Let's take a moment to look back at the year that’s been and review a handful of the global headlining moments that have defined 2019.
As expected, Brexit dominated many new articles and talking points throughout 2019. The United Kingdom’s withdrawal from the European Union was due to conclude in March of this year, following a two-year-long process. However, as 2019 draws to a close the renewal date of January the 31st 2020 has now been established. The new year will no doubt again be dominated with much talk of this deal, with the United Kingdom and European parliament’s hopefully forming an agreeance.
In March 2019, the heart-breaking Christchurch mosque massacre sent New Zealand into a state of shock and disbelief at such an extreme act of violence. The terrorism threat level was raised to high for the first time in New Zealand history. On April 1st the Arms Amendment Act 2019 was introduced in the house of representatives and passed its first reading the following day. The final reading was passed on April 10th and it became law by the end of that week, less than one month following the attack.
The phenomenon that is Greta Thunberg took the world by storm, as she demanded individuals and nation leaders to enforce climate action. Many of the younger generation took to the streets around the world supporting Greta’s protests, using their voices to fight for global warming acknowledgment and climate change action.
In September of 2019, an impeachment inquiry against Donald Trump was initiated after allegations that Trump had abused the power of the presidency. This was based on the notion Trump had withheld information, as a means of pressuring Ukraine's newly elected president to announce investigations that would be publicly damaging to Trumps 2020 election political rival. On the 18th of December, President Donald Trump was impeached by the House of Representatives, making him the 3rd president in history to be so. This decision has created the need for a trial in which the senate will have the final vote on whether Trump will remain in office. We can expect the impeachment inquiry will carry on through to the New year with much discussion surrounding its outcome with the upcoming 2020 Election.
In terms of reviewing the New Zealand financial markets for 2019, we also saw several notable changes.
The Official Cash Rate began the year unchanged at 1.75. In May 2019 a point change of -0.25 basis points was announced, the first reduction in nearly two and a half years. This brought the Official Cash Rate to a record low of 1.5% due to longstanding price stability. This change had an immediate effect on the mortgage rates on offer by New Zealand Banks. In August of this year, another change was announced reducing the OCR by a further 0.50 basis points, bringing the OCR to yet another record low of 1.00%. The final announcement released in November established there would be no further change, and the first announcement for 2020 will take place on February 12th.
With the changes in the OCR, we also experienced interest rates continuing to decrease as the year progressed. Consumer price inflation remained below the 2% mid-point target. It was noted that interest rates would need to remain at low levels for prolonged periods in order to ensure inflation will reach the mid-point of the Monetary Policy Committee’s 1% to 3% target range.
This year KiwiSaver experienced a new law change with the addition of two new contribution rate options, 6% and 10%, as from April 1st. With this change the ‘contributions holiday’ was also renamed ‘savings suspension’ and the 5-year suspension was reduced to a yearly renewable opportunity, based on a reassessment of position. Later, from July 1st, those over the age of 65 who missed out on the opportunity to invest in KiwiSaver or had previously closed their accounts, were offered the opportunity to reinvest into the scheme.
The global economy has many people curious as to whether it is finally moving forward from its rocky period. The United States and New Zealand share markets both show signs of reaching record years. The New Zealand stock market is positioned to reach one of its strongest runs in 20 years with the S&P/NZX50 up 28.3 percent in the year to date while overseas markets such as the Dow Jones Index have also managed to hit new highs in the past few weeks. The return the New Zealand stock market has experienced throughout 2019 leaves investors hoping the good run will continue well into the new year and beyond.
New Zealand’s new dwelling consents also reached all-time highs, with the number of new dwelling consents issued rising by 7.2 per cent in September 2019 alone, following a 0.9 percent rise in August. In January 2019, a total of 2,496 new dwellings consents were issued, while September had over 3,347. As more consents are issued and more houses are built, the New Zealand Housing market is bound to face repercussions. The residential property market experienced a decline in new listings progressively throughout 2019, meaning a lower level of total stock on the market and less choice for buyers, ultimately assisting in maintaining higher asking prices. Due to the fluctuations in the market, it is hard to predict whether this trend will continue into the New Year or not.
2019 has been an incredibly challenging yet engaging year across many channels. As we approach the beginning of the new decade, we can expect to continue seeing trends such as climate action and political unrest develop in many ways. We will no doubt see the concluding answers to many current events that have been dominating our recent news articles. It is important to remain aware and up to date on such events, and we look forward to keeping you updated when we resume in the new year.
Today the Monetary Policy Committee met for its final interest rate call of 2019. There were many predictions that the Reserve Bank would choose to cut the Official Cash Rate below one percent following the surprising 50-point interest rate cut in August.
However just after 2pm on Wednesday 13th November, the official media release from the Reserve Bank of New Zealand announced the committee had decided to keep the OCR at its current rate of 1.0 percent. The committee explained "Economic developments since the August statement was released do not warrant a change to the already stimulatory monetary setting at this time".
Members of the committee noted that employment currently remains close to its maximum sustainable level, while consumer price inflation remains below the 2 percent target mid-point but within the 1 to 3 percent target range.
