Money Smart

The man who sows wrong thoughts and deeds and prays that God will bless him is in the position of a farmer who, having sown tares, asks God to bring forth for him a harvest of wheat.

We have all made mistakes and hopefully have learnt from them and then made completely different mistakes and hopefully learnt from them and thus the cycle continues.

As an athlete becomes better and stronger with training and good habits so hopefully shall we in our pursuit of financial stability with some basic skills or shall I say habits that one should incorporate in their daily lives.

1. Respect

Start from home, look at the people around you and see how you treat them. How you treat other people says what kind of a person you are. Give respect to everyone until they do something to lose that respect but using bad language does not show professionalism nor strength or integrity. And it starts from home and builds into a strong character which your family and community appreciate and later leads into your work and the rest of your life.

Have respect for yourself also, don’t underestimate your capabilities. Learn a new skill, put yourself out there, age or sex should not be a barrier. Also look the part, no one is going to hire someone who does not look well-dressed or overdressed. Make it a habit rather than just doing it for interviews or special occasions.

2. Flexible Order

Having order in your life is important but with flexibility for unseen circumstances and also to avoid boredom. Again start from home, if you are too lazy not to  put things in its place at home, what happens when you face a problem at work and you just give up or too lazy to do it. Start small, tackle one task a day. For instance say you have a messy room.

Start by sorting out everything on the floor into piles like put all books on the floor onto the top of the bookshelf, put all clothes in the wardrobe or drawers and throw away the rubbish. Next day sort out the books in the bookshelves. Same thing in your life whenever you face a big mess at work or business, break them down in chewable small bits, the immediate urgent ones today and the less important ones the following day.

Furthermore one day when you are running your own business and for tax purposes need to show a certain expense, it will be filed exactly in the folder labelled as such thus saving you time because by than order would have become a habit.

3. Money wise

You don’t have to be a maths genius but basic understanding of mathematics is important. Need to understand how to calculate profit, percentage returns and how much tax you need to pay. Having a job, a budget and savings will allow you to invest first in small amounts and later in bigger amounts. Also making cutting costs a habit will allow your savings to grow, thus having more to invest. Remember every dollar will make the difference.

4. Fitness

A healthier body means a healthier mind and also helps cope with stress. Exercise is also a good way to let out all your anger and frustration and look at a problem with a fresher mind. All you need is 30 mins a day for exercise and around 30 mins a day to plan your nutrition for the day. No use exercising if what you are eating is full of sugar and empty calories.

5. Be frugal

Look at the things you are buying, do you have to buy a gleaming $10,000 car which will depreciate in value every year by 10% or a $2000 car with chipped away paint.

My car is a 1995 rav4 2 door I bought for $2500 in 2013. I spend about $500 a year on it for maintenance like oil change etc. Only a single person so a small 2 door vehicle which does not use a lot of fuel is adequate. Can hire or borrow a trailer when rarely need to move bigger loads.

Same goes for grocery shopping, buying budget products can save you around $20 each shopping trip. When once I was living with flatmates I used to cook with, I filled all the empty expensive boxes of cereal, bread, jam etc. with budget products and my flatmates never knew the difference.

 

In the end, what I am trying to say is that in life everything starts from you. If you install the simplest good habits now and then keep developing them, one day you will get where you want to be.

Here is an exercise for you, grab a piece of paper and draw or paste a picture of what you want to look or be like in 10 years. Now draw lines down from it and for each line write down a specific attribute about the future you for instance, I have 3 houses returning 8% yield. Draw another line down to explain how you get there like saved $30k a year to buy the house and so on. Eventually, it may lead you to your basic step which is you got a job.

The first step is always the hardest, after that it becomes a habit and finally a mindset.

We are reaching the end of another year again. Some are still worrying about the next month, how to get through the most expensive holiday season of the year in their budget. Some are looking back at the year gone by thinking of what they could have done differently, some are rejoicing for a good year but I don’t think many people are actually thinking or planning for the coming year. That’s 365 days of change and opportunities that’s going to go as fast as this year has and you would be at this same point next year with being no better. Here are some tips on where and how to start:

1. Set some time and place

I am a single person but still have family and friend commitments as well as full time work, property managers and an investment portfolio which requires some time daily. I will take my hat off to people with big families though.

Living in a flatting situation, sometimes I need to get away to concentrate so I keep a writing pad and pen in my car all the time and allocate at least an hour or two a week where I put my phone on silent and drive to a place of quiet and write. I will try to picture where I want to be, where I am today, steps I need to take to get there and the time it would take to get there.

