Part Two: My Financial Plan & Beliefs Exposed with a Financial Planner

Generate is supporting my vision to improve the financial literacy of a hundred thousand Kiwis by sponsoring Keep the Change. Cheers, Generate. Head to generatekeywisavid.co.nz/change to find out more. I want a mission to get more and more people actually thinking about their financial futures and having planned for it, because just a little bit of planning can make a massive impact. Little decisions that you make now will have a big impact further down the track. There are not many people that have a financial plan that know what they're truly know what they should be doing with their money and where they're heading and have got real clarity and direction. It can be quite eye-opening or confronting for them of all shit. We think we're doing a lot of great things, but it may not be getting us to where we had thought because we're not running the numbers. I'm yet to come across somebody where their Kiwisavid is actually going to be all they need to provide for their retirement. I love Kiwisavid and what it's doing for people, but we need to be doing some other things outside of that, because it's just not enough right now. A couple of months ago, you got to hear how I was starting to think about planning for my financial future and my retirement. Amy Poaching was sitting across from me thinking, "What the hell is this guy talking about?" I've had some good feedback and also some G's. You've got a bit on, make type feedback. Today we're going to go a little bit deeper and maybe give me some action items and take me on a bit further of a journey of what things I need to be thinking about when it comes to my own plan financially into the future. What really struck me is that for all this planning and spreadsheets that you don't actually have one around your own personal financial future and your retirement. So, I thought this would be a good opportunity for us to talk a bit more about that. Yep, for sure. Well, I did go away and do one piece of homework and that's what I will call it, because it's a shout out to my old teachers. But I went and modeled my Kiwisavid to see. Did you? Okay. Yeah. Did you press? Yes, okay. Well done. Actually, I wondered. Yeah, I did it five minutes before you got here. No, I went and played with it and I was like, "No, that can't be right. The figure must be more than that. What the hell?" And I guess some of the stuff comes back to us. We don't know. It's hard to know how much we're actually going to need because we don't know what our life would look like, how much travel we're going to want to do or we're going to want to sit up the front of the plane, all those sorts of things. But anyway, my Kiwisavid at the moment is about 188K, right? And in my heat, I kind of think, "Well, in my late thirties, it should be a shit ton of money by the time I'm 65." Now, sorters calculated told me that adjusted for inflation whilst working right through to 65, that would only be worth a million point to $1.2 million in today's money. So two percent inflation eating into that every day. I have a sense that their aggressive rate in their calculator, like they often tone it back. I may be wrong. I couldn't find the exact rate, but I feel like I've read somewhere that they often, some of those returns that they base it on are cautious. I'm happy to be proven wrong on that. But then if I said, okay, if I don't adjust that for inflation, that would then be worth about $2 million, but obviously that's not going to buy you what it can today. Then I wanted to know, well, if I don't contribute anything, and if I just roll that snowball, and I said, at a 9% rate every year, on average, without contributing anything else, then that should get to $1.93 million. So my takeaway from that is that, even if I don't make it to 65, if I don't touch this, I will be a on-paper millionaire with just my KiwiSaver, which don't know if that means anything, but I also then said, well, what if it does achieve 9% annual return, but then 2% inflation, then it's basically $1.13 million. So I've got a million bucks already if I just let it roll through to 65 and don't interrupt compounding, and there are also 9% returns. So that in my head gives me a bit of comfort that my retirement, well, I should have some good ammo at the age of 65. So you've worked out that if you don't contribute any more to your KiwiSaver, your 188K, and roughly what, 27 years, is going to be the equivalent of 1.1.2 mil today. Yes. If you were to retire. And so if you're living on your 10K a month net, 120K a year, I wonder how long that's going to last you. Quick methods say about 10 years. Yeah. So that'll get you to 75. Okay. But it is interesting because what I typically see is that I'm yet to come across somebody where their KiwiSaver is actually going to be all they need to provide for their retirement. It is great. And I love KiwiSaver and what it's doing for people. But we need to be doing some other things outside of that because it's just not enough right now. Okay. Maybe for people who are starting KiwiSaver now, you know, like a few 18. And, you know, next year, the contributions are going to be 4%. So if you're starting with 4% contributions from 18 and you've got all that runway, then, you know, that might be a different story. But for now where we are in the piece with KiwiSaver, yeah, we've got to do some other things. As soon as we start these things, what you're saying is probably the better. And I think there's a lesson in there for us two of our kids and stuff. If we start compounding in their favour at an even earlier age. So I'm talking about 38 to 65. If we start thinking about 18 to 65 or even 0 or 1, there is 65 of a small amount of money, then, yeah, we can use the benefit of compounding. But great to have that awareness because, you know, a lot of people you may have thought, "Oh, shit, that's a reasonable amount to have my KiwiSaver." Like, that will provide for my retirement. And it's like, that's going to provide for about 10 years of retirement. Right. Oh, that's a more work to do. Right. So, I have done a bit of a scenario. I've taken a