Episode 130 | Young and cashed up: What millennials need to know about borrowing | Glen James, My Millennial Money | Insights from My Millennial Money

Everything millennials (and those who love them) need to know but were afraid to ask
In this episode, our hosts chat with expert millennial Glen James, financial advisor and podcast host of “My Millennial Money”. Glen’s business and podcast focuses primarily on millennial financial goals and “sorting your money out”. We get the lowdown from Glen on how millennials are achieving their financial goals, what they are doing to save for their deposit and whose advice should they be listening to; is mum and dad’s financial advice enough?

Here’s what we covered:

• How are millenials currently borrowing?

• Who can you trust to advise you on your money?

• Why advice from previous generations is out-dated.

• What is eating up your savings?

• Why should you ‘lose’ your credit card?

• How has spending, savings and borrowing changed between generations?

• Are subscriptions eating up your cash flow?

• Why you don't need a credit card to build your credit score.

• Are Millennials locked out of the property market?

• How to engage the most appropriate professional advice.

This weeks dumbo:

• Why Should you not buy property because you can.

Elephant rider boot camp

• Rentvesting vs dream home

RELEVANT EPISODES:
Episode 116 | Property & Taxes
Episode 124 | Martin North
Episode 128 | Trends in property investment

GUEST LINKS:
Home Buyers Academy - Rentvesting
Sort your money out - online-course

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: info@gooddeeds.com.au

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Buy the book - AUCTION READY How to buy property at auction even though you’re scared s#!tless:
www.getauctionready.com.au
Use the coupon ELEPHANT for your 30% listener discount.

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT: 
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded on 4 June, 2020.

Veronica Morgan: You're listening to the elephant in the room, property podcast, where the big things that never get talked about, actually get talked about I'm Veronica Morgan, real estate agent buyers, agent cohost of Foxtel's location, location, location, Australia, and author of a new book called auction. Ready? How to buy property at auction, even though you're scared shitless.

Chris Bates: And I'm Chris Bates, mortgage broker, and together, we're going to uncover, who's really making the decisions when you buy property.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website, as well as download our free, full, or forecast or report, which experts can you trust to get it right? The elephant in the room.com.edu,

Chris Bates: Please stick around for this week's elephant rider bootcamp, and we have a cracking Dumbo the week coming up

Chris Bates: Before we get started. Everything we talk about on this podcast is generally nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial advisor or buyer's agent. They will tailor and document their advice to your personal circumstances. Now let's get cracking.

Veronica Morgan: How hard is it really for millennials to get onto the property? Ladder is affordability really such a new thing that hits them unfairly? Does it really take an average person 12 years to save for a deposit in Sydney and nine years in Melbourne or with interest rates at all time low? Should they be busy saving instead of having lavish weddings and traveling? Not that anybody's been traveling of late, what are they doing? Right? What are they doing wrong? What can we learn from the way millennials are approaching life today? We're going to discuss the financial challenges facing first home buyers and millennials in general, I mean, is owning a home really on the top of their list of priorities. Anyway, let's bust some myths and if you're a millennial or your kids or friends are, I'm sure you pick up some really valuable information from today's guest. In this episode, we're joined by Glen James. He's previously been a financial planner, and now he's cohost of the, my millennial money podcast. Thank you for joining us, Glen.

Glen James: Thanks for having me Veronica and hello, Chris.

Chris Bates: Hey Glen. Good to chat mate. And just want to say off the calf, absolutely love watching your success and the growth of your podcast and just your scale, really impacting people, because I think we need more people like yourself out there educating around financial literacy, because there's a huge gap out there and just love seeing it. What made you kind of pivot and really focus on that millennial sort of market and start my millennial money podcast?

Glen James: Well, it was more of a you know, in my past life I'll call it. Now. I got to the point where I wanted a new challenge and I was kind of podcasting on the side and I really thought that hang on theory so much opportunity just to help people in a basic way, you said the word Finn financial literacy, and actually saw online this morning, there was a hashtag called fin lit and a few of us dinosaurs didn't know what that meant. But basically what it was the catalyst, I guess, was I used to have so many clients come into my financial planning practice that wanted financial advice. Now what the financial advice profession, Caesar's financial advice is different to the consumer. A lot of people were coming in saying, I need financial advice. And I was like, no, you need a budget and you need to stop overspending.

Glen James: So that just kept happening and happening. And I just can't charge people thousands of thousands of dollars to show them how to budget. So I had an online course the Glen James spending plan that I used to use with clients. And I say to them like, Hey, I'm happy to help you set up a budget, but it's going to cost three grand. Or you can do this online for $70, you know, pick one, I know what I'll do. And then it was kind of like, well, I was podcasting on the side and then I really wanted to turn up my online content. So I called a friend or two and said, Hey, let's start a podcast. At the time the word millennial was kind of everywhere and I wanted to do about money. So I thought, hang on my millennial money. They'll do.

Glen James: And then we just jumped on the microphone. It was a bit of a train wreck, but it was still taking off. So we've refined it all. And I guess we're here today and yeah, just helping people building a community and you're having fun while we're at it.

Chris Bates: There's lots of challenges. I mean, a budget's a huge part of it. No one teaches you how to manage your money. Society actually wants you to be very confused. The banks in particular, because you know what money comes in, they want you to spend that. So, you know, tap and go credit cards, short term credit. These are all things to make it more complex for you to actually spend more money. What are some of the other big challenges as you find with millennials where they're just constantly can't get over that hurdle, whether it's savings or whether it's investing, et cetera.

Glen James: I think one of the big things is particularly, you know, the top end of the millennial, I guess, age bracket, our parents were an are baby boomers. And some of the messaging that are coming from our parents, you know, two generations up. So you've got millennials, gen Y, then you've got gen X and then baby boomer. It's, it's actually just different. And I think the pressure that millennials receive from sometimes their family who are older just doesn't apply. So there's that element. I also think as well, like, you know, there's a lot of well-paid millennials out there. We serve our podcast group every 12 months and the average income of our listeners is 75,000 and the medium being 70,000. So a lot of well-paid millennials. And I think you couple the messages from an another generation saying, you have to do this, you have to do that.

