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!
I'm Nilar, a 30 year old Kiwi who has been living in Asia for the last 5 years.
I work in the humanitarian aid sector in conflict settings. For the last two years I have been working with a large refugee crisis and my job has required me to travel a lot (to a different country in Asia every week or two.) My lifestyle - social and financial - has had to bend around this crazy schedule. I’ve prioritized work and everything else has taken a back seat.
When COVID-19 hit I made the hard decision to return to NZ. My time back here has got me thinking about what parts of my lifestyle I want to change when I return to Asia, and the way I deal with money is a big one.
|Earning and spending summary|
|Less annual spending||-$52,540|
|Equals remaining income||$36,260|
|Net worth summary|
|Less total debt||$21,141|
|Equals net worth||$43,953|
My salary during the first three years in the aid sector didn’t cover basic monthly costs, so I used up my savings to help get by. It’s only in the last 2 years that I’ve had surplus monthly income, and I haven’t managed that in any systematic way. I don't budget and I don't keep track of spending - at the end of each month I just move any leftover money into separate checking accounts that I have labelled ‘savings’ and ‘student loan’. Sometimes there is nothing left over, sometimes there is quite a bit.
I want to improve my financial habits and financial literacy. My family was never big on investing (mum and dad own their house and half of another house where dad runs his business from, and that's really the extent of it). I want to start investing in a way that makes sense for my lifestyle - minimal admin, and some degree of flexibility.
I also want to budget more, save more, and start cutting back in areas where I have been too extravagant. I need to build better money habits for when I have more responsibilities (such as family/kids) in the future.
There is one additional challenge when it comes to financial management. The project teams I work with are small with 2-3 people per team, and I basically run the projects out of my bank account. For example I make all travel arrangements and pay for all project costs from my credit card. I then make a giant expense claim every month or 6 weeks to claim back the costs (usually around 10,000 USD). Very rarely does my bank account accurately show how much money I have. Sometimes I will have a ton of excess cash in there, for example occasionally I request a cash advance before major expenses rather than wait to get reimbursed after the fact (such as if I’m organising a big workshop and it’s going to cost $10,000 or more). But often I have to use the money in my ‘savings’ account and get reimbursed later. On occasion I forget to claim back an expense and there is nothing I can do about it later (like the first 2 years where I didn’t realise I should be claiming ATM fees and exchange rate fees…).
The other issue is that many of our donors do not allow us to spend donor funds on alcohol and/or cigarettes - which is understandable - yet so much of my work requires socialising with drinks, cigarettes, and food (try going to rural parts of Asia to talk to people about sensitive issues and NOT offering to buy a round of drinks...you won’t get far.) The result is that I usually just end up paying for those costs myself.
I need a better way of separating out work costs and personal costs so that my expense claims don't take me an entire weekend to complete and I don’t forget to claim any expenses. Would love ideas on how to do this easily.
The amount under "Other" in the table above: Not sure where to place this. My work has a pension scheme, and for the last 18 months they have been paying 10% of my salary into this. When I leave I can get given this as a lump sum + any earnings. I believe my contributions to date are around $12,218 NZD. So hopefully the balance is a bit more including earnings... I'm not sure who the provider is, or what type of fund.
My Kiwisaver is managed by my bank ANZ. It's currently in the Growth Fund. The only reason I chose to go through my bank is because I find it helpful to be able to see my Kiwisaver account when I log in - it reminds me to keep adding money to it. I am not systematic with the way I use Kiwisaver (I'm not systematic when it comes to any finance-related activities!) Every couple of months when I see that I have some extra money in my checking account I transfer some into Kiwisaver and put some on my student loan. Because my employer is not NZ-based I don't automatically contribute each month and I don't get the employer's contribution. However, I do try to make sure that I've contributed enough each year to qualify for the annual NZ government contribution. I've become better in the last two years at putting money into Kiwisaver - in 2019 I put $4,000 in. So far in 2020 I have put in $3,500. At this stage I don’t plan on buying a house in NZ so my Kiwisaver will remain as retirement savings. But this could definitely change at some stage in the next 5-10 years.
