What actually is a recession, and does it warrant the inherent doom and gloom that’s associated with the term?

Stay safe be kind - Image by Parker

Naturally, there’s a lot of uncertainty at the moment, and it’s got us all feeling a bit anxious about the future – Our health, our jobs, our safety and security.

I’m sure by now you’ve heard the word ‘recession’ floating around – In fact, New Zealand is now ‘officially’ experiencing it’s first recession in a decade.

It’s a concerning word for many of us, but what does it actually mean?

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It may be the first time in your working life that you’re experiencing this situation, or you may have worked through previous recessions. The last time New Zealand experienced a recession was in 2008 – Also known as the Global Financial Crisis.

Let’s start with the basics:

What is a Recession –

When there’s a significant decline in economic activity as people and businesses spend less money.

Many economists define a recession as ‘two consecutive quarters of decline in GDP”. In other words, we’re going backwards, for two quarters in a row.  

What is Gross Domestic Product –

GDP is essentially a look at the output of a country’s entire economy during a period of time, not just one industry. 

New Zealand’s GDP was roughly $208 billion in 2019 – That’s the value of goods & services we produced as a country. To put that in perspective, the United States GDP was 21.4 trillion.

The crux of it is, experiencing a recession doesn’t necessarily mean shit’s hit the fan, it just means things have slowed down.

What’s the difference between a recession, and a depression –

• Recessions are economic declines that last for at least 6 months (and have happened more often throughout history)

• Depressions are less frequent, more severe, typically last several years, and have deeper impacts on society (the last big one was ‘The Great Depression’ from 1929-1941). The good news is, we have a better handle on regulating the economy than what they did back then. We have more tools and data available to stimulate the economy today.

The History of Recessions –

In the past 100 years, the world has experienced 17 recessions (technically speaking, the US has had 35**,  and some countries have experienced more) – Ranging from 6 months to 3.5 years long. That’s roughly one every 6 years, so it’s been a disproportionately long time since we’ve experienced our last global slowdown. 

How does a recession impact society –

It primarily means people are less likely to want to spend money because they have lost confidence in the future. This in some cases can be a ‘self-fulfilling prophecy’ – Because if everyone believes a recession is near and tightens up their spending, this could in itself fuel the next down-turn. (Obviously in the situation we’re all facing today, the primary reason we’re facing a recession is due to Covid-19, and the huge disruption it has caused businesses and individuals all over the world.)

When people don’t want to spend money (or when spending habits are interrupted), things tighten up - businesses close down, jobs are lost, incomes drop – and this causes a ripple effect throughout society.

Some people will be impacted more than others, and that comes down to the industry you work in, your assets (e.g. Cash savings, house) versus debts (e.g. credit card, payday loans, mortgage), and how quickly the economy bounces back.

Are there any positives? -

Some professionals argue that recessions can help keep economic growth balanced. E.g. by ensuring inflation levels don’t rise too quickly. If everyone earns more, they spend more, and prices then go up - Also known as a ‘Wage-Price Spiral’.

Economic hardship can also help reset some of the bad habits we’ve become accustomed to. As we stop trying to live above our means, we are forced to live within the income we have available. This can sometimes result in people saving more money.

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The bottom line is, people are feeling significant health and economic effects of Covid-19, with business forced to close, and people losing their jobs – It’s an extremely tough time for many people across the world.

My hope is that we will get a handle on this situation soon, but in the meantime, a little bit of understanding and Aroha can go along way. You never know what someone else’s situation is right now. 

Exclusive Pre-Existing Health Insurance Offer

It’s pretty rare that an offer like this comes about, whereby one of New Zealand’s most comprehensive private health providers offers cover for many pre-existing conditions after three years.

Until the end of September, Nib is offering this deal on both their Ultimate Health, and Ultimate Health Max policies.

If you have exclusions on your existing medical cover, or haven’t taken out cover before due to pre-exiting conditions, now is your chance to take advantage of this unique opportunity.

*Please note, some conditions will not be covered after three years due to the significant risk they pose for claims. These include cardiovascular, cancer, hip, back, knee, transplant surgery, reconstructive surgery etc.

Why take out private health insurance?

While we are lucky to have a pretty comprehensive public health system in New Zealand, there can be very long wait lists for treatment. Everyone is ranked in order of urgency, meaning some people can end up waiting a long time, and can be pushed back in line if a more pressing case comes up. Also, not all medications are subsidised - there are limited funds available, and the most commonly-used medications are at the top of the list when funding decisions are made. This means that both rare and innovative/new medications can miss out on being subsidised. Good medical insurance can combat both these issues.

If you would like to know more, please get in touch with us via the form below

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What is a Financial Adviser and why should I use one?

A lot of Kiwis would like to get some good financial advice, but don’t know where to start, or what to look for.

In a nutshell, a Financial Adviser is one point of contact, who knows all the financial stuff, inside and out.

They’re independent, registered, and work with lots of Insurance Companies, Lawyers, Accountants etc to make sure your ducks are in a row.

Your Adviser is like your own personal ‘fixer’. If something changes in your life (like a new job, new kids or buying a house, they’ll help you sort your Insurances, KiwiSaver, Mortgage, Legal Documentation etc so it continues to meet your needs through life.

One of the most important things your Financial Adviser can do, is go to bat for you if you need to make an Insurance claim. They deal directly with the Insurance Company to make sure they pay out.

There’s only a few thousand Independent Financial Advisers in New Zealand, and they’re busy as bees working to looking after their clients. We can tell you wholeheartedly, our Advisers at Solutions (our sister company), are fiercely passionate about helping Kiwis succeed in life financially.

Some Financial Advisers will charge you a fee for their work (mainly in the investment space), while many others offer their services free of charge (they are usually paid a fee directly by the financial institutions, such as the Insurance Company or KiwiSaver provider, to look after you).

They say there’s no time like the present, and Covid-19 has certainly shaken us all this year. This has highlighted the need for Kiwis to have good financial resilience for when the unexpected happens – This is exactly what Financial Advisers are there to help you with.

“New Zealanders who get financial advice on average have KiwiSaver balances over 50% bigger than those who don’t; are more likely to have insurance cover; and have greater peace of mind and confidence in making financial decisions.” - Money & You NZ

We deal with people from all walks of life – Trades people, Small business owners, Medical Professionals, Farmers, Teachers, CEO’s and Directors – The list goes on. It doesn’t matter who you are, what you do, or how much you earn, you can always benefit from having a good Financial Adviser look after you.

Get in touch, and we can have a quick chat about how we can help you.

Changes to KiwiSaver you should know about

The government has been reviewing KiwiSaver recently, and is making some great changes to the scheme that are set to take place from June next year.  

1 - Changes to Default KiwiSaver Funds

Like many of us, if you didn’t specifically choose a provider for yourself when you first signed up for KiwiSaver, Inland Revenue allocates you to one of nine default KiwiSaver providers.

This is to get you started, until you decide how you want to invest your contributions. The problem is, most of us haven’t touched it since, because we didn’t know we were supposed to.

By the way

Provider = the company that looks after your money. Each provider has a number of funds (usually 3-5).

Fund = Where the provider pools all their client’s KiwiSaver money, and invests it in various different places (eg shares, property, term deposits, bonds).

