A few weeks ago, I made a cardinal personal finance sin. I purchased a puppy.
Getting a pet is a financial liability. Most veteran pet owners know that. First time pet owners, go into it blind, captured by those puppy dog eyes and fluffy stuff.
The rules of common sense don't apply when you get a pet. And to be fair, just like having a child, you don't get a fur baby out of fiscal prudence.
While I have owned several pets in my time, I have never had pet insurance. It wasn't widely available until recently and the numbers didn't stack up well, against self insuring.
2023 was annus horribilis for my family, pet wise.
Last November, lost my beloved wheaten-terrier of 12 years. I was expecting gorgeous Mazzy to live another two years. She'd had remarkable good health most of her life. Regular trips to the vet didn't pick up anything sinister either.
Mazzy died very suddenly and unexpected from a ruptured tumour. We only found out the cause of death through an autopsy, something I'm sure pet insurance would not cover.
Mazzy's death was made all the worse as we'd also lost our six-year-old cat Magic six months earlier. Another very sad, and expensive sob story which has me pondering pet insurance for the first time ever.
I believe pet insurance really only became popular about a decade ago. Like other types of insurance, it buys you peace of mind. Things don't often go wrong, but when they do, they can be incredibly expensive and worth it.
When our cat Magic died of complications from a blocked bladder, it was a brutal in just about every way. He was one of the most chilled out, loveable, and cool cats I've owned. Everyone adored him. When he didn't come back for his dinner one night, panic ensued. He loved his food so much, it was cause for worry when he didn't bolt through his cat flap at the first sound of the kibble hitting his bowl.
We eventually found Magic under a neighbor's house, deep in the bushes and in agony. Our local vet diagnosed him instantly performed an emergency procedure to unblock him. The treatment involved anesthetising, catheterising him and cleaning out all the tubes to make sure he could pee again. While it is a common procedure it is invasive, risky and requires strict supervision afterwards.
Magic stayed at the vets the first night after his surgery but wasn't quite right and still needed emergency care so ended up in emergency for the weekend. Even before he was admitted, we were close to $2k in medical bills.
Each night at the hospital was going to be another $800 or so, IF he stayed well.
To cut a long and very sad story short, poor Magic had to undergo the procedure again plus undergo a number of tests to check his blood and kidneys. At this stage, it was eye-watering on all fronts and the poor little critter wasn't turning a corner. He just kept going down hill.
On Monday, we transferred him back to our local vet, who suggested, as a last attempt to save his life, something akin to a sex change operation that would ostensibly fix his busted-up bladder. Sadly, that also did not work and a week or so later finally said goodbye. I think the final bill was in excess of $8k. It was a good case for pet insurance.
My older dog remained healthy most of her 12 years so I could confidently say pet insurance wasn't necessary and wouldn't have been in our interest.
But that's the thing with pets, like humans, you don't have a crystal ball.
It doesn't take a foreteller to know that pets are going to be expensive over their lifetime. Just how expensive, really depends on their lifespan, and health. The former, you can guess-timate a lot easier.
Like kids, you don't get a pet because it is financially prudent. If you looked at the costs
It's 100% emotional, and there is, I would argue, a good case that pets reduce your own medical bills because they add to your happiness and well-being. Well, I know they do mine.
Mazzy was only expensive because we ended up getting an autopsy to find out what killed her, as her death was so sudden and unexpected, and her tumors had remained invisible to all, including a vet. I don't believe she was a good case for pet insurance, but let's face it, insurance buys you peace of mind and protection for the unknown.
But back to Winston, the newest member of our family. When Winston arrived from breeders, we were pitched free pet insurance for the first six weeks. You can bet your bottom dollar the actuaries have done the numbers on pet emergencies and the first six weeks, and they would be slim to none. So let's not be fooled here; the "free" pet insurance is an appetizer to get you signed up after you have fully fallen in love.
Now, I'm coming close to the end of my free coverage period and will have to make a decision going forward. I find it hilarious, although not surprising, that in all the correspondence I have received in this honeymoon freebie time, that at no stage did the insurer explain what the real cost would be. Of course, they don't want to put you off.
I'm still weighing up the pros and cons and will weigh up the actual cost over the years too, versus self-insuring. The good folks at MoneyHub have done some research here and provide a table of comparisons on their website. It is comprehensive and well worth the read if you are seriously thinking about going down this route.
