In case the contents of this email are topical, it was first sent on 21st May 2020. 

Welcome to the first edition of Money Mail,

What an amazing response - thank you!

I want these to be bite sized and easy to consume. Something to look forward to each week.

I can’t promise that you will learn something new every week but I can promise you that it won’t be the worst thing you read on a Friday.

Stick with these lessons and take your learning seriously.

Where did the name ‘Keep The Change’ come from?

One day last year, I was buying breakfast: 2 eggs on toast with salmon.

It cost me $19 so I handed over a $20 note and they went to give me a dollar back.

In autopilot, I said ‘Keep The Change’. Something we’ve all done before no doubt.

I sat down and thought about what made me do that? Part of me wanted the $1 for my car coins.

But I had been studying ‘abundance’ and the theory that there is A LOT of money in the world.

Maybe I had been studying it so closely that it rubbed off on me. I didn't need the dollar, I trusted that I would get another one soon.

That is an important part of learning about money.

Who’s lessons have rubbed off on you? Who’s lessons have you decided to be ‘your truth’?

If you learn about money from people with a scarce mindset to money, do you expect yourself to believe that there is an abundance of money out there? 

If you believe money is the ‘root of all evil’ then what’s the story with all the nice people who have quite a bit of money? They still seem pretty helpful and keen to use their money to help. 

FACT: If you are a broke a$$hole OR a rich a$$hole...you are still an a$$hole.

Human beings are goal oriented. We are often ‘programmed’ by the information that surrounds us. We make things real, that we think. We need to be careful who we take our lessons from and what we think.

As we grow up, we pick up on the lessons we hear ‘money doesn’t grow on trees’, ‘the Fonterra CEO gets paid too much’, ‘don’t tell people what you get paid’, ‘if I won Lotto, I would…’, ‘rich people are greedy’, ‘a penny saved is a penny earned’ and on and on we go.

NONE of these things actually help us understand money any better or how it works so you need to arm yourself with actual knowledge around money - that is YOUR responsibility.

Activity

Be open minded and sit down and make some notes about who taught you about money and what you learnt from them,
Do you think money is a good or bad thing? Have a think why you believe that.

I think the best teachers of any subject are the people that have been there and done it so look for those people you have access to in your life and ask if they will help you?

Keep The Change is about believing that there is a better way with money. We don’t need to struggle through life and it’s OK to want to be on top of your finances + financial literacy.

Alright, nice and easy this week but get ready because next week we’ve got to get straight into BUDGETING and there is a spreadsheet involved (I know, I know!).

Have a good weekend,

Luke

In case the contents of this email are topical, it was first sent on 28th May 2020. 

7am this morning consisted of 2 coffees too many and time with a New Zealand Rich Lister. 

Why? I can’t remember half the sh*t i’ve read in text books but like I said last week, I am a big fan of learning from people who have been there and done it before.

They are just ordinary people like you and I. I got home and did a mind dump of lessons so I can revisit them in future.

How? Admittedly I have a connection with them but just sent a message and asked to chew the fat. Easy. Don’t over complicate things. Learn from people you know are smart.

Now here we are...Week two is probably the most homework you’ll need to do {first_name},

Apologies in advance but unlike a calculus class, you already have most of the answers.

In this email you will find a link. Do not approach this link in public. It is extremely practical and will require you to take it seriously.

The link is a folder from within the ‘Keep The Change’ content and has budgeting templates: 

https://drive.google.com/drive/u/1/folders/1djmETm-76k4gEwb9EupQ_Hx0x4BtGT0Y

• Cashflow/budget tool (cash in and cash out),
• Goal setting template you review each month,
• Financial position (A what? Relax, you’ll see),
• A list of nearly every expense you can think of to get you thinking about what you might have missed in your budget
• Instructions (Youtube Video)

Yup, I know some of you have attention spans shorter than mine so I even made a video explaining how to use the tools.

Now you may think these templates are too simple. Good, that is the whole point. If you are an excel freak then brag to your own mates, not any of us. 

The point is to start with these and MAKE THEM YOUR OWN to suit your situation (and brain). OR use the template you already have.

Why?

Part of the budgeting process is taking your money seriously. Businesses are required to do this but individuals don’t often do it. You might have a better budgeting tool, but are you using it regularly to help you plan your month and calculate your ‘net worth’?

Net Worth

Your worth is much more than just dollars in a bank account BUT tell that to the bank when you go for a loan. They want to know what assets you have and what liabilities you have. You’ll find those on the financial position tab of the template.

To give ourselves a chance of financial freedom in life, our budget should be mapping towards us increasing our ‘net worth’. That is, having more assets than liabilities (debt).

Tracking this does something for your brain - it helps you recognise your progress regularly, rather than just when the bank asks.
 

Activity

• Access the folder: https://drive.google.com/drive/u/1/folders/1djmETm-76k4gEwb9EupQ_Hx0x4BtGT0Y
• Download the ‘Financial Position’ template in your preferred format
• Work through the instructions when you have a good 30 mins to focus
• HACK - Set a reminder in your phone to review this inline with the frequency of your pay cycle. I.e. fortnightly, monthly.

Budgeting does suck a bit but so does being broke. Did you know that if combined, NZ households spend more than what comes in? Sounds like a lack of budgeting. Household ‘net worth’ goes backwards and we are spending debt to cover the shortfall. Not gooood is it!

Have a budget weekend,

Luke

Right now, during COVID, people in the US are saving more than they ever have before. 

In April, retail spend via credit card in NZ was down $2.6billi (48%) on March. That’s about $520 per Kiwi. Did those people move to online shopping or did they save it?

Kiwi's saved it too, as deposits with bank increased by 7.8% (biggest jump since 2017).

Pre COVID, I found data that 60% of Kiwis don’t have $500 saved. Then data that 60% of Kiwis don’t have $5,000 saved. I believe the first one because most Kiwis live pay cheque to pay cheque. The second one probably factors in KiwiSaver.

BUT what’s the point of saving if interest rates are so low? You could make a case for not saving as much anymore as it's not going to earn you much interest (after tax and inflation).

Just be careful not to accept old methodology here. 'Go to school, get a job, save money, earn interest'. Great when interest rates were 5%. Today, interest is at record lows.

If I taught my children this in 2020 I would knock myself out for not encouraging them to push for more. Interest on deposits is 2%, tax that at 33% and you are left with 1.34% growth on your money. $134 of interest on $10,000 over a year. 

Then there is inflation. Stick with me here.

Inflation is the rise in price levels in an economy. Our current 2 percent inflation means $10,000 NZ dollars will be worth $9,800 dollars in one year. You can say an F bomb now.

You yourself can generate a return higher than 2% to protect yourself, but can your money? We'll explore that another time.

It’s all confusing isn’t it. But here’s why we need to think about saving - it creates habit. 

Habits create consistency. Consistency creates results.

If you can’t save when you make $50k you can’t save when you earn $80k.

I didn’t choose to believe that because I wanted to get to $80k to prove I could be a saver.

Poor strategy that. I wasted years and missed plenty of opportunities.

As we earn more, the money comes and it goes. You know that feeling don’t you Sam.

Try this. As soon as you get paid, get rid of some money - save it. Out of sight out of mind. Send it off to savings school whilst you learn about creating a good habit.

Now you have less cash to make poor choices with. Your life will adjust to the amount of cash you have access too.

You can’t shout 10 mates jäger bombs if you don’t have access to $180*

I once paid off a $15k credit card using this exact process. Money in, pay down the card (just like saving except instead, paying for a ‘few’ poor life choices).

Every payday this was me - ‘’Hi Westpac it’s Luke here...again. Yeah please decrease my credit card limit by $500. I need to repay my sins. God bless you and talk in a fortnight’’.

That’s 26 fortnights and 26 phone calls. Sh^t it was demoralising. But it was effective and I got to know a few of the phone staff at Westpac (always chase the positives).

Limit your access to cash to discourage stupid habits.

These days when I get paid, savings go straight to my Sister. Seeee ya. No risk of 10 round jäger bombs. No chance she’s sending it back to me without good reason.

I’m building a habit and adjusting to the remaining cash I have available. No matter what income level i’m at, this habit will help me. Repetition is key to most things in life.

Activity 

• How much are you saving? Be honest & use the budgeting tools to work out what you can save
• Do you pay yourself first?
• Can you shift cash to somewhere you can’t touch?
• Set a phone alarm reminder to build habit next pay day
• Can someone hold you accountable?
• What has worked well for you in the past? What hasn’t?

Finally something fun: Have you ever thought about the fact that the IRD apply this same tactic to you? They tax you before you even get paid, they aren’t stupid enough to trust you to hand it over. Gee sus, imagine if they let you pay your rent, bills and latte’s before asking for their tax. The country would be in even more debt than it already is.
BUT it is a bit different for businesses, they pay tax at varying dates - something else business has in its favour - options. More on that another time.

Well there was a lot there this week, I think a lot of you just had your mind blown about inflation and the fact your money is going backward. Sorry about that, but we need to educate ourselves because yesterdays education isn't fit for today's reality.

Have a good weekend,

Luke

In case the contents of this email are topical, it was first sent on 11th June 2020.

Last year I broke a girl’s heart.

Her name was Sarah and she came to work at nextAdvisory (accounting business) during a placement to finish her study.

In week one instead of teaching her about how an abacus works I took a whiteboard marker and said watch and learn.

I wanted to teach her what I wish I learnt at my Summer internship. But I knew it was going to hurt.

I wrote down $52,000 on one side of the whiteboard and $100,000 on the other.

The average New Zealand income is $52,000 so let’s work through that:

Income

$52,000

Less: Tax + ACC 

$9,343

Less: Kiwisaver 4%

$2,080

Leaves You

$40,577

$40.5k to last you 52 weeks. 

Costs

For most people this includes things like: rent, power, phone, internet and insurance, food, miscellaneous items, kids' activities, school fees and daycare, vehicle and pets.

What about

Savings, holidays, birthday’s, Christmas, doctor and dentist visits. We haven’t even factored in the 12% on the student loan to get the degree.

Oh and clothing, we can’t do life nude anymore apparently.

How the hell is one supposed to get ahead with that level of income?

But this is where we get taught not to be greedy and to be satisfied with average otherwise you get accused of being ‘money hungry’ or all the bullsh*t terms people come up with to make sense of average.

Gee we’d hate to be ungrateful and expect a bit more from life wouldn’t we? Be horrible to have a goal of $100,000 a year, contribute more to society through tax and then be able to donate to some causes you care about too?

Surely that will solve everything? Next week we’ll work through what the elusive 6 FIGURES looks like.

Back to poor ole Sarah, she joined us to finish her degree and in week one got smacked with a money lesson that they weren’t dishing out at university.

I wanted to wake her up so that she didn’t get caught in the 6 figure trap that if you get through the accounting levels to finally reach $100,000 you have clocked life. Hey, if you are happy, that is more important and maybe you have clocked life.

Whilst with us, Sarah started an amazing podcast called ‘The OneUp Project’ which shares finance tips and tricks, interviews with business owners and understanding things like Sharsies. Check it out.

We also taught her about side hustles and learning early about challenging the status quo.

She’ a bright, smart young lady who deserves more from life than 'average' & so do you.

Activity 

Have a think about what A LOT of money is
Tax is going to crush one third of that in some way shape or form
What is your income goal and has today’s Money Mail made you question it?
Start to think about how you might be able to add income to your life - we’ll explore that together another time
Happiness: These emails will often be confronting and challenge what we’ve learnt about money. Happiness should always be at the heart of your goals.

AND don’t forget in week one we said if you are a broke a$$hole or a rich a$$hole, you are still an a$$hole...the same thing for happiness.

Don’t have an average weekend!
 

Luke

In case the contents of this email are topical, it was first sent on 18th June 2020.

Last week we looked at average. This week we look at making it to 6 figures of income.

This is roughly about a 1 in 10 chance for Kiwi’s. Like anything money related, it is hard to find quality data so 10% is probably being kind.

My goal was to hit $100,000 by 30. Surely you can coast to retirement from there?

I used to think that was the figure to target. Move to Auckland and you learn pretty quickly about the cost of living in a city where transport crushes a good portion of your income (and time) let alone having a roof over your head, visiting rainbows end, or watching Beauden Barreeet slot a few at Eden Park with you.

Anyway, let’s work through $100,000:

Income

$100,000

Less: Tax + ACC 

$25,310

Less: Kiwisaver 4%

$4,000

Leaves You

$70,690

$1,359.42 in your hand per week of the year. Seems pretty decent!

10% Savings

Let’s say you take on the rule of saving 10% of that $70,690. You’ll save $7,069 per year. Ignoring interest, growth and inflation, that will give you $70,690 after 10 years +$40,000 in Kiwisaver.

Would you be happy with that? That’s for you to decide. You should certainly be grateful at least. Because you are in the top 10% of earners in New Zealand.

There are no right or wrong answers here. There are no silver bullets either.

1 in 5 households earning $150,001 or more said they had only just enough, or not enough, money to live on.

About 1 in 3 households in the $100,001 to $150,000 bracket felt the same.

This highlights that we can’t rely on small thinking or simple ‘Save 10%’ rules to give us financial freedom in the long run.

Times have changed and we need to learn how we fit into all of these income brackets and spending situations.

If we can’t get our relationship with money in order, spending habits under control and a saving system sorted, it won’t matter what income we earn; we will struggle to make money work for us.

Every person's situation will be unique so you need to create a unique saving strategy based on your goals.

Oh don’t forget our costs from last week:

Rent, power, phone, internet, insurance, food, activities, kids, school fees, vehicles, pets, clothing, birthday’s, coachella, Christmas, health...it goes on.

Activity 

• Are you grateful for your financial situation or constantly looking at it from a negative perspective?

• How can you remind yourself to have perspective and gratefulness?

• It’s ok & normal to want for more - set a long term goal and picture having it

Next week we’ll look at tax (yuck... but don’t unsubscribe...i’ll make it simple) then we are back to month end and reviewing/confirming our budgets and Net Worth.

Hey, before you go and crush your Friday, I’ll leave you with this.

Don’t have a six figure weekend if you don’t earn a six figure salary.
 

Luke

Below you will find the pathway that plenty of Kiwis borrow blindly from someone else and work their way through life.

Borrow for a degree

It takes on average 6-7 years to pay off your Student Loan if you stay in New Zealand and work, based on information in the 2014 Student Loan annual report.

Borrow for a phone

Usually paid back over 12 or 24 months.

Borrow to get from payday to payday

Credit cards, payday loans, afterpay, you name it.

Borrow for a car 

Usually a 3-5 year term.

Borrow for an engagement ring

Optional.

Borrow for a house 

Usually a 20 to 30 year loan. House debt of usually 7 to 9 times a persons salary.

Borrow for a boat

Usually goes on the mortgage ensuring the home loan stays at 20 to 30 years.

Borrow for house renovations

Goes on the mortgage too. Home loan stays at 20 to 30 years.

Now what…arrive at retirement and hope you are debt free on your property.

We are programmed to follow the same path to get to retirement with a debt free property and then collect the pension. Happily ever after.

Who really benefits from the above pathway of debt? The bank, every single time.

Guess how many people who followed the above path are on the New Zealand rich list? Zero.

Why not borrow someone else’s methodology?

What did you just learn?

There is nothing wrong with the above methodology if it gets you to your goal. You might not aspire to be on the NZ rich list, that's sweet too. But you need to think differently if your goal is to want more than the above outcome. 

If you know you want more from life than the most common pathway, you need to borrow someone else’s pathway and learn how they did it.

Activity 

• Where you are at now, what would you do differently looking back?
• What pathway are you on and who did you learn it from?
• What pathway do you want your children/grandchildren to take? 
• Who leads a life you admire? Study their methodology, how did they get there?

I hope you checked out The Undercover Billionaire. That bloke certainly didn't pick the above pathway.

Luke

During the week, my mates at Heartland Bank came out and said that they are going to offer borrowers interest rates of less than 2%.

There are two reasons this is exciting.

The first one is that this is the first time in New Zealand we’ve seen rates under 2%.

The second one is that they got a lot of attention for it. That’s exciting for me and my mates who dumped a $15,000 Vegas stag-do fund into Heartland Bank in the sharemarket a few months back. WIth plenty of attention, money follows and their shares have gone up.

I’ll pause there actually as there is a lesson for you...with plenty of attention, money follows. Think All Blacks, influencers, businesses, a new baby. They get attention, they get money.

You might want to think about that when hunting out opportunities. If plenty of attention is going somewhere, money most probably will too.

Still not making sense? Let's say an All Black gets added as a brand ambassador for a health company = Attention. Same day….share price moves from 9cents to 16cents = money follows.

4 months on, all the attention has gone and the money has too. The share is back below 9 cents. Will the money return? For sure, just drum up some more attention.

Anyway, I got side tracked. Mates and I couldn’t see the point of leaving the stag fund in the bank nor bonus bonds as it doesn’t look like we’ll be getting to Vegas anytime soon are we?

This is the more important part. Think about how much this is happening across New Zealand. 

We have record levels of money sitting in the bank and record low interest rates. We talked about this months back now, what's the point of leaving it in there?

Right now, parents sitting on money will be questioning whether they pass it through to younger generations to buy assets or leave it in the bank to rot away.

Where is all this money going to go if they pass it down generations? Stay in the bank for security reasons? Head to the housing market? Head to the sharemarket? Start a business?

The older generations have loved property more than some of their own children and will be looking at 2% borrowing rates saying ‘you need to buy a house young son!’.

This is why asset prices (houses, shares etc.) head up in times like this. If we keep seeing this, those who sit on the sidelines get left behind as prices rise. Especially in housing.

If your money isn’t increasing in value in the bank but a house price is, your ability to buy a house is decreasing as you may not have enough money for the deposit when it is your turn.

Economists are getting the housing market wrong left, right and centre but my man Mikey who predicted interest rates starting with a 1 before Christmas, tells me he is banking on house prices continuing to rise and playing his cards that way himself.

Some major family decisions are going to be made over the next 12 months and that will ultimately determine what happens with A LOT of money currently sitting dormant with the bank.

It’s a bloody exciting time to be alive but remember, we haven’t been here before so everyone is truly guessing.

What did you just learn?

Money follows attention. It’s a simple lesson but it is so true and might help some of you out there take advantage of it.

A great way to build wealth is by understanding what people will do before they even realise they will. That sounds like predicting the future but really it is just thinking about how people think, the herd mentality and what they’ll do because of this.

Unfortunately we can get caught doing the same. Buying things just because they get a lot of attention.

If an influencer posts about a new product and if Sharesies hit their email list about a certain stock, attention is going to follow, now you know what will happen!

Activity 

• Do you get caught up buying things just because they have a lot of attention? Do you really need them?
• Can you spot attention trends to help take advantage of them?

On Wednesday, my Kiwisaver mate Adam and I got together to teach people about Kiwisaver. Learn: https://www.facebook.com/keepthechangeNZ/videos/695006481110454​

Be bold,

Luke

Right I am going to start this by saying that I don’t necessarily suggest that buying bitcoin is a good idea.

I simply don’t know enough about it. BUT I just sold out...I got on the bandwagon. What a stupid time to do that when it’s at a recent high.

I keep an eye on the price of Bitcoin. Before I tell you how or why I want to tell you a story.

I’ll take you back to 2017 when I was working in the great province of Taranaki. Smashing out sets of accounts and tax returns. It’s so much fun. I was the envy of all my friends, everyone wanted to be an accountant...sh!t sorry wait, that's not the story.

We had a client come in and say they got given a bitcoin years ago on a travel trip and had heard bitcoin was booming so wanted to cash it in. Naturally they asked their accountants.

The boss left this one with me and given I had studied for years to be a qualified accountant so valuable to my community, I knew exactly what to do. I rung a mate i’d seen banging on about bitcoin on Facebook.

Hours later they turned up with stacks of cash (tens of thousands) and took the bitcoin off the clients hands/digital wallet or something like that.

I had no idea what the fark just happened but everyone was happy and I believed this bitcoin thing was a bubble. You know, money following attention...leave me out of it.

Fast forward to 2020 and some people believe that crypto will crash to zero and others think it’ll boom. Who knows!

Months back, when the economy started getting shaky, I thought hmm I wonder if people will move toward crypto as they get nervous. Maybe I will jump on the bandwagon and buy a bitcoin. I thought it could be a good thing to learn to then explain to Money Mail readers too.

Riiiight that’ll be $14k. Sh*t I don’t know if I like you that much to risk 14 rack.

Instead, I put some money into a ‘safe’ coin called Tether which usually holds its price so I could learn how you can buy crypto.

Last night as you were watching another episode of Emily In Italy, I was researching the bitcoin price and it’s now bloody $19,000 for one of these things.

Next I was uppercutting myself in the mirror for not getting in at $14k wasn’t I. The price rise made me think HOW?

Earlier in the week I watched a video from the international monetary fund...I know don’t even ask. Anyway they are worried about how money is currently working in the world and suggested we need a conversation around resetting money.

The IMF president is a boss lady, and said heaps of stuff that went over my head but she basically stressed that today’s economic hardships are the same as the difficulties the world faced at the end of World War II.

