Weekend reading (3 & 4 June 2017)

3 June 2017

From the Saturday 3 June 2017 edition of The Press:

  • Foundations of resilience an issue of national importance” by Liz Koh. I found this article refreshing, in that it recognises that financial well-being is part of a much broader picture, both at the personal level and the national level. Koh explains that “There are many aspects to resilience – physical, emotional, psychological and financial.”

Springboarding off a recent Deloitte report (State of the State of New Zealand 2017), she refers to New Zealand’s “low savings rate and high levels of external debt [which] make us vulnerable to… events [such as “global economic downturns, increased barriers to trade, technological change, and demographic change”]”. But Koh’s more important message is at the individual level:

we cannot rely on government support to get us through bad times. We need to take responsible for our own resilience using the resources available to us. 

That means keeping ourselves up-to-date with technological change, maintaining our health, increasing our savings to create a financial buffer, insuring our major assets against loss through theft, accidental damage or natural disaster and protecting the financial futures of ourselves and our dependents by insuring our lives and our incomes. 

It is also important to maintan good support networks with family,  friends and neighbours who can provide help when adversity strikes.

Amen to taking a broader view of resiliency! I might even go further. We live in a time of great uncertainty, and not only is it wise to develop resiliency, but it is smart (if not prudent) to develop what Nassim Taleb refers to as “antifragility”. How can we structure our lives so that when uncertain events happen, they are not so much setbacks as opportunities

  • Banks disagree on how much you can borrow” by Susan Edmunds. The article’s title is a little attention-baity, because of course banks have different lending criteria. They have some common constraints (capital adequacy requirements, reserve bank lending criteria) but ultimately they are free to differ in terms of how they operate their business operations, including the lending criteria they use. The article expands on this. Edmunds quotes Claire Matthews from Massey University: “different banks will assess a borrower in different ways. / Each bank is willing to accept more or less risk. In addition, they will have different expectations about the surplus income required by the borrower to meet general expenses.” To be honest, I’d find it more unusual if banks all had the same lending criteria. 

From Sunday 4 June 2017’s edition of The Sunday Star Times:

  • Save hard, but risk a little cash for learning” by Martin Hawes. Hawes admits to an exception to his general rule of contributing to Kiwisaver to get the maximum amount of subsidies, then using “every spare dollar to pay down debt and to leave off investing for when all debt is gone”. 

Hawes concedes that “maybe I have been wrong that Kiwisaver is the only exception” – “That exception involves the value of investment education: using a little of that spare cash will give you investment learnings”. Hawes explains that by people often learn by doing, and investment is no exception. The earlier you learn about investing, when the stakes are lower, the better. 

In short, he explains that “you are better to concentrate everything to debt repayment, but to take a small amount of money and invest it will give learnings that will stand you in good stead later”.


    antifragility, banks, borrowing, media, resilience, risk, risk management

    About the author 

    Sonnie Bailey

    In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (www.fairhavenwealth.co.nz), he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

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