Independent People and Money

My 24 year old daughter hauled me up last week, telling me that my previous article “Women and Money” seemed to focus on women either in relationships or coming out of relationships and wasn’t really relevant to her. She was right. In my practice I was usually seeing situations where things had gone badly, usually because of a relationship breakup, and I was brought in to help pick up the pieces or set things up so that the pieces didn’t fall apart.

So today my thoughts are for people who define themselves as independent, whether they’re single or in a relationship. And some of those thoughts are the same as for those mentioned previously. These are some essentials:

• Make sure you have qualifications and a career that you can fall back on if you decide to do something else in between. Matt worked as a quantity surveyor for a number of years before he decided he wanted more control over his life so spent several years sailing round the world before he came back to NZ and was able to work again as a quantity surveyor. Although he started back at a lower level job he was quickly promoted. When applying for jobs he emphasized the skills he had obtained from his sailing that he felt added to his experience in QS.

• Spend less than you earn. The only borrowing you should consider is a bank loan to buy a property. If you want to buy a car then save up for it, or maybe add it to your mortgage if it’s essential. If you don’t earn enough for the lifestyle you want or feel you should be having then get a different job that pays more. You might have to get some more experience or qualifications so start thinking about these things now. You may also need to change your job regularly so that you are moving each time up the ranks and expanding your experiences along the way. Never under-sell yourself in a job interview.

• Contribute to KiwiSaver either at 3% if you want to explore other investment options to retire earlier than 65, or 10% if you are getting closer to retirement, want to buy a house, or want to rely on KiwiSaver solely for your retirement and want to just forget about it.

• Buy your own home. This not only provides a roof over your head but can be the basis for future investing activity, for example, the security for buying a rental property. It is harder on your own but still possible. Put 10% into KiwiSaver, save as much as you can for a deposit, think laterally about where and what you might buy (eg first home in the outer suburbs, small apartment on leasehold land, a doer-upper, a two bedroom flat and rent one room out) or consider buying with someone else. If you don’t know anyone then ask among your own friends or work colleagues. It doesn’t need to be forever. If you buy with someone else make sure you have a written agreement about deciding the priorities for maintenance and what to do if someone wants to sell their share. If the mortgage is going to cost you significantly more than the rent you’re currently paying and you’re happy where you are then consider renting the property out or getting in flatmates. Remember though that you may not be able to get your KiwiSaver out or get any Government assistance if you are buying an investment property.

Kyle and Tom were best mates from kindy and in their mid-twenties were each keen to buy a house. They couldn’t afford to buy anything much individually so in the end they decided to go in together and bought a four bedroom house in an outer suburb. Although Kyle had a higher deposit they bought half the house each with Tom having a slightly higher mortgage. They got in flatmates for the other two rooms. They set up a long term maintenance plan, a separate bank account for the rent and joint outgoings (rates, insurance and maintenance), paid their own share of their mortgages, and made an agreement re division if one wanted out. They had a few niggles when Tom couldn’t afford to spend as much on maintenance as he had a higher mortgage to service but they resolved this by re-jigging the maintenance plan and Tom agreeing to put in more of his own labour to get some of the work done.

Five years later Tom and his partner decided to buy their own place together. As previously agreed Kyle and Tom got in an independent valuer and they were both happy with the valuation. The property had increased considerably in the time they’d owned it, partly due to renovation and improvement work they’d done but also because of general property value increases in the area and inflation. Kyle decided that he would rather buy Tom’s share than sell the property and he’s still there 5 years later. While they remain good friends, Kyle is happier being in control of the property but is pleased that they bought when they did as he couldn’t have afforded to buy in that area now. Tom is also happy as he ended up with a higher deposit for the property that he and his partner bought than he would have had if he hadn’t bought the first property with Kyle.

• Keep a financial buffer or emergency fund to weather financial storms such as a health crisis or redundancy. The amount should be enough to cover costs for 3 months and rather than having it in cash, it could be in the form of a revolving credit mortgage or investments that you can sell relatively quickly.