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Going forward, those who join KiwiSaver and don’t specify a fund type will be put into a ‘balanced fund’. This will be more advantageous for people who don’t engage with KiwiSaver for a long time and may otherwise miss out on thousands of investment dollars.

“By the time they’re 65, it’s estimated they will have around $56,000 more than if they were in a conservative fund” – Retirement Commissioner Jane Wrightston.

This doesn’t mean to say you don’t need to review your fund type.

Your fund type should match your risk profile, and take into consideration the time you’ve got until you’re likely to withdraw your funds.

Which fund type you decide to go into depends entirely on your circumstances and stage in life:

• A younger person may be more comfortable with risk, as they don’t plan to withdraw their KiwiSaver money until they’re 65 (They’re in it for the long haul).

• At the same time, they may need that money soon for their first home, and therefore might not be willing to risk it in a high growth fund.

• A person nearing retirement may want to go into a conservative fund as they don’t want to risk their investment returns suddenly dropping before they make a withdrawal.

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2 - The move away from oil and gas

Another great change coming to KiwiSaver, is the total ban in default funds investing in fossil fuels – Benefiting the planet and savers alike.

Recent data shows there was around $64 million invested in fossil fuel companies from default KiwiSaver members who hadn’t made an active decision about where to invest their money.

Barry Coates from Mindful Money has said moving away from fossil fuels is not only good for climate stability, but should help boost returns: “There’s increasing evidence that fossil fuels are not good investments”.

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If you’re not sure what’s happening with your KiwiSaver, or would like to know a bit more about it, click below and chat to one of our team.

Top money tips as told by Boomers

Boomers. We love em. Friends, parents, aunties, uncles, cousins - heck maybe even yourself. We thought we’d chat to a few, and see if they could share their top tips about managing money. After all, they do hold the bulk of New Zealand’s wealth.

Tip number one - Money doesn’t grow on trees. 

Who hasn’t heard this one before? Turns out, it’s true. Over a nice glass of buttery chardonnay, they told us to...

Start early, save regularly – Save small amounts often. 

Warren Buffet (okay, not technically a ‘boomer’) once said, “Don’t save what is left after spending; instead spend what is left after saving”.

Saving as little as $20 a week can create a very nice nest egg thanks to something called  compound interest. A lot of the time, saving small amounts earlier in life will have a greater impact than saving larger amounts later on.

Make a budget, and stick to it. 

To figure out how much you can comfortably put away each week, start with putting a budget together. Setting out a realistic plan will help you figure out the difference between:

1. How much you earn (e.g. $400 per week after tax)

2. How much you want to save (e.g. $20 per week)

3. The cost of your expenses each week (e.g. fuel, rent, food, phone bill etc). 

A budget also helps you stay accountable for your spending, and checking in regularly will help keep you on track towards your savings goals. 

Tip number two - Avoid hire purchase and pay-day loans

These types of loans typically carry high interest rates, and if you don’t pay them off on time, debt can start compounding against you and become a bit of a trap.

Long story short, you may end up paying a lot more for the items than you need to. If you’d saved up and purchased them with money from your bank account, you’d be much better off.

If you can’t avoid it, don’t miss any repayments, and try your best to pay it off as quickly as possible.

Tip number three - Don’t spend money you don’t have (yet). 

Buying things on lay-buy has become quite popular, making it easier to get things now, and pay them off in weekly installments, instead of all in one go. It makes financial sense on paper, but only if you have massive self control. A key issue is the encouragement you’re getting to purchase something that you might not normally buy - also known as impulse buying. And in some cases, you are potentially spending money you haven’t earned yet.

Tip number four - Invest in your retirement

Superannuation is currently available for every Kiwi here in New Zealand, once they hit 65 years of age - regardless of whether they’re still working or how many assets they have. 

But this doesn’t necessarily mean it’s here to stay. It could be risky to assume this support is going to be available in the same form for the next 10, 20, 30+ years. 

The government is trying to make New Zealanders better at planning their own retirement, by putting in place initiatives that encourage saving, such as KiwiSaver. 

While you can also withdraw KiwiSaver for your first home, you should be thinking long-term about your retirement, and making sure you have a nice little nest-egg building away in the background throughout your working life. 

Newshub has written a pretty good article on how much you may need for retirement, which you can find here. 

Tip number 5 - Learn about property and consider it as an investment

Real house prices have increased almost three-fold in the last 18 years, proving to be a good investment for many Kiwis. 

Regardless of whether you’re currently in a position to consider purchasing a property, starting to learn about how the property market works in New Zealand is useful. Look at house prices in different areas, evaluate how the market has performed historically, and learn about the basics, i.e. how rental returns work.

The majority of Kiwis need to borrow money to buy a home, so it’s crucial to understand the basics of how a mortgage works. We’ve written a blog on this here.

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And there you have it. Boomers have had a good run at this money stuff, and if we can put into practice some of their wisdom, we’ll most likely be a lot better off for it. 

I put money in to KiwiSaver every time I get paid. When can I actually use it?

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There are 4 situations in which you can withdraw your KiwiSaver money.

1. When you turn 65 years old.

This one is pretty self explanatory. This is so you can live off this big lump-sum payment after you retire.

If you continue to work after 65, that’s great. And you can actually keep contributing to KiwiSaver. The difference is that you’ll be able to withdraw the money whenever you like, while still reaping the benefits of your employer matching your KiwiSaver contributions up to 3% - This is on the condition they’re nice enough to continue contributing, as it’s not mandatory for your employer once you’re 65. If you’re self-employed, you can continue to make voluntary contributions into your KiwiSaver.

2. When you buy your first home

You can apply to withdraw your KiwiSaver money when you go to buy your first home. As long as you’ve been in KiwiSaver for 3 years or longer and have never owned a property before*, then you qualify to receive your KiwiSaver. The main reason for the "application" is so they can make sure you’re actually using the money to buy your first home.  

A few things to note:

• You have to leave $1,000 in your KiwiSaver account

• You don’t actually get the cash in your bank account, the money goes to your lawyer and they pay it directly to the vendor (seller)

• You don’t have to withdraw all of it

• You need to intend on living in the home, i.e. it can’t be an investment property

*If you’ve already owned a home in the past (but have not withdrawn your KiwiSaver before), you may still be able to withdraw your KiwiSaver money. In this situation you need to contact housing New Zealand and have them determine that you are in the same financial position as a first home buyer (basically they just look at the combined value of your assets). They’ll then give you a certificate to pass on to your KiwiSaver provider - and again it will be up to the provider to make the call on releasing the funds.

3. If you’re experiencing significant financial hardship.

You can actually withdraw your KiwiSaver funds early if you’re seriously strapped for cash.

For example:

• You can’t make your mortgage repayments on time, and the bank is threatening to take the house.

• You can’t afford to live - This isn’t just having to miss out on a few nice dinners. It means you can’t afford pay for the basic necessities of life.

• You need to pay for medical treatment for yourself or a dependent family member, due to sickness, injury, or terminal illness.

How to avoid getting in to money trouble.

A major contributor to financial hardships is the above situation: someone gets sick. This is made even worse if they are one of (or even the only) income earner in a household.