little bit of information from what you shared with me last time. And then I've made up some numbers as well, just because I thought it would be interesting. Yep. So, what I've looked at, I've got a 38-year-old couple. And I've made some assumptions here that they are renting. And they're paying 1,200 bucks a week rent. And they have got 170K in KiwiSaver plus 80K in KiwiSaver, so total turn 50K in KiwiSaver. I've made an assumption that they're spending 80 grand a year on a living. And then added an extra 20K a year because they go on a lot of holidays. We're at like. Well, some kids have made it here. They came from. They came from. They came from my Instagram feed. Okay. They've got a million bucks, they're renting, they've got a million dollars in savings and investments wherever, and the income of just use 200K plus 100K, so gross income for the household 300. Yep. So, that's net probably 200. I've made an assumption that they're going to have a kid next year and maybe another kid two years after that. So that's going to reduce household income for five years and then a staged approach back for partner two to get back into work. And so if they just carried on like that and they saved surplus at their head into some form of investment, which gave them a 4% real return. So the real return is after tax inflation and fees. So if you 4% then you add on inflation, you add on tax fees, you might be able to put it around 8% potentially. So that's the kind of return that they've got to get on their money. Now on that basis, they would be able to retire at 65 and they would run out of money when they were about 90. Brilliant. Got no house. Oh, shit forgot about that. So, you know, if you calculate before 90, then you're okay. But if you last beyond 90, got no home, you've got no legacy. That's kind of. So that's renting from 65 to 90? Yeah. Yeah. Okay. Run out at 90 and then I'll point the finger at the government and say, well, I didn't I was going to live to 90, that is also at 38 no super. Oh, okay. You've modelled it on no super for Luki. It means tested by then. Someone have taken it from me. Yeah. Shit. Hey mate, you're done too well. You don't need it. You don't deserve it. Yeah. Keep that. But in Josh's case mate. Yeah. Okay. Well. Yep. interesting just to know that, and obviously, those aren't your numbers, but it just paints a bit of a picture of what it actually could look like. These are the things that people don't sit down and, you know, in January, model out for things. No, because I'd imagine the people that you're dealing with, or working with, sorry, they're probably not going to have a million dollars worth of assets. No. They're not going to, they're going to be maybe children earlier, but maybe not these days, you know, with people having children later. And the Kiwi Savior balances would be lower. Their income is potentially lower as a household. And I'd imagine it can be quite eye-opening or confronting for them of old shit. Yeah, yeah, yeah, absolutely right. And so there are always things that can be done to improve the numbers. But we can't figure those things out until we first know where we are right now. And also, you know, this particular example is based on 120k of income through retirement. Some people might be quite happy with 60 or 80, you know. So their numbers change, change things a lot. But what's quite interesting is recently, since we recorded this, I did go on overseas trips. So it's quite a shame that you put that in there. And we were bringing the average age and net worth down on the tour. Yeah, but it was quite a lot of chat from people older than us of like, this is why you got to do these things before you get to their age. Look at them and stuff like that. Not saying they were judging, but you could see people deciding how they were going to live through retirement based on what they were seeing on this tour. So, you know, you might have had 65 year olds, but then also 85 year olds on there. And hey, I'm going to need a wheelchair, hey, you know, there was just, I was without revealing to, there was, there was people where you would think, wow, that's bold to get on a plan and go that far and to trick around this place for two weeks. And in some ways, think, yeah, I don't really don't want to worry this poorly. But, well, it's a trip of a lifetime. I'm going on. It doesn't really matter who I'm impacting on this tour by doing it. They can provide for me or make sure that I have a good time. But what was just fascinating for me is that there was quite often a bit of commentary about, you've got to spend the money, do your travel, do the things whilst you're fit and able to do it. Because you don't want to be, you know, wanting to do it and having the financial capacity to do it, but then not the physical. And there seems to be quite a bit of research about as you start to keep, like, you know, 65 to 75, you're probably going to spend more money than 75 to 85 to 95 to 95. You're going to spend way less money than 65 to 85. Yeah. Yeah. So I was away researching on these trips, you think I'm holidaying, I'm actually studying the wealth of the healers. Yeah. Yeah. Yeah. Yeah. Well, that, you know, to me, that I feel pretty confident about my retirement, if that's how, if those numbers were mine and that's how it goes. But what I do often think about, even when I was modelling my Kiwis everything, the solid count I'm thinking, there's no guarantee I'm going to look in that level of income from now until 65. And that's where I think these things get kind of tricky to work out or maybe why some people put them off because they can't see what their future may look like or, you know, do you have a health event or a life event or a family person has a life event and it changes what you'd be doing. A business event, do you have a, you know, career event and then your income drops from 200k to 80. And you go, shit, like hell, you know, you thought you would get your moulded based on the same amount of income, for instance, when you do your taxi self, but then there's always things that can change in the plan. Yeah. I mean, people life is fluid, like life is constantly