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
We are Tom and Barbara, 40 somethings living the good life in Canterbury. Tom works full-time in senior management for a national charity, Barbara works two part-time jobs for 19 hours/week: one in an office in a small business and one in the charitable sector. We have two primary school aged children.
| Earning and spending summary | |
|---|---|
| Total annual income | $109,444 |
| Less tax and payroll deductions | -$23,025 |
| Less annual spending | -$77,439 |
| Equals remaining income | $8,980 |
| Net worth summary | |
|---|---|
| Total assets | $1,036,500 |
| Less total debt | $212,000 |
| Equals net worth | $824,500 |
FINANCIAL GOALS
We aim to:
Have all student loans paid off by age 50.
Have our Europe mortgage paid off by age 50.
Have our NZ mortgage paid off by age 50 (this will be the hardest of the first 3).
From age 50, divert half of what we were paying on mortgage to charitable giving, and half on index fund investments.
Provide money-sense education for our kids, teaching them to avoid greed and practice generosity. The kids are involved with setting our family budget. They receive pocket money each week (less if they don’t help with jobs around the house) based on age, $1 a week for each year of age (max $10 a week). We give them encouragement (but no forcing) to split it into Give / Save / Spend. We’re delighted that they have their favourite charities already. We’re considering opening Sharesies accounts for them (despite what we see as expensive fees) to educate them, with some of their own Save money, about shares.
Live out the biblical proverb ‘Give me neither poverty nor riches but give me my daily bread’. We aim to live a life marked by gratitude and generosity, recognising that our society is set up for dissatisfaction. Another related biblical quote we want to live by is ‘Contentment with godliness is great gain’.
Assets
| Assets | |
|---|---|
| Kiwisaver | $130,000 |
| Real estate | $900,000 |
| Managed funds | $500 |
| Vehicles | $6,000 |
| Total assets | $1,036,500 |
Housing: Our first marital home was in Europe. After getting married, we rented for a year, then bought a small starter home. We were there for 3 years before work brought us to NZ. We still own it, many years later, and are fortunate that the tenants have been there many many years, far longer than we ever were. Naturally, as they’re such good tenants, they pay circa 20% less than market rates.
We bought and moved into our current home when Barbara was pregnant with child no.1. We bought from friends (the house, not the child!). It was a wonderful and easy purchase at market rate. We love our home.
KiwiSaver: 3% of Tom’s salary and 4% of Barbara’s since the beginning of KiwiSaver certainly add up. We top up Barbara’s to make sure of the maximum government contribution each year. Both of us are in a low-fee passively managed funds from Simplicity (a charitable trust) because we love that model and are convinced that it provides good returns over the long haul.
Index funds: Very recently we’ve started drip-feeding money, like in KiwiSaver, into index funds. One of them tracks the NZ50 (AMP NZ Shares Index Fund) and the other one is global equities (AMP All Country Global Shares Index Fund). The fund provider is AMP, and our investments are made via InvestNow. We should have started this decades ago.
Cars: We don’t understand wanting the latest and flashest cars. We own two cars, one of which we’ve owned for 12 years.
Debt
| Debt | |
|---|---|
| Student loan | $40,000 |
| Mortgages | $172,000 |
| Total debt | $212,000 |
We really don’t like debt at all. Glad to never have had consumer debt. Grateful however, to have used debt to buy homes in which to live and realise that owning your own home gives so much more long term financial and emotional security than renting. We’re keen to continue attacking the mortgage debt and wonder if we should or could have been more aggressive on this sooner.
Barbara has a student loan in Europe, at circa 4% interest each year. We have never paid anything on this as Barbara’s income has never been above the payment threshold. At age 50, under the terms of the loan, the debt will be wiped clear, so unless Barbara has a significant income increase this debt will be gone in a few years.
Income
| Income | |
|---|---|
| Salary or wages | $99,444 |
| Rental income | $10,000 |
| Total annual income | $109,444 |
| After-tax income | $86,419 |
| Total weekly income | $2,105 |
| Weekly after-tax income | $1,662 |
We understand that our family income is fairly middle-of-the-road for NZ, yet we’re aware that we are wealthy compared to many across NZ, and incredibly wealthy compared to the vast majority of humanity, so we want to take that responsibility seriously, starting with looking to leave a legacy of being good and generous so our tamariki learn to be generous too.
When child no.1 was born, Barbara’s income at $45k was larger than Tom’s, but she resigned to be a full-time mum, which was an awesome decision. With kids the expenditure going up at the same time as income going down was hard to cope with, so we’re very grateful to the Working for Families government benefit which was a huge help. As the kids have got older, Barbara has been slowly getting back into paid employment, and increasing her hours. 2019-20 is the first year we’ve not received Working for Families. We think that a graduated scale for that government benefit is a good approach. We feel that in the last 2 years we’ve really started getting ahead financially.