Bloody hell that sounds major. I wasn’t here back then but in 1944 they had a huge world meeting and reset how money works. They are calling for this again.

I don’t know what the boss lady was trying to tell us but people smarter than me are suggesting Central Bank Digital Currencies are coming. So again, money is following attention and bitcoin is on the way up gambling on what the boss lady is working on behind the scenes.

Finally, I transferred some of my Tether coin to Bitcoin but of course I needed some Ethereum to complete the transaction. My word, I am learning a new language now too.

What did you just learn?

Money follows attention. Wait that was last week...but it is the same thing here. As it gets more attention will it increase in price?

It’s not all over my Facebook feed like it was in 2017 so maybe the bandwagon isn’t full or maybe I am just a fool? Probably a bit of both. For me, I am purely gambling - with real money. An amount I can afford to lose though and at the same time, I am learning.

Activity 

• Want to learn more about crypto currencies and how you can buy them?
• The One Up Project - Crypto

Whatever you do, don’t go and put all your money into a crypto currency. For me, this is about diversifying and extending my knowledge of ‘digital currencies’.

Be bold,

Luke

Housing Boom...the little blue pill for Kiwis with cash. We can’t help but stay excited.

You will start to hear these two words even more as people make headlines out of house prices going up.

These two words drive plenty of FOMO too. Something we’ve been discussing (money following attention) that economists and smart people find really hard to measure.

In September, the number of properties sold across the country increased almost 30% from last year.

All of that whilst life does still look very uncertain. But according to the market, now must be the time to buy a house?

Cheap debt, people moving back to NZ, too few houses, no international travel, bank of Mum & Dad opening the floodgates, FOMO. It’s all happening Jemma.

September house sales were the busiest month of sales since March 2017, and the strongest September in 14 years.

House prices across NZ are 10% higher than a year ago. Auckland? Those buggers are 11.5% ahead.

When was the last time you got a 10% pay rise at work? Probably never. A house that can’t even talk is showing us all up.

For those sitting on property for longer than 5 years, they aren’t paying tax on those increases either.

For first home buyers it puts them into a tricky spot ‘If I don’t get in now will I ever get on the property ladder?’ and ‘Is this mortgage going to soak up my entire paycheque until I retire?’

Sure debt might be cheap but mortgage repayments required to service a mortgage will chew up a lot of someone's income meaning a sacrifice in other areas of the ole lifestyle.

Nothing wrong with that, it just needs to align to your life goals right?

With rising house prices, those already in the market can borrow against House A to buy House B without any money down - remember the leverage lesson?

Who knows when this ends or if it ever does. Probably with a capital gains tax finally getting accepted by a NZ population that remembers how much debt we have.

But for now, if you are thinking about buying, do your research and be prepared for the bank.

Think about what YOU want. There is a bloody cool strategy of buying where you want to live in the future and renting it out until it is time to go and live there. Something to think about.

Remember that month end process? That’ll help you prepare your list of assets and liabilities that the bank will want to see.

If you’re in business, the bank will probably ask for a cash projection over the next 12 months too.

They are trying to de-risk themselves from the very real reality that some people are going to over leverage themselves.

What did you just learn?

It's all go in the housing market and prices just seem to keep screaming up. No one really knows how this will play out but whilst interest rates are low and people can access debt, sales will continue to go through.

If you already have a home, maybe the smart play is to consider using the equity in the home to build out your future wealth.

Activity 

·        It’s month end...prepare your budget for the upcoming month

·        Remember to complete your ‘financial position’ for the end of October 2020

·        How is your progress? What is working well, what isn’t?

·        Thinking of buying a home? Start studying the market and talk to an advisor

FOMO can be a real nasty nagger so make sure you are making financial decisions in line with what you want your life to look like, not what someone else's life looks like.

Luke

I get to work with successful people and watch what they can achieve over a set time frame.

They are people who set goals, make progress and then arrive at destinations.

Of course it's not all smooth sailing and every now and then they get in a rut.

No one likes feeling stuck in a rut. Whether it be with finance, health, your career progress or whatever is getting you frustrated.

There are 5 simple things you can do to get yourself fired up and inspired.

These 5 things aren't world beating but they work. These are the steps you too can work through when you feel stuck:

1. Make a decision
2. Planning (how will you do it - WRITE IT DOWN)
3. Beginning and getting started
4. Making identifiable progress (humans love progress)
5. Achieving 

The strange thing is that the feeling of step 5 is often similar to step 1.

A big part of what we often need help with is just making a decision.

Let’s look at an example: 

1. Decision - no more credit card debt
2. Plan - pay off credit card and not use it going forward
3. Getting started - ring bank to order debit card, prepare budget to repay debt
4. Progress - pay day decreases of credit card balance until paid off
5. Achieving - credit card paid off, cut up and credit closed

Activity 

Think of one thing (just one) that you know you need to do or have been putting off. Something in regards to your finances.

Make a decision before 5pm Friday that you are going to sort this out. Write it down and then take some form of action.

See how you feel after getting it done. It will be a huge inspiration for you. Then you have a blueprint toward getting sh!t done.

Get it done this weekend,

Luke

Before we start this week, I want to take you back to a few weeks ago when we discussed those two words ‘Housing Boom’. Well every day this week, the media have been talking about house prices getting out of control.

Of course they aren’t out of control if you own a home, just if you don’t and it then gets harder to get into a home.

I foresee a HUGE financial issue in 10 years time where New Zealand has a very unfortunate wealth gap.

The gap between the wealthy and the poor as such. Internationally we are at record levels since the 1930’s.

Rewind 27 weeks and that is exactly why I started Keep The Change. I promise you I don’t have all of the answers but it is CRITICAL that you do what you can to educate yourself. Hopefully this helps you take action in your life in areas of your finances.

Right in we go...A lot of people will tell you that there is a magic number you need to retire.

If you have a google you’ll probably find different theories that should apply to a lot of people.

I don’t like to think like a lot of people. I’m a bit (A BIT) weird. I prefer to look at complex situations like retirement and think about ways to make it look less scary.

My brain is very strategic which gives me a huge advantage. It instantly looks for different solutions and ways past roadblocks.

My retirement is a fair way off but I do think about it, as we all should.

Instead of boring you with data that might make retirement seem like a giant financial mountain, I am going to share some lessons that have helped me look at retirement more practically.

What about aiming for these practical targets:

• A mortgage free property to remove living costs (usually your biggest cost)
• A Kiwisaver fund that can pay you $20k per year
• Income streams from a rental property or investments (using leverage)
• ​An emergency fund built up to tackle sudden life changes

The niggly thing about retirement is that we don't know when we are going to die nor what life looks like at that age.

Here’s the thing I always hear too ‘oh when you turn 65 you get your entire Kiwisaver’.

Why would you move your entire Kiwisaver into your bank account if you don’t need the entire thing?

I’m going to check with my man Adam who helps me with Kiwisaver but it’s not how i’m going to play it.

I plan to have a giant stack of cash in there, attach an eftpos card to it and spend some of the annual gains, hopefully leaving the initial balance in check.

If you stack say a million over your life and can achieve a 6% gain each year you’re living off $60,000 tax free income (unfortunately I predict it won’t be tax free in the future). 

What did you just learn?
Retirement is a long way away for me and by the time i’m there, the world will be completely different to what it is today.

What I am trying to show you here is not to listen to the noise. Break down these complex problems with practical steps that you can achieve throughout your life.

Think differently and don’t let it scare you into doing nothing or learning nothing.

Activity 

• Have you got your Kiwisaver optimised to your risk profile yet? Get it done!
• Have you thought about what a retirement life looks like and what each week would cost?

Next week I am going to make you do something sexy, it’s called math, I know you loved it last time.

Luke

We are 7 days out from Christmas, bitcoin is at record levels, we all just got shouted a $200 vaccine, we are running out of watermelons, my Mum is staying, IT'S ALL HAPPENING!

How are we supposed to keep up let alone get ahead? That's the problem for a lot of Kiwis.

Living paycheck to paycheck is very, very common in NZ. Data suggests that over 6 in 10 people are living from paycheck to paycheck.

Paycheck to paycheck: Using most or all of your monthly income to cover your monthly expenses. No money left over & none for savings.

Is this because life is expensive, maybe it was how we were taught or maybe it’s just habit?

The comments on my Facebook post about this say: ‘I didn’t know there was another way’, ‘yeah because sh!t is expensive’. 

Those comments have plenty of likes & support so people clearly believe there is no other way.

We’ve already learnt that we will change our lives to match our income / earnings.

I was asked to speak at an online business summit this week with a few accounting tips.

I was at 11.45am so most people probably grabbed an extra lunch break as soon as they heard an accountant was speaking.

For those that stayed on, I tried to keep it really practical to make sure they didn’t mute me.

A lot of business owners get themselves into trouble because they pay their tax last.

Once all the money's gone they try to figure out how to pay tax. That doesn’t work.

We flip it with our smart clients and make them pay tax first. By putting it aside into a separate tax bank account.

When tax is due they have it & pay it. Easy. Just like businesses, you & I can do the same thing. 

‘I can’t save because there is nothing left over’.

Time to save first then! Save, invest, pay down debt, over pay the mortgage FIRST.

THEN figure out how to live off of the rest. We will match our expenses to our remaining money.

You guys crushing it with house mortgages need to think about this with your interest rate changes (a % decrease can put thousands back in the household income every week).

You need to put your future FIRST when you get paid, not LAST. 

Activity 

• Are you in the 6 in 10 or the 4 in 10?
• Have this convo over Summer with mates and see who lives on what side
• The next time you get paid, put some straight to savings - time to build the habit
• Are you completing your personal net worth monthly - do that to track your progress

You don’t want to struggle through life and from pay day to pay day do you? We all need to get in control of this and a great way to do it is to save something FIRST.

Luke

To finish the year, I knocked off something i’d had on my goals list. Not a major but a much needed task.

Closed down the ole credit card. I’ve had this credit card for over a decade and don’t really know why I still had it.

Sh!t i’ve had some good and bad times with this bit of plastic. 

You can really use them to your advantage sometimes (rorting rewards, short term 0% finance etc).

But really I just don’t need one. I simply had it because i’ve always had it.

Obviously we have debit cards these days but I haven’t had one. I use my credit card like this anyway and just pay it back ahead of time to re use the money on it. 

I got rid of it to simplify my internet banking and not have to think ‘oh but I actually have $500 less as I owe it on my credit card’.

One less thing for my brain to compute. One less account fee too. One less piece of debt.

I tell you what, they don’t make it easy to close it though.

Call the bank, wait 25. Get told I can’t close it yet. Put a pause on it. Call back 4 days later. Get told I can’t close it. Get told we’ll sort it in 3 days just don’t use it in the meantime.

Blardy heel I felt like maxing it out in the Viaduct last night and calling Fair Go for a whinge.

But I stayed true and got it sorted.

Whilst everyone p*sses around with ‘thinking' about goals and resolutions, think about why they don’t follow through with them.

They are all talk. Missing the execution bit. Not you though, you are a doer.

My accounting business helps businesses set 12 month plans for their success & growth. It costs them tens of thousands to work with us to execute their plans together.

Really strange but the businesses that DO the work are the ones that kick a$$. 

In 2021, make a commitment to taking action. Doing. Not just talking.

Activity 

• What is something money related you need to tidy up?
• Get it done in January, take some action today (i.e just decide, then take action)
• What BIG financial goal can you set for yourself in 2021? Write it down
• 2021; hopefully your best year yet.

Get it done in 2021!

Luke

One bad habit I got back into in 2020 was reading the news again. It doesn’t serve me too well.

Stuff, The Herald. I was getting way too clicky. Tuning in 8 times a day to see what was happening with housing, business, money or COVID.

Most people will say they read the news to stay up to date with current affairs but really its to procrastinate from their life. If news is important enough it will end up in front of you.

Most of these articles are opinions these days anyway. The click bait titles drag you in to prove to advertisers that their dwindling media product is still getting engaged eyeballs everyday.

News - a horrible way to get you off task & fill yourself with sh*t energy. Something had to change.

To tip me over the edge I read an article about NZ CEO’s and how they should have taken no pay in 2020.

Riiiight, go to work (in one of the most stressful years in history) for free basically because:

‘’These are very well-paid individuals, so they've got accumulated wealth, they have assets, they have everything they could possibly need.”

I kind of get it because I used to think like that too. Oh these rich people earn so much why do they even need it?

The opinion piece went on to say:

‘’The chief executives of many New Zealand companies could have afforded to go without pay this year as the country navigated the Covid-19 pandemic, one expert says, but instead some actually took home more pay this year than last’’.

I thought. Wow I wonder who this expert is...found it…a university senior lecturer.

Imagine paying for an overpriced degree to have your lecturer tell you not to expect to get paid once you get ‘high enough’ up.

Especially when the going gets really tough, you work double time, barely see your family, your team needs you more than ever, you neglect yourself, your health, you burden everyone’s circumstances, your country needs your talent, your next career move depends on your performance.

Yeah go on just go to $0 pay wouldn’t ya you selfish bugger.

The more time I have tried to rid myself of hatin on high income earners and actually studying them i’ve realised some freeing things.

We all know how hard it is to get to ‘the top’. How much sacrifice it requires. How much you have to invest in yourself to get there. The work that most people aren't willing to do to get there.

Be very careful of opinion pieces like these when you go down the rabbit hole. Even when they are ‘experts’. They have more chance of you wanting other peoples lives to be worse off than you wanting your own life to be better.

Most of us aren’t high income earners or CEO’s or whatever title expert opinion piece writers use. It becomes very easy for us to resent these people rather than understand them. Or challenge ourselves and think of the 1,000 other ways these people add value to our own lives.

You will continue to see this sort of Stuff (can pun) and you need to be able to question how it can impact your money mindset.

No matter what side of the fence you sit with this, HOW can some stranger taking a pay cut improve your life?

Hating won’t increase your income, pay your bills or make you feel better about yourself.

Activity 

• What things are you reading that are making you resent other people?
• What things are you reading that build yourself up?
• Which type of information is going to be more beneficial to YOU?

Be careful what you consume this year, it’s going to be messy out there and someone will always dislike what someone else likes.

Luke

Us humans are weird. We love to complicate things and then justify why we do it.

Like money...the thing that actually has no value. Bits of plastic, maybe metal, numbers on the screen these days.

That money, well when you think about it, it really has no value.

The value is in the product or service that you purchase with the money. Money is a vector for expressing value. 

Value comes from what you were willing to do to get that money.

Humans 'assign’ value to it. However, we all have different ideas of value.

But hang on, ‘Money is the root of all evil’?

Everyone learnt that one growing up. My Mum even reminded me at Christmas time.

I won’t claim to be qualified to be taking Sunday school but I think that saying is misquoted. 

‘’For the love of money is the root of all kinds of evil’’.

Is the actual line from the bible. Us humans have left off the ‘for the love of’ bit.

Now, given that most Kiwis aren’t actually Christian nor believe the bible, it’s interesting that they are so keen to believe that ‘Money is the root of all evil’.

It seems a pretty easy way to make excuses for not having money, for bringing down people that earn more, for bad things that happen in the world.

That’s something we can ALL get in behind. A bible phrase on the other hand, don’t think so.

When I hear people use this saying I stop and think ‘alright let's see who is at fault here, the money that has no value OR the human causing the problem’.

This year, when setting financial goals don’t be scared of them. Don’t think that you’re a bad person because they involve money which is ‘the root of all evil’.

Have a think about WHY you want those goals, money and what value you assign to money personally.

Activity 

• Next time you hear someone say ‘money is the root of all evil’ ask them ‘How come?’
• Ask them who taught them that saying?
• Stop and think about the real problem that has led to that saying being used. Is it moneys fault or maybe a humans?

Over the next few weeks we are going to take a look at some different savings strategies.

Luke

In 2020 I sent out 33 [Money Mail] lessons and the most common question I get is still in regards to secondary tax OR 'double tax'.

Lets clear a few things up:

 There is no such thing as 'double tax'

 A second stream of income is not taxed at a 'double tax rate'

 You are taxed on your total income, not total number of jobs. I.e.

- Be’n Broak has 1 job and earns $70,000  

- Terry Ten Taxes has 2 jobs and earns $40,000 in one and $30,000 in the other (a total of $70,000) 

 Be’n Broak and Terry Ten Taxes both pay the same amount of tax.

 The secondary tax rate system aimed to tax someone who earns (say) $50,000 in total from two jobs, the same as someone who earns $50,000 from just one job.

 At year end if you have paid too much in tax, the IRD will refund it, so you aren’t paying more than your fair share.

I would hate to know the number of people who have avoided a second stream of income due to the thinking that they will lose most of it to tax.

Don't buy into the 'double tax' 'secondary income tax' or what other phrases people give it.

Some of the people that didn’t get caught by this myth use the second stream of income to save and invest.

They live off of income A and then save/invest secondary income B.

This is a very common savings technique for families too. As you know, humans will usually match their living standards to the income they have.

So the most disciplined couples will try and live off of one salary and then save/invest the other. OR if not quite at that stage, they will ensure that any joint increases in income become savings/investments.

They do not change their lifestyle to match the new level of income. Something to think about!

Thanks to all of the people who took time out of their day to send over some feedback regarding Money Mail, it has given me a heap of ideas that will no doubt help a lot of people thinking the same things.

Luke

I got a lot of feedback about investing over the last two weeks.

There is a lot of interest in how, who, what and why, when it comes to investing.

I’m a bit concerned about diving into it without getting into what I believe is the most important investment you need to make every year.

So far this year I have spent time & money on a personal trainer, books, a nutritionist, a $600 ring to track my sleep better, a mental strength coach and a relationship coach.

Trading my time and money for their knowledge because I don’t have it. Sometimes the lessons stick and other times I probably wasn’t ready for them.

Cool story Luke, must be great having money that allows you to do all of that.

Actually it kind of sucks. Money in. Money out. Gone before you know it.

I see these all as ways to improve myself. Unfortunately for my bank balance, I’m hell bent on doing that. It’s just how I’m wired.

I search for areas I want to improve and I go after them. I call it betting on myself. 

My strategy is that a bet on myself will return more in the long run than any company will on the stock exchange.

What comes of a better me? A lot better life. A more valuable person.

Why is everyone so hell bent on investing in the best share or the quickest gain?

Probably because as humans, we love short cuts.

That’s probably why we dislike investing in ourselves too. It’s hard and takes time. We don't know what the returns will be either. Plus we didn’t really get taught to do this did we? 

You’re probably reading this one email thinking ‘knew it, this bloke is definitely weird’.

Us kiwis are so obsessed with investing in property and trips to watch the All Blacks so that we can put it on Instagram. That stops you from being weird and allows you to be normal...yay!

But dig deep into the successful people of the world and you’ll sh^t yourself at how much time and money they invest into themselves.

Before we get deep into weeks of investment chat I want to reiterate one point:

You are the greatest asset you will ever own so why not consider how you are investing time, knowledge, education into levelling yourself up before we start looking at ways to invest into New Zealand companies. 

Activity 

• Are you an employee? Can you invest in getting better at your job?
• A business owner? Can you invest in your own business before someone else's?
• Are you a human? You will have a couple of flaws to invest in improving
• Do you know what you are good at? Can you invest in getting even better at that?

Lastly , compare yourself to who you were yesterday, not who someone else is today.

Luke

Well if you don’t, apparently Elon does. Mr Musk announced that he has put $1.5billion dollars of Tesla's cash reserves into Bitcoin.

Fair bit of coin to invest into the world's most volatile asset. So why would he do that?

I don’t want to get too deep for you but we did speak about this in Money Mail 23. That was the week I got itchy and finally got some bitcoin myself.

In America, they are printing so much money that each year that money is becoming worth even less. Ie. If there was only $100 and you had all of it you'd have 100% of the world's money. But then they make a new $50 and now you’ve only got 2/3rds the world's money. Your $100 isn’t worth as much as it used to be before they printed more.

The theory is that some of these large organisations in the States, much like Elon & Tesla are fed up with the value of cash decreasing and are moving cash to assets that won’t erode in value.

There is a limited supply of Bitcoin so the theory is that it will stabilise in value over time. For the meantime, it is very, very volatile.

In summary, cash is trash. But we get taught that ‘cash is king’.

Cash is the king of options. In a time where the stock market, bitcoin and housing are all increasing in value and your dollars are buying you less, cash is actually trash.

I.e if you had $100,000 in cash at the start of last year, it is still $100,000 today and it’s true buying power is now less (things get more expensive).

If you had $100,000 in a property and $0 cash, your $100,000 in that asset increased to roughly $115,000.

This is part of why people are moving so much money out of banks and into financial assets as we have read in earlier emails.

Of course this all might settle down or ‘bubbles always pop’ so sitting on cash will be king - well really the options you will have will make you king.

Right now you are probably reading this thinking you need a university degree to understand what this all means.

And maybe you do because it is bloody hard to understand and not many people are well educated in this space. If you’re interested in this space you’re going to have to do your own research.