It was decided that interest rates will need to remain at low levels for prolonged periods in order to ensure inflation will reach the mid-point of the Monetary Policy Committee’s target range.
The first Monetary Policy Statement and Official Cash Rate announcement for 2020 will be release on Wednesday 12th of February.
A full summary of the items discussed during today’s November meeting can be accessed here.
Financial planning has become an important factor in today’s consumer savvy market. However, people are quick to forget about the importance of future proof asset protection, also known as estate planning.
Estate planning is all about making financial arrangements for the longevity of assets beyond one’s own life, and the control of one’s wealth while alive, which is just as essential as your day to day financial management.
An estate refers to both literal and personal property owned by a person under their name, such as finances, homes, apartments, motor vehicles or contents. Estate planning allows individuals to arrange the transfer or distribution of their ‘estate’ after the instance of their death. The idea of estate planning allows the individual to decide exactly who will benefit from all assets owned at the time of their death and to what extent.
In most instances, estate planning includes discretionary and/or testamentary trusts. Also included in this process is the creation of a will. These trusts and wills are established by an individual whilst alive in an effort to appropriately distribute their property and finances. While wills are not a legal requirement, it is preferable to establish a breakdown of where they want their assets to go in the event of their passing. Those who do not create a will or trust with identified beneficiaries, risk having no say in what happens in terms of their final affairs after their death.
If minor children (aged under 18) are involved, planning your estate is important to establish your final wishes for the children, such as who will be their caregiver and what areas of your estate will go to them when they reach the appropriate age. Minor children are unable to make any decisions regarding your estate so appointing a power of attorney to make these decisions on your behalf or until the children are old enough is encouraged.
The process of estate planning can include many different groups, from family members to professionals such as lawyers, financial advisers, accountants and representatives for insurance. While you are able to create a will and plan arrangements for your estate on your own, gaining professional advice can ensure that all of your assets are covered, and the necessary people are taken care of after your passing.
At Financial Architects, we can use our knowledge to assist you in ensuring your assets and investments are protected while you are alive, and that a transfer of your estate will flow seamlessly for the beneficiaries upon your passing. To reassess the protection of your current assets and for help obtaining future assets, book an appointment with one of our advisers today and start your journey to achieving happiness in wealth.
In New Zealand, the threat of climate change and the impact this will have on our small country is imminent. In a recent report completed by the Ministry for the Environment, changes such as temperature and rainfall are already creating problems with the more frequent occurrence of extreme weather events.
During summer, the higher temperature rises mean the regular occurrence of droughts and with more intense rainfalls during the winter months, flash flooding also becomes a great concern. Also, with the change of climate comes the risk of rising sea levels, which creates erosion, coastal flooding and saltwater intrusion especially on coastal inhabited areas. What many New Zealand residents do not realise, is that with these climate change events comes many risks involving the insurability of houses and properties and the increasing rise of premiums by domestic insurance providers.
In the instance of properties located on coastal areas, as sea levels continue to rise the risk of claims made to domestic insurance providers also heightens. As insurance patterns begin to make an appearance in these areas, excessive premium increases will begin to be enforced and some insurance providers may decline the insurance completely.
Increases in premiums will not just affect residential coastal areas, but also inland areas susceptible to flooding or landslides. As the events of climate change are no longer just patterned events but occurring rapidly, insurers will inevitably reassess their insurance guidelines. This will be impacted by either increasing costs, altering the terms or refusing to renew policies. Therefore, leaving many homeowners vulnerable with their homes deemed uninsurable.
Ministry for the Environment’s climate change impact estimates show that over $19 billion of New Zealand properties are currently under threat due to the impending risks of coastal eroding and increased flooding. Over 9,000 homes and 4,000 commercial buildings are at serious risk should a sea level rise of 50cm occur. According to Jan Wright, ex-environment commissioner, this 50cm could equate to $3 billion in replacement costs for insurance companies.
As New Zealand has become the 2nd most nation at risk for national disasters, insurance companies may also decide to cancel the inclusion of Natural Disaster Cover within the policy wordings. With this we may see insurance providers treat this cover much like California’s current Earthquake cover, where it can only be obtained for an excessive premium amount per year.
If a home is deemed uninsurable due to factors relating to climate change or natural disasters, banks may begin pulling or refusing loans, leaving homeowners left with a terrifying reality.
On a more positive note, there are ways to ensure these events do not affect your home loan, equity or insurability. If you are interested in learning how, book a complimentary introductory appointment with one of our Advisers today to ensure you remain covered by your domestic risks’ insurance should you ever need to claim.
On the 8th of May 2019, the Reserve Bank of New Zealand announced the Official Cash Rate (OCR) had been reduced to 1.5%, a 25-basis point cut, due to longstanding price stability.
This announcement brings with it the first change in the OCR since it was reduced from 2.00% to 1.75% in November 2016. The new rate is a record low for New Zealand and has had an immediate effect on mortgage rates offered by New Zealand Banks.
Following the Reserve Bank’s decision, ANZ, Westpac and Kiwibank were quick to announce cuts to their own mortgage rates.