• Think about your financial goals. For me this was about having financial independence, that is, always having the earning capacity to earn enough to live off so that if things got really dire (for example, no work) then I could take a lower paid job, lower my spending and living expectations and still be OK. I would be happy to take an unskilled job if required. That’s at the lower level. At the higher level it might be to retire early, reduce to part time work early on to spend more time on hobbies or with friends or family (young and/ or old). It’s worthwhile thinking about these things early on so that you can be heading steadily in the direction you want. It’s much harder to decide at 50 that you want to retire at 55 if you haven’t started setting money aside or to decide at 30 that you want to retire at 35 when you have a large mortgage, single income and a young family. But these things are all doable if you think about them before hand and make some plans early on. Decide what you want, cost it out, then work out how you’ll get there. Most bank websites have calculators for the amount you’ll need in retirement and the amount you have. They’re a great place to start. So does the website. Don’t get hung up on the numbers being precise as investment returns will vary over time anyway.

• Understand and accept your financial personality and do what allows you to sleep at night. But stretch yourself a little, especially as you start exploring your investing capability and interests. Remember there is no return without risk. Put everything into term deposits at the bank and your KiwiSaver funds into a Conservative, Defensive (Default fund) or Cash Fund and you will make a small return based on interest rates which are at a historic low, or allow yourself to trust in long term returns and invest in a high growth fund if you’re under 40 or a growth or balanced fund if you’re over 50. If you feel comfortable with property then invest in rental property, especially if you are scared of shares and don’t understand them. I can understand that. I’m not an architect or engineer so I will never want to build a house on a steep hill in Wellington for fear of earthquakes and slips but I feel comfortable with shares because I understand them so I’m happy to invest in them. If you want to try shares then you could start with Sharesies by putting in only small amounts regularly spreading it across different shares to reduce your risk or across Exchange Traded Funds (ETFs) which provide a cross -spectrum of shares. Invest more as your understanding and confidence builds. That’s probably the stage that you want to talk to a financial adviser.

• If you do have a partner keep on top of the whole financial situation. Don’t defer to your partner just because they might be an expert in the financial field. Always know where your money is and any mortgages that you have entered into. Be particularly aware of any business loans or guarantees. Prefer to be a shareholder in a family business rather than a director unless you want to be hands on: remember control equals liability. If you’re a director then know everything that’s going on in the business: this is not a passive role. Keep any personal money or inheritances as separate relationship property in case things fall apart.

• Acknowledge that sometimes luck plays a part but, as they say, opportunity comes knocking every day, you just need to see and act upon it. Timing also makes a difference. But the sooner you start the more time you’ll have to make money and recover from any downturns.

• Enjoy being in control of your financial situation.

Women and Money

Are women worse off financially than men? More often than not. Why? Not only do they tend to earn less on average but they often don’t work for as many years. This impacts their total earnings and their superannuation or retirement savings.

Over my years in accounting practice I’ve seen a lot of very successful women – and many whose lives could have been easier with different financial circumstances.

The key things to remember are:

  • Make sure you have a career of your own before you have children. Usually this will involve getting some sort of qualification.
  • If you have children, or take extended time out travelling, keep your work skills up. This may be through volunteering at your local pre-school or having a part time or full time job. In particular, keep your computer skills current and maybe take the time to learn new skills.
  • Have your own KiwiSaver and continue contributing if you have a career break.
  • If you’re in a relationship, know your joint financial situation:
    Have access to all the bank accounts and investments.
    Understand your assets and liabilities. This might be your house and the amount of current mortgage. Know the amount and keep on top of it.
  • Know the income you both earn and make sure it goes into a joint account.
  • Understand your financial personalities and if money is a constant source of disagreement for you both then set budgets for contentious matters. For example you could each agree a clothing allowance or an activities allowance.
  • If you have different financial approaches or personalities then make sure you each receive an allowance from the joint account each week that you can spend on whatever you like. It may be a small amount, $50 or $100 but you can do what you like with it. You may decide to invest yours.
  • If you divorce, engage a good lawyer (use word of mouth) to ensure you get the best possible settlement. Don’t give in too easily.

One client, who was married to a medical specialist, continued to work part time while raising their three children. They divorced when the children were still in primary school. She was so upset and humiliated by the whole situation that she accepted what he offered as a divorce settlement, a position she sorely regrets given the impact on the standard of living for both herself and the children.

While it rankles with her that he takes the children on overseas and skiing trips while she works extra hours, she is pleased the children are getting those opportunities. However if she had gone to the family court instead of accepting his settlement offer, it is likely that she would have received more both via ongoing financial support for the children (maintenance) and a higher than 50% share of their assets given his much higher earning capacity.