Glen James: You have to save for your first home. It was like, Oh, I live in Chatswood. It's impossible to buy a first home. He, Oh, it's all too hard. And then you've coupled with, we've got a good income and the amount of crap that's available for us to buy that was not around 15 years ago, even is just chugging or clogging up our cashflow. So, you know, you could have good income and no assets, but you've got a lot of expenses and your cashflow is tied down. So I think that's a big thing that I'm seeing. And then it goes back to more of a cashflow conversation and how you build in your cashflow as opposed to, and that's why I don't like the word budget because a lot of the times a budget, you know, that work and feel like you've got constraints on you.

Glen James: Whereas I think I use the word spending plan because it's like, no, we're just planning how we're spending our money.

Veronica Morgan: It's a little bit like the difference between using the word diet or healthy eating.

Glen James: Yeah. And, and the whole thing is diets are crap because you just kind of jump into it and change overnight where it's not sustainable because you're not building that habit. But if you decide this, like, I don't want to be a diet. I want to be someone who eats healthy. So I don't want to be a hardcore budgeter. I just want to manage my money better. And a lot of people say, Oh, I don't know, like what expenses, how much things cost me. I say, Hey, when you get started on the Glen James spending plan, just make a guess, just guess make a, you know, if you've gone, well, I don't know how much the council rates are if I own a home or I don't know how much my car ratio is because you know, that was eight months ago, well say $800. And if it's less sweet, if it's more we'll deal with it, let's just get a start and just and just make that step to a good financial lifestyle.

Glen James: I'm wondering, I'm curious, you said that in saying the last 15 years, there's been different things for young wave, all of us really, I guess, to spend money on what sort of things are you, have you identified as being a real change in that really zaps the cash flow of somebody potentially trying to save them for their first home or just basically earning good money and not doing other things with that money. Yeah. So the real low hanging fruit might be the after pay. Is it pay a buy now pay later thing? Which is, you know, Oh, that item is $600 or I can pay $150 a fortnight for, you know what I mean?

Glen James: Like, so I think that's really easy for someone to compute. I want that right now. I can't afford it right now, but I can afford $150 right now. Yeah. Sweet. I'll do that. So that's kind of the low hanging fruit. And I really hope that the government steps in and start to regulate that industry or that portion, because what we will start to see, it's been another competitor after pay saying, Oh, it's now 10 easy installments. Whereas think if it doesn't get regulated, it could be 52 easy installments. And then it's so all that aside. So that's kind of the low hanging fruit side of it. Another thing cars, I mean, it's so easy to walk in and get a brand new car, 0% interest where the interest isn't actually a problem. Because if you look at a car payment, this is a small percentage of that payment is the interest.

Glen James: It's the actual chunk of capital. So it's easy to get brand new car finance. It's easy to use the emotional crutch. I have to buy brand new because it comes with a five year warranty. It comes with a seven year warranty. A brand new car is safer. Yes. But if you use that logic, it means you have to buy a new car every single year. So you can't use that logic. So, and then the other kind of end with the, you know, the rats and mice, there are subscription services. I mean, I coached a young lady who she was in dire need and you're about to get evicted, like horrendous situation financially. And she was in debt up to her eyeballs and it all came back to bad cashflow management. And she, we got, I think she got through it and she's like, Oh, should I borrow money from my boyfriend and all this?

Glen James: Anyway, she emailed me back a couple of months later, actually I may have emailed her and say, Hey, just checking in. How did that go? And she said, yep, I'm on. Well, on the way, I finally canceled a New York times subscription that I had at $27 a month or something I'm like, okay, well, let's just, it's awesome that you've got a New York times subscription one. You didn't know you had it. You're living hand to mouth, you know, trying to get by, like, why have you got that? So it just speaks to that thing that tack onto your cashflow that just clog it up. So there's just a variety of things in like even the food, like it's so good that we can eat healthy, but you pay for convenience. So the the box delivery services and all that stuff, I tried that. And then it pissed me off the amount of plastic that came in the box. And then it pisses me off

Glen James: That there was the assumption that everyone has the basic staples and I live in a batch and I don't have any basic staples and I had to cook it. So I get a light and easy box delivered, one so forth. It was just the throwing the freezer. But again, it costs money and you pay for convenience.

Chris Bates: I love the subscription ones. I've been guilty of that, you know, where you, you know, whether it's a TV or newspapers or, you know, lots of different things and they can easily add up. So what I, I mean, I don't know if you do this as well as I just purposely lose my card every three to six months. Yeah. And just call the bank and just say, I've lost my card and what it does is it automatically declines all my subscriptions. And then I have to know what you want it. Cause it's a behavioral psychology issue. So to actually go into, and if you go into a subscription service and how to cancel, like where do you find that.

Veronica Morgan: It's a total nightmare. I get that. But why subscribing the first place? Why wouldn't you change that behavior?

Chris Bates: Well, because sometimes you got up in the moment. Yeah. You want something. I really want to watch that TV series and you have these idea. You're always going to watch it, but then three months later, you still haven't logged in three months. And then you're like, well, I've just wasted 30 bucks on it. I don't want to cancel it now cause I still want to watch that TV series.

Chris Bates: And so you just end up holding onto these subscriptions because there's these loss of version that's at play. And so what I think you do the best way to do it is rather than trying to go in and cancel one by one and figure out what you got, you just lose your card and then it just declines everything. And then you have to then go and resign up. And if you have to resign up, it's a different like behavioral thing. Now it's like, Ooh, actually now I've got to make a choice, but I want to really invest more money in this. And I find that it's a way of just kind of clearing clearing out every kind of three, six months and figuring just basically tracking your spending.

Glen James: So the worst one I had was I had two Amazon prime subscriptions and I didn't even know it because I bought something rewind, email address. And then the next time you used another one and even like, I had a delivery yesterday from Amazon prime and I'm freaking out, I was like, Teeter at race, sign me up or something weird. It's just so confusing.

Chris Bates: When you buy the echo, they automatically sign you up to prime when you log in and you can, you've got your credit card on account. I'm pretty sure it automatically kinda signed you up. Cause I got caught out with that as well.