Expenses
| Expenses | |
|---|---|
| Housing | $34,300 |
| Groceries & home supplies | $8,780 |
| Eating & drinking out | $1,260 |
| Transport | $4,615 |
| Utilities | $1,392 |
| Entertainment | $1,000 |
| Sports & hobbies | $3,500 |
| Health | $1,500 |
| Shopping | $3,300 |
| Kids | $4,900 |
| Personal care | $1,500 |
| Travel | $3,000 |
| Insurance | $1,592 |
| Gifts & donations | $6,800 |
| Total annual expenses | $77,439 |
| Total weekly expenses | $1,489 |
Some more explanation of these expenses below:
Housing: We’re really pleased that most of our mortgage debt is with a charitable trust (Liberty Trust) which exists to teach financial education from a biblical view. Over 10 years ago we started contributing to the trust and two years ago received an interest free mortgage. It is SO satisfying seeing the debt shrink so fast when there’s no interest, and the main reason we are aiming to be debt-free by the age of 50. We are considering contributing to the trust in the name of our children at $50/month each so that, after 10 years or so, they will be eligible for an interest free house loan too, which could be used as a house deposit anywhere in NZ. The housing costs break down as follows: Mortgage repayments - $19,000. House insurance - $1,200. Maintenance - $5,000. Garden - $600. Rates - $3,000. Europe house agent fees and maintenance - $4,000. The rental income on the Europe house covers maintenance, insurance, and mortgage payments.
Groceries and home supplies: We think our food expense is lower than many. We’re pleased to have ‘inventive’ meals with what is at hand in the pantry, and to have a well stocked freezer with heaps of produce from our suburban garden. It’s amazing what can be grown in what is a small space. We use our veggie garden to the max to eat fresh, and bottle/freeze too. Very little from the garden goes to waste. We’re finding that at this national lockdown time we have heaps more food than normal as we’re (obviously) not hosting anyone else for meals, which we usually love to do several times a week.
Entertainment: In the summer, we go to several cricket games which we greatly enjoy. That cost seems to be increasing fast however, so in the future we will likely cut back on this to maybe just one summer test match. $15/month for Spotify, we buy the occasional weekend newspaper, and go to the occasional live music concert.
Eating out: Eating out is a rare treat, often on holiday.
Health: Health is hard to get right in our budget as some years we spend very little, others a lot given in our whānau of four we have two glasses wearers and one hearing aid. We don't budget for hearing aid (thousands of dollars up front but current one has lasted for years and years) but do for glasses.
Transport: We have two cars, but rarely use both at same time. We still manage 10-15,000km each year, often for holidays and skiing and are frustrated, economically and environmentally, at our car usage. We’ve had one car for years (12 years and counting), and bought a second two years ago; we realised the 'old' one had little residual value, so keep it road-worthy and intend to scrap when it fails WoF - but it just keeps going! We both tend to have the majority of our commute by biking, although if it’s raining Barbara will likely drive not bike the 4km to the office, and Tom drives regularly to the airport for his work around NZ. The kids walk to school. We haven't bought tyres since 2018, and budget $500 across two years. Our car insurance for both cars is cheap at $125, as we only have 3rd party.
Utilities: We treat lowering our electricity consumption as a game: low-flow showers, night rate for hot water/dishwasher/washing machine etc. Our main form of heating is a wood burner and much of our wood is free. Work pays for internet and one of our two mobile phones. Electricity is $100/month.
Kids: As the kids are getting older, an extra expense that can become large quickly is extra curricular activities on top of school costs (no such thing as ‘free’ schooling in NZ!). We are not prepared to fund everything our kids want to do as we do not want to raise entitled people, but we accept that although dance/music/cricket for children is a significant expense, it is worth it for our children to be well-rounded interesting people. We spend around $2400 on cricket, dancing, and music. $1500 for school uniforms / textbooks / trips etc - it's amazing how expensive public schools can be, it's been an eye-opener for us! $1000 pocket money.
Sports & hobbies: $1500 gym membership, which we are considering cancelling for home online classes. We run and bike. Spend around $2000 skiing.
Insurance: Life & Trauma insurance for Barbara, Trauma for Tom (Tom's work covers his Life insurance).
Travel: Holidays are important for us; we’ve actively explored holidaying closer to home and partly for reasons of cost, using, for example, council-run free camp grounds. The kids love it (more than the parents, to be fair!). We’ve also discovered the whole whānau loves skiing in the winter, so whilst it’s expensive in absolute terms, we’ve very happy spending that for our physical, mental and familial good.
Gifts & donations: We’re considering upping our charitable giving back to pre-kid levels, as we haven’t changed our giving for a while, despite salaries increasing with more work hours. Currently around $5,000 per year on charitable donations. $900 for birthday, and $900 for Christmas presents.
Remaining income
| Remaining income | |
|---|---|
| Total annual income | $109,444 |
| Less tax and payroll deductions | -$23,025 |
| Less annual spending | -$77,439 |
| Equals remaining income | $8,980 |
Surplus income usually remains in our European offset or NZ revolving credit accounts, which minimises the mortgage interest. For Europe, it’s there to cover any maintenance issues on the house. At home in NZ, the aim is to let that build then pay off a chunk of the mortgage when the term expires.
Inviting feedback from readers
Thanks for reading this far! Money is such a taboo subject, and we love that MoneySecrets is helping to make it less taboo. So we appreciate your feedback as we’re flying blind really. It’s been cathartic writing this. In particular:
To what level do you think we should up our charitable giving?
Should we concentrate on paying off mortgage before regular investing?
Should we get rid of one car?
What’s the best way to budget for large but very occasional expenses, such as hearing aids and overseas trips to see family?
Should we reduce the amount going into index funds so that we can start contributing, for our children, to the same charitable trust who has granted us an interest-free loan, or wait two years?