We might be watching another moment in history kick off here and us little ole New Zealanders will be late to the party again because we are undereducated and not living in the chaos playing out in the rest of the world right now.

I started with YouTube, US news articles and then once I had my base knowledge I jumped over to Easycrypto.ai to join the party.

Easycrypto are described as the ‘on and off ramp’ to buying crypto currency in New Zealand. 

Of course, you shouldn’t buy crypto currency just because Elon is. You do what works for you and what matches your investment + risk profile. This is a whole different game.

Even if you don’t buy crypto assets, it might be worth putting some research into the technology on the list because if one of the world's smartest and richest humans is getting involved, you’d expect them and their team have done their research too right?

What ever you do, don’t lose your crypto wallet password!

Luke

If you read one of these emails, you’ll learn something.

If you read one of these emails every week you’ll learn something that can change your life.

If you go to the gym once you’ll feel good for a few hours.

If you go to the gym every day for years, you’ll change your life for the better.

If you save money one week you’ll have a bit of money in a bank account.

If you learn to save and invest every single week, you’ll be amongst NZ’s top savers.

If you learn how to do it every year, again, again and again, you’ll end up with a stack of cash that stabilises your future and perhaps those of your next generation.

So what's the problem with us all then? Why don’t we do what we know we should?

It’s hard for us humans to know what the effect of our current choices will be in the future.

What will saving a dollar a day, everyday for 20 years, mean to a 20year older version of yourself?

You don’t know and you won’t know until you get there.

But how about this bloke. His name is Warren Buffett.​

Had $6k at 15, a million by 30, $7million at 35 and nearly $60billion by 83.

Check that sh!t out, it’s exponential compounding.

​
You can already hear the haters, the disbelievers and those who don’t believe in cause and effect.

Couldn’t happen for them though aye. Imagine it if you pull it off; ‘Oh what ever, don’t you know, got lucky’. 

You reckon Buffet got lucky? Doubt it. Small smart plays over long periods of time remove luck from your vocabulary.

You reckon Dan Carter got lucky at kicking goals? What about the Six60 lads getting 50,000 people to a concert? Probably just lucky 50,000 people were walking past that night...surely.

Compound accumulation is usually exponential. But most of us never get to taste it because we don’t start or we don’t stay consistent. 

For some of you scrollers, your favourite follow was punching content, after content, after content and then BANG one piece blew up and they ‘made it’.

We should understand compounding and cause & effect then shouldn’t we. It’s the same as clocking social media by going viral. Lots of small pieces lead to exponential growth. 

This is what makes using your money wisely such an important topic. Warren didn’t get there by just saving, he had to invest too.

We are going to look at exactly this in the Five Figure Formula. If Warren isn’t solely relying on his money to make it ahead, I don’t want to either.

Believe in cause and effect...not chance.

Luke

You need to figure out a way to invest in the future of your family and friends. 

This sounds simple, and you may think it’s a no-brainer, but take some time to think on it further.

I said INVEST. I did not say GIVE. Let me explain.

Purely giving material things to your siblings and friends may appear to be the right decision.

You love them, and they were always there for you growing up, so it’s only right that they should share in your success and all that comes with it.

So you buy them a car, a big house, pay all of their bills. You want them to live a beautiful, comfortable life, right?

But the day will come when you realize that as much as you believed you were doing the right thing, you were actually holding them back.

You will come to understand that you were taking care of them because it made YOU feel good, it made YOU happy to see them smiling and without a care in the world — and that was extremely selfish of you.

While you were feeling satisfied with yourself, you were slowly eating away at their own dreams and ambitions.

You were adding material things to their lives, but subtracting the most precious gifts of all: independence and growth.

The above isn’t my writing. It is a true champion writing to himself. Guess who? 

Kobe Bryant. After his NBA career, Kobe Bryant wrote a letter to himself; his 17-year-old self who is about to be signed to the Lakers.

I don’t get excited by basketball much (gee it drags on for someone who can’t sit still) but I love studying this man and the way he thought. He has some unbelievable interviews on YouTube.

Kobe tragically died at 41 so this letter holds even more weight when reading it.

He goes on to say:

Use your success, wealth and influence to put them in the best position to realize their own dreams and find their true purpose.

Kobe obviously believes that independence and growth are more important than material things and money.

Deep down, I think we could all agree on that. That is why it is important to stay away from envy. Envy of those who ‘win lotto’ or ‘get given everything’. Understand, they will have their problems.

Worry about the things you have and the things you want. Not those things that others have & want. Those things are not your dreams nor are they your ambitions.

Google ‘Kobe’s letter to his 17 year old self’ if you want to read the entire letter.

I often wonder how long it took him to write this and how he felt knowing that hundreds of millions of people would read his thoughts. 

That letter has something that we can all learn from - if we choose too.

THANKS to those who joined us for the live workshop on saving $10,000 in 365 days. 
You can still request a copy of the replay if you like - it will be sent on the weekend.
Details are here: https://docs.google.com/document/d/1h8y4eJis98sRKDKKW3gCuDDcTZXt4Rj7heqq8kkrHtY/edit?usp=sharing

Luke

A couple of weeks ago I got going on cause & effect. How compound accumulation is exponential & most of us never get to taste it because we don’t start or stay consistent.

Remember that? Well it played out for me this week.

On LinkedIn, I threw up my email about buying my coffee for $100 when we went into lockdown and the post views went exponential.

Over 65,000 people saw the post. A lot of people messaged me. Now they’ve read other Money Mails. I nearly ended up on Seven Sharp (my agent didn’t approve….jokes)**, randoms were ringing, some dude wanted me to mine bitcoin with him, IT WAS ALL HAPPENING  I tell ya.

At one stage I thought i'd get my own discount code for HelloFresh but anyway...72hours on it’s all over and life goes on.

I didn’t post it for the view count, couldn’t give a sh*t to be honest. I posted to inspire a different way of thinking.

I’ve posted over 40 Money Mails to LinkedIn now and been producing content on LinkedIn for years.

Sometimes those posts get 5 likes or 30 views. Every now and then they go exponential.

​

Just like I explained two weeks ago. But, I wouldn’t know unless I stayed consistent.
​Believe in cause & effect.

Anyway, this week I wanted to introduce you to the concept of ‘Dollar cost averaging’.

DCA if you will. What the hell is it? Another acronym to learn. It’s about consistency too.

It is an investment strategy or concept whereby you spread out the purchases of stocks (in this instance) over a period of time.

The methodology aims to reduce the impact of volatility (big ups and downs) by consistently investing or purchasing.

Have I lost you? Ok really simply then. Instead of waiting 5 months to drop $1k into a single stock, we buy $200 of it, over 5 months.

Instead of buying $1k at one price, you’d be buying $200 at 5 different prices (the price at the time of making the transaction). This helps you buy at an average price rather than one price.

After the market crashed last year, A LOT of people benefited from continued purcahsing during the upswing of the stock market.

Their Kiwisaver was still buying stocks & they were a lot cheaper than the week or month before. Investing into the stocks their portfolio is set to invest into and buying at the new price.

As the prices increased, they had effectively bought the stocks cheaper in earlier weeks. 

This brings down the ‘average cost’ of those stocks.

If you’re in Kiwisaver, you’re most probably doing the DCA and didn’t even know it.

Next week, if I get some time away from being an influencer (might be selling Hellofresh boxes on Seven Sharp) i’ll explain some examples of how people use dollar cost averaging.

**SINCE writing this earlier this week, I've been locked in for Seven Sharp..see you tonight, 7pm.

Luke

Did you catch the budget last week ? Didn’t think so. If you weren’t tuning in you’d probably be considered normal, so I don’t blame you. It was pretty boring listening anyway.

But the Government need to budget just like you and I. Work out what we have coming in and what is going out too. They have to keep a financial position; assets and liabilities.
 

I’ll give you a few of the high level key points from last weeks budget:

• We are borrowing more money to fund the spending needed in the economy
• We are spending more than we earn (living beyond our means)
• In the next 5 years, our nation's debt is going to double again

If you’re reading this you’ve learnt that living within your means is a good idea but many of our fellow Kiwis don’t do that.

They use debt to add more income to their household. The government's plan is no different.
 

People will argue it doesn’t matter as interest rates are so low so we might as well take advantage of that.

That debt is going to wash out in the economy somewhere and you should figure out how to get your hands on a piece of it. I’ll give you a hint - it’ll probably end up over in housing again.

Part of me doesn’t really care about the budget as it shouldn’t be a determinant of my life BUT part of me watches with intrigue of where the money will flow too as well as hoping one day there will be something seriously BOLD in it.

For example, I’ve always wondered what NZ would look like 10 years into tax deductible expenditure of gym memberships, counselling, therapy, coaching and self funded learning.

For the non accountants and geeks (all of you), here is what this would look like:
 

PAYE salary $70,000

Tax deductible;

 Counselling $2,500

 Gym membership $1,000

 Finance course $500

Total annual expenditure $4,000

 Total taxable income $66,000

Your tax would be calculated on $66k not $70k

This is basically how businesses work. Business owners can claim business related expenses in their businesses that PAYE earners can’t.

A change like this would allow more Kiwis (not just businesses) to claim expenses that make them more productive, healthier, educated & happier - some of the key goals of a Govt anyway...

Each year, I get let down as no one seems to think like this. The budget does more 'same ole' promising plenty & delivering poorly (google 'Mike King medal' for a current example of this). 

Anyway...a lot of larger businesses offer a wellness or professional development contribution. You might want to check with your employer whether there is any room for them to cover your healthcare, fitness, education, therapy or development...you never know unless you ask.

I highly recommend you listen to the ‘Side Hustles’ webinar from minute 36 to 52.40 to learn more about how claiming expenses works & how one day you could use these tax rules in your favour. 

Make sure you check out the podcast if you want an audio version of these lessons! There are over 15 lessons available on Apple Podcasts now too. Search for 'Keep The Change'.

Cheers,

Luke

The red one isn't it...I knew it! 

The Keep The Change podcast is now available on Apple Podcasts here:
https://podcasts.apple.com/nz/podcast/keep-the-change/id1568386864

Or Spotify here:
https://open.spotify.com/show/2xfURkXZGEHVYIOK0DdR9S?si=W5t8bKhtT8SA2N88gcQCCg

It has been good to see hundreds of people already tuning in to the audio versions of Money Mail. 

Recently I was travelling down country and I got to the airport early...that means get the laptop out and rip into some mahi.

The beauty (and curse for some) with my business is that I can basically dress up like that backpack kid and have my business wherever I need it. Laptop, phone, internet, off we go.

It wasn’t too many years ago that I believed that the Koru lounge was only really for rich people or the ‘elite’ or what ever sh*t you’d been taught growing up. I had to unlearn that education.

I took a membership pre that world wide virus thing because I was travelling so much and could justify the price of an annual membership very easily.

I hadn’t renewed my membership since the virus as I didn’t have much travel planned. Then I found myself at the airport at short notice.

I sat at the airport in the departure area, looking at the Koru lounge door and thought: ‘I’m definitely not travelling as much as before but I should probably pay some ‘self tax’ here’.

That’s where, for me, I pay for things that I don’t necessarily need, intend on buying or think are worth the price.

Why? Well Air New Zealand lost a billion dollars of revenue with the virus and I really, really rate their service and business as a whole so I want to see that continue in the future.

I went online, spent $600 odd bucks and renewed my membership. Wandered over, scanned straight in, grabbed a snack, coffee and took the backpack off.

You see, I think there are times where we need to think bigger picture and support things that we care about rather than ‘what else could I do with that $600’...probably invest it or not spend it.

But that $600 will make itself back in some way. I have learnt so much about business from studying different areas of Air NZ and their business model.

When you become committed to learning you start to want to repay those who have taught you. It’s a subtle change you notice within yourself.

Air NZ weren’t hounding me to renew, I did it because ultimately I value what they bring to my life and I am going to need their help in the future so I should find ways to help them along the way too.

I actually finished this email from the Koru lounge this morning as I head down country for the day. 

The first time I used the Koru lounge, it was like a brand new club I finally had access to. Excitement levels were high for this young lad from Dannevirke (we didn't have an airport let alone an Koru lounge where I grew up). Who would I see, what could I eat, who would I meet?

I sat down with the laptop, had a muffin and the place was rammed as they were renovating the soon to be finished lounge. A couple of politicians were left without a seat so I ended up giving my seat up for them to do some work and I went back out to the departure lounge.

An anti climax but you don’t want your politicians standing around looking for seats you want them doing some bloody work. I don’t ‘self tax’ myself to pay them, they do that to me themselves. 

Go well this weekend,

Luke

Turns out plenty of you like the green Air NZ lollies and the red ones too.

But not everyone likes Air NZ. One reader told me that it was the end of their learning from Keep The Change as they are ‘a conglomerate corporation who do not care about actual New Zealanders’.

It was heavy reading for a Friday and I was sad to see them go but that’s life. My parents taught me that 'in life, you’re not going to please everyone' and they were pretty right!

It made me think about how our personal bias & opinion can get in the way of our own growth.

We can become close minded to learning because we don’t hear the things that we want to hear or get triggered by things that we don’t like.

We turn our back on teachers because we don’t agree with something that they have done.

It seems like we’ve continued to move to a world where if we have a bad experience with a company, business, telco, petrol station, influencer, podcast etc. we then have to ‘hate’ them.

Hopefully people are using the word HATE too easily instead of genuinely hating these things. We are all guilty of it, I am no different. Trying to spot it in ourselves when it happens is valuable.

We’ve spoken about this before. What good does hate do for us to learn?

If we become close minded to different ways of thinking it makes it hard to explore both sides of education. It's horrible fuel for creating tension and division also.

These emails are often designed to test some of the ways we think about money and what we have been taught.

Take cryptocurrency for example...some say it's a scam & others say you can't buy enough.

What about Kiwisaver...not everyone thinks it’s worth being a part of because you can do it yourself. Other people think that it is an amazing solution to retirement planning and EVERYONE should be in it.

The key is to work out what works for YOU, not THEM.

Whilst talking Kiwisaver, remember that the 30th of June is the cut off for the KiwiSaver Government contribution of $521.43.

If you are aged between 18 – 64 and have contributed at least $1042.86 to your KiwiSaver fund since 1 July 2020 you will be eligible for the full government contribution. If you are contributing to Kiwisaver out of your usual PAYE salary, this will be happening for you automatically. 

If you haven’t contributed to this level you only have until 30 June 2021 to do so. The government contributes $0.50 for every $1 that you save – to a maximum of $521.43.

The future value of the free $521.43 contribution to a 25 year old, invested at 7.5% per annum, upon retirement is $9,408. The power of this extra money compounding over time can make a huge difference to your retirement balance.

Stay open minded,

Luke

Last week we learnt that roughly 92% of people in New Zealand earn below $100,000.

For those of you that aspire to earn $100,000 from a salary (i.e. not from house prices going up) then you have 8 out of 100 people to look at for clues.

What about earning over $260,000? My word, what would that be like you ask? Well you’ll need to ask the 0.78% of people who do that. Hard to find 0.78% of a person, but statistically there aren’t too many of these people we can seek answers from.

It might not be the $100,000 salary you’re after...maybe it’s a better physique, diet or control of your emotions.

There is a saying that you are the sum of the 5 people you spend the most time with.

You’ll know what I mean, it’s why you keep saying LESSSSHGO when you are heading out for a weekend drink.

We become the product of our environment. We need to be careful of the environment we are in.

Often, with business owners, we see them doing the same thing, year after year. They say they have ‘7 years of business experience’ (this concept goes for people in employment too) but really they have 7x the same 1 years experience.

It is not until they decide that they REALLY WANT to achieve something different that they then have to work out a plan to take action (PLACTION) to help them get there.

They hold the image in their mind of what they WANT which they then visualise and ‘feel’. This then determines their actions, which determine their results.

Think about the results you want to achieve and feel how it would, to have achieved those results. Practice this and see what actions you come up with that you need to take, to get you closer to the desired outcome.

A question for you - are the people you are socialising with earning much the same as you? How do you think that happened?

These days with the internet, it’s easier than ever to surround yourself with the right people. BUT it’s equally as easy to surround yourself with the wrong types of people and content.

Think about a couple of things in your life that you want to improve - it could be finance, health, diet, relationships, faith or whatever is important to you.

Go on social media and FOLLOW two people who you know will genuinely inspire you in that area.

Time for some extra for experts...jump back on social media. UNFOLLOW two people you know that really p*ss you off, drain your energy or make you compare yourself to them.

​I’m waiting….

Still waiting...

You did it? Good work! You don’t want ‘mates’ who make fun of you for investing or wanting more from your life. HINT - they aren’t mates. They are scared of you leaving them behind & scared of losing you as a mate. Re-read that, yeah? Someone needed to hear this….you're welcome.

Remember, we become the product of our environment, so get yourself into a good environment.

Bring people into your life that you want to learn from and be inspired by. First, you need to know what you want - start there!

Change your environment, change your results,

Luke

Getting rich is confusing. There seem to be a thousand different ways to do it.

In New Zealand, the majority of us are taught to get a good education. It’ll give you a good job and therefore a good income. 

Those who apply themselves work their way ‘up the ladder’ and get rewarded with an increase in income. 

But the world has changed...this internet thing has a lot to answer for.

Last week I watched a documentary on a lady in Australia selling images of herself and dating people online. Pulling in a cheeky $1,000,000 most months.

I’m sitting there thinking. Are you serious? You mean these last ten years i’ve spent studying and researching to be a Chartered Accountant and I should have been training to take selfies and nudes? What a world we live in.

I don't think my pillow talk game is strong enough for online dating 'Hey did you know only 8% of Kiwis earn over $100k?' isn't the sexiest sort of chat is it...

I had to turn the documentary off and go back to studying more practical methods.

What about Bernard Arnault... have you heard of him? Well, Bernard recently became the world's richest person.

I know, I know, it wasn't long ago that I told you that Elon Musk was. Things change quickly around here.

Before you go to the Big G of Google and find out who he is, I’ll enlighten you below.

Chances are you’ve tasted a bottle of his champagne, Moët. Perhaps something from his bag collection is in your wardrobe? Louis Vuitton, Fendi, Christian Dior and Givenchy.

(Can we talk about how much ladies spend on bags one day? Or is that off limits? They're an investment I've been told...).

Anyway, these luxury goods are loved by people all over the world. His potential market is HUGE and he can achieve scalability.

Arnault’s fortune jumped from $76 billion in March 2020 to $186.3 billion in May 2021. A rise of over $110 billion in only 14 months.

We don’t really get taught about ‘scale’ in New Zealand. Remember from the top: good education, good job, good income. 

To be fair, it is hard to think about ‘scale’ in New Zealand as we have a population of around 5 million people. Most NZ businesses need to carve out a potential buyer from that 5 million.

Trading your time for money in a job is often not seen as a good vehicle to scalable income - your hope of an increase in income is usually an increase in your salary or hourly rate.

Scale is often why a lot of New Zealanders look overseas to pursue bigger dreams or bigger markets.

I'm not suggesting you level up on your soft core selfie game, but those who are, are learning about the access they have to the worldwide market - huge scale.

Scalability shows us that when property is going nuts, people flock to become real estate agents. Taking a clip of each sale they make, they can scale their income dramatically. 

This is also why people love property investment - they get the hang of one investment and realise they can scale their methodology and get 2,3,4 properties over time. Scalable.

Perhaps you are working on a business idea or a side hustle idea. Have a think about how scalable it is...how many times can you replicate it before you get in the way & hinder the growth?

Scalability requires processes, automation and, of course, a huge customer base to start with.

Think big, think scale.

Easy on the selfies this weekend Jade...once they are online, they are online forever,

Luke

In my accounting practice, we have been having conversation after conversation with business owners & HR experts about finding staff.

The business owners tell us that finding staff is proving extremely testing. Labour supply has been restricted with our borders being closed (fewer workers coming to NZ).

The HR experts tell us that every placement is met with a counter offer from the current employer. What this means is that people are going for jobs and when they get an offer, they go to resign from their job and their current employer offers them more money to stay.

Some big corporates are offering large pay increases to keep staff from moving to competitors.

The simple solution for most employers is to offer staff more money, hoping that they will stay. People enjoy progress & progress in income is no different. They are tempted by the higher pay.

We know that house prices are rocketing up. Our prized possession and goal in New Zealand of home ownership, means people go after a rate of pay in line with the ability to achieve their goal - buying a home.

We can look to the banks to see what their economists predict (take it with a grain of salt as always). On this one, ANZ says that the economy is rapidly approaching “full employment”.

Full employment is when everyone that can work has a job.

ANZ think unemployment will drop from 4.7 per cent to below 4 per cent by 2023. This would be a new 16-year low.

What about ASB? "Difficulty of finding labour and labour as a limiting factor are at record highs.  Labour turnover surged in Q2, evidence that firms are now poaching staff off each other''.

What does that mean for you?

Employers can expect wage pressure from their staff. (See the HR experts' experience above).

The noise on this is getting louder, so much so that I nearly sent this out to you on Monday. 

You need to pay attention to it as there may be an opportunity to speak to your employer and see whether there is room for you to be paid more. You need to think about your last pay-rise.

