Mary's Money column appears in the
Business section in the Weekend Herald.
NZ Herald14 December 2013
Q&As: Wisdom for bankrupt couple from one who has been there
- How to find ethical funds in the KiwiSaver Fund Finder
- Dangerous issue with last week's picture
- Stop tampering with KiwiSaver
- Last column of the year and thanks to correspondents
Question: Your column had a letter from a lady who suffered bankruptcy and whose husband is struggling to find work.
They'll both be struggling with more than the finances, as I know only too well - having been in a similar situation. The mental and emotional effects are devastating. So in practical terms what can I offer your respondents?
We accumulate inordinate amounts of "stuff". Sell whatever you can. And don't be tempted, ever again, to buy stuff. I had a collection of model cars accumulated over the prosperous years. I had "invested" about $20,000 in total. I was lucky to find someone to take it off my hands for $3,000. We have also sold a lot of other stuff.
We can also live more cheaply than we may have thought. We've never smoked, thank heavens. We do like a bit of red wine but we buy the $8 bottles from the supermarket rather than the $30 bottles we used to. We don't subscribe to Sky. We seldom go to the movies, and we rent DVDs when they move to the cheap category. We seldom eat out or get takeaways.
We ask friends and family not to buy us "stuff" for birthdays, Christmases etc. We ask for practical presents such as supermarket or petrol vouchers.
Count your blessings and remember to be grateful to your spouse. You need each other more than ever.
Pride is a terrible two-edged sword. The wrong kind of pride causes trouble, and that's also the kind of pride that gets deeply hurt when we have to ask for help, admit failures etc.
But if you can set that aside and replace it with the personal and inner pride of being an honest person with something to contribute, then you can hold your head up regardless of the circumstances. Truth is, luck plays a bigger role in success or failure than anyone realises. Having a quiet confidence when talking to a prospective employer (or client) is extremely important.
Tabulate your skills. At 60, I have no doubt that you have developed a lot of wisdom and experience in business, as well as specific knowledge. There are businesses out there who desperately need wisdom and experience, and they may not be advertising for it.
Potentially you could offer to work for minimal wages to prove yourself for a short period. Or you may be able to find two or three part-time roles. Or you may be able to start a business yourself with minimal capital. Many businesses need people who can write sales letters, for example. If you're good with words, sell your services in small doses to many businesses.
Face your challenges and don't procrastinate. When you tackle them head on two things happen - they are seldom as bad as you feared, and you feel a lot better about yourself for taking the action.
Finally - among other issues I had some challenges with the IRD over tax, as you can probably imagine. People have a great time slagging off the IRD - they're an easy target. I found them very helpful and human to deal with, and by being open and honest with them I received flexibility and common sense in return.
Answer: Yours is the last of many readers' letters in response to the couple. And it's full of wisdom - not the least of it your comments about "stuff", which others might take on board through the Christmas shopping season.
In a recent email, the woman who wrote the original letter said: "I write to thank you for your kind consideration to print and then send on some of the responses. I sit here gulping back the tears because if nothing else I feel less lonely than I was when writing.... The simple act of writing to you focussed me, and with that I shall spend more time thinking of practical solutions rather than swilling in despair. Thank you again."
That thanks goes to you and everyone else who wrote.
Question: You asked for comments on the KiwiSaver Fund Finder tool on www.sorted.org.nz. I found it easy to use and informative.
However, it would be helpful for those concerned about ethical investments if it showed the funds within each category that identified themselves as ethical KiwiSaver funds.
Answer: That's something the people who designed the tool - I was one of them - considered. But we decided against labelling ethical funds because it's not easy to define one.
I tried when I was writing a KiwiSaver book a few years back, and some providers said things like, "We invest only in good sound companies, so you could say all our investments are ethical." Others differentiated between ethical and "sustainable" investments. It all got complicated.
I suggest that you start with step one on the Fund Funder, "Find the right type of fund for you". It's important to do this first, as some ethical funds invest fully in shares while others are lower risk, with bonds and cash as well. You don't want to land in the wrong type of fund just because you like the way it invests.
Once you've established your type of fund, scroll through the fund titles looking for words like "ethical", "socially responsible" or "sustainable". Some examples I found:
• In the balanced funds, Fidelity's Ethical Kiwi Fund and SuperLife's Ethica.
• In the growth funds, Grosvenor's Socially Responsible Investment Fund.