Sometimes people assume ACC will help them out. But remember, this only covers accidental injury, not any kind of sickness or treatment for illness. Learn more about what ACC covers here: https://www.acc.co.nz/im-injured/injuries-we-cover/

Fortunately it’s possible to protect ourselves against these risks. A small amount of insurance, for things such as medical bills and covering lost income, can make a huge difference. This means if something happens, you and your family won’t have to dig into savings, apply for KiwiSaver funds or even remortgage the house just to pay for medical bills and the basic costs of living.

4. If you’re seriously sick or injured

And you don’t have insurance.

You may be able to withdraw your KiwiSaver money if you have a serious illness, injury or disability which means you either can’t work anymore, or may die as a result.

Remember, you’re using your nest egg on this - So once the money has been spent on medical bills etc. - you’ll be back to square one in terms of saving for your retirement.

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Do you know what’s happening with your KiwiSaver? For example, who your provider is, and what type of fund you’re in?

To make sure your nest-egg is in the right hands, and in-line with your financial goals, you can have a free chat to one of our advisers. Just click below.

If I get a serious illness, will the government fund my medication?

Medications, particularly the ones that can save people’s lives, cost money. A lot of money. Years of research, clinical trials, and approvals put a hefty price tag on these drugs - and place them out of reach for most kiwis. 

Fortunately, our public health system has something called Pharmac. This is a government organisation that subsidises certain medicines and equipment, to make them affordable and available to all New Zealanders. 

Around 3.5 million Kiwis use pharmac-funded medications every single year.*

What does Pharmac cover?

• Community Medicines

• Vaccines

• Hospital Cancer Medicines 

• Medical Devices

The problem is limited resources. The government allocates Pharmac a budget each year, but obviously they can’t afford to subsidise every single medication available. Decisions are made to prioritise funding for the medications that will positively impact the most people.

This means a big list of medically approved, cutting edge medications aren’t subsidised. To get hold of them, we have two options:

1. Fork out the full amount ourselves (which can be very expensive); or 

2. Use private medical insurance

Most good insurance companies will cover the cost of non-Pharmac drugs, which can literally be the difference between life and death. However, the amount they cover can differ from $10,000 to $400,000, and $10k isn’t going to get you very far in the event of serious illness. For example – A non-pharmac melanoma drug can cost up to $150,000 per year.*

If you have medical insurance, that’s great. But do you know exactly what you’re covered for? And for how much?

If not, we can check the policy wordings for you, free of charge, so you know exactly what you’re covered for. Or, if you would like to learn a bit more about medical insurance, you can chat to one of our financial advisers. Remember, their help is free. And it’s important you sort out this stuff now, before you need it.

The Beauty of Compound Interest

As always, the content below is meant as general information to give you a better understanding of this topic, and is subject to our terms and conditions. You should seek appropriate personalised financial advice from a qualified professional to suit your individual circumstances.

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So, compound Interest. Never heard of it? Fair enough. The purpose of this blog is to:

1. Explain what compound interest is

2. Help you understand why it is so valuable, so that hopefully you can take advantage of its key benefits, and make it a part of your long-term financial future

First, let’s cover off “interest” - this is the ‘fee’ you either pay (when you borrow money) or receive (when you loan money). It’s almost always calculated as a % of the amount borrowed, per year. So if you borrowed $100,000 at a rate of 4% - you would pay $4,000 of interest per year.

Many people don’t realise that when leaving money in their bank account, they are effectively ‘loaning’ that money to the bank. In return, they receive interest. Sometimes it’s not that much, which is why it pays to check the level of interest paid on your savings and everyday accounts.

There are other ways to earn interest, for example term deposits.

Compound interest is pretty simple. Each time you are paid interest, just leave it in the account. Don’t withdraw it, don’t spend it, just leave it. Then, the next time you are paid interest, you’ll be earning interest on your interest. 

Albert Einstein called compound interest “the eighth wonder of the world.” - Okay, so that’s quite extreme, but it is pretty amazing.
Let’s say you have $1,000 in the bank earning 4% interest per year. By the end of the year, you will have received $40 of interest, and will then have $1,040 sitting in your account. The following year (as long as you haven’t withdrawn the money), the 4% of interest will be calculated on the new amount (the $1,040) - not the $1,000.

So, at the end of year 2, you will have $1,081.60 in the account - you received $41.60 of interest, instead of the $40. You earned interest on your interest.
This might not sound like much. It’s not even enough for a flat white. But let’s fast forward 10, 20, 30 and even 40 years. Compound interest shines the longer you leave it.

Example 1: Compound interest (4% per year) with a $1,000 initial deposit and no regular deposits.

Source: Money Smart Compound Interest Calculator

Example 2: Compound interest (4% per year) with $1,000 initial deposit and $20 regular deposits each week.

Source - Money Smart Compound Interest Calculator

How to make the most of compound interest

1. Start early, save regularly – Save small amounts often. As shown above, saving as little as $20 a week can create a very nice nest egg thanks to compounding interest. A lot of the time, saving small amounts earlier in life will have a greater impact than saving larger amounts later on.

2. Check the interest rates on your bank accounts –  A recent survey* shows that around 62% of Kiwis use their savings account as their primary investment strategy. That’s okay, but it means we should be paying extra attention to the details - e.g. the interest rate and how often it’s compounding (generally speaking, the more frequent compounding, the better).

 A cheque or ‘everyday’ account linked to your Eftpos card typically earns no interest. If you’re keen to start saving, have a look at your bank's website to see what kinds of savings accounts are available, and at what interest rate. You can check out what you bank is offering and compare to others in the market here: https://www.interest.co.nz/saving/call-account 

3. Get excited about the numbers!
So maybe numbers aren’t the most exciting thing. But the rule of 72 is an easy tool you can use to figure out how your savings or investments can grow with compound interest. Simply divide the number 72 by the interest rate. The answer shows how many years it will take for your money to double.

o   E.g. if you have $5,000 earning 4% (after tax). 72 divided by 4 = 18 years.

o   Every 18 years, your money will double.

There’s a handy tool you can use to see what your money may look like in the years to come: Compound Interest Calculator

Compound interest on our debt

Unfortunately, compounding interest can work against us as well, making it more difficult to pay off debt. The longer it takes us to repay debt that charges interest, the more we ultimately end up paying.

If you do have debt such as credit cards or pay day loans, compound interest can work against you. To work out how much you will pay over the lifetime of the loan, check out this debt calculator.

So, there you have it. A bit of an explanation about compound interest and you can use it in your long-term financial planning. 

If you have any questions, please get in touch with us at hello@ducksinarow.nz - We would love to hear from you. 

KiwiSaver changes from July 1st, 2019

The Government has made a few changes to KiwiSaver this year. We’ve covered the April updates here, and there are two new changes as of July 1st that you may find interesting:

• Now, a further 500,000 Kiwis are eligible to join KiwiSaver as they’ve removed the entry age (this used to be capped at 65 years old). 

• New members between 60-64 years are no longer locked in for five years. Instead, they can access the funds when they reach the qualifying age, which is currently 65.

So, if you or anyone aged 65+ aren’t in KiwiSaver - it’s something you can now look into. The benefit is that once you reach 65, you can use your KiwiSaver like a bank account, taking out small bits at a time. This leaves the rest of your nest-egg still growing in your KiwiSaver fund, even in retirement.