People scarcely read the terms and conditions because often, they are pages and pages long and in fine print, but if you don't want to be disappointed, you really ought to. On a recent visit to the vet with young Winston, our vet also cautioned me about how tricky some of these policies can be. If junior happens to have a heat rash, for example, or an allergy to grass, and that gets reported by the vet, it could destroy all hope of ever getting any coverage from your insurer for a future skin issue, which is the biggest problem by a long mile to affect dogs over their life. It doesn't matter if it was a hot summer, or puppy was still growing into his skin and therefore had some sensitivities.
Another case our vet shared was of a pup who got some wart from another pooch at puppy preschool. Although it was totally treatable and went away, having a record of that wart on his medical history nullified his eligibility to cover him having to undergo surgery later on in life for a tumor. When even vets are skeptical, it makes you wonder.
On the other hand, you'll hear plenty of positive pet insurance stories by puppy parents who say it was a godsend after junior ate the Christmas chocolates or a pair of plastic crocs. The jury is still out for me and Winston despite the special offer by my insurer to treat me to a real bonus: the removal of any stand-down period in which I would potentially be waiting for them to reimburse me. It is this kind of stuff that really claws me and makes me want to self-insure. But the financial wounds of young Magic are still fresh and almost as deep as the heartache. So maybe this time I may cave.
I wonder what Winston (Churchill) would do?
Every few months, the folks over at Morningstar, who eat, breathe and live investment stuff, put together a report on KiwiSaver. The newest one just came out for the period ending June 30, 2023.
Now, not everyone's heard of Morningstar outside of the finance world, but if you're curious about how different funds and their managers are doing, this report is a treasure trove of info that's hard to resist.
The exciting part is that more investors are catching onto Morningstar and finding these reports super handy.
What to expect
The report starts with a general overview of what went down in the markets, what factors played a role, which sectors did well, or not, and why and highlights the best and not-so-great-performing funds during that time.
Quick heads-up, though: remember the old saying that "past performance doesn't predict future outcomes"? Yeah, that's worth keeping in mind before diving into the nitty-gritty.
There's a good reason for that. If you're always chasing the highest earner every quarter by constantly switching funds, you might actually end up in a worse spot than if you just stuck with a steady, middle-of-the-road fund manager.
Here's another one: "This year's superstar might be next year's dog." Yup, trends can change quickly in the investing world, so don't get too caught up in short-term wins and losses.
Morningstar keeps hammering home the point that long-term results are what truly matter. That's why their report gives you the lowdown on performance spanning from three months to 10 years. It's like seeing the big picture of how things are going down the line.
And remember, KiwiSaver is all about the long haul. It's like the vehicle that's gonna give you a smooth ride to financial awesomeness when you retire. Well, that's the hope anyway.
Believe it or not, KiwiSaver isn't that ancient. It kicked off in 2007, just around the time of the Global Financial Crisis. It might seem like old news in New Zealand, but compared to other countries with way more history in retirement savings, it's basically a blink of an eye.
Don't expect a 16-year performance history in Morningstar's report. Lots of the KiwiSaver funds you see today weren't even a thing when KiwiSaver first started.
Now, if you're itching to check out how your fund's been doing since day one, most fund manager websites have that info. Just look for the performance since inception bit.
Morningstar breaks down fund performance into different timeframes like three months, one year, three years, five years, and even a decade. Plus, they group funds by types, like default funds, peer averages, and then go all-in with the risk categories: Conservative, Moderate, Balanced, Growth, and Aggressive.
The numbers they dish out are after fees but before taxes.
They even rank the funds within each group so you can compare your fund against the others.
Zoom out from the research and it's important to make sure you have the basics in place when it comes to KiwiSaver:
1) Know your provider
2) Know your fund type
3) Understand how you're tracking for retirement or that first home deposit
4) Review your PIR and contribution rates
5) Hold the course
It never fails to shock me how little people understand about their investment, even those people who you think have it sorted. i.e. changing KiwiSaver providers to support your mate's kid because Jessie just started working there? Not a great idea. Changing again five times for other reasons?! Nooooo.
That's not to say you won't end up with a decent provider, or outcome, but it's not exactly the way you want to manage what could be the most significant investment of your retirement future.
The following Q&A with myself (on behalf of Simplicity KiwiSaver) and Women's Weekly NZ is reprinted below with permission.
In New Zealand, are there still inequities for women in the workforce?