Andie had been happily married to her husband for 20 years. She had stopped working a few years earlier as she was experiencing problems with RSI and arthritis and her doctor recommended that she significantly reduce her work or stop it completely. After discussion with her husband it was agreed that she would stop work completely as he earned enough for them both. Then her husband announced that he was leaving her for someone else. Andie didn’t know what to do. Suddenly she had no income and didn’t want to sell up and leave the home she had been living in and loved for the last 20 years. She had poured so many hours of herself into it, redecorating it just the way she wanted. Although she received a share of his future income she had to buy him out of the house. He agreed to lend her the money to do that as she was unable to borrow from the bank.

In spite of her immense grief Andie sat down and worked out a plan to recover financially. She let everyone she knew know that she was available for house sitting and then rented out the house. She then used the equity she had in the house to purchase a rental property which needed a lot of work and which she did up with some help from builders, plumbers etc. She stayed there part of the time she was renovating it and while she wasn’t house-sitting. She completed the work quickly and then rented out that property, had it revalued and bought another rental property. The three properties covered the mortgage and provided her with a small income but her costs were minimal. After two years she was able to move back into the property she owned and loved and had the income from two rental properties to keep her afloat. She kept doing some house sitting and rented out her house on Airbnb while she was away.

From a very low base she was able to make the most of her situation and create her own financial independence relatively quickly – but it required a lot of compromise on her part.

In summary, always maximise your earning capability, be on top of your financial situation and, if you’re in a relationship, make sure that your financial approaches are working to improving your long term situation, not ruining it.

Do you still need your family trust?

This is a question I am increasingly being asked these days, mainly because the new Trusts Act 2019 comes into effect from 30 January 2021.

There is no record of the number of trusts in New Zealand although it is estimated that there are around 450,000; that’s nearly one for every 10 New Zealanders. There is still no register although all trusts will now have to have an IRD number.

Some of the main requirements coming from the Act are:

• Increased financial reporting (that is annual financial statements or accounts for every trust even though the trust might just own the family home).

• The need to advise beneficiaries that they are beneficiaries of the trust (this shouldn’t be a surprise for most beneficiaries but might be a good time to tidy up the list of beneficiaries. For example, your daughter’s ex- partner may be listed (even if not by name) and this may no longer be appropriate. This tidy up of beneficiaries will require a variation to the trust deed.

• The need to provide beneficiaries with financial information if requested. This is a potential minefield but one that has been anticipated by the law makers who have allowed that trustees can resolve not to provide the information if they believe that it is not in the best interest of the beneficiary(ies), it is commercially sensitive information or other relevant reason. They will need to be able to justify their decision on reasonableness grounds.

• Trustees cannot profit from being a trustee. This means they can’t receive any personal benefit from the trust (such as living in the family home) so technically trustees can’t also be beneficiaries. To get around this you will need to vary the trust deed to allow the trustees to live in a trust asset – the family home.

• Some disputes between trustees and beneficiaries can now be resolved by mediation or arbitration. This will save significant cost and time as not all disputes will have to go to court now.

• There is now greater ability to delegate trustee powers for example for investment decisions.

Most solicitors I’ve spoken to are recommending that a professional trustee (such as a lawyer, accountant or trustee firm) be appointed as co-trustee to ensure that the new legal requirements are being met. This will be a big change for many mum and dad trustees who have had a family trust for a number of years but may not have been having annual meetings and preparing accounts.

There will inevitably be increased compliance costs with the new legislation.

So, should you keep your trust going or is this a good time to consider winding it up?

In making this decision you will need to consider the reason or reasons that you set it up in the first place. Generally there are four main reasons that trusts are set up:

1. Creditor protection

This is relevant if you own your own business or there is any chance you might be sued as a director of a company. If this is a possibility then owning your major assets such as your family home and an investment portfolio in a trust keeps those assets separate for your family. By divesting or selling your assets to a trust, you are giving away ownership of the assets to the trustees. You can’t legally continue to treat the assets as your own.

However, recent case law shows that judges can be reluctant to accept that assets are completely separate to the owner if the assets were clearly only put in trust to avoid paying creditors or if the judge feels that you have enough control over the trust assets to use them to pay creditors. To reduce this likelihood, appoint an independent or professional trustee, clearly document major decisions and operate the trust as if you are truly holding the assets in trust for the beneficiaries.

If you are no longer in business then the creditor protection provided by a trust may no longer be relevant for you.