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If you’re in KiwiSaver but unsure whether you’re with the right provider or in the fund that’s right for your situation, book in for a KiwiSaver catch-up with one of our specialists.

This is a free chat, on the phone or in person, and shouldn’t take more than 20 minutes.

We will talk about your current KiwiSaver set up, and explain your options - so you can assess whether you are with the right provider and fund type for your situation.

The sooner you get this sorted, the better. As over 90% of Kiwis are missing out on potential financial benefits, by leaving their nest egg sitting in a default fund. 

Mortgage Basics

As always, the content below is meant as general information to give you a better understanding of this topic, and is subject to our terms and conditions. You should seek appropriate personalised financial advice from a qualified professional to suit your individual circumstances. We are happy to help you arrange this :)

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How does a mortgage work?

A mortgage is essentially a loan that you take out with a bank, or other financial institution, for the purposes of buying property. While banks aren’t the only ones who offer mortgages, for simplicity we’re going to refer to them when we talk about lenders for the rest of this guide.

A mortgage example: say you want to buy a home for $600,000, but only have access to $120,000 in cash. You can apply to the bank to borrow the remaining $480,000, and pay the rest off over time. The bank benefits from this loan by charging you interest on the $480,000 at an agreed rate, until you pay it back.

There are some key terms to know in relation to mortgages:

Deposit: The amount of money you have available to put towards buying the home. Often made up of cash and the money in your KiwiSaver account. In the above example, this is the $120,000.

Equity: This is how much of the property you actually own, based on its market value. It is usually referred to as a % figure. So from the example above, on the day of purchase you had 20% equity (your $120,000 deposit) in that $600,000 property. This means the bank’s loan represents the other 80% of the property’s value.

Interest Rate: Each year, the bank charges you a percentage of the amount you have borrowed. The % rate they charge is called the ‘interest rate’ - at the time of writing, mortgage interest rates varied from about 3.85% to 6.80% for most banks.

Repayments: The money you regularly give to the bank to pay off your loan. These are usually weekly, fortnightly, or monthly payments. Each repayment has a portion that is interest (based off the % amount mentioned above) and a portion that is principal (money that goes towards actually paying off the lump sum you borrowed). The more you can chip away at the principal, the more equity you have, and the less interest you will pay in the long run.

Increasing your equity

As the value of your property increases, so does the equity you hold in the property. In simpler terms: if your property goes up in value over time, you will own a bigger percentage of the property compared to the bank.

Again using the above example, let’s say $600k property magically jumped in value by $42,500 the day after you purchased it - and is now worth $642,500. You would now own 25% of the property instead of the 20% because you benefit from the property’s value increasing over time, not the bank. The bank’s $420k loan now only represents 75% of the property’s value, instead of the 80% yesterday.

This is a general example only, and does not take into account interest, inflation or repayments over time etc.

Interest rates

When it comes time to take out a mortgage, interest rates play a big part in deciding who to borrow money from. Different banks (and other lenders) offer different interest rates, depending on whether you want to ‘float’ or ‘fix’ - more on this later.

It’s important to note that interest rates can change over time. Although it hasn’t changed much in recent times, what the banks are offering in April, may be different to rates they are offering in October. This is because of something called the ‘OCR’.

Without going into too much detail, the ‘OCR’ (or the Official Cash Rate) is an interest rate set by the Reserve Bank of New Zealand. They use it to regulate our economy, and control inflation.

It may sound odd, but banks actually borrow money too. The OCR is the ‘wholesale rate’ of borrowing money -  which the banks have access to. So, if the OCR goes up, and the banks have to pay more interest when they borrow money, our mortgage interest rates will probably go up too. If they OCR goes down, the mortgage interest rates on offer from the bank will usually follow.

Different types of mortgages

Here we’re going to focus on the two main types: fixed and floating mortgages.

Floating-Rate Mortgages - Here, your interest rate will change over time. This is great if your bank’s floating interest rate goes down, not so great if it goes up.

The main benefit of opting for a floating rate is flexibility. There are no penalties for paying off lump sums of your mortgage. This is great if you are paid in irregular amounts, for example monthly commissions or bonuses.

The tradeoff is that historically, floating rates have been higher than fixed rates. So you need to evaluate your situation, and decide whether the added flexibility is worth the higher interest rate.

Fixed-Rate Mortgages - For this type of home loan, you lock in your interest rate and your repayments for a certain period of time.

This is great for budgeting. You can usually lock in an interest rate for a period of time between 6 months - 5 years, and you will know exactly how much money you need to pay for that fixed period.

The downside here is that if you want to pay off more (or all) of your loan outside of your regular repayments, the bank will charge you what is called a ‘break fee’. This fee is usually calculated by taking into account how much interest the bank is going to ‘miss out on’ as a result of you breaking the fixed term.

Having said that, some banks will give you a little leeway, and let you pay off  a bit more than you originally agreed when you set up the fixed term. For example, the bank may let you increase your fortnightly repayments by 20% - and all of this extra money will go to pay off the principal, because the interest rate is already locked-in.

Float or Fix? - As with pretty much everything in the financial world, it depends on your circumstances. But one key thing to remember is that you can have the best of both worlds. Most lenders will let you fix part of your loan, and float the other. And remember, if you don’t like the way interest rates are heading, you can move some or all of your debt from floating to fixed.

If you have any questions you would like answered, please flick us an email hello@ducksinarow.nz

Are you getting $521 free from the NZ government this year?

Each year, the government is willing to put up to $521 of cold hard cash into each of our KiwiSaver accounts.

For every $1 we contribute to KiwiSaver each year, they will contribute 50 cents, up to a maximum of $521. Unfortunately, thousands of Kiwis leave this money unclaimed.

It’s called a ‘government contribution’ - which basically means free money. There’s no catch, it’s just the government’s way of encouraging New Zealanders to make contributions to KiwiSaver. If you would like to know more about how it all works, click here.

The details

Everyone enrolled in KiwiSaver between the ages of 18-65 is eligible for this top-up. Regardless of whether you are currently working.

If you’re earning $34,762 or more per year via PAYE - and you’re contributing the minimum 3% to KiwiSaver - then you’re going to automatically receive the full $521 from the government each year. In other words, you don’t need to do anything. As you were.

However, if you are not paid via PAYE, or if you’re earning less than $34,762 per year, you will need to top up your KiwiSaver account manually - making sure you have contributed a total of $1,043 since 1 July 2018, to ensure you receive the $521 bonus payment from the government.

You must make sure you have contributed the $1,043 to your KiwiSaver account before Friday, 28th June. If you’re making a manual payment, the sooner the better - as it can take a wee while for your contribution to be processed.

If you would like to make a KiwiSaver payment manually, and aren’t sure how, we’ve written a step by step guide here.

If you have any questions or need a hand, please just flick us an email - we’ll be happy to help, free of charge. hello@ducksinarow.nz

KiwiSaver Changes from April 1st, 2019.

If you have KiwiSaver, there’s a few changes you should know about. Two of them are taking effect from April 1st, 2019.

Change number 1 - More contribution options.

Up until March 31st, 2019 - you could only contribute either 3%, 4%, or 8% of your earnings to KiwiSaver. Now, you will be able to also choose 6% or 10%.