changing. That's the one thing we can guarantee is that things are going to change. And so, you know, if you're going to go through the exercise and get an understanding of kind of what you're on track for, you want to be able to model out, okay, well, you know, my income is this right now. Maybe it's going to increase or decrease or maybe I want to like scale back my hours from 55 and, you know, actually, actually modelling your income decreasing, which is going to decrease your Kiwi Saver contributions as well. There might be, you know, big one-off events or holidays that you want to take at certain ages, you know, you want to build that into the plan. If you need to upgrade your vehicle, you need to be able to build that into the plan. So, you can make all of these assumptions, it's never going to be perfect, but you can, to some extent, actually build in all these sorts of things or if you're starting out with a business, you know, maybe you earn nothing this year, maybe next year you earn 30k. And then, you know, you can actually model out your income increasing over time. So, I then had a look at, well, what if you did buy a house? It's going to decimate my net worth, yep. Yeah, well, and this is something that we've spoken about previously, like, what would you actually do? Would you go and check all of your cash into the house or would you just put in a deposit to the house and have a mortgage and keep your investments there, how would you do it? So, I looked at a scenario where you put everything into the mortgage, right? So, if this 250k across Kiwi Saver and you got a million bucks invested, if you put in 1.25 mil down as a deposit, no cash left, let's say you bought a 2 mil house, so you can have a 750k mortgage. And I also added in an extra 15 grand a year for property expenses, rates, insurance, blah, blah. What that shows is that there's a bit of a blip over the next five years because we're down to one income having kids, right? Which is what most families that have kids, they go through the same thing. So, we've got a bit of a blip here, but then, once we get through that, and we've potentially got two partners working again, or even part time, then we've got the ability to pay down the mortgage much sooner. And what that means is that you're then getting out to 85 years of age before you run out of money, if you're living on 120k of retirement income, but you still got a 2 million dollar home. There is only one, so you could down size, or sell a home in rent or whatever, but there's potentially something that you're going to be leaving behind rather than renting your whole life. So this is convert the investments back into cash by the property take on a 750k mortgage, and then pay that down over a standard or an accelerated payment plan over a 30 year period or a year. So a standard period might be 30 years, but with your surplus income based on you spending 100k a year on life living, if you put your surplus income into the mortgage, you could pay it down in 18 years instead of the standard 30, and that is going to save you 252,000 in interest. We like that. As well as 12 years that you're not paying a mortgage. Like that banks. So what are we spending through to later on, because we've got, so then we get, so we're paying down the mortgage faster, are we building up any other forms of assets? Not until the mortgage is paid off. So if you have a look at that bottom graph, you can see we're heading along here because we're focusing on paying off the mortgage. Then once the mortgage is paid off, if we save that money that was going into the mortgage, we can see how your savings would increase. And then at 65, we start spending 10 grand a month. Gotcha. We get through it like 86. And that's not including selling the home to access the cash. No. So you run out of money at 86, but you've got a $2 million home. Gotcha. And I get a reverse mortgage too. I get a reverse mortgage. You'll find that. We're getting trouble. Okay. So that was, sorry, I locked it that. And then I locked it. Well, what if you just put in a 500k deposit towards this $2 million house and you left the money in Kiwis Aver? And in other investments? Yeah, that looks good. And so you end up with a $1.5 million mortgage. And what we can see here is that we're going backwards. Yeah. Because for families, you know, when income is limited, when you're having children, it's always cash flow is really, really hard throughout that period of time. And so we can kind of see that here, the mortgage at 1.5 mil is just too high for these people's income. And so they go backwards and they never actually get a chance to catch back up. and so we just keep going, keep going backwards. So taking on 1.5mm of debt might be a bit scary. Taking on 1.5mm of debt would be scary. Putting in what this shows us is that, you know, checking the money into the mortgage, having the mortgage lower, makes sense in this instance. Yeah. For a while. Sounds boring. Okay. Doesn't it sound boring? But this is why it's important to run these types of calculations with someone like yourself. Yeah. So you're not just doing it off of feeling, you can actually see the difference in the scenarios. Yeah. Because this is how this is played out, but in a lot of cases, it would actually look quite different. And maybe it does make sense for, you know, some people to not put everything into the mortgage. It really comes down to, you know, income, how much they're spending on living, what their situation is, their time frame. So we can get very, very different results. And is this something that you've done commonly with people where they then get a bit of a shock as to what the numbers show them when you run these graphs for them, or where they might have been thinking one way, then they look at it a different way. Oh yeah. Yeah. I've got a couple that I'm working with at the moment. And they have an interesting situation, actually. They, one of their parents gave them a whole chunk of money to buy house, interest free. And they have to pay back their money in 10 years time. So it's kind of like they've got a house that they can, yeah. So they don't have