2. Relationship property issues

Trusts are frequently used to keep property as separate relationship property. This means that as long as the property is kept separate and not intermingled with joint property then it can remain as separate relationship property. Trusts are often used for this purpose when couples separate. Putting the assets distributed on their split into a separate trust for each partner means they can be kept separate as long as the assets aren’t mixed with a new partner’s property. This works really well for an investment portfolio or a rental property as long as joint funds are not used for example to pay off the rental property mortgage.

Parents also often set up separate trusts for their children (often referred to as inheritance trusts) to leave any inheritance or their own trust distributions to ensure the funds are kept intact for their child and then grandchildren.

If this is the only reason you are keeping a trust then you may prefer to just use a “pre-nup” or contracting out agreement if or when you start a relationship with a new person. Remember though that many people find this conversation difficult and a trust means they can avoid the conversation. This is especially important when one partner has substantially more assets than the other.

If you want to leave assets to your children or their trusts, you can also easily do this through your will.

3. Rest home subsidies

For many years some people used trusts to squirrel away their assets to reduce their liability to pay for rest home care. At the moment, the amount of assets an individual can hold and still be eligible for rest home care subsidies is $236,336.

In the past individuals would religiously “gift” $27,000 a year of their assets to their trust to avoid paying gift duty to Inland Revenue. Gift duty was collected by Inland Revenue on gifts of more than $27,000 per person. However the rate of gift duty was reduced to 0% in 2011 although the rate could be raised quickly at any time.

Work and Income uses different criteria and has the ability to disallow any gifts of more than $6,500 per couple for each of the last five years. This means that they could refuse your application for rest home care subsidies. MSD also has the power to review a trust’s documentation to work out the true gifting position and whether the beneficiary is entitled to any distributions from the trust.

Setting up a trust now purely to reduce rest home care costs does not work – even if it may have in the past.

4. Estate and tax planning

Trusts have traditionally been used as estate planning and tax minimization vehicles.
In the days when estate duties were significant, trusts were often established to own family assets. Distributions could be made to beneficiaries to minimize any estate duty or to legitimately provide for unequal distributions for some beneficiaries such as handicapped children.

The income produced, for example, from a farm or investments, could also be distributed to trust beneficiaries on lower tax rates as long as the distributions were made to them.
Even with the reduction in estate duties to 0%, the principles remain the same and there are still opportunities to make different distributions to beneficiaries according to need or to minimise income taxes by allocating trust income to beneficiaries.

With distributions to minors under 16 years of age being taxed at the same rate as trusts (33%) there may now be limited cost effective opportunities to use trusts to minimize taxes. However there may still be opportunities to allocate income and assets according to need.

Some trustees may now be concerned that they may find it difficult to provide financial information as it may demotivate beneficiaries from finding work and encourage them to demand an income from the trust. Or trustees may find it difficult to justify unequal distributions to beneficiaries for fear of their decision being challenged in the courts. In these cases winding up the trust and holding the assets in your own name means that you will have no accountability to any beneficiaries any more and can keep your financial information quite private from children and other potential beneficiaries.

If you decide that the original reasons for retaining your trust are no longer relevant then you may decide to wind up your trust before the new trust law comes into effect in January. There will be some cost particularly in conveyancing if there is a physical or real property involved so you may want to get this process under way by talking to your solicitor as soon as possible.

The most important financial rule

There is one fundamental rule to get ahead financially. It’s not new, or surprising, and is well known by everyone, but not everyone abides by it.

The rule is simply: Spend less than you have. On a pay cycle basis that would be “spend less than you earn”.

Following that rule should generally keep you happy. Breaking it may keep you unhappy, indefinitely. The common example used is of Mister Micawber from Charles Dickens’ David Copperfield, who famously observed in Chapter 12:

Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Sometimes this can be harder to achieve in practice.

For example, what do you do when something comes up that you “need” to pay for? For example it may be to attend a close relative’s funeral or to replace a broken washing machine. Dipping into savings is one way or getting a temporary loan (for example from the bank) or by extending your mortgage. Or you might be able to do some extra work for someone or sell something on TradeMe or see if a relative will lend you the money temporarily.

If these aren’t options for you then you may be tempted to go to a payday lender. This is the worst option. These lenders charge astronomical interest rates as well as additional charges for late repayment. These lenders should be avoided at all costs.

Jamie’s brother was killed in a car accident up country. Jamie didn’t have enough money to fly there or enough for the petrol and the ferry but he was upset and needed to head home. He calculated that the ferry would cost $320 plus he’d need around $200 for petrol. He would be able to stay at a friend’s place in Wellington and could stay at the family home up North. In the meantime though he needed around $520. He had $120 but still needed $400. His next payday was only a few days away but he knew he’d need at least a little spending money on the way.