With the OCR being so low, it is making it easier for first homeowners to borrow money from the bank and for existing homeowners, it presents an opportunity to increase their payments and pay off their home loans faster by having more of their repayments going towards the principle and not on interest.
However, with such opportunity also comes an adjustment in lending criteria, as banks tighten up the requirements and allowances given to home loan borrowers. Mortgage rate wars are already so strong between banks and this decrease in the OCR will continue to see competition.
The current borrowing environment sits steady with borrowers having more favourable outcomes, especially over the next 1-2 years.
Many economists predict that there is still a 50% chance the OCR rate will be cut again by the end of 2019 due to the current position of the global markets. If this even more record-breaking cut does occur, we will no doubt see more significant changes from banks and an impact will further influence property prices.
If you are interested in finding out more about the OCR changes, or how they affect you, your current home loan or you are looking at buying your first home, book an introductory appointment with our in-house mortgage broker and Authorised Financial Adviser, Brayden Judd.
The importance of financial savings is always a well-covered topic, especially the reiteration of setting up savings accounts and creating spending plans to stay on top of your finances. However, there are many life factors that can also affect our financial decisions and in turn affect our savings techniques.
Many individuals live very overfull lives, without realising the significant and often overwhelming effects this can have long term. Overfull lives can come in many forms, whether that be by spending too much money and obtaining too much unproductive debt, obtaining too many possessions which leads to too much clutter, or taking on too many commitments and being left feeling busy and behind on everything. This in turn will enforce those long-term effects by requiring you to have a longer career than necessary.
Living a simplistic lifestyle can have many benefits both mentally and financially for you. Buddhist meditation master Chogyam Trungpa once said “You can’t act on your desires alone. You have to contemplate the details of what needs to be removed and what needs to be cultivated”.
By cutting down on the unnecessary elements of life, this leaves us with a clearer mind and more time to figure out what we really want and what is just unnecessary noise distracting us from the finer details of life. Cutting down on possessions or unnecessary purchases not only eliminates overcrowding or clutter from our lives but it also helps aid us in reaching important financial goals for ourselves. Putting money into a savings account can in turn lead you to more opportunities than buying a new piece of furniture just because you want it, or it is on sale.
Making small alterations to living a simpler life now can help you to live a more fulfilling life in the future. When your basic needs have been taken care of and you are more level headed you can then find yourself in the position to indulge in smart spending decisions and your simplistic approach to saving can alter the value of this indulgence.
Taking the time out of your busy schedule to acknowledge the areas where your life is feeling overfull and how you may be able to remove the congestion from your lifestyle, can help you to make calmer and clearer decisions in the long run. It is not about eliminating certain activities that you enjoy, it is about prioritising the parts of your life that are more beneficial than others.
Finding joy in owning or participating in as little as possible helps you to acknowledge what the essentials are for your life and provides you with a clear canvas to rearrange and action the necessary changes for both your life and your financial needs. Holding on to unnecessary attachments may be causing us more damage than we are fully internalising.
If you are feeling as though your life has become overfilled and you can feel the affect it has on your financial situation, contact the team at Financial Architects for help.
Making an Introductory meeting with one of our Financial Architects Advisers to undergo a Comprehensive Financial Plan, will certainly assist you to declutter your financial world and therefore give you true perspective on the future; what we call “Happiness in Wealth”.
The New Zealand KiwiSaver scheme is a Government funded initiative looking to help Kiwis maintain a steady savings routine. KiwiSaver focuses on setting individuals up for their retirement (the next phase in one’s life) by contributing money from their weekly earnings, receiving contributions from their employer and the government as well as earning through investment returns. Multiple providers offer to manage New Zealanders KiwiSaver investments, each providing different investment options depending on personal lifestyle needs and their investment time frame.
Currently, KiwiSaver offers personal contribution rates of 3%, 4% or 8% from pre-tax earnings. However, as from 1st April 2019, KiwiSaver has additional contribution rate options of 6% and 10% available for those invested in the scheme. The Acting Retirement Commissioner Peter Cordtz stated the reasoning for the change is that “many New Zealanders tell us the gap between 4% and 8% is too large for those able to contribute more, so they feel stuck on the lower rates”. Inland revenue figures show that 24% of members are contributing at the 4% rate, while only 9% of scheme members are contributing at 8%. The addition of the 6% contribution rates is the perfect middle ground for those stuck between the higher and lower rates, while the 10% rate offers a higher investment opportunity for those looking to maximise their savings as much as possible.
To change your contribution rate, simply ask your employer and they will be able to action the change on your behalf (complete the KS2 form available from the IRD).
If you are unsure whether you should make the change to a different contribution rate, then getting a second opinion from an adviser could be the right step in ensuring you are maintaining a steady contribution rate for both your future needs, as well as leaving enough for your current lifestyle needs.