to pay back over 10 years, but in 10 years time, they have to have, we've got to pay back. They've got to pay back. Gotcha. Yeah. So in the meantime, they've got to be saving and investing. They want to make the most of this opportunity that they have. And they can pay it back in 10 years and really try and get ahead. And they have got a very young family. So they are kind of in the cash flow trenches right now. And they have got a home worth, I don't know, 1.3, 1.4 mil. Yeah. And they found this other home that was about 400 K less. Yeah. And they're like, should we sell our home? Their home is a home in income, by the way. So they get in rental income, as well as not paying mortgage. Yeah. We want to sell our home and buy another home, pull 400 K out. And then we can invest that 400 K, which will compound over the next 10 years. And get how much better off financially are we going to be if we do that? So we ran the numbers, but actually without their rental, even though their mortgage would be, well, they don't have a mortgage. But even with the 400 K invested, because they're in the cash flow trenches right now, because they've got two young kids. They're actually about 20 grand a year worse off if they were to do that. Yeah. It shows you how important having something that can generate an income for you is right. So the house that they do have can generate income. And when we can't individually, because we can't work, et cetera, or are taking time away from work, then, yeah, we've got an asset. Because it's genuinely an asset because it generates an income for us. Yeah. Yeah. Interesting. Yeah. So income really makes a difference. And also, you know, quite rightly, these people are thinking of ways that they can improve their financial position. And it was a great idea. And it's not until you run the numbers that you're like, oh, hang on. Gosh, this is actually that real impact of it. It even surprised me a little bit. I had to go ahead and have a look so you can look at just make sure everything was right. Yeah. It doesn't make sense for them to do that. And they're like, oh, sweet. Well, we'll just stay where we are. Aren't you great? Some of the things that come up for me, and I'll be interested to get your thoughts, do most people underestimate how expensive children are going to be as part of their budget? I don't know if they. I don't know if it's that they underestimate it. But it's like, it's another thing. It's one thing to, you know, estimate how expensive it's going to be. And then it's another thing to actually live through it. Yeah. Because what got me thinking about this is I got a number of messages recently from people who. They purchased the property at the top of the market and then interest rates went up as well. And then the income changed. And most of the messages, they then ended up having children a couple of years later. Or within like 18 months, 12 months. And my logical accounting sort of planning type hit on my. Like how when you took that loan and then interest rates went up and then your income dropped. But do you not think about those things? And some people commented if I shared some of the examples about that. Whereas, you know, there's no shade on them. They're just genuinely like, no, we just didn't think about any of that. We just went and brought the house, the rates were what they were, the interest rates were what they were, rates went up, interest rates went up. And then our income fell and it's bloody hard. And I think whether that, you know, sort of leans itself to what you're saying about. It's not that they're not flippantly making these decisions where some people may see them as doing that. But they just don't know how hard it's actually going to be until they're in it. Yeah. Yeah. Yeah. When you drop down to one income and you've got all these other extra expenses. Like, I don't know what the government thinks happens between, like, you get, do you have a baby, right? You get paid, I don't know, patents for like six months or might be extended to nine months now. I don't know, six months, right? I don't know what they, and then once the child tends to, you get 20 hours of free child care. But I don't know what they think happens between the time that the child is six months old. Ah, sorry, yes, six months old through to the two years old. Like that 18 month period. So you're not getting any maternity leave. You're not getting any free child care hours. And so either someone's got to say at home and look after the baby. Or you send the baby to daycare. And then you've got to pay for daycare. And does that actually, yeah, do you earn enough after tax to cover the daycare costs and it's really, really expensive? Yeah. And then on housing, the same thing. I'd imagine people probably don't model the actual true cost of the property, instead of just looking at the mortgage and then thinking about rates insurance and potentially repairs that come up. And then you've got a, like, you've done this so many times that it's one of the, I'd imagine one of the first things you actually model into. It's like, hey, here's another 15 gram worth of cost for us. Someone probably doesn't go buy a house and go, well, this house is XYZ. Oh, well, you know, there's usually probably another $15,000 per year with after tax income. I'd imagine as well. They'd just be like, ah, what's the mortgage on it? Yeah. But like when people were looking at buying an investment property. So are the yielders this? And it's like, is that the gross yield or the net yield? Because they don't really care what the gross yield is. Like it's what is the yield after expenses? Yeah. And, you know, it's not just rent less mortgage. It's rent less mortgage, less rates, less insurance, less accounting fees, less vacancy maintenance. You know, there's all these other things you've got to bring into it. And then look at the picture and see, you know, whether that still is comfortable for you. I think this highlights the value of sitting down with a financial planner right. So that you're not just guessing your way through this. You're actually getting someone who's stressed tested thousands of