He checked on line and found a payday lender who could lend him the money that day. And it was cheaper than the other payday lenders. The sign up process was quick and easy and a few hours later he had the $500 in his bank account. He had had to pay a $64 loan establishment fee and an account set up fee of $24, which were added to the loan, giving a total loan of $588. He knew the interest rate was 365% but at 1% a day that didn’t seem too bad. He agreed to repay it in 8 weeks. That gave a total loan of $917 and he felt confident that he could repay that amount at around $230 per payday for the next 4 paydays. Jamie would say he lived on next to nothing for those weeks and at several points almost defaulted on the payments. But, knowing that that would just increase the costs he held out on spending on anything other than the bare essentials but he still says it was a very tough period. All up his $500 loan cost him $917, almost double the amount he borrowed. Asked if he would do anything differently again he said he would have sold something on TradeMe and borrowed the rest off a mate or two. The cost of the payday lender way outweighed the benefit from using that type of lender.

But in all cases, prevention is better. The way to avoid these situations is to establish an emergency fund or buffer. The amount may be $200, $500, $1,000 or $10,000 depending on your financial situation and the things you might need the funds for. Yes, it may take a while to build up an emergency fund or buffer but it will reduce your stress levels immeasurably to know that there is some money stashed away if needed urgently.

Remember, before using it, that it is only for emergencies and that it will take a while to rebuild, so use it with caution.

If you want to avoid these situations, or frequently find yourself in a situation where you are running out of money, then look at ways to increase your income on a more regular or permanent basis. These might be to apply for promotion at your work or somewhere else, take on a second, part time job, take in a boarder, or look at selling things on the internet or at local farmer’s markets or fairs, for example, things you own and no longer use, or things you can make or grow. With the additional income, make sure you set aside your emergency fund or buffer before you start spending the increased funds.

Is education the key to financial success?

Is education the key to financial success?  Yes and no. 

Yes, better education will usually enable you to get qualifications and then a job that will pay more than jobs without qualifications.  This in turn should provide income and savings that will lead to your financial success.

But having qualifications that lead to a well-paying job isn’t enough by itself.  You also need financial education as well.

Starting with job qualifications:  These can be many and varied and a qualification is often just a stepping stone or a way to open up more job options.

However some jobs can be obtained with minimal or no qualifications if you have great and relevant experience, for example, working in a family business. There are also many stories in the computer industry of great programmers or sales people who are naturals and self-taught and doing well without formal qualifications.  But qualifications, whether in a trade or through university, are a way for many to break into better paid and more stimulating work opportunities.  By mid-life earning ability may be similar for trade and university educated people.

Students are constantly told to follow their passion.  That passion may be fashion, music, film, drama, media or sport but getting a well paid job in these areas early on is very difficult, especially without an established name and reputation. So do you doggedly follow your passion or get a reliable paying job first?

There is no right or wrong answer here.  Many pursue their craft while working part time, for example, in hospitality, cleaning or office work. The term “struggling artist” has been around a very long time so is not a new thing. But this doesn’t make travelling or buying a house any easier.

Another way to approach this is to get a qualification that will provide you with a well-paid income source while pursuing your passion outside of work hours. Musicians often do this. This also gives a back-up for whenever the craft no longer provides you with an income.  And this approach is particularly relevant for top athletes.

Or another option is to complete a joint qualification, for example, a degree in finance and drama.  This may allow you the best of both worlds.  Although realistically you may have to complete both separately as you may not be able to complete them at the same time.

So having qualifications can make it easier to get a job – but not in all cases.  Having a job in turn makes it easier to improve your financial success but a job by itself is not enough.  Most people can easily spend all they earn regardless of the amount they earn. 

This is where financial education comes in.  It will enhance or hasten your financial success.  By learning about financial matters such as understanding key financial concepts including loans, interest, and how shares work, and then putting that education into practice will give you a head start in improving your financial situation.


Ellie’s favourite subjects at school were film, art, media, drama – all creative subjects. She excelled at them and was excited to be accepted at film school after she completed her BA.  While she did well there as well, there wasn’t much work around in NZ so she decided that she needed to be proactive at getting herself established here.

She worked several part time jobs while she built up the equipment she needed, set up a website and started doing videos for friends’ businesses.  This has led to more work and she has picked up a steady stream of editing work – which she has found she has a real knack for.  While not yet giving her the financial and creative freedom that she would like, Ellie is building a reputation in the industry which she hopes will open doors to bigger projects and opportunities in the near future.


