Musings

The Importance of Financial Education

“A wise person should have money in their head, but not in their heart.” ~Jonathan Swift

Over the last few weeks the financial services industry has been all over our newsfeeds, TV and newspapers, and if you’re like me the Royal Commission has made it into the lunchtime conversations at the office. There’s been some devastating stories and disgraceful misconduct exposed, and countless articles on questions to ask your financial planner and how to avoid being ripped off by your financial institution.

My big takeaway from all of this, is that you can never truly trust any sole person or corporation with your life savings. I wonder how many times we have to hear these devastating stories, before we take control of our finances? Who knows what the consequences will be for these individuals and corporations? A warning? A fine? Maybe even jail-time?

Only one thing’s for sure — you need to take control and responsibility of your finances, and you need to financially educate yourself.

You are going to learn most of your financial lessons along the journey, but it needs to be your journey, When you outsource your finances to someone else, they make the mistakes and they learn the lessons, and you miss out on so much. Yes, sometimes it is appropriate and even necessary to seek out professional financial advice, but without a basic level of financial literacy you have no way of knowing if the information they provide to you is in your best interests.

I have definitely made mistakes and lost money along my own financial journey, but I have owned those mistakes and I have learnt from them. It’s not something that you can master overnight, rather I think of financial education as a lifelong journey of knowledge and lessons. I can’t promise you that your journey will be easy, but I can pretty well guess that it will grow and empower you.

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” ~Ayn Rand

While all of these news stories may make you want to run and hide from the industry all together, it is important to know that for every bad seed out there, there are countless others who are passionate and dedicated to the industry and to providing you with high a high quality service.

I know young Australians want to learn about their finances and take control, but they often feel as though it is out of their power. Let me tell you right now that no one can force you into signing the dotted line for a financial product. You can choose everything from your transaction account to your superannuation, but most people don’t realise how much choice they actually have when it comes to their finances.

The main thing that I hope you takeaway from this — is that it’s never to early or late to take back control, and get started on your financial education journey.

If you want to get started, the most important resource I would like to suggest to you is ASIC’s MoneySmart website, which has such a huge wealth of knowledge contained within. They also offer free downloadable guides that cover a whole range of topics from first-time investing to planning your superannuation.

Another good resource for those interested in investing for the first time is the Australian Securities Exchange (ASX) website, where they offer free online courses, videos and even the ASX share game (where you can try out investing without using your own money).

I’d love to hear your thoughts on financial education in Australia, so please feel free to reach out via email at hello@katecampbell.info or in the comments below.

Until next time,

Kate


Vision Without Action is Worthless

Are you doing something every day that will lead you to achieve your goals and overarching vision?

I’ve been thinking a lot about organisational vision and mission lately, and the importance of having both along with clear company goals. I see many companies with these crazy big visions, which I am all for, but if they can’t back them up with clear strategic goals and relevant action, then they’re just impressive words. Companies with clear actionable items that are in line with their vision and mission are going to have much greater results than those with a vision that is just for show.

A vision defines the desired future state of an organisation, and what it wants to achieve over time, whereas a mission defines the current state of an organisation and why it exists (Evans, 2010). In terms of executing the vision, it is crucial that it is not imposed or sold to the company, rather an effective leader will be able to inspire employees to take on the work of making the vision a reality (Quijada, 2017).

It is important however to recognise that the vision is not the end goal in itself, rather a way for leaders and employees ‘to share a vision in order to facilitate common goals, perspectives, and outcomes’ (Berson, Waldman and Pearce, 2015).

Here are some questions to think about in relation to your vision and mission.

  • Is your vision and mission clear to everyone that sees your company?

  • Have you developed clear, actionable goals for your employees to strive towards your vision?

  • How is your company working towards achieving the vision?

  • Are you developing your employees with the skills necessary to maintain the mission, and achieve the vision?

‘Learning is a necessity for organizations to remain adaptive and competitive in today’s ever-changing business environment.’ (Chadwick and Raver, 2012)

Even if you don’t own a company, it is really good idea to think about your own vision. The principle that vision without action is worthless still applies here, so think about your own vision and how you are working to achieve that.

Best Wishes,

Kate


References        

Evans, J. (2010). Vision and Mission. [online] Psychology Today. Available at: https://www.psychologytoday.com/blog/smartwork/201004/vision-and-mission [Accessed 16 Sep. 2017].