2. Basics

One does not have to wait for New Year to start your resolutions, today you have decided to be your new year so start from today. Start from the basics making a budget using your shopping receipts or card statements to see how much you are spending and where. Have a separate piece of paper ready to write your resolutions on as you are going along. Maybe you are paying too much rent so you can write in your resolutions, Find a 3 bedroom house for rent max 20 mins from work for $500/week by 28^th February, 2017.

3. Holiday season

Next you may want to tackle the white elephant in your calendar, the Christmas/new year holiday season. If you start now, there is a month’s time to organise everything. It’s a time for family so send invites (free online ones) to RSVP who would be coming and decide on a budget accordingly. Instead of buying toys or the latest gadgets which will fade, give practical gifts which will be a long and positive experience. For instance, I usually look into antique and second hand shops and this year I found a brass bangle and an old jewellery box both rusted when I bought them for $10. I soaked them in baking soda and vinegar overnight and it almost looked new with some nice designs on them. I have in the past bought shares/bonds and given them as gifts and for some of my friends it has started them on the financial path. Also start buying groceries now instead of waiting for the last minute maybe ask your guests to bring appetizers or drinks to share around.

Furthermore, make a plan for next year on the basis of this year’s expenditure say $50/week savings per week allocate on your budget under Christmas savings. That will total $2600 for next year’s Christmas.

4. Planning the year

In my past blogs, I have advised on how to plan a fortnightly budget and a fortnightly meal planner. Now let’s look at the bigger picture, where do you want to be in 10years time, Dream a little. Say your dream is to replace the income of $1000/weekly you are earning at present with passive income from rentals. Do your research find properties with good yield %. Say if you buy properties which after expenses paid and on interest only mortgages earn $200/weekly, so you will need to buy 5 properties in 10 years to reach that income once the mortgage is paid in full. That means you need to buy 1 property every 2 years to reach your goal. If that property costs $150,000 on 40% deposit you need to save $60,000/2 years or $30,000 per year or $577 weekly to reach that goal. Play with the numbers to decide on your goals, the above are just examples. If your savings are not up to par, increase the time frame or find ways to increase your income.

Plan your year in the same way for holidays, buying a car or any other big purchases or paying off any personal debt.

5. Learning a new skill

Learning a new skill or studying further could help save money or get a pay rise. For instance, learning how to do regular maintenance on your car will save on garage costs.

Sample 2017 resolutions

1. June end: Pay off $10,000 personal loan by paying $1000/fortnight.
2. December end: Save $1000/fortnight for total $13,000.

 

Writing down resolutions or goals for the coming year can be very powerful, especially if it’s put somewhere where you will see it every day. It reminds and keeps you on track. So get out pen and paper and start writing and planning.

After our rents or mortgages, groceries are usually our biggest spend on our weekly budgets. Somehow we always end up spending more than we budgeted for, right. I usually spend $100 max fortnightly and most of the times its actually less. Here are some tips:

1. Make a Meal Planner

Take a piece of paper or better a whiteboard from a $2 shop and make the following table:

Monday Breakfast Porridge   Lunch Chicken stirfry and rice   Dinner Chicken curry on rice   Snacks Yogurt Mixed nuts Protein drink

In stock oats       chicken breast     Chicken legs Curry powder

Shopping Milk       Mixed veges Rice

Now go in your pantry and see what ingredients you already have, fill in the stock section and then using those ingredients try to make a weekly or fortnightly meal plan. If there are any ingredients missing than put them in the shopping section. Try to use all the tinned and dried ingredients before buying any new ones for instance one week could be Indian week and you can use up all your curry powder, than next week could be Chinese week which means buying soy sauce, etc.

2. Buy in bulk

I love my meat but they are expensive so I buy in bulk whenever I could. Pak n save, Countdown, New World and Mad Butcher is usually where I do my shopping so whenever they have specials on meat I buy in bulk and freeze it. Also keep an eye out for mid-week specials when the meat is supposed to expire in a few days and price is slashed to get rid of. Rice, flour, dried and tinned beans, milk powder, cleaning products and sugar are just a few things that could also be bought in bulk and stored safely when on special.

3. Home/budget brands

I have found no difference in cooking or taste with Home brands or budget brand products. They are usually cheaper because extra money has not been spent on advertising and packaging.