Women still have a way to go to reach equity here and elsewhere in the world. Only last month, female CEOs finally outnumbered CEOs with the first name John among S&P 500 companies (the leading publicly traded companies in the US), according to a new analysis from Bloomberg. In many sectors, women are still paid less than their male counterparts, with the average gender pay gap in NZ in 2022 at 9.2% overall based on statistics provided by the NZ government. The pay gaps for Ma¯ori, Pacific and other ethnicities are wider than for European women.
What is the child premium?
The child premium refers to the career and economic costs of having a child. It’s a multi-factorial impairment that includes loss of income, reduced retirement savings, limited career progression, wage gap discrimination, dependency on partner income and childcare expenses. Oh, and unless you have a cleaner, research still shows women do most of the household work for free. So, there’s that too. Although there are protections now to ensure that women who take breaks to have kids aren’t professionally disadvantaged, women still face challenges.
What can I do about it?
In the last two columns, we discussed the importance of negotiating your worth and having your KiwiSaver scheme set up correctly for your personal needs and goals. Both are very important. They should teach this at school so women entering the workforce start off on the right foot, armed with the knowledge of how to build wealth effectively. When it comes to having children, one size does not fit all. Career priorities, ambitions and commitments differ. Regardless of how long your maternity leave is and whether you decide to return to a full-time, part-time or hybrid work arrangement, it’s good to have a game plan, ideally with your partner (if applicable). Also, don’t emotionalise your decision to have children with your employer. Just demonstrate that you can continue to do a great job but in the configuration that suits your new life too.
What kind of impact can the child premium have on my KiwiSaver?
Retirement Commission data shows that on average, women in their 40s had 30% less in KiwiSaver funds than men in the same age group. The longer you’re out of the workforce, the worse that gap may become. If you go back part-time, that could also impact your savings too. If you plan to have kids in a few years and can afford it, consider a higher KiwiSaver contribution rate before having a baby. Stock the war chest while you can. This could provide more for a first-home deposit or mean more savings in retirement.
What is the best way to navigate the child premium?
Find out the maternity policy at your workplace and investigate some of the others out there. Use it as leverage. There is a registry called Gocrayon.com where you can see what New Zealand employers are offering. After the baby is born, ensure you continue to pay into your KiwiSaver account. Make sure you contribute at least $1043 each year (to June 30) to qualify for the full Government contribution of $521. On a positive note, the Government has just announced it will match KiwiSaver employer contributions during the 26 weeks of paid parental leave. You can also elect to get a portion of your paid parental leave put into your KiwiSaver scheme. Use the projection tools on Sorted.org.nz (or your provider’s website) to see the effect of regular contributions over time. Check your fund type too. The type of fund you’re invested in can make a big difference over the long-term.
Is there anything else you’d like to add?
Teach your kids early how to do their own laundry; don’t sacrifice time that you know makes you a happier, saner and healthier human; get help where you need it; give up on perfectionism and keep your priorities straight.
THE INFORMATION PROVIDED AND OPINIONS EXPRESSED IN THIS ARTICLE ARE INTENDED FOR GENERAL GUIDANCE AND ARE NOT FINANCIAL ADVICE OR A RECOMMENDATION.
‘You can elect to get a portion of your paid parental leave put into your KiwiSaver scheme’
Comparisons between New Zealand and Australia usually don't end well. It's the same with those involving the United States and Canada. Feelings get hurt. Conversation descends quickly.
Here's hoping the end justify the means; in this case super comparisons with our Antipodean neighbour sparks positive change.
I was originally going to write about the growing drift between the balances of men and women in KiwiSaver, based on recent reports the increase jumped from 20% to 25% in one year. When I looked a little closer at the actual balance differences by age, I became triggered. Then doubly so after seeing how the numbers stack up across the Tasman.
For Kiwi men aged 18-25, the average is $8,694 compared to $7,099 for women. That was in 2022.
The difference is bigger yet again between 31-35; $21,535 for men and $16,985 for women and by their early 40s, $36,114 vs $27,269.
The Retirement Commission, who contracted the KiwiSaver data mining, said it had ruled out hardship withdrawals, savings suspensions and first home withdrawals from the equation. The inference was that contribution rates differences (which it doesn't have clear transparency over) are behind the yawning gap. The other obvious explanations are more women than men work in part-time jobs, pay inequity across many sectors, and women taking time out of the workforce to raise families. All that combined serves to pull down our balances, compared to men.