Glen James: Yeah. And I think we're getting at the point where it's like, you know, it's death by a thousand cuts. Like people don't end up in $10,000 credit card debt because they bought one lounge worth $500 and two chairs with two and a half grand. It has been the systemic death by a thousand cuts sustained over a longer period of time.

Veronica Morgan: So, okay. Full disclosure here. I'm gen X. You guys, both millennials. When I was interested, when you said there, Glen, about this, the temptations that are around now that weren't around say when I was growing up and you mentioned after pay and I thought to myself, well, they used to be lay by. Of course you didn't get the goods until you'd finished paying it off. There also has been credit cards for a long time. And to be honest, I don't really get the difference. There's also been interest free. You know, having almond and the likes of had interest free fridges, lounges, whatever for ever since I first set up home. So that's not really different. It's just a different delivery method. The car's same deal. You know, you could buy cars quite easily when I was young too.

Veronica Morgan: And they were coming down in price, et cetera, et cetera. The delivery services where I knew people on Jenny Craig and I used to get their, their meals delivered. So there was a level of convenience still even then, but, but the subscription thing is different. Certainly that whole page you go model. And, and even in business, I know it in my business and I, and I object to certain pieces of software. For instance, you used to be able to buy software and then you'd pay for an upgrade every few years, but now you pay, you know, a few hundred bucks a month or whatever. And it adds up to so much more. It's a great business model for the software company, not so great for the actual consumer and in business. And I, I noticed that change and I often will take the purchase option rather than the subscription option because of that reason.

Veronica Morgan: And obviously that's, that's coming to our everyday lives. And I do see that that's a much more insidious way of taking our money. But all the others, to be honest, I think it's same shit, different shovel basically.

Glen James: But I would push back on the comparison of lay by and after pay because lay buy in, like, I remember going to Kmart with mum as a five year old and you walk past the red light, special tin or bin, and then you go and she laid by us for Christmas. She was never engaged in any type of credit. It was just I'm hacking my behavior and getting the thing, putting it behind the sh in the storage section. And I'll put 20 bucks on it every week. So that's any type of credit work credit by default is if you take something in you own money.

Veronica Morgan: So no, no, I agree. This was said, you get, you don't get the good suit. You finished paying it off, but big credit cards. I mean, after pay is just a different way of yes. Issuing credit clearly. But what, I guess what I'm trying to say is that those challenges per se, the credit challenges are certainly something that gen X had baby boomers didn't have. I mean, I remember my parents getting their first bank card. It was the first time a credit card was around. Was that in the eighties, you know, I was definitely a kid anyway. Maybe the seventies even. So, so this is something that is in the last say three decades. 

Veronica Morgan: But yeah, I think that those insidious as I said, that the subscription thing, but the other thing that I'm curious about is there's also this sort of Insta world, you know, like there's the, the aspirational set there's, you know, I think what's his name? Bernard salt came out and accused millennials of eating too much avocado on toast, but there's obviously a lifestyle element to this and in aspiring to a certain lifestyle, wouldn't you, would you say that social media in terms of what it presents as the ideal life is, is I guess, asleep providing a slippery pole for millennials.

Glen James: Yeah. I think it's a, it's a cultural thing as well. I mean, we know now that there's actually more cafes, there's actually more places to eat out than they were 15, 20 years ago. So it's kind of like, it's this thing where it's like, well, there's more people wanting to eat out, so we'll do more, people will open more cafes because there's more, I guess, work to open a business. But I just think it's, it's like everything it's yes. I want everyone to go out and eat breakfast every day. Absolutely. But it's bloody expensive and it's a luxury. And you know, if you're earning 50 grand a year and trying to save for a house and trying to get out of debt and trying to do this, something's gotta give, and it's either the going out every weekend has gotta be turned down and you're capping that cost. I talked to someone, I don't drink alcohol. I never have, I've talked to some people. They like, I'll go out Friday night and I'll drop 200 bucks just on like going out. And that blows my mind, but something, I just think something's got to give, because our personal budget pie is only so big. So what do you need to do? Well, you need to either tweak the pie, so give and take to one section or make the pie bigger. And that means more income.

Chris Bates: In terms of doing your surveys on your younger generation. Have they really thought about the emergency funds and do they take it seriously enough as part of their finances?

Glen James: Yeah. And this is an interesting one and because that sounds so boring. It's like, Oh, my first financial goal is to have an emergency fund. And I mean the last, you know, however many years I've been crapping on about just doing that as your foundation, funny coming out of COVID the amount of emails, the amount of Instagram, the amount of Facebook posts said, man, I'm so happy that you told me about an emergency fund as my first thing, because it saved my butt. I got a thing the other day saying two years ago, we didn't have an emergency fund last night, the dog was really sick and we had to do emergency surgery surgery.

Glen James: If I didn't have the emergency fund, we wouldn't have been able to do that. We would have had to put pooch down. So I think it's just, it's getting to the point is like COVID was an example of something that happened that no I could plan for. And you just want to be prepared and have a strong foundation. And if it's your first financial goal to get out of debt, awesome. Get an emergency fund. Awesome. And yeah, we say three months worth of expenses. Realistically, do what you want. I like I'm sleeping just as well tonight. If your emergency fund is two grand or eight grand, but I think is a good life buffer that three months is good. And then once you do that, now we can actually attack our goals because that foundation is done.

Chris Bates: How do you recommend people deal with that though? Do they just leave it in their everyday bank account, need their other site, like their day to day spending? Do they park it at a different bank and manage it?

Glen James: Yeah, I think it's got to be out of sight out of mind just because it's actually, it's, it's an insurance policy and it's not like, Oh, we'll invest our emergency fund and these, because if something goes down, you know, I always say the analogy, if you out and you bite down on your bite, a bit of bone or chip your tooth, or have an accident and you need $2,000 for a dental thing or he need that money now. So, and people go, well, I've got a credit card for that. And I'm like, well, I think the worst time to go into debt is when it's an emergency. But also it's, the excuses are, well, what if I need the money right then? And there it's like, okay, well let's just park this and just talk about this little scenario. When have you ever needed, we'll just say a thousand dollars on the spot that day.