Quijada, M. (2017). Ideas for Teaching Vision and Visioning. Management Teaching Review, pp.3-4.

Berson, Y., Waldman, D. and Pearce, C. (2015). Enhancing our understanding of vision in organizations. Organizational Psychology Review, 6(2), pp.171-173.        

Chadwick, I. and Raver, J. (2012). Motivating Organizations to Learn. Journal of Management, 41(3), p.958.

Financial Decision Making

I find it fascinating how much the media and general trends affect our decision making processes. I often see this clearly exemplified on the ASX (Australian Stock Exchange) where retail investors often follow the trends, and one media article can cause a huge swing in buying and selling behaviours.

I understand that when it concerns their hard earned cash people get scared. They may be wanting to follow the crowd if they're feeling nervous about loosing money, or worrying that they might be missing out on a huge opportunity if they don't act quickly. The funny thing is that sometimes these trends are purely based on speculation and rumours, and could potentially be fake news spread around so someone could make a profit.

We saw this with the Telstra (ASX: TLS) share price recently. Although there were in this case some cold hard facts regarding a dividend reduction and lower than expected annual report profits, everyone suddenly went scrambling to get Telstra shares off of there hands as quickly as possible. This resulted in a very noticeable drop in share price, which in turn prompted others to sell, often at a loss.

While this was happening plenty of online sites were spreading speculation that the share would never be the same again, which further added to the growing alarm towards the future for Telstra shareholders. I don't know what will happen with Telstra, but I do know the good financial decision making is now more important than ever.

It's important when making any financial decisions that you fully understand the implications of what you're doing, and are comfortable with the risks involved. Don't just sign a contract because your friend recommended the product without doing your own research first. Similarly if you're putting money into an investment, make sure you understand who is holding your money, and whether they are regulated or not.

Here are some important points to consider when making a financial decision:

  • What are the risks, and do they outweigh the potential rewards?
  • What a the management and performance fees (if any)?
  • Is the company regulated by APRA or ASIC?
  • Where are the funds held, and what security do you have over them?
  • How and when can you get your money back?
  • What will be the tax implications of any gains made?
  • Does it sound to good to be true?

All the best, 

Kate

Mistakes and Mishaps

So you stuffed up at work? Sent a text you regret to a friend? Posted something in anger online?

It happens, it's entirely human to make mistakes, and do things we wouldn't usually set out with the intention to do. It doesn’t mean you’re a failure or is a sign to give up. As the timeless song repeats 'we're only human.' I guess the most important thing here is how you react to these mistakes. If you let the mistake derail you, one smaller error can have a snowball effect and lead to much larger issues. Maybe you’ve tried to hide the mistake, and it’s blown up in your face, or it grew exponentially while you tried to ignore it.

The best thing to do when you make a mistake is to take a breath, step back and evaluate the situation. You might need to let someone know as there may be flow on implications that affect others, or certain processes in place to deal with it. Once you have thoroughly evaluated the situation, you can then make a plan to adequately remedy or deal with the mistake as best you can. You may need to ask other people for help or discuss the problem with people you trust. It may be a simple as reflecting on your mistake and offering a sincere apology, or there may be internal work processes that you have to go through.

"It’s fine to celebrate success, but it is more important to heed the lessons of failure." 
~ Bill Gates

When I made a mistake on the second week at my new job, I was completely freaking out. I think I was a lot more worried than anyone else at the company, who kept telling me it was okay and it had happened before. It was highly likely that the issue was going to be fixed in a few days with no one the wiser, but I’d catastrophised the entire situation in my head and kept thinking about the worst case scenarios. 

I did get straight onto fixing the mistake and followed it up until a resolution was obtained, but the entire experience taught me a huge lesson. Ever since that day I have been twice as diligent about checking my work and making sure I don’t make a mistake like that again (although I'm confident that won’t be the last mistake I ever make in my career).

I think the most important takeaway here for me when I make an error in the future, is to take a step back and come up with a plan of attack, resolve the problem and put strategies in place, so you don’t repeat it in the future. We can learn so much from our failures and mix-ups, so it’s important to recognise and reflect on the learning points brought up by mistakes and mishaps.