23/5/2023 0 Comments
A little baby bump in KiwiSaver contributions, courtesy of Wellbeing Budget 2023
Last week, the Labour Government announced a new proposal to help close the gender gap in KiwiSaver balances.
For qualifying individuals taking Paid Parental Leaving AND contributing from that 3% into their KiwiSaver, Government will match the 'employer' contribution that you would normally get at work, for up to 26 weeks.
T&Cs apply so be sure to read the eligibility requirements here for PPL.
The cost to Government has been estimated at around $19.6 million p.a.
The value to the mums (and dads) who take up this nugget?
It depends on your pre-baby income.
According to Employment NZ, paid parental leave payments equal the greater of:ESCT (Employer Superannuation Contribution Tax).
Quick back of the envelope, your new combined KiwiSaver contribution via PPL, works out to around $40 a week (max). This is before regular tax and ESCT but that roughly $1,032.90.
To be eligible to receive the full regular Government contribution of $521 a year, you have to paid $1,043 into your KiwiSaver account between July 1st and June 30th each year. That's out of your own ledger so this portion alone won't get you all the way there.
I don't have any stats on hand on the average time out of the workforce women (or men) take to raise families and this baby bump in KiwiSaver is only for 26 week period but it's a good start. especially if it gets women who wouldn't otherwise qualify over the line for getting the $521 additional.
Ideally, you should try to maintain the same level of contribution you were making working full-time but I know this will seem a preposterous suggestion during a cost of living crisis, where mortgage repayment increases and falling house prices are putting people into serious financial distress.
Having kids, just like having pets, is a financial liability but hey that's not why we do it.
This is coming from a mother of two and pet owner of 3, well now 2 sadly.
Not everything is about money, but it sure can feel like it in this country.
For context, when I moved here from Canada in 2007, Paid Parental Leave was a scant 12 weeks and KiwiSaver was only just introduced. By comparison, maternity leave in Canada is one year. You get, or used to 50% of your gross average earnings for a whole glorious year, which is a great head start for baby. Other workplace retirement schemes and Government incentives to have you save for retirement have been around for decades.
Even so, women there and elsewhere till face a retirement saving shortfall relative to their male counterparts.
I call it the "baby premium."
A few ways the fairer sex is disadvantaged:
Still, the data shows a clear picture.
According to research by the Retirement Commission, women in their 40s have balances 30% lower than men in KiwiSaver. That gap increases to 32% in the following decade, just around the time that many marriages start splitting up!
All the more reason to keep up those KiwiSaver contributions and to celebrate this Wellbeing Baby Bump, small as it is.
Before exiting this blog or questioning its relevance, my flexibility and the madness entangled in the pose above, consider this:
The body that formed that shape (which, by the way, is called Mermaid pose or eka pada rajakapotasana in Sanskrit) started contorting, training and shaping at age 6 and continued to do so for decades; it is a pose that even some veterans yogis will never master because their anatomy simply won't allow it; and truth be told, it isn't a very relaxing one to hold. Not at least for any period of time.
Just as the underlying work that required me to arrive at that particular pose was over a long period and through regular practice as a professionally trained dancer and later yogi, personal finance goals are only achieved after some time. The personal finance equivalent of master poses i.e. getting that first home deposit together, paying off the mortgage, and building a $1 million portfolio, are the product of systematic, consistently applied behaviours and strategies over time.
In yoga philosophy, Sadhana is considered essential.
Effectively, this is a daily spiritual practice. It isn't just asana (that's the physical practice of yoga); but includes other spokes that turn the wheel of progress. It would include meditation, journalling, nature walks, affirmations, breathing exercises, and gratitude.
Many people assume that yoga (at least the Western face) is all about the downward-facing dogs and, more recently, the yoga pants and, Instagram shots in the lycra. However, the physical practice is really just a warm-up for the deeper stuff, like pranayama and meditation.
So you may be thinking at this stage, "I think I've come to the wrong place; I just want to make more money."
Listen, you don't need to do yoga to become rich, although I wholeheartedly advocate it for all its benefits.
My point is that building financial well-being requires a similar process and habit as what yoga guru prescribes for their students in Sadhana. It requires a daily practice of mindfulness and habits.
Meditation is a good start, if you want to crib a page from the yoga handbook.