Rawiri had always wanted to be a top rugby player and to play for the All Blacks.  He had done well at school and had been picked by selectors for various junior teams.  He looked to be on the road to his dreams.  He earned just enough income from various part time jobs and casual work.  But by his late teens/ early 20s he was suffering from regular injuries which knocked him out for significant parts of the season, and affected his earning ability as one of his jobs was working for a furniture moving company.

By his mid-twenties he realized that he wasn’t going to fulfill his dream and that his body was pretty broken.  When he caught up with his mates at the weekends  he felt as if he’d wasted important earning years, years that he couldn’t “recover”.  After a period of not knowing what to do he set himself some goals and he now works as a manager in a nationwide furniture moving company.

Although he hadn’t any formal qualifications, skills he had learnt as a sportsperson: determination, self-discipline, pushing through tough times, punctuality, reliability, consideration of others etc had made him a popular and inspiring leader.  As part of his sports training he also had exposure to the financial education provided to players and he used this information to buy his own home and a couple of rental properties.

In summary, the steps to financial success are:

  1. Get qualified (it makes step two easier),
  2. Get a job to provide income for living and saving,
  3. Invest in your financial education (this can be free through online blogs such as this one),
  4. Act on what you’ve learnt, for example, buy shares or invest in property.
  5. Enjoy the benefits of your work!

Photo credit: Te Herenga Waka-Victoria University of Wellington.

Starting to get ahead financially

However it makes much more sense to start without having to wait until a shocking life event.  To start, you just need to take the first step.

So the very first step is for you to decide you want to change your financial life.  This involves acknowledging that you will take full responsibility for your financial future.  This also means throwing aside your previous life experiences with regards to money.  So it no longer matters that you don’t have To get ahead financially your head needs to be in the right space.  If it’s not then you may need to make a seismic shift to change your attitude to one of believing that you can have the financially sustainable life you want.  Only you can do this. 

The good thing is that it’s never too late to start. 

Sometimes you need some catalyst – usually something terrible that happens that shakes you into taking action.  That may be a divorce or health scare.  You may have read or heard about Sir Michael Hill and the house fire that catapulted him into taking some action on his financial future in his 40’s!  From there he went on to build a global empire selling jewellery.

Don’t be put off by thinking you haven’t had enough education or that your parents were poor.  You can create the financial life you want.

If you have a partner, you will need to include them in your decision. Otherwise your best efforts at moving forward may be in vain.

Consider your Money Language.  Changing this is so quick and easy to do and will give you some quick wins.

Once you’ve decided that you want to take charge and have taken that first step then the rest can become easier. 

Now write down your financial goal(s). Keep this achievable (but at a stretch) and measurable, and make sure you put a timeframe on it.  This will give you something to work towards.  This may be to buy a house, go on a working holiday, or retire early.

Now write down what you are going to do today to start on that journey towards your goal.  This first step might be that you will work out a savings plan or limits to spending, that you’ll start on a course to improve your qualifications to increase your income, or to start investing small amounts through an online platform such as Sharesies or Hatch. 

If you are a parent or grandparent you may decide to set up a children’s account to provide for your child/ grandchild’s tertiary education.

A good first place to start is to work out where your money goes.  To do this set up a spreadsheet with the following columns:

  • Food ( for example, groceries)
  • Eating out, including work lunches
  • Other entertainment (for example, movies)
  • Rent or mortgage
  • Health ( for example, doctor’s visits, dentists, medication, gym)
  • Insurances
  • Utilities (for example, rates, phone, power, gas)
  • Appearance (for example, clothes and hair)
  • Holidays
  • Transport ( for example, bus, train, petrol, car maintenance)
  • Tobacco
  • Alcohol
  • Gambling (including Lotto tickets) and fines
  • Incidentals (for example, magazines, gifts, etc).

Then in the top row for each category estimate the amount you spend in each area in a typical month.  Some will be easy to estimate such as your rent.  Don’t look anything up such as prior phone and power bills – this process is about understanding how much you spend on these items.  For annual amounts such as insurance, estimate the total and divide it by 12 to get the monthly cost.

Then download your last month’s banking transactions from internet banking via a .csv file and copy your actual items of spending across these columns.  Don’t pick December or January as they’re not typical months. Total each column and compare it with your estimate in the top row of each column.  This will help identify areas where you are spending more than you think you are. 

