Speaker 1: Cyta. I'm Susie Nordquitzt and for Chelsea Daniels. And this
Speaker 1: is the Front Page, a daily podcast presented by Benny
Speaker 1: Zealand Herald. The pressure of the cost of living crunch
Speaker 1: has been felt by most of us for a few
Speaker 1: years now. Many of us hope that the more we earn,
Speaker 1: the less we have to worry about bills, unexpected costs
Speaker 1: and living week to week. This week, though, Wellington Mayor
Speaker 1: Tory Farno revealed she's had to sell her car in
Speaker 1: order to help pay her bills. So if Amia on
Speaker 1: a salary of just under one hundred and ninety thousand
Speaker 1: dollars a year is finding it tough, can you really
Speaker 1: earn enough to avoid financial pressure? Today on the Front Page,
Speaker 1: we're joined by Katie Wesney, head strategic coach. It enable
Speaker 1: me to discuss how to tackle the cost of living Katie.
Speaker 1: When did a six figure income suddenly become not enough?
Speaker 2: There is so much pressure at the moment economically for people.
Speaker 2: Interest rates are higher than they have been for a
Speaker 2: very long time, inflation, we have an incredible amount of
Speaker 2: pressure from a cash flow perspective. If I'm really honest
Speaker 2: with you, though, This is not a new problem and
Speaker 2: I think that often in New Zealand, the thing we
Speaker 2: think that will fix our personal financial situation is that
Speaker 2: we need to earn more money. And in all reality,
Speaker 2: the more that we earn, the more that we spend,
Speaker 2: and the more we disconnect from our finances. And I
Speaker 2: think the average household income of I think it's about
Speaker 2: one hundred and thirty thousand in New Zealand at the moment,
Speaker 2: means that some households will really struggle in terms of
Speaker 2: level of debt they have their lifestyle, and others will
Speaker 2: be very comfortable being able to invest, et cetera. So
Speaker 2: it's horses for courses in terms of personal situation.
Speaker 1: Speaking to the lifestyle creep, is there an element of
Speaker 1: people falling into a trap of feeling like they have
Speaker 1: to keep up with the jones is? And if so,
Speaker 1: what would you say to them?
Speaker 2: To be honest, that's the basis of capitalism. Again, the
Speaker 2: more that you earn, the more that you spend. And
Speaker 2: it is not what you earn get through your head,
Speaker 2: it's what's left over. And there is a balance to
Speaker 2: be had of living a great life, but you have
Speaker 2: to balance that with making progress otherwise, often you feel
Speaker 2: like you are just maintaining a system, and that is exhausting.
Speaker 2: And I see lots of examples every day in terms
Speaker 2: of the clients that I see who are very clever,
Speaker 2: They are earning much more than average, but that is
Speaker 2: not translating to the financial press that they know that
Speaker 2: they deserve, and there's often a sense of almost shame
Speaker 2: around that. And I actually think it's really brave to
Speaker 2: acknowledge that you have an issue, and it's about calling
Speaker 2: out what do I do about said issue?
Speaker 1: Could you single out a particular worst case kind of
Speaker 1: scenario that you're seeing at the moment.
Speaker 2: There's lots of studies and it all gives you the
Speaker 2: same kind of metrics and information. I was reading the
Speaker 2: other day that fifty six percent of kiwis worry about
Speaker 2: money daily or weekly. So I think my key messages
Speaker 2: if you are worried, you are certainly not alone. But
Speaker 2: worrying doesn't solve anything. It's well, what are the actions
Speaker 2: or strategies that can put in place to be better
Speaker 2: and do better. I think that stats from the Financial
Speaker 2: Services Council financial Resilience indexed in April, and fascinatingly, I
Speaker 2: think This is shocking. Forty two percent of US have
Speaker 2: credit card did and thirty one percent of us have
Speaker 2: buy now Pay later did it?
Speaker 3: So seventy percent of New Zealanders are worrying about money daily, weekly,
Speaker 3: or monthly. That's pretty alarming. You know how many people
Speaker 3: are going to bed at night going can I pay
Speaker 3: my credit card bill? Can I make my mortgage repayment?