Not so you can meditate your way to a new Mercedes but to clear the clutter and maybe even the delusion that you'll be happier driving one, although maybe you will?
Only you know your mind. One thing is for sure though, meditation will help you to get to know it better, your mind, that is.
Don't be deterred or daunted if you're a beginner or have never tried it. It can feel incredibly frustrating until you get a little more established. The benefits are worth enduring. Do it for a minimum of 3-5 minutes a day for a month, and see for yourself what changes take place.
For encouragement and or research sake, I recommend watching Stanford University Professor Andrew Huberman's YouTube talk on the neuroscience of meditation here. In five months, it has had almost 2 million views. There are some great learnings there.
Meditation helps tame the crazy in us all and, over time, helps to get traffic flowing more freely in the brain's neural networks. That can lead to clarity, creativity, inspiration and a pleasant escape from the chatter.
All of that is good in personal finance or any other sphere of your life, I reckon.
Knowing what you want to accomplish and why, how you'll get there, tracking your goals and insights as you reach them, and or understanding what is standing in the way or sabotaging your progress is part of that.
A financial Sadhana could include those things in the form of journals, reflections, checks and balances and a higher rate of engagement with some of your apps or financial obligations.
Having those cornerstone habits will set you up for success. Again, it doesn't have to be huge. Start small and build up your base. Whatever that base is.
Extra Reading and Resources:
Best Meditation Apps reviewed: New York Times
Billionaire Ray Dalio credits his success to 40 minutes of meditation a day, CNBC
10 Best Books on Mindfulness: Business Insider
Mind over Money: Yoga & Meditation help this money manager remain mentally fit: The Economic Times.
Meditating on Money: The Tricycle: The Buddhist Review
Charity is a core pillar in the world of personal finance.
Many famous personal finance gurus, including Tony Robbins, Robert Kiyosaki of Rich Dad, Poor. Dad fame and Dave Ramsey follow a tithing system, where they give away 10% of their wealth. Some religious organisations suggest you should do this too but in this case their charity is self-directed, so not pointed at a religious institution.
If you can afford to give away 10% of your annual income, which goes to a good cause(s), great.
If you can do more, even better. If you can't, well that's okay too.
As I write in my book, generosity comes in many forms.
You can gift your time, talent, knowledge, unused assets, patience and kindness. Heck, you can even donate your body to science when you die. What else are you going to do with it?
For over a decade now, I have been gifting regularly, giving money each month to three different charities in addition to many one-offs. My dear dad has adopted a diversified gifting strategy and donates to 52 other charities, one for each week of the year. Dad has great karma.
I give in other ways as a volunteer and through my KiwiSaver investments with Simplicity KiwiSaver. The latter isn't much on an individual basis, but as an aggregate, the 140k plus members have donated more than $5 million, which shows all those dollars and cents add up when bundled together.
But enough with the virtue signalling, and down to business.
If you donate to charity, it is now easier than ever to claim a Government rebate on a portion of it.
As long as you give to a registered charity, you're eligible to get 33.33% of it back. You can regift that portion to the charity, or another one, or to someone who could use it more than you i.e your kids!
It used to be much more complicated process.
You had to download paper forms, print them, and return to via post to Lower Hutt with all those paper receipts, assuming you kept them.
I've blogged about the process before but here's another recap if you missed it.
Filter through your email by date and find all the electronic tax receipts from the tax year April 1, 2022 - March 31, 2023. If you didn't get one in by email, you might have to request one from the charity or take a photo of the one you received in the post.
Login MyIR. If you still need an account, create one immediately. This is how those cost of living cheques found people and their bank accounts. You can have one registered against your account.
At the top of the summary page, you'll see a section called Donation Tax Credit. Click Enter Donation Tax Receipts. That will take you through uploading the Tax Receipts for each charity. You'll have to enter the charity name, amount and GST# or registered charity number, but all of that should be on the receipts you dug up.
Instruct IRD whether to regift those amounts you have claimed or add your bank details to get it back in your account. Only one person in the family can claim the rebate, so don't double dip here.
Remember that school donations also count, so get that paperwork from your school.
Every little bit counts, now more than ever.
The crazy thing about retirement is that the best time to think, and plan for it, is when you're young.
Ironically, when you're young, you think you're going to live forever and the very idea of 'retiring' is repugnant because it's another word for getting old. As a consequence, most people fail to plan when they should and therefore lose the opportunity to get on top of it when they are in their 20s and 30s.
