By Erika Jonsson
I used to read and re-read my dad’s dog-eared childhood comics when I was a kid, and I desperately wanted to be Lois Lane. She was confident and glamorous, she was dating the Man of Steel, but, more importantly, she seemed to have the most exciting job in the world.
Superman dodged plenty of bullets, but Lois was no shrinking violet either, and I think some of that superhero attitude might have rubbed off on me when it came to money as well as my career, because I realised recently that I’ve dodged quite a few financial bullets in my time.
In chronological order, here are three of them, along with the lessons they’ve reinforced:
The super-sized home loan.
In 2006, my now-husband and I lived and worked in the fruit-growing rural city of Shepparton.
We were going through our mortgage application with a bank manager, who suggested we could easily borrow three times as much and “buy something a bit more aspirational”.
We explained that we were happy with the home we’d found and wanted a buffer in case interest rates rose.
“You should really think a bit bigger,” she pressed. “Is this really your forever home?”
No. It wasn’t. But it was the home we were comfortable with. It served us well for the years we owned it and, importantly, we could afford the repayments without putting the rest of our lifestyle under serious duress.
Lesson: Being able to afford something doesn’t mean you should buy it.
- The noughties plantation scheme.
At the turn of the 21st century, Great Southern ran Australia’s largest agribusiness managed investment scheme. Its growth was unsustainable and the company collapsed in 2008.
When our little home became an investment property after we moved to Melbourne, we needed an accountant to help us with our more complex tax returns. The accountant who’d been recommended was on leave, so we made an appointment with his business partner.
After working silently through our paperwork and tapping numbers into his ATO portal, he told us we’d be receiving a healthy return. He then transformed in front of our eyes into a full-blown salesman, with an aggressive pitch to use that healthy return to buy into Great Southern’s new plantations.
Despite the glossy brochures and this guy getting increasingly pushy and playing on our emotions, my gut told me something wasn’t right, and we told him we weren’t interested.
Great Southern’s demise is still haunting many investors, including a man who spoke at the Royal Commission about being on the brink of losing his home after investing in Great Southern through a self-managed super fund.
Lesson: If it sounds too good to be true, it probably is.
The uncomfortable level of risk.
In 2009, my partner became my husband – a huge milestone that often leads to closer examination of different aspects of shared life. We sought professional advice that involved a broad financial health check and recommendations to consider that might improve our position.
One option that was presented was borrowing to invest. Now, I’m not suggesting this was bad advice, because a lot of the reasoning the adviser walked us through seemed sound. But borrowing to invest didn’t fit with the level of risk we wanted to take.
What I learned, though, is the importance of examining my own financial situation and attitude before seeking advice.
Lesson: Understand your own attitude to risk before you ask anyone to help you make financial decisions.
Why confidence counts
The point I want to make by sharing these stories is not that I’m some kind of financial guru – far from it.
What I have realised, though, is that I’m more financially confident than many people. And that goes a long way – a US study of more than 3,000 people found that financial courage was more important to outcomes than financial literacy.
Building confidence is a process – it doesn’t happen overnight. It takes time, and effort, but it’s time well spent when it has the capacity to completely change the way you live your life in the future. By investing in yourself, you’re also investing in your quality of life for the future.
By Erika Jonsson
Erika loves to communicate complex concepts in simple terms. She is Head of Communication for Six Park (http://www.sixpark.com.au), an innovative, automated investment service, which is sometimes referred to as robo-advice. Six Park combines smart technology with the oversight of a world-class Investment Advisory Committee to give Australians access to low-cost investment management without the usual fees or complicated processes associated with the share market.