Belle, an engineer in the South Island

About MoneySecrets: MoneySecrets offers a peek into the financial lives of our fellow Kiwis. The story below was written using pseudonyms to remain anonymous. When commenting, please remember that the writer has laid bare their financial life, which can be a scary thing to do. Please be kind, and enjoy!

INTRODUCTION

Hi! I’m Belle, I’m 28 and married to Tom who’s also 28. We live in the South Island and are both engineers (we met at university!). I’m writing this story for the both of us, as I’m generally the one who takes care of everything finance related.

FINANCIAL GOALS

In my early twenties I underwent a transformation in the way I think and spend money. I come from a fairly spendy family, and while I was at university I thought nothing of spending my weekly student loan money on expensive clothes and eating out. I had a big wake up when I realised after my first year of working (suddenly earning a salary of $56k) that I had only saved $1,000. For the entire year. Month by month I would put some away, then the next month spend it on travel or shopping and the net result was almost nothing. Tom and I were also in a long distance relationship at that time so we spent a lot on flights and entertainment, and I don’t regret that part of it. I had a budget but had no motivation to stick to it when something came up. Thankfully I was never tempted to get into debt, or else I might’ve had a real problem. When I realised towards the end of the year that I wasn’t making the best decisions, the first thing I did was track all my spending for the preceding year in a spreadsheet. So many bombshells. In that year, the category I called “Apparel/Stuff” - i.e. clothes, shoes, physical stuff that wasn’t food, groceries, rent, petrol, etc came to over $10,000!! For just me! That blew me away, I was horrified. After the tracking, I started reading a lot of personal finances blogs (mostly Mr Money Mustache) which really reframed my perspective about money, and now I find it quite hard to make large purchases, or even small ones sometimes.

I would describe Tom as not exactly frugal but not extravagant either, although he doesn’t really like having to stick to a budget. We only combined our finances recently which makes it easier (for me) to see everything, and we give ourselves a small allowance into our own accounts for whatever we want to buy. If we want to make a big purchase we can talk about it, or save up our own allowances.

I still track everything we spend at the end of each month, in the same spreadsheet I’ve used for 6 years, and it’s grown to contain basically everything about our money and investments. I’m actually quite proud of it, which I know is probably super lame!

Our main goal is to try to pay off the mortgage as soon as possible, so when we have children in the next 2-3 years we don’t have financial pressure if I decide not to go back to work. My job isn’t exactly conducive to family life so it’s likely I will either go part time or stop work while we have young kids. I don’t know what exactly will happen, but while we can, I want to be as aggressive as possible at building up reserves so we aren’t worrying about it later.

Assets

When I look in our spreadsheet (my spreadsheet, really) I don’t include our house, because we have to live somewhere, and I don’t include our car either. But when I looked the other day and saw our investments (excluding KiwiSavers) had reached $100,000 I was really proud and happy. I feel like the hard work we’ve put in over the last 5 years or so to save, buy a house, and stick to a budget are paying off. It’s hard sometimes when I see other people buying nice things, upgrading cars, and having lots of trips overseas, and then I’m here trying to shave $20 off my weekly grocery bill, but in the big scheme of things I think our 1000 tiny insignificant decisions are adding up to big savings.

Cash: We set up our mortgage to have a portion offset by our bank accounts, so it allows us to have money here for emergencies, and also allows us to have a buffer in case we need to make a big purchase one month. We also each have an account we can use for whatever we want, that we pay an "allowance" into.

Kiwisaver: Both in Simplicity Growth funds. I used my KiwiSaver when we bought our house 3 years ago.

Real estate: 3 bed, 2 bathroom 1930's bungalow. Not exactly low maintenance or warm, but we were so happy to find it.

Managed funds: Simplicity NZ Share Fund. We had flatmates for the first 2 years of having our house, and we put most of that rent money in this account.

Shares: I invested 50k using Hatch (the maximum before FIF rules come into play for one person), Tom has some Meridian shares, and the rest are Smartshares index funds.

Bonds: Bonus bonds! I also class this as a sort of emergency fund as we could get it in a few days if needed. I know it's not "smart" but hey it's fun to dream about winning 1 million.

Vehicles: We only have one car between us. Tom sold his car to pay for my engagement ring and a surprise trip away. It was mostly sitting in the garage unused, as due to working in the CBD he either bikes or buses to work.

Debt

I generally feel ambivalent about our mortgage - we didn’t pay off as much as I wanted in the first few years because I underestimated how much all the set-up house costs would be. Currently the value of our house is basically what we paid, so I feel like we paid too much for it (we were naive first home buyers!)

We have the mortgage split into four loans. Excluding the floating portion which is mostly offset, the equivalent weighted interest rate is 3.20%. We’ve just refixed a large portion of our loan and we decided to commit to quite high repayments (basically all my wage) to really bust that portion down over the next year, which will mean we will start making a serious dent in it. My student loan was paid off at the start of this year so that also effectively meant a huge pay rise for me, so we have more money available now to smash the mortgage.