Glen James: I can't think of an, a scenario and now we've Oscoe internet and all that. You could have it transferred within the same day. So I think, just say I want a credit card. Like don't try and I don't care. Just say I want a credit card. I don't want an emergency, whatever. I don't care. But I'm just saying for, particularly for me speaking on behalf of myself, which I'm, yeah, I'm a professional at speaking on behalf of myself. I don't have a credit card because I can't trust myself. My emergency fund is out of sight out of mind because if I can see it, I'll spend it. So you just got to find who you are as a money, personality, and play to that and tell everyone else to shut up.

Veronica Morgan: Do you find that, are you really shocked with the lack of financial literacy of people coming to you and why do you think, you know, they are the way they are or we are the way we are, because I tell you there's, there's older people that have got very little financial literacy as well. Why do you think it's come about and what are some, the shocking things that you hear them say that you just scratch your head and think, Oh my God, you don't even know the basics. Yeah, it's funny.

Glen James: It's not shocking because I look back at me growing up when I first got my first job at 16 and then my full time job and all that stuff, my parents didn't sit me down and say, all right, so you're getting money coming in. I think you should have a spending account. I think you should have an account and work out your bills. So it just wasn't there. So if that was happening for Glen James in Berkeley Vale, new South Wales, I'm sure that's just going to be repeated hundreds of thousands of times elsewhere. So, so that's fine. But now we've got access to learn about how to manage money. And I guess my aim is to get people into their mid to late twenties without any consumer debt in good financial habits, because you can walk straight into debt and bad management, but you just can't walk out of it. And what was your second

Glen James: Thingy? What are some of the fallacies and stuff people say?

Veronica Morgan: Yeah. Yeah. What are some of the things that they you know, what are some of the things that they do say like, I mean, for instance, I read some, some research that said that, you know, a first home buyer, so these people saving for their first home. A lot of them don't understand what interest rates mean. They don't understand the concept of compounding. And, and obviously that feeds back into the credit debt, you know, because they obviously don't understand the negative of that as well. You know, and that sort of astounds me that you can sign up for a credit. I think you should be able to pass a financial literacy test to get a credit card for God's sake. You know, and I guess that, that, that shocked me that even when you get the bill in and you look at the numbers down the bottom, that it doesn't compute, you know, so I'm amazed at that. And how, I guess how prevalent is that?

Glen James: Yeah. And I th I think it's out there and just on that point about interest rates and credit and all that, it's the biggest fallacy that I see out there is people thinking I need a credit card to build my credit score because I want to get a loan. And that's actually just untrue. It's yeah. It's American culture that is snuck in it's all wives tales. It's it's just not the facts that the best thing you can do through your credit score is one pay bills on time to save cash. Hmm that's you know, I'm,

Glen James: I run a personal finance podcast. I'm a money guy. I'm in this crab all day, every day. I don't know what my credit score is, and I don't care because it doesn't impact my life because I pay all my stuff on time. Yeah. And I'd get on with my life, and I'm not dictated by some third party company. And again, if you want to drill down and get technical, and Chris could probably speak to more of that, there's basically three credit bureaus in Australia. And the banks have access to all of them. Now, the banks and the lenders, they will build their own credit profile based on the data they get. So if you log on Equifax or whatever, credit check thing, you get a free credit score. That's just one Bureau. And that's their view. The bank might get that data and go, Oh, that's cute. But on the statement there's after pay and it's overdue or whatever. So that means nothing anyway. So I think that's the biggest one about credit. And I would love, like, I love having philosophical discussions around the credit card thing, because why does anyone actually need a credit card? Like I am credit cards. I've had one, I just don't have one anymore.

Chris Bates: Yeah. I've got a bit of stick on this as well. Cause I've done quite a lot of posts around this and I despise them, you know, completely, I think you know, it's the same as CBA going to schools, teaching financial literacy, it's kind of same as McDonald's kind of teaching nutrition, you know, like it's unfortunately I remember when I was 18, I was adding $13,000 a year. I know I had a $10,000 credit card limit. Delicious. I mean, how do I, how do I even get that? You know what I mean? And so the problem is that, you know, the banks know that a certain portion like, like poker machines, aren't going to follow the rules and they're going to make a lot of money or those few that actually just fail to the system and the points thing, and actually how much interest she said, no, one's actually actually done the calculation on how much it actually saves you and gave me if you spend, you know, $10,000 a month, it's not actually saving you much interest. It might only save you about four or $500 a year worth of interest. And a couple of missed payments, or even just buy one more thing on your credit card. Cause the mindset, and you can probably walk out your savings. So,

Veronica Morgan: You know, it's like when you go to your accountant and you count and says are right, we want to save you the tax issue. So how about you move you forward, pay all of your health insurance for next year, I'll be on June 29 and then he can get the tax deduction for this year. And I'm like, that only works once. And the credit card is a bit the same. You know, you basically you're forwarding your forward paying or your back forward paying everything by one month. That's all, that's all it buys you one extra month.

Glen James: Exactly. Yeah. And there was actually, I did a webinar online, obviously with, I forget what it was for. I was a guest on someone's webinar and there was somebody that was saying, I, what should I pull 10 grand out of super or something to pay off my credit card. And it got into the, I guess, a philosophical discussion and this individual said, Oh, I don't have credit card debt that is left there month on month. I've just got it this month. And I've lost my job. So basically this individual was running on the line month on month. He's cashflow stopped. He couldn't clear that 10 grand off the credit card. Yeah. So it's had to stay on there and he got stung. So I just think I just don't run on the line financially. And I mean, there's a discussion, to be honest, I would probably, if I travel again overseas, I mean, I've done it the last couple of times to the States without a credit card.

Glen James: Last time I was there in February, I did get caught out and it was a Royal pain in the ass. Try hiring a car from an airport and dropping it off at another location. It's not happening without a credit card. There's a law in the States where you actually can't do it. So that was a pain in the ass for me. So do you use a debit card Glenn? All I did and I do, but if I go back overseas, I probably will get two grand credit card or something.