budgets and scenarios. And you can look at things from different angles. Yeah. I'm on a mission. Yeah. I look, I am. I was talking to somebody about this the other day. But you know, when I started out working in financial services 25 years ago, I started as a mortgage broker. And back then, you know, not that many people would go to see a mortgage broker. Because you actually walked into the bank and you sat down with your bank manager back in those days. I remember going with life folks. Yeah. Yeah, that's what you did. So it wasn't commonplace to see a mortgage broker. But nowadays, it's like more than two thirds of mortgages are taken out through a mortgage advisor. Sure. So it's great. People are getting the right advice and that's awesome. And so I kind of see financial planning where mortgages was 25 years ago. Whereas there are not many people that have a financial plan that know what they're like, that truly know what they should be doing with their money and where they're heading and have got real clarity and direction. And so I'm on a mission to get more and more people actually thinking about their financial futures and having planned for it. Because just a little bit of planning can make a massive impact on, you know, overtime. Yeah. My little decisions that you make now will have a big impact further down the track. Hopefully with people getting key wish over advice as well. It becomes more normalized around getting advice. and sort of dropping the, because I think a little bit our, we got like shame around money embarrassment around it, so then we don't want to ask for help and then secondly that whole kiwi DIY approach that we've had for so long and even marketed to that, so therefore you should be able to figure your money out on your own, I just don't think that, like given we have such low levels of financial literacy, do they think we're going to DIY it? Well that is part of the problem because if you go and see a mortgage advisor, you don't have to pay for them because the bank pays for them, if you go and see an insurance advisor or even a kiwi saver advisor, they get paid by the providers of most of the case, so it's like a free service to the public, but for financial planning, it's like there's no one else paying, you know, you got to pay for your own financial plan, so there is a bit of a barrier there, it like it is an investment. But I'd imagine though that once people get to that point of investing into their financial plan they're probably so much more dedicated to staying on the path or doing what they've been told. Oh absolutely, yeah, when they can see everything clearly and they know why they're doing it and how it's going to get them to where they want to be. Most kiwis don't have a financial plan, they've got a Shelby right mate attitude, Amy from leverage is now leading Guardian financial planning, helping kiwis make smarter financial decisions and build a future with more freedom. If you're wanting to shave years off your mortgage, know where to invest or just want some clarity and some direction, book a free 15 minute chat with Amy's team at Guardian financial planning. Visit financialplan.co.nz. Some of the things that I always think about that even at this level when this fictitious scenario that you've taken us through here is that the biggest cost that we'll have in New Zealand in our life are most likely taxes, housing and children and food, right? Divorce. Divorce. Divorce. Yeah, we could do another pot on that, but it's a good point. I mean I see a lot of expense going in to what's that. So if you can, if you can be mindful of those things, those, those outgoing, then potentially you can redirect that money to increasing your wealth and your assets. And it's, I think we can plan a lot about what housing costs in New Zealand and I get that and I hear it and I think it sucks as well, but you look at that, a couple of you mentioned before, okay, they have a place that generates income, you know, I was talking to some people who would be, you know, in the top percentage of wealth in New Zealand if they liquidate everything like their balance sheet, right, assets, my abilities. And even they, the property they're thinking about building, I will, it will have income generation on it as well. It's got this unit and, you know, and like they're thinking about the fact that housing is still expensive, no matter what lever you're playing the game, how can we bring that cost down? I think something I always been on about as well is that we can get really excited about investing in stuff which is cool. But if we can decrease what we give the banks longer term because we can pay it off faster because we can sacrifice it another area of our life, then we're going to build wealth faster because we're not then, we're not having to give it to the bank and I was recording a podcast earlier, and he was explaining to me how when he was growing up, they would go to McDonald's, much like many Kiwi kids would, and he would be the person who got eight because it was his birthday, his celebration, but his parents didn't. And he would be like, why aren't you guys, what are you doing, get a burger, what's in their light, no, it's not our, and so that was the level of sacrifice. But I think we let so much money leak out of our budget, and I'm guilty of it as well. And if we, we've got to start with what we've got to start with, it probably doesn't seem like we've got to start with what we've got to start with anyway, so that we can then figure out how do we build wealth from here? Yeah, it's so easy to spend money these days that if you're not like really consciously paying attention to where your money's going, like it just goes, like I can't tell you the number of time, like daily, weekly at least, you know, I'll sit down with some people and we go through a full budget, so we look at how much you're spending on your rates, insurance, food, clothing, entertainment, holidays, all the rest of it. And so it's like, okay, well here's your net income, here's what we're spending on all of your bits and pieces, and then, you know, we'll have the surplus at the bottom, might be 15 