If we hope to get a future generation ready for retirement, I think we need another word for retirement that encapsulates a far more attractive idea.
I also think we also need to de-stigmatise ageing by portraying more positive images and stories of people past retirement age because increasingly many choose to work past 65 because they want to, not need to.
This past week on Smart Money we talked retirement readiness and heard plenty of good examples.
One caller worked as a chef his whole life but returned to the kitchen to earn a bit of cash washing dishes. Having worked in a restaurant myself back in high school, I know the pecking order of this business and washing up was the least glamorous position of all. So going from being the chef to chief bottle washer must come with a fair bit of humility. You could tell this fellow was egoless in that regard.
As well as getting him out of the house, he enjoyed the socialising with younger folks, the residual health benefits of being more active. The payment was almost a bonus.
Another was a retired teacher who went back to do some relief teaching. He said it afforded him trips back home annually to the United States but you could also sense the buzz he got from being around younger people and being useful.
Another chap, who drove a truck for a living, came back out of retirement to earn a bit of money after having suffered a stroke. He'd conceived a plan to sell the family home and retire more affordably, in Thailand! How awesome is that?
These kind of stories may come as a relief to those in their 50s or 60s who are panic stricken about their lack of prepardedness. Sure, retirement seems the best thing in the world when you hate your job but if you find something you enjoy doing, and get a lot back from it, not dropping tools at 65 to stay home may seem less daunting.
On the other hand, if you are determined to stop trading your time for money by age 50, or earlier so you can travel the world, you're going to need a shrewd plan to get there. The FIRE (financial independence retire early movement) was all the rage a decade ago and still has a strong following. It was popularised by the Canadian-born engineer turned blogger Mr Money Moustache, who extolled the benefits of biking, fixing and making your own stuff and eschewed consumerism and wasting money.
His no-nonsense methods put him on the path of early retirement and inspired of personal finance fans to follow suit.
He was/is a talented writer and his methodology a sound one too. Mr Money Moustached proved that you don't have to be born-rich, a tech-entrepreneur-turned billionaire, or an early adopter of Bitcoin to stop paid employment.
If you're a determined individual, with discipline, a plan and some consistency, you can move mountains in most area of your life.
Where money is concerned, the vast majority of people are simply not awake to what it is they want to achieve, and how their daily habits and choices are shaping their reality. Unfortunately, the wake up call comes some time around 40 or later when you start feeling weary and then turn your mind to the retirement issue.
At that stage, if you haven't planned, it can be ugly. All the more so with interest rates being so high, and the cost of living too!
A simple plan to avoiding this horror is doing some basic work early on.
Decide when you would like to give up paid employment and calculate how much you think you would need to live off. Run two sets of number; one that includes NZ Super or your government pension if you are domiciled in another country and one that doesn't. Factor in inflation too.
Look at current savings balance in KiwiSaver, or with whatever investments you currently have. If you don't have a workplace retirement savings investment, consider opening one smartly. Most providers have projection tools which show you how much you're on track to have by retirement age. Read the assumptions because they are also important. They include things like; your fund type, your tax rate, your level of contribution and time frame. Most of these tools tell you what you can expect to have per week as a result of your current investment strategy from age of retirement till 90 or so.
In most instances, the exercise above will elicit gasps of horror when you realise how far you have to go to bridge the gap. DON'T panic. If you have any wiggle room in your budget, consider increasingly your contribution rate and see what impact that will have on the 'terminal' amount. You can also think about cutting back on other expenses to increase your savings, take on other types of work (side hussles), reinvest in yourself to study or train at something you may enjoy better or earns you more money, both preferably.
Take comfort from the true stories of some of the folks above who are working in their '70s and getting a lot more out of it than simply money.
15/3/2023 0 Comments
How to find out if you're invested in Silicon Valley Bank and Credit Suisse via your KiwiSaver provider
The latest financial blow-up involving Silicon Valley Bank (SVB), and the contagion of Credit Suisse, have likely had one of two responses: “SVB who?”, Or :”Which one is next and am I invested in it?"
If your reaction was the first, read Matt Levin’s excellent piece here in Bloomberg. If the latter, read on.
Levels of panic depend on whether you're a depositor or a shareholder in the banks that go bust or are at risk of going bust.
