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Earning more than you ever have, but spending more than you ever have as well?
We Kiwis are buying houses and having children later than our parents did, which is no surprise with the current cost of living. Having said that, plenty of us still hope to retire early, and if not that specifically, to at least have some financial freedom in the next few decades.
New Zealanders are, on average, buying their first home around age 35 (compared with age 25 in 1970) and the average age range to have children in is 30-34 years old as well. Add to this the fact that women’s income has been shown to peak at around age 40 – roughly a decade earlier than men’s – and you can see that the financial juggling act of your 30s and 40s could easily fall apart.
A friend of mine turned 30 recently, and his Mum wrote a fairly accurate guide to life in his birthday card, she said:
In your first 14 years someone else is rowing your canoe, and from age 14-20 others are rowing but you’re steering towards the rapids.
From 20- 30 you’re happy to go with the flow, but from 30-40, s*t gets real and you’re rowing on your own for the first time.
She continued the voyage all the way to 100, but this is where I want to step in and make sure you don’t bail out or throw your co-paddler to the Piranhas!
We know that there is a strong link between financial stress and mental health, with some studies finding that nearly half of all surveyed who had trouble with debt also suffered from mental health difficulties. Additionally, physical health can be compromised when people are struggling financially, with people choosing not to access healthcare, making poor food decisions, skipping exercise and actually feeling ill.
Naturally we want to work with people before they get to that level of stress around their financial situation!
Recent research has shown the difference speaking with a financial adviser can make. People who work with a financial adviser get better returns across the board, with up to 50% more in their KiwiSaver balances, but the benefits aren’t purely quantitative; they also felt more confident in making financial decisions and overall improved wellbeing.
So the benefits of working with a professional to get a handle on your finances is clear, but a 2020 survey by the FMA showed that only 18% of respondents had reached out to a financial adviser in the previous 12 months.
The trouble is, many people don’t know what a financial plan entails, how much it will cost, how much work they’ll need to put in (do you need to be financially literate to make one?) or who to go to that can help.
So today, let’s cover off some FAQ’s
A. A Financial Plan is something of catch all phrase, as you could go to a range of different advisers and come away having had different conversations and receiving different advice. Some may focus more on the budgeting side of things, many will focus heavily on retirement and investment strategies, but a good holistic plan should be a roadmap for you on your financial journey.
Think of it like GoogleMaps - you know where you want to go, but not the best route. You need a road map, some of us need more detailed instructions than others, and for those with the same navigational abilities as I have (paddling round in circles most of the time) you need someone to re-route you and help you course correct when you start veering off track.
A. Hopefully it’s a collaborative effort that feels helpful and (I’m aiming high here) fun. Our Financial Plans have four main pieces to them, and we usually spend about 6 weeks working closely with you to get the plan in place. First, we want to know all about you, not just your age and annual income, but your attitude to money, your goals for the future, your concerns about finances. Secondly, we will talk through potential scenarios, as people very rarely have only one path they could take forward. The third step is presenting you with the plan itself, an easy to follow report outlining our recommendations for you going forward that we talk through to make sure everyone is happy with the direction we’re heading.
The final piece is the implementation of the plan, some of which will be done by you and some by us. This might be buying or selling property, taking out insurances, changing your KiwiSaver settings or starting an investment fund. We will also keep working with you going forward, with a minimum of one annual check in, but we tend to chat to our clients pretty frequently anyway!
Not at all! That’s literally our job, to talk with you about your situation and goals and then to run the numbers on your behalf. The most helpful thing you can do is know your key numbers, which are your income and – the bit people less often know – your expenses. If you also know your KiwiSaver details and what insurances you have in place that’s very helpful too, but plenty of our clients don’t know or understand what they have and we help them unravel it all.
A. A Financial Plan can range in price, depending on the qualifications of the adviser and the scope of advice given among other factors. Our plans are $2,000 +GST which covers 3 initial sessions, cashflow modelling, the creation of the plan and ongoing reviews.
A. You can look at factors such as online reviews, their qualifications or the fee, but the most important thing to assess is whether you like and trust them. We always offer a free initial meeting so you can get a feel for the person you’re going to be working with, because if the rapport isn’t there, or you don’t feel comfortable, you just won’t get the value out of the process.
A. Some advice is better than no advice. While we would absolutely say that a holistic financial plan is going to give you the best outcomes, if it feels like too much to start, you can come in for a chat about whatever is top of mind for you right now. We advise on insurances, mortgages and investments, so even if you just have a few questions about how to make the most of your KiwiSaver give us a call and we will be more than happy to help (free of charge!).
Elizabeth.
Elizabeth Tsikanovski (FSP693611) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Elizabeth’s disclosure statement on our website.