4. Substitution

Can also substitute ingredients for instance when I sometimes make a lamb curry I put less lamb and more chickpeas in it. Its fills me up for less meat used but I still get all my nutrients.

5. Frozen/Tinned

Instead of buying fresh vegetables, buy frozen. They stay for longer, are already cut up, have been frozen when they were at their best so more nutrients possibly and does work out cheaper. For instance if today I went shopping at Countdown, McCain Stirfry supreme 1Kg will cost me $4 and will last me around 3-4days so for a fortnight I will buy 3 packets costing me $12. Now if we buy the same fresh ingredients at Countdown:

Beans 500g/$5, carrots 2k/$5, broccoli 4 for $6, cauliflower 3 for $9, baby corn tinned $8 for 4, pineapple 2 for $7, capsicum 6 for $15 which will equal to $55 but most of these products are on special and in season and I did get some leftovers. I did frozen for one fortnight and fresh the following fortnight so try yourself and see how it goes.

Tinned beans and lentils are great in price $1 a tin and less when on specials. They are already tender and cuts cooking time by half but still has all the nutrients. Chopped tinned tomatoes are especially great, just pour in the soups and curries.

6. Save the excess money

Every fortnight when I get my pay, I takeout $100 cash on my day off. First I sit down and make a planner as above, than I look online for specials or on the mailers, usually takes me about 30 mins max. If meat is on special, I plan on buying the small items first and buy meat for maybe 1-2months depending on cash available. Any cash leftover, I put in a tin marked groceries. So if I say last fortnight bought meat lamb 4kg at $10/kg and chicken 2kg chicken legs at $5/kg and breast 2kg at $10/kg and the rest on tinned goods and frozen vegetables which should last me a month at least. This fortnight I will buy 5kg rice $8, Flour 5kg $6, washing powder $12 for 5kg (the warehouse lasts me for nearly 6 months), Tinned stuff and some cosmetics which should last me a few months. That means I will be able to save most of my grocery budget in my 3^rd fortnight onwards as most of the basics have been bought for months except meat and vegetables.

This way one day when Easter or Christmas rolls up, you will look in the grocery money box and find all those extra dollars have amounted to enough to buy the extra groceries for a holiday dinner with family and friends.

 I have managed to slash my grocery to an average of $60 fortnightly over the last 3 months and have around $250 sitting in my grocery tin which I will use for a small dinner party for my coming birthday and of course Christmas. Maybe have enough for a few presents even. So take the challenge and tell me how much you have slashed your budget over the coming months.

A special thanks to Heather, Mel and Hope for their youthful insight.

Firstly, thanks for all your messages and questions.  Today I would like to answer questions from a much younger audience. I must say I was pleasantly surprised to find a question from a 19 year old as well as a lot of questions from adults in their early 20s. It was great to find young people are worried about their financial health so early on in their lives. Most of them had similar questions though and it got me thinking what financial decisions I would made differently at that same age.

1. Get a job

In my opinion, having a part time job as early as possible in life is good because you basically have no living costs to worry about as you are still living at home and every little bit helps. I started on my grandfather’s farm working a few hours after school and sometimes on weekends and holidays to earn a few extra dollars. Later progressed to working data entries as a teenager in an office and earning $1/hr. So working for a family business, babysitting, cleaning, etc. are good start up jobs. Maybe putting out flyers in your area highlighting jobs you are comfortable doing and hourly rate charge.

2. Setting up an account

I never had a bank account until I entered university and I wish I had. I literally hid money in my sock draw so it was always in reach for me to spend on things I saw my friends had like branded clothes, shoes, etc. If I had a bank account back than (before atms), I would have been saving $40/weekly, $2080 a year and let’s say from age 13 to 18 would have given me $12,480. At that time it was enough to put a deposit on a house in my country. I would have had more prestige with my friends if I had a house at 18 rather than branded clothes.

3. Cutting costs

No matter how much you earn, if you spend most or all of it you will still save nothing. First step always to cut costs: clothes do not need to be branded and wearing a new outfit is not necessary every day. Homemade meals are best, learning to look after your things like simple maintenance on car there are so many ways. Life should be comfortable but not to the point where flashy defines comfort. I have a friend Linda whose salary is nearly twice as much as I do and yet to this day she struggles to save money for a deposit for a house because of her expenses.

