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
Kia ora! I’m Melanie (38) and I’ve been married to Andrew (38) for 10 years. We have a young primary school aged child called Jason.
We live in Wellington, working in the CBD and living in the near northern suburbs. Andrew is an IT consultant, self-employed, and I’m working in the government sector part time.
| Earning and spending summary | |
|---|---|
| Annual income | $160,000 |
| Less tax and payroll deductions | -$49,162 |
| Less annual spending | -$65,500 |
| Equals remaining income | $45,338 |
| Net worth summary | |
|---|---|
| Total assets | $805,000 |
| Less total debt | -$200,000 |
| Equals net worth | $605,000 |
FINANCIAL GOALS
Our medium to long term goal is to relocate to Central Otago. We all love the outdoors, and I’d love to work in the outdoor tourism sector. We need another few years for Andrew to build his consultancy practice to a point where flying in to see clients intermittently is a feasible proposition before we can jump though.
Thankfully, we hadn’t made this jump yet before Covid-19 hit, and by the time we are ready, hopefully the tourism sector will be back operational in the spaces I want to work in.
For us, the most important thing in life is being active - we love camping, skiing, tramping - and travelling. We’ve mostly travelled domestically (and are down to needing to do East Cape to have visited every part of the country), but had some plans for significant overseas travel in a couple of years time. We’re adjusting those plans based on a combination of learning that, actually, we work best with max 2-3 weeks at a time with just the three of us, and the impact Covid-19 may still be having in the world.
We’re far less generally wasteful with money than we were 5 years ago (before I discovered Mr Money Mustache), but we’re also not super frugal. We aim to have a life while also saving for the future. We budget through YNAB, and run a single credit card and set of accounts. Makes it hard to surprise each other with presents, that's for sure.
We’re done with one kid. He’s enough for us. He’s of an age where getting out exploring is easy, and he actually makes a pretty cruisy travel companion.
Longer-term, we’re keen to work on the “Retire Early, Retire Often” mindset - taking sabbaticals / mini retirements on a reasonably regular basis, and using them as an opportunity to do some longer-term travel. We’d be keen to hear from people who have done this to understand how they've managed things. Obviously, how this will work in the future might look different to how it has in the past (and our first mini retirement was planned to be an around the world trip at 40, but thats VERY up in the air right now). Our plan to take a year on the road around New Zealand (and maybe Australia) when we are kid-free again at about 50 is still looking more solid at least. But it also might have to be that we do the more local travel over a shorter time frame first, then celebrate Jason becoming an adult by either leaving him in NZ while we go on a long trip, or taking him with us for some / all of it.
Assets
| Assets | |
|---|---|
| Cash | $60,000 |
| Kiwisaver | $105,000 |
| Real estate | $590,000 |
| Managed funds | $10,000 |
| Shares | $10,000 |
| Vehicles | $15,000 |
| Other | $15,000 |
| Total assets | $805,000 |
Cash: Available within revolving credit. This is our day-to-day spending money, our emergency fund, our sinking funds for renovations or travel. It's working well for us.
Kiwisaver: Combined across two accounts - one with Simplicity, the other SuperLife. It would be more, but Andrew was paid out $60,000 from a private company super when he was made redundant in 2010, and we used that for the deposit for our house (and to pay for our honeymoon). I really wish I had known more about personal finance years ago - I wasted so many years of not contributing to Kiwisaver. The projections for how much I’ll get out of that are horrifically low. Andrew pays a fixed amount every month he has work into his Kiwisaver. Since he doesn’t get employer match, we’re not bothering to calculate how much he should put in each month for the moment.
Housing: We’ve been in our “starter house” for 10 years because everything else we see misses ticking some really key boxes for us. We have a 2 Bedroom, semi-detatched unit 10 minutes from the CBD. We'd love to move to something bigger, but we really love the neighbourhood and the prices are massive for a 3rd bedroom. We get amazing sunshine and privacy, and are on great public transport routes.
Managed funds: Sharesies. I’ve been enjoying building my Sharesies fund. Each of the three of us have an account. Mine is bigger as I used some of a redundancy payout to buy more shares, trying to boost my investments after years of not contributing to Kiwisaver.
Shares: Melanie had the option at a previous job of buying company shares direct out of her wages. We're glad this happened, as the shares have doubled in value.
Vehicles: We have a standard Toyota Corolla Sedan which we use for everything. We’re a one-car household and have only very rarely considered wanting a second. Most likely, we’ll get a couple of e-bikes, or a petrol scooter instead of a second car if a real need started to present itself. We did a lot of local cycling during Level 4 lockdown, but as soon as traffic picked up in Level 3, it felt less safe, so while we’d love e-bikes, we also probably wouldn’t use them enough.
