She's On The Money - How To Prepare For A Recession

Episode Date: August 23, 2022

On this episode we talk about some things to keep in mind when heading into a recession or a time where the economy is sluggish. We want you to be prepared for what may lay ahead, so Victoria shares a few simple steps to help reduce your risks and assist you to weather the economic storm.This episode is a companion to last week’s episode "What Is A Recession" so go back and listen to that episode when you’re done with this one! Here are some resources discussed in today's show:The National Debt HelplineThe Good ShepherdAcknowledgement of Country By Natarsha Bamblett aka Queen Acknowledgements.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 and She's On The Money are Authorised Representatives of Infocus Securities Australia Proprietary Limited ABN 47 097 797 049 AFSL - AFSL 236523.See omnystudio.com/listener for privacy information.

Hello, my name is Natasha Nabanunga-Bamblett. I'm a proud Yorta Yorta, Kernai, Wolperi and Awadjeri woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on Awadjeri country, acknowledging the elders, the ancestors and the next generation coming through. As this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow. Let's get into it. 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. My name is Georgia King and joining me as she does each and every Wednesday is Victoria Devine-Vee. Hello. Hello. Today we are talking all about how to prepare for a recession. This episode is a companion piece to last week's episode where we broke down what exactly a recession actually is. A companion piece. A companion piece.

That's so cute instead of saying part two. It's a companion piece. We're sophisticated, Kira. She's on the money. Carry on. So the point of that is please go back and listen to that when you are done with this episode so you know what a recession is, so you know what we are talking about. Well, you're welcome here if you haven't listened to it. Of course, of course. But we would hang with us.

We would recommend that you listen to the first companion piece before the second. It makes more sense. But if you are doing it the wrong way around, some key takeaways from that episode were that recessions are an economic reality. sucked in everyone. They're also challenging to predict with any precision. So that's good to know. And they typically last about 11 months, which is good, short and sweet. But then the impacts do go on for longer. So kind of dark. Is that literally how you summarized the entire podcast? I put my heart and soul into creating that. And you're like, yeah, cool. They're a reality. Also, they're not very accurate and they're not around for a long time. Why did we

bother? Is that where you're going with this? Yeah, well, a little bit. I mean, you're not wrong. So today we are going to talk about some things to keep in mind when heading into a recession or a time when the economy is a little bit sluggish. So this is more the hard and fast tips and tricks that you guys can implement to feel a little bit more financially secure, which we love. We want you to be prepared for what might lay ahead because at the end of the day, gee, as you said before, they're challenging to predict with any precision. Exactly. And yeah, that's right. So I might be completely wrong in saying that there is a recession coming. So could a whole heap of economists. And I would argue it's way more

embarrassing for them than it is for me to say that. So we want you to be prepared. This means mental preparedness and a few simple tips to reduce your risk and help weather this economic storm. And that's what we're going to get into today, Georgia King. What it also means, Victoria Devine, is that I'm going to tell you some stats. Oh, stats girl. Bring it. The chat. What have you got for us. Australia was the only major economy to avoid a recession in the global financial crisis, the GFC. So we touched on that last week. But the country was unable to escape the COVID induced downturn. We tried. Try as we might, we were unsuccessful. We gave it a crack. Gross domestic products or the GDP fell 7% in the June 2020 quarter. And that is the most significant

decline since records began in 1959. And we spoke about that on the podcast during that period of time. So go back to June 2020 if you would like to hear some chat about that. Some of it might be irrelevant now, though, because the world has changed significantly. Yes, it really has. That followed a 0.3% contraction in the March 2020 quarter, which was when we were hit by the bushfires and then the pandemic and everything else that happened. So that's just a little bit of statistical context. And then we fast forward all the way to June 2022 and we officially were in a bear market, which we said before means that we are 20% down on the 12-month high, which is, it seems a lot more complicated than it is, but it means that the market is going

backwards at a pretty significant rate. So Georgia King, that gives us a little bit of context as to why we are currently here as we stand today alongside the war in Ukraine and so many other complex forces. There is a bit on. Yeah. It's a bit hectic. She's been busy. Absolutely. But we're here today to make everyone feel better by talking through how we can prepare for the looming recession. V, what should my priorities be in a time of a sluggish economy slash a recession and what steps should I be taking? I wish I had some tips that were really specific to this point in time because at the end of the day, I think that's why you guys are all listening to this, But these are tried and true tips that are going to see you through any kind of economic

climate. And I think that we all should be implementing anyway. So first things first, let's stop panicking. Let's stop looking at the media because they make money off making us anxious. They make money off us clicking on headlines because we're like, oh my gosh, what? And click it. If they had a headline that was like business as usual, you're going to click it, Georgia King?