4. Enrolling in an investment course

My first advice came from my grandfather, very basic about saving, buying a house and land and living happily forever. Later out of necessity in my first year of uni trying to balance my expenses with my income, I took a free seminar at the university student centre to make a budget. That got me on the financial track and firstly I read books than later looked up advice on the internet. I made mistakes but learned from it. I was working two jobs and a full time study and any money I was saving was being invested in a fund. I wish instead I had enrolled in an investment course, would have saved me a lot of time and money and less struggle. This year finally at the age of 31, I enrolled in an investment course and learnt so much and also kicked myself for taking so long to do so.

5. Investing early

If I had done no 4, I would have known that saving does not get you ahead, investing does. I would have invested my money earlier meaning I would have had more than what I have today. Hell, I might have even be able to retire by now.

5. Never getting a credit card

First day of University, there were lots of booths with lots of offers from free credit cards to interest free laptops. There is always a catch and paying cash on an item means one can negotiate a good deal. At 19, I did not understand so I got the credit card and well used it in a week and then was paying it off for 6 months. Save for what you want if you don’t own a credit card and if you have one, pay it off quickly and cancel. If you buy online get a debit card.

6. Loans to friends

I call it the success guilt, the need to give money to friends as loans and never ask for it or let it slide. Hey, I am the lucky one, I have a house, good job, etc, and surely I can lend some money to my less successful friend. Don’t be heartless, bad things happen and a good friend should be there for the in need person. But giving money so they can update their car, house or go on a vacation or anything that they don’t need right now and can save for is bad. You have worked hard for it, you don’t want to work hard further to get that money back.

In conclusion, there are a lot of things I could tell my younger self but the big question is whether I would have listened than. When I was young, peer pressure got to me, so I did spend money on things to keep up with friends. In my opinion, it’s a personal choice to be financially stable and from the time you start full time doing that it will on average will take you 10years regardless of one’s income. Its individual choice whether that journey starts at 16 years old or 30.

Fix or float and for how long? A question many property owners ask themselves quite a few times. At present, I am asking myself the same question because by some stroke of good design ( pat on the back) all my 3 mortgage fixed terms are now finished and I am looking at re fixing them.

One option is to put them with different banks to split the risk but also to take advantage of any offers of fringe benefits such as overseas trips, cash back, fly buys or a TV. The downside is the lawyer fees when changing the mortgagee bank on paper,  plus for some keeping up with 3 different banks may be too much.

On the other hand, I can offer all 3 mortgages as one to different banks and get them to offer me competitive interest rates and any other deals to get it.

The next dilemma would be on how long to refix the mortgages for, too long and I may not be able to access the equity when I need to buy another property, too short and I may have to refix at a higher rate next time.

A good idea would be to split a big mortgage into smaller chunks say for example a $175k mortgage with ASB can be split into 3 mortgages of $25k for 1year @4.69%, $50K for 2 years @4.79%  and $100k for 4years @ 5.29%. Than if after one year if interest rates rise to their former average of 7% at least the majority of your mortgage would still be on a better rate. Moreover some banks allow a lump sum payment every year without charging extra repayment fees such as BNZ which allows up to 5% every year. So on a $175K mortgage that’s $8750 extra payment every year.

But for myself, I do it a little bit differently. I look at what my plans are for the coming few years and base my mortgage terms on that. For instance, my smallest mortgage left is around $15K (Yippee!). It is absolutely doable to pay off this amount from rent and income in a year but in the coming year there is a wedding in the family planned (not mine!) plus I want to get rid of some personal loan debt that I initially took for repairs on my investment properties (interest is tax deductible) as well as due to new laws some insulation work required on the properties. So the smallest mortgage would have to be on a 2 year fixed term, next one, around $80K for 3years and the biggest one for 4 years.

If you have a different system please do share your ideas……..

Over the past year, I have gotten in the bad habit of making daily trips to my local McDonalds after work. I have been working almost every day and playing tennis when I am free so laziness sets in whenever the thought of cooking comes around. Though this has not increased my budget as I stick to the $5 meals but it has definitely increased my belly size.

Back to point, a young lady who works there most of the nights at McDonalds, read my blog and asked me a question, “What to do if there was something they wanted? Where to take the money from or to save for it?” I was unable to discuss it with her in full as there were other customers waiting behind me, so I decided to blog about it here.

It depends whether it’s a need or want. A car to travel to work is a need but if it is cheaper by bus and you don’t work at an ungodly hour when buses don’t run than it’s a want. I bought my 1995 Rav4 with its peeling paint and outdated interior décor for $2500. It’s a 2 door and I bought it since I do night shifts so it’s a need. If I had bought a 5 door 2010 Rav4 costing $20,000, it would have been a want as I am single and don’t need a big car like that. I also learned via youtube how to look after my car and change oils among other things so I don’t have to pay for garage costs. I am planning on changing my brake pads next.