In addition to the change of contribution rates, the current ‘Contribution holiday’ will be renamed ‘savings suspension’ and the maximum time allowed by KiwiSaver has been reduced from a 5-year suspension to a one-year renewable period. KiwiSaver found that halting contributions for a full five-year period was having a significant impact on members’ long-term savings results. The ‘savings suspension’ will still have the opportunity for a yearly renewal, however, this will now only be after a reassessment of position after the one-year time frame. Existing ‘Contribution holidays’ over the one-year time period will retain their original end date but the option will no longer be offered as from April 1st.
Later, from 1st July 2019, KiwiSaver will introduce another change allowing those over the age of 65, who have previously missed out on the option to opt into KiwiSaver, or who closed their accounts and wish to opt back in, the opportunity to reinvest.
This change also brings in the removal of the five-year lock-in period. This means that those who join KiwiSaver after the age of 60 who have not been a member for the full five years will still be eligible to access their funds once they qualify for the New Zealand Superannuation at 65. These changes come into effect following the decision that the current laws regarding members 60 years and over were “inappropriate” and “there is no apparent reason for those over 65 not to be able to join KiwiSaver”.
For more information on what these KiwiSaver changes may mean for you, or to discuss with an Adviser as to which contribution rate or scheme provider will be the best fitted for you, book an introductory appointment with one of the team at Financial Architects for a full KiwiSaver review.
American actor Will Rogers once said, “Too many people spend money they earned, to buy things they don't want, to impress people that they don't like”. Unsurprisingly, it is most often those with more financial wealth who create a larger expenditure and fall into the trap of making unobtainable spending decisions. Those with less wealth learn how to budget their money in smart ways as they have no other option but to live a financially sustainable lifestyle.
Savings does not always translate to putting a set amount of money aside per week for future uses, be that a home, retirement or other financial investments. Savings can also include the simple things such as reigning in utility bills, watching expenditure on groceries, clothes, eating out and other mindless transactions that are more of a want than a need.
Through our own review of people’s cash flow management, we have noticed majority of people’s expenditure habits comes down to two key areas; Groceries and eating out. Simple savings habits can be used to cut down on over expenditure, especially in these discretionary areas.
When it comes to saving on groceries, simple budgeting steps can include making a list of groceries you need and buying only what has been written down, planning weekly meals in advance, taking cash with you to put a limit on your spending and if you have children, asking someone to mind them so you can take your time and not succumb to pestering.
Eating out can be maintained by limiting the amount of times you go out to eat per week, replacing expensive drink options for water and avoiding the dessert menu and going elsewhere for a cheaper alternative.
Taking time out of your busy schedule to review your spending can help significantly with acknowledging your spending trends and making the appropriate decisions to cut back and save.
The power of setting up a spending plan is overlooked by many, as they receive a steady and substantial income which caters to their current wants and needs, but these spending habits do not factor in future inevitable circumstances (such as retirement) or a risk of unforeseen circumstances (such as an illness or accident). Creating a plan is the first step in the process to maintaining a steady cash flow management routine that will assist you in future circumstances or endeavors.
We recommend that all working individuals should be saving a minimum of 20% of their incomes, with 12-15% of this going towards a retirement savings and the other 5-8% going towards an emergency fund or other long-term savings. Every few months it can be smart to set a time to budget for all long and short-term goals (i.e. Retirement, holidays, a new car or a home etc.). Include in this how much you need to save and by when to figure out a rough idea of how much you need to be putting aside per week or month to achieve these goals in the time objective. If your income does not allow you to comfortably put this money aside into a savings, then it may be time to look deeper into your spending habits or make realistic adjustments to each goal.
Looking at different saving trends or styles- such as Barefoot Investor, can also offer a new insight into saving techniques or habits to get yourself on top of your cash flow management.
Financial Architects offers the opportunity for you to have a comprehensive well-designed cash flow plan to help you enhance your lifestyle options both now and in your future. Using a cloud-based software, we can help you map out your day to day spending and assess the areas where overspending is most frequent.
If a comprehensive cash flow management plan sounds suited for your current budgeting needs, book an introductory appointment with one of our Authorised financial advisers and begin your journey on a successful Financial Management path.
As New Zealand’s average rental prices continue to heighten to some of the most expensive seen, first home buyers looking to enter the market are faced with an important decision; Is it more beneficial to rent long term and face the high rental prices whilst saving? Or is it more advantageous to take on a home loan and pay it off while interest rates are low?
At present, people can secure a fixed five-year interest rate under 5% per annum and at present the Reserve Bank has the official cash rate (OCR) on hold at 1.75% until late 2020.
According to the January 2019 rental price index report, rental costs nationwide have continued to increase over each of the given time periods:
In the last quarter of 2018, the average weekly rent in New Zealand for a standard three-bedroom home was $421. This is a 5.1% rise since the same time last year ($401 weekly).
During 2018, Wellington rental prices have gone up 7.9%, Hamilton’s rose 6.2% and both Christchurch and Tauranga’s are now exceeding 4%.
Source: Core Logic NZ and MBIE.
Wellington’s central suburbs three-bedroom home average is currently situated at $640 per week and Auckland central averages $695 weekly rent.