You're not going to click it? No, I want to know about what's going on in the Kardashians lives, Georgia. I'm going to click that headline instead. So first things first, we're not going to panic. We're going to calm down because the world likes to blow content out of proportion. At the end of the day, yes, we are going to go through this, but what that means for you is not nearly as significant as what the media is making out. The second thing we are going to do, if we haven't done it already, I would hope that after three years of the She's On The Money podcast, you guys have started to listen to me. But if you're anything like me, you haven't taken a thing in

because I'm going to make my own decisions. I'm a Cancerian, Georgia King. So we're going to build an emergency fund. From my perspective, people always say, oh, but what's a good amount of money to have in an emergency fund? That's so personal. I can't answer it. Not because we're verging on the difference between personal and general advice. It's not that. It's that everybody's circumstances are literally different. If you live at home and mum and dad are paying rent and you don't even have to pay board. Well, your emergency fund is going to look so significantly different to a mum who has three young kids under five and is looking after them, has a mortgage repayment and a husband that is in a rocky, unsteady job, right? Like those two circumstances are so

different. And George, you might go, oh, I just need 500 bucks if anything pops up. That mum might go, oh, well, I'm not going to be able to sleep at all unless we have $20,000 sitting in an emergency fund. So it's actually what makes you comfortable. But my favorite starting point is planning out three months worth of expenses, non-negotiable expenses. So we're not talking about your savings or your investment plans. We're just talking about roof over your head, food on the table, bills paid. That is it. We're not talking about, gee, what do you spend on average? Three months worth of expenses and that amount of money is usually a really good place to start. Then the next hot tip here is stick it in a bank account. What do we do with an emergency

fund, Georgia King? Do not invest it. Yes, clean. We do not invest our emergency funds because our emergency funds job is to sit and lie in wait until it is called upon. It can't be working somewhere else. Every dollar that comes into our bank accounts gets given a job. Some of them, they go out to earn the money. They go out into their investment world. They start making bank can they leave there? And that's their job. Other dollars come in and we go, your job is to stay at home and make sure our home is safe. And you put them in a savings account. If you have a mortgage, perhaps you put them in your offset account because that operates in exactly the same way that a savings account will, but it will offset some of the interest that you're paying on your

mortgage. Money win, money win, same accessibility, same level of risk. So we're all good, but we never invest our emergency funds. A lot of people over the last, I don't know, three or four weeks, I feel, have slid into my DMs and they're like, Victoria, what do I do with my emergency fund? I feel like it's doing nothing. Like, I don't feel like I'm making any money on it. I go, I get it, but let's reframe this. That's its job. Its job is to sit there and wait until something happens. If something happens, then it will be called upon to do its job. But right now, its job is to sit there and guard your financial house, right? So I think we need to reframe what emergency funds look like because so many of you have said they're not doing anything,

like it feels like a waste having that money sitting there not making any money because we obviously on Cheers on the Money talk a lot about making money with the money that you make. But your emergency fund, its job is to sit at home and make sure that your financial security is always front of mind. Yes, that's a good point. I feel like we haven't spoken that much about that in the past. No, because I feel like it hasn't come up for us that often. I mean, people have always said, should we invest our emergency fund? And I say, no. But at the end of the day, your emergency fund, its job is to keep you safe. And it needs to be easily accessible, right? Exactly. Like, I need you to be able to walk up to an ATM and pull that emergency money

out and be in a really good financial position. And from my perspective, I feel like I've got a lot of ranting to do because yesterday, George, I spent the entire day recording my audio book version of the investing book that's coming out. Incredible. And one of the chapters at the very front, we talk about this because I think it's really important to preface. You have to have an emergency fund. Job is not to work hard. Its job is to work smart. But our emergency fund is not just for those unexpected costs. It's for that financial freedom aspect. And I talk about how some people see their emergency fund as an F-off fund. Yep. Just kind of a funner way to do it. I mean, I wouldn't swear on this podcast, so that's why we're calling it that name. But the

