Flirting with Finance and Home Budgeting:

Anneli Knight has written the finance and budgeting book, Flirting with Finance. She also writes a finance blog for The Age and The Sydney Morning Herald. Her book is written with female readers in mind and it really tackles the question of how to understand finance and investments and make some smart decisions that can set you up for the future. This questions needs to be answered in a slightly different way for women compared to men. We were lucky to be able to get some time with her to get some advice for our readers.

Hi Anneli, could you give us a little bit of an overview on your history for our readers?
In my earlier years, I studied commerce and law and worked at a large stockbroking firm while I was studying. I worked in London at an investment bank, and then I worked as a lawyer before becoming a journalist.

So I had a background in commerce, but not so much in personal finance. In my twenties, I was always trying to save to purchase a house. But I noticed a lot of my girlfriends didn't really talk about money or savings; it wasn't something we focussed on.

But when I turned 30 and bought my first apartment, this opened my eyes to just what a benefit building your wealth can bring. Since then I have done a lot of finance writing, particularly for women because I think it's important for women to take interest in their finances so they can increase their choices in life.

How did your book come about?
Well, I met the co-writer Virginia Graham as she was my mortgage broker on my apartment. We got talking and came to the conclusion that women tend to switch off when the subject turns to money and getting their own finances together. I have always been into girl power just a little bit. But it made me realise just how important it is for women to increase their choices and opportunities by just changing their attitude a little.

So what are some of the differences between men and women where their home budget is concerned?
A huge difference is superannuation in Australia. Women on average at the end normally have half of what men have. Even the structure means if women take time away from the workforce, and all the research shows that we do; mainly to look after kids or care for sick parents. Of course, while you are not working your superannuation payments stop. Plus in 2011, we still earn less money than men, and women are more likely to be in part-time or casual work. Plus there is a compounding factor to women's budgets, because on average we live longer. All these influences affect savings later on in life.

To make the problem worse, there is a trend that women are just not interested in money. It could be a historical trend, because only two generations ago a lot of women were quite happy to hand over the managing of their money completely to their husbands. While a lot has changed during this time, some of our attitudes are still the same, and a lot of girls have not learned a lot about managing their money from their mums. So it can take a while for their attitudes to change.

I really think women at the end of the day just find talking about money boring. Most women would rather change the subject right away to something they consider more interesting. Part of what our book (Flirting with Finance) was designed to do was make it fun. Plus we set it in a context where you can have a bit of laugh about it.

There is a perception with men and women that when you live your life there is an invisible straight line. Down one end is finance and investments and down the other end is friendships and relationships with a whole bunch of other stuff in between. But I think people need to think of their line as a circle, and everything affects everything else; where you live, what you earn, your job, relationship, freedom and opportunities. Finance is only one thing in your life, but it 100% does affect all the other things.

In fact, some women will stay in a bad relationship only because they have the fear of being financially worse off if they leave. So in this scenario it really affects everything.

So what saying would you live by in your home budget?
This is an old one, but it is so true. "It's Not What You Earn, But What You Do With It".

I have a friend who studied law at uni and has been in the workforce for more than 10 years and does not have more than $10,000 in savings.. Sometimes people on higher incomes feel like they don't need to save because they will always have this higher income. [think you have mixed stories about two different friends, one who is my age and studied commerce (a male) and a girl friend who studied law and has 10K saving?

But as I keep telling her, there are a million things which that could happen to stop this high wage. What if she decides she wants to leave the workforce to have kids and is with a partner who is not earning much money?

Down the track, she might be really kicking herself because she didn't take this opportunity to set herself up, because you never know what might happen in life. Plus because she is on a higher income, she could get things done more quickly than someone on an average income. It would be much harder for someone who is earning less, than on what she is earning.

Opposite to this is me. I have been a freelance journalist for a number of years, and while this is not high-paying by any means, I have managed to save a significant portion of what I have earned. But I'm still living in a really good way. A small shift in attitude can make a huge difference to what is possible over time. I think a lot of people put off budgeting and thinking about money because they are waiting for the stars to align. Their excuses include:

When I get into my dream job I will start
When I earn more I will start
When I hit a certain age I will start

It's almost like people are trapped, thinking I will do it "whenever". But part of taking control of your financial situation is opening up your opportunities and not using it as an excuse.