Bridging the gap
The superannuation gender gap is increasingly getting the attention of policy makers both here and across the Tasman. During its most recent Budget announcement, the NZ Government announced an employer KiwiSaver contribution top-up to Paid Parental Leave. It'll help at the margins but it certainly won't fix the problem.
Whether you're male or female, the savings are still well below what retirement experts predict you'll need to retire comfortably. By 65, even a no-frills retirement, assuming you want to live in either Wellington, Chch or Auckland, will require around $300k in your KiwiSaver. The average balance in 2022, for those over 65 in KiwiSaver, was only $51k.
When you compare balances with our Aussie counterparts, there's a continental divide.
According to research by Deloitte, for Australia Super, the average balances of Aussie men, age 45-49 is north of $224k (AUD).
Women, comparatively, are left in the dust at around $146k.
Similar factors explain the gender super gap in Australia, according to government policy papers on the subject.
The shock and horror isn't so much around the gender balance differences, although I admit, it does not thrill me.
What is more stupefying is just how much bigger average balances are in Australia.
Before taking into account currency differences, Australian women in their mid 40s, have almost 4.5 x as much in their Superannuation accounts as Kiwi women.
I doubt our Australian sisters are happy they're lagging so far behind their male counterparts, but if they saw our puny balances here they'd been feeling very rich indeed. KiwiSaver balances for women aged 41-45 are $27,269.
Let's clarify a few things.
Australians have been at this savings game a lot longer than New Zealanders.
The Superannuation Guarantee (Administration) Act came into force around 1992, forcing employers by law to contribute into their employees schemes. KiwiSaver was only introduced in 2007.
To be fair (to us), Australians have had a huge head start in terms of education, savings and retirement planning psychology. It's also compulsory.
In New Zealand, employees are auto-enrolled into KiwiSaver when they start their first job. If they don't want to commit, they can opt-out within three months.
In Australia, employers make contributions to their employees’ accounts as a proportion of wages or salaries. The contribution rate increased from 10.5% to 11% (of wages/salaries) on 1 July 2023, and is scheduled to rise by a further 0.5% each year until it reaches 12% (on 1 July 2025)
You can see the full rates chart here at the Australia Taxation Office.
Compare that to New Zealand where there is a minimum 3% paid by employees and a minimum 3% by the employer. The Retirement Commission found that 2/3 of KiwiSavers still only pay the minimum of 3%. Also of note, is that 41% of the 2.9 million KiwiSavers have balances worth $10,000 or less!
It's no secret that many jobs in Australia pay more than they do in New Zealand so that also accounts for higher balances over time. Unlike New Zealand, you can't use your savings in Australia as a deposit on a first home. Not yet anyway.
It's all quite depressing I admit but I've never known Kiwis to let Australian comparisons get the better of them, for anything.
Ask yourself if you have the ability to contribute a higher amount. Use Sorted.org.nz's KiwiSaver calculator to see what a difference a 4, 6, 8, or 10% contribution rate could make over time.
If you're a woman, make sure you're being paid equitably for your work and take salary negotiations more seriously.
On a somewhat happier note, women who end up living into their 80s, will finally overtake men in the KiwiSaver department. The same data set quoted above found that females age 86+, had average balances of close to $227k, compared to men with half that.
I'm guessing this has to do with the fact that they outlive men on average, and are usually the beneficiaries of a deceased spouse's wealth, including their KiwiSaver.
Still, I'm not counting on the long game. You?
I was asked recently how I defined success?
It was harder to answer than I expected because my definition of success seems to change with every milestone I achieve.
I don't think I'm unique in this regard.
Life is dynamic and we move through ages and stages over a lifetime. Our perception, expectations and definitions of success inevitably evolve
I have read countless profiles of accomplished actors and other professionals who've made their 'fortune' and fame who say if they had their time again, they'd focus more on their families and friends. That is to say, they define success as having good relationships with those closest to them. Hindsight is a wonder, ain't it?
It's easy to have perfect vision once you've scaled the highest mountain.
Success, in a classical sense, is marked by wealth, fame, power and status. It is usually hard won and takes years to accomplish. Hence the sacrifices, and the revisionism later on about what success is.
In the interim, those focussed purely on money, need to ask themselves how much?
If we can learn from those who've made a lot of it, it is helpful to understand money in the context of what it can and can't buy.