reason we have that is so that we can say no to things. Gee, if you've got a good emergency fund and you're working for me and you're like, I don't really like working with V anymore, freedom to leave. Yeah, right. In a relationship you want to get out of, but don't have enough money to do so, well, emergency fund comes in to save the day. Free to leave. Go over to Europe with your friends, having a terrible time. You just go, I want to go home. You can buy some emergency flights back home if you need it. Free to leave. Right. I like that. You can leave any circumstance, situation or place with an emergency fund. It's not just for that rego bill that you didn't expect to pop up. Because if we've got our financial house in order and we have a good

budgeting cash flow plan, there won't be anything that's unexpected except potentially random things that come up. Like I ran my car Georgia on the weekend. It wasn't really great. I was reversing out of my driveway. This is entirely my fault by the way. Steve and Lucy were standing in front of the car. It was Saturday. I was on the way to Sydney to speak at a conference. They were on the way to the coffee shop to get a coffee and I'm like reversing the car out like I usually do and I'm like waving, being like, bye Lucy, bye Steve, have a good day. And I ran into my neighbour's car, which was parked somewhere. It never is, so I'm not saying it's their fault.

It was parked completely illegally on the street, but I didn't see it and I ran into the side of their car with the back of mine. So I'm going to have an unexpected insurance claim to make and I'm going to have to cover my own excess, right? That's an emergency. That is me going, all right, well, this is a really sucky situation, but I've got some money aside so that I'm able to afford that. But from my perspective, all these other costs should be planned for. And coming into a quite tumultuous period of time,

we can plan for that. We can actually sit down and go, all right, gee, let's do our budget. Let's do our cash flow. You know, it might be 12 months in advance that our rego is due again, but let's like put that into the budget so that there are no surprises. Like right now, the last thing you want is a financial surprise because we just don't need to be stressed. Let's move on now, V, to talk about debt. What should we be doing with our debt at this time as we head into a recession, maybe? All right, so spicy, but my view is that you should have

an emergency fund even if you have debt. I've seen, I'm on TikTok. I'm not saying I make good videos on TikTok, but I consume a lot of TikTok content. I actually tell my partner that I'm going to bed and I'm not, I'm going to bed to lay in bed for an hour to watch TikToks. Just scrolling.

Yeah, like I'm addicted. What can I say? Until that guy, you don't have TikTok, but there's this random TikTok that pops up from TikTok that says, ah, ah, ah, is it time to turn out the lights? Really? Yeah. The shame of seeing that. I'm always like, no. And then I watch two more TikToks and put my phone down because I'm like, I don't want him to know that it was him that got me, you know? Anyway, I've seen a lot of advice on there about smashing down debt with absolutely every dollar you have. And I actually think that's really irresponsible. And the reason I think that's irresponsible is debt is as much physical, because you've got to pay it back physically, as it is mental.

And the issue with debt and feeling like you're trapped in the debt cycle is that, George, if you had, you know, $20,000 on your credit card and you're channeling every single dollar into that credit card, so you don't really have any free cash flow, while that might feel like you're achieving a lot because you're like, V, I'm smashing down that debt. What if an emergency pops up? What if something pops up and you just didn't budget for it? What if you've got a daughter and, oh my gosh, it's end of term three ballet and there's a concert and it costumes $150? That situation, very likely to happen, very normal expense that might pop up. However, if you have no emergency fund, have no savings, you're going to go, oh my God, I'm so bad at

money. I have been channeling all my cash to paying off my debt. Now I have this other expense and I'm going to have to go further into debt. It feels like an awful cycle. It feels horrendous because you're just like, I've been working so hard and then this bit me in the bottom. Reframe that. You've got an emergency fund. You've got some free cash flow. Yeah, we're smashing down our debt. That expense pops up. You go 150 bucks. No worries. Pull that out of my emergency fund or the savings I've got set aside. And you're not continuing that debt cycle. You're going to be proud of yourself for not having had to rely on credit. You're not putting yourself further behind because our emergency fund is there to not only pay for things when

they pop up, but it's also to reframe our thoughts around money. Because otherwise, this alternative is putting us further into debt. It's putting us in a position where we feel awful about it. We go, oh my gosh, I'm so bad at this. I'm so bad at money. You're not. We just haven't planned to be good at money. So having an emergency fund puts you in a position where you don't need to continue that debt cycle and go further into debt so that we can always stay in a really good mental place. Brilliant. Yeah, it's a good buffer. Vee, so we know we've got good debt, like HECS, for example, that's a fine debt. And then we have bad debt, which could be perceived as like a car loan or a credit card or something like that. Which kinds of debts should we be prioritizing