The $22,000 cash is currently just sitting in my bank account. Honestly, I am not sure what to do with it and would be grateful for suggestions. $20,000 is in a checking account I’ve named ‘savings’ but it’s not an actual savings account. I don’t know what's best - whether to use it to pay off the remainder of my student loan, throw it in Kiwisaver, invest in shares, or a term deposit. Ideally something I can add the pension money to whenever I leave my current job.
I probably need to keep at least $10,000 in an account as an emergency fund in case I find myself out of work (+ this new COVID-19 quarantine fee means that if I need to come back to NZ during that period I will need to pay $3,100).
My student loan is my only debt at the moment. Since I started earning enough to save a little, I have been focused on paying off my student loan. I have been an “overseas borrower” for the last 4.5 years so I pay interest on my student loan. $7,178 in interest has been added during that time. In the last two years I’ve paid off $34,000 which I’m really proud of. I still have a way to go.
Similar to my Kiwisaver, I am not systematic in the way I pay off my student loan. At the end of each month if there's any extra money in my checking account I move it into a seperate account that I have labelled 'student loan'. Whenever that gets to $5,000 I then make a voluntary repayment. I hope to have paid the remainder off in two years (unless I decide to make a lump sum payment now and get it over with).
I’m not sure whether it would be a good idea to pay the rest off as a lump sum using my savings, or whether to keep going with my current approach (putting aside some unspent funds each month and paying it off in $5,000 chunks).
|Annual after-tax income||$88,800|
|Weekly after-tax income||$1,708|
My understanding of the way that tax applies to my income is that my employer pays 17% for every 'foreign employee'. I haven’t added that amount into the income details above. Apparently I don't owe other taxes in the Asian country where my work is based.
My salary changes slightly every month depending on the exchange rate. I am paid USD $4,950 into my NZ bank account, minus bank charges and exchange fees. On average it seems to be about $7,400 NZD per month. I have recently signed up for a Transferwise online USD bank account. I am considering having my salary transferred to this account as it may reduce some of the fees.
This year I've spent much more time than usual in NZ due to COVID-19, so I think I will be a tax resident in NZ. I don't think there is a way around this. We don't have a double taxation agreement with the country where I am employed as a foreign employee.
My income is not going to be reliable in the coming years. The economic recession following COVID-19 is going to hit the aid sector hard. My organisation has said they can guarantee my job till the end of this year, but things will be a bit uncertain from then on.
I think it is likely that in the coming 3 - 5 years I will need to be flexible, maybe taking a few consultancy jobs, then having periods of time without paid work. My lifestyle adjusts to my salary, and I can definitely live on far less than I am now. But I am cognizant that I shouldn't take on any debt right now.
|Groceries & supplies||$2,500|
|Eating & drinking out||$8,600|
|Sports & hobbies||$2,000|
|Fees & charges||$1,200|
|Interest on debt||$740|
|Gifts & donations||$3,500|
|Total annual expenses||-$52,540|
|Total weekly expenses||-$1,010|
Ahhh filling out the ‘expenses’ section made me realize how unnecessary many of my expenses are. Some detail about my spending below:
Housing: For the past year I have been renting two apartments, each located in a different country. It sounds extravagant but it made a lot of sense given my lifestyle. My job required me to travel almost weekly, jumping between four different countries, and I would often find myself paying for hotels up to 6-7 nights a month while transiting. Some of these costs could be refunded by work, but lots could not. I worked out that it would be the same price for me to rent a room in an apartment in a second country that I was spending a lot of time in. It also meant I could be more flexible with my travel schedule, and it made sense socially as I could start having more of a life outside of work in the second country, with flatmates and a 'second home' to come back to while travelling. COVID-19 has meant I will not be undertaking nearly as much travel for the foreseeable future so it is unlikely I will be paying double-rent in 2021. However, for the rest of 2020 I will continue to do so as our rent is paid upfront for a year so I have already paid for 2020. Fortunately in NZ I am living rent-free with my parents - 3 rents would be a bit much...
Groceries: I don't do a weekly grocery shop because I'm often not home for a whole week. I shop for each meal that I'm cooking, and this usually involves cooking for friends (and a couple bottles of wine - which is actually a little pricer than in NZ!)