Speaker 3: Do I need to make trade offs? Are there any
Speaker 3: things that I need to do? What are people most
Speaker 3: concerned about? Inflation is nuts? Eighty nine percent are really
Speaker 3: concerned about inflation in twenty twenty four, interest rates not
Speaker 3: far behind about seventy five percent, and house prices. You
Speaker 3: can start to see that cooling.
Speaker 2: I can give you a client example. Lovely clients that
Speaker 2: I saw this week. They have a household income double
Speaker 2: that or more than double that average household income. So
Speaker 2: their income household was three hundred and fifty k, so
Speaker 2: working incredibly long hours, very clever people. But in the
Speaker 2: same breath, they have one home with a one point
Speaker 2: one million mortgage and at seven percent interest, that means
Speaker 2: eighty eight thousand is just gone per year on one
Speaker 2: line item. In terms of that accommodation piece, and when
Speaker 2: they came to see me, we really feel like we
Speaker 2: shouldn't be in the situation that we are, Katie. We
Speaker 2: are honestly living paycheck to paycheck. We just don't know
Speaker 2: where we're going wrong, and really hard to say that,
Speaker 2: really brave to come along. They have to have a plan,
Speaker 2: and they have to have a better structure and a
Speaker 2: system in place from a cash flow perspective that sets
Speaker 2: them up for success in the future, so they're not
Speaker 2: reliant on the uncontrollable often of having to earn more
Speaker 2: or pedal faster, because often you feel like you're just
Speaker 2: a hamster in a well. You know you're peddling really fast,
Speaker 2: but the system has got so big that you're just
Speaker 2: not getting ahead.
Speaker 1: Is that what a lot of people are feeling like
Speaker 1: at the moment, that they are hamsters on a wheel?
Speaker 2: Unequivocally but really interesting because I get I think you
Speaker 2: get to a spot that there's always been enough money
Speaker 2: coming in that you haven't really had to think terribly
Speaker 2: hard around what you do, and with all due respect,
Speaker 2: most people get comfortably inefficient in that they aren't doing
Speaker 2: what needs to be done. Things are a little bit loose,
Speaker 2: so they end up paying more interest back to the bank,
Speaker 2: and we have really profitable banks in New Zealand in
Speaker 2: terms of interest rates and fees. And you get what
Speaker 2: you focus on. And if you are focused on doing better,
Speaker 2: there are rules around all of this. You understand them,
Speaker 2: you execute on them, and then you do better.
Speaker 1: Okay, where were those high income earners you spoke about
Speaker 1: going wrong with their finances?
Speaker 2: They're just spending everything they earn. It's that lifestyle creep
Speaker 2: that they've bought a house that felt doable from a
Speaker 2: mortgage perspective when rates were two three percent less so
Speaker 2: at seven so they've over extended themselves. They are buying
Speaker 2: more expensive cars than they should, and I think there
Speaker 2: is grace in reading that some people are getting to
Speaker 2: the point where they're like, Oh, do I really need
Speaker 2: that car? Can I sell that car and alleviate a
Speaker 2: bit of pressure build in a little bit of a
Speaker 2: buffer in my situation, because that is absolutely critical, getting
Speaker 2: that really strong foundation in terms of being able to
Speaker 2: call upon reserves if something goes wrong, because things will
Speaker 2: always go wrong, and I think we're naive to think
Speaker 2: that it wouldn't. There's a really interesting stat that I read,
Speaker 2: what is it over two million New Zealanders and not
Speaker 2: prepared for loss of income of the main income earner,
Speaker 2: which actually scares me, that stat And that's the first
Speaker 2: piece we put in place for our clients is to
Speaker 2: make sure they have that really strong foundation in terms
Speaker 2: of resilience. So they have a buffet that they can
Speaker 2: draw upon. Do you know what that might not even
Speaker 2: necessarily be savings. If they have a mortgage, that might
Speaker 2: be a line of credit available to them, so if
Speaker 2: anything goes wrong, they can hold their line and their
Speaker 2: hand is never forced. And I think that's really important
Speaker 2: in terms of that foundation piece of that strong plan
Speaker 2: into the future.