at this time? So the two types of debt that you're talking about, the really easy, I do good debt, bad debt and okay debt. And I prioritize them based on good debt helps you create wealth. It could be a home loan or an investment loan. Bad debt is debt that takes away from your ability to create wealth. So say you went on a holiday and you put it on a credit card and now you're paying off that credit card and that money is now tied up in debt repayments instead of helping you get ahead financially. And then we've got okay debt. So that from my perspective is things like your help or hex debt. And I say it's okay debt because some people look at debt as bad and some people look at debt as good. And some people in our community might say, oh, well, hex debt is

good because it got me ahead. But at the end of the day, it's okay debt because it does have inflation tied to it. But from my personal perspective, I don't pay it down aggressively purely because I know if something happened, let's say a really bad recession happened and she's on the money, couldn't produce content anymore and we had to go under. I know that if I didn't have any income coming in, I don't have to pay that back. So it can sit there and wait. There's no time limit or there's no timeframe on it. It can kind of go stagnant. So when we look at this from the perspective of a recession, our priorities might be on getting out of personal debt because that ties up our free cash flow. Not worrying too much about our good debt,

but talking to our mortgage brokers or our investment advisors about putting us in the best possible position and having the best possible interest rate on that and not being too concerned about that okay debt. But from my perspective, smashing down personal debt is going to be a priority regardless of the economic circumstances of the world. Now, if you have multiple debts, you could choose to tackle this in two different ways. And one of them you might go, Victoria, that is the way you should be doing it because financially that makes the most sense. And that is the debt avalanche method. So an avalanche method is where it starts at the top and it falls down, right? Like an avalanche happens and it crashes down. You're starting

with the debt that has the biggest interest rate associated with it. So if you had three credit cards, one at 5%, one at 15% and one at 20%. You'd start with the 20% credit card and then you would move down to the 15% credit card and you might then do the 5% credit card later. Usually when we look at how this works, 20% credit card might be like $20,000. That 15% credit card might have like, I don't know, three grand on it. And you're like, little debt might be only $500. So you'd be leaving that $500 debt till last because you're trying to smash off the biggest interest rate first because it's technically costing you the most. So financially, that adds up. However, if you're like me, it's not going to work that well for you because I like snowball myself off

the momentum. So you know a snowball, it starts really small at the start. And if you put it at the top of a hill and it rolled down, it would progressively get bigger. The snowball method, while it doesn't stack up quote financially, mentally for me, that works better. That would mean that I get to cut up a credit card sooner. So I would then start with that $500 debt with, yeah, it's the lowest interest rate, but that's the easy win. And I can prove to myself that I can do this. And the gratification I get from being able to cut up my first credit card and be like, oh my gosh, I did it. Let's move on to the next one is sometimes stronger than the necessity for paying down the debt that makes the most financial sense first. So we have to balance

the mentality with the actual financial side of things, because a lot of us will go, oh, well, that makes the most sense. I'll do that. But I'll go, oh, but historically, has that worked for you? Or should we look at it from a reward way and go, all right, gee, how are you going to feel the most reward? What's going to keep that momentum up? Because at the end of the day, getting out of debt is the key. And if it costs us a little bit more to actually feel like we're prioritizing it, that's okay. My books. Yeah. Brilliant. Is it right that that's Dave Ramsey's approach is snowball over avalanche? To be honest, I have not consumed his content. It's been a while. Doesn't resonate with me because he also said you shouldn't go out to a restaurant if you have any

debt. Oh, get out. We've got a life to live. Forget about Dave. Would it be worth reducing our credit limit fee? Look, that can be a really good way to put ourselves back in the driver's seat. So some of us are going to feel overwhelmed with having a really big credit limit because we might be tempted to go and spend up to that amount at the same time. If you've paid off a certain amount and now you've maybe got $5,000 left on that credit card that is $20,000, maybe reduce it down so that you can go, oh my gosh, now I just don't even have the ability to get back into that place. I think that can be a really positive thing. But again, it's all about how you feel. And as much as reducing your credit limit in general, if you were going to get a mortgage,