To stem a full-on banking sector melt-down, Governments are leaning in with guarantees that retail deposits are safe, well to a certain amount anyway. They do this to comfort retail investors who have comfortable size term deposits and the like to prevent a mass exodus. The greater fear lies with shareholders who aren't likely to benefit from any Government bail-out.
Before you heave a sigh of relief about not being a shareholder in any American banks, or Credit Suisse, take a beat.
If you’re a New Zealander, chances are you have a KiwiSaver account. More than 3 million people do. The majority are invested in Growth funds, which tend to have a broader exposure to sharemarkets around the world, including Switzerland and of course America.
So despite being at the bottom of the world, when it comes to diversified share portfolios, it is a small world indeed. There is a good chance you do have exposure to both SVB and Credit Suisse.
The good news is, it's not likely much.
The average balance in KiwiSaver is around $30k. And when you breakdown all the investments you hold around the world, your exposure to any single stock (unless it is in the Top 10 holdings) is likely to be miniscule.
On a balance of $30k if you're invested in the S&P500, its around $11.
On a balance of $100k for example, it's around $36. In other words, it is not going to throw off your retirement. This is the benefit of being invested in a wide range of companies, across a wide range of countries.
The lesson here for investors is to start caring, more, about what they're invested in.
I will hazard a guess that 98% wouldn't have a clue.
It’s a bit harsh but consider the fact that close to 40% of savers don't make regular contributions into their accounts. KiwiSaver is an investment vehicle engineered specifically for your retirement. You need to make regular contributions to optimise what you'll have for retirement.
Step by Step
Before we go forward, let's take a step back.
If you want to understand better what you’re invested in, firstly you need to know your fund type.
If you don’t already know, log into your KiwiSaver account. If you're invested in other funds outside of KiwiSaver, I expect your understanding (overall) will be better. If you don’t who your provider is, phone Inland Revenue or try logging into your MyIR account online. You'll find it under the KiwiSaver tab.
Once you know with whom and what fund you’re invested in, you can look at the composition of that fund on your provider’s website. Regardless of who you’re invested with, all of them will have a Fund Update page, usually it is alongside the Fund type you’re in.
This is an example below with reference to Simplicity KiwiSaver.
Navigate to the page that outlines the different fund types and find your fund. There will find a risk indicator rating.
This indicates the level of risk you face given your fund type with 7 being the highest and 1 being the lowest.
Generally speaking, the more shares you have in your fund, the higher the risk.
The risk is higher because the share market has a lot of volatility.
Regardless of your level of expertise, you’ll have some appreciation for this after all the covid aftershocks and the rise and fall of your balance.
Underneath the fund’s description, you’ll see the first year return. Don’t panic if you see a negative numbers. It has been a horrible year in the markets and most providers will be posting a negative one year return at this stage. To cheer yourself up, look at the return p.a. since inception. There you will see a happier story, unless you only joined KiwiSaver recently.
Underneath the return, you’ll see a pie chart. This breaks down the types of assets you’re invested in.
In this case it breakdown as follows:
The key difference between a Conservative Fund and a Growth Fund is the ratio of income assets (cash and fixed interest) to growth assets (shares and increasingly other assets like Private Equity holdings - more on that in a later blog).)
These are great documents to read. It’ll explain all of the above in greater detail.
It’ll also show you how your fund fared, compared to the benchmark that it uses to compare performance.
“The market index annual return is a composite index, calculated using the return of each asset class index the fund invests in, weighted by the fund’s benchmark asset allocation."
Okay so these are broad brush strokes.
For the real juicy details, i.e. are you invested in Credit Suisse or SVB, you’ll need to look at the holdings of your fund. The fund update will show you a provide of the top 10, but you’ll want to go deeper than that for the rest. With Simplicity's diversified funds, you're invested in 3,000 shares spread across 23 countries so SVB won't be in the Top 10. If it was, you'd be worried.
You can find the entire holdings on the Companies Offices disclose register. Search your provider and fund type.
Your fund manager, if asked, should provide you with the complete holdings. It may also be on their website if you did a big of digging.
With Simplicity, you have total transparency via a cool tool called Where in the World is My Money. If you enter your balanced and the fund type you’re in, you can find out to the dollar what shares, bonds and other assets you own.
Users will be reassure how well diversified they are.