Veronica Morgan: Just so a debit card wasn't accepted like a debit visa?

Glen James: No, not at the airport. No. So I think what it is, it's S it would have been if I was picking it up from the airport and returning the car to the same airport, but I was driving from Columbus, Ohio to Nashville and dropping the car off at a separate higher car location. So I had to get an Uber and go to another car, high plays downtown and do it from there. Yeah.

Veronica Morgan: They worried then that you may not have funds in the debit card.

Glen James: I think it's an extra layer of being able to track you down because it's an official credit bank product or something like that. If you steal the car, I don't know what it is, but it's actually, there was no hire car place in the terminal that I could get a car with my debit card.

Veronica Morgan: So back to millennials and their attitude towards housing, I mean, we interviewed a fellow named Chris Def some time ago is who's looking at building a different sort of model for first time buyers down in in Victoria. And he was saying that he's, he's research had said that you know, millennials are basically felt that they'd be locked out of the property market, that it just wasn't for them. Is that the sort of feeling you get when you're talking to millennials about buying their first?

Glen James: Yes. Until they start to have the conversation. So for example, again, you might grow up in suburb, a living on straight a and the instant thing is I need to buy a house. So I start just looking around the same suburb. Now, if you, if that suburb happens to be within three kilometers of a CBD of Australia, that might not happen, that's bloody expensive. So then it's that, Oh, it's too hard. Oh, I can't do it. Oh, it's overwhelming. However, again, we're living in a different generation. Maybe if property is your thing, maybe you have to have a bit more strategy and say, look, I want to build wealth for the future. I like living in this capital or, or around these beach area. That's expensive. So I'm going to have to rent here because I like the lifestyle part and invest and buy a property elsewhere and essentially rent vest. I mean, where I live at the moment on the new South Wales, central coast, you know, run of the mill suburbia house, very much attainable. And there's, you know, plenty of first home buyers on the coats that are doing it. But the ones that I know who are, you know, have quote unquote, everyday incomes, they've sacrificed, they haven't had a new car. They haven't gone on international holidays. They've chosen one thing stuck to it, got intentional and nailed it.

Chris Bates: And I guess it's, if you know, central coast is a good example, right? Because when you're talking about people who say they were living in Sydney and they're looking around and going a bit too expensive, part of their compromise was a lot of people going to the central coast to say, well, yeah, I can't afford where I want to live today, but I'm going through a lifestyle shift at the moment and a transition from sight single to couple to family. And I'm willing to compromise. I'm willing to change locations. So that's one of the things I guess millennials are doing is they're potentially willing to shift locations just to own a home.

Glen James: Yeah. And I think like if someone says, Oh, I can't afford a house. It's like, okay, well, let's, let's have a look at that. Well, you've got a car payment of $600 a month. Okay. That's a factor. You paying a little bit too much in rent. That's a factor you might be doing this. That's a factor. You might be able to afford them, but it could be in another place that isn't a capital city. That's a factor. So I just, don't like to see when people just throw their hands up. Oh, it's all too hard. One. It could be two cases. They actually don't want to change their habits and behaviors and they love overspending. And just, it's an excuse or the other one where we can really help is, Oh, it's all too hard. We'll know it. Isn't because of X, Y, and Z.

Glen James: Oh, sweet. Let's put a plan together. I kid you not the amount of testimonies that we get when people do the Glen James spending plan. There's a podcast episode on my millennial money where a couple save 20 grand in one year just after doing a spending plan. Like, wow, it's unbelievable. I get ones. Are we save an extra $500 a month? We didn't even know we had, so it's actually it's possible. But you just have to decide what side of the fence you're on. Are you saying it's impossible because that's a nice excuse for me to keep, I'm not getting my life together financially, or he's saying it's impossible because you want more information and want to learn other ways. Which might mean whether you're a victim or not, isn't it, that's it. And that might mean we had a, someone wrote in the other day, like my parents they're discouraging me from doing a property invests or buying a property.

Glen James: So it's like, okay, well, let's unpack this. Are they discouraging you? Because they know that your life's a financial mess and that you're overspend and you're in debt and you aren't listening to anyone or are they fearful because they've never been able to buy a house and they renting. And so what of that? So it might be okay. Well, if it's a good relationship with your parents and it's not the latter that you're overspending in your, a brat, it could be well, mum and dad, what about we go and talk to a mortgage broker or talk to somebody I'd love to have you there and just let's get information. We're not deciding tomorrow, but let's just get informed. Or it could be the other thing, like my parents, they're totally supportive of what I do, but sometimes now with bigger decisions, I'll just tell them after the fact, cause I don't want to freak them out. Hey mom, dad, I bought an investment property. Oh, awesome. That's radical. Hey mom, I've got a motorbike. You what? So, I mean, it's all with respect, but so I just think it's so hard. It's so hard to give blanket crap on a podcast because there's always different scenarios.

Veronica Morgan: Did you, did you get answers to those questions or that was sort of rhetorical questions with what? Sorry, you know, the person saying, you know, my parents are actually against me buying a property.

Glen James: Yeah. We actually didn't know. And I'd love to it was an anonymous question then I'd just, I'd love to actually chat to that because it's just such a, an interesting question. Whether my parents are against me buying a property, that's just one angle and we just hypothesize on, is it the angle because you overspend and you don't have a job or is it because our parents are fearful? I mean,

Veronica Morgan: Exactly. It's, it's fascinating. Cause sometimes you get also the idea that the parents never managed to get an investment property and though for like failures and so they want to be what we don't understand. Yeah. Yeah. So there's all sorts of stuff that goes on. I mean, I see on the flip side, you've got parents that are overly confident about, you know, the fact that they bought one family home 40 years ago and it's done really well and overly confident and think that their kids and they pressure their kids into buying and the poor kids go and buy stuff that basically traps and financially for the rest of their lives. So, you know, not all property has good property to buy and, and certainly the over positivity can be just as bad from coming from the parents. As an I, as over negativity,

Glen James: I met with a client once a couple of years ago, it was, it wasn't even a client. It was somebody and I didn't engage them because I just couldn't add any value. And you guys will find this, you'll get it. You know, they bought property in Sydney in 2010 and did really well, like pretty much rode the Sydney property wave out. And that meant in their mind they were sophisticated investors. And no, you're not. You just got lucky. And what you're about to do next is financial suicide. But we couldn't tell them because in their mind they're successful. Yep.