• In the aggressive funds, FirstChoice's Global Sustainability Fund and OneAnswer's Sustainable Growth Interest Fund.
Click on a fund's title to get the provider's brief description of the fund and information on what it invests in.
If you particularly like, say, an aggressive ethical fund but it's too risky for you, you can always water down the risk by asking the provider to put half your savings in that fund and half in a low-risk cash fund. Most providers will do that for you.
Question: A slightly tongue-in-cheek letter perhaps.
I read your column last week and my attention was drawn to the DIY photo. Nobody should ever put a stepladder up (even just to lean on it!) without putting the safety braces in place. The picture shows the nearer brace with the elbow joint still bent. The far brace was hanging loose and not engaged in its proper slot.
I know that safety is not your province, but there's no point adding to your savings if you kill or injure yourself.
Your article made analogies between DIY in the home and in arranging annuities. Further similarities exist in (a) getting the proper foundations and (b) as you progress up the ladder, falling is more catastrophic especially if the situation is top heavy!
I would be interested to know how many letters similar to this you have received. I hope one came from ACC!
Answer: No, you've got an exclusive on this one.
But given that the column this year has branched out from personal finance into all sorts of topics - grammatical errors; cleaning up a property used as a P lab; whether there's sexism in KiwiSaver; sadness that arose from a young prostitute's letter; growing your own veggies; and many relationship issues between partners or parents and children - why not safety too?
Question: Thanks for your answer regarding a suggestion by a lobby group to force people to invest parts of KiwiSaver into an annuity when they retire.
As you correctly pointed out, changing the rules for people who joined KiwiSaver under the assumption they had full flexibility when they retire would be outright fraud. It's stealing people's money. I for one wouldn't have invested a single cent if that turned out to be true.
I agree that just because a lobby group makes a suggestion it doesn't mean it will become reality. However, we have also a history in this country of applying changes retrospectively. Here is an example.
Just a few years ago, tax law was changed in New Zealand with the result that depreciation on property can no longer be deducted from rental income. This was not only applied for new property purchases but also for existing portfolio properties. It had a big impact on some property in my portfolio.
New Zealand needs to realize that continuously changing the regulatory requirement is an obstacle to economic growth. Overseas investors are more likely to choose a jurisdiction with stable tax laws and predictable regulations. Equally people in New Zealand who are saving are more likely to save more and use more favorable vehicles if they know that the regulatory environment is not tampered with.
So, yes, I am very concerned. Something that is being discussed today can become reality very quickly. Personally I am against any further fiddling with KiwiSaver. The increase from 2 per cent to 3 per cent minimum contribution has already made me think whether my continued contribution to KiwiSaver is the right choice for me.
Bottom line: I want to keep the flexibility of taking all of my KiwiSaver money once I'm entitled and investing it the way I want. I don't need a nanny state telling me what I can or cannot do. All who are in KiwiSaver need to fight this type of change.
Your suggestion of a "KiwiSaver 2" with a different set of rules would be an option, and the rules for the existing "KiwiSaver 1" could remain unchanged.
Answer: Hang on a minute. I didn't say making people buy an annuity with some of their KiwiSaver savings would be fraud or theft, just unfair. People would still have their money. It's just that some of it would be handed out to them in regular payments. And while those who live to 100 would do really well, those who die soon after retirement wouldn't.
Of course the latter group wouldn't be around to care. But their heirs might. People in ill health, in particular, would be justified in objecting to such a change.
More broadly, I agree with you that frequent tinkering with the KiwiSaver rules is not good.
Question: Just a note to say thank you. Five years ago I was 63 years, had just retired and followed your suggestion in the NZ Herald to open a KiwiSaver Account. I banked $20 a week for the next five years and have just cashed it in for $11,000 plus, more than double what I had banked!
What a lovely nest egg at this stage of our lives.
Answer: I don't usually publish letters like yours. But this is the last column for the year, and I wanted to thank you and other readers who brighten my day with such letters.
Thanks, too, to the many others - more and more each year - who send questions that don't make it into the column. I'm sorry I can't reply to everyone. I appreciate and learn from every letter.
Here's to a fun-filled and relaxing holiday! Drink slowly, drive carefully, and don't forget those safety braces on stepladders. See you again in late January.
* Mary Holm is a freelance journalist, part-time university lecturer, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to email@example.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.