could be a really good idea. That doesn't necessarily mean you have to lower your credit limit just cause. But when we're getting out of debt, it's kind of like a peg along the way, right? Like we want to get rid of this credit card so bad. Let's start chopping it up technically as we go. It was $20,000. Now it's $10,000. After you've paid off that five, maybe you drop it down to five and it can go lower and lower and lower. And then once it's completely gone, we actually get to cut the plastic bit up. So I think that can be a really rewarding process as well. And it can really pinpoint, I don't want to ever get back to that position again. But let's loop back to that first point, have an emergency fund before you make that decision. Because a lot of us ended up

with credit card debt because we didn't have an emergency fund. I think there's this misconception that credit card debt is just made up of frivolous purchases. Like that is a really privileged perspective. And don't get me wrong. That's what mine was made up of. Like mine was shoes and clothes. And I went over to France and I traveled and I bought a car. That's where my personal loan came from. That's privileged. Some people rely on credit cards because they don't have any other option. Some people are like, you know what? I really don't know how I'm going to buy a new school uniform, I'm going to have to put her on credit. So if that is you and you are in that position, don't feel any shame. You're being a good parent. You're being a good person. Maybe

you needed to go buy some new shoes so that you could get to work and have a good job. I think that going into a recession or feeling like we're going into a period of economic turmoil makes us put more pressure on ourselves and feel bad about our circumstances when that shouldn't be it at If you're in a circumstance where you're in debt, it is what it is. Let's just get out of it. Let's find a way to not put ourselves in that position again. But also if you're going through this period of time and you're like, I'm going to have to go back into debt. Okay, no problems. But you've got the education to know where you need to be and where you want to be. And that can actually be a tool to help you get from point A to point B. Not everyone's journey is linear. Some people's

journeys do involve debt. We just need to be educated about it so that we know how to ultimately put ourselves in the best position. Nice. Let's talk about loans slash helping out family members or close ones who might be going through a tough time during all this. If they lose their jobs or something like that, how can we help them without hurting ourselves? So from my perspective, I don't believe in lending money to friends. So if you lend money to a friend and you go, all right, I'm going to give Georgia King $500. I need to think about this before I give that to you and work out, is the money more important than my friendship? Because money taints relationships. Obviously, if I'm going to lend you 500 bucks, G, I'll probably be like, all right, let's put it in

a, you know, a detailed email. Here's how you're going to pay it off. Here's how the plan is. But that's actually a bigger problem. Like if you, George, needed to borrow 500 bucks from me, is there something else I could help you with? Are there financial resources I could share with you? The Debt Free Helpline is a really great place to start because the Debt Free Helpline is not just about being in debt. They're financial counselors. Maybe you need to reframe how you're spending your money. Maybe your friend needs to focus on their budget and their cash flow. There's also a company called The Good Shepherd, which I am obsessed with. I think I mentioned it a lot in the start of like season two of our podcast but haven't revisited it recently yeah what do they do so

the good shepherd it's goodshep.org.au and we'll make sure that the link to this is in these show notes but it's nil's loans so they're no interest loans and they're no interest no fees no charges ever they're obviously not available to absolutely everybody you have to be in a little bit of a sticky circumstance, and they have loans that are available up to $2,000 for essentials. So essential goods and services, they're not going to let you get a new flat screen TV, but they will let you get things that are household items that you might need. I know people who have bought washing machines and dryers and stuff like that on NILS loans, car repairs and registration, medical and dental, technology if you need it, housing and education, like they are so fantastic,

but they do also have some criteria that you need to meet to be eligible. So you either need to have a healthcare card or a pension card, or you need to earn less than $70,000 as a single or $100,000 as a couple. And you can show that you have the capacity to repay the loan. So that's pretty good. That's very good. Like it's not saying you need to have experienced really significant disadvantage, but we really need to understand what it means when a friend asks to borrow money. Like I do think it's not your position to be like, Georgia, let's give you an education. But it's also like, hey, here are some resources. I don't have the capacity to lend you $500 or I really don't want

to for the sake of our friendship because I feel like you're going to lose one of those things if your friend's bad at money, right? I'm either going to lose the friendship or I'm going to lose the money. And that's a really awkward circumstance to be in. And if a person is coming directly to you for cash, I always wonder, like, what other avenues have they explored? Maybe it was just the easiest one that they came to. Yeah. And I think that we need to look into the alternatives because, as we know, payday loans are not great. Like, they're going to put you in an awful financial position. And I guarantee over the next few months or even the next 12 months, we're going to see an uptake of advertising for those payday loans. I'm seeing them everywhere.