This change will give KiwiSaver members more flexibility in how much they put away into their nest egg.

This won’t have any effect on how much your employer legally needs to contribute. Their contributions are still fixed at a minimum of 3% - however they may choose to match you at a higher rate. If you’re not sure what the policy is at your workplace, it’s worth asking. If your employer is willing to match you up to 4%, or even more, you might seriously consider increasing your own contributions.

Change Number 2 - ‘Contributions Holidays’ are now ‘Savings Suspensions’

This doesn’t sound like much, but it is more than just a name change.

A ‘contributions’ holiday was a tool available for KiwiSaver members, where they could take a break from contributing into their KiwiSaver account. The maximum holiday term was five years. It was also available up until March 31st, 2019.

Issues with taking a contributions holiday:

• Stopping contributions means missing out on the Government’s contribution of $521 per year (As long as you contribute at least $1,043 per year).

• It also means missing out on any potential investment returns from that money being invested.

• People could forget that they had activated the holiday, and stop contributing to KiwiSaver for a full 5 years. Missing out on a large chunk of employer contributions, and ending up worse-off down the track, when buying their first home or hitting retirement.

• The word ‘holiday’ makes people think of a relatively short, positive thing. But in reality, the ‘Contributions Holiday’ could last up to 5 years if you forgot about it, and potentially leave KiwiSaver members in an unfavourable financial position.

So, the ‘contributions holiday’ is no more. Now, you can make a ‘savings suspension’.

The main thing to know about the new ‘Savings Suspension’ tool

• It only lasts a maximum of one year. At which point you may choose to go on another Savings Suspension immediately.

So, they changed the name from ‘Contributions Holiday’ to ‘Savings Suspension’, and they lowered the maximum period of a single break from five years to one year.

The new name is more accurate, as you are essentially suspending one of your savings strategies by activating this tool. It’s also less of a negative if you were to forget about it, as it now lasts a maximum of 12 months, instead of five years.

Remember, 3% is the minimum amount you can contribute to KiwiSaver. if you are contributing more, but are finding it too much pressure on your personal cash flow, it is absolutely fine to reduce your contributions down to the 3% mark. This can be a much better strategy for some people, as it means they see a little more cash in their account each time they’re paid, but they still receive the benefits of a 3% contribution from their employer, the free $521 from the government each year, any investment returns that might be achieved, and the compound interest effect of continuously making contributions.

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While we’re here, it’s also worth pointing out two changes coming from July 1st, 2019.

Change 1 - People over the age of 65 can join

• A lot of people are aware that you can withdraw your KiwiSaver money once you hit 65 year old. But there was also a rule that over 65’s weren’t allowed to join.

• From July onwards, people over the age of 65 may join, and withdraw their money whenever they like.

• The benefit of joining is that if you are over 65 and are working, your employer may decide to continue to contribute to your KiwiSaver (although they are not legally obliged to).

• Also, your KiwiSaver account may earn better interest than keeping the money at a bank. However this all depends on the type of fund your money is in, and how the market is performing.

Change 2 - No lock in period for over 65’s

• Pre-July, if people join between the ages 60-65, there is a five-year lock in period, where the funds cannot be released.

• So fro example, if a 63-year old joins KiwiSaver, they will have to wait five years to withdraw their funds - they cannot simply withdraw at age 65

• From July onwards, this lock-in period won’t apply

Are you paying too much tax on your KiwiSaver?

As always, the content below is meant as general information to give you a better understanding of this topic, and is subject to our terms and conditions. You should seek appropriate personalised financial advice from a qualified professional to suit your individual circumstances. We are happy to help you arrange this.

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 If you are registered for KiwiSaver, your provider should be investing your money in various places, in order to grow your nest egg.

The extra money you earn through these investments will be taxed at different rates depending on your income.

Unfortunately, this isn’t one of those ‘tax refund’ situations. if you don’t declare the correct tax rate, you could be paying too much, and you will not be able to claim it back.

What is KiwiSaver?

A bit of a refresher: KiwiSaver is New Zealand’s retirement investment initiative, and has a current membership rate of around 3 million people.

It started because us Kiwis aren’t the best at saving, or planning ahead for our retirement. Lots of people were hitting retirement with a lot of debt (for example mortgages) and no savings, expecting to live off superannuation (the ‘pension’). However, this is bugger all money, leaving many people high and dry. Further, we don’t know what the pension will look like in 10, 20, or 30+ years from now, so a plan needed to be put in place.

A lot of people signed up for KiwiSaver either when it launched, or when they started their first job. From there, most of us don’t pay all that much attention to it – until we want to withdraw the funds for our first home, or retirement.

If you don’t select which company you want to look after and invest your KiwiSaver money (provider), or which type of fund (i.e. conservative, balanced, or growth)  then your money is automatically placed in a default fund.

Default funds and why they’re a bit shit.

If you don’t choose a provider and a fund, your money will end up in a default fund.

This means your money will be invested conservatively (lowest risk = potentially lower reward) and you’ll likely be placed on the highest tax rate, even if it is incorrect for your circumstances – more on that later.

Currently 400,000 New Zealanders have their KiwiSaver money sitting in a default fund. These people have missed out on an estimated $1billion in the last 6 years. *1

Now, there’s nothing wrong with being in a conservative fund, as long as it fits your risk profile. However, many people might be better off in a balanced, or more growth-focused fund. For example, a 30-year-old earning $60,000 per year, that isn’t going to withdraw their KiwiSaver until they’re 65, still has 35 years left in KiwiSaver (They’re in it for the long-haul). Their risk profile might be matched to something more growth-focused. In doing so, they could make upwards of $400,000 more before they retire, simply by switching funds. *2 Please note, this is a general example and is not personalised advice.

Your PIR (Prescribed Investor Rate) and why it needs to be spot on.

For our purposes here, you can think of PIR as ‘tax on KiwiSaver earnings’ – although it does apply to all investment earnings you might make.

For example, if you have $5,000 in your KiwiSaver account, and it earned $100 of interest last year, that $100 will be taxed.

If you were earning under $14k per year, the $100 would be taxed at only 10.5%

If you were earning $30,000 per year, it would be taxed at 17.5%

And if you’re earning over $48,000, your PIR would be 28% (the top rate).

However, it can get tricky, because it’s not just your primary income that counts. Any income you might earn off other investments, such as managed funds, needs to be taken into account. More on that here.

Also, your PIR is based off your last two years of income. If your income has changed during this period, go off the lowest amount. I.e. if you were at University and only earned $10,000 last year, but earned $50,000 working full time this year, you would base your PIR on the lower amount (the $10,000) and therefore only get taxed at 10.5%. However, at the end of next year, you would need to update your PIR to 28%.

You are responsible for making sure you’re on the correct PIR. And because many Kiwis don’t understand how it all works, many of us end up on an incorrect rate.

The IRD has a website to help you determine your PIR. It is a bit complicated, so if your finding it tricky to determine your exact rate, we are more than happy to help you out – Just click here.

What happens if you’re on the incorrect PIR?

This depends on whether you’re on a higher rate than you should be, or a lower one.