Veronica Morgan: I hear it all the time. So it seems to be, you go to a barbecue, you go to a party, whatever, a dinner party and minutes, someone knows you're in property. It's, they've full of advice or full of trying to tell me how much they know. And they start telling me their property stories and I'm horrified. Most of the time I'm absolutely horrified. And I think they've got no idea what ridiculous thing they've just done and how they've risked everything. I was talking to someone, Oh God, you know, this, this couple. And, and they've, they've obviously had some financial problems in the past because they had, had actually had to sell their house at some point to pay off debt. And then they went off and got some advice from one of those spruikers and they are waiting. They've gone to put all of their super money.

Veronica Morgan: So everything they had in super now has been put towards an off the plan, one bedroom apartment in Melbourne without parking that hasn't even settled yet. And I'm like, there is, I would say zero chance that that property is worth more, will value at what they offer, what they paid. I would say now you know, the, there's something like 60% of properties of, of apartments in Melbourne, the last decade on the second. So the first resale 60% has lost money. You know, the tax benefits, you know, it's like, you're paying 15% tax in super. So therefore the depreciation, everything really doesn't, doesn't add it's minimal. And you got to lose money to get money there anyway and all this sort of stuff. And I'm like, I'm like thinking how the hell, but their justification was. Oh, but the data this company supplied us with was fantastic.

Glen James: Yeah. It's just it's well, and it's, it's funny as, I guess we could say we're podcasters. I, the more I podcast, the more I do stuff, the more I say, this is just my view on what I do, because I don't want to sound arrogant or smug. And I made that comment earlier about, yeah, if you want a $5,000 emergency fund, I don't actually care because that's you, and you've got to make that decision, but this is just what I do. And a lot of the time people will have a problem with my answer. It's like, no, you asked me what I thought, because it doesn't line up with, but at the end of the day, I'm sleeping just as well tonight. I'm just telling people what I would do in that situation.

Chris Bates: I think you're you're right. I think the, you know, the parents' sort of impact is a huge element. You know, whether it's positive or negative, you also especially if they've gone and bought an investment property, every property investor thinks they're an expert. Even though, you know, 80, 90% of property investors only buy one property, but what do you think about the friends impact for millennials and the kind of work colleagues and then kind of giving them financial advice and then following what their friends are doing when their friends are in assigned stage and nothing they've done is really been proven. They've only kind of done it yesterday or the last month or so. How do you think that the social sort of environment that people are in are compounding, you know, either good or bad behaviors?

Glen James: Yeah. I mean, on the friends and colleagues, quote, unquote advice flip a coin, like you got to get whatever the coin flips. Like it could be some really good advice or it could not be I'm a big fan of encouraging the, my millennial money, I guess, podcast community too. Don't be afraid to pay for advice, to pay for professional advice, whether it is with the pro, like as example, it's not a plug for John pitcher, my cohost, but he's whole business is fee for service, property coaching. So you could pay him just to be a sounding board like we do these clarity calls. So, you know, he might charge $300 for a clarity call, but at least it's a third party. Who's a little bit further along in your world and can just give you some clarity. And I think it's, you know, people will save up and like, I wear nice shoes. A lot of you wear nice shoes. Those shoes might cost $300. Those shoes might cost $400. Why you not spending that same value, getting a little bit of advice before you pull the trigger on a $500,000 deal.

Veronica Morgan: It just doesn't have these conversations all the time at this, this fellow ring me the other day. Cause of course I'm a buyer's agent and he rings me and he's, he's talking about shelling at two point $4 million on a, on an apartment. And he hasn't really thought through exactly what he wants, the how long he wants to own it for. If he doesn't have a plan at all, it's, it's his first residential property, obviously he's got very good earning potential. And and, and he's a millennial what gets me, it was like, I, you know, I quoted him just shy of $10,000 to advise him on this particular property, which I actually think is really cheap, you know, compared to the actual risk that he's taking and he's arming and Aring over and I'm like, mate, you would rather take a two point $4 million risk rather than risk 10 grand to really pressure test that two point $4 million risk.

Veronica Morgan: Are you seriously that that's what you're going to do.

Glen James: Well, in that discussion, like I've just got my calculator in front of me. I would say to someone like that, it's like, Oh, okay. So you're spending two point $4 million, right? You don't want to spend under half a percent 0.4, 2%. Yup. So I think my view with professional advice, whether it's engaging a mortgage broker that might pay an upfront engagement fee or something of $200, $5, whatever that is. Yeah. It might be paying a financial advisor for some strategic tax advice with planning or something like that. It might be paying your accountant. I tell people you want number crunching, pick up the phone, so your accountant, Hey, can you do me two scenarios? How much would it cost like, Oh, we'll do that. I'd love to. So I actually think professional advice should and will pay for itself, but you've got to get into that mindset of it's okay to spend a couple of hundred dollars on getting advice.

Chris Bates: And this is sort of by selecting the person you know, you've worked in financial advice for a long time. Glen and I have Veronica is working buyers agency or property world and you know, accountants, you know, et cetera. You know, if you walk into five different of any profession, the quality of that advice will vary dramatically. And I guess it's just sometimes the people will go get the advice with the mindset that it, or validate what they're doing. And it's very easy to be in a validator as an advisor, you know? And so if you go in there with that mindset, what you actually want to do is go in there and be expecting the advice is going to be X and then be told something completely different and have your, your version of what's right. To do completely destroyed. And that's some of the things that I love to do on the first phone call. We clauses though, they'll come in, they'll think that this is, this is the right thing, and this is what I'm going to do.

Chris Bates: And I'll say, well, these are some of the challenges that I don't think you're thinking about and you know, and then they go, wow, actually I actually need to save more actually, no, I shouldn't buy that type of property or whatever it might be. And I think you just gotta be very careful with advice. Are you paying just to validate or are you paying to actually hear what is actually the best, best advice?