In order to get out of the rental market and away from the increasing costs, people tend to rush into purchasing their first homes. First home buyers accounted for 31% of property buyers in Wellington during 2018
The decision to purchase a first home is not a task to be taken lightly or rushed into; the process takes a lot of time and planning in order to achieve an end goal. Purchasing your first home requires a solid amount of personal savings to be set aside in order to make the initial deposit and obtain lending from the bank. Saving schemes such as KiwiSaver and ‘gifts’ of money from family are able to be used for the 20% deposit. However, a steady personal savings is the most definite way to secure higher lending from the bank and show positive spending habits.
For example, a couple who is paying $500 per week in rent and putting $0 into a savings account would be seen as only being able to make the equivalent $500 weekly loan repayments resulting in a mortgage of only $350,000. However, if a couple is spending $500 on rent per week and putting a further $300 into a savings account the bank can see an ability to make repayments of $800 weekly. The later will, therefore, have a higher borrowing capacity of circa $500,000. If you are looking at making the step to purchase your first home, remember the more money that you can prove you can save each week, the more the bank may be willing to lend you.
In a report completed by interest.co.nz, they claimed that as of November 2018, the average weekly mortgage payment of a lower quartile house price was $353.28. This weekly average is based off a house price of $386,000 with a two-year fixed mortgage rate of 4.25%pa.
It is to be noted however that the average house price in Wellington in December 2018 was $688,074 and $1,048,145 for Auckland. Using the same above assumptions including a 20% deposit you would be looking at mortgage repayments of approximately $624.49 per week for Wellington and $951.28 per week for Auckland.
This means that in an ideal circumstance (excluding the benefits of capital gain in the property value), it could be more beneficial to own your residence with a home loan than choosing to rent long-term.
It is key to remember that the goals and preferences people want to happen may not align with what they have the financial liberty to achieve. It is important to remain flexible when it comes to options associated with large financial decisions such as purchasing property.
During this process, seeking advice from those with financial intelligence on the subject may help in deciding which route is best for your situation. Gaining professional advice that not only aligns with your goals but also takes into consideration every aspect of your current and future situations can emphasise the path which may be more beneficial for your financial success.
If you are looking to enter the housing market or obtain mortgage advice, get in touch with our team today by booking a complementary mortgage meeting with our in-house mortgage broker and Authorised Financial Adviser, Brayden Judd.
He will assess your current borrowing situation/potential and at the same time ensure you experience happiness in wealth.
He can also help you put together a plan to save for that first home deposit which is for many people the biggest hurdle of purchasing their first home. With house prices increasing so too has the deposit required.
As seen in every past New Year, we are exposed to new predictions for how well different investment markets will perform, and what new assets we should invest in.
With popular press towards many specified funds, assets and markets, an increased amount of noise is created and will continue to be prominent. This can often create more trouble than it is ultimately worth. Studies completed by Investment management company ‘Dimensional’ show that stocks are primarily based on chance. This means funds that have previously taken top rankings are not guaranteed to continue with this pattern.
For example, a study completed by Dimensional looked at the performance of the top 25% of funds from a three-year duration, over a 12-year period ending in 2014. On the completion of this study they discovered that only 26% of these funds from the top quartile of the world markets went on to repeat a high ranking during this period. Therefore, when choosing your future investment options do not to rely on previous performance results.
Dimensional Fund adviser’s executive chairman David Booth emphasises the importance of remembering the prediction of rise or falls in stocks is an almost impossible task. This raises the question; why get involved and place your current investments at risk?
Booth notes that there are never any guarantees when investing in different stocks or markets. Investors must feel like they are okay through both good and bad times in order to stay on track with their goals and remain successful.
Throughout 2019, it would be fair to assume that noise within the investment sector will continue to increase. It is critical during this time not to be distracted from your pre-planned long-term goals and objectives. While there is a lot of market volatility, there is plenty of opportunity, so it is critical you stick to the plan in action. If you do not have a financial plan now is a very good time to establish one.
Moving into the new year it can be an opportunity to set yourself sensible solutions to help you maintain a level head through tough times so you can benefit from the good times that may be ahead.
The Financial Architects Investment committee meet on a regular basis to ensure your portfolio and wealth management goals benefit from the market conditions in action.
During market volatility, it is important to take advantage of lower asset prices and we therefore inspire you to review the level of contribution made to your KiwiSaver investment portfolio. It may be appropriate to increase the amount you invest from 3% or 4% to 8% of income but only in consultation with your adviser.
In addition, if you have increased cash flow surpluses or additional lump sum funds for investment, you should speak with your adviser to gain guidance as to whether you invest further in this market environment.
The Holiday period is an exciting time for everybody, as families and friends are reunited through a time of love, cheer and gift giving. For many, the Christmas and New Year period is a time to switch their minds off and relax under the summers sun.
While the opportunity to spend time with your loved ones in a stress-free environment is encouraged, it is also important for people to keep an eye on their budgeting during the summer season. A study produced by Hospitality New Zealand shows that people are likely to spend more over the Christmas/New year period. The weather encourages more purchases of food and beverages, there are Christmas gifts that fill up space under the tree as well as the holiday's many kiwi families participate in over this period, whether it be domestically or internationally.