On the way here, I was listening to the radio and there was an ad for a company called MyPayNow and it's get your pay on demand. Guys, it's just a new way of framing a payday loan. They have very high interest. The entire premise is they're like, oh, we'll help you budget and cash flow easier because you can get the pay that you're going to get paid on the 15th next month today. And you go, oh, that's really helpful. But it's actually putting you behind because they're saying things like, oh, we changed the way people get paid. No, you've changed the way you're making money. You've gone from being a loan shark to pretending like you're helping me with my budget and cash flow and you're not. Yeah. You're absolutely not. You're clipping the ticket

along the way and it's expensive. It's an absolute rort. Anyway, I just think we need to talk more about what it means when friends and family ask for money because there's so many things we can help with. But at the end of the day, again, really weigh up. What are you going to lose in this? If I lend you $500, am I losing the friendship or am I losing the money? Because most of the time you'll lose one of those things. Last question before we head to the break, V, what if it's your partner who's asking for money? I think it's a bit of a different circumstance. And if they're your partner, it would be around, all right, let's talk about this. Why, when, where, how? I mean, if your partner's just lost their job because their job was not recession

proof. I think that's a wider conversation to having a balanced conversation about budgeting cash flow and supporting your partner during that time. But I think if it's, you know, just a friend, that's a different circumstance than looking after your partner. Yeah. Very different. Okay. Very good. Let's take a break here, VD. But on the other side, guys, we will be chatting about what we should do when it comes to our jobs and our investments in preparation and for a recession. So please don't go anywhere. All right, Vicky D, we're not panicking. Love being called Vicky D. We're establishing an emergency fund. We are. And we're striving to pay off our debt as best we can.

We're not crucifying ourselves if we are in debt. We are being very kind to ourselves. But there is a lot more to get to, V. I want to start by talking about interest rates, which I believe you have a special episode coming up with Kate Bransgrove, the director of Zella Wealth. I mean, I'm unbiased, but they're a pretty good mortgage breaking company. Pretty good. Not bad. Absolutely. So interest rates have been sickeningly high. How do we prepare for a recession if we have a mortgage? Let's zoom out. Yep. When in doubt, zoom out. Zoom out. We've learned that. We're going to look at the big picture. Gee, I think it's really important to put things in perspective because if

we look back to 1990, neither of us were alive yet, but interest rates were 17%. So yes, they can get that high. However, at the time that interest rates were 17%, houses also were costing between two and four times your annual salary to purchase. Now here in Melbourne, that's 13 times your annual salary to purchase a home. That's disgusting. That's sickening. However, past performance doesn't help me from feeling not stressed, right? Like you can't just go, oh V, People had it worse, so you're not in the worst position. This is where you need to take your power back. Stop looking at the media. They're the ones making us anxious and talk to your broker. Have a chat with them about what that means. If you already have a mortgage, go to them.

Some banks, G, have actually dropped their interest rates because they are trying to protect their communities. And I think that's great. What a better time to refinance to a lower interest rate to put you in the best position going into a time of economic turmoil. However, if you're thinking about getting into the market, it can make you a little bit anxious because you might have the deposit to borrow 600 grand, but if interest rates increase again, that might drop to like 580 or 550,000 and that changes the ball game. In saying that, the property market is coming off, so it's not nearly as competitive as it was and that means that prices are very likely to come down because obviously with interest rates rising, people are

like, well, I don't want to buy right now because it's more expensive than it was. So we'll just wait. However, it's really important to always pay attention to what your interest rate is and make sure that you're getting the best one with your mortgage broker. So yes, rising interest rates can be really scary. But the thing I want you to remember there is when you speak to a broker, because of the bank's requirements, they always add 3% when assessing what you can pay back. so even G if you were like all right well I got assessed at three percent and now the interest rate is five and a half your broker would have sat you down and said if this increases to this you can still pay it off let's have a look at your budget and cash flow like the bank doesn't

actually want to give you a loan you can't pay off because then we'd be in a circumstance like the GFC where so many people were defaulting on mortgages because they were given mortgages they couldn't afford so here in Australia there is very strict regulation which is why it's so hard to get into the property market around who can have a mortgage and what the interest rate might rise to and how to assess you. So don't worry too much, but my advice would be talk to a mortgage broker or your financial advisor. And if you're super worried about it increasing, maybe consider having a locked in mortgage rate instead of a variable loan going through this period of time. Beautiful. Bea, let's move on to talk about jobs now. We mentioned last week that they can be