It is an age old adage, but diversification really is one of the best ways to mitigate risk when it comes to investment. Imagine you were only invested in US bank stocks for instance and there was a huge run on banks there. As an investor, you'd be in shocked.
Property is another good example where diversification should be considered. Let's take Christchurch as an example. Say you were only invested in property located in Christchurch in 2010. I'm willing to bet many investors learned the hard way, not to put all their eggs in the property basket after that year.
Risk is all around us. Understanding what the risks are with your investments means you can either sleep better at night or potentially enjoy a higher standard of living in retirement. Of course there are no guarantees, but it pays to know either way.
The information contained above is purely informational and should not be construed as personalised financial advice. For personalised advice, I recommend you seek a fee charging financial advisor.
Remember the Spark Joy phenomenon?
The term was coined by minimalist Marie Kondo, who devised an inspired system for decluttering closets, transforming mountains of messy clothes and other junk into a Zen-like temple of tranquillity and order.
My mother-in-law was an early adopter. She bought the book, copies for grandkids, and worked Kondo cleaning rituals like an exorcism. She was a quick study.
She was eager to show me her magic when I visited for a Sunday meal. She had managed to origami her undies into domino lines of perfection in the sacred drawer. The arrangement starkly contrasted my lucky dip drawer of disorder at home.
It has been a few years since the Kondo craze, but on a rain-induced folding frenzy the other day, it got me thinking about how to KonMari your finances. Could a similar system be adapted to bring some Spark Joy in the form of financial well-being?
Unlike my undie drawer, my finances are well structured. Ironically, they follow a system not dissimilar to the Japanese declutter goddess's.
Here’s the financial overlay on Kondo’s five steps regime. See for yourself how well it works.
An organised closet is beautiful to behold, but those Kondo standards can be tricky to maintain. Even Kondo herself admits she's taken a more relaxed approach recently.
Because my partner is a bit OCD, his side of the closet makes mine look bad by comparison, so I do attempt to KonMari at times. But those freshly pressed shirts have nothing on my financial Spark Joy.
The information above is not personalised financial advice and the opinions expressed are mine alone. Should you require financial advice, I recommend you seek a fee paying financial advisor.
One of the first riddles I learned as a small child was the chicken or egg quandary.
It did my head in trying to crack that one.
The relationship between the mind and money is also somewhat circular.
What came first, the right mindset or the money?
You'll have plenty of examples on either side of the ledger I'm sure but it is an interesting debate.
For those fortunate enough to be born into wealth, money came first naturally. But just because someone is rich at birth doesn't assure them a good relationship with money ,or a guaranteed supply of it either.
And regardless of whether you made it, or inherited it, wealth needs a healthy mind to manage it properly.
I'll never forget the scene in "All The Money In the World," documenting the life of Jean Paul Getty senior. At one time, America's wealthiest man, Getty was apparently so thrifty he would wash his own undies in a hotel sink to save a buck. Notoriously, he did not pay the ransom when his grandson was kidnapped.
It's an extreme example, but it underscores how the mind can delude itself where money is concerned.
Research has found that folks living in wealthier postal districts give less money to charity, than those of more modest means suggesting that the richer you become, the less generous of pocket.
With today's cost of living, and mortgage rates tripling for some, the financial pain of 2023 is not exaggerated. But wishing one's financial situation was better than it is, without doing something differently, is unlikely to make a difference.
However, seeing your situation from a different angle and forming a plan of action will.
It starts with having mental clarity and then a road map.
Sadly far too many people become paralysed by their finances. They either fail to do anything at all or make matters worse for themselves by pretending things are different than they are. Neither is helpful.
In the gripes of a financial crisis, what you need first and foremost is a clear mind and then a clean slate to set a new course.
The mind needs to be cleansed of fear, anxiety and generally unhelpful thoughts to find a way forward. It may not be easy, but it's far better than freaking out.
This is where mind-calming techniques like meditation or slow, steady breathing come into hand.
When practised with some regularity, both have the effect of taming that monkey mind.
Both work on a physiological level overriding the fight or flight mode that we haven't evolved out of yet. When the body relaxes, the mental mind fog also lifts.
It can alter how you perceive your external world, and teach you to become more responsive and less reactive.
Regular meditators will know from experience the positive benefits of having that clarity and calmness of mind across all areas of life.
