing. It's like, oh, just an extra 30% babe. This isn't a McDonald's $1 coin. Like this is like, that's a lot of money for us, especially because one, we've been saving for it for so long and I don't want to take out a loan for this renovation. Anyway, side thing. The second main reason for inflation is demand pool inflation. And that is

when something is so popular that the supplier can't actually meet the demand of it. And then prices go up to reflect that. So. Rat test. Yes. A good example is rats recently. And then you remember when face masks were really expensive and hand sanitizer. Like I'm not saying that hand sanitizer is the reason for inflation, but it's really good to understand the basic theories as to why these things happen. So, I won't go through like how it's measured and what that means because it doesn't actually help you. But when it comes to inflation, to make sure that we're okay, there is a way that it is controlled. So, the Reserve Bank of Australia actually has a specific responsibility for low and stable inflation. That's literally their job. They

have to make sure that we have full employment and they need to be promoting the general welfare of the Australian people. So, that's their job, if you guys didn't know, because I think a lot of people just assume the RBA is bank, like they just make bank things happen, but they're there to look after us. And the government has a set target of two to 3% for inflation on average over time. So, it's clearly at the top end of the inflation scale, which is why I think a lot of people are like, what does this mean? But what does this mean for your spending? What does this mean for you? As I said before, it will mean an increase in the cost of goods and services that you purchase. The rising prices of goods and services means that unless your income is rising

as well, you're just going to find it more difficult to afford things that you would normally buy. So, it's not something that you should be super shocked about, but this is why I'm such an advocate of speaking up and talking to your employer. And if you didn't get a pay rise in the last 12 months, talking to them about, you know, what you can do and how that might work. Because at the end of the day, from a personal perspective, this absolutely isn't, you know, the legal mandate. It's not enforceable, all of that. Like your employer doesn't legally have to give you a pay rise. But from my perspective, it would only be fair that your salary would increase in line with CPI each year so that you are still able to afford the same lifestyle that you were

affording the years before. So, we're not saying, oh Jess, you need a $50,000 pay rise because like you need a different lifestyle. Like I want you to be able to purchase bread on your grocery budget because we have made sure that CPI has been taken into consideration with the income you have so that you're not stripping money from another part of your budget because you have to buy groceries. And over time, those groceries are going to be more expensive. Does that make sense? Is it just one of those little sneaky kind of things where I know that we're talking a lot about inflation. It's obviously quite front of mind in the public eye right now, but it's not as if the supermarket's going to turn around on like Tuesday, the 1st of February and say,

hey everybody um everything's gonna cost three percent more right is it just those prices will kind of be put up maybe not everything at once just here and there yeah and you might not necessarily notice it yeah here and there i think that we are feeling it a little bit more in small businesses and things that we're importing from overseas because at the moment importation is so expensive so you might have gone and bought you know and i'm looking at leggings at the moment as you guys know you might have gone and bought leggings for 120 bucks and now they're 125 because the company's just making sure that the cost of their services and you know getting that product into your hands has been taken into account with how much you're paying

for it so costs over time are going up i'm seeing lots of small businesses go hey cool like it's more expensive for me to do the use makes sense it's all very fair in the world of love and war but at the end of the day that's why i'm such a positive advocate of talking about your salary and making sure that you're talking to your employer about consistently having pay rises every year. We're not saying that you need massive bumps, but it should be in line from my perspective with CPI. But to get to the goods, to get to the question that, you know, this question is actually asking, this obviously is about a few things, right? So, loans, the Reserve Bank, this is actually their realm and the Reserve Bank, they set the interest rate, right? So, they set the

interest rate that the banks then adopt and then you can get loans for. And that is the primary tool that they use to control inflation. As inflation goes up, the Reserve Bank tend to be a little bit more willing to raise interest rates, meaning mortgages, personal loans, credit cards, they're all going to become more expensive. But given we have just come out of COVID, I'd be very apprehensive to think that the government would actually allow the RBA to increase interest rates dramatically quickly, given how much financial disadvantage the entire country's been through recently. Like that would just put us into a bigger hole. More people couldn't afford their mortgages. More people couldn't afford their personal loans. They'd be