These are the first areas that you can start cutting costs.  Nothing is off limits.  For example you might decide to move someone cheaper to save rent, or to go housesitting or move back with parents, to change your phone plan or have your hair cut 8-weekly rather than 6- weekly. In many cases reducing costs will be relatively painless and after a couple of months you will have changed your spending habits.

Chloe & Daniel

Chloe and Daniel were tired of paying rent but couldn’t see how they could ever get the deposit together to buy their own home.  They had tried sticking to a strict budget but for them it was worse than being on a diet or trying to go to the gym.  They would start off well but just couldn’t seem to stick to it. They also watched house prices rising on an almost daily basis. But one day, after friends had just bought their own place, they decided that they were going to pull out all stops to achieve their goal.

They went through the exercise above of working out what their spending was going on, set about ruthlessly reviewing and reducing where possible (they found they could save a bundle on insurance and power by changing providers) and then agreed the amounts they were going to keep for discretionary spending.

They set up two new bank accounts (one for bills such as rent, power, phone, petrol, insurance and food), and one for savings ($100 each per week), leaving their main account for other spending.

They then put in place automatic payments to allocate funds from their main account to the other accounts each payday. They increased their KiwiSaver contributions to 10%.  They agreed that as soon as their student loans were paid off they’d put 80% of the additional income into their savings account.

Chloe and Daniel have estimated that they should have a good deposit within 2 years given that they already have some money in KiwiSaver and that they have agreed that any pay increase or other unexpected income should be allocated to the savings account.  They have decided that 2 years of only eating out occasionally and only cheap holidays will be worth the sacrifice.

Several months down the track they can see that they will make their goal and have started looking at houses they might be able to afford.

Money language

You are probably not aware of the language you use around money but the thoughts and words you use will have a significant impact on your attitude to money and financial matters, and those around you.

So, for example, if your money conversations or thoughts are always along the lines of:

“We can’t afford that”

“I wish we could buy a new …” move someone else”,

“It’s OK for the Jones’s – they’ve got heaps of money”,

“We don’t earn enough”

“Money doesn’t grow on trees”

“When the grandparents die we’ll inherit some money”

“If interest rates increase, we’ll be out on the street”

“Banks are robbers”

“Business owners rip off their customers and don’t pay their fair share of taxes”

Etc etc,

Then that is what you will subconsciously believe. You will find financial matters stressful, that interest is bad, bankers are bad, and that money is hard to get. This may be the language that you grew up with or that you hear in your workplace or amongst your friends or colleagues or even from your partner.  Your children will grow up thinking and believing what they hear from you every day.

Indeed, research from Massey University [1] has shown that the single biggest influence on your financial behaviour is your parents. Conversations you had at home while growing up greatly influence your confidence around financial matters. You may, for example, be wary of the sharemarket because you’ve heard your parents talking about how much they lost in the crash of ’87, through Finance Companies or the GFC (Global Financial Crisis) between  2007 and 2009, or the COVID-19 Coronavirus in 2020.

But you will need to change your thinking first. Some of this will be subconscious but all you can change is on the conscious level. Consciously changing your thoughts will impact your subconscious thinking.  Some people find using affirmations or printing out post notes and putting them in places that you will see help reinforce positive thoughts.

Then by simply changing our language, we can completely change our perspective on money and financial matters.

For example, notice the change in attitude and emphasis from the following phrases:

“What can we do to be able to afford that?”

“How can we afford to buy x?”

“The Jones’s are fortunate in that they don’t have to think as carefully about money”

“We earn enough/ plenty for everything we need”

“We should pay some more principal off our mortgage now in case interest rates rise in the future”

“Let’s use your bonus to buy a small treat and then pay off a chunk of the mortgage”

“We should bank with a NZ owned bank so we know the profits remain in NZ”

“It’s difficult for people who own their own businesses to take holidays when they want”.

The latter conversations are not as negative and put the onus of taking responsibility on sorting out financial decisions back to us, the decision maker, not blaming someone else.

Remember your children absorb so much from their parents, often subconsciously.  And parents role model behavior for their children. Our children are listening to our every word, even though it may take them several years to work out what they mean.  So in much the same way that children learn to speak from hearing others speak, so too they learn about financial matters.

And that is why the words we use, and our tone when using them, reinforce our own thinking and teach our children about money.

But if we and they are constantly exposed to negative words and connotations around money then that’s what we’ll think and they’ll learn and it will take some effort to change that ingrained thinking.