Don't get me wrong, you can do some fundamental things with money that result in better financial outcomes that don't take meditation or psychoanalysis.
They include simply not spending more than you earn, automating your savings, understanding the actual cost of debt, avoiding it where possible and tracking your spending more mindfully.
But for those more perplexing financial situations, and more ambitious goals having greater mastery over one's mind is key.
I could start with another New Year, New You personal finance post, but I won't.
That is well-trodden territory; if you're honest with yourself, you will know the answers.
If not, very quickly, here's a reminder to:
Instead, indulge me in a rant about the finance industry and others who are currently inadvertently perpetuating the myth about the weak, stupid little woman.
If I have to read another column written by a white middle age man, dispensing cliches from his mother or grannie, about coupon clipping, baking their own bread, and 'you can do it girlie' fist-pumping propaganda, I'll puke.
I get there are good intentions behind all this, about wanting better outcomes for women, but I can't help but be cynical about the current approach.
It's all well and good to preach money 101 basics to gals, ostensibly because you want them to achieve higher savings, but the narrative at the moment seems built on the assumption that women don't know there are financial inequities that could impair their financial wellbeing and don't know how to fix it. Extra cynically, those players piling into this female empowerment space are seeking to win over and build their female client base.
There is a zinger of a speech that actress Reese Witherspoon, an accomplished actor and producer, gives at an award ceremony that takes aim at the same issue. In it, she describes how far too many Hollywood movies feature a scared and helpless female who turns to the firm and stable male and cries, "What do we do now?!"
Ask any woman whose been lost with her partner in a foreign country, dealt with an errant child, had a broken-down car, or dealt with virtually any crisis, and you'll know that the Hollywood myth is bullshit.
These pathetic stereotypes about women do not match today's reality. They probably never did, but women have not had the same chance to record their history or stories as men.
In my world, most of the women I know are financial powerhouses. Whether single or partnered, they are the money managers in the household, and I'm not talking about paying the bills and buying food. I'm talking about investments across all asset classes.
Much of the talk around women and money currently centres around women not having as much as men in their KiwiSaver accounts. The inference is that women don't know this; they don't understand why they should care and don't know how to fix it. It is also commonly assumed they lack the confidence to deal with money beyond managing household accounts.
I have no doubt some women may fit this profile, but if I'm honest, I know more males than females who fall into that category and rely on their female counterparts to play the CFO in the family.
Both of my grandmothers controlled the family finances AND the investments. My late mother, who managed her own finances as a single working mother, was far savvier about investments than any fund manager or financial advisor I know, warning me about unjustified investment fees back in the '80s when I was in high school. She retired more than just well.
Still, there was this assumption by those who met my mother for the first time that she must have inherited her wealth or received some cash windfall in a divorce, or was supported by a partner.
I'm not sure my mom would describe herself as a feminist, but by most traditional definitions, she was. Financially independent, self-directed, wise and career driven, she had total confidence and control of her finances. That was my role model growing up, so maybe that has shaped my thinking and behaviour around money. My mom didn't buy Barbie Dolls or bake cookies for my sister and me when we were kids. She worked in a male-dominated industry with a title she held until she retired as a "Landman." She negotiated land deals for a living and was very good at helping buyers and sellers reach their targets.
I never met another woman who did what my mother did for a living (or matched her capabilities in so many areas). Still, I have known numerous professional women like her.
My tribe may be unique in that sense but what steams my bean about the current narrative is that instead of looking through the lens of women who are not languishing in debt and spending all their disposable income on hair, nails and high heels, we talk about women as though they are helpless financial illiterates.
Just because women's savings in KiwiSaver are lower, we should not infer incompetence or ignorance with money. In most cases, the disparity is directly attributable to lower pay or likely workplace absences for the purposes of rearing children. The financially savvy female will know they should contribute at least $1,043 a year (even if they have left the workforce) to receive the $521 in free Government support. They will also be acutely aware of their savings shortfall while not working full-time.
The difficulty for most women, at least those working women who decide to have children, will be balancing a career and motherhood and trying to excel at both. This, in my experience, is not the same burden (yes, there will be exceptions) as men who have the luxury of pursuing (unbridled by guilt) their careers. At the same time, the working mother typically organises play dates, sports, after-school programmes and tutoring, birthday parties and gift buying whilst remembering to do the shopping, keep the house in some semblance of order and do a good nay great job at work too. That is the challenging piece for intelligent women, not any deficiency in their intelligence or ability when investing their money.