in far more debt. Like it's not a positive thing from my perspective to put the interest rates up. But in saying that, that's why guys, when you go to see a mortgage broker and Jess, I keep referring to you, but you're going through this process at the moment. It's very exciting. they don't just assess you for that 2% that that mortgage is going to cost you each year at this current rate, right? They actually assess you for double or even triple to make sure that if interest rates go up, you're still going to be able to afford it. Because a bank doesn't want to take the risk of being like, all right, Jess, no problems. Come in, sit down. We're going to give you a mortgage. It's right at the top end of what you can afford. But if interest rates go up,

you're kind of screwed. You won't be able to afford it. So, banks actually cover their own but by assessing Jess as paying a higher interest rate. So, it's not something that hasn't been not taken into consideration, but at the end of the day, if you've been calculating mortgage repayments and doing your budget, like it's a pretty shit stick to be dealt, right? Like you don't want someone to turn around and be like, oh my gosh, now it's so much more expensive. We don't want to be surprised, but that is what a rising inflation rate means for your loan. Yeah. I think for, again, like speaking from current recent personal experience, I was assessed at around 6%, I think is what my vote said.

Yeah, it's pretty standard. And yeah, I guess I would just say to this listener and anyone else who's in the same boat as me, who is looking at buying or building and is probably on the Money Smart website every day, looking at that calculator, figuring out what you can afford, how much you can borrow, how that works into your budget. I would say to plug those numbers in at, yeah, a significantly higher interest rate than what's going around now. And then what you would qualify for, 6% or 7% was kind of the benchmark we were looking

at. um and to be honest I would say kind of over inflate it rather than under inflate it because you'd rather be over prepared than taken by surprise exactly and that's why Jess apologies for throwing you under the bus there but it's really relevant and you're going through that at the moment and it's not something that I think a lot of people think of when they're like but I have the deposit like okay but we're actually going to assess you at a higher interest rate than what you're going to expect to pay and the reason for that is to protect you and to protect the bank to make sure that if this happens and inflation does go up, you're protected and

everybody is safe and okay. Because in the US, during the global financial crisis, things change, people can't afford it. We don't want to see something similar to that happen. In saying that, not everyone's looking for a loan. So what does that mean for your savings? What does it mean for your investments? So first things first, if your savings do not grow, and this is going to be a little bit of a rude shock. If your savings aren't growing at the rate that is at least equal to inflation, your wealth is shrinking, which is not nice to hear because Jess, George, are your savings returning 3% in the moment? I wish. Yeah, I know, right? So, for example, inflation is now literally running at 3%, but cash in,

I guess, a current bank account in a high interest savings account is on average earning 0.1%, like we are not getting ahead and its value is being really eroded with every day that is passing. And I don't mean to be super dramatic, but that's what is happening. And a lot of people are like, yeah, but I'm sitting on cash and I'm fine. But you know how we were talking before about the inflation of goods and services that cost $10 in 2010? $10 in 2010 today is going to cost you $124. So, this is really important to take into consideration when we're doing things like projecting for retirement, projecting for future investments, we need to take into consideration the present value of a dollar because what we can buy today, like if we go

down to the shops and a loaf of bread is $4, in the future, that loaf of bread is not going to be $4. It might be $8. And if I say, hey, Jess, how much do you think you'll need in retirement? You go, oh, do you know what? Like if I own my house outright and I don't need too much, do you know what? 60 grand a year would be more than sufficient because my groceries cost $100 a week and this costs this a week and you go through your budget. Well, groceries might today cost you $100 a week, but with inflation in the future, that's going to be a lot more. So, we need to take inflation into consideration when we are talking about investments because if we don't and we project it out and we go, wow, I could have a million dollars in 30 years,

what is that million dollars actually going to buy you and is that sufficient to provide the lifestyle that you want to have or want to maintain. Important to talk about because hypothetically, if you had $10 10 years ago, if you had invested that, it should have doubled. That money over a 10-year period of time, instead of costing you money, if it was invested instead of just sitting in cash, it means that you would have more than you had to begin with. I think it's important to think about that and what that actually means because a lot of people think that they're doing the best possible thing for themselves when they just hoard a whole heap of cash in their savings account. But $100 today is actually worth less than $100 tomorrow based on