Other: Ski, camping and outdoors gear. Engagement ring (wedding ring only worth about $400 because we're cheap!). Significant quantity of camera equipment for my hobbyist life. We include a budget line item for updating our outdoors gear, and always spend it all. Our last couple of big purchases were ski boots for me (I’m enough past being a learner now that rental boots are uncomfortable) and a roof box for our camping trips. Because we buy good quality, and work hard to keep them in good condition, if we were to sell them, we should get a significant amount back for them.
Debt
| Debt | |
|---|---|
| Credit card | $5,000 |
| Student loan | $35,000 |
| Mortgage | $160,000 |
| Total debt | $200,000 |
Credit card: When we first met, I had credit card debt that was just going nowhere. Moving back home to pay it off didn’t work. Andrew offered to help clear it when we were dating, with a promise that I would pay it back to him at a low rate of interest. We wound up getting married before I had cleared that debt to him, so we wrote it off when we combined finances. Now, a huge credit card month is about $6,000 (and that's usually "insurances month" at the end of the year), and we pay it off in full every month. Everything that CAN go on the card DOES, and for a number of years we earned enough Airpoints off it that we didn’t pay for a single domestic flight ourselves. Now we have to pay for three tickets and have massively curbed our spending, we DO have to routinely pay for flights. (You win some, you lose some!)
Student loan: One paid off, one not (yay maternity leave and underemployment). Making voluntary contributions to this, just to ever so slightly speed up this process because I want it gone before I retire!
Mortgage: Our mortgage is small, but still more than half what we paid for the house 10 years ago. We have $70k on a fixed rate of 3.39%, due to roll over in December (when we aim to have paid off the bulk of this). $90k in revolving credit, with a rate about to drop to 3.4% at the end of June. We've included the "cash" available in our revolving credit as a debt (since the bank could call it in any time). Next year we'll focus on paying off the revolving credit, or we might buy a bigger house.
Income
| Income | |
|---|---|
| Salaries | $160,000 |
| Annual take-home income | $110,838 |
| Total weekly income | $3,077 |
| Weekly take-home income | $2,132 |
Andrew is a contractor, earning an average of $105,000 a year over the last two years but with heaps of scope to earn masses more. He has been contracting for just under two years. We went through a rough patch last winter where promised contracts were delayed significantly and no money came in for a couple of months. That’s pretty anxiety-inducing. In October we were debating getting him back into the standard workforce just to bring some money in, and whether we would need to refinance the house.
Thankfully we had some really good months over the summer, so when Covid-19 hit, we were in a really solid place to weather the reduced income.
Melanie is a government employee working part time. My government role doesn’t match my skillset (or match what I was told the job would be), so I’m actively in the market looking for something to replace it. It will be hard to beat in terms of income and hours, but I’m willing to take a pay cut or return to full or near-full time work just to be back in a role I understand.
We earn small amounts from our shares, as many of them pay dividends. But we tend to directly re-invest any dividends, and they're small enough that we don't track them.
Expenses
| Expenses | |
|---|---|
| Housing | $13,000 |
| Groceries & supplies | $13,000 |
| Eating & drinking out | $2,000 |
| Entertainment | $2,500 |
| Transport | $4,100 |
| Utilities | $2,500 |
| Sports & hobbies | $1,600 |
| Health | $1,100 |
| Shopping | $1,200 |
| Kids | $4,300 |
| Personal care | $1,200 |
| Travel | $12,000 |
| Insurance | $4,500 |
| Gifts & donations | $2,500 |
| Total annual expenses | -$65,500 |
| Total weekly expenses | -$1,260 |
During Covid-19 lockdown, our monthly outgoings dropped to nearly nothing, as many others found. We only spent on absolute essentials (food, utilities, streaming services). But usually we spend a chunk more than that, obviously!
Housing: This includes fixed mortgage plus revolving mortgage interest costs. House and Contents insurance is discounted because we also have the car with the same insurer. Rates are included. We get a cleaner in once a fortnight for an hour to do surfaces and bathrooms, and a gardener every quarter for a clean up. We’ve done some solid renovation work to our house - double glazed throughout, insulated underfloor, added a conservatory - and we're planning to renovate the bathroom and kitchen within the next 12 months as they are both hitting that point where they need to be done, regardless of whether we stay, rent it out, or sell.
Groceries and supplies: Melanie is a coeliac and loves to cook. The spending period this amount is based on includes both Christmas (where we hosted) and preparing for / operating during lockdown. I’m constantly trying to pull our grocery bill down, but we like nice food, so instead I increased the allowance...
Eating and drinking out: We only track FAMILY dining out as "Dining Out". If at least two of us are together for the meal / tea break, it goes here. If its just one of us, it has to come out of our personal allowance, which is only ever intended to cover frivolous things.