Veronica Morgan: I also think when it comes to property, see, in financial planning, you've got really tight controls over who can give advice and what have I should given how you give that advice, right? Problem is it, property is, it is unregulated. And people are giving advice all the time without actually ever really fully understanding that even the fundamentals or even the very fact that 95% of property is extraordinarily dangerous to buy. And I'm actually trying, I was talking to Eliza. I went from CoreLogic the other day, she's now the author of my favorite report, which is the pain and gain report. And of course this, this pain and gain report comes out every quarter. And it shows how many properties in Australia sold a loss in the previous quarter. And it's sort of plus, or minus 10% every single quarter. And that's, that's not including the actual cost of owning the property or you renovated it

Veronica Morgan: Is pure SAR price. So the real figure even just went, she said to me, she just even just vetted in stamp Judy, the real figure then goes up to 16%. Just if you factor in stamp duty, adding all their rich, you could be talking, you know, feasibly 25% of everything. Every property that sells in Australia sells at a loss. And that's been not including all the property that is not being offered for sale that is currently worth less than what was paid for. It. There's an enormous risk in buying property. And unfortunately there's a lot of people giving advice on property that have absolutely no idea of this.

Glen James: Yeah. And that's why, you know, I, I jokingly because I've got property, I've got investment properties, I love property. I've got shares. Like I just love life hashtag living the dream or whatever. But when I was a practicing advisor, I would call them properties, zombies, where they just want properties like, well, I actually can't help you because it's not my bag. So that's when I would refer them over to John pigeon. But I just back to Chris's point with the professional advice, I think for anyone out there who does want to engage professional for any type of advice, sounding board or whatever, always ask the question, look, I want to discuss two strategies with you. And can you tell me in your view, the pros and cons of each one, because at least then you'll get that negative advantages and disadvantages. When, you know, I might do a statement of advice, a formal financial advice. There will be a section advantages and disadvantages. So I think it's clean to know the downside risk because when we talk about risk, there's a spectrum of risk. Like, and it's how much you want to take on in terms of risk.

Chris Bates: So yeah, exactly. There's always some potential unintended consequences that you may not know about. Cause you thinking about the upside and the you know, like just recently there was advertised in the kind of IFR S M H for over a year was a number of funds that were targeted very heavily at wholesale investors with a very guaranteed investment return. And these were, these were advertised pretty much for a year straight. And that fund just went under, you know, in the last couple of weeks, I don't want to name it because it's going through courts and stuff like that. But you know, this is something where you get attracted to the rate, but no one would have explained to these investors, the risks with being a wholesale sort of investor, the problems with the liquidity and how these funds can go under. And a lot of people just lost all their money because they chased what they thought was a guaranteed rate. So you're right. You've always got to be thinking about the disadvantage and the downside. I think whenever you're making financial decisions, because it's so easy to get excited about the upside. But that's also not guaranteed most of the time. Anyway, I think

Glen James: We've got to say loud, like life is full of risks and even our financial life is full of risk. So, you know, you could have cash in a savings account, alternative posits. There is actually still risk holding them at cash that it will be eroded by inflation, but you might be willing to take that risk because you can't take a greater risk of loss of the actual capital.

Veronica Morgan: Now on that, have you got a property Dumbo forest Glen. Okay.

Glen James: My Dumbo. And I'll shout out to my sister cause you can pick on family, but it's a parallel that we see time and time again in the my millennial money U Facebook group in with our listeners and just with friends and family. And I think it's executing an investment or doing something without a strategy in mind. So I'll give you an example. My sister brother-in-law, I bought a house. Awesome. Oh, let's buy an investment property. Awesome. Oh, we want to start a family. Awesome. Oh, can't afford the investment property anymore. Alright, we'll sell it. So the problem that can happen is I reckon if you did an autopsy of the purchase price of the investment property over the five year period, for example, purchase price, maintenance, interest repayments, and I'm talking wash up after tax stamp duty, exit costs. I reckon they cost them money. Are we going to cost them money? Yup. So the Dumbo is the execution is the easy part. It's easy to go and buy property tomorrow. It's easy. Like there's probably is everywhere. Go and buy one easy. I'm being dramatic FYI for those who don't know me. But take the time to do a strategy. Okay. And that could be, well, this first strategy is we're going to get our emergency fund.

Glen James: We're going to make sure our insurances are in place, our income insurances. So that's factored into our budget. We're going to make sure we have a, you know, a system mated, automated spending plan, budget, whatever you want to call it, then we're not going to say, okay, over the next five years, what do we want our life to look like? If we buy an investment property, is that for us? Or should we just pump money to a share portfolio that gives us absolute flexibility, whatever your strategy is. You just got to play it out rather than just looking two feet in front of you. I always say you gotta have one eye on the future one eye on today because you just need to hedge that because I've just seen too many people pull the trigger on buying an investment property without spending 10 minutes thinking about overall strategy.

Veronica Morgan: Yep. It's very true. And it comes back to that guy. In my example of the guy wanting to spend two point $4 million on a property without actually knowing what he wanted in life, he's got a partner. I said, do you want kids, you know, to want to get married? Is this, you know, do you, he's not even from here originally, I was like, do you want to stay living in Sydney? Is that, is that your longterm plan? How long do you think you'll live in this place? Will it ever become an investment property? Like all those questions? I dunno. I just like it. Well, that's lovely. And if you're happy to, to take that massive risk in that plunge just cause you like, and you want the, I like the idea of owning it. Then you've got to understand that, you know, your circumstances might change and all of a sudden you find yourself selling it and costing you a whole lot of money to go rent something a lot nicer.

Chris Bates: Totally. I think you're bang on that's amaze. Probably the biggest mistake where people go and buy the property just for the sake of buying something, without really thinking through where they're going. I haven't heard anything that says that millennials are any different to gen X just telling you this is all the same shit that I went through. It's same silly justification, same argument, same lack of foresight, everything I eat the same as human condition. Yeah. And that's what I was going to say. The common denominator is you're a human being and weirdly there's a module in my spending plan because not like I'm not trying to blatantly promote it, but whatever. Where I talk about habits and behaviors and I draw so like a 25 year old at one end of the spectrum and a 65 year old at the other end of the spectrum.