Were you always good with money or was it something you had to learn?
Luckily for me, I feel like I was always good with money. I had my first job at 12 and two jobs by 13. This lesson came from my dad. Because when I was 11, I really wanted a computer and dad told me the easiest thing he could do would be to give me the money. But as he said, "you really need to learn the value of money." So I had to save a thousand dollars and this was how I started saving.

We have all made mistakes with money, what would you say your biggest mistake has been?
I'm not very good at investing in shares. I really just prefer property as an investment over shares. I think it's really easy to make bad investments in shares. You can quite easily sell when the market is going down or buy when the market is going up.

Plus sometimes you are just not able to make a clear decision. When I was working at the stockbroking firm, I could not decide which bank I wanted to invest in. And each bank's shares were only around $5 or $6 dollars then. But I really could not decide which one to plounk my money down on. So I didn't invest in any, and they all went up quite a lot.

But as long as you can learn from each mistake, and turn it into an opportunity next time, you become smarter over time. And hopefully you don't make the same mistake twice.

I have never really had any money disasters where I have been wiped out; I have just learnt lessons along the way.

If you could go back to your 21st birthday and talk to yourself about money going forward. What advice would you give yourself?
When I was working for a lawyer, I was going to go halves in a house with a good friend of mine. Both of us were on good wages for a couple of 25-year-olds.

Had we done it from a purely financial perspective, it would have been an unbelievably great decision. Those houses we were looking at are worth over one million dollars now. We could have got them far cheaper ten years ago.

But really this was my first job and I had decided that law was not for me. All I ever wanted to be was a journalist. So I was able to quit my job at the law firm and do my masters in journalism. Due to having no home loan, I had freedom. Had I purchased the house, I would probably have had to stay a lawyer. Every time I think back on purchasing the house, I think wow, maybe I would still be a lawyer to this day had things gone differently.

In 2008, the Global Financial Crisis Hit. Have you noticed a change in people's behaviour? And do you think they have changed back?
People are way more conscious of money, how to budget and investing. Plus if people did lose a lot of money they are now taking more time to learn where they went wrong.

In my experiences from 2008, the level of interest in money and finance has gone up.

What is your opinion on credit cards?
Personally, I think they are great with people who have a lot of self-discipline and use them for all the bonuses. I don't pay any annual fee because I have it as part of my mortgage. However, I get frequent flyer points, so every couple of years I have been getting a free ticket to Europe.

At the end of each month I review what I have spent. But I absolutely always, without exception pay it all back by the end of the month. Trust me; this is the only way to have a credit card.

I get really upset when people pay credit card interest; it is a really bad way to handle your finances because interest is way too high and it can be a real trap. So for people who can manage it, it's fantastic, but for anyone else, use debit cards.

We have a lot of baby boomers in Australia who have saved very little for retirement, and they don't have much in the super fund. What do you think the future holds for people in this situation?
As a demographic on the whole, a lot of baby boomers who own their own homes have benefitted greatly from the property boom. So some people, who will downsize in the years to come, will be able to benefit from the capital released when they sell.

For any baby boomers approaching retirement who don't own their house, now is the time to start taking financial advice to see what they can do. We are lucky in Australia, because the pension is still available, so a lot of people will not become destitute. Unfortunately, these people don't have the luxury of time, so they need to pull in the reins and live on a smaller amount of money right now.

A good exercise for people is to find out what the pension is now and see if you could live on less than that right now. Then you could start saving everything above this right away.

What sort of reaction have you had to your book Flirting with Finance?
The emails we have got regarding the book have been great. A lot of women have really appreciated the fun way we explained how to use your money but written from a woman's point of view.

A lot of people are keeping and using the book as a reference. So when it comes time to buy an investment property, they will come back to it and read this section. People have seen we have written the book as a bit of fun to explain concepts that are usually though of as dry and boring. It has particularly captured young women's attention regarding their money.

Thanks for that and to learn more go to her website www.flirtingwithfinance.com.au