grand, whatever. And they'll be like, well where's that money? And I'm like, well, it's obviously, it's going somewhere. So if our incomes are this level, you know, if we're sure about that, then we're spending it somewhere. So we've got to identify where it's being spent, and so we'll go back to the budget, and they're like, this is like plenty for us to be really comfortable, and like across everything, car maintenance and tires, and like, we allow for everything. And it's, it's that awareness pace that shirt like, we're spending money on things that probably don't matter to us. I had a family who, and I never asked people to cut back their budget, like I never do. I want people to enjoy their lives, often it's their choice that they will decide that they want to do that, but I had a family a little while ago, and that exact same thing happened with the budget, they're like, oh, where's this money, it's been spent somewhere. And anyway, they came back, and I saw them a couple of months later, and they were like, we have been so just conscious about where we're spending money, and we realise that we were spending so much money on coffees, lunches, takeaways, things that are not adding any value to our life. So we've stripped that back, we still do it sometimes, but we've stripped it back. And we're saving 450 bucks a month, and we've put that into like some sort of boat time she thing. So now we can go out, and we're actually getting really valuable time together with the family and the kids, and I'm like, wow, that's so awesome. So it's not about cutting back, like people going through a budget, it's not about, you know, scrimping and saving here and there, it's just being aware of where your money's going. So that you are choosing, like, is that where I want my money to go. Yeah, the thing that I often think about that just blows me away, excuse the pun, is vaping. But just how it came out of nowhere, and we went like this in a recession, I can't walk down any street now without seeing a vape store. And I don't talk about it a lot, I create a lot of content about it, because it's, you know, it's just because people get frustrated by you telling them, don't vape, and, you know, I think you've got 30 bucks a week or whatever, but every now and then I think about it, I think that overall principle is like, not that long ago, no one vaped. Yeah, but even outside of those people, which is what vaping let's say was designed for to help people get off that, you now have hundreds of thousands of Kiwi people who vape and choose deliberately to spend money on that, yet we'll see saving for our future or for going that and going, yeah, actually I didn't even want that habit, like I got to wind it back, and then what can I do with that? You know, just how quickly that blew up, again, excuse the pun, but just how it's just been normalized and also we haven't thought, shit, how do we all have the budget to do that, and like why did everyone start doing that and how much are we actually spending on that and how do we normalise it? I think it just highlights for me, you know, how much money we actually do have in our budgets, but we're not aware of where it's going and we don't challenge ourselves to go, okay, well, if I'm going to do that, then what am I going to do for future version of me? Because I look at it too and think, well, man, like I'm definitely not getting my pension, why? And I find like cancer treatment for people who are currently vaping that are then going to say, well, I didn't know that led to that, and we're not going to go, oh, well, tough shit. You got some sort of insurance for it, but like, no, no, well, I don't, you can't just leave me. I'm going to sue someone whatever. So I think about these things maybe other people don't, but you know, I just went and paid $8.40 for a coffee, so it's not like I'm any better. Nothing. I think up there, isn't it? Yeah. $8.40. I could have just made an instant coffee there and then I'm justifying, oh, I need to take a little break, and it's support the cafe and staff, and so you then I challenge myself to think, well, are you investing $8 a day, because I don't really need the coffee. So what are you doing for your future self, because you've accepted that you don't really need that $8.40, because I could have had a free coffee, but instead I choose to prioritise that. So this. Right balance, say, you know, like you don't want to be account everything out of your life for your future, because what if you don't get there? So you know, you still want to have the things that are important, like if it's actually a part of your day that you want to like get away, take a break, go get a nice coffee, like great, do that, as long as, you know, you are also thinking about your future. Yeah, I think it's, I don't even really need it, but I've shown. just then just created a habit, so then I go and do it. But I, yeah, I think at some stage, we've got to take some form of responsibility to go. Well, if we let these costs come into our budget, right? Then you might even be signing up to Uber one. I think it is, which then gives you a discount to Uber and Uber Eats. You're basically inviting that you're seeking the third order consequences are, I should probably use Uber and shit more because it's not going to be as expensive because I now have Uber one. So not only have we added one new subscription in to then get a discount, you know, you sign up for a Costco membership, for instance. Oh, but it's cheaper there. Okay, but are you now going to have a look at what your average spend was and have a look at what it is now? Did it save you money? Or did you invite extra costs, you know? I mean, I'm a sucker for both of those things. (laughs) I mean, I think Costco's like 60 or 65 bucks a year, and I probably go twice a year. So, you know, I don't buy enough stuff there to actually save money. But it's like, I enjoy going there every now and then and just looking at the things, really. And I mean, Uber one, like, gosh, if I've run out of milk, I'm not gonna be packing up the kids at 7 o'clock at night to go down to the market to get some milk. So I just want to deliver