So my answer for this particular young lady, think if you really need. Emergency accounts are for unforeseen circumstances like you lose your job, get sick and pay medical bills or a sudden event like a funeral.

If you want to take a holiday, plan ahead. In June I plan to go to Wellington which I applied for and saved 3 months beforehand. After checking online for places to visit, admission costs, eating out costs and flights, I decided on a $500 budget for the 4 day trip. Since my friends kindly letting me crash at their place, I saved on accommodation otherwise I would have found deals online or backpackers have always been a good option for me.

By some luck, I got offered extra shifts at work and the extra I earned went into my holiday account. Otherwise I would have added a $100/fortnight which would have come to $600 once the holiday rolled around. In fact, I loved this idea so much, I decided to make $100 payments into my holiday account every fortnight. So that I will always have money when I need to take a holiday.

Additionally I bought my plane tickets quite early so they were quite cheap. Keep an eye on online sites or sign up to alerts so whenever they have specials, an email will show up in your box. So that’s $100 gone.

Next were clothes since its much colder in Wellington than in Auckland especially with winter approaching. Now many stores get their most customers between Friday and Monday. Why? Because most public holidays fall on a Monday or Friday and weekends are usually when most people are off anyway. These are the days when the maximum amount of people would come to do the shopping. Tuesdays are usually when something on sale or special ends and is usually taken down or put back to its original pricing. Wednesdays are usually when the new sales or special signs go up. Now I am quite a big lady and usually if something I want which is on special, It would be either finished when I get to it or I will not find it in my size.

So I went with a friend to The Warehouse, between the days of Wednesday and Friday and I managed to get some great branded tops ($10 each), jeans ($9 each)and a jacket ($40) all for a $120 and in my size. Shopping done.

So I have around $300 to spend in Wellington and since there are a lot of activities and sights which are either free or cheap, $300 would be more than enough.

Planning is everything, even meals since you can read reviews and costs online. I know what I am going to do every minute of those 4 days and indoor activities will be left to the end or for rainy days. So I hope this answers my McDonald friend’s question.

Ok, so now the budget is made, Kiwisaver is set up and some money is being saved up. Your savings may be $10 a week or $1000 a week, the amount does not matter, but how you are going to make it work for you does.

Let’s first look at the two types of income: passive and active.

Active income is what you earn as your weekly or fortnightly pay. It’s the income that one has to actually do some work to earn and can be in the terms of wages or salary and one pays income tax on it.

Passive income is what one earns without doing a job but through investments like shares, bonds, rental income and bank deposits. GST or withholding tax is charged depending on the investment. Passive income works for you 24hours a day, 7 days a week, 365 days a year and does not take a break or sleep.

Personally, I would like to semi-retire by the time I am 40 and try to enjoy the finer things in life before I am too old to appreciate them. But for many people like me doing a middle class job it would be difficult to do so. How many of you can actually survive on half of what you earn today? What if you become sick? Inflation? So many things can go wrong. Oh no, its too scary to even semi-retire that early at 40. It is simply not possible, right? Depends

Depends if you are willing to save a portion of your active income to invest to earn passive income.

Lets say, 3 people have saved $1000 and want to keep it for 10years.

Person A puts it under their mattress for 10 years. After 10years person A would still have $1000. But where $1000 before would have bought a nice car, after 10years it can only buy the tyres.

Person B puts it in a bank at a fixed rate of 5%annum for 10years. Withholding tax would be charged on the interest earned which most banks automatically subtract from the interest earned. Say after 1 year, interest earned is $50 and after tax its $36. Than take out bank fees and Person B is left with $20 interest earned. if reinvested, after 10 years Person B may have $1250 altogether. That is 2.5%return yearly on the $1000 investment. According to past articles on interest.co.nz, inflation has been rising in NZ over 3%yearly. Just look at the housing market and rents.

Person C invested in a mixed fund consisting of shares, bonds, property and cash deposits. Some years shares performed well, some years property boomed. On an average, the returns were lets say 7% yearly. After tax, the return would be $50/yr minus fees $40/yr. but share prices itself would have increased so if he bought 1000 shares at a dollar each and after 10 years those shares now were $3 a share, Person C now has tripled his money and more than outpaced inflation. But the risk here is higher and shares do go up and down which is why spreading them out would be a better way to go.