Entertainment: We don't subscribe to any magazines at the moment, and are rationalising our streaming subscriptions. Melanie loves music, so goes to a concert every 18 months or so. Jason also enjoys the rugby, so we try to go to a home game at least once a year (especially if the Hurricanes are hosting the Crusaders!).
Transport: We mostly use public transport to get to and from work. We tried to use the lockdown to break the habit of driving Jason to school, but that only held the first couple of days. We use the car otherwise mostly to go visiting or shopping in the weekends, and for holidays. We are AA members, which we've not had to use a lot, but think is worth keeping.
Utilities: Our house is small, so heating is cheap! We upgraded to a heatpump just over a year ago, and its made a significant difference to our winter power bills from the oil heater we had previously.
Sports and hobbies: About to quit the gym, so that will save money! Our family is big into the outdoors. We are members of a local tramping club and Zealandia, as well as several volunteer organisations.
Kids: Includes Kea Scouts, after-school care, holiday programmes, One Day School, swiming lessons, school activities that cost money. Was such a relief to get out of daycare (at $1200/mo) a couple of years ago.
Travel: We spend a LOT on travel, but it is so completely worth it. We go cheap so we can do more without it costing the earth. We mostly travel domestically, but have some big international trips coming up (hopefully). Basing this amount off the last 6 months is WAY not a true reflection. So I've based it off what we budgeted the last two years. Travel is one of our obsessions. In 2018 and 2019, we spent nearly 5 weeks total on holiday each year. Neither Melanie nor Andrew (when he was salaried) ever have positive leave balances. We try to save money where we can - staying in cheap accommodation with kitchens and booking in advance. The less we spend each time, the more of it we can do. If we can’t go around the world in late 2022, we’ll be hoping to at least do a white Christmas in Canada or Japan instead, and then do some of the other sections we had planned in a later trip.
Insurance: Health - we have Southern Cross Wellbeing Two for all of us. We're likely to keep it long term, as a previous employer bought out all Melanie's pre-existing conditions (of which there were plenty, mostly minor). Both Melanie and Jason have had surgeries fully paid at Southern Cross hospitals, that wouldn't have even made the assessment list publically. Life - Andrew is insured for about $1m and Melanie for about $400k. Given a history of Post-Natal Depression, its too expensive to insure Melanie for more, or shift providers. When we no longer have a child at home, we'll reduce this significantly, as its purpose for us is to allow the remaining spouse breathing room to grieve without worrying about money, and if we're not supporting a kid as well, the amounts can be smaller.
Remaining income
| Earning and spending summary | |
|---|---|
| Annual income | $160,000 |
| Less tax and payroll deductions | -$49,162 |
| Less annual spending | -$65,500 |
| Equals remaining income | $45,338 |
Residual income is usually “banked” within our revolving credit for the moment. Our focus is paying off our mortgage as a means of building equity, so when we find the house we want to upgrade to, we can hopefully buy it while keeping our current one as a rental.
Some is earmarked for renovations, future travel, tax liabilities, and the like. It’s also our emergency fund. In the current climate, we don’t want to tie it up more than we need to, especially as a team review (and probable restructure) is planned for Melanie's work, if she doesn’t jump before that happens.
Our plan keeps changing. Late last year we were looking at buying a cheap rental in another town (since Wellington is hellishly expensive). Then this year, suddenly we’ve hit a point where the bank will loan us enough to buy ourselves a more expensive house and keep the current place. I’m feeling a bit trapped by the current situation and part of me would like to buy a campervan or housebus so we can just hit the road a bit more often, but the ongoing storage and maintenance costs put me off (plus the TradeMe search function by length doesn’t help when I’m not sure how long the size I’m looking for should be!).
Our biggest issue (given our dream of multiple mini retirements) is how to invest in a way that will help fund the travel we’ll likely do in those times. Our shares accounts are tiny (and we’re only putting in a couple of hundred a month between us), and we’re not completely sold on the idea of being landlords. If we are mortgage free by early 2022 (as our current plan forecasts), what do we do with all the extra money? $50,000-odd a year needs to be put somewhere, right?
Inviting feedback from readers
Given the current uncertain environment, what would be your recommendation - buy a bigger house for our comfort, buy a cheaper rental somewhere else, invest more in shares, or just hold on to the money and focus on the mortgage?
Also super keen to hear from those who have done “Retire Early, Retire Often” (RERO) rather than Financial Independence, Retire Early” (FIRE). Interested to know how you structured your lives to enable multiple mini retirements, and what the best (and worst) parts of that have been.
We tend to indecisiveness sometimes, and we have a LOT of available options. It’s really hard to pick one and make it stick. How have people with options made the calls? What has been your decision-making process?
