Some links to interesting articles in published media such as The PressThe Sunday Star Times, and The Herald from recent months:

  • John McCrone wrote a valuable article about “How to succeed at the retirement game“. He points out that retirement is not just a 30-year weekend – it’s important not just to retire from something, but also to retire to something. “When working, you can’t wait to stop. Then once you stop, you mourn the loss of everything work gave.” Retirement isn’t something you should drift into – it should be something you think about years – if not decades – ahead. 

One observation I found interesting was that Kiwis usually retire in place – ie, where they lived. It’s more common for North Americans, however, to travel to places like California and Florida.

Susan Edmunds continued to be prolific:

  • She asked nine high-profile financial experts what they would do with a $100,000 windfall. Janine Starks hopes for 6% percent compound growth over about two decades (which seems high to me). Shamubeel Eaqub says he would “Invest in a New Zealand business. I know a number of people with great businesses and great ideas, but who have bought a house and don’t have a spare $100,000.” Hannah McQueen says “Property is the way to go”, provided you don’t buy a lemon”, and that you should leverage; stating that “The property is supposed to double in value over 10 years.” (This is a compounded return of over 7%! I assume she’s talking about property doubling in value in real terms, in which case this is really aggressive. No asset class can grow indefinitely at a faster rate than total economic growth – it’s mathematically impossible.) Points go to David Boyle who would spend a good portion of it on a trip to London to “see every cool band I could imagine”. 
  • Edmunds points out that if you’re leaving your property unoccupied you should tell your insurer – “most insurance policies [have] a 60-day rule: Anyone who was away for longer than that would find their cover no longer applie[s]”.
  • She makes a bold opinion after the change in Government was announced: “The housing party is definitely over.” “Whether we’re talking a plateau in prices or a more significant fall from here will remain to be seen.” She provides many reasons, which aren’t just limited to the new Government (“[The party] probably already was [over]”) – LVR restrictions; immigration; reduced investment; foreign ownership restrictions; Labour’s proposed building programme; etc.
  • Edmunds notes that “breaches of the road rules, or… licence conditions, [can give] insurance companies reason to turn down [vehicle] accident claims”. She quotes Michael Burke from Vero, pointing out the obligations of insurance-holders: ” For car insurance, that includes things like locking your car, keeping it well maintained, and following the laws that New Zealand has in place to keep us safe on the road”. 
  • In the 21 October 2017 edition of The Press there was a good article by Liz Koh titled “The money machine syndrome”. (I can’t find a link online.) Koh points out that “Every parent wants to see their children succeed but there are different philosophies about how best to help children get ahead in life. Some parents feel the best way to help their children is to give them a hand through gifts of money or interest-free loans. Others think it is only by children pulling themselves up by their own bootstraps that they will learn how to be successful. These deep philosophical differences can be problematic” where parents and/or children hold different views. Koh points out some basic principles in relation to helping adult children: “Decide how much you can afford to give”, “Set clear expectations”, “Act like a banker”, “Get legal advice for large sums”, and “Consider your other children”.
  • Koh also has an article titled “When your mortgage is gone, it’s time to build your wealth”. She points out that “There is one life event which is a major financial milestone and that is the day on which your mortgage balance finally hits zero.” She talks about the things you can/should do. She does, however, finish with “one word of caution. Resist the temptation to pour your savings into doing up your home. It won’t give you the best return on your investment, you won’t be able to easily access your funds, and it’s much better for our economy if your money is invested in productive assets.”

Martin Hawes:

  • Uses a personal experience to explain why “Buy and Hold” is still the best investment strategy. (It relates to a property investment he made in the 1970s. I think there’s some hindsight bias going on.)
  • Discusses the importance of having contracting out agreements (pre-nups) when entering into a relationship. He makes the point that de facto relationships “can sneak up on people”. If a couple has been together for three years, their assets (and liabilities) can become relationship property and divided if they split up. The question in many cases is when that three years began. He concludes: “Hard though it may be, a contracting out agreement takes “uncertainty out of the relationship. Relationship property cases are poisonous, life-wrecking misery – to be avoided at all cost.” I couldn’t agree more. 
  • Talks about “Loving your future self“. He points out that “Most of us know what we have to do [in all sorts of domains of life] – it’s just we cannot or will not do it.” He says that “An interesting way to think about this is to imagine your future self and think what this older person would want us to do now”. 
  • Related to Hawes’ article about contracting out agreements, Auckland-based family lawyer Jeremy Sutton points out something that is often overlooked when it comes to relationship property matters: it’s not just relationship assets that are divided, but debts too. He discusses the difference between relationship debt and non-relationship debt.
  • There was a small article by Hamish Rutherford, in the October 28 edition of The Press, which I can’t find online, which points out a fact that is often overlooked: inflation doesn’t impact everyone evenly. Statistics New Zealand’s recent figures showed that while inflation in the year to 30 September 2017 was 1.9% across all households, for households in the bottom quintile it was 2.6%, and for households in the top quintile it was 1.5%. 

Sonnie Bailey

Sonnie is an Authorised Financial Adviser (AFA) and former lawyer with experience in the financial services and trustee industries. Sonnie operates Fairhaven Wealth (www.fairhavenwealth.co.nz).