Speaker 1: You spoke before about people having flashy cars than they need.
Speaker 1: I'm not saying too had to flash a car then
Speaker 1: she needed. But are you surprised to hear that she
Speaker 1: had to sell her car despite her high salary and
Speaker 1: having one lotto two decades ago.
Speaker 2: No, I'm not surprised at all, to be honest, And
Speaker 2: I say, good honor for acknowledging that, you know, if
Speaker 2: you find yourself maybe in a little hole, and obviously
Speaker 2: we don't know the backstory, well good on her for
Speaker 2: looking at her position and saying, well, how do I
Speaker 2: free up cash flow, How can I be more purposeful?
Speaker 2: In my mind, cars a depreciable asset. They get you
Speaker 2: from A to B. But for some people they're important.
Speaker 2: But you live below your means and that's a non negotiable,
Speaker 2: and sometimes you can get a little carried away. Things
Speaker 2: can change and you focus on the controllables. And if
Speaker 2: you are looking at getting a little bit leaner, well
Speaker 2: good on them for looking at that and doing that.
Speaker 1: What are people increasingly going without? That might surprise some.
Speaker 2: It worries me often that the first thing people sometimes
Speaker 2: go and cut is that insurance protection, which does worry
Speaker 2: me because again futures promised to no one and it
Speaker 2: can just leave you really exposed. In my experience, from
Speaker 2: an inefficiency perspective, often you can find money elsewhere, more accessible,
Speaker 2: with less risk to cut back on, to make a
Speaker 2: real difference. Again, coming back to what we know to
Speaker 2: be true in New Zealand, we frit are about fifteen
Speaker 2: percent of our net income, a little bit of overspending,
Speaker 2: a lot of pain, too much interest to the bank.
Speaker 2: So that fretter piece or inefficiency is where I look
Speaker 2: at first for my clients versus exposing them to more risk.
Speaker 2: Than they really need to if they lost their job,
Speaker 2: for example, if something happened in terms of natural weather events.
Speaker 2: I mean it's a very rocky road in New Zealand
Speaker 2: just in terms of risk. So again I would be
Speaker 2: looking and suggesting that people look first at that almost
Speaker 2: lazy money that can so easily slip through the cracks,
Speaker 2: spending too much on food, often a little bit of
Speaker 2: entertainment piece looking at subscriptions, etc. Ay of itself seems minuscule,
Speaker 2: but it all adds up and you think fifty you
Speaker 2: do the math. Fifteen percent of your net income generally
Speaker 2: is not used to give any more benefit in terms
Speaker 2: of enjoying life. If you find that and put that
Speaker 2: to better use, your whole financial trajectory shifts in effect.
Speaker 2: And I think often the focus has been on that
Speaker 2: income side, but actually living a purposeful life certainly not
Speaker 2: living a miserable life. There's always a balance to be had,
Speaker 2: but again finding those in efficiencies around mortgage, around cost
Speaker 2: load that can make a huge difference in terms of
Speaker 2: financial momentum and where you land longer term from a
Speaker 2: wealth creation perspective.
Speaker 4: That there have been periods when I considered dropping health
Speaker 4: insurance because I seem to be living a pretty healthy
Speaker 4: life and not really needing to make any claim. But
Speaker 4: this is the interesting thing. As my health insurance got
Speaker 4: more expensive as I got older, the value of great
Speaker 4: health outcomes from the treatments that I or my partner
Speaker 4: had outweighed the additional cost. It's a funny ottle game
Speaker 4: health insurance. But I'm so glad that we kept at it.
Speaker 1: Do you think budgeting being taught in schools could help
Speaker 1: address some of these issues that you're seeing?
Speaker 2: Unequivocally, unequivocally, it's a really good start. I think though
Speaker 2: we have a response ability. I have three children as
Speaker 2: parents to role model that behavioral element ourselves. It's a
Speaker 2: really important pillar for all of my clients who have children,
Speaker 2: that we are creating financially independent children and how you
Speaker 2: do that while you sort yourself out and they do
Speaker 2: what you do in effect from a behavioral perspective, and
Speaker 2: that budgeting piece, I call it a spending plan, but
Speaker 2: that cash flow and getting that right that is the
Speaker 2: engine room of what comes next. And that budgeting piece.