If we accept, that after a certain amount, more money is not going to add to your happiness threshold, it's best to know when to stop pursuing it so aggressively. Because to do so, (chasing it for the sake of it) is often at the detriment of one's health, or personal relationships.
Having a goal or a number in mind, and a plan to get there, is a pragmatic wealth creation strategy. It removes the fuzzy fantasy of happily ever after once you've banked a million bucks.
I think it is better by far to flip the equation and actively explore and pursue what it is that makes you happy, occupationally and otherwise, then set up a financial plan that is congruent with your goals. It's also more realistic for the masses.
This approach is not without its own hazards because it forces one to dig deep. Let's be honest; sometimes it's easier to follow others peoples' expectations of us, or follow the road we happen to have landed on, rather than search our soul.
Sometimes we fall into a trap of what is convenient at the time, rather than what is truly meaningful and important.
It's understandable too. We are not taught to follow our bliss. I know I wasn't anyway.
Life doesn't follow a simple, linear path. It is usually through struggle, disappointment, conflict and resistance that we are forced to confront those deeper, scarier questions in life.
The reward for doing so can be both liberating and meaningful.
So, you wanna be rich?
Great! Before you seek your riches, make sure you understand why and try to quantify that wealth too.
The pursuit of it will be all the easier. Or perhaps just a few less regrets will come of it.
This week on SmartMoney with NewstalkZB host Tim Beveridge, we talked about borrowing money to invest and whether it is a bad idea. Intuitively you'll know the answer I imagine.
The topic followed hot on the heals of Auckland City Council's highly contested decision to sell some of its shares in Auckland Airport to avoid passing on hair raising increases to rate payers.
See NewstalkZB story June 10, 2023 for more.
Two key points before I dive in:
1) I am not a financial advisor and do not provide personalised financial advise. I prefer to share information and the benefit of my knowledge after working in this space over 15 years.
2) It is important to distinguish between personal finances and government accounts.
Unlike Governments which can borrow cheaply and squeeze taxpayers tighter if they need to, in order to raise capital, most regular folk do not have that luxury.
For the purposes of what follows below, and pretty much all content on this website, I'm referencing personal financial matters.
So...on the original question posed by Tim B; "Is it a bad idea to borrow money to invest in the share market?" my personal view, in a nutshell, is "Hell yeah."
It's a bad idea for a number of reasons which I will outline below:
Where to begin?
The days of cheap and easy credit look to be fast fading. As interest rates rise, including the cost of living, it is important to consider your overall net position and intelligently assess your financial position and wellbeing ahead of investing in something you don't understand.
If you have debt, figure out how much it is costing you and how you may get that money off your back faster.
If you're already invested in KiwiSaver, and in full-time or paid part-time work, remember that you are already an investor. You're making regular contributions into your account in line with the pay cycle at work. This is a good start.
If you're debt-free, and still have a heavy mortgage, you may want to consider increasing the frequency of your payments or else making (penalty free lump sum repayments)* to reduce your debt.
If you're saving for a house, and you have a KiwiSaver account, you may want to fast track your savings there by increasing your contribution levels.
Just be clear you're invested in a fund that is well-suited to your time frame to buying a home. I've seen many disappointed investors see their balances fall by 10-30% right at the time they needed their money because they were in high-growth, high risk funds, trying to max out long-term projected returns. As tempting as it may be to choose the fund that dangles that highest long-term return rate, you must understand that on some years, because of market vagaries and other external factors, it can go south. First time home savers need to adjust for this risk.
If you're not saving for a first home, or carrying debt, and you're keen to grow your wealth, then this is a good time to explore investment options outside of KiwiSaver. In the last five years, we've seen an explosion of choices and providers offering alternatives in terms of investment platforms.
A decade ago, or so, you needed a minimum of $25,000 to invest and you had to do it through a financial advisor or a broker. Those thresholds have all but disappeared, which has reduced the barriers to entry for investors.
That's been great for would be investors with smaller wallets but it's also be created hazardous conditions for those folks who don't know much about investing and the risks.
Sure, you can invest with as little as $1 now on some platforms. Whether it makes sense to do so, is another matter!
Investing in line with your goals, your time horizons, your risk tolerance and financial ability will all help to minimise disappointments.
*Ahead of reducing debt on your mortgage, make sure you understand if there is a cost to doing so. On a floating rate mortgage this usually isn't the case but fixed mortgages can lock you in with repayments made on a complex bank-biased formula.
23/5/2023 0 Comments
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.
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.