Cost of living on the rise – does this mean no more avocado toast?
At Scientiam, we have a lot of younger investors starting out their financial journey.
For many this is the first time experiencing higher interest rates, increasing costs and potentially a recession.
So, here is a checklist to prepare yourself for a rainy day and see the opportunities that wait on the other side.
- After all downturns, markets have returned to higher levels. I remember in the 90’s we used to talk about property in Sydney being extraordinarily expensive. When I bought my first place, I could not believe how much I was paying for a one-bedroom unit. When my partner and I bought our first home we were stretched and could not imagine in our wildest dreams our house being worth what it is today. Through that period, we have had a late 90’s market crash called the “Asian Crisis”, the “long term capital management crash”, the “dot com” crash, the GFC, a few mini crashes between 2008 and 2020, COVID and now this recent market correction. The overarching message is that if you keep a long-term view and remain sensible you will be ok.
- Have an investment plan and try to stick to it. Life changes, you will experience good things and bad things, you’ll lose money and make money. You can’t control everything in life, but you can control, to a large extent, how much you save. Invest as much as you can and don’t waste your money; it’s too hard to earn to gamble it away.
- Improve your earning capacity. Study, work harder, work smarter, start a business whatever it is and give it a real crack. There are endless opportunities out there and Australia is a land of opportunity and abundance. Go for it. I have not met too many lucky wealthy people. All of them worked hard. Some incredibly hard. Keep a balance and outside interests, keep a network, and look for opportunities to get outside your comfort zone. The secret ingredient is often “BHW” – bloody hard work!
- Aim high, hit high. Set some goals that seem a bit out of reach.
- See the opportunity. All market downturns have been incredible buying opportunities. The GFC and COVID, looking back, were great times to invest. Google started in the aftermath of the dot com crash when all investors piled out of tech companies. You won’t time it perfectly and that is ok because no one can, but if your investment time horizon is longer than 5-years, invest through the downturn. Especially in your super fund – you can’t access those funds until you are at least 60 so invest and be brave.
- Cut out all your unnecessary credit accounts; like buy now pay later, store credit, credit cards and, if you can, car loans. These are very expensive funding sources generally and deplete your wealth.
- Check expenses like insurances, health cover, or any subscriptions and shop around for good deals.
- Steer clear of the smashed avocado and start drinking instant coffee! – Ok, just kidding. I confess to drinking instant coffee at times. It does the job, is quick and easy and costs about 10c vs $5!
- Make sure you enjoy what you are doing and have fun along the way.
At Scientiam we see the power in financial education – it can change lives for the better.