It is time to spin a new narrative around women and money, address the pay inequities that are the real barriers to equality in financial well-being and make it easier for women to balance work and raising a family (i.e. subsidised child care) so they can get on with building wealth on par with their male equivalents.
And please, let's bury the helpless female myth once and for all. Women know what to do. Let's create an equal playing field to allow them to do so.
The plight of the single parent...where do I start?!
Your assets are halved, your household income savaged, both made worse by your ability - or lack thereof - to work unless you have free, or highly subsidised childcare. Throw in the stress of separation, the emotional aftermath of a bitter ex, and now the crushingly high cost of living issues, and it is no wonder New Zealand's collective mental health is in the toilet.
Having been a single parent myself, without the benefit of free child care from family living living on another continent, I am familiar with the pain.
My childcare arrangement, as a full-time working mum, consisted of a patchwork of friends, other school mums, cheap after-school programmes and a revolving door of young nannies. This was pre-covid and pre-WFH when your absence at work was noticed. If it was a reoccurring thing, you would likely get the axe. Journalism was merciless. Maybe it still is? Stories don't write themselves.
It was a stress fest of unceasing deadlines, juggling of childcare and a lot of running around to manage a household on my own. Student flatmates to make ends meet, sick kids, parent teacher interviews and the elusive goal of work life balance.
It was several years before I was able to carve out a four-day workweek that included a few days of school pick-ups. On the one hand, it was reassuring the kids were at home and not in the after-school programmes they despised, but it was also a pressure cooker trying to get interviews done with kids banging at the office door demanding sandwiches and snacks, and hard deadlines hanging over my head.
Journalism is a tough gig because you have to deliver. And at the risk of sounding ancient, before the media was savaged to its existing skeletal state, there was a fortress of subs to get through, which meant you couldn't just rewrite a press release and file it with a single quote. Single-source stories were (rightly) thrown back in your face, and typically, you had 2-3 sources so you and your readers could be offered differing perspectives. But this is not a pity party. I'm just glad I'm at the other end of it.
I was reminded just how tough it can be after catching up with a good friend going through the wringer with a terribly messy divorce, made even worse by money problems and custody issues.
I shared some resources with her and thought this week's blog might be helpful for others in the same boat.
Know your rights
In the case of my friend, who was the leaver in the relationship, her ex took revenge in the most cowardly way, via the children. Because she was forced to leave the house, she was left homeless, literally. Her access to the kids was another form of control, and abuse, which he used liberally to punish her. It is widely known that unless one parent is an abuser, you shouldn't prevent your kids from seeing the other parent. For some reason, my friend's lawyer advised her to try to get her relationship property matters sorted first, and for almost two years, they have not had a custody order. The effect of this has been soul-destroying for my friend.
Know your rights. Visit the Ministry of Justice website here for Relationship Break up guidance.
Get your finances sorted ASAP.
As dreadful as it may seem to think about doing a budget, getting a second job or figuring out if you'll be left homeless, you need to be pragmatic. Figure out your financial position and try to get some agreements while formalising your separation and relationship property.
If you're the primary caregiver and work a minimum of 20 years, you will likely be eligible for Working for Families, and the additional support is not insignificant. Apply for what you can as soon as possible, and if its child support, make sure you get that in train ASAP via Inland Revenue. One friend, assumed that lawyers would make things happen faster, and to better effect but was left instead high and dry.
She didn't see a single cent and is still waiting for resolution in the courts. If she had gone to Inland Revenue in the early days, at least she would have had help with child care costs. You can work out what your potential support payments are from WFF here.
Get the support you need
Don't stress, if you can't afford a lawyer. You may qualify for legal aid. You can also consult with the Citizens Advice Bureau to get further support.
Like cancer, the longer you let your problems fester, the worse the outcome will likely be. Surround yourself with loving, helpful and supportive people, and try to minimise the time spent wallowing in anger, sadness or bitterness. Easier said than done, I know but focusing on taking some practical measures will not only be helpful for you, and your kids but also distract you from the pain and grieving you inevitably need to process. "Getting through it all" takes much longer than you may expect. Years in fact.