Remember previously I've said that your biggest asset is yourself and this is the sort of environment where you need to remember that.

Of course, just because something is scarce doesn't make it 'good'. However, scarce labour means more competition, which usually means a bigger cost to secure the labour.

Don’t approach your employer without a well-thought out story as to why you deserve to be paid more. Try to understand what will help them as an employer and what they are trying to achieve.

No employer enjoys a staff member threatening them that they'll leave if they don't get more money.

You need to actually be valuable to your employer to be paid more in value. Have an honest conversation with yourself first - are you worth more in this labour market?

Of course, you could always approach similar employers and ask them what your skillset and experience is worth to them or whether they are hiring. From what ASB said, that is happening a lot so the chances are, they are looking for good labour.

ANZ also reported that job vacancies had risen “way above pre-Covid levels”. This is across every industry. The total number of job vacancies is “well above previous record highs”.

We are in interesting and unusual economic times. I suggest you spend some time thinking about how you can become more valuable to your current or future employers. 

Time to have a brave conversation,

Luke

A few weeks ago, we looked at the new tax rate in New Zealand. The top tax rate in New Zealand is now 39% for income over $180,000.

I also reminded you to be wary of extra income sources. I.e. For those people buying and selling property on the side, for instance, you should be aware that the proceeds from these ventures (and others - i.e. side hustles, buying and selling crypto at a profit) MAY be income and add to your total taxable income.

Well, this week we had this exact scenario and I thought I would share it with you so that you understand how it works.

We had a client contact us with an offer on the table for their rental property. The sale of this property would give them a $186,000 profit....I know...

This is an unreal gain in just over 12 months....especially when you think that the house earnt more than 92% of our taxpayers do in a year.

Now, this client is in the new 39% tax bracket as they earn over $180,000 from their business income.

Therefore, they will be taxed at 39% on the profit of the property sale (should they decide to sell).

The tax on this sale would be $72.5k. This is because they have bought and sold the investment property - it is not their own personal dwelling used for their own use.

The client now needs to decide whether they sell or not. There is a high chance that they won’t sell and that they will do something that won’t trigger any tax.

The client will most likely just hold the property, rent it out and use the extra equity as collateral. I.e. borrow tax-free dollars to spend on what they like (subject to their ability to service the debt).

This has been going on for decades in New Zealand. No doubt you’ve heard the saying ‘Put it on the mortgage’.

That’s how a lot of NZers add extra tax-free income to their household. They borrow against their home for a vehicle, boat, pool or deck.

They receive the proceeds tax free from the bank & spend them on their extension of choice.

Their loan repayments change and they carry on with life. Better still, they are usually repaying today’s spending with future dollars.

BEWARE: this has worked well for people over the last 30yrs with consistently lowering interest rates, BUT rates could go up and debt servicing can become a burden.

Recently, America has been looking at the amount of tax that their mega-wealthy individuals pay & how they avoid large taxes by keeping their incomes low & borrowing money against their assets to spend. There was outrage across the country...turns out home-owning Kiwis are good at it too.
 

This week, we have gone past 4,000 readers. Thank you to all of you who have helped Keep The Change grow past this milestone. There are thousands of podcast downloads now also.

Enjoy the weekend,

Luke

You might remember that last year I became an Uncle for the first time. 

It was my first go at buying gifts for a baby in the family, so I wasn’t too sure what to get.

The Chartered Accountant in me really wanted to get him an abacus.

Instead, I built the new addition to the family, a little share portfolio. 7 shares only. 3 shares made up 60% of the portfolio & the other 40% went to 4 lots of 10% (you love a bit of math).

Well, a year on and I can report to you that he is 33.6% ahead.

I am not too sure I will be writing to you next week as I assume today I will be getting a call to join one of the NZ investment firms. Surely they will want my secrets & to put me on the pay-roll.

The truth is, I just timed it well and bought the stocks when the market was in a slump. I expected that with more money printing (thanks Reserve Bank) we would be well ahead if we waited it out.

I am not the only one though...the Net Worth (assets - liabilities) of Kiwi households increased by more than $400 billion in the 12 months to March 2021.

This increase is nearly as much as the increase of the four previous years combined. Whoopsies, did we just leave those without assets a lot further behind? Yes!

(This shouldn't be a surprise to you smart readers. I think you will hear more about that this week. I need to calmly collect my thoughts before diving into it. We will look at it next Friday).

Of course, these are unrealised gains, aren’t they...they would only be realised gains if the shares were sold and the profit taken.

This year it was a tougher decision. The market is pretty bubbly and, of course, I still have the internal conflict of whether I should get him that abacus? Maybe a calculator?

Perhaps those can wait for a later year when the dividends from the shares can pay for them.

I ended up opting for Bitcoin and Ethereum. Risky, risky stuff you say. I could be accused by some of throwing money away.

Well, given he isn’t of the age to even understand he has these gifts yet, I think we can take the gamble. These 'investments' match his risk profile.

Who knows, maybe they will be teaching kids about crypto at school by the time he gets there.

Given that I like to invest with a 10-year view, I think that this gift may give the little fella a wild ride that we can talk about one day...or he'll wonder what I was thinking and i'll teach him something there too.

Remember that gifts are a big cost for us every year. Birthdays, events, weddings, baby showers, Christmas, Easter, Valentine’s Day, you name it, they are all designed to get you spending. 

Some people build a ‘gift account’ where they allocate some of their income to cover upcoming presents, gifts and events they need to attend.

Other people set 'gift rules' where they have a set limit for what can be spent on a gift. Perfect for relationships and big families. Be practical, not emotional.

Hey before we go...every previous edition of Keep The Change Money Mail lessons are now available as a podcast on your favourite podcast platform. A deeper dive into the week's lesson.

Be gifted,

Luke

Eyes open because the numbers are in & we have an elephant in the room to address.

The net worth of Kiwi households increased by around $417 billion in the 12 months to March 2021  (houses anyone?).

This increase is nearly as much as the increase of the four previous years combined.

Statistics New Zealand released this data last week and it doesn’t make for the best reading when we are trying to close the gap between ‘the haves’ and ‘the have nots’.

You smart readers will remember that Net worth = Assets less Liabilities. It's something that right from Week 2 I taught you and suggested you track month to month.

Well Statistics New Zealand do it for the entire nation and Kiwis just got a good dose of net worth in the 12 months to March 2021.

Alright, let's not beat around the bush and get right into it.

I don’t want to tell you ‘I told you so’ but I did. I have told you time and time again that the money put into the system would have to wash out somewhere. Week 14 ‘What happens to a bubble’ August 2020.

If you don’t have assets, like houses, shares, shares in a business...well, you just got left behind. More so than those who do anyway.

To those of you in that position (especially those without houses), that will be a hard pill to swallow and I am sorry!! I genuinely feel for you.

I don’t set the rules of the game and I know you are trying hard and doing a lot of the right things. I don’t want to make you feel hopeless, so please remember that there is ALWAYS a way and that this is still a country where you can get ahead if you can just find the right path...
 

You'd have to think that the powers that be must have known that this would be the outcome. Studying this stuff is just a hobby for me and it seemed fairly obvious. For some, it is their full-time job. They must have known?

Enough about them, guess what else? Savings rates have dropped too. With such low interest rates, who would have thought? We did! We spoke about this in Week 3 ‘To save or not to save?’ This was June 2020!

Well what happens now?

I don’t think enough people understand what is really going on here, for any serious action to take place - soo uhh probably nothing?

Maybe there is a serious ‘correction’ coming where we have a market crash and people lose a portion of this wealth that they’ve recently gained...could potentially happen, but will the powers that be let it happen? Who knows!

This one has already happened - last year we talked about how you are going to get taxed in the form of inflation and new taxes. I got the inflation bit right (it is at record levels)...
Week 20 (Dec 20) - The hidden tax is prices going up, that’s how every one of us will be taxed. Your income stays the same but your costs go up leaving you with less money.

And taxes? Well unfortunately, I think we had better get real and start talking about some of those soon too.

Because, back to the start, we are trying to create a country where we don’t increase the gap between ‘the rich and the poor’ but yet we’ve done exactly that?

A lot of people suspect this is political but it probably goes further than that into our monetary policy which you don't want to bore yourself with.

The message here (yet again) is that no matter who is in power of our country, you want to make sure you are in power of yourself and your future.

So if you haven't optimised your Kiwisaver, started learning about investing vs savings, set some financial goals, killed some high interest debt, figured out how to increase your income...you have some work to do.
 

Please, continue to learn and pay attention to your finances. We are just getting started.

Be bold,

Luke

Recently, I had a special half an hour on the phone with someone a lot younger than me.

They were now in a position where they were making really, really good money and had achieved a lot of the things they thought might take a lifetime (mortgage free on one property, for instance).

Of course, this person received some good ole fashion Kiwi Tall Poppy chat from others. How dare they do so well? How dare they change? Who do they think they are?

Then there were family criticisms of the new career direction chosen. That’s normal, our family wants to protect us. They don’t want to see you get hurt & they can’t always see what you can see.

This person had to completely change their life to see these results. Change careers. Change habits. Change workloads. Learn new skills. Build resilience. Learn to grind. 

They’ve done exactly that and achieved things they hadn’t previously thought possible. 

Here’s where it gets tricky. There are still hesitations about spending and also worries about money that can’t seem to be shaken. Fear creeps in when making financial decisions.

On the call, we spoke about how the lessons for ‘the majority’ no longer apply or make sense, so we need to let that old education go.

Some of the things learnt when growing up don’t work for this person anymore. ‘Count every cent’, ‘don’t spend money on coffees’, ‘get a job & stay there’, 'don't get too ahead of yourself'.

This person is now operating from a place of abundance, not scarcity.

Those old money lessons are no longer fit for who that person is today. It is time for them to study others who have done the same and have gone further. Ultimately, the same direction this person is now aiming their life toward.

Surrounding yourself with people who have done the things you want to do - they can be your teachers. Not the naysayers and those who don't dare to achieve the things you desire.

We spoke about how you need to start positioning yourself to see yourself as the person you will become and start doing it right now. Not when you get there.

You see if you want to go after change and you want to break the mould, you need to be ready because you will have your own tests like the above.

This person changed their life. Now it’s time to fine tune the operating system they run on. This is possible for every one of us.

I often finish these emails with ‘Be bold’ because when it matters most, you have to be.

Enjoy the weekend,

Luke

Last week, I asked the Keep The Change community how their progress was going with The Five Figure Formula. 

For those of you who didn’t see it, The Five Figure Formula was a challenge we ran earlier in the year, to save $10,000 in 365 days.

Month to month we are tracking the progress and seeing whether it can be done. 

Understanding that it is possible is just as important as what we learn along the way.

The community are an honest bunch of people and we got a few differing responses:

1) Badly, but I'm making changes to get on track.

2) Terrible!! No excuses, I'm going to start again!!

It’s not always easy to keep our money goals on track because….well, life happens. These two are great attitudes though, acknowledging it and getting back on track.

For many people, at this point they give up. This is not the time to give up, it is the time to learn and carry on. Setbacks will come and we need to work our way through them.

3) Brilliant! I love the structure of the spreadsheet, the ability to look and plan ahead for what’s on the horizon. I love that I have been able to plan/challenge myself on spending habits. The weekly emails/podcasts get me thinking, taking notes, learning and implementing new ideas.

Currently, I am planning out how I can pay for Christmas and save each month (paid monthly) so I stay within my means and buy gifts that have meaning/purpose.

I love having my money work for me and being away from temptation.

There have been moments that have daunted me and put me out of my comfort zone (not having savings in a traditional bank account), but I am loving where I am heading.

This is somebody who has followed the process and built on top of momentum from month to month.

This is the key - making progress and then stacking more progress on top of that. Look at all of the things this person has learnt and thought about when sticking to the process.

We all go through money ruts where nothing seems to be going our way when it comes to finances & bills.

Our job is to see these for what they are - temporary ruts and then find ways to get to the other side and start making progress again.

Better yet, if we have an emergency fund or money set aside to deal with these things, we are even better prepared.

Often we can have a ‘bigger month than normal’ OR we miss our savings goal that month OR end up having to dip into our emergency fund OR our investments decrease OR life happens...it goes on and on. 

That’s why tracking your progress over time is so important, because you see the progress you make over a longer period of time and can look back at where you've come from. This can be incredibly inspiring for us - much like the person in comment 3.

Don’t give up when it gets tough. Find a reason to keep making progress. 

Have a good weekend,

Luke

This week the Reserve Bank left the Official Cash Rate the same.

Over the coming weeks we are going to look at who the hell the Reserve Bank is, what the official cash rate is and how inflation is ruining the cost of many things you buy.

Before we get into that geeky material, we will look quickly at low interest rates with a bit more info (we first looked at this in week 3).

Well, what’s the big problem with low interest rates? 

They make it cheaper to get debt, which excites a lot of people who are borrowing, but let’s look at some of the less talked about implications.

• People don’t want to let go of well-performing assets. People have to ask themselves what is the risk of not holding an investment?

Recently, I discussed this exact scenario with an asset owner who was looking to sell up some investments that have gone up in value a lot.

We talked it over for 40 minutes and eventually I got a bit over the excitement and back & forth and asked the question ‘what are you going to do with all that money? Given your experience in assets, surely you’re not going to cash forever?’.

The conversation basically finished. Great question. Because if the asset holder cashes out, what do they do next? This is the concept of protecting your wealth in a money printing environment.

For many who are sitting on assets, they are now realising the bank isn’t so appealing. In fact, our term deposit rates currently mean you end up with less at the end of your term than when you started - remember that inflation thing?

This can slow down people's willingness to sell off assets to their next user. I.e. 'No point selling this second home as the money's no good earning interest in the bank anyway'.

Consider that a lot of the large asset holders are the generation who are used to the bank & ‘safety’ & ‘good interest returns’. Now even the things they learnt are gone. They need to learn now too.

Financial advisors should be the busiest they’ve ever been, as people look for returns that will keep them satisfied.

Now then...it’s time to remember that since 2016 the country has turned 400,000 savers into share investors through Sharesies (a deliberate decision). This is without factoring in those learning about the markets via their Kiwisaver exposure (a somewhat encouraged decision).

I believe this will mean a fundamental shift in our education levels and risk appetites for a HUGE portion of our population. A different way of thinking leads to new actions and new choices. This will take years and years to watch it play out in full.

The thing for the younger people to think about is to not get complacent. The game is always changing and we all need to adapt as it changes. Perhaps interest rates will rise temporarily again and then fall or they might just continue to rise.

Even our parents must keep learning…a lot of them are now sitting on piles of wealth tied up in assets but have watched their cash deteriorate in a bank account, bonus bonds or term deposit and can now actually buy less with the same amount of money.

The banks? They will find a way to benefit. They’ll re-loan houses to the same owner. 

How? Look for things like ‘reverse mortgages’ to start to grow in popularity.

What is a reverse mortgage? Let’s look at Heartland banks offer:

A reverse mortgage allows people to access some of the equity in their home….with a reverse mortgage you, continue to own and live in your home and community for as long as you choose.

Interest is calculated on the outstanding balance and added monthly to your loan. 

This will allow Kiwis to access more tax-free money (by borrowing against assets) for longer periods of time.

Like we said in Week 61: BEWARE: this has worked well for people over the last 40yrs with consistently lowering interest rates, BUT rates could go up and debt servicing can become a burden.

The tricky times are just arriving. Keep learning.

Hey I know this has been a long one, but before you go, please support your favourite hospo joint on the other side of Level 4 - they get crushed in Level 4. If you can afford to, jump online and buy some things you need (as per the 'essential rules' of course) to keep money flowing through the economy, which helps wages + bills to continue to be paid.

Be well,

Luke

The Reserve Bank Of New Zealand. Who the hell are they?

Their name suggests that they are the TJ Perenara of Halfbacks in New Zealand. Ready to step in off the bench if ya Westpacs, ASB’s, ANZ’s, Kiwibanks, BNZ’s, Heartlands all get injured.

Although they do provide these banks with some support when things get dicey, they are also in charge of monitoring and supervising the registered banks.

A central bank (or the Reserve Bank) is there to protect the value of money, keep the system running, keep prices stable and ensure money is flowing through the economy.

They have a number of ways to do this and the one we will look at soon will be the ‘Official Cash Rate’.

The RBNZ ‘was established in 1934, and although not a government department, has been wholly owned by the government of New Zealand since 1936’.

Gee, that's confusing, so our government owns a bank too? They’ve got a bit on.

Maybe that’s how they could ‘print or create’ all of that money during the 2020 lock down to pay out as wage subsidies.

Well, what do they do?

The Reserve Bank is required to ensure that, throughout the economy, money works as well as possible as a mechanism for making transactions, storing value, and keeping account - RBNZ.

I read through their briefing to the Finance Minister & was going to note down some of the points but I know I’ll lose you. You just don’t need that in the week you’ve had...let's go plain English.

You and I bank with the commercial banks who want to make a profit out of us for their shareholders. The reserve bank lends these dudes some money and somewhat controls the interest rates we pay (on debt) and receive (on deposits). 

This is meant to keep the system stable and ensure a prosperous nation. The Reserve Bank are busy tackling problems like unemployment, inflation, innovation & productivity in our economy via money related levers they can pull - such as deciding how much money is actually in supply; yes it can change.

They are independent from the government but the government owns them. Doesn’t make much sense, does it? But I didn’t set it up in 1934, so don’t put that on me. 

Adrian Orr is running the show at the moment: he is the Governor of the Reserve Bank of New Zealand. If you want this job, you basically have to study heaps of economics. He studied at the hearty University of Waikato which shows you don’t need to go to a poncy Auckland Uni to get the top jobs (hey come on Aucklanders, relax, just having you on).

At this stage, I assume you are so fascinated with the Reserve Bank of NZ that you’ll be sending them love letters this afternoon asking if they’ll increase the supply of money to your bank account - unfortunately they won’t do that for you.

If you are intrigued, (I know you aren’t) you can check out their hot pink website here: https://www.rbnz.govt.nz

If anyone is interested, I will be hosting a tour of The Reserve Bank Museum when we get back to Level 1 (I am joking, I think). But legit there is a museum.

During the week, I sat down with Mikey to go through some common questions I get asked about crypto currencies. I am not an expert in this field or suggesting you should buy it, but I am happy to share my experiences with it. You can listen to that on any podcast platform or watch the video on youtube: https://www.youtube.com/watch?v=voBOzqWCwP8

Pray for Level 3,

Luke

Us Kiwis love cars. I live by the port and watch them get unloaded off of boats, get loaded onto trucks and head all around the country.

I get it, I've had a few over the years. Usually I've not paid for these upfront either. I have used finance to buy them. Debt allows us to have something sooner than perhaps we should.
 

Many of us use debt to get into a new vehicle. We get the new vehicle and we repay it over a term of 3 to 5 years.

The thing to watch out for is when you are buying a vehicle you are usually emotional.

‘I love this car’, ‘This car is my favourite’, ‘OMG this will look sick on insta’, are all signs that you are buying with emotion.

What's the problem? Well, it’s only a problem if you don’t know what you're getting yourself into.

When that car dealer pushes the papers in front of you to sign, you are thinking ‘what’s the monthly or weekly payment and can I afford it?’. If it’s a yes, you are signing the docs and getting your a$$ in that whip ASAP.

You’re not thinking about the interest rate, loan fees or the terms of the loan.

I was reviewing a car loan with a client and they didn’t know what the length of the loan was or what the interest rate was. This is pretty common. People just think about the payment coming out of their bank account.

The loan was set up over a 5 year term and at interest of 9.95%. For this client, they actually have the money to buy the car outright. But they did what they thought was the thing to do - borrow money to pay for the car. The contract also ensures that if they repay the loan early they will be charged a fee in the form of a percentage of the interest they would have paid if they stuck to the loan terms.

This client has money in their bank account earning no interest (income) but is paying 9.95% on a vehicle they didn’t need a loan for. The total interest and charges for the loan add up to over 25% of the amount financed.

(The challenge for the client is to use the spare cash they have to generate a return of 9.95% or greater - fortunately, they will be able to do this through their business).

Not everyone is in the position of having spare cash to buy a vehicle, so a loan may be necessary. Before you go and finance something like this, understand YOUR cash situation.

• How much of a deposit can you pay?
• What regular repayment can you afford to make?
• Can you pay off lump sums if you come into some money
• Ask the dealer ‘’what is the total cost of this loan over its lifetime?’’

BEFORE accepting second tier finance through the dealership, at least speak to your bank and find out if they have specific asset finance for a vehicle - it might turn out to be a whole lot cheaper than the rate you’re going to be paying.
(Perhaps consider asking a friend or family member for a loan? There is a lot of cash in the system as we have previously discussed - they might give you a cheap rate). 

Some people prefer to borrow against their house to buy a vehicle. I.e. extend their mortgage. This can often mean borrowing at a cheaper rate. BUT be careful doing this, as if you’re borrowing for a vehicle over a 30 year period, you might end up paying A LOT more for the vehicle than you realise.