Petra grew up in a household where money was never talked about although the children seemed to understand what the family could afford and what they couldn’t.  Things became worse when her parents divorced. Large items such as a new bike were reserved for birthdays or Christmas.  So when she got her first job at an investment company after leaving school she spent the whole of her first pay check.  Afterwards she felt worried sick but she quickly learned to be more careful.

Meanwhile everyone she worked with seemed quite extravagant with their money.  Sure they earned more than her but their language was of financial abundance.  She took their advice on savings and investments and soon found herself very comfortable and confident around money.

So always speak in an abundant and positive, but modest, way about money.  And it won’t cost you anything!

[1]  Matthews C, Reyers M, Stangl J, Wood P. Insights from 2012–2032 Longitudinal Study: Stage two. Westpac Massey Fin-Ed Centre. URL:

What is a financially sustainable life?

What do we mean by “a financially sustainable life”?

For me it’s about being financially independent: having enough income and assets to live the life you want.  It means not being dependent on anyone else: not on a partner to provide you with an income (even if you’re a full time caregiver), not on a job (jobs are never permanent), not on the government, not on family or others.  It’s about being in charge of your own financial destiny.  It’s about being master of your time.

If you are young, KiwiSaver may provide enough for a simple but adequate life in retirement but if you want more, like the ability to retire early or have more money in retirement, you may need to do something else as well.

To be sustainable you need an asset base to provide you with income throughout your lifetime.  This asset base may be a property that provides you with rental income, it may be a business that provides you with profits, or shares or other investments which provide you with dividend and interest income.

Being in this position doesn’t happen overnight but it will happen over time, and that length of time will depend entirely on the amount of effort you are prepared to put in.

You’ve probably read stories of people who are millionaires at 22, usually through a start-up or through property.  Start-ups are not for everyone but if you have a good idea and are prepared to back yourself then go for it! 

You can make money on property by buying a rental property that has potential (either using equity in your own home) or staying at home (or renting cheaply) and using your savings as a deposit.  You may have to do the property up, including tidying the section and some planting/ landscaping.  You can do up a rental property relatively cheaply – the trick is to contain the costs (ie don’t go overboard) and do it quickly.  You will save money if you can do as much of the work as you can yourself.  But remember “time is money” and every day it’s not rented or sold is costing you interest. 

Get it rented as quickly as possible for a market rent, have the property revalued, and use the increased equity to purchase another property.  Keep going and soon you’ll have a number of properties and an income stream.  For the first few years the rental income will only be covering the costs but this will improve over time as rents increase.  For those that have made huge profits early on it is likely they have being buying up properties, doing them up quickly and selling them, then using the profits to buy more property.

Or you could steadily build an investment portfolio, following your shares closely and investing in areas that you understand.  For example if you’re a chemist then you may realise that a new product will take off as you can see a high use for it. Some shares can increase by a significant amount over a short period, providing the shareholder with large profits.  These can then be invested in little known companies, giving the opportunity to make huge gains (or huge losses). If you don’t have specialist knowledge, like most of us, then spread your investments across a range of shares and some will do well while others may not.  The longer you are in the sharemarket though, general inflation should ensure that your portfolio increases in value.  This is the principle of KiwiSaver.

Running your own business is another option but not for the faint hearted.  It requires the ability to take responsibility for all aspects of a business, the human resources, health and safety, operational and financial. But this is a good way to earn a reasonable income and to build a business that may have some sale value in the future.

If this all sounds quite daunting and you love your job then absolutely stick with it – just remember to set aside money each payday for investments so that you can choose when you retire.

And when you retire, you can also start to use some of your capital as “income” or a source of retirement funds.  For example if you have $250,000 excluding your home on retirement at age 65, then that gives you $10,000 or around $200 per week of capital to add to your pension for the expected 25 years until you turn 90. And that’s before considering any income or capital gains you’ll receive on those funds during the 25 years.  Realistically you’ll have around $300 per week tax free to spend, in addition to your pension.

Other than the costs of rest home care (and many people fund this from the sale of their property or a unit they buy in a retirement village) older people don’t spend a lot!

Remember though that as you deplete your capital base you are also eroding your income from that capital base. So if you want to have a more even weekly income level then you can dip slowly into your capital at the beginning, leaving your capital to earn even more income.

Hopefully but that stage you will have built a financially sustainable life so you are able to enjoy your retirement and live it on your terms.