Over the past 6 years, I have invested in property and shares and have seen great returns. House no 1 bought in 2009 earns $470 fortnight after tax, rates and insurance and is on track to be paid off by the time I turn 40. House no 2 I bought this year earns $300 fortnight after tax, rates and insurance. If you read back to my current personal budget highlighted in an earlier post, $770 would cover my fortnightly budget . And with inflation costs rising, rents can also increase. But there will be maintenance and repair costs plus the house may not be tenanted all the time. Therefore, I also invest in shares.

As a result of my lean budget, being single, a workaholic and loving the outdoors and sports, I have been only requiring a place to store and sleep and thus flatting which is cheap. Therefore I have been on average saving $15-20000 a year part of which I invest in shares and the rest save for buying next property. It actually would have been $26,000/yr but there are things like clothes, shoes, small holidays and sometimes a party or two which ate into those savings. Oh and I also celebrated my 30^th birthday in style with weeklong hotel stays with lots of pampering. There were also some sad events and some unexpected ones.

It would be good to break your savings down into groups such as emergency 10%, travel/holiday 20%, personal emergeny 10% and savings 60%.

Emergency for that one of sudden events such as death in family, natural disater, etc. For Holiday or travel saving say $100/fortnight would give $2600 at the end of the year. Personal emergency constitutes clothes for that big event, car maintenance , etc.  Savings can be invested knowing that you are covered for any other emergencies.

As of today, I have liquidated most of my shares, partially because I needed money to fund buying a new investment property and partially because i think we are due for a downturn.  Now remember, share prices change all the time, some may go up while others go down. Dividends are more stable. For the past year, I earned a total of $4000 in dividends before tax. My aim in 2015 was to make my total passive income $20,000 after tax in the next 10 years. In two years, I have surpassed that. So new goal, increase my passive income by $5000 a year for the next 8 years as well as pay off any debt.

Partial retirement at 40 is looking good for me at present…..

 

 

I still find it very perplexing to hear that many New Zealanders are either not in kiwisaver or have opted out of it. Some are misinformed, some think it’s a hassle but quite a number of people think investing 3% of one’s pre-tax income is something they cannot afford. What’s your reason?

I mean let’s face it when was the last time the government gave away free money without you the public having to invest even more. Uhmm…. NEVER!!!

So what’s the big deal in signing up and getting an instant $1000 bonus in your kiwisaver account? Furthermore, you can get more money every year from the government in the form of member tax credits. The government will pay 50cents for every dollar you put into kiwisaver up to the maximum amount of $521.43 yearly which breaks down to $20.06 fortnightly. You might be saying to yourself that’s not much, right? Let’s do some calculations first,

So let’s say Person A who is 30 years old joins kiwisaver today:

2016

• First year own contribution $1042.86 ($20.06/weekly)

• Governments contributions $521.43

• Employers contributions $1042.86 (before tax)

• Total $3607.15

 

Ok so you can’t get this money until you are 65 years old but in the meantime, it would still be quite useful. After 5 years you can use some of it as a deposit for a first home. If you for instance lost your job and can’t pay the mortgage payments or feed your family, you may get a withdrawal from your kiwisaver under the financial hardship exemption rule. Because of this, even banks are happier to lend to people with Kiwisaver as mine did for my second rental.

Can’t afford $20/weekly? On minimum income? Let’s see:

Person A is on minimum income of $15.25 an hour which is $610 for a 40 hour week and $31,720 per year before tax.

Between $0 to 14,000 @ 10.5% = $1470 tax charged

Between $14,001 and $31,720 @ 17.5% = $3101 tax charged

Total = $4571 tax deducted per year, $87.90 weekly

Take home pay $27,149 yearly or $522.10 weekly.

Now if Person A joins kiwisaver and decides to contribute $20.06 weekly:

$31,720– $1042.86 = $30,677.14 salary before tax

Between $0 to 14,000 @ 10.5% = $1470 tax charged

Between $14,001 and $30,677.14@ 17.5% = $2918.50 tax charged

Total = $4388.50 tax deducted per year, $84.39 weekly

Take home pay $ 26,288.64 yearly or $505.55 weekly.

So, person A is only paying $16.55 weekly from their pay and $13.48 by the government. Almost a dollar for dollar and remember your employer also has to match your contributions up to 3%. What do you spend $16.55 on weekly that you can go without once a week? Cost of a movie ticket? A takeaway?