An article released by Statistics New Zealand recorded a rise in spending on accommodation, bars, cafes and restaurants by 1.2% in January 2018 compared to the other months of the previous year. In 2015 electronic card spending rose 0.4% in December followed by a greater increase to 0.6% in January 2016.
While it is easy to get caught up in the spirit of the holidays, keeping an eye on your expenditure during your time off can ultimately help you with the rollover into the New Year.
Many people choose to plan a larger budget during this summer season however, it is still important to make sure you do not get too caught up in the moment creating a tenuous financial situation that will need resolving after the holiday has passed and ordinary life resumes.
This summer before making any large financial decisions make sure to ask yourself;
1. Is this purchase a want or a need?
2. Is this worth putting myself through financial stress in the New Year?
3. Am I able to find a more cost-efficient way to go about this purchase?
In the long run, you will find yourself thankful that you applied the extra thought during this time to ensure you do not begin 2019 with a financial hangover.
When it comes to heightened emotions, we have all been involved in a situation where unforeseen circumstances take place. These times generally leave us in a position of anger and pondering where to channel this new wave of overwhelming emotions.
These emotions can be brought about by a rise or fall in the stock market pricing (as seen over the last three months and expected to continue in the short term), a set back with property construction or maintenance, an unexpected illness in the family or even a disagreement with an insurance provider.
Every now and again we are faced with the reality that it is not always smooth sailing in the case of products or services involving our financial involvement. In many cases, we often act during this time of heightened emotion, which then leaves us with regret once the moment of anger has passed.
For many people, the easiest ways to deal with heightened emotions is to either suppress the feelings or act upon them. Both options can leave us in a vulnerable position once the moment has passed and we have regained control of ourselves.
1. Stop once the emotions surface
2. Think clearly and logically about the next move
3. Envision how the next move will play out
4. Proceed to act upon the most strategic option for the intended situation
5. Obtain a third-party perspective
In some instances, during these volatile situations, the advice or assistance from a third party can be an extremely useful factor. A third party who specialises in the key intelligence of the original issue can assist you in making rational decisions during moments of heightened anger.
They are also able to provide rational and strategic advice on how to approach the situation moving forward. Engaging with these professionals before incidents take place also gives them the opportunity to assess the situation from a clear perspective of knowing the entire process up till that point.
At Financial Architects we offer financial planning advice that will assist you with decisions in both the minor and major matters you come across in life.
Contact one of the team today to book a complimentary ‘Introductory Appointment’ to make an investment in your financial future.
With the roll over of the new year, the Reserve Bank of New Zealand will impose a new change in the current LVR (loan to value ratio) restrictions placed upon banks and lenders. This ease on restrictions was disclosed in the Financial Stability Report released on the 28th November by our central bank.
The report revealed the banks will now be able to increase the total portion of their overall lending to owner-occupiers with a deposit of 20% or less, from 15% of their books to 20%. There is also change to the lending conditions for investors. Investors will now borrow for an investment property with a deposit of only 30%, which is a reduction from the previous 35% deposit requirement.
Reserve Bank Governor Adrian Orr states the reduction in high LVR lending significantly decreases the risks involved in New Zealand’s financial system. This is also the case with the slowing down in household lending and interest-only lending rates declining. He goes on to claim they will continue to loosen the LVR restrictions “so long as the risks continue to diminish”.
So, what does this mean for you?
The new requirements allow banks to loan to 20% of people wanting lower than normal deposit lending. When you make a deposit of less than 20% your LVR becomes higher, which may make you more susceptible to a financial shock than those with a lower LVR.
This new change in rules does not automatically mean you can borrow with a lower deposit or equity, it purely means that banks are now able to provide this higher LVR to a slightly greater percent of people wanting to acquire low deposit lending.
Therefore, this ease in the ‘loan to value’ restrictions will soon make it easier for more people to have the opportunity to obtain mortgage lending, especially in higher priced property markets such as Auckland and Wellington regions. However, the large mortgage debt will still leave individuals vulnerable to economic shocks and high LVR lending is not guaranteed.
If you have any further questions call our mortgage desk on 04 978 8120.
The idea of failure is one most people try and avoid to the best of their abilities throughout their lives. With every success story, the likelihood of encountering a failure at some point of the journey is inevitable. How the instance of these failures has been preemptively planned for, are the determining factors to how severe the effect of the impact is.
Steps you can undertake to ensure you have a strong risk management in place include;
• Diversification of your assets, investments and opportunities,
• A high savings rate to assist in the unlikely event of a financial loss,
• Having a financial backup in place to assist you in the event the risk does occur (ie. Insurance).
The team at Financial Architects work hard to be able to assist you in identifying your potential blind spots. We provide you with advice on how to address the risks of financial failures to minimise the impact on your personal wealth and investment journey. To find out more about how Financial Architects can help you, contact the team for information or book a complimentary introductory appointment to get on top of your risk management.
When it comes to managing your money and assets, making decisions can often be a confusing task. This becomes increasingly harder when you factor in marketers and salespeople continuously pushing the images of new cars, homes, insurance policies and other investments in our faces.