current CPI and current inflation rates. What does that mean for your investments though? Because a lot of people at the moment, guys, and you would see this in the Shoes on the Money community, are messaging us going, what's going on with Spaceship? What's going on with Raise? What's happening with my investment? And we literally spoke about this on a Friday drinks a couple of weeks ago. But when inflation is rising or it's already high, holding assets like shares or property or even bonds can actually be more attractive than keeping your money in cash, which I alluded to before. But shifts in inflation and in interest rate expectations can also spook us. It can make us a little bit worried as investors, especially as first-time investors

getting into the market. You're like, oh my gosh, this is so expensive. I don't know if it's the right time, because it does create a little bit of market volatility. And volatility is when the share prices or the price of anything goes up and down over time. And the more volatile an asset is, the more likely it is to kind of look like a wave and it will go up and down over time. And it can just result in unpredictable asset prices. So, at the moment, I'm seeing a lot, because I follow lots of finance people on Instagram, guys, like I am a hoot at parties, but lots of people are like, oh my gosh, the share market is so volatile at the moment. It's going up. It's really unpredictable. Yes, there's a lot going on in the market. And that's why as a

financial advisor, I really back a theory of investment that is around dollar cost averaging and making sure we're not trying to time the market, that we are just investing at the times that are right for us and investing consistently over the long term to make sure that we're making the most of the high days and we're making the most of the low days. So on average, we have an average return instead of trying to time the market because we cannot time the market because we don't know what's going to happen tomorrow. Like, no one saw this coming. Even the people at the RBA who were predicting interest rates didn't see inflation coming in at the top end of 3%. So, I think it's important to remember that this stuff is going to happen and the best

thing you can do for you is to actually just be educated on it and not freak out when things like this happen or not be scared away. Because from my perspective, when it comes to purchasing property, there's no such thing as timing the market or when's the right time to buy, because the right time to buy is actually when it is the right time for you to buy based on your financial circumstances. Like Jess, the right time for you to buy isn't when there's low interest rate or when property prices are dropping. It's actually when you've got the funds available to you. You've got the financial security behind you to get qualified for a good loan. It's when you are mentally ready. It's when you have the time and energy and effort to put

into the home buying process and that search. And so, I think from my perspective, it's really important to kind of take ourselves out of this and go, is this actually going to affect me in the way that the media seems to be making up that it will? Does that help? Does that answer it? I don't know george summarize what i said because i rant i will give you my take on what you just said so i've been voraciously making notes um because there was a lot there so basically the impact of inflation on millennials all of us right now is that the costs of everyday goods and services will increase that just is what what it is your oat latte is now going to cost five dollars instead of four dollars fifty i have noticed that actually in my local cafe kind of rude really it's

inflation. I get it. If there's more business though, I'm happy to pay them more. We'll also be able to save less because of the costs of those goods and services, but hopefully our incomes will go up if our bosses help us out. And then from a home buying point of view, the costs of our mortgages will increase, right? Because interest rates are increasing. very likely. But as I said, given the current state of the world, inflation isn't going to just sting us overnight. Like over a period of time, it might increase. And this is where we could have a conversation about fixed versus variable loans. And, you know, people often want fixed because they get that certainty of, okay, well, I know even if inflation impacts and the interest

rates go up, I'll still only pay that lower amount for that period of time versus variable where people like, no, if the interest rate goes down, like I want to be able to make use of that. So, I think it's interesting to have a look at your loan structure at this point in time too, and go, hey, if you can't actually afford to, you know, have any change in your mortgage repayment amount, obviously increasing because we all want to pay less, but now would be a really good time to talk to a mortgage broker. Like if you don't have one and you want to have a chat, hit us up on the She's On The Money website and we can match you with a broker that'll work for you. but it's one of those things where you should be having that conversation to make sure you're in

the best possible financial position and even if you talk to a broker and they're like ah Jess you're fine that just gives you the peace of mind that you're like no I checked I'm okay yeah 100% but I do think that is all we have time for today so just before we head off we'd like to acknowledge and pay respect to Australia's Aboriginal and Torres Strait Islander peoples they're the traditional custodians of the lands the waterways and the skies all across Australia we thank you for sharing at the caring for the land on which we are able to learn we pay our respects to elders past and present and we share our friendship and our kindness see you next week guys bye guys