Money talks: Julia Newbould

What a difference a year makes – 2020 especially. In the past couple of months, I’ve been marvelling at the Facebook memories that keep popping up about what I was up to before lockdowns started in March 2020 – Elton John, New Order, A Chorus Line, work functions and the usual social events that used to happen. It seems much longer than 12 months.

Looking back, I can see that a lot more changed than just Covid restrictions, in particular my mindset, confidence and goals.

As you might have read last month, I was looking to break up with my bank – I was shopping around for a new loan. Because the current price of my property dropped, one option I had was adding to the equity to guarantee the best interest rates. With the cash sitting in my offset account, it would have been simple to transfer the money, but the way forward now I think is different.

I don’t want to lose access to the cash reserves I have built. A major revelation for me last year came from Back in Time for Dinner star Carol Ferrone, who said the biggest lesson her family learned last year from time-travelling to the early part of the 20th century was that “things can change overnight”: a world war (1914), the Spanish flu (1918) and a stockmarket crash (1929).

Before then I’d often heard the phrase, but it didn’t resonate with me. Why? I haven’t lived through a momentous event like these, until Covid, where things indeed changed overnight.

Money readers will be familiar with the idea of having savings for a rainy day, but a rainy month and rainy year is a bit of a stretch for most of us. Many of us are also familiar with the idea of spreading our risk, but in this case there were few safe havens.

Shares and property were both touched by the sudden economic downturn and while shares bounced back more quickly, property was different. Some parts of the market seem unaffected, but units in most major cities have not recovered. Property is a long-term investment and so this should not overly concern people, but those wanting to take advantage of better financing deals may find the drop in equity (caused by falling prices) constrains their options.

For me, putting more cash into property to secure the best rate seems to be somewhat like a margin call for real estate. Alternatively, I can settle for a not-quite-sogood deal. But unlike last year, when I would have thought nothing beyond wanting to take advantage of the best deal, this year I like the idea of cash.

I like the idea of having money when I need it. In fact, when I think more deeply about it I wonder if property is the best place to put more money into right now. With an interest rate of around 3% and relatively low yields, even with the potential of negative gearing, perhaps there are better investments at present. It has given me food for thought.

And I’m not alone in focusing on my financial plans. Just as we were locking down last year, I was busy cancelling events to launch my personal finance book, The Joy of Money, with co-author Kate McCallum.

At first we despaired over the bad timing, but as weeks went by we realised that people were more focused on money than ever.

Those needing extra cash were considering accessing their superannuation nest egg when the rules allowed. People were keen to increase their savings but were unsure how to go about it. While others were focused on their investments and the possibilty of switching asset classes.

The guidance I found most useful comes from our parents and grandparents: spend less than you earn, save at least 10% of what you earn, and repair, recycle, reuse. These last three have been forgotten by many of us, but when we had time on our hands to declutter and onsell or recycle it made sense both financially and environmentally.

Several of my friends intend to have a “no spend” year in 2021, just sticking to discretionary items such as clothing, furniture, etc.

They might instead acquire things through trading online, selling what they already have to buy something they need, or they might do swaps.

Becoming more conscious of what we spend our money on is a good habit to develop. If it’s not giving you the joy it should, perhaps reconsider the spend. That way we’ll be living lives that spark more joy overall.

And as I contemplate the past 12 months of my own life, I think I have earned some joy.

We made it!