greatly impacted during a recession. How can we safeguard ourselves during this time? Play the long game with your job, J. King. One of the points, you know, looking into this is that during a recession, it's not usually recommended to move jobs. It's usually recommended to sit down and find your place and, you know, just wait out the storm, like bunker down. And that makes sense because during a recession, there are less jobs going around anyway. There are less pay rises. you're less likely to be able to, you know, move up and up. This period of time is more about having financial stability instead of trying to increase your pay rate. While I'm not saying don't seize an opportunity if it's right in front of you. Like if someone knocked on your door, G, and was like,

hey, here's a step up, here's a great role. This job is quite recession proof because you're working in an area that isn't impacted by recession. You might go, yeah, right, no problems. But that might not be the reality for everybody. So while I encourage you to always back yourself if you're not happy or supported in your workplace obviously move on but I think it's also time to realize that the job market or what's available in the job market is going to be much less than it usually is because coming into times like this a lot of businesses and I look at it too you know as a business owner and go oh is it a good idea to hire somebody else I don't know what's going to happen they might just put the brakes on hiring they might put a hiring freeze on just to make sure

that they're not increasing costs or shifting around. So the opportunities you want might not actually exist at this point in time. If you do need to quit and you don't have another job to immediately go to, emergency fund, Georgia King, make sure you have enough cash to support you during that period of time that it might take to find some new work. And then also side hustle. Why can't we make some extra money during this time? Let's go side hustle. We had an Uber driver on the show a couple of weeks ago, legend, making bank, that's really flexible. There are so many ways in 2022 to add extra income to your life. I love it. So if that's something you want to do, go for it. And then if you're staying in your job, upskill, find ways to make yourself more

valuable in that. So once we do come out the other side, maybe it's time to grow. Maybe it's time to step up. I think that we should always be looking for opportunities to upskill or study or do something to get ourselves ahead because not only do employers expect that, but your finances are going to benefit from you being more valuable, right? Definitely. Okay. I feel like that's interesting because it doesn't marry up with the great resignation that we've seen and how many people have been so unsatisfied post-pandemic. It's actually so interesting. The juxtaposition of TikTok content again is so interesting because so many people are like, know your rights, tell your boss this and that and quit if you're not being valued. And I totally get that. But

then the juxtaposition of there's going to be a whole heap of recession content coming of like staying in your job and being stable. Like it's just so interesting how much advice floats around that you go, this is like completely conflicting one another. So I think the important thing is just stay in your own lane, look at your own job. If you work in a job where it is quite stable during a period of economic turmoil, you're good. But if it's a bit risky, maybe have a think about adding a little bit of extra cash to your emergency fund, because we all deserve to sleep well at night. Speaking of risk fee, would you say it's too risky if I have dreams of opening my own wine bar or maybe a cafe that at a time of potential recession, it's probably not the

best time to be doing so? Or should I go for it? I want to support you so bad, G. But I would argue that now might not be the time to start a cafe or a boutique that you've always dreamed of if you don't have a solid financial plan. Early on in a recession is not arguably the time to stick your neck out and get it done. Later, once the economy starts to show signs of a sustainable recovery, then we can think about it. Then might be a really good opportunity that you can seize because unfortunately during a recession, a lot of businesses do and will shut down. So there could be really great commercial opportunities. Great time to pick up a cheap commercial lease if you're opening a shop. Great time to pick up a cafe in a good location. Maybe there are a whole heap of

opportunities, but I'm one that is quite averse to risk and I would be concerned if you wanted to open something right here and now, not knowing what the future might hold. But that information and that advice could have been true in COVID too, right? And I think that we need to learn a lot from what happened during COVID and our lockdowns because look at how many businesses absolutely flourished even online. So I think we just need to look at the type of business you're opening and work out whether it's still going to be an attractive offering when people have less disposable income. In saying that, G, we've also talked on the podcast before about the lipstick recession and how people are very likely to spend during a recession on small luxuries because they

can't afford the big ones. So maybe now's the time to seize, but that is honestly not up to me. It's going to only be up to you. I'd just be apprehensive. You're saying that starting any business, you should be thinking about risk and what that means and what's the worst thing that could happen so that you can plan to not have that happen. Great podcast about business. It's called Business Bible. I heard that one time. If you're interested, we'll bring that back at some point next year, I promise. It's coming. Two final questions for today, V, and they involve spending money in this time while prices are really low. If you are in a position to invest, is now the right time while prices are low? Didn't we say like shares are on sale? Shares are on sale.