So your contribution towards your retirement fund is actually just over $40 weekly. Still not enough?? How much have you saved on your own?

Kiwisaver savings is something and your small contributions will grow over time and by how much depends on what type of fund you invest it in.

If we use Person A’s income and say they joined kiwisaver at age 30 and calculate using Sorted’s Kiwisaver calculator, by age 65 they would have saved over $300,000.

If Person A decides to use that income, that would be around $350 per week until they are 90 years old.

On top of this, everyone who qualifies gets a superannuation from the government after the age of 65, regardless of any other income you may be earning. If Person A was single and living alone at age 65, in today’s date he would get $384.76 after tax weekly. In 35 years, that may not be enough and that kiwisaver contribution of $20/weekly returning $350 weekly may just be what Person A may need to survive. Still not enough?

There are currently debates going around NZ and the parliament whether NZ Super should be scrapped or changed such as raising the minimum age. Kiwisaver government payments were downgraded from $1042 to $521 and $1000 start up was scrapped totally.

I have personally been in Kiwisaver since 2009, at minimum 2% when it started and 3% now which amounts to $68 fortnightly from me, $53 (after tax) from my employer and $20 from government. I am with BNZ growth fund and can see my balance and fund performance anytime. Today there is around $30,000 in my kiwisaver account and if I use Sorted’s Kiwisaver calculator, when I turn 65 I will have $575,272 which will be $633 per week until I turn 90. Add superannuation and I will have a weekly income of $1000 after tax which is more than I earn today. Again this depends on fund performance, so choose wisely. And that my friends is more than enough for me. Your comments and views are welcome.

If you want to know about kiwisaver, you can go to http://www.kiwisaver.govt.nz/, and find out all about kiwisaver and even sign up. If you want to choose a fund and want to see how a certain fund has performed over the last few years, how much it costs, etc., check out http://fundfinder.sorted.org.nz/. For superannuation information go to https://www.workandincome.govt.nz/eligibility/seniors/superannuation/payment-rates.html

 

 

Making a budget seems so simple but it really is not. There are always unforeseen circumstances and the bigger the family, the more it will be. So how can one make the perfect budget? Sorry but there is no such thing. Inflation is always rising and things will cost more so a budget should be fluid. But that does not mean spending more than you earn. My wise grandfather used to say (translation into English), only stretch your legs as much as the blanket is long. To this day, whenever I update my budget, I imagine my twinkly toes getting cold!

So first rule, a budget should work for you and not the other way around.

Second rule, keep updating it. When I started at 19, I updated my budget every week until I was comfortable I had covered every expense and then some. For some people keeping a diary would help. My budget made me realize I was spending more than I was earning, so I either had to earn more or cut costs. As I was only working part time and studying full-time, working more hours was not achievable so I looked at what I can do about expenses. The following is from my diary year 2004, my first year as a student:

Rent                    $150

Groceries           $30

Travel                 $20

Pocket money   $50

Total expense $250/week

Income $9.50hr x 25hrs = $237.50 minus tax = $200/week.

From the above one can see I was spending outside my means. So I made a few changes. First of all the biggest expense was rent, I was living in a big room in a fancy house and everything except food was included. Since I was studying and working, I was hardly at home only coming in to sleep, shower and cook. Spare time was spent at the library studying. So I looked around for cheaper housing. I found that renting as a boarder with a family or in an existing flat with flat mates would save me $50/week. So I checked online ads, talked with other students and looked at noticeboards at supermarkets and on campus. Finally I found a small room offered by a nice couple in their house for $100/week inclusive of everything except food. Plus it had the added bonus of being 25 minutes walking distance from both work and university so I saved most weeks on travel expenses. There were compromises. The room was small, and I had to make the best use of space. Also I had to get up early to be able to walk to uni for an 8am lecture and be home late from work. But to save money I had to make it work. Furthermore, since I worked at a takeaway place I got to take leftovers home so I saved on groceries as well. I also found that if I was diligent and did most of coursework during the week in between lectures, I was able to pull an extra shift at work during the weekend and still have a day off to relax or socialize. I kept updating my budget as I made these changes over a period of a year. At the end of my first year my fortnightly budget looked like this:

Rent     $200

Groceries $50

Pocket Money $50

Total       $300/fortnightly

Income $10/hr. x 60hrs/fortnight = $600 minus tax = $500

Savings $200/fortnight = $5200/yr.