If you are going to go down this route of extending your mortgage, then ask your bank if you can increase your mortgage repayments to clear the car debt that you are taking on. We are trying to get out of debt here, not get further in it.

With our business clients, we often suggest taking out debt over the time you expect to have the asset. For a vehicle, that might be a 3 year loan before you get sick of the car and upgrade or change vehicles.

Remember too that there are ALWAYS fees & random charges involved when taking out a car loan.

Example 1

You borrow $30,000 for a vehicle at 9.95% and pay the car off over 5 years (60 months).

The total cost of the car is $38,200 & you're repaying 1.27 times the amount you've borrowed.

(If you paid this off over 3 years, the total cost would be $34,823).

Example 2

You borrow $30,000 for a vehicle at 4.95% and pay the car off over 5 years (60 months).

The total cost of the car is $33,927 & you're repaying 1.13 times the amount you've borrowed.

(If you paid this off over 3 years, the total cost would be $32,344).

You can see how much of a difference interest rates & repayment periods have on the total you ACTUALLY pay for the vehicle. The scary thing is, a lot of people take car finance out at 19.95%. $30,000 at 19.95% over 60 months is $47,639 or 1.59 times the total borrowing.

Both of these examples ignore the set-up fees and charges that loans add on to the true cost of a vehicle. Remember that you are effectively financing these costs over the term of the loan too, because you don’t pay them up front, they add them to the loan.

We can go deeper into this topic, but for now that should really get you thinking! Before blindly signing up for a car loan - have someone you trust review it and explain it to you.

A reminder that you can read all the earlier lessons at the Keep The Change Blog:
​http://keepthechange.co.nz/blog

Be good,

Luke

Recently, we looked at who the Reserve Bank are and this week we are going to look at one of the levers that they pull.

If you’ve got any geeky economics mates, they probably get pretty fired up for ‘Official Cash Rate’ announcements and throw around the acronym 'OCR' whilst you wonder what they are talking about.

Well, the Official Cash Rate or OCR is the interest rate set by the Reserve Bank. It is a lever they pull to support ‘maximum sustainable employment’ and ‘price stability over the medium term’.

This ‘price stability’ is defined as increases in the ‘Consumers Price Index’ (CPI) (you’re kidding, more bloody acronyms) of 1% to 3% each year. Loosely, this is ‘inflation’ because we believe that if prices rise between 1% to 3% each year, our economy will be growing.

The OCR is reviewed 7 times a year by the Reserve Bank but unscheduled adjustments can be made at any time in response to sudden circumstances (like COVID).

The Official Cash Rate is currently at 0.25 percent.

Come on Luke, give me that plain English sh!t please man, seriously.

Alright, so remember Governor Orr from Waikato Uni? He and the crew can change this OCR to help determine what banks will then charge Kiwis when they buy their guilty pleasure - a house.

With a lower OCR, the banks get access to cash at a cheaper rate. Those banks then charge you & I a cheaper interest rate. We then have more money in our hands (instead of paying the bank higher interest) to spend on other guilty pleasures like trim flat white lattes & Gucci sunglasses.

Of course, with lower interest rates, we get less from the bank when we are saving too, so we are more inclined to spend the money and not hold it in a bank account. This often means that assets run up in prices (i.e. houses, stocks, crypto-currencies etc.) as people chase returns they are comfortable with instead of bank interest rates.

It’s all one fine ole balancing act and the above explanation should make it simple for you to understand. 

Whether you are a borrower or a saver, you will want to understand the OCR in some way. 

As an example, if prices of goods in New Zealand keep going up & up, the Reserve Bank may raise the OCR quickly to ensure we all pay more interest on our mortgages and have less money to spend on these goods. This is partly why people love to play the game of fixing their interest rates, instead of floating, in order to get ‘the best’ price & certainty.

They were actually expected to make an increase to this rate just before the big ole delta flew into the country and locked us all down, but that got put on hold.

The Reserve Bank have signalled that they would like the Official Cash Rate to be around the 2% rate. This is a huge jump considering it currently sits at 0.25%.

Whether they can actually do that or not is another story. We can explore this another time.

A reminder that you can read all the earlier lessons at the Keep The Change Blog:
​http://keepthechange.co.nz/blog

Have a great weekend,

Luke

You might remember from an earlier lesson that my business partner & I had a business called Schoolrebates. We helped parents claim back a million dollars from the government.

Many parents didn’t know they were entitled to a third of their school donations back. We made it easy for them to do it online.

This was possible because we can all claim back 33.33% of the donations that we make.

You can claim tax credits for donations of $5 or more when the donation:

• was to an approved charity or organisation
• did not provide any direct benefit to you or your family
• was not given, bequeathed, done or appointed by will or made by way of a full or partial debt forgiveness.

You can submit the receipt of a donation at any time within 4 years of payment. You need a receipt for each donation you want to claim. If you’ve lost yours, don't worry, most organisations keep copies of receipts.

What this means is that you can claim donations you’ve made in the last four years.

Who pays for it?

When we were operating Schoolrebates, there was some misinformation floating around that this affected the schools (or the charity) as they are the ones who have to pay the refund.

This isn’t true. The IRD refunds you the money and there’s a tax law in place to encourage Kiwis to be charitable towards the causes they care about. The government actually ‘provide’ for this by putting money aside to allow for refunds back to those people who donate.

Examples 

1. You pay $1,000 in donations. You can claim $333.33 back.

2. You’ve been paying $1,000 in donations for the last 4 years and had no idea you could make a claim. You have copies of the receipts and had income in all 4 of those years. You can claim $1,333.32 back via the IRD website.

How?

You need to go online to your MyIR account & lodge a donation rebate return. Follow the steps at this link:

https://www.ird.govt.nz/income-tax/income-tax-for-individuals/individual-tax-credits/tax-credits-for-donations/submit-a-donation-receipt

Bit of a brag here...this link or the process didn’t exist when Schoolrebates started. You couldn’t upload a receipt online (in our system you could). You were required to fill out a form, attach hard copy receipts and send them in an envelope to the IRD - maybe why no one did it!!!

Note: there is a limit to how much you can claim back. Your claim is limited to the total amount of income you had in that year. I.e. say you genuinely donated $20,000 to charities, you could only claim the whole $20,000 if you had taxable income of at least $20,000.

Say you won the lotto (which is not taxable income) and donated $1,000,000 to charity. You most likely wouldn’t have the income to allow for a claim of that amount.

If your total donations were more than your taxable income, you can split your donations with your spouse or partner.

That will give you a good solid understanding of how donations (and claiming them) work in New Zealand under our tax rules. If you are interested, there is more simple reading at this link:

ird.govt.nz/donations

Be giving,

Luke

A bit of a one-off email here to bring you some warning. Hopefully you don't need it and I hope this comes to nothing, but as a Keep The Change reader, I want you to be awake.

The problem with New Zealand is we get so caught up in our own sh!t that we forget to see what is happening around the world.

For the last week i've been keeping an eye on China and what is happening with one of their largest property developers (Evergrande). These dudes are the world’s most indebted property developer.

Did you know they are on the brink of collapse? Doesn't sound good does it.

Evergrande has obligations of more than $300bn (yeah that's billions) to creditors and other businesses. They owe more than our whole country does. This could be your first wake up call as to how SMALL New Zealand really is.

Well, what's the big problem? We end up with a thing called contagion where fear spreads and people start to sell off shares related to that potential failure. 

- Is Evergrande just the tip of the iceberg?
- Banks are exposed, insurers are exposed 
- The suppliers to the property sector are exposed (i.e. iron ore)

The big question is whether the government will bail this business out. Will they let it fail? Currently the markets are betting that it is going down. This story has a long way to go.

Over the last week I've been asking business NZ owners, well-educated friends & financial connections about Evergrande & nearly every one of them has wondered what I am talking about.

It's only just starting to come out down here in New Zealand with our mainstream media copy & pasting some of the international articles that are now a week too late to be considered a heads up.

Yesterday I considered selling off some of my shares because I just don't know how this is going to play out. I didn't and have made the decision to ride it out....for now (always stay agile).

Because I know that I still have a good few market crashes and recessions to roll through in my lifetime. This is part of investing. Putting on a life jacket, getting smashed by the storm and waiting for calmer seas to turn up.

Late yesterday, I checked a few of my shares and saw the decline across the board and thought 'here we go'!

On Friday night, whilst you non-Aucklanders were fired up for some Level 2 hospitality, I was watching The Big Short to get myself ready for what could be a hideous crash.

You might want to go and check out the movie 'The Big Short'. It is technical teaching of the HUGE collapse of the real estate market in the USA, put into plain English.

Buckle up! In times like these, I try to remember that there is always someone with WAY MORE at stake than me, so is there someone I can go and learn from via YouTube etc.

Don't just rely on New Zealand for your financial news. You'll only end up learning about property because it's all our economy is built on. You need to go looking for further education. I only learnt about Evergrande because I went looking.

If you are looking at your shares, crypto or Kiwisaver this week, it could be all over the show and this is probably why.

It's going to be an interesting week. Try not to do anything rash!

Be bold,

Luke

Well, it certainly was a rocky start to the week but we seem to have come to some calm now.

There were huge concerns that an Evergrande property bust in China could cause a worldwide ripple impacting all markets. This has been brewing for months, and really for those researching close enough, years.

They are just like you & I...they have debts & they have a timeframe for when they need to repay them. They admitted last week that they cannot sell off assets quickly enough to repay their debts.

At the moment, it looks like they’ve been able to delay the crisis with an announcement that they can meet their immediate interest payment obligations.

Even if the worldwide crisis has been delayed or avoided, people still do get burnt (like the shareholders) and there is still the concern of the overall slowdown of China. It's pretty important to us down under as China accounts for roughly 30% of exports and 40% of Australian exports.

Where do you think 90% of those logs on trucks are going, when you're stuck behind them in the car freaking out they are going to fall off the back?

Also, decisions get made based on ‘contagion’ which we spoke about on Tuesday.

As an example, we saw one of our Kiwi property companies postponing a $250 million capital raise for office buildings due to fears of Evergrande contagion.

I got a message from a reader who had been following the Evergrande saga for weeks and they were nervous about it causing a big hit to their Kiwisaver.

They decided to move their Kiwisaver out of the aggressive fund it was sitting in (with a lot of worldwide exposure) and put it to ‘cash’ with effectively 0 risk.

Why were they doing this? Surely they aren’t trying to 'day trade' their own retirement balance?

Thankfully they aren’t. They were trying to protect a deposit for a house.

This person will soon be withdrawing from their Kiwisaver to buy a property and no doubt they’ve done their calculations on withdrawing ‘x’ amount. 

If a worldwide sell-off comes in & wipes out 20% of that, they’ve got to find 20% elsewhere.

This is why I continue to remind you that you need financial goals and your actions need to map back toward achieving them.

If you’re soon looking at buying a home and using your Kiwisaver, you’d want to be more alert to the risk of your portfolio compared to someone who doesn’t need their Kiwisaver for 30 years.

This is often how these big shocks sneak up on us. We aren’t awake to the fact that risk is just around the corner. We are busy doing our day-to-day lives and all of a sudden it seems to just come out of nowhere.

If we take it to a micro example, a shock dentist bill can cause a money crisis and ripple through your personal financial situation, stress levels and short-term decision making.

Better to be prepared for something like this so that the ‘crisis’ doesn’t feel as impactful when it arrives. Have you got your emergency savings sorted?

Back to Tuesday's topic of educating ourselves...I invest across 5 different investment platforms and I didn’t see communication from any of those platforms about Evergrande until one finally got something out on Tuesday night. Meanwhile, this situation had been bubbling for weeks.

Remember that these platforms are great and make it really easy to invest, BUT they aren't optimized to provide you with education and advice, they're optimized to build revenue.

This is part of the reason that the traditional financial space has been disrupted and everyday investors are accessing their financial information increasingly via smart internet channels and reputable experts from all over the world.

Your financial future will still remain your responsibility. The information & access is there for all of us now, not just for those with millions tied up in investment accounts.

Eyes open,

Luke

Coming to you on this beautiful Level 3 Friday during mental health awareness week.

I hope you’ve had a good week and have done something to boost your mental and physical health.

This week I rang an electrical company who had a van parked across from me with the lights left on. I gave them the heads up and they sent someone to turn the lights off in the van. How much does a flat battery play with your mental wellbeing? 

These little things cause us stress and can derail an otherwise brilliant day. We know that money causes stress, anxiety, worry and arguments for a lot of people too.

Last week we talked about how financial shocks are stressful, especially when they are unexpected.

For some of us though, we just feel like we are in too deep.

Surely we’ve all had that feeling at some point in our lives where we just think all of the solutions seem too practical & they are going to take too long. It stops us from even starting. What’s the point?

Who worries about money? Guilty. You know it is really really common for us Kiwis?

The worry cycle is a dangerous one because most of the time the worry doesn’t eventuate to the level we are thinking it will or we forget it is something we can get back in control of.

Like last year, I want you to pick something money related, that is causing you stress or overwhelm and make a commitment to deal with it. Do something about it TODAY.

Make some progress toward solving it. We want to get ourselves to a point where we have to worry about money less and less and less.

I want to help someone who is struggling with debt and you've got yourself into a bit of a mess with it. It’s playing on your mind and consuming more of your thinking than it should be.

You might be lacking a pathway out of debt or just want to make sure you are on the right track.

You and I will record an anonymous podcast of your debt situation and create a plan to get back on track and get in control of it.

Who knows who we might help? There will be plenty of Kiwis in the exact same position, so let's create a podcast of hope and build a plan for others to follow.

Who’s brave enough to get in touch with me? If that is you, drop me a line with a bit about your situation and we can go from there.

Now a reminder that we are on the pathway toward 5,000 readers.

When we hit 5,000 subscribers to Keep The Change, I am going to give one lucky reader a $500 investment.

You might want a Sharesies giftcard or perhaps a bit of bitcoin? That will be up to the winner.

To enter:

• ​Be a Keep The Change subscriber when we have 5,000 subscribers
• Open the Friday email that goes out after we hit 5,000 subscribers

How you can help:

• Get a friend to sign up - forward them this link:  www.keepthechange.co.nz/moneymail
• Share a Keep The Change post on your instagram story (please tag us)
• Post about Keep The Change on your Facebook / social media (please tag us)

Look after yourselves,

Luke

I found my person in debt...in fact, I found a number of people in debt. It was great to see so many people brave enough to reach out and offer to be the person I recorded a podcast with. 

Unfortunately, I couldn’t get back to each of you in detail, but hopefully the podcast I did record will give people a framework of things to think about.

For those who missed last week's episode, I wanted to record a podcast with one of his Keep The Change readers about the stress of debt and how it impacts them every day.

The person who got in touch thinks about debt and money within 20 minutes of waking up every day. 'The stress is huge, I'm keen for help' were their exact words.

We went through their background and how they came to be in debt as well as some ways to get back in control of it.

By the end of the podcast, they admitted that just talking through the situation gave them some peace of mind. A plan gave them direction & they knew what actionable steps they needed to take.

Simply having a plan and knowing what we need to do is often the starting point of huge PROGRESS. 

PROGRESS = happiness. Make progress when it comes to clearing debt, investing or storing money.

For you, this might mean decreasing a credit card limit and the access to credit that goes with it. Instead of just paying money over onto your credit card, that you end up spending again and again and again. Repeating the cycle rather than actually making progress.

This podcast is a worthy listen for all of us who find ourselves juggling multiple forms of debt in our personal lives.

Spotify

https://open.spotify.com/episode/3BniKf0ltEB1fJdi0AJPLM?si=2n3WQUhkRhyoLs0cyAnuAA&dl_branch=1

Apple

https://podcasts.apple.com/nz/podcast/case-study-the-debt-stress-is-huge/id1568386864?i=1000537344567

Start by writing down all of your debt and eyeball it. Actually, come to terms with the debt that you have (this is why I suggest completing your financial position monthly).

Rank your debt in order of importance. The most important may not be the largest. It is most probably the debt with the highest interest rate.

You need to know what rate of interest you are paying on each piece of debt Jade.

Now we need a plan to kill this debt. There are 'hacks' in this podcast, but unfortunately, killing debt usually means lifestyle changes and sacrifices. These annoying things called changes.

Remember that debt is a number on a page - you gave it the emotions that you now feel. Those emotions are a choice, you can unwind them.

Reminder - when we hit 5,000 subscribers to Keep The Change, I am going to give one lucky reader a $500 investment.

You might want a Sharesies giftcard or perhaps a bit of bitcoin? That will be up to the winner.

To enter:

• ​Be a Keep The Change subscriber when we have 5,000 subscribers
• Open the Friday email that goes out after we hit 5,000 subscribers

How you can help:

• Get a friend to sign up - forward them this link:  www.keepthechange.co.nz/moneymail
• Share a Keep The Change post on your instagram story (please tag us)
• Post about Keep The Change on your Facebook / social media (please tag us)

Have a good weekend,

Luke

In 1971 there was an Act introduced called the Unclaimed Money Act. Cheers for the legal lesson Luke but I ain’t tryna be no lawyer.

Relax & stick with me because you might have some ‘unclaimed money’ waiting for you to claim.

Unclaimed money is money left untouched by its owner in organisations like banks, insurance companies, power companies or an old employer. It is usually amounts over $100. 

The length of time that passes before money becomes 'unclaimed' is generally 5 years. 

After the organisation has been unsuccessful in trying to find you to return your cash, most unclaimed money is transferred to the IRD, the Public Trust or the Treasury.

More plain English please Luke, seriously. Alright, say a phone company owes you money and they don’t have your new bank account number to refund you and they can’t get in touch with you, they will most probably hold onto the money for some time and then give up.

From here, they may pass the money to the IRD to hold onto, in the hope that one day you read an email like this and go to search if you’re owed anything.

Once the money has been passed to the IRD, it is published in a searchable database. You can search this database at any time to see if you are on there.

Money stays in the database for no longer than 25 years. If no one claims the money in this time, it is removed from the database and no further claims can be made.

Take 2 minutes out of your day to search whether you are owed anything. Could come in handy right now...

Link here, scroll to the bottom:

https://www.ird.govt.nz/unclaimedmoney/claiming-unclaimed-money/search-the-database

IF you are in the money (or out of pocket depending how you look at it) then you will need to complete an application process to ensure the unclaimed money is actually yours. This will take you a few minutes, but perhaps it will be worth it!

I put out a teaser of this content earlier in the week & I've already had a couple of people message me who have claims lodged for unclaimed money from power companies. Have a look for yourself & your family members. (Don't forget to check maidan/married names).

Speaking of unclaimed money….there was a thing called Bonus Bonds that we spoke about many months ago. They were basically the worst returning investment invented, but anyway people loved them as they mixed safety with gambling (which usually doesn’t go together).

Bond holders were in a monthly draw for a big money prize. ANZ ran the fund and recently wound it up as interest rates declined. They are currently trying to track down and repay every bondholder.

They were a popular gift from parents and grandparents to children. A LOT of kiwis had these things and some don't even know that they did.

You might want to check whether you have an online account or whether someone gifted you bonus bonds. If this rings a bell and you don't know if you've got some, then perhaps drop them a line or give them a call.
 

Bonus Bonds: 0800 266 3743 https://www.bonusbonds.co.nz

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Last week we introduced a way for people to be able to support Keep The Change from as little as $5. This was due to people asking how they can support this content to go further. Thank you to those people who have done so.

Contributions are used to get previous episodes in front of people on social media and hopefully signing up to learn.

You might even want to contribute with a topic you'd like to learn about or provide feedback on how Keep The Change has helped you.

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Take a look at it,

Luke

In 1971 there was an Act introduced called the Unclaimed Money Act. Cheers for the legal lesson Luke but I ain’t tryna be no lawyer.

Relax & stick with me because you might have some ‘unclaimed money’ waiting for you to claim.

Unclaimed money is money left untouched by its owner in organisations like banks, insurance companies, power companies or an old employer. It is usually amounts over $100. 

The length of time that passes before money becomes 'unclaimed' is generally 5 years. 

After the organisation has been unsuccessful in trying to find you to return your cash, most unclaimed money is transferred to the IRD, the Public Trust or the Treasury.

More plain English please Luke, seriously. Alright, say a phone company owes you money and they don’t have your new bank account number to refund you and they can’t get in touch with you, they will most probably hold onto the money for some time and then give up.

From here, they may pass the money to the IRD to hold onto, in the hope that one day you read an email like this and go to search if you’re owed anything.

Once the money has been passed to the IRD, it is published in a searchable database. You can search this database at any time to see if you are on there.

Money stays in the database for no longer than 25 years. If no one claims the money in this time, it is removed from the database and no further claims can be made.

Take 2 minutes out of your day to search whether you are owed anything. Could come in handy right now...

Link here, scroll to the bottom:

https://www.ird.govt.nz/unclaimedmoney/claiming-unclaimed-money/search-the-database

IF you are in the money (or out of pocket depending how you look at it) then you will need to complete an application process to ensure the unclaimed money is actually yours. This will take you a few minutes, but perhaps it will be worth it!

I put out a teaser of this content earlier in the week & I've already had a couple of people message me who have claims lodged for unclaimed money from power companies. Have a look for yourself & your family members. (Don't forget to check maidan/married names).