It is important to maintain a level head when deciding on key financial opportunities to invest your money into, this can be achieved by ensuring you are asking the right questions.
Before investing in key financial opportunities in the future, why not ask yourself, how do these questions apply to my life? How do they apply to the decisions I am currently making?
Here at Financial Architects, we pride ourselves on providing a service centered on the ideology of our clients finding ‘Happiness in Wealth’ (Goals based financial advice).
If you are interested in managing your money efficiently or need help in ensuring you are asking the right questions when it comes to decision making, contact our team today or alternatively, book an introductory appointment, so we can help you with smart financial management.
Author and Financial Adviser Liz Koh claims one of the biggest mistakes retirees can make is to underspend during their retirement.
Expenditure caution can lead to seriously under spending throughout the entirety of ones retirement due to fear of using too much too quickly and spending the remainder of their non-working years barely getting by with the funds that are left.
Establishing a thorough expenditure plan and enforcing it during your retirement can reduce the risk of uncertainties while still having the leniency to alter your plan as your circumstances change.
To begin planning for your retirement or to establish an expenditure plan get in touch with the Financial Architects team, or book an introductory appointment with us.
This journey can be the same when it comes to making your Financial decisions. In order to achieve your end goal, you must first be sure you know what your final destination needs to look like, have a plan of when you wish to get there and finally, engage with a guide that will direct you along the way.
In order to ensure you are receiving the best service, you need to also ensure your guide has experience in assisting others with their journeys, in order to provide you with the most effective course of action to reach your financial freedom.
We believe you need to be very mindful of every step you take on your pathway to financial success.
To begin your guided journey to Financial freedom, book an introductory appointment with one of the team today.
When choosing to explore new financial opportunities, often time's people are not fully aware of the amount of work it takes when it comes to planning, researching, and maintaining these investments and the future risks that may be associated. To make things easier for beginner investors, here are four key steps you need to consider before choosing to buy investment property.
The second step
Ensuring you receive the right advice and guidance.
Employing a third party to help you does not automatically mean your idea will not fail but, choosing professionals who have invested or are investing in their own property portfolio will provide a personal understanding of your needs and therefore provide you with relevant guidance. Knowing the market needs to be blended into this step to determine whether there is an upward opportunity for investment valuation.
The final step
Establishing your risk tolerance. Risk tolerance will be different for each investor and identifying what your risk tolerance may be is a personal choice. It is important for you to review your attitude to risk as this may need to alter depending on what a bank is willing to lend you and what loan conditions are imposed. Your risk tolerance level will also change as you age and when your family circumstances change, which includes reducing your hours of work.
Before committing to a direct property investment option ask yourself;
Are you prepared to spend your free time maintaining and planning your investments?
Do you have the right professional help to make key planning decisions?
Are you fully aware of the risks involved and what they mean for your wealth and lifestyle?
Here at Financial Architects, we offer services you will find useful in answering all your questions and when it comes to investing in your first or additional rental property opportunities, which can be found here.
To receive a complimentary meeting with the team to discuss your options contact us here or book an appointment.
Maintaining a level temperament is essential when it comes to making smart investment decisions.
Often markets go through volatile time periods, and it is during these times when an investor’s temperament is strongly tested. In terms of successful investing, having a strong control over an individual’s own temperament will usually top any intelligence they have acquired through the years of experience.
During an interview in June 1999 with Businessweek, American business magnate, investor, speaker and philanthropist Warren Buffett states “Success in investing doesn’t correlate with IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people in trouble investing.”
Since then many other successful investors have continued to back this statement.
When it comes to smart investing, Dimensional Global firms’ data shows that over a five and a half year period (January 2014 till June 2018) the ‘DFSVX’ (US small companies portfolio) only provided a 38% return compared to the S&P 500 Index’s (The largest 500 listed companies in the US) return of 61%. These are time periods which strongly test the temperament of investors.
It is the idea of long term investing benefits that need to be constantly thought of during these times, as even though the ‘DFSVX’ had periods of underperformance compared to the S&P index, their total return from establishment till June 2018 is 1,642% compared to S&P 500’s total return of only 893%. This is true testament that maintaining a level temperament through tough performance periods, can in the end still achieve better investment results.
Are your investment decisions based off rational thought or temperament?
Here at Financial Architects, we can help you ensure the investment decisions you make are made based on smart decisions with a strong discipline in staying focused on the end goal.
Click here to talk to one of the Team about disciplined Investment decisions or click here to book a complimentary appointment so Financial Architects can help you.
Many people will decide to retire at 65 while others will continue to keep active in the workforce through a desire to keep adding value to community and themselves.
How do you envision the transition at this phase of the lifecycle?
It is common for people to believe that they will need to keep working past 65 as while they own a debt-free family home they have done little else to prepare for retirement. If you desire to retain your current lifestyle it is very likely you will need more money than the government super payment.
See HERE for the current payments that people may qualify for.
If New Zealand Superannuation isn’t going to provide you with the income you wish, it is important for you to supplement this income with other income-producing assets.