If you’re paying less tax than you should be, you need to correct your PIR asap. You may also need to file a tax return to account for the under-deduction. If you simply leave it, the IRD could hit you with a very big tax bill down the track.
If you’re paying more tax than you should be, and don’t update your PIR with your provider, that money is gone. It’s called ‘final tax’ and is not subject to any kind of refund. The best course of action is to contact your KiwiSaver provider as soon as possible, and get updated to the correct PIR.

Obviously if you don’t know what rate you’re currently on, contact your provider.
If you don’t know who your provider is, contact us, one of our financial advisers can help you get it sorted free of charge.

What if you want to change fund while you’re at it?

While you’re looking at your PIR, it’s a good opportunity to look at who your provider is, and what kind of fund your money is in.
if you like, we have a small team of financial advisers here at Ducks in a Row, that can have a quick (free) chat with you, in order to help figure out how your KiwiSaver is doing, and what other options are out there.

Just click the button below, and we’ll get in touch shortly.

References

*1 https://www.stuff.co.nz/business/money/105514546/protest-over-the-1billion-cost-of-kiwisaver-default-funds

*2 Generate Calculator - The 5 year returns shown are the average for each fund type per annum (p.a.) from sorted.org.nz Fundfinder 01/04/13 to 30/06/18 less 2% p.a. to adjust for inflation Defensive 2.17% (0.17%), Conservative 4.65% (2.65%), Balanced 6.84% (4.84%) and Growth 8.89% (6.89%) p.a. See more here

What happens to my student loan if I go travelling?

If you are planning on going travelling for 6 months or longer, and have a student loan, you need to read this.

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What is a student loan?

If you didn’t already know, a ‘student loan’ is essentially money borrowed from the New Zealand government. It allows you to study, without the pressure of interest over your head, as long as you stay in New Zealand. The idea is that you will gradually pay it off later once you’re in the workforce.

How does it get paid off?

The amount you pay off is proportionate to how much you’re earning. If you’re living in New Zealand, and are paid under PAYE, your employer should automatically send 12% of your income (for everything you make over $19,448 per year) to the IRD, in order to pay off your loan.

If you are not paid via PAYE, you will need to make repayments manually. The amount you need to repay will depend on how much you earn. To work out the minimum repayment amount, head to the IRD website.  

As long as you don’t leave New Zealand for longer than 6 months, the IRD will write off any interest incurred on your student loan.

What happens if you head overseas?

If you are away from New Zealand for more than 6 months, your loan will no longer be interest free. And, your repayments will be based on your loan balance and not your income.

This means that instead of a portion coming out of your paycheck each week, you need to make two payments per year. You are responsible for making these payments yourself - there’s no way for them to be automatically deducted from any income you earn while overseas.

There are two main installment dates for student loan repayments that you must meet every year – 30th September and 31st March.

Under certain circumstances you can apply for your loan to remain interest free if you meet any of the following criteria:

• If you or your partner or studying overseas

• Working for the NZ government

• Working for a NZ employer

• Volunteering for a charitable organisation

• Living in Niue, the Cook islands, Tokelau or Ross Dependency.

How much do you need to repay?

This varies, but as an example, if your student loan is between $30,000 - $45,000, you will need to pay $1,500 in September and $1,500 in March. If your loan is over $60,000, you will need to pay at least $2,500, twice a year.

You can use this calculator to figure out your minimum yearly repayments: https://www.ird.govt.nz/calculators/keyword/studentloans/sl-repayment-calculator.html

Note: You can’t just come back home for a few days every 6 months in order to keep the loan interest free. You would need to be back for at least 32 consecutive days to ‘reset the clock’ on the 6-month rule.

When will you start being charged interest?

If you’re out of New Zealand for longer than six months, you will be charged interest on your student loan. The current rate is 4.3% - however this rate changes periodically.

On top of this, they will actually back-date your interest obligations to start from the day after you left New Zealand.

It’s important to note that the repayments you make while overseas are going to pay off the interest first, and then start chipping into your total loan amount. This means that if you have money available, you may be better off paying more than the minimum repayment amount (if you can), in order to decrease your level of debt as quickly as possible.

What are your options for repayment while overseas?

1. If you’re working or have money available while you’re overseas, you can make voluntary contributions whenever you like - this will help pay your loan off faster. Make sure you are paying off at least the minimum amount required based on the student loan calculator here.

2. If you’re not working, or don’t have funds available, you can apply for a repayment holiday. This gives you a 12-month break from repaying your student loan. However, there will still be interest added to your balance which you will have to pay off once your repayment holiday comes to an end. If you’re thinking of doing this, you need to do it before you go, or within 6 months of leaving, through your myIR account.

What happens if you miss a payment?

In short, don’t. This is really not a situation you want to get yourself into. You should tuck the money away for these repayments as an absolute priority. If you miss more than one repayment (and aren’t transparent with the IRD about why you’ve missed it) you may be charged late payment interest, and in some cases people have even been arrested at the border in New Zealand. So yeah, it’s a big deal.

However, if you do miss a payment, call the IRD as soon as you can, and be honest about what’s happened. They may be able to offer you payment options.

What happens when you move back to NZ?

If and when you move home to New Zealand, after 6 months your student loan becomes interest free again. All you need to do is let the IRD know you’re back in the country.

If you planned on being overseas for less than 6 months, but your return was delayed by any of the below, you can apply for your loan to remain interest-free until you return.

• Airline strikes

• Illness

• Death of a family member

• Natural disasters

• Terrorism or war

In a nutshell, if you have a student loan and are leaving the country for six months or more, you need to let IRD know. You should also start making a plan for how much you need to repay while you’re away, and how you’re going to pay it.

It’s easy to get caught up in the excitement of going overseas, but remember that your interest free student loan comes with conditions. And if you don’t repay it on time, you can get into some serious trouble.

If you have any comments please drop them below :)

Freelancers – here’s how to make sure you’re still contributing to KiwiSaver.

If you are not an employee of a company, you will need to make ‘voluntary contributions’ to your KiwiSaver account.

Firstly, let’s cover off the why. Here at Ducks in a Row, we think damn near everyone should be in KiwiSaver, contributing at least 3% of their income. But if we can’t convince you to do that, you should at least consider contributing a total sum of $1,042 per year.

Why? Because if you do, the Government will give you $521 each year. No strings attached.

For every $1 you put in to your KiwiSaver account, the government will contribute 50 cents, up to a total of $521, every single year. That is a 50% return on investment on your $1,042 – which is huge. And it will only cost you about $20 per week.

One thing to note: you only qualify for this perk if you are aged between 18-64, and mainly live in New Zealand.

Now, let’s get down to how you go about making contributions.

Oddly enough, this isn’t as straightforward as it should be, so we’ve broken it down for Westpac, ASB, ANZ and BNZ account holders.

There are a couple of ways you can make voluntary contributions. Either set up an automatic payment, or make manual payments.

Some banks don’t let you make automatic payments for KiwiSaver contributions – including Westpac and ASB. So, if you’re with one of those banks, you will need to do it manually each time.

You could do a one-off payment of $1,042, or split this into two or three payments throughout the year. But if your bank lets you, it can be easier to simple set up an automatic payment of approximately $21 a week to receive the maximum member tax credits.

Whichever way you do it, make sure you’ve contributed at least $1,042 before June 30th every year, as this is the cut-off date. 