Speaker 2: It's a really good first step. But you've got to
Speaker 2: also layer that with a strategy. Knowing that people can't
Speaker 2: save themselves to wealth. It's what they do with what's
Speaker 2: left over. But you've got to have something left over
Speaker 2: to start with.
Speaker 1: Certainly, is it a case of if your parents were
Speaker 1: bad with money, you were likely to be bad at
Speaker 1: handling money yourself.
Speaker 2: It's definitely aallenge because generally speaking, we start learning about
Speaker 2: money from the age of three and you replicate the
Speaker 2: behaviors that you see. But all is not lost though,
Speaker 2: and what I know to be true from all of
Speaker 2: my clients who I see again, what they've done in
Speaker 2: the past is no indication of what they can do
Speaker 2: in the future. But again it's making sure that they
Speaker 2: have a better structure and that really strong foundation. I
Speaker 2: don't use credit cards. Make sure they have a really
Speaker 2: good goal, make sure they're being efficient, so they have
Speaker 2: a really good bank account structure, and they've got goals
Speaker 2: to clear a mortgage, to look at where they need
Speaker 2: to be in retirement, and that we're tracking to be
Speaker 2: where we need to. That really makes a difference. And again,
Speaker 2: if our children are watching us on that journey, they're
Speaker 2: going to be better off. And I know for my
Speaker 2: kiddies again twelve fourteen and sixt it's going to be
Speaker 2: harder for them. They have to hit the ground running,
Speaker 2: and we have a duty of care to make sure
Speaker 2: that they know what needs to be done and if
Speaker 2: they're doing that by watching us as well. But yeah, great,
Speaker 2: great start in schools, certainly.
Speaker 1: And just finally you spoke to the amount of credit
Speaker 1: card debt that we have. Should we be cutting our
Speaker 1: credit cards up and throwing them away?
Speaker 2: Yes? Please, yes, please? And I can get then arguments
Speaker 2: around this point. But we know from a behavioral economics perspective,
Speaker 2: people spend about fifteen percent more than they would otherwise
Speaker 2: by using credit cards, just because it's a less transparent
Speaker 2: form of payment. You know, you can have I paid
Speaker 2: who knows who cares? You never quite know where you're at.
Speaker 2: You always do better when you work in the constraints
Speaker 2: of what you have.
Speaker 1: Certainly, that's a really interesting stat Is there anything else
Speaker 1: you'd like to add before we wrap up?
Speaker 2: I would really encourage people if they are struggling, and
Speaker 2: it's just not an adding up. You know, you feel
Speaker 2: like you know you're a good salary. You are certainly
Speaker 2: not alone, but understand where you're at, even if it's
Speaker 2: going through your bank statements for the last you know,
Speaker 2: a few months, cash in, cash out, what's left over.
Speaker 2: If you're going backwards or holding your ground, I think
Speaker 2: that's unacceptable. You need to be looking at leavers to
Speaker 2: do better. And if it's all too hard, please reach
Speaker 2: out for support, speak to a qualified financial advisor. They're
Speaker 2: there to help. And it's a crying shame. I personally
Speaker 2: think that only twenty percent of New Zealanders take professional
Speaker 2: financial advice because when they do, that is stronger and again,
Speaker 2: they understand the rules and they make sure how hard
Speaker 2: they work, they make the financial progress they deserve. And
Speaker 2: that's what we lean into going forward.
Speaker 1: Thanks for joining us, Katie. That's it for this episode
Speaker 1: of the Front Page. You can read more about today's
Speaker 1: stories and extensive news coverage at zherld dot co dot enzet.
Speaker 1: The Front Page is produced by Ethan Sills. Patty Fox
Speaker 1: is a sound engineer. I'm Susie Nordquist. Subscribe to the
Speaker 1: Front Page on iHeartRadio or wherever you get your podcasts,
Speaker 1: and tune in on Monday for another look behind the headlines.