KiwiSaver: Have the Conversation

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Is your KiwiSaver working as hard as it could for you? Is it time to tweak the dials to maximise your investment or make things more conservative?

 

KiwiSaver is a voluntary savings scheme set up by the government to help New Zealanders save for their retirement. You can choose to contribute 3, 4 or 8 per cent of your gross (before tax) wage or salary to your KiwiSaver account. Your employer must contribute as well—at least 3 per cent of your gross salary.

 

There are a few instances when you can use your KiwiSaver before retirement—these are known as “time horizons”.

 

It could be for:

·      your first home (where you can withdraw all but the $1000 kick start),

·      perhaps you’ll be emigrating (there are some timeframes around when you can take that money out),

·      severe hardship (let’s hope it doesn’t come to that), or

·      when you reach 65 years of age.

 

The key here is to ensure that your KiwiSaver is on track to maximise your return in the time between today and when you’re going to withdraw the money (time horizon).

 

There are several different funds you can invest your KiwiSaver in. These are generally classified as either conservative, balanced and growth or variations of these. You do need to have all of your sum in one classification. You can choose to split a percentage of “units” across a number of different funds (i.e. from a low-risk to a more aggressive fund). For example, you might put half of your savings in balanced and the half in growth. And it’s not a set-and-forget scenario—you can move these percentages around to suit your goals and life circumstances.

 

The investment statements must be provided to you prior to you signing up to KiwiSaver. You can of course do some of your own research. This could be looking at the Sorted website to compare some funds (see who has the best returns, lowest fees, and who invests in socially responsible sectors and so on).

 

The government’s KiwiSaver website provides forms and tools to get things set up, to keep track of your contributions or to help get your money out.

 

There are a number of different levels of advice that you can receive, from “information only” to “class advice” where the representative will outline what is suitable for people in your group or “class”. For example, “we recommend people aged 30 to 45 choose ABC fund” through to personalised advice where the investment structure is tailored to your personal situation.

 

The advice piece is crucial.

 

So many Kiwis are not close to their next time horizon where funds will be withdrawn, and they are sitting in a default fund—where their KiwiSaver is just ticking away and the potential for a larger KiwiSaver balance is not being realised.

 

When’s your next KiwiSaver time horizon? Is it time to have a chat about getting the most from your KiwiSaver?

 

Simon O’Neill is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Am I Ready to Buy for the First Time? Or Again?

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There is one constant in the ever-changing world of banking: the confusion as to what people can and can’t afford. Lance explores the murky waters of why some banks say yes and some say no.

 

Yeah? Nah.

 

I often find myself sitting with people who believed they were in no position to purchase but could and, conversely, people who believed they could but, at that time, could not. Beyond this, they may have been sabotaging their plans by putting together a strategy that was actually taking them even further away from their house-buying goal.

 

To help clear up some of the confusion, there are really only three things a bank is interested in:

1. Deposit (or equity)

2. Income

3. Debt

 

A scenario I have come across often is when people have strong income, some debt, but a low deposit. They believe their biggest hurdle is the debt, so set about reducing this. The truth is, while they have some debt, their earnings are at a level that the debt is easily managed, even with a mortgage. They need to increase their deposit, but unfortunately all their extra cash is being channelled inefficiently towards debt repayment and, so, unnecessarily delaying their timeframe for purchase.

 

To all those colour-coded Excel spread sheet lovers …

 

There can be times when people have been up all hours looking at properties or going to open homes for months when, unfortunately, they had no ability to purchase at their target price point. This can be frustrating as numbers can be based on correct “true-to-life” calculations. However, banks have their own rules of basic math.

 

When a bank calculates what we can afford to borrow, they use a far higher interest rate (to mitigate fluctuations), and they have a minimum average spend for cost of living for each scenario presented e.g. two adults, one child vs. one adult, no children etc. Furthermore, because each bank perceives risks in different ways, they each calculate a household’s scenario differently. They’ll give greater or less importance to things like the number of vehicles you own and whether child support is organised formally through the IRD, as well as a few other quirks.

 

“If I could turn back time.” — Cher

Time is our gift to you. Tell us your scenario, what you are hoping to do, and when you are hoping to do it. Let us sit down and come up with a clear strategy based on what you are truly able to do.

 

If it is not today, let us help you journey towards that “yes” sooner rather than later. Let’s unpack your plans beyond this next purchase and consider the ramifications of each step. Let’s reduce the uncertainty.

 

Lance Shearman is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

5 Daily Steps to Wellbeing

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As financial advisers, we help guide people through our fair share of stressful situations. So, as a team, we’ve made a commitment to prioritise wellbeing. And here are five simple steps to help boost your wellbeing today.

 

I have worked for Velocity for a few years now and have slowly learnt the importance of looking after my wellbeing, both at work and at home. Life is rather hectic (juggling three kids, a full time job, and Brendon) so I’ve put in place some strategies to ensure I look after myself and stay sane in the workplace.

 

The Mental Health Foundation recommends we incorporate five elements into our daily lives to improve our overall wellbeing. So I’ve taken these on board and try to follow these every day.

 

So, here are my five daily steps to wellbeing!

 

5. Be Active

I get up at 5am and go to the gym each morning. Starting the day with exercise   leaves me feeling good for the rest of the day and I tend to eat better throughout the day too!

 

Then it’s yoga in the evenings to unwind and de-stress. I aim to do at least 10,000 steps a day on my Fitbit, too, which often means taking breaks to walk around the block throughout the day. You may find both myself and Stevie walking around the office, looking at our watches, to get our steps up!

 

4. Give           

Each week I aim to do two good deeds, whether it’s donating to the local food bank or dedicating my time to someone who needs help. I make sure it’s something I want to do and have time for, so that I don’t end up feeling resentful. Doing something for others makes me feel good.

 

3. Learn        

I’m always trying to learn something new, both at work and at home. I try to set myself a fitness challenge as well as a learning challenge each month. I’m currently trying to master the “side crow” pose in yoga. Not easy! According to mentalhealth.org.nz, adult learning (which includes goal-setting) is proven to be strongly associated with higher levels of wellbeing.

 

2. Connect    

I try and catch up with friends as often as I can—even if it’s just for a quick walk or a cup of coffee. In the past, I’ve been too busy to fit it all in, so I am making a habit of fostering relationships and ensuring I allocate them the time they need.

 

1. Take Notice

Each day I think of one thing I am grateful for.

 

For further information head to mentalhealth.org.nz