Eating and Drinking out: I know this expense is unnecessary but I've fallen into a habit of eating out or ordering in. It's difficult to plan to cook with all the travel and frequent dinner meetings. I also work from cafes a lot of the time as I don't have an office in many of the places I travel to. The kitchens in my apartments are pretty basic (and in one of them the electricity is pretty unreliable as well). I do need to find a way to reduce the amount I spend on food.
Entertainment: I have subscriptions for Netflix, Spotify, and 5 online newspapers. I probably buy at least 2 magazines a month, a couple of kindle books, and go to the movies twice a month (although the cost in Asia is substantially less than the cost in NZ at about $5). I'd go to about 2 cheap festivals or concerts a year.
Transport: I don't have a car and rely solely on taxis/motobike taxis/uber. In one of the cities I live in there is some public transport but it is not very good. On average I would spend $10 USD a day getting around ($15 NZD). It is a little difficult to calculate because some of the costs I can reimburse from work (such as taxis to and from airports for work travel).
Utilities: Most of these costs are mobile plans and electricity/water bills. It's nearly impossible to get internet hooked up to my apartments so everything is done using my phone as a hotspot. The electricity/water cost is an estimate as we pay the utility bills to the landlord each month in cash based on their calculations - it's a trust-based system.
Sports and hobbies: Because I am on the move so often it doesn't make sense to have a gym membership for one gym. Opportunities to exercise outside are also limited as there are few outdoor spaces in most of the places I spend time in, air pollution is often extreme, and/or it can be too unsafe to exercise outside alone. Given these reasons I choose to pay expensive week-by-week or daily rates for gyms and pools in the places I am living in and travel to.
Health: The huge bonus about living in Asia is cheap massages, and I get one almost weekly. I am also fortunate that my work has recently given me full health insurance, so medical costs are minimal. That won't be the case forever though, and if/when I move onto a new job overseas I would need to budget around $5,000 a year for health insurance.
Shopping: I go through waves with these types of extra shopping costs. Sometimes I will go months without any expenses, then have a spending spree when I travel to a place with decent shopping or nice art/household items.
Personal care: These costs are limited to a couple of haircuts a year and basic personal care products.
Travel: With such a busy work life I do prioritize getting away twice a year - one trip home to NZ and another overseas trip for at least a week or 10 days. In addition, I frequently have short weekend trips within Asia to visit friends, head to the beach, or renew my visa (which has to happen every 90 days). It's a large expense, but right now it's still a priority.
Fees and charges: Because my NZ bank account is still my primary bank account (I've tried to open up an account in Asia, but don't have the necessary resident documentation) I get hit with a huge amount of ATM fees and exchange rate fees. I have recently ordered a Transferwise card which will enable me to have foreign currency accounts, and this might reduce some of these costs in the future.
Interest on debt: This is the interest on my student loan (based on a 3.5% rate and the current balance over the next 12 months).
Gifts and donations: I give $1,000 a year to two different charities, and would spend at least $1,500 a year on presents for friends and family.
|Earning and spending summary|
|Less annual spending||-$52,540|
|Equals remaining income||$36,260|
Right now my remaining income each month gets split into my ‘savings’ account and my ‘student loan’ account. Although the savings then gets dipped into for things like travel and rent (which we pay at the beginning of every year...in cash…. for either a 6 month or 12 month period). I want to start investing some of the money more systematically - if it’s not in my account I can’t keep dipping into it!
Inviting feedback from readers
I would appreciate any and all feedback and advice!
But most specifically:
- What are the investment options that I should consider? I can probably put away $15,000 now, keep putting away some money each month, and then add my pension whenever I leave my current organisation.
- What should I do with my student loan - use my current savings to pay off in a lump sum or slowly pay off over the next two years?
- How could I structure my finances better so that I can separate out work costs from personal costs more easily so I have better oversight on a week by week basis?
- Is Transferwise the best option for me to remove some of the ATM and exchange fees that I keep incurring - or is there a better way?
- What tips do people have for budgeting and tracking expenses?