Speaking of unclaimed money….there was a thing called Bonus Bonds that we spoke about many months ago. They were basically the worst returning investment invented, but anyway people loved them as they mixed safety with gambling (which usually doesn’t go together).

Bond holders were in a monthly draw for a big money prize. ANZ ran the fund and recently wound it up as interest rates declined. They are currently trying to track down and repay every bondholder.

They were a popular gift from parents and grandparents to children. A LOT of kiwis had these things and some don't even know that they did.

You might want to check whether you have an online account or whether someone gifted you bonus bonds. If this rings a bell and you don't know if you've got some, then perhaps drop them a line or give them a call.
 

Bonus Bonds: 0800 266 3743 https://www.bonusbonds.co.nz

Keep The Change Update

Last week we introduced a way for people to be able to support Keep The Change from as little as $5. This was due to people asking how they can support this content to go further. Thank you to those people who have done so.

Contributions are used to get previous episodes in front of people on social media and hopefully signing up to learn.

You might even want to contribute with a topic you'd like to learn about or provide feedback on how Keep The Change has helped you.

Contribute: http://keepthechange.co.nz/contribute

Take a look at it,

Luke

Today is exactly one year on since I made my first bitcoin purchase. (Not a whole one, you do realise you don't have to buy a whole one, right?).

The $3,300 is now worth $15,100. Pretty decent return, huh?

An $11,800 unrealised gain. I haven’t sold it, so as you know, this is an ‘unrealised gain’. It would only become a realised gain if I were to sell & bank the profits (which I would pay tax on).

It’s a great feeling. You probably think that it’s a great feeling due to the fact that I’ve made $11,800 on paper?

Well, that’s great, but it’s not really about that. It’s more about trusting my instinct, research and then having the courage to do something about it...turning those thoughts into action.

I will take you back to the money mail lesson 23 where I explained why I bought bitcoin:

...again, money is following attention and bitcoin is on the way up...

Money follows attention...As it gets more attention will it increase in price?

It’s not all over my Facebook feed yet so maybe the bandwagon isn’t full or maybe I am just a fool? Probably a bit of both but for me, I am purely gambling - with real money. An amount I can afford to lose though, and at the same time, I am learning.

Whatever you do, don’t go and put all your money into a crypto-currency. For me, this is about diversifying and extending my knowledge of ‘digital currencies’.

A year on and I can say that I have learnt A LOT about the economy, money, digital currencies and my emotions when the price swings.

Unlike university, which cost me a stack of cash, this learning has just cost me my time & if I were to sell today, I would actually have been paid to do it.

This ‘gamble’ or investment (whatever camp you sit in) has helped me beat inflation too. We will discuss inflation next week.

You’re probably thinking that the $11,800 gain isn’t life-changing and you’re right. The person who just won $40million tax free, through Lotto is unsubscribing right now whilst laughing at my $11,800 taxable gain.

The amount of money might not be life changing as such, but here is what is:

In my work, I help business owners build out plans and set clear actions that they have to take.  As they start to take action & achieve their goals, I like to ask them if it’s improved their confidence. They all say yes. 

Doing the things we say we will do and achieving the things we set out to achieve gives us great confidence.

I haven’t found many things more rewarding than seeing people increase in confidence. If you’ve ever coached someone or helped a friend become more confident, you will know exactly what I mean. It is literally, life changing.

You can’t go and buy confidence off of the shelf. Finding ways to build confidence in ourselves doesn’t seem to be a part of the education system either.

For me, when I expect something to happen in the future, & I take actions that reflect that (i.e. more people paying attention to bitcoin & the price increasing) & it happens, I improve my confidence.

That has a huge effect on other areas of life, including the decisions I then go on to make and the ability to trust my decision-making process, my strengths and my intuition.

That might sound pretty deep, but I think we live in a time of an inability to make decisions for ourselves, low self-esteem, low self-confidence and a desire for external validation when it really starts inside us.

I was taught that if you want to improve your self-confidence and trust in yourself, then you must start by doing the things you say you will do.

When we don’t do the things we say we will do, we reduce our self confidence and erode our ability to trust ourselves. I.e. not saving money when we said we would, spending when we said we wouldn’t, or not getting up when we said we would.

We are in control of our own self-confidence whether we like it or not. It is no one else's job but ours to build this and improve it.

NOW...it’s not all sunshine and rainbows, is it? I haven’t cashed out the bit of bitcoin I bought a year ago. I’ve actually purchased more over the last 12 months, confident that my thinking is right and that more attention will come to this space and money will follow.

I am aware this can swing dramatically but I am in a position to ride that out or accept that it all could go to zero. I have put serious thought into why I am doing this and how I am treating the money I have in it. 

If it crashes would I lose my confidence? No, because my initial thoughts and research have been proven accurate…money has followed attention.

I’ve made the decision not to sell and that is based on new learning and expectations - again, I get to see if I’ve done the work to be correct.

I would encourage anyone ‘gambling’ on this **SCAM** to do their research in order to be better educated when you talk to people who tell you that that is exactly what you are doing.

Before going and putting your money in a crypto-currency (or any investment), ask yourself why?

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Learn to be confident in yourself. It is life-changing,

Luke

Last year, we talked about how you and I were going to get taxed in the form of inflation and it is here, BIG TIME!

Statistics NZ tells us that annual inflation jumped to 4.9% in the September quarter. This is the highest level of inflation we have seen in over 10 years.

Some people say it’s actually the largest in 13 years, as 10 years ago we had an increase in GST which increased prices artificially.

Anyway, this puts inflation almost 2 per cent above the top of the Reserve Bank’s target. Remember that the Reserve Bank targets inflation between 1-3% (you can see earlier Money Mail lessons at www.keepthechange.co.nz/blog).

Inflation is the rise in price levels in an economy. Want plain English?

• Veges are up 19% in the quarter
• Transport costs are up 4.2% in the quarter
• Petrol is up 22% for the year (yet no one's going anywhere?)
• New house construction costs are up 12% for the year

It gets worse...data shows us that the cost of living is rising faster than our wages are increasing. That means we are going backwards because our wages aren’t increasing fast enough to keep up with price increases.

These are all comments ‘in general’ and you may not feel it yet as you may have had a good pay rise, benefited from a house price going up or you might not buy some of those goods that are going up in price.

Inflation is worth understanding and thinking about for all of us because we can take actions to combat it.

For instance, recently I moved some of my investments to shares which are paying a 5% plus dividend because they will help me weather the inflation storm.

Your term deposits and bonds, for instance, are going backwards. It’s a negative ‘real return’ as the interest paid on the term deposit (some are 3% now (before tax)), isn’t enough to keep up with the rate of inflation & rising costs.

Sure, they may be stable but your purchasing power is being eroded.

Got a mortgage? (Or any debt). You could see higher interest rates as interest rates increase in order to decrease the disposable income you have available to spend on lattes.

A lot of the above is a consequence of printing so much money and putting it into supply whilst we decrease our ability to produce as many goods as usual (lockdowns anyone?).

This situation leaves us with more money chasing the same goods, in turn driving the price up.

Then there is the concept of this set of price increases being ‘transitory’. That means that this high level of inflation will pass and we don’t need to worry about it too much. Just suck up ya $8 tomatoes for now.

Of course, you know as well as I know, that when prices start rising for things we all need, you don’t often see them coming down do you? Wouldn’t mind $2 petrol again!

Surely there is a silver lining? Well, if you took out an interest-free student loan years ago and are now paying it off with today's inflated dollars, it is effectively cheaper for you (if, you've got the ability to repay it).

Inflation looks like it is going to be something we are all going to learn about over the next couple of years, so take some time to understand how it could impact your situation and decide what things you could do to decrease the impact.

Here is a bit of extra reading if you want to look at ideas & ways to 'inflation-proof' your life:
https://www.stuff.co.nz/business/money/126459826/heres-how-to-inflationproof-your-life

Month End: It's month end Jade...you know what that means. Time to review last months spending and forecast the next couple of months (very important with Christmas coming up). Then you need to work out your financial position and check your progress to your goals. If you are new here and have no idea what we are talking about, then go back and read the first two weeks in the blog. 

You can grab a copy of the month end spreadsheet with worked examples from the KTC template folder below. Download or make a copy.
https://drive.google.com/drive/folders/1djmETm-76k4gEwb9EupQ_Hx0x4BtGT0Y?usp=sharing​

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Stay afloat,

Luke

We are 80 weeks deep and recently I have been getting some amazing feedback. It is great to see and hear so many people taking action that is improving their situation - keep it up, love it!

 Well Aucklanders, how happy are you? You can finally get out of jail and get around the country.

For some of you outside of Auckland, you are probably keen to tune straight out. JAFAS and all that.

Fair enough, I’ve come from a small town and I tell you what, if you smile at some Aucklanders like you would in a small town (i.e. being friendly), they look at you like you’ve given them COVID.

Some of them are probably loving the fact that they have to wear a mask and don’t need to show any emotion but anyway we aren’t just here to beat up on the 09ers.

We are talking about how important it is for the country to be moving freely and what this leads to.

Within a couple of hours of border announcements, I had flights locked in to go to Mt Maunganui to go down and complete some work for the day.

Here are a few costs that pop straight up when we all need to travel:

• Flights,
• Fuel,
• Parking,
• Eating

By the time we are done for the day, this will mean money flowing through the economy and a happy business owner with clarity for their business in 2022.

Outside of business, people all over the country will be booking travel and trips that they haven’t wanted to do for fear it would be a waste of time. (PROTIP: only book travel arrangements that guarantee a refund or have a policy around cancellations).

People need certainty and without it, people struggle to make decisions.

People don’t make decisions when they don’t have all of the information they need to make a decision. If you’re ever struggling with a financial decision, you can always ask yourself ‘what information do I need to make a decision?’. 

That is what you need to go and find the answer to, not to ‘think about it’. What people are saying when they say they will ‘think about it’ is that they don’t have all of the information they need to make a decision.

Now that we have the information that the borders will be open domestically, more people can make decisions.

There will be a lot of pent-up demand all over the country that is about to be spent in the economy.

This effectively speeds up the velocity of money. What the hell is that you ask?

It is a measure of the number of times that money is used to purchase goods and services within a certain time period. 

This is important as the speed of money exchange is one of the variables that determine inflation. 

We all know that we have plenty of inflation and this pent-up demand could really get Kiwis spending and spending quickly over the summer months - making the most of their freedom, just in case it gets taken away from us again.

Add the mad Christmas rush to this and we are going to see some serious cash moving through the economy. More money chasing fewer goods!

Don’t make the mistake of searching for Christmas presents too late as you might be relying on Santa to bring them to you instead!

I would suggest getting any Christmas shopping done ASAP in order that you don't miss out on getting the goods to your door before the big day.

For some of you with kids, you may notice that toys are increasing in price at 30% at the moment. You might want to protect yourself from further price increases by getting 2022 birthday presents or Christmas presents early.

 Plenty for us all to think about as it doesn't look like inflation is leaving us for a while.

Have a good weekend,

Luke

Ahh the ole term deposit. What are they?

A term deposit is a type of deposit account usually held at a bank, where the money is locked up for a set period of time and returns a set interest rate.

You get paid the interest for effectively lending the bank money.

A bit like a savings account that you can’t touch. You pay tax on the interest you make too don't forget that.

Historically, these have been very popular products because it’s easy money and simple for people to understand.

As interest rates have decreased, these have become less popular because the return is so low. Hence the growth of the likes of Sharesies where people are chasing a larger return.

What does the bank do with the money? Probably lend it back out for people to buy homes.

This week I heard from someone that they went to break their term deposit. 

Breaking the term deposit happens when you ask the bank for the money back early. I.e. before the time period ends that you originally agreed to lend the money to them for.

Sometimes, the bank then charges you a fee for breaking the term deposit & usually you forfeit any interest you had accrued. A lot of term deposits pay interest at the end or ‘upon maturity’.

Then this person had to justify to the bank why they wanted the money. In this instance, it was to help a family member get into business.

Guess what? No can do. The bank didn’t have any part of that. That wasn’t an approved reason to return term deposit money early.

This week we are putting the did you know into the body of the email...

Did you know: Banks do not legally have to allow customers to break term deposits, that is, give back the money early. 

Whether you can break your deposit will depend on the terms of your contract with the bank. In most cases, you can do so only if the bank agrees.

Back to the situation above and it is good news...the bank did offer a solution. An overdraft at 10% interest until the term deposit matured (could be released).

A bit of a costly solution, but a solution nonetheless.

Obviously, the whole point of a term deposit is to lock up the cash so that you can’t spend it, but let this be a lesson as to how liquid that term deposit may actually be should you need the money.

Different circumstances create different results, so some things will be acceptable to the bank whereas others clearly won’t.

We don’t seem to like seeing money go toward business in this country (unless it’s secured by a house) so it’s not a surprise, but beware there are T&C’s when using term deposits.

Always read the terms and conditions when using these offerings and ask questions before committing to them. You don’t know what you don’t know.

Maybe we can have a bit of fun and, before committing to a term deposit, ask the bank what they are going to do with our money? ;).

Before I go, I hope you opened this before one of the 894 black Friday sales emails and adverts you'll see today. Be careful. I've told you before, these sales aren't designed for you, they are designed for the sellers. We just take the bait and 'take advantage' of them.

Do you really need that 5th candle or that 'discounted' overpriced pair of shoes?

Lift it, only buy the things you really need.
 

Have a good weekend,

Luke

Every month I read an article about how median house prices in New Zealand are up by some ridiculous amount. I've usually seen an article about how house prices are about to come down too.

It seems like the housing market can’t stop and won’t stop.

The average value of NZ homes increased by $17,227 in November. The average value is now $987,401, according to the CoreLogic House Price Index.

Over the year to the end of November, the average value of New Zealand homes is up $218,388

That is nuts. Anyone on a $180,000+ salary in New Zealand is paying 39% tax on the income over and above $180,000.

You're about a 2% chance to have a personal income of over $180,000.

Most of these, on paper, housing gains will go untaxed. ''You beauty'' some of you will say.

Here’s where it isn’t great...I got a message last week from a mate who won’t have a job in a childcare centre soon. Not enough staff were willing to get vaccinated, so the centre is closing.

I said, 'surely the business owner wants to keep the joint going'? Nope. Sell the property that it is run out of & make a mint on the gain, which would be better than the profits of the childcare centre anyway.

My mate's words were ‘why work when you can get rich on property?’.

He is partially taking the p!ss but it is a mindset that many adopt. And hey you do you, right?

Given your a 2% chance of making a $180,000 salary in NZ but a better chance of making that gain via a house (tax free), perhaps he is right?

I’ve never got the fascination of not wanting to work, but I’ve been lucky to enjoy my work and also hate sitting still for too long, so I may be biased.

We love our houses us Kiwis, so it is no surprise that money has poured into the market. Especially with huge amounts of borrowing allowed and low interest rates aiding the borrowing.

Things are going the other way as interest rates look to rise though, and we will get to that.

But firstly, what about the sharemarket? It’s not as popular as the housing market and Craigs investments tell us that NZ share prices are down slightly in 2021 and are only 7% above pre-COVID levels, in contrast to house prices which have been up 40% since the end of 2019.

Westpac tells us that ‘’…since March 2020, reductions in borrowing costs have put around $380m back into households’ wallets each quarter. 

At the same time, household balance sheets have been boosted by a 40% rise in house prices over the past 18 months…those developments have super- charged household spending over the past year. 

Household debt levels have also risen rapidly over this period: New Zealand households are now carrying debt that’s equivalent to 169% of their disposable income, with most of the rise related to mortgage debt on owner-occupied or investment properties’’.

To keep it simple for you, money has been cheap and we’ve spent it. Then we’ve borrowed against the rises in our home prices and spent that too. More cash in the pocket. That wasn’t enough, so we took on more debt and then spent that too. (Making sense why we have inflation?).

But interest rates are on the rise, so house prices ‘should’ level out and maybe even some people return money to things like term deposits instead of housing investments.

With higher interest rates, borrowers are going to have less disposable income and less ability to finance debt.

However, something is lurking in the background and it’s this C-19 thing that I believe we haven’t truly had yet. No one seems to mention this, but as a nation, we haven’t actually had C-19 run through our country in terms of high levels of cases and lots of people being sick.

Sure we have had some cases, but what about when it really spreads? We don’t yet know for certain how our country will cope and what our leaders will do to combat it.

Oh then there is the new variant thing...that probably won’t be the last one, right? (DISCLAIMER I quit science classes in school as soon as I could, so I may not be qualified to guess that a virus mutates).

Hopefully we’ve dodged a bullet, but if we haven’t, I suspect you’ll see more money printing and a very complicated situation about what we do with interest rates when the economy is actually slowing and people are spending less, whilst inflation lingers around.

That’s why our lovely politicians keep conditioning us with ‘‘it’s not a lot of debt compared too…[insert other countries' name here]’’ so that they can falsely lead us into thinking printing more money & creating more debt isn’t a problem & won’t have consequences because ‘comapred to ….’ we are still not as bad as them.

To put it into 5 words: we are addicted to debt.

I don’t think alcoholics anonymous accept an alcoholic telling them that they have everything under control because compared to one of the other AA members, they got sloshed less times than them last week.

When it comes to politicians & debt, get used to hearing ‘but compared to…’. You can't unhear it now. Side note - they all say ''what I would say is'' a lot too, keep an ear out for that.

We are all running our own race and should be building out our destiny based on how we want our future to look. Winners focus on winning, losers focus on winners. In our case we are focusing on and comparing ourselves to other losers.

The destiny we are continuing to build in New Zealand is over inflated house prices and a huge division between the ‘have a house’ and the ‘haven’t a house’.

Can it all come crashing down? I think it will have to be a world event that really rocks our little boat; like a collapse of the Chinese property market or a capitulation of the US economy.

But really as I have explained before, everyone is guessing so just enjoy the ride and together we will learn to find a way through.

Have a good weekend,

Luke

Last year we were talking about how Kiwis were getting huge household pay rises due to interest rates decreasing.

This year, inflation is here and the Reserve Bank is trying to do something about it.

Let's dig into it and see how it works and what the flow on effects are.

 Huge pay cut expected for a number of Kiwis in 2022.

There are two things Kiwis love to gamble on - one is Lotto ($1bil a year) and the other is mortgage interest rates.

Kiwis are obsessed with ‘locking in’ the best interest rate and playing the ‘will they go up or down’ game.

In 2022 this means billions & billions (fair bit more than lotto) of dollars of debt will roll off their current locked in interest rates.
 

Reserve Bank data suggests that $227.8 billion in mortgages are either floating or due to roll over in the next year.
 

"This equates to 71% of all lending – a lot of funding which, when refixed, will likely lead to greater mortgage repayments & less disposable income." - CoreLogic chief property economist Kelvin Davidson.

Put simply: these loans will need to be re-fixed at a new, higher interest rate compared to last time they were fixed.

 The pay decrease - the increase in interest paid to the bank leading to less money left in the household for spending.

This is money that, in 2021, has been flowing into cafes, art, cars, online shopping, clothing & so on. 

Westpac tells us that ‘’…since March 2020, reductions in borrowing costs have put around $380m back into households’ wallets each quarter.

Remember from last week that household debt levels have also risen rapidly over this period: New Zealand households are now carrying debt that’s equivalent to 169% of their disposable income.

The Reserve Bank has signalled increases in the Official Cash Rate which raises interest rates that we pay and encourages less household spending in order to try and put a lid on inflation.

I.e 
OLD $600,000 debt at 2.5% = $15k int. per year
NEW $600,000 debt at 4.5% = $27k int. per year
Pay cut of $12k (a net salary decrease) per year.

Of course, this needs to be paid for out of after-tax income.

If this impacts you, do some sums early and be smart about your exposure to debt and when you may be likely to be exposed to larger interest rates.

Start planning what the decrease in household income is going to mean for your budget.

2022 is going to be an interesting year with less money being spent in the economy that a lot of businesses will be relying on.

Last year we were asking whether consumers would use their extra cash (due to interest rate decreases) to pay down debt? The answer looks to be no, according to the data above from Westpac.

This year the question is, will consumers change their behaviour with rates rising? Or will they seek credit cards and the likes of after-pay to continue to maintain their spending habits?

In 12 months' time we will know.
 

In the meantime, on Tuesday night at 7pm, we are going to dive deep into a stack of ways that we can all make more money and why we may want to do that.

This is how we learn to get back in control of some of the things that are happening out there.

Tuesday 14th December 7pm - pop it in your calendar.

Topic: The More Money Webinar
Time: December 14th, 2021 07:00 PM Auckland, Wellington

I am inviting you to a scheduled Zoom meeting:
Join Zoom Meeting
https://us02web.zoom.us/j/81162451652
 

Have a good weekend and I will see you Tuesday night,

Luke

Welcome to what will be one of the last weeks of work for a lot of you...you made it!

This week I have a bit of a random thought that I have been pondering and recently posted on social media. I know some of you will have missed this.