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ANZ

Go onto your online banking

1. Set up a payment (manual or automatic)

2. Go to your payees list – Search for the name of your KiwiSaver provider. (Image 1 below)

3. Select the amount you want to contribute (eg $20), when the first payment is to be deducted and the frequency of payments ongoing. (Image 2)

4. It will ask you to add the reference details so your KiwiSaver provider can identify you. If you’re not sure what they are, they will be on your KiwiSaver statement or online profile. (Image 3)

5. Select confirm and you’re all done!

Image 1

Image 2

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ASB

Go onto your online banking

1. Click the payment tab and select ‘IRD Payments’ from the drop-down menu.

2. Select ‘KiwiSaver member account (KSS)’ from the drop-down menu. (image 1)

3. Put in your IRD number, the amount you want to contribute (eg $20). (image 2)

4. Select next, confirm and you’re all done!

Image 1

Image 2

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Westpac

Go onto your online banking

1. Select ‘Pay and transfer’ on the right hand bar

2. Select the account you want the money to come out from.

3. Select ‘IRD (inland revenue) pay tax’ from the drop-down menu.

4. Under the details section, select ‘KiwiSaver Member Account’ from the drop-down menu.

5. Put in the amount you want to contribute (eg $20).

6. Select confirm and you’re all done!

Image 1

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BNZ

Go onto your online banking

1. Select ‘pay or transfer’ from the drop-down menu

2. Select the account you want to contribute from (eg savings). (image 1)

3. Select ‘Employer - KiwiSaver deductions for employees - KSS’ from the drop-down menu.

4. Put in the amount you want to contribute (eg $20) and your IRD number.

5. Select continue and you’re all done!

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If you would like to get your ducks in a row, just click the button below and we will sort the rest.

"I earn more than I used to, but it feels like I have less money."

If this sounds like you, don't feel bad. It's a really common situation that most of us have experienced, and usually we aren't even aware of what we're doing to cause it.

First things first, we know life happens. Unexpected bills and greater responsibilities can mean more spending. What we've written below refers more to the extras, the things we don't need to spend money on.

So, there's this thing called Parkinson's law. Without getting too far into it, the law says that "Work expands so as to fill the time available for its completion." This basically means it doesn't matter how long you give yourself to complete a task, 1 day, 1 week, a month - whatever time limit you set, that's how long it will take.

This law seems to apply to other things, too. The bigger our house, the more stuff we'll accumulate to fill it up. The bigger our plate, the more food we'll pack it with, and subsequently eat.

In a financial context, the more money we have, the more we seem to find things to spend it on. Living our entire lives like this means we'll probably never get ahead financially, and will live our lives paycheque to paycheque.

So why do we spend more when we earn more?

Essentially it comes down to our relationship with money, and our lack of transparency over where it goes.

Us and money.

Let's say you get a new job and go from receiving $650 cash into your bank account each week to $900. Fantastic. Now, there are a couple of legitimate expenses that might come with that. Maybe the job is further away, so transport costs a bit more - or you might need to upgrade your wardrobe. But fundamentally, there is no reason you shouldn't be able to save at least $200 extra per week than you were before. It's just... you probably won't.

Now don't get us wrong, we're guilty of this too. See, the issue is in our thinking. As soon as we hear the words "pay rise" many of us start making a mental list of all the great things we can now afford. This might seem okay to get us to a certain "level" of comfort - but the problem is, it never stops. There will always be something to upgrade, something better than what we currently have. Unless we change our thinking, it doesn't matter how much more we earn, we'll continue to spend all that extra money - and never reach our financial goals.

The transparency thing.

"You really should have a budget" - we hear this often. But it's so important that we're aware of where our money is going each week, each month - instead of pay-waving our way through life without a care in the world.

A budget is essential, and we have a great tool for you a little later in this blog.

 

There are a few other things that trap us in to overspending

- Online lay-buy services

- Hire Purchases

- Apple bringing out a shiny new iPhone that no one actually needs

- Qualifying for higher levels of debt, such as a credit card or big mortgage. A bank or financial institution being willing to loan you money, doesn't necessarily mean you should take it.

How do we stop it?

1. Look at all your spending from the last 2-3 months. That is, take a good hard look at your spending. What is essential, what isn't? Do you remember when you used to live of $300 a week? What are you doing differently now? We're not saying live off bread and water, but be practical about what you need vs. what you want.

And one thing, don't discount something from your analysis as a "one-off" big purchase, like a holiday. Because chances are, you'll have more of these coming up. You're better off accounting for ALL your spending, and then making a "holiday fund" bank account where you put a set amount aside each week.

2. The best way to break that annoying Parkinson's law? Limit your spending. The only way: Make a budget, and stick to it. We know, you hear it all the time. But there's a reason for that. It makes you cut the crap, and become accountable for where your money is going. Sorted.org has a really good budgeting tool you can find here. Go make one, and set yourself a goal of sticking to it for 8 weeks. See how you go.

3. Talk to a financial adviser. We say this a lot too, but their help is free, and they often have some really good ideas. For example, if you have a mortgage and a decent amount of credit card debt, they might suggest you move the credit card debt (on which you're probably paying interest of over 18%) and turn it into mortgage debt (which is probably somewhere around the 4.5-6% mark).

There it is. A brief explanation of why we often find ourselves with less, when we're earning more - and a few practical steps to help you get past it. If you have any more questions, please just get in touch.

Should I bring my Aussie Superannuation money back to New Zealand?

There are over 650,000 Kiwis living in Aussie. Every year, thousands return back to Aotearoa. No surprises there. But while working over the ditch, they’re generally obliged to sign up to the Australian superannuation scheme - and it’s a sizable 9.5% that their employer pays on-top of their wages.

But what happens when they move home? Should they bring their Aussie-super back to NZ’s KiwiSaver scheme?

Unfortunately like most things, there’s no one-size fits all answer. It depends on your personal circumstances, and we’ve had a go at breaking down the key factors below.

Here are a few things to know about before making the move:

 

Pros

• It can be done: Kiwis can transfer their super into KiwiSaver (and vice-versa) if you’re planning on moving to that country permanently.

• Tax: Transferring the money across the ditch is a tax-free transaction.

• Save on Fees: If you have both KiwiSaver and a superannuation fund, you are probably paying two sets of fees. So, it makes sense to have your money in one place, and get charged just once.

• Retirement rules: Instead of waiting until you’re 65 (the registered retirement age in NZ), you can access your KiwiSaver at 60, in line with the Australian rules.

• NZ withdrawal rules: compassionate ground rules apply in New Zealand, so you can apply to withdraw your funds early if you suffer a serious illness or financial hardship.

Cons

• First Home Withdrawals: You can’t withdraw your Australian money for your first home, even after it has been transferred into KiwiSaver. The money is locked up until retirement, because Australian rules apply.

• Insurance Benefits: Australian super often comes with added benefits, for example life insurance. You could lose these entitlements by moving the funds out of Australia. It’s so important you read the fine print, or talk to an expert.

• Exit and Entry Fees: You may be charged for the transfer into your KiwiSaver fund (or exit-fees for leaving) – If you have a few different super funds, you may be charged the fee several times.

• Exchange Rate: It can take some time to transfer the money, and the exchange rate will fluctuate over time. The applicable rate when the funds are transferred may positively or negatively impact your nest egg.