I know logically that we would get a better return by putting our extra money in index funds, but when we were discussing our financial goals recently, it was just when the COVID-19 crisis was hitting and so many people were worried about their jobs and the future. We decided then that the security of owning our home was worth more to us.

We got rid of our credit cards and just use debit cards. They were never a problem, we always paid them off in full, but it was harder to stick to a budget because there was never a clear view of how much we had left in the accounts.

Income

Tom is on $82,500. I'm on $112,275.

I was lucky a few years ago to get a job that I really enjoy which also drastically increased my wage, although I am fairly close to the upper limit now. Tom still has lots of room for movement in his job, but when I make speculations about the future I don’t include large pay rises as nothing is guaranteed.

I generally feel really proud of what we’ve managed to achieve in our careers, and I feel so lucky but also a little bit guilty sometimes. My starting wage out of uni was more than my mum made in her final year of teaching. I hope those reading this still find something helpful and interesting in my story, even if our wages aren’t representative of the average New Zealand couple.

The investment income is the estimated value of dividends from investments made through Hatch. Dividends from Smartshares holdings are reinvested automatically and not included above.

Expenses

I think we are doing ok with our expenses. I’m always looking for ways to cut them down, but we live comfortably and don’t have to make too many sacrifices day to day. It’s the big things that really throw it out - like if we end up fixing up the kitchen or go overseas for a holiday.

Some more explanation of these expenses below:

• Housing: We haven't spent a lot on home improvement since we've moved in. The garden is in dire need of some work so we might tackle that in the next year. We also need to replace the oven and do some minor maintenace so this will go up for the next year or so. The mortgage, excluding extra repayments, is $21,600 per year. We bought two new heatpumps last year ($5,400), and the rest is mostly Bunnings or Mitre 10.

• Groceries and home supplies: We shop at Pak n Save and Bin Inn. Fairly minimal on the cleaning/laundry products but we get what we need at Bin Inn, which helps reduce waste too.

• Entertainment: Spotify family ($22.50/m) and apple storage ($1.69/m) are the only subscription services we have, the rest includes movies, going to the rugby, seeing a show.

• Eating out: Always trying to get this down! Tom had a bit of a habit of buying lunch but has mostly stopped now. Mostly meals and coffees with friends, some takeaways 2-3x per month. This also includes alcohol purchased from liquor shops.

• Health: Specialist medical care for me, dentist, doctor, and prescriptions.

• Transport: Petrol, rego, WOF, service, insurance (full cover, $1,100) for one car and the odd Uber. Most Ubers that are related to an event (like a concert) or out of town travel are included under entertainment or travel.

• Utilities: Internet $85, phone $16 each on Skinny, the rest is power.

• Sports & hobbies: Before we combined finances Tom bought an indoor rowing machine, and has just started golf, so membership fee may come in next year. This total includes my yoga membership ($1,200) from the previous year (however haven't continued it for 2020), and about $500 towards my hobby of sewing clothes.

• Shopping: Clothes, books (I read a LOT, mostly from the library but if they don't have it I will buy the ebook), some random homewares like houseplants, supplements from the pharmacy. Both our wardrobes are fairly well established and don't get replaced often. When I do buy clothes and shoes I try to buy New Zealand designers / NZ made, and items that will last a long time.

• Personal care: I am fairly minimal on beauty regimens, only 2 haircuts a year generally. I did recently bought a gel manicure kit for home as I realised I liked having gel nails but definitely didn't want to pay at the salon. I don't wear makeup daily so don't have to buy that very often. Tom gets haircuts at the mall.

• Travel: This number included doing the Otago Rail Trail and a trip to Queenstown ($2,172), flights to Australia to visit family, flights to regional North Island to see family, and a trip to Tekapo ($340). We usually stay in AirBnbs, and I have included the petrol and food while away as part of the travel costs. We also have a few weddings coming up so we will attend those rather than doing separate holidays.

• Insurance: We have health insurance provided free through my work, and have chosen not to have other personal insurance, but we may reevaluate this when we start a family.

• Pets: No expenses yet, but we did just get a kitten. TBC!

• Fees & charges: $10 monthly fee for the mortgage offset function.

• Other: There always seems to be an "other" category! This includes firewood (approx $400/year) and gas for the stove.

Remaining income

I transfer money at the start of the month to our bills account to cover our direct debits, and put a small amount in our personal accounts for gifts, coffee, miscellany. Because our accounts all pool towards the floating portion of our mortgage, generally the extra just stays in our accounts, or gets swept into the account designated as savings. I think not having a huge balance in our daily expenses account helps to remove the subconscious thought of “oh we have lots of money and can buy this expensive thing”.

In the past few years we were directing money into the investments above, and we would put lump sums on the mortgage as they came up for re-fixing, but as I mentioned we have now committed to higher mortgage repayments so we won't have much leftover each month. We are close to completely offsetting our floating portion, so once we do we will move some money either into the Smartshares or the Simplicity fund.

Inviting feedback from readers

I would be interested to read what people think! It’s very strange actually writing down all the numbers, it’s like letting strangers poke around in our underwear drawer. I would be interested to know what parts of our expenses seem very high or low, as it’s possible I’ve become blind to them.