Glen James: Okay. So things that get better over time, it could be, my income gets better over time. My assets get better over time and a few other things, things that get worse over time, it could be my health gets better over time. My, I don't know looks get worse over time. My libido gets worse over time. Your number of ex wives and husbands gets worse over them, but there's one thing that actually flat lines and doesn't change. And that's your habits and behaviors, unless you conscious enough to change it. And that's why at the retirement village where Bob and Mary are bitching about the next door neighbor, there's no different than the boys and girls in the school yard bitching because it's the human nature that doesn't change over time.

Veronica Morgan: It's such a good point because what you're basically saying there is the one thing that you yourself can do is actually look intentionally at your habits and make a choice about what you're going to do. And then that can impact on your future. Absolutely. I think that's the, really the nub of this. And we will include the link for your spending plan course in the show notes. Why not? It sounds like such bloody good advice. And I think, you know, if, if everything that we can get to at the end of this conversation is really the fact that to get educated is really the answer. If you have no financial literacy, you're going to make really terrible decisions. If you have some, you get to choose whether you make a bad decision, a good decision. So we really appreciate you joining us today, Glen, this has been really interesting and at times very philosophical chat. And I thank you for having me and sorry if I came across a bit harsh in some points, I just get so passionate it well, funnily enough, you're very moderate in the way you deliver your patient.

Veronica Morgan: It did occur to me earlier that, you know, it's not really sexy talking about, you know, savings plans and actually choosing not to buy new cars and choosing not to go on holidays and choosing not to go out every weekend and blow two on a bikes at the bar, you know, to actually have a goal and work towards that goal and make active decisions every step of the way to get you actually, where you want to be. So it's not very sexy, but Hey, when you have financial freedom, when you are in your forties, fifties, sixties, that's sexy. And that has been life does get better.

Glen James: Totally, totally. We're about to do a series on what to do with your money in your twenties, thirties, and forties. Oh, what about fifties? Well, it's millennial money. So draw the line somewhere. They will 51 day. If you're lucky.

Veronica Morgan: Thank you so much, Glen. We really appreciate your time. Thanks, Brian.

Chris Bates: Great to chat with you, mate. Thank you. We want to make you a better elephant rider and this week's elephant rider training is let's have a little bit more of a chat about rent vesting. Now rent festing is, as you would have heard earlier, it's where you rent, where you want to live and you buy where you can afford. And so therefore you buy an investment property rather than your own home, and it can be a very effective way to get onto the property and the letter for some first home buyers, there are drawbacks to rent vesting, and there are advantages to rent vesting. I mean, one of the advantages is, as I said before, you get to live where you want to leave. You don't have to compromise on your lifestyle or your connections or your proximity to your work.

Veronica Morgan: For instance, in order to buy a property, you can also, there are some certain tax advantages of rent, vesting I E you get negative gearing. And also it means that you've got rent coming in to help pay that mortgage. So there's some of the advantages of investing and also you get to get into the property market at the same time. Some of the downsides of our investing is that that capital gain that you get, because assuming you're buying a good property that goes up in value, and that leads to another thing. We'll talk about the sick, but sometimes you might be impacting on your borrowing capacity, which means that in the future, if you decide to partner up and have kids, you may not be able to afford to actually buy a home. At that point, even though you've got increased incomes, for instance, because you've tied up your borrowing capacity on an investment property.

Veronica Morgan: So there are things to consider and that's where having a longer term plan is really important. So you don't sort of back yourself into a corner. But the other thing that I really want to say around rent vesting is at what often happens is people go, well, I'm going to live where I want to live and say, that might be in Bondo beach was in Kilda, right? Or somewhere expensive. It might be in a, you might be living in Brisbane. You might be living wherever you're living, you live, where you want to live, and then you think, okay, well, I've got to find an affordable location to invest in. And that's where the danger starts. Because when you start thinking, I want to buy an investment in an affordable location. You're starting to go into B and C grid locations, and you're starting to take enormous risk because affordability sounds sensible, but it isn't necessarily always sensible when it comes to property.

Veronica Morgan: So when you're buying an investment property, don't then just go, okay, I've got to turn to an affordable location. I'd be looking at what is the best location I can possibly afford to buy and where I can afford to buy a quality asset. And it might be that it is a one bedroom apartment in a really good area, or it might be that there's certain areas where you do not want to be buying an apartment. You definitely don't want to be buying a one bedroom apartment. So you really have to sort of look at what your budget is and where you can get the best bang for your buck, but take the word affordable out of the equation. Because if you start looking at affordable locations, you might end up buying an apartment in Brisbane or in Melbourne, for instance, and holding an asset that is not expected to go up in value and might actually declining value over the next 10 years, which is defeats the whole purpose of rent vesting in the first place.

Chris Bates: I think you're a hundred percent now the two issues I have with it is the future home. And secondly, a lot of people rent vesting though, the quantity strategy rather than the quality strategy. I think there's a, there's a final element to it that has changed back before appro did a full crackdown on the banks, you know, in 2014, 15, 16 and that basically reduced borrowing capacity for investors. Now you used to be able to borrow a lot more if you wanted to build a big investment portfolio rather than going and buying a home. And you used to be able to borrow 10 times income for investments, but only six times income, if you wanted to buy a home. So rent vesting did use to work because you used to be able to buy a lot more if you wanted to buy investments rather than homes.

Chris Bates: And then that would grow for you potentially at a much compounding bigger rate. And so it sometimes made sense to invest rather than buying a home. And the second thing is interest rates when interest rates are higher, it actually makes more sense to go down and investment routes because of negative gearing. The, and also because the cost of owning a home is higher. So your mortgage repayments in the part of that interest, you lose is much higher. So when rates are very low, it actually means home ownership's cheaper and potentially buying a home is a better strategy because it's grows tax free. So rentvesting is great in the old world, but it's not perfectly suited for the new world of low rates and the same borrowing capacity.