• Tax burdens – Tax on Aussie super is only 15%, whereas in New Zealand it is up to 28% depending on your income. Only Kiwis who pay less than 15% PIR on their KiwiSaver (i.e. earn $14,000 or less, will pay less tax in NZ than Aussie.

Get specialised advice about switching your nest-egg

Moving your nest-egg overseas can be quite a daunting decision. It’s a good idea to weigh up the pros and cons of moving the money, or leaving it where it is for now. Your decision will primarily relate to your individual circumstances, i.e. your age, your financial needs at the time, how much you earn, and whether you intend on retiring here in New Zealand.

It’s a great idea to get independent financial advice before moving the money. Seeking help from people who do this sort of thing every day, can make the process a whole lot easier.

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We hope you’re enjoying Ducks in a Row. If you’re interested in learning more about money and all the rest (basically the things they didn’t teach us at school) subscribe to our blog, updated every couple of weeks.

Or,

If you would like to speak to an independent financial adviser about getting your Ducks in a Row, click the button below, and we’ll sort the rest.

Copyright 2019 Row of Ducks Limited

Effective KiwiSaver - Here's what you need to know.

Many of us know what KiwiSaver is, but aren’t 100% sure on the details, and how to manage it.

KiwiSaver is a simplified saving scheme. You put a small percentage of your wages away into a fund and this money is topped up by the Government and your employer.

That money is then invested by your KiwiSaver Provider. They choose investments from around the world and try to grow your KiwiSaver money even more. In return, they take a fee. Some providers take more, some take less.

Except in special circumstances - eg, severe financial hardship or as a deposit on your first home - you cannot withdraw money from your KiwiSaver fund until you reach retirement age (currently 65).

If you never specifically chose a provider, chances are your KiwiSaver money is sitting with a ‘default provider’ chosen by the Government (90% of people are in this boat) - Your contributions will be invested in the scheme’s conservative investment fund, low risk = potentially low return. Over a lifetime this could mean missing out on thousands of dollars. 

You also need to ensure you are paying the correct tax rate on your KiwiSaver money. We can help with this. 

Where it gets slightly more complicated is when it comes time to choose where your money is invested. In a nutshell, KiwiSaver Providers generally offer three-five types of funds. To make things simple, we’ve selected three:

Where you allocate your money is entirely up to you and depends on your circumstances. For example, a young person may be willing to put more of their money in the growth fund, as they want to grow their KiwiSaver as much as possible to use it towards buying their first home. Growth funds are the most risky KiwiSaver investments, but the have the potential to reap the biggest rewards. 

You need a KiwiSaver provider who:

• Has a reasonable fee structure

• Communicates well

• Makes it easy to set the correct level of investment risk for your situation

• Has a history of performing well in terms of investment growth (although this is never guaranteed)

Talking to a financial adviser will help you assess the right fund options for your unique situation.

If you get your KiwiSaver set up correctly, you could actually double your nest egg in half the time*

*Obviously we can’t guarantee this. But most KiwiSaver funds are doing less than 4% return. This means your money will double every 18 years. But by understanding the different types of risk, and the time you have to invest, an adviser will help you create a unique KiwiSaver strategy. Depending on your circumstances, you could double your money in half the time.

Meet Kev.

Meet Kev. Lead adviser at Ducks in a Row.

If you’re new to Ducks in a Row, and aren’t sure what we do, have a read of this.

Kevin’s job is to help people get themselves, and their businesses, to a better place financially. This includes top-notch advice around budgeting, borrowing, insurance, KiwiSaver, and more.

When he’s not working with his own clients directly, Kev steps into his role as CEO of a nation-wide group of advisers. Essentially, he advises other advisers, on how to give their clients the best-damned advice they can give.

Kev is the lead adviser here at Ducks in a Row, and we’re lucky to have him. We managed to pin him down for a minute, to ask him a few questions that we’ve had through the grapevine.

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Say we want to really get it together in 2019. Where should we start?

• Get an up to date Will – It’s estimated that 50% of Kiwis don’t have one, but it’s one of those documents everyone has to pull out sooner or later. Make it easy for those you care about. More on that here.

• Start saving first, spending second – Most people spend spend spend, and try and save after. This method is deeply flawed. If you set an (achievable) goal of, say, $25 per week, and put that away first, you have the freedom of spending the rest, while quietly building a nest egg.

• Figure out where your KiwiSaver money is, and make sure it’s the right place. So many New Zealanders don’t know which company is looking after their KiwiSaver money, let alone what kind of fund it’s in. Considering this is the ticket to many people’s first home, and/or their retirement plan, it deserves a lot more attention than most people give. More on that here.

What are some easy mistakes that can be avoided?

• Borrowing money the wrong way – people often use credit cards and pay high interest rates, when interest rates on mortgages are a quarter of the price.

• Putting things on hire purchase (or lay-buy) that you simply don’t need.

• Replacing/ upgrading something for no real reason (ie your phone or car)

• Making risky investment decisions (shares, KiwiSaver, business ventures).

How can you start savings when you don’t have much money left at the end of the week?

I know you hear it all the time - But making a budget is the best way to figure out exactly where the money is going. Obviously, there are things you can’t cut, like rent, fuel, food, but if you do it accurately you will see how much is being spent on funding your lifestyle – Nights out, unused subscriptions, new clothes and more. Once you’ve identified these you can start cutting what you don’t truly need. Look at how much is left over, and set up an automatic payment to put a feasible amount (eg $50 per week) into savings for future wealth creation.

When’s a good time to get Insurance?

Get it before you need it. We can’t predict what happens in our lives. It’s about asking quality questions to make sure you can survive financial hardship in unforeseen circumstances;

• If your car got stolen and it’s under finance, what are the implications? You don’t have a car anymore, but you still owe money on it.

• If you get sick and can’t work, your income will simply stop. How will you pay your bills? ACC won’t help unless it’s an injury.

• If you’ve got a mortgage with your partner and they’re killed in a car accident tomorrow, can you afford to keep paying it off?

• An effective insurance strategy can make sure you’re covered for all of this. More on that here.

Why should I get financial advice?

The same reason a professional golfer still has a coach – To help improve weaknesses they’re not aware of. An adviser will open your eyes on the areas that are important to you. Financial literacy is not something we’re taught at school, it’s something we’re expected to learn along the way. Having a coach to guide you helps get you to where you’re trying to be a lot easier. Not to mention, it’s free.



If you’d like to have a chat to Kevin, or one of our other advisers, just click below to get your Ducks in a Row.

Why every Kiwi needs a Will.

Passing away without a Will places a lot of added stress and pressure on your family during an emotional time. Your Will should be sorted as soon as possible, for the sake of your family and loved ones.

What happens if you die without a Will? 

1. Everything in your name, including your bank accounts, is frozen by the court.

2. Even if there is no disagreements between who gets what, all your assets will remain frozen for at least six months. 

3. Your family will need to pay legal and court fees to get it all sorted out. 

Many people are under the misconception that they don’t have any assets to put into a will.

Even if you don’t mind where your assets will go, having a Will means your family won’t be stuck with the expensive burden of sorting it all out after you have passed away.

*Wills can be complex, and it's something you can chat to an adviser about helping map out your wishes with a lawyer.