The current minimum wage in New Zealand is $20.
2,080 hours per year (52 weeks x 40 hours) = $41,600

It has not yet been announced what the minimum wage will be moved to from the 1st of April 2022. Perhaps it will stay the same...I doubt it when prices have been rising so rapidly.

The last increase (from 1 April 2021) was estimated to boost wages by $216 million. This means more people spending more money within the economy.

As the minimum wage increases in the future, it won't be long before it is $23.
2,080 hours per year at $23 is = $47,840

The increase in minimum wage also changes expectations for workers who sit just above minimum wage.

This is because people see the gap closing between what they are getting paid and what someone on minimum wage is getting paid. Often this leads to them asking to be paid more also, as they can see it to be unfair that they aren't getting an increase.

As we raise these incomes, something else is happening...we are getting people closer and closer to a 30% tax bracket which kicks in from $48,000 of income.

We will need to educate people that this isn’t 30% tax on ALL of their income but only the income above $48,000 (see tax rates below).

Often I see things like ‘all bonuses are taxed at 33%’.

OR hear things like ‘’I remember hearing from someone a few years ago that they 'didn't want a pay rise as they didn't want to pay more tax.'. My mind was blown!’’.

This is all due to our lack of understanding of how the progressive tax system works. 

New Zealand has a progressive tax scale, which means as you earn more, you progress into higher tax brackets. But only for the income above that bracket.

Personal income tax rates
$0 - $14,000 10.5%
$14,001 - $48,000 17.5%
$48,001 - $70,000 30%
$70,001 - $180,000 33%
$180,000+ is a 39% tax rate.
 

This Summer, listen out for what people are talking about when it comes to money, finance and tax and see if you can add some value from all of the things you've learnt this year.

On Tuesday, I recorded a webinar on Making More Money in 2022. You might find this useful to watch over the break. I have uploaded it to YouTube & uploaded the audio version as a podcast:​​.
https://www.youtube.com/watch?v=vFoaF2B4JcI

See you on Christmas eve,

Luke

Merry Christmas,

Before we get started, maybe some people are making sense of these KTC emails...there has been some amazing feedback, but also I see one of the political parties suggesting we need to do something about the tax rates.

As we said last week, more and more people are about to be in the 30% tax bracket as the brackets haven't been reviewed for a long time (over a decade) so watch this space. As always I will keep you updated and help you understand how it will work if changes are suggested or made.

Right enough about tax, let's bloody well get into the Christmas spirit...

I hope you have an amazing time with your family and loved ones. Christmas certainly means something different to each of us, so make the most of this special time of the year.

Given it is Christmas eve, I can't giveaway what gifts I am handing around this year, but don't worry, the grinch over here didn't get too carried away, I can assure you of that.

If you have been reading since last year, you will know I do some weird stuff around the festive season, including challenging myself to give strangers money.

You might not be in the position to do this, so even starting by exchanging a smile with a stranger in this divided world might be a good idea. If you can go a step further, then brilliant!

I have some cash earmarked for a new challenge this summer. This year I am changing it up and I would like you to think about this too.

If this year has taught us anything, it is that the next generation of entrepreneurs will be more likely to solve bigger problems than the politicians will claim to.

Here’s how you can help the next generation of entrepreneurs...

This summer, when you see kids out on the street selling lemonade, fruits etc., then stop and reward them for their work. You never know who you will inspire.

Money exchanges hands when value exceeds price. Show them that what they are doing is valuable by exchanging a few dollars with them.

Debt won’t be the solution forever and may not be a good teacher for the next generation.

I learnt a lot about business selling feiojas at my gate when flatting at university. I can recall some of those lessons and memories very vividly (some not so much, due to a few too many Tui's but hey...uni life).

I’ve scaled up some of those simple lessons & kept them as foundations for the successful business I am a part of today.

I’ve got some cash ready in the wallet for some budding entrepreneurs. Little do they know i’m going to buy their entire supply and then see if they can solve the next problem…supply chain issues.

P.s yes Karen, we know….wash your hands, scan in, wear a mask, do it safely etc etc etc.

Reminder: I recorded a webinar on Making More Money in 2022. You might find this useful to watch over the break. I have uploaded it to YouTube & uploaded the audio version as a podcast:​​.
https://www.youtube.com/watch?v=vFoaF2B4JcI

Before I go...I think one of the greatest gifts I have received is that of practicing gratefulness. I understand that Xmas can be a tough period for a lot of people and hey, for some of us we just don't get the things we want - all of us can try to write down or think about 3 things we are grateful for this Christmas and why those things are special to you. Even better, if it is a person, let them know.

Now go and enjoy the festive season and I will see you before the year is out.

Have a safe & brilliant Xmas,

Luke

It's New Years Eve, you made it.

2021 done and dusted, time to tackle 2022. This is the time of the year when a lot of us like to set new goals and really think about what we are up to.

I recorded a podcast for you so that I could share some of the tactics I use when it comes to planning and sticking to goals. I am sure there will be something in there that will get you thinking. Good luck!

Spotify
https://open.spotify.com/episode/4ClRPBGF4g6VAknodrvx8v?si=fC9l36QwQu2xJz4HVMScUw

Apple
https://podcasts.apple.com/nz/podcast/how-to-smash-2022-tactics-i-used-to-smash-2021/id1568386864?i=1000546301833
 

To end the year, I want to talk about the vehicle you are in.

I’m not talking about the car you’ve been thrasing for years. I am talking about the vehicle that is taking you to your eventual income and wealth.

If you look at your income earner (your job, business, investments etc) as a vehicle, you can ask yourself whether this vehicle will take you to your ultimate desired destination?

This is a conversation we don’t really like having in New Zealand as it makes us face realities.

First, you need to understand what your goal is.

Let’s say it is to own your own home, buy a rental property, pay off both loans and have a stash set aside in Kiwisaver for when you retire.

By the time you retire, you'll have the pension coming in (hopefully), rental income (this is taxed too, FYI) and be living payment free in your mortgage-free property. Your Kiwisaver would be there for the house repairs and a bit of playing around money.

Now…is your current income source (your vehicle) really taking you there? Is that the vehicle you need to be in to help you arrive at your desired destination?

Perhaps a minimum wage role isn’t the right vehicle to get you there? Perhaps an income capped salary isn’t the right vehicle for your goals either?

It is time to have a realistic conversation with yourself about the vehicle you are in.

I am not a fan of resetting goals to be ‘more realistic’’. How boring…that is the easy way out. I am a fan of resetting thinking about the vehicle you are in so that we don’t compromise our goals.

Do you need to build a plan to change vehicles? Perhaps your goals require you to work an extra shift a week to pay down the mortgage. Maybe you need a new role with a higher salary.

Maybe your goals require you to get into a role that has an uncapped income? A lot of sales roles are like this and that is why salespeople often get paid very well in this country. A lot of Kiwis are scared of sales and selling - GOOD! That means you have an unfair advantage, because if you can get over that and get into one of those roles, you have a higher chance of succeeding because others will simply be too scared to try.

Maybe your goals require you to start with a hard conversation with your employer about your pay or even just a working from home allowance to cover the power bill going up?

Whatever it is, it is time to get real New Zealand. Costs are going up and things are becoming more expensive. If we don’t change the vehicles we are travelling in, we may not arrive at our desired destination.

I know these things can be confronting and some of you will want to bury your head in the sand because ‘this doesn’t apply to me’ or ‘this is too late for me’ or ‘easy for him to say’, but...

To you, I ask you to think of your children, friends, family and loved ones - do you want to teach them that this is possible for them? I am sure you do.

If you are thinking about a higher income, you might find this cheat sheet handy with ideas of ways to make a few bucks: https://docs.google.com/document/d/1HP2cjvCzaf8s2YMhbfBAAZNtzs-ULww52c3P4oX3k_8/edit

Next week we are going to look at a friend of mine whose work has made him a millionaire. It required him to take some risks and make sacrifices, but it is a good example of someone who has put their head down and been rewarded for doing so.

Before we go, here is a little tactic I use to help me think bigger. Everytime I see a helicopter I think ‘someone figured out how to build it and someone figured out how to pay for it…they didn’t use excuses to do either of those things’.

In 2022, make a commitment to taking action. Doing. Not just talking.

Activity 

• What is something money related you need to tidy up?
• Get it done in January. Take some action today (i.e first, decide to)
• What BIG financial goal can you set for yourself in 2022? Write it down.

Perhaps it is time to set a goal to change the vehicle you are travelling in Jade? I hope you have your best year ever in 2022. You deserve it.

Be good out there tonight,

Luke

Happy New Year,

I hope you've had a great start to 2022. Did you take some time to set a couple of financial goals for this year?
 

Last week we were talking about the vehicle we are in and whether that is going to make it when it comes to taking us to our desired destination of financial goals.

I hope it got you thinking and talking. Sometimes those things can be confronting, but now that we are aware of it we can start to brainstorm some solutions of new vehicles.

I want to tell you a story about one of my best mates.

He recently sent through a screenshot of shares that he owns and they had gone past one million dollars in total.

This isn’t a sharesies account. In fact, it is one share and one share only.

It is shares in the company he works for.

You see, my friend decided to take a risk and leave his well-paying job for a role that he saw huge upside in over a decent time period.

If he committed to it and did well, part of his salary would be given to him as shares in the company he was working for.

Don’t get me wrong, we can’t all just ask our bosses for shares in the business, but my friend could see this as possible for him, so he played the long game and went for it.

He could see where the business was going and that he could become a shareholder in that growth. He was happy to dedicate some of his working life to help them achieve their desired outcomes.

All going well, he would achieve his desired outcomes also.

YES, he has worked extremely hard and questioned why he is working so hard at times, but ultimately he could see that to get to his desired destination, these days should and will come.

He has been rewarded with shares in a company that has grown in the time that he has been there and these have paid him a nice dividend (portion of the profits) along the way too.

His shares in the business are now worth over $1million and he hasn’t had to start the business from scratch himself.

There is a little bit of teaching in New Zealand that 'the only way to get ahead is to start your own business' and this lesson proves that that is not always the case.

Starting and running a successful business is a great vehicle to wealth (becasue you are often building an asset you can sell at the same time), but so is working in one that rewards you well.

Keep an eye out for opportunities where you have the ability to earn more than just a dollar amount. Can you get a stake in something that can be sold later too?

What might surprise you is that my mate is only just buying a house. How dear he you may say? Surely that is the first thing he should have done.

No, he's built wealth and been happy to rent this whole time. He tells me that as his pay increased too, they saved the difference as they lived the same lifestyle so that when they bought a house, they needed less debt.

He has now decided to buy a house for his family and has been able to sell some of the shares for cash to then pay a further deposit on his property.

We don’t often hear stories like this so I wanted to bring it to you because I know it will open the eyes of some of you to what is possible and how some people build wealth and achieve their dreams.

Already encountering problems in 2022? Try this...

You don’t always need all of the answers right now, you just need to be open to finding them. Your brain is an amazing device. We have been encouraged to think that our devices will solve all of our problems, but you know what, the brain has been around A LOT longer than all devices and is still there to help you - don’t forget to ask it to!

Take some time to sit in private and write down some solutions to problems that you face. Whether this be financial or any other area of your life, just give your brain a chance.

Write the problem at the top of the page and then just start writing potential solutions to this problem. You’ll be amazed at what you will come up with.

Don’t give up Jade. Chase your goals and dreams, you deserve them.

Before we go - a huge congratulations to Logan Bell who won the $500 investment as part of the draw once we hit 5,000 readers. Logan chose to put the $500 to work in Ethereum. I am going to record a podcast with him soon to find out why. Keep an eye out for that.
 

Luke

Happy Friday,
 

You might have heard this saying before: ‘Your network is your net worth’ and thought it is some throwaway comment.

What about; ‘if they don’t know you, they can’t flow you’.

Or perhaps, ‘it’s not what you know, it is who you know’. 

From what I have seen (as much as we might not like it), these sayings are very true and we will all see this playout throughout our lives and probably even use these sayings.

Sometimes these things can work for us and other times against us. Ultimately, you need to build connections over time so that you can get these things working for you.

Of course, there are sayings about how we are the sum of the people we spend the most time with. This seems pretty relevant too. Why spend all of your time with people who aren’t adding any value to your life?

That might sound harsh, but as I’ve said before, it might be worth starting this process by curating your instagram and social media feeds so that the content serves you and lifts you up rather than taking your time and attention away from things that could help you grow.

Every year, I’ve been lucky enough to spend time with people whom I have benefited from the information they’ve given me or the things they’ve taught me.

This isn’t rocket science, it is simply that people who help us grow, help us become more valuable and often this ends up increasing our net worth (assets less liabilities).

This might be a good time to think about where you are working on your LinkedIn connections and building up a network there?

I have solved countless problems for myself and my clients by simply posting ‘Does anybody know somebody who can help with [insert problem here]?’.

You don’t know until you ask. First you need to start building your network so that you can actually ask.

You don’t know when you may need a prior contact from earlier in your life, so find a way to stay connected with them over time. They just might unlock the door that you need opened.

Sometimes it is worth swapping ‘how can I solve this problem’ for ‘who can help me solve this problem?’. People love helping other people. Again you need to be brave enough to ask.

This goes for you too. Find ways to add value to other people's lives. Doing good things for people stacks karma and credit in your favour and if someone asks about you, they’ll remember what you’ve done for them and the type of person you are.

New Zealand is a small country and when you start getting down into industries, you start getting into smaller pools of people. Then, at a company level, there is a high chance someone will remember or know you, so…don’t be a d!ck because it could cost you in the future.

Life is built on top of relationships. Invest some time in the ones you know are going to be important to maintain.

If you want to link up on LinkedIn, you can find me here:

https://www.linkedin.com/in/lukekemeys/

Enjoy your weekend.

Luke

Lately, we’ve been talking about prices going up and most people are probably just skimming past it thinking it doesn’t apply too much to them.

I’ve put together a practical exercise you can do over the weekend.

If you are brave enough, you need to look at EVERY cost in your life. This isn’t fun, but neither is not sleeping or worrying about money, so get this done.

EXERCISE

Go to internet banking and run an export of 2 months of bank transactions, including your credit card + any accounts where you spend money.

In these exports, you’ll find negotiable costs and non-negotiable costs - go through and work out whether that cost can be binned or has to stay.

This is an exercise to get you thinking, not thinking about how boring life is if you are not spending any money at all. If you have to have Gucci shoes for Instagram, it is what it is, go you.

Here are some thoughts:

- Wow that’s a lot of money spent on food. Could we be smarter about that?

- Hmm, do we need to review our savings plan temporarily?

- Power, internet, phone - are these still the right plans for us?

- Am I actually using my gym membership (hint if you aren’t, then you should be - I’m huge on wellness spending, so biased here),

- What even is that insurance? Insurance is used to de-risk potential outcomes in your life. Re-read that 3 times,

- Do you know how consumer finance works because you can use it to your advantage too (Q Cards, GEM Visas etc),

- How many have now, pay next week services do you have? Get them under control,

- The hidden habit. What’s my ‘boredom vice’ - we can often fill boredom by spending money, it’ll show up in your transactions. What is yours?

Think about if you literally had NO INCOME, what changes would you make to each of those expenses you are currently paying? 

Look at it this way - every expense you pay is solving a problem. Rent=somewhere to live. Netflix=entertainment. How would you solve these same problems with less or no money?

These are really worthwhile exercises to do to wake yourself up to your spending habits.

TIP: Set financial spending habits that are actually sustainable and that you can commit to. Think long game AND short game. I.e. if you say you won’t spend a dollar for the next month, is that really sustainable and something you can implement to help you in the long term?

EXTRA - Capping the frequency of transactions

Similar to running an export of your banking transactions, some of us still like to print things and get the highlighter out.

Whichever you choose, you will want to run your eye over the statements and see how frequently you are transacting at certain stores/businesses/cafes etc.

As an example, you will note purchase one from Monday at ‘Cafe x’ as 1, then purchase two on Wednesday as 2. Go through and see, in numbers, how many times you are going to the same places.

Then it is up to you to have a discussion with yourself to decide whether those purchases need limits?

What this exercise does is that it helps you understand, in numbers, how many times you actually go somewhere. The ‘I went to ‘Cafe x’ 22 times in April might give you the wake up call that you never intended to go there that many times.

You may then choose to put limits in place for places you frequent. Only 2 lots of McDonalds per month etc.

Set your bare minimums and then try to stick to those.

Sometimes less is more!

Enjoy your weekend.

From time to time, I will go through the assets that I own and I will question myself about whether they are performing.

I can do this because I keep my monthly financial position (which we learnt about early on in Money Mail - you can see earlier episodes in the blog) and keep track of what assets I have.

Then I go through and query whether the assets I bought (stocks, Kiwisaver & crypto-currencies etc.) are performing to the standard and reasoning which I expected when I purchased them.

As an example, when I did this with my Skycity shares, I decided to sell them and invest in other companies less impacted by a global pandemic. When I bought those shares I didn’t expect the borders to be closed and us to go into a pandemic. They were no longer the assets that I originally purchased.

Buy and hold is a great simplistic strategy, but sometimes, things can change and sometimes our tactics need to change as the world does.

It is ok to change your mind and let go of assets that are no longer performing. DO NOT mistake this for selling shares because they aren’t going up anymore. This is why it is important to think about why you are buying certain things that you buy - the purpose for which they serve you.

You could also do this with things around the house too. Do you really need them? Are they fulfilling the purpose you originally purchased them for? I.e. Do you ever use that treadmill? Do you need the second vacuum cleaner that was on special that time you went shopping?

This also got me thinking about the Keep The Change Night School that I built over a year ago.

It is an asset to people who use it but not many people use it. For it to perform better, I need more people to use it and implement some of the lessons.

As a way to invest in Keep The Change further, I want to ensure more people can access and benefit from the Night School lessons. I have decided to make it free to access for those who really need it.
 

If you haven’t heard about night school before, it is an online learning tool with exercises, webinars and lessons. This is a bit of what is inside:

• Full access to over 20 chapters, lessons & templates
• Critical steps to improving your financial literacy
• Build a long-term plan and budget, with the tools provided
• Learn about the most common financial mistakes that stop people all around the world improving their finances
• Learn from others - suggestions of people I trust in different areas of finance
• Simple, bite-sized chapters to help those more committed to their learning
• Online learning platform you can log into when it suits you to learn as you go

Next week I will be sharing with you how you can access this. Please only access it if you will use it.

Now back to other assets that might not be performing. There is a high chance that your Kiwisaver and other shares are getting pretty beat up at the moment.

As humans, we can get very caught up in the negatives a lot more than the positives, so be mindful of that.

Just because the market is volatile, doesn’t necessarily mean that businesses behind the stock market prices aren’t performing. Playing the long game with investing is critical to giving yourself some assurance that investing is something smart for you.

Perhaps this is the year that you (the asset) figure out how to learn 10% more in your job than you knew last year or 10% more in an area that interests you. Control what you can control.

The other thing that you may have noticed is that inflation hit a 3-decade high in the December 2021 quarter. This means that consumer prices rose 5.9% over the year. You probably understand this better than you would have a year ago because we have talked about it a number of times.

We will no doubt hear more and more about this as 2022 goes on and we see volatile share markets and rising interest rates.

This weekend, take a look around at the assets that you own and question whether they are still performing to the standard and reason of which you purchased them for.

Enjoy your weekend.

Luke

If you haven’t bumped into my passion project ‘Boys Get Paid’, you might find this subject line very confusing. 

To bring you up to speed, I am part of a Facebook group that started as 5 friends who needed a way to chat and enjoy our hobby of horse racing.

Now, ladies, before I lose you, it’s just a brand name & a saying…we would have a bet together and, if we won we would say ‘and the boys get paid’. It's just a saying...right, let's carry on.

Today that group is over 21,500 people strong and two Saturdays ago we hosted an event for 850 people (plenty of ladies joined us on the day).

We also run a ‘punters club’ where we pool everyone's money and bet it on behalf of everyone on the night. We had over 7,500 people deposit money from all over the country (and a few Aussies).

This was the 5th year of doing this and we wanted to set a target for a pool of $500,000. We ended up with $660,000 by the time the betting pool closed.

I wanted to share a few things with you that I have learnt from this journey. Firstly:

When I quit my job I told my employer I wasn't sure how I was going to make it work, but I knew I owed it to myself to chase my potential and just try things.

I likened it to jumping from a tall building and, although I didn't know when, I knew my parachute would open before I hit the ground.

Last Saturday, this event generated more revenue than my entire year's salary in the job that I left. The impact I've had is no doubt far greater too. The beauty is that this is my outlet & my passion project on the side of my now '9-5' (is a 9-5 even a saying anymore?).

 I don't know who needs to read this, but back yourself. You are capable of so much more than you realise, you just need to get started.

Put your head down and grind for 5 years and see where you land. The parachute will open!

WATCH: The 5 years explained… https://www.youtube.com/watch?v=_jxpcw3BF2g

Secondly, you need to figure it out as you go. Do you think I knew everything I needed to know 5 years ago? Of course not, I simply got started and then kept figuring things out as I went. Getting around the right people and trying to make small improvements.