it to me. Yeah, that's what I think you've got to understand like what you, I mean, I couldn't Uber today, for instance, 'cause I, in my head, I think, well, yeah, the Uber's gonna be more expensive back and forth, but by the time I take off parking, but I also get 40 minutes back where I can do some work. And you've got to understand, I guess, like, what, you know, how you're playing the game and where your money is potentially best spent. Like, there was a time where I didn't have, I didn't have a flat nor a rental property, 'cause it's like, that is, I just can't, I can't afford that yet. I don't, yeah, I'm not the, yeah, but once I can, it's probably gonna be one of the first things that I can pay for, and then I can start to level up from there. But I think all of these fundamental principles around money, I think it's easy when we've got a lower income to think that they're just earning more money, souls, everything. But, you know, I recently was talking to some people about a massive boat in New Zealand and it's sold, and I said, oh, I would imagine the reason the family sold was because it just leaks money, like, every single month, and the people who then inherited were like, yeah, I don't wanna, it doesn't mean enough for me to pay for the ongoing maintenance, and so I think it was listed and sold very quickly, once the family passed, because it doesn't mean what it meant to the parents. - Yeah. - And I think what I always see in your example there of where is that money, when I speak in a business owner's, where is the money, is loan repayments. And they map out all their expenses, but then forget that they've still got to pay back the decisions that they've made, so then we go right with these digging finances, vehicle finance, there's whatever finance, or you did wanna provide a vehicle for the other person who was starting this 10 grand a month of cash that needs to leave the business, and they're like, oh, shit, that's 120 grand a year. You know, they're like, whoa, so have you saved 120 grand a year before? Nah, I'm like, okay, we invited that level of debt in, and now we've got the expenses for all of it too. All of them need to be insured, all of them need fuel, for instance, registrations. And we are, I think this accounts about your practical level for an individual is, if we do sign up for the buy now pay later, we're just inviting more costs into our life, because at some stage, we will want to use it, and so then we'll spend tomorrow's money, and then we sit down to do a budget. Unfortunately, one of the first things you need to actually put in there is your cash repayments for the decisions you've already made, but instead we'll start it like, what are my living costs? Not what are my future payments that I need that I've already committed myself to? I think that's where the zero percent interest finance of the world has been an amazing tool for people to feel like they're getting a win, but instead we've now got the opportunity cost of what we could have done with that cash, and by inviting that into our life, have we brought shit that we potentially didn't need, or more of the stuff that was more expensive, and sometimes going back to that, can I save up for it and buy it and pay for it out of cash? You may not want it as much. Massive tangent there, Amy. (laughing) Right. - Well, we're doing well. - Yeah, let's, as we can do on this page, Pods, let's get out of here. Before we do, two things, just very quickly, how often do you see people have all these amazing plans, and then bang, there's a health issue or something, and they go far out, that's hundreds of thousands, or tens of thousands or something. Are they ensuring against that? Are they providing for that? Are they, is it just, we've got to deal with that, if it happens and we're starting to give a little, what do you differently see? - When these things happen, and I come across them happening a lot, there is just a massive difference between people that have protected themselves around those things, and people that haven't. I think people are sort of getting better, at particularly once they have kids getting better, at protecting themselves, if something goes wrong, but not always, sometimes they get cover, that maybe they don't actually really need, and then they're lacking cover that they do really need, so making sure that they have their rights amount, right amount of covers in place. But I was with a couple last week, and they've got three kids under five, and they've got no life insurance, no income protection, and I just like, I actually had a physical response, I was like, "Oh my God, it's like, yeah, "because they, and they're doing all these great things, "actually trying to like set themselves up, "but they haven't done that, "and so it's all well and good to do all these great things, "but gosh, man, something happens, bang." - Just kidding. - Yeah, your income is your greatest asset for most of us right, and we don't really want to admit it or accept that, hey, like if it does drop, I mean, it's exactly what those young people are saying that have purchased the property at the top of the market, that they've then had a child, and they're like, "Fuck, everything doesn't work anymore, "because we went to one income," and it's like, "Yeah, your income was your greatest asset." - The mention of that was, yeah, forever. Yeah, I mean, with people, and what I have actually seen is that income protection is actually getting harder to get, like the insurance companies are looking a lot more closely at people before they take them on. And so, you know, a lot of people that would have got income protection through a couple of years ago, now they're being deferred, and actually not getting cover. So, you know, and then when you're really young, you kinda don't think about it because you're young and healthy, but actually that's the time that you need to get it. It doesn't cost so much because you are young, but you wait until later when things start happening, then, you know, you either can't get it, or you're gonna be paying twice as much for it. - Yeah, I think mine goes out, and I think there's $100,000 