So, it is best to get on with the things you can change, like bank accounts, mail forwarding, and child care arrangements, so you can rebuild the life you desire, along with your tattered finances.
Procrastinate at your own peril.
You don't have to be an economist to understand the effects of inflation. You feel it every time you shop, whether purchasing a flight, veggies or even dog food.
We've all become numb to these sky-high prices but tend to experience at least a weekly price shock.
Last week, I had mine at the Countdown in the pet food section, which has been hallowed out recently due to supply chain problems.
I gasped recently when I saw my dog's favourite brand shoot up by $2 a tin. Not to $2 but up by another $2. I bought one and then went looking elsewhere. I found it $1.30 cheaper somewhere else and loaded up.
Because we don't live off dog food, these are marginal savings. You're not likely to notice a huge difference in isolation. But if you apply the same vigilance in the hunt for savings across all spheres of your personal finance life, you may see a difference, even if you have to squint.
You might need to stock up on eye wrinkle cream the way things are headed.
Despite the government hoping for inflation cooling, the latest numbers show no change. Okay, it dropped 1/10 of 1% from 7.3% to 7,2%. Big deal!
To add insult to injury, we've also been dealt a further blow with a sharp decline in asset values in both the housing sector and the share market. The average KiwiSaver Growth fund is down by 10% year to date. Yup, it's painful.
You may console yourself by remembering that KiwiSaver (unless you're saving for your first home) is a long game. So think long-term and take a deep breath, right?
Even then, when you look at the long-term returns, those sunny days of 11% p.a. returns are fast fading from memory. Across all peer group averages, they've sunk around 2% p.a., pulled down by the recent meltdown, er, should I say 'correction.'
To compare returns and fees over the life of KiwiSaver, follow Morningstar's quarterly KiwiSaver reports here.
Looking on the bright side, you could choose to look at today's deflated share prices as a discount. We're entering a bear cycle, but it won't last forever. So anything you buy now will likely rise again. We just don't know when.
When KiwiSaver first launched in 2007, it was around the time of the Global Financial Crisis. Back then, default funds (which were Conservative in profile, not Balanced as they are now) and actual Conservative Funds, withstood the blows better than their Balanced, Growth and Aggressive counterparts.
It was demoralising for first-time retirement savers still trying to wrap their heads around KiwiSaver, but those who stuck it out were rewarded in the end with much higher returns.
From that low, we saw one of the longest bull runs in some time, including housing. Markets were almost gravity-defying. They kept going and going, even through Covid, a byproduct of Central banks printing money to prevent total economic ruin.
Fast forward to 2022, when we should be celebrating to return to quasi-normalcy in a sorta-post-covid world, we get slammed.
The effects of all that cheap money finally caught up.
Hence, inflation is at 7% and higher in some places. And interest rates creeping back up to levels that younger investors will have never experienced.
I still remember when my sister bought her first home. We were all very excited for her. Her interest rate was a whopping 14% something that is unimaginable to today's borrowers.
I'm not forecasting or suggesting we're headed back to these crazy highs. Far from it, it would create mass homelessness in New Zealand.
Banks deliberately build a buffer when assessing your ability to service a mortgage. It's called stress testing. Currently, many of them are stress-testing would-be borrowers at 8%. With inflation, what it is, many hopefuls will be knocked out before their first meeting.
Since June 2021, fixed-rate mortgages have increased by almost 4%. On an average mortgage of $650k, you'll be paying around $1,000 extra monthly to service your debt.
The pain is real if you have kids or pets, drive a car, and like to eat.
Personal loans are rising in popularity, and food banks are busier than ever. People are struggling.
So easy wins to reign in costs include the following:
It is increasingly hard to save but not impossible, and if you approach it like a challenge, you'll find more joy in it.
When it comes to money, attitude and behaviour are everything.
We may not be out of the woods yet, but sitting idly with fear, worry and/or apathy isn't going to move the dial. That's on you.
(The usual caveat applies. This is not personalised financial advice. If you need some, see fee based authorised financial advisor. Check out the FMA website to find out more.
Amanda is a personal finance specialist and published author based in Auckland, New Zealand. She is also a certified meditation and yoga instructor which informs her teachings on financial wellness.
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CARE FOR YOUR INNER WEALTH AS MUCH AS YOU DO TO YOUR BUDGET, MAKE YOUR MONEY MATTER