If there is time to add further assets to ensure that you can be self-sufficient and not have to work past 65 it is important to determine what these assets may be and if they suit not only your retirement goals but also your appetite for risk.
There is a lot of evidence available that shows it is healthy to work longer than other generations did as it adds to our life balance and a calmer state of mind (when we are doing what we love to do).
Working helps us create and experience a purpose in life and as we always say here at Financial Architects;
“If you help enough people get what they want, you will always get what you want”
Take some time out of your busy life to reflect on what your future needs look like and begin mapping out a plan to help you get there.
If you wish to consider this subject further, complete the inquiry form by clicking here
and we will arrange your complimentary initial planning meeting for you.
Due to the recent concerns from the Ministry of Primary Industries regarding the exposure of Mycoplasma Bovis (M.Bovis) - a bacterium disease affecting cattle, a select number of New Zealand farms have been labelled as ‘Infected Properties’.
One personal risk insurer has just announced that they recognise that New Zealand farmers play a considerable role in the New Zealand economy through the local and export trade markets so in turn have decided to lend a hand in assisting those who have been impacted by the M.Bovis exposure.
Will your insurer provide a Premium Holiday if you are an affected farmer, in order to maintain certainty of your personal insurance cover?
The premium holiday offered in this case lasts 6 months, or until the ‘Infected property’ quarantine has ended. To be eligible to receive the Premium Holiday one must be a Farm owner, Share milker or a contract milker who have 25% or greater ownership of the cattle, and others only by individual consideration.
We suggest you ask your insurer if they will offer a premium holiday while the quarantine is in place on your farm unit.
The Official Cash Rate (OCR) is a set interest rate and represents the price of lending or borrowing money in New Zealand. 2018 has seen the OCR remain unchanged at 1.75%, with the Reserve Bank stating that it expects to keep the OCR at this level throughout 2019 and into 2020 – longer than predicted in its May statement. The Reserve Bank also states the direction of its next OCR is unpredictable and could go up or down.
Economic growth is expected to pick up throughout the rest of 2018 and be maintained over 2019, with strong global growth and a lower New Zealand dollar exchange rate supporting earnings. Reserve Bank governor Adrian Orr also expects New Zealand’s capacity and labour constraints to lead to more business investment, which will in turn be supported by low interest rates.
Mortgage interest rates are impacted by each bank and their business but over the last five years the rates set have been correlated to the OCR rate movement and we do not see this to change.
International money costs are another factor that can influence mortgage rates which we here at Financial Architects monitor to insure your debt portfolio is well positioned to meet your goals and to minimise your interest costs.
Is your KiwiSaver performing in a manner that will allow you to reach your financial goals?
KiwiSaver is an important investment that will not only assist you in purchasing your first home but will also provide noticeable cash flow in your retirement years, especially with the growing likelihood that New Zealand Superannuation may no longer be able to fund your retirement spending habits.
Here at Financial Architects, we monitor the progress being made by the fund managers offering KiwiSaver investments to ensure our clients benefit from a product offering that suits their goals and investment time frames.
Over the last ten years KiwiSaver funds have produced investment returns that range from 4.8%pa to 13.4%pa. Over a ten year period the difference between a 4.8% and 13.4% annual rate of return on your KiwiSaver could be worth 10’s of thousands of dollars.
How has your KiwiSaver performed? Could it be doing better?
If you are interested in having Financial Architects review your KiwiSaver please complete our inquiry form, which you can access by clicking the button below, and we will be in contact to begin your review.
When you ponder this question, several answers are possible, such as;
These are all fair answers but how do you bring your options together into a sound action plan, so that you have confidence in knowing you will reach the ultimate outcome you desire?
Financial Planning with advisers that have years of experience to call on, will assist you to explore the various scenarios available, that will suit your comfort zone and risk tolerance levels.
Knowing and understanding your risk capacity needs to be identified before you embark on deciding what of the above is best for you, at your stage in life.
If you wish to address this subject, feel free to contact our team to arrange your complimentary Introduction to Financial Planning meeting with one of our advisers.
To complete the inquiry form to start the process Click Here.
Welcome Home loans only require a 10% deposit instead of the standard 20%, but your income cannot be higher than $85k (one person) or $130k for two people.
The house purchase price is capped at $600k or $650k (existing or new) for Auckland,
$500k or $550k for some main centre’s and the rest of NZ, $400k or $450k.
The deposit can be gifted by a relative and/or funds can be withdrawn from a KiwiSaver account that has had at least three years of regular contributions.
Lender mortgage Insurance will cost 1% of the loan.
You must be a NZ citizen or permanent NZ resident.
Not all banks offer this loan option/style.
KiwiSaver HomeStart Grant provides you with an additional $1,000 for every year you have been in KiwiSaver (maximum $5k) when you are buying an existing home or $2k for every year for a new home (maximum $10k).
Grants are income dependent, with the same criteria as the Welcome Home Loan criteria.
The property must be your principal place of residence for at least six months after settlement.
Previous property owner should not have realizable assets totaling more than 20% of the house cap’s set per region.
If you are interested in receiving initial feedback from us, as to whether now is a good time to pursue your first home purchase, Click here