every fortnight, and every time I see it go out, I just think, "Oh man, I've had to pay for that with after tax profit to protect something's happening." And it doesn't get any boric sighting, you know, and it's only increases with inflation and goes up and you think, "Man, when I signed up for that originally, I think I was paying $37,000 now, but $176,000 I think it is, you know, far out." - So I can see how people get to a point of 100%. But also, that's why you need to be reviewing it, you know, so like I was working with a couple of weeks back, and they are in their 50s, and they've just made their last mortgage repayment. - Yeah, well done. - So it's like, okay, well, we don't need the life insurance anymore because all of your kids are grown up, you don't have a mortgage, you've got some money and you keep your savers of something happened to one of you, you're going to be okay. What you do need is some income protection because you got like 10 years to go to set yourself up for retirement now, and if you can do that, and we've got a plan to do that, but if something kills you income, then this whole plan falls over. So it's like, you can redistribute where you're spending money. - Yeah, the thing that scares me is every time, I get one of these messages of, hey, you know, they've done the same exercise of me, my insurance has gone from this to this, this sucks. I've started thinking 'cause I've learned a little bit about investing now too. Well, I could just invest that money and I think, oh, no, like, I just do it every time I say, yeah, but what if the mass of a medical have been torn away? - Haven't reached here. - Yeah, they're like, oh, yeah. I think how have you not thought of that? Or, by suppose, yeah, people just say it is, where we're so keen to find a leak in our budget, that's an easy thing to solve. But yeah, that I think is a pretty dangerous path to go down. 'Cause imagine what that feels like if you do do that and you invest slightly and then the thing does happen and you go shit. - My four-year-old twin boys at their preschool, one of their buddies, his dad has got bowel cancer. And so he's going through surgery and chemo. And thankfully, they've got some good cover in place, which just means that they don't have to worry about the financial aspects. They can take some time off work, they can just focus on the treatment. They can, now they're paying for a cleaner to come in, once a week and it's like a huge relief that they don't have to worry about the cleaning when they've got all this other stuff going on. So those little things that just make such a difference when you gotta go through something like that. And this is. what it is all about right, trying to remove the stress and pressure of those things happening in our future and planning for it and finding what financial freedom means to us as we've been doing over this two-part series as we dive into some of these questions. So hopefully it's been helpful for the listener, there are a few people that were pretty disappointed in my, me not ensuring my item that I don't really care if I have stolen or lose, because Josh kindly clipped it out as a little clip and chuck it on social media and I'm like, "Ah, geez, I'm going to get bashed for this." How irresponsible isn't this a financial literacy podcast, am I, yep, but without the context then, hey, we're all doing things differently, but if people want to get in touch, what's the best way for them to do that, and on top of that, who do you see that benefits the most from going through and putting a financial plan together? Well, financialplan.co.nz, it's where you can find us, who benefits the most. It is people that are wondering what they should be doing with their money. Should they be paying off their mortgage, should they be investing, how do you plan for retirement, people coming up to retirement, how do I make my money last? How much income can I draw, so that I don't run out of money when I'm 80? Whenever there are burning questions and you're thinking and potentially going around circles, trying to figure out what you're right next move is, that's the sorts of things that a financial plan can really help solve. I do have one burning question then going back to what we were talking about earlier. So let's say my KiwiSaver, I get to 65, and then I start drawing it down, when financial plan is model this scenario, do they normally model them based on, okay, we go back to zero risks, so we're not invested anymore, because I'm thinking, well, couldn't I keep my KiwiSaver invested to 95 or to the day I die or never go risk off and then just draw down on it from there, and hopefully, like if I do still live through the volatility, it just keeps dragging up until the right to a degree, and I assume some people do it that way. Oh for sure, yeah, so even when you go into retirement, there's still some money that you can have invested in growth assets that you know that you're not going to want to all need to touch for quite some period of time, and then you're going to have other investments, savings that you're going to use over the shorter term. So yeah, investing it in the right places, having the right investment strategy, very important. Well that has been fun to dive into, probably not so much for you, having to sit there and listen to me, and this is my day, I'm like, one is like off on 26 tangents, but it's been helpful for me, and I've definitely got some action points that I need to go and take and be thinking about and running my own numbers with you at some stage to ensure that the past that we do decide to go down are going to get us to what we want life to look like, so good luck with that. Thanks. There are not many people that have a financial plan that know what they, like they truly know what they should be doing with their money and where they're heading and have got real clarity and direction. I have a goal to help 100,000 Kiwis improve their financial literacy. Generate Kiwis' savings scheme has sponsored Kiwis' change to help me reach more people and make this a reality, cheers to Generate. Head to GenerateKiwisavour.co.nz/change to find out more.