Opinion
After 20 years of columns, here’s what’s changed about money
Nicole Pedersen-McKinnon
Money contributorTwenty years ago this week, I walked into (formerly) Fairfax HQ and my dream job, after a stint writing and editing for Financial Times Business in London.
I had to hit the ground running because Aussies’ appetite for financial information – and help with strategy navigation – was insatiable. The mining boom was bonkers, and everyone was wondering if it could last forever. Spoiler alert: that theory was crazy, and I was frantically warning thus.
Nicole Pedersen-McKinnon has been writing about money for 20 years. Here’s what she’s learned.
But our land – and sharemarket with a 16 per cent one-year return – was flowing with milk and money. Inflation, at just 2 per cent, wasn’t even reducing it yet.
Property prices though – goodness! If you had some, you were sitting pretty; if you didn’t, it was a pity. The market was over-heated and over-hyped. The only thing was that interest rate hikes were starting to bite … those last bits sounding familiar?
Except that forget today’s 4.35 per cent official interest rate. In May 2004, we were already at 5.25 per cent and on the way to 7.25 per cent.
By then, though, it was 2008. I recall standing with colleagues around a (possibly cubed) TV at The Australian Financial Review, expert jaws all on the floor, as the Aussie sharemarket plunged 8.3 per cent in a day (and 16 per cent that week) in the worst falls since the 1987 crash. The global financial crisis had hit and was threatening to crack our credit system.
You will still succeed – ultimately – if you grow your income and squeeze your expenses, and smartly squirrel away any excess.
Besides those from traumatised retail investors, some of the most heart-rending reader phone calls I’ve taken were from people who had panicked and fixed their mortgage interest rate just before rates were slashed to (then) emergency settings of 3 per cent.
But nowadays, we might consider all that light training for the year 2020 and the COVID economy. Because lest I am coming across like an annoying, “in-my-day-we-had-it-harder”-type, that’s far from true.
If it feels so, it is tougher now than in the past 20 years to get ahead.
It was a full year ago when I crunched the numbers that showed it had become worse for home owners than in the painful, pinnacle-interest ’80s and early 90s. To quote myself: “[The] interest rate today devours a gut-punching 58 per cent of our income.”
No, it’s not a function of that rate itself, some 8 per cent as opposed to 17 per cent back then, but the sheer loan size – the amount you have to borrow now to call a home your own.
However, it’s also far harder to get approved for loans – and there’s a frightening new phenomenon of mortgage prison (meanwhile, advance-income facilities, buy-now-pay-later – so far – and payday loans and their predatory like remain dreadfully, dangerously accessible). The spellbinding Royal Commission into Banking and its 2019 revelations of fast-and-loose consumer protections saw to that.
Speaking of safety, insurance premium pain is a massive modern challenge. That essential insurance is now being dropped by Aussies stretched to breaking point terrifies me. What if your house is destroyed, and you can’t rebuild? Or your income ceases? Or your health has a blip?
But there – thankfully – is also more help at hand. Such as:
- Cheap and easy investment options. Twenty years ago, for the Fin Review, I delivered the Australia keynote at the World Money Shows in the US and UK. The audiences were mad for a thing called exchange-traded funds that let you ‘buy’ a market or index (they were also mad, predictably, for Australian miners). Fast-forward to today and ETFs have as much profit-turning traction here. And thank goodness for online brokers making investment affordable.
- Funky – often phone-focused – fintech products. I note particularly the 2016 introduction (and trailblazing integration with your bank accounts) of round-up apps. Micro saving and investing in the background of your busy life could make it a whole lot better. (The downside of the tech take-over, besides the now fast-march towards a cashless society, is that virtually every money move you make is today mapped and tracked, unless you go off-grid.)
- Super. Though messed with over more than 20 years and under fresh threat from a (bad) Coalition policy to allow access for housing, it’s better. It’s on its way to a set-and-forget level of 12 per cent by July 2026. And there’s a lot more transparency about the balance you are headed for versus what you need – and forewarning if a dud fund might thwart you.
Oh, how different smart money management is from my start 20 years ago. Well, same same … but different. You will still succeed – ultimately – if you grow your income and squeeze your expenses, and smartly squirrel away any excess.
And getting out of housing debt fast – therefore handing over as little possible extra as interest – works wealth wonders. But, yep, those things – though done differently – remain freaking difficult.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter or Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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