I know pay rate was low at that time and so were costs and one has not kept with the other but even in this day and age one can save money on  a minimum income. Yes this budget is for a single person and everyone’s situation will be different.

Furthermore, during holidays I picked up holiday jobs everything from cleaning houses to working in a factory. One summer holiday I worked mornings at a factory, evenings at takeaway place and weekends at a retail store. I saved $1000/ weekly. Thus I would save enough  which would enable me to pay next year’s fees, second hand books (or use the free ones in library), clothes, insurance and  other emergency costs.

For entertainment, I went to free concerts, movie nights on campus and hanged with friends at their flats and shared the cost of rental DVDs. Over the 4 years of my study, my budget increased to $450 while income was $600. I had to move twice but I always found room for rent for $100/week. Travelling costs, mobile phone plan, increase in groceries and two short holidays abroad were taken. But they were all paid for by cash and I did not own a credit card during these four years. I also had savings of around $10,000.

End of 2007 I graduated with a degree and got a job paying starting rate of $19.50/hr. and after a year with my savings bought a house but that is another story.

Today as of 2016, I am renting in Auckland with flat mates and have a double room to myself close to work. I own a car and my two rental houses pretty much pay for themselves. So today my budget is:

Auckland Budget 2016	Fortnightly
Rent	$270
Income insurance	$43.10           $313.10
Groceries ·         Meat $30 ·         Vegetables n fruit  $30 ·         Supermarket staples $20	$80
Petrol	$50
Pocket money	$40
Lotto	$20
Mobile	$10
	$513.10

 

Some of you may express disbelief at surviving on such a lean budget but let me assure you it is doable, although there have been weeks where I have indulge a little too much. Let’s break it down.

Rent: The more people you live with the cheaper the accommodation as you are sharing the cost of living. I used to live in a 2 bedroom apartment but had to share a room with one other person and space was pretty tight among other things. I moved to suburbs and found a 5 bedroom house near work $135/week for a room all to myself. There are compromises but I have lived here for over 4 years and utilities are included.

Income Insurance: Say you have some savings saved up. You lose your job, it’s possible I resigned one job and it took two months of applying and interviews to find my current job. I had $4000 saved up and expenses were $500/fortnight, which means I could only survive 8 fortnights on it. Look at your savings, divide it by your budget, how many weeks can you survive?

Groceries: There are many supermarket chains and the local fruit and vege shops in NZ. Every week a different shop will have different items on sale. I usually load up my fridge with meat when on specials and save the money on next few weeks they are not. Vegetables are cheaper and easier frozen but I do buy some fresh ones for salads. I also grow a few herbs on the window stands. Other staples such as washing powder, canned or dried foods, etc. I buy in bulk so they last me many months. Good place to find specials are on flyers and online supermarket sites to decide what and where you are going to shop this week.

Petrol: Find a car with less fuel consumption, do your regular 6 monthly maintenance on it, keep tires pumped up, clear any excess junk from inside your car as they add to the weight thus more fuel consumption and look for deals on fuel and fill up. I have found keeping the car filled more than half tank seems to use less fuel. Carpool or live close to work.

Lotto: I like the odd flutter and usually chose my own numbers.

Pocket money: can get cheap haircuts from home run saloons or free ones from student trainees. $11 movie tickets per week, cheap takeaways, a top or shirt from warehouse, etc.

Mobile: $19 mobile plan monthly

We all learn from each other’s experiences so please do write about your achievements or any tips other readers can learn from.

 

 

Kia Ora, NZ.

Welcome to my first blog. I decided to start a blog on the insistence of a friend I had been helping to become more money savvy. I am a common person like many of you holding a middle class 40 hour a week job. I was 19 when I came to this lovely country to study with dreams of big 3 bedroom houses with big outside space, a nice big car and savings in the bank allowing me to travel once every year. Reality shook me to the core. I realised that living on my own meant expenses like rent, groceries, travel expenses, etc. My weekly income disappeared pretty fast. Out of my depth and struggling, I went to a free workshop offered by the university I was attending at that time on budgeting.

Wow! That one hour workshop made me realise there was more to money and saving. I was hooked and went to several other free workshops and learnt more especially about taxes. I started reading books and later following financial blogs online. Although these were mostly based on US laws, they still had some good information.  I still follow some to this day. Today I am 30years old, have 2 rental properties, a good share portfolio and kiwisaver.

And all of it started from a workshop on budgeting, so that’s going to be my first topic also.