Money win. But from my perspective, the best time to invest is the time that works for you. However, a lot of people in our community are seeing right now as a really great opportunity to add some stuff to their portfolios because shares are on sale. Again, I'd go back to your cash flow? Can you afford that? Or should you really be prepping yourself to have a bit more of a financially secure home? Like should we be building up our emergency fund a little bit more and before anybody starts investing? Summary of my next book, George, comes out on the 20th of October. Have an emergency fund before we even consider investing. Because we never, ever, ever want to buy a share. And then what happens if you lose your job in a month, George? Like then you

have to sell it and the market might have gone down even more because it might have because you lost your job. Then we pull out the money and we've lost even more. It's not a position we want to be in. Anything we put into the market, we want to put into the market for a long period of time so that we can benefit from the magic of compound interest. And if you can't do that, I wouldn't be investing it. So it's not the time to make short-term gains. It's not about buying now and selling in six months. One, because you'll have big CGT issues. Capital gains tax discussed. I'm not needed here. But two, because we just don't want to be in a circumstance where we're forced to sell something. And we also can't predict the markets. Like, how do you know in six

months that that's going to go up? If we could predict the markets, gee, King, I'd be wealthy. You'd definitely be wealthy. Oh, you'd be talking about me like they talk about Warren Buffett and I'm all about that. So you would also say we're obviously in a bear market as discussed. We are. We shouldn't feel the temptation to sell. No, we need to remember the emotional journey of investing. When people are really scared, that's often a really good time to pick up more investments. However, it's not a good time to sell because say you had 10 shares G and you bought them for $10, so a dollar per share. And then we're going through this bear market, they've dropped in value, your shares are now worth 50 cents each. You're absolutely terrified

and you're like, maybe I should take my cash off the table. No, because you're accepting less for something that was worth more. And we want to make sure that we are putting ourselves in the best possible position. And the best position is to educate ourselves on what that means and have a look at those shares and go, all right, well, right now they're worth 50 cents each and my share portfolio might only be worth $5. But when in doubt, zoom out. We look at how every other hiccup in history has always recovered and then some. You look at the Great Depression, you look at the GFC, you look at COVID, we are up and up since then. Nobody, if they had invested $10,000 over a period of 30 years in the Australian stock market, had a portfolio that went backwards, George.

So we need to zoom out and see the big picture. It might be stressful. However, the amount that you are seeing in your investment portfolio today is not how much money you have, it's how much money your investment portfolio would be worth if you sold it. But we're not going to sell it, are we, G? We're not going to sell it. And the same is true if you're looking at your superannuation. You're like, should I put it in a more conservative portfolio? Okay, well, that might be more aligned to your risk profile. However, if you move it right now, you are accepting losses in that previous portfolio to then sell it down and put it in a different one. Is that what you want to do with your money? But I can't answer that for you. You might not want

to do that, G, but someone else might go, but V, I'd sleep so much better at night. You do you, but our job is to make sure you are super educated and have all the tools and skills and options on the table necessary to make the right decision for you. Because sadly, as much as I would love to give each and every single one of you personal advice and go, G, this is right for you. Annalisa, this is right for you. Lucy the dog, this is how you do your finances. Unfortunately, there's not enough of me to go around. And that's why I want to put you in a position where you can make that decision for yourself. All right, BT, I'm feeling zen. I'm feeling calm and feeling ready for this gorgeous recession on the way. Moral of the story is set yourself up with an emergency fund.

Yeah, moral of the story is that always understand what it means to go through a period of time that isn't so certain. And maybe think about upskilling or doing some side jobs or how are you going to generate income if you were to lose your job i think is a very good question to answer for yourself as well as i said in a previous episode v honestly i'm excited for this period after the recession yeah the flapper era oh the flapper era we're getting in our little skirts we're going for a dance are we we're going i love it you're all invited she's on the money having a gatsby party yeah absolutely just gotta get through this we're done here all righty 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 a financial decision and we promise victoria divine and she's on the money are authorized representatives in focus securities australia proprietary limited abn 4709-779-7049 afsl 236-523 we will see you on friday team see you on friday guys bye Thank you for watching.