Your money must have a job description

At Money Over 50, we always give our clients’ money a job description. Without this, the money doesn’t have any sense of purpose and no clear metric for success.

You have different portions of money. All these portions should have a different job. It’s a bit like working in an office – everyone has a different role. Someone answers phones, someone is in charge of getting the technician out, there’s a sales rep and so on. Everyone knows their job and what they need to do, and they all do their own thing.

Our Director of Financial Doing, Kylie, has a unique role at Money Over 50. If you think of having a performance scorecard (that is, a way of measuring effectiveness), her scorecard would measure things like how quickly she answers calls, how often she communicates with clients, and how she solves problems. Of course, she has a lot of intangible and irreplaceable qualities, too – not everything can be measured by a scorecard. But it’s a unique role that only Kylie does. Your portions of money should all have different roles, too.

When we talk about ‘your money’, we’re talking about everything – bank accounts, superannuation, investments, rental property. Portions of money can have different scorecards: different measures of success, as well as different job descriptions.

If we’re looking at a single person or a couple who are 15 years away from retirement, their scorecard would be to invest in the best way to get an 8% rate of return or above. Another thing for the scorecard is to accept and embrace when a third, or even a half, of our wealth disappears for a period of time due to market volatility.

When a sum of $500,000 drops to $250,000 in our super, we can accept and embrace that, because it’s part of the job description. Its description is to generate 8% over the next 15 years or so – the job is long term.

Another portion of your money might be an emergency fund. This portion gets measured in a very different way. It needs to be a buffer against hard times, and we need to know it won’t disappear in volatile times. If that portion of money disappears or is halved, unlike the investments or super, it hasn't done its job properly.

When we meet with a new client, we put their assets and liabilities into a spreadsheet. Then we go through it line by line and ask the client to think about what the money should do and what the measure of success for it is (the scorecard). We look at it portion by portion, not as one big chunk of money. And often, when the client thinks about the job of their money, they realise it’s not doing what it should be – or that they have given it the wrong job.