I didn’t know how to run a good event. How could I? I studied accounting - probably close to being rated the most boring profession.

Some people told me that it was the best weekend of their life. Google & YouTube are your friends and sometimes I will google things like ‘how to host an epic event?’. Our access to smart people has never been better.

You don’t need all of the answers at the start, you just need to commit to finding them as you go.

Thirdly, if you are ever in a leadership role (HINT: we all are leaders in the eyes of someone), then lead with your personality. Be yourself and show up as yourself everywhere you go. Authenticity can’t be beaten.

Finally, here are some of the things I have learnt that I can bullet point;

• If you give a people a goal and speak it out loud, they will want to help you achieve it,
• Logic is a smarter thing to rely on than emotion (just because you want something to happen doesn’t mean it will),
• Everyone will have an opinion, you need to get comfortable with your own opinion. Don’t forget to ask yourself for the answer too,
• These things take a team effort and you don’t need to do it all yourself,
• No matter what you do, someone will always ‘hate’ you and try to bring you down,
• Seek feedback on ideas and improvements. You never know who has the next great idea,
• Partner with people, brands and businesses. Aim to deliver value to these people.

Something a little left field for you this week but hopefully you can take a lesson from there and implement something into your life with the things you are working on.

I recorded a podcast for nextAdvisory podcast listeners with an hour of tactics I implement, that might interest you: https://open.spotify.com/episode/25Dq1LMcxGVyZdrqHGiv4Q?si=UvbI8SDKRuu5EDSJdjwMPg

I will go a little deeper into all of these on the podcast version of Keep The Change (on all podcast platforms) as I know some of you have work to do so get stuck into your Friday.

If gambling/horses aren't your thing, that's fine. Well done for reading this whole thing & remaining open-minded when things don't necessarily interest you. Stay cautiously curious.

If gambling is a problem for you or someone you know, you are not alone. NZ has great support services - put your hand up for help!

Have an outstanding long weekend - I am off down to Mount Maunganui for a couple of days' break.

Take care out there.

Luke

I was giving someone a hand with their finances and we noticed something pretty alarming. 

The cost of petrol and parking for them was over 10% of their total salary.

That means that over 1/10th of their salary is being spent on going to work.  If we factor in tax, it is actually 13% of their after tax income.

This is a mix of petrol expenses  and car parking. We aren’t even measuring the other costs of a car here: rego, insurance, cleaning, maintenance etc.

Now some would say, just catch the train. Which actually is a great suggestion and an alternative, so we mapped out what that would cost and it is a fair bit cheaper than the car. 

Something else to think about - this person actually likes the drive and the commute as it is their 1 hour dedicated learning time each day - a good use of a commute.

If your commute is going to soak up a fair bit of your life & finances, make sure you are using it wisely by learning in that time, networking (calls) or visualising a better life - do something for you!

We know from recent data that transport was the second biggest contributor to inflation for 2021. Statistics New Zealand said during last year the average price of 91 octane petrol increased 30%, from $1.87 per litre to $2.45 during the year.

Given that I think inflation could be sticky - meaning it is keen to stick around, we need to keep an eye on the costs we have.

Perhaps work out your annual cost of transport, insurance, rent, food, entertainment etc. as a percentage of your total salary or annual income. Make a calendar reminder to do this every 6 months and see how things have changed for you.

Here are a few solutions my amazing LinkedIn network added to my post about the cost of transport:
 

• If your friend has the option to work from home, carpool, go electric or public transport (or mix of) - it could be a good saving!
• Can they work from home? Even just a day or two here and there
• Can they switch to being a subcontractor to claim expenses and not 'lose out'?
• Sometimes we have to sacrifice to get what we want. If they didn't have that job is there an alternative with a higher net pay?
• Is an E-bike an option? We've never owned a second car, at times we were even carless. At one stage I worked out I was saving $5k a year by cycle commuting (based on IRD km rates). There are also no parking costs and the potential for no gym costs.

That fourth bullet point is a good reminder to look at the cost of taking a new job with a pay rise. What costs are associated with the new job? I.e. parking etc.

When I moved to Auckland (from Hawera) I made a rookie mistake and moved for the same money. On the first day I realised it took 40 minutes to get to work (used to take me 4mins) and then I had to pay for parking. On the Thursday the city had broken me, I cried…true story…blokes cry too.

For some of you, you will relate to this and I've said it before but it might be worth taking these concerns to your employer, instead of just ‘sucking it up’.

Inflation and the cost of transportation are not their fault, BUT people want to look after good employees, so have the conversation. Good employers are often good problem solvers too.

Perhaps take a solution to the conversation like working from home one or two days a week or asking whether there is some form of non-taxable allowance that could help? Maybe a cheaper parking spot that they know of?

A lot of these emails are written to get you thinking about how you can take some control back when it is being taken from you.

Just like me in Auckland. I could keep crying or I could change my commute and decrease my parking costs by getting up earlier & parking in the streets for free, then I'd go running and work on my health.

You and I can’t control petrol and transport costs, but with awareness of them changing, we can change the actions we take around them changing on us.

I've even invested in an electric scooter to go to and from work from time to time. I could also see this coming somewhat, so in February 2021 I invested into a US Oil fund. That investment is now 60% ahead, 12 months to the day on Wednesday - this effectively offsets my cost of petrol rising.

Hope I got you thinking!

Have an outstanding weekend,

Luke

We spoke briefly about how January wasn’t very flash for investors.

On the 31st of January I was brave enough to pull up my Financial Position (I suggest you do this monthly). I remembered to do it as I have a calendar reminder (i’ve taught you this tactic).

I started to key in what all of my investments were worth as of 31 January.

It became pretty obvious that the numbers were all less than when I had done this a month ago.

I thought January was going to be a good month as I had saved some extra cash and built back up some savings accounts.

But I had still gone backwards. My ‘networth’, which is your assets less your liabilities, had gone backwards.

$37k of networth gone! Crypto, stocks, kiwisaver, sharesies, it had all sh!t the bed to put it politely.

Did I sh!t the bed too? No. Not literally and not figuratively. This is a time for logic, not emotion.

I think this year (and next) could be pretty bumpy financially, but I expect the next decade to still see more advancement and improvement financially. Especially if I stick to my strategy and do the things that help me to lead a good, happy life.

It’s like looking at a toddler throwing a tanty in the supermarket. Eventually, they settle down, don’t they?

Remember that investing requires long-term thinking. Just like I don’t get too excited when my assets are increasing, I try not to get too unsettled when they are going backwards.

I can’t touch my Kiwisaver for 30 years, so why stress over the swings and roundabouts? This is different if you need your Kiwisaver to buy a house soon (as an example). That’s why you need to tune into smart people like Adam from Compound Wealth who are in that space day in day out having conversations with clients about their finances and kiwisaver profiles.

January was actually one of the worst months for the NZX 50 since March 2020. We all know what happened in March 2020. If we remove that month, then January 2022 was one of the worst months for the NZX 50 since February 2009.

It won’t always be exciting to check your share values, so you need to remember why you bought them in the first place. You’re not gambling, you’re investing.

Don’t get caught up in the trashy news headlines and do anything too rash. You don’t want to let these bumps in the road put you off your investing altogether.

Last week, I made my Keep The Change Night School resource FREE to access for anyone who wants it.

It’s over 20 chapters of learning on an e-platform. There are videos, webinar replays, activities and questions to get you thinking about finances. This might be perfect for someone keen to do some learning.

You or a friend can access it here: https://www.keepthechange.co.nz/nightschool-v2

Have an outstanding weekend,

Luke

A fair while ago, I completed a test. It wasn’t one you can pass or fail, which is always good.

It was a personality test and it came out with my unique type of personality.

You might have heard of it before, as it is quite popular. It is called the 16 Personalities.

They have a very informative content sequence that you go into, which is an email every couple of weeks specific to your personality type.

A lot of it isn't related to finances and money, but there was a beauty the other day.

They have data that suggest personality traits influence sensibilities when it comes to shopping.

For example, they find that Executives (like me):

- Are unlikely to purchase items they hadn’t planned on getting,

- Prefer shopping at mega-marts or chain stores as opposed to small, independent ones,

- Check out labels to see if there are any unhealthy ingredients during their grocery shopping – more than most other types,

- Are the most likely type to hunt for discounts,

- Say that shopping often makes them feel better (especially turbulent executives).

Some of those things I am not too sure about, but when I really think about it, it is very accurate.

You can do your own 16 Personalities test here (takes about 10 mins):

https://www.16personalities.com

I find these emails very insightful to help me learn more about myself and to know that there are other people out there just as crazy as me.

It also makes you aware of some blindspots….like these ones:

Things can become too rigid, and it can be difficult for family, friends, and co-workers if there’s no room for play or enjoyment.

Guilty as charged….

There is a great quote: ‘know yourself to know others’ and it’s a great reminder that often we are quick to judge or make sense of other people but we need to ask ourselves if we have done the same for ourselves?

Do we know where our money habits come from? Our sayings about money? The risk levels we are keen to take?

Money can be a touchy subject in relationships and I’m not just talking about sexual ones. (I didn’t know what other word to use). I mean ALL relationships. Flatting, friends, mates, business family etc.

We are all different people and have a different lens on the world.

Tools like this help us get better at understanding ourselves and then understanding others.

If you missed a Valentine's Day gift with your loved one, perhaps do the 16 Personalities together and then one more…5 Love Languages. Lads...this will get you more brownie points than an overpriced handbag or unethically sourced fake diamond.

https://www.5lovelanguages.com

Guess what? In March, it is my birthday. I know, exciting huh. I am looking forward to you sending me a bit of bitcoin as I don’t really eat cake. I thought I would do something for all of you.

In March I am releasing 30 audio lessons (podcasts) from 30 stories of my life. Basically, things that have happened for me and I sit down and tell a story that you can hopefully learn from.

I have already recorded 14 so come the 1st of March, you’ll have a 15 minute story every single day for 30 days.

Each one is recorded with no planning, I just hit record and tell you a story. I think you’ll get a good insight into what makes me tick and what mistakes + gains I’ve made in my life. Stay tuned.

Remember that KTC Night School is FREE to access for anyone who wants it.

You or a friend can access it here: https://www.keepthechange.co.nz/nightschool-v2

Have an outstanding weekend,

Luke

World Wars, market crashes, pandemics, floods, endemics, inflation, protests, business closures, the list goes on.

How did we get here? And what’s the point of carrying on investing when it’s all so messy?

That is no doubt how some people are feeling about their investing right now. You can’t blame some people for thinking like this because it’s pretty rocky out there.

I’m not going to lie, even I've struggled to figure out whether I should continue to invest or maybe just sit on my cash.

But sitting on my excess cash won’t help me in the long term. I need to trust the process and invest in businesses that are paying dividends because that helps subsidise part of my rent.
 

If you or I weren’t investing or saving what would we do with that money? If you are anything like me before my disciplined days, you would be rinsing it on sh!t you don’t need or food and drink you also don’t need.

Usually we adjust our lifestyle to match our level of income. That's why it is important to pay yourself (saving & investing) first and learn to live off the rest.

The IRD don't take your tax and Kiwisaver at the end of the week, do they? No, they take it as soon as you get paid and you don't even see it.

Here is a cliche term; ‘nothing good happens in your comfort zone’, but it’s pretty accurate.

We love comfort and we seek it. But sometimes I remind myself to run into fear because I know I will gain so much from making it through to the other side.

Here’s another ripper one liner that I thought of earlier in the week which became the idea for this week's lesson.

It’s not always about what you earn, it's about what you learn.

Don’t just look at investing as a way to log back in and see if you’ve ‘earned’ another few bucks.

Some of my most valuable lessons have been from my biggest failures. We can learn from our mistakes (sometimes it takes a few of the same mistakes to learn).

When investing, ask yourself; what did you learn during the process? Who have you become during the process?

It might not be investing in the stock market, but perhaps yourself…that brave question for a raise…that process of finding a new job…that ask you didn’t feel comfortable doing.

These are the moments where we really learn and when we learn, we usually increase our ability to earn.

Where have you come from when you look back at your savings or investing journey?

Who have you become in your pursuit of clearing a credit card? What did you learn during the process?

Let’s be frank, the world is pretty farked right now…but the sun always seems to rise and we go again.

Habits create consistency. Consistency creates results.

The habits we build along the way and the things that we learn are the things that help us be better for our families and communities.

Don’t give up on your good habits just because the world has given up on some of its good habits.
 

Before you go, remember that when you feel like giving up, it is usually the time you have the most to gain!

A reminder that in March I am releasing 30 audio lessons (podcasts) from 30 stories about my life so far. There are 4 there waiting for you. I'd love to hear your feedback too.

You might enjoy my candid episode (#3) about financing lazy boys and super-king size beds in my early 20's. Why? Because I could...how stupid is that. 
Check it out: https://open.spotify.com/episode/6UMMroJlqH131j24DHQG1U?si=msDAkJdyThu42ci7RPfi6A
 

Have the best weekend,

Luke

This week we had international women's day. I hope you celebrated the best way you know.

On the weekend, I was reading about how women have less money in their Kiwisaver than men.
 

Straight away my assumption was that this would be because women take less risk, so are probably more likely to be in conservative funds.

I know a lot of males and have grown up as one and know that I can be pretty bloody reckless. So can a lot of my mates. A lot of them like taking a risk too.

My Sharesies account tells me 97% of my investments are high risk. It frustrates me. I can’t work out what the lazy 3% are because I’d probably sell them to take on more risk.

A number of women I've tried to help through business and other ventures often seem more reserved or risk-averse in their thinking. But, of course, this is just my observation and opinion.

This week I was talking with a lady who was considering changing roles. She was trying to make sense of a contract role that paid double their current salary.

In my mind I thought; take it as in 6 months they’d earn what they usually take 12 months to earn. They could save the extra and have 6 months off, or 6 months to find a new job if the contract wasn’t extended.

This person decided to stay in their job as they saw the contract as too risky. Part of this was due to having a mortgage. A good reminder that we all see risk differently and have our own level of tolerance.

Side note - this is also why I hated having a mortgage, because it makes you massively risk-averse and clouds your decision making. That’s the trade off of having a house, I guess!

Anyway, I didn’t want to just assume all ladies are risk-averse, as a lovely lady (my Mother) taught me that assumption is the Mother of all stuff ups.

So I continued reading and learning. Straight away the report told me:

…women are far more likely to invest conservatively.

20% fewer women than men were in a growth fund.
 

Come on ladies, what are you doing? Don’t let the boys risk it all in Kiwisaver & blindly get taken further ahead. Of course, the boys don’t look so good in their risky funds right now, do they?

The story went on to speak with the co-founder of Hatch who I knew would have some good data as they’d know what gender their users are.

Hatch co-founder Kristen Lunman says women are starting to take control of their funds, but there’s a long way to go.

“Unfortunately part of the bias [with] women and investing that we've grown to accept is that we're not good with money, we spend too much, we're risk averse, the industry was built by men, for men, so women have felt excluded.”

• Not good with money,
• Spend too much money,
• Risk averse,
• Industry built by men, for men,
• Women felt excluded.

Ladies, you might as well give up after reading those rules...gee whiz they will make you feel down & out.

Remember that a number of lessons ago we learnt that women make most of the financial decisions in a household?

Let’s be honest, plenty of blokes probably wouldn’t even know their password to internet banking if it wasn’t for their lovely lady.

Be careful what bias of others you buy into & decide to own. If you have things that haven’t served you well when it comes to money, it is time to unlearn them. Don’t hold onto them because others have.

Ladies, if you do one thing by the end of this week, it should be to understand if your kiwisaver investment matches your risk profile and perhaps don’t decide this yourself, get some advice.

There is a high chance you are making most of the financial decisions in the household too, but here is my challenge for you:

For two minutes, stop making decisions for everyone else and write down 3 financial decisions you need to make for yourself.

It could be; how to ask for a raise in the next 90 days, how to invest for your kids, how to start investing yourself, whether you need insurance on your life or your partner's life, how to pay less mortgage interest, how to pay your mortgage off faster or how a rich person you know, became rich. 
 

Just pick one thing!

You know there is a lot of fashion associated with shining light on ‘men vs women’ situations, but let's be real, we all need each other and we all love each other. So let’s work together and kick some a$$$$$!

I don’t care if you are a male or a female, you are a human to me. If you need my help at some point and I can genuinely help you, I will try to point you in the right direction.

Thanks to those of you who have been tuning in to my 30 in 30 audio lessons this month. We are up to day 11 and have covered a lot of ground. You might enjoy my life-altering episode (#11) about quitting my job.

Check it out: https://open.spotify.com/episode/1J6LDMcvDGXfjy7ASC0olv?si=2-BFa0CCRSaDjDGQbG8QSw

Go well,

Luke

Firstly, last week's email certainly got some responses. A lot of positive but I also really triggered some people.

I do realise there are other reasons women’s Kiwisavers are lower than men’s. I was simply highlighting one of the ways we could close this gap. A few people messaged me to say that they had reviewed their Kiwisaver and changed their risk appetite, which was good to see.

It’s a highly sensitive topic for a lot of people and it’s not something I am an expert in, so it was great to hear some stories from the readers & listeners.

Onto this week and it is nearly the end of the financial year and that means tax time!!!! How exciting. The accountants out there will start to struggle to sleep because they get so excited.

For most people on PAYE salaries, they don’t need to do too much and you probably don’t care.

BUT a lot of people are investing these days or have other forms of income that need to be disclosed.

I was having a look on the IRD site the other day and I noticed that my Sharesies dividends are included in my MyIR income summary.

Sharesies and share registers are passing on the income and tax information to the IRD for all of us so it means they have it without us having to try and figure out how to notify the IRD.

USUALLY this is the dividend income, NOT any gains or losses from selling your shares as the IRD assume you weren't buying and selling these to make a profit - if you were you'll need to consider your tax obligations.

Most people buy shares hoping for a capital gain and we do not currently have a capital gains tax in New Zealand. Shares are usually a capital asset and any gains the seller gets on the share sale are non-taxable income (as long as the shares were held with the intention of a long-term investment).

Here is a snippet from my MyIR account:
 

You can see they are keeping the IRD in the loop each month of any dividends i've been paid direct to my Sharesies account.

HOWEVER, there are plenty of different things you can invest in very easily these days. NZ and international shares + funds, to name a few.

You need to be aware that US, Aussie and NZ shares can all be treated differently so whichever platform you invest through, you need to be sure to keep an eye out on what advice they provide you with.

Often, the share investing platforms will send you a tax pack at the end of the year and it will show you what income you've received from the shares you own. You'll want to ensure all of that info is in your tax return, where it needs to be.

NOTE: If you hold overseas shares (excluding Aussie shares) that cost over $50,000(NZD) in total you'll need to be mindful of the specific set of tax rules for these investments. These are the Foreign Investment Fund rules and it would be worth having a Google. It is best to check with an accountant with this sort of stuff.

In terms of general tax returns, after the end of each tax year the IRD will usually:
 

• Automatically issue an income tax assessment telling you if you have a refund or tax to pay
• Request for you to provide or confirm information about your income
• Send you a message to complete your individual income tax return - IR3 in myIR,

The IRD work out if you’ve paid the right amount of tax each year by using the information they hold about your income and the tax you’ve paid. (Your employer and sharesies for instance, will pass this information on).
 

But as above, if you receive an automatically issued income tax assessment, you would still be wise to check it and tell the IRD about anything that is missing. For instance, any income not showing or expenses like income protection insurance you may be eligible to claim.

Summary: the above is all very general information and not specific to your circumstances or intentions Jade. You'll need to dig a little deeper if you've been investing throughout the year to make sure of your obligations for your specific investment types.

Remember that the IRD has very broad information gathering powers. This enables them to look further into your share trading history & records should they wish to. They can even ask investing platforms for details of all of your trades.

I am 18 days into my 30 in 30 audio lessons this month. Thanks for all of the feedback so far and welcome if you've just found Keep The Change. There are around 350 downloads of these podcasts per day.

Have a nice weekend,

Luke

As I told you last week, it is nearly the end of the financial year and I recently realised that I will achieve one of the goals I set for myself when I quit my job.

For the 2022FY I will pay the IRD more tax than what my entire salary was when I left my job.

Note: the financial year/tax year for most Kiwis in NZ runs from 1 April to 31 March. 

I also noticed that the dividends I have received from investments will be over 5% of my entire salary when I left my job too.

Trust me...there were some leeeean years in between today & quitting. 

From house sitting (to avoid rent) and finding the cheapest lunchtime meals, I was hunting for a solution to a low cash problem.

It has taken me a number of years, but I have worked my way into the top tax bracket. The bracket that didn't exist when I left my job. There are about 119,000 Kiwis in this tax bracket.

More importantly, this is an income level that a previous version of Luke didn't think was possible. 'only the rich a$$holes earn that', 'the elite' etc.

 Well I guess I'm a 'rich a$$hole' and part of 'the elite' then huh? I don't think so...I just learnt that money exchanges hands when value exceeds price. I love to help people and one thing I've noticed is that the more people I help, the more chance my income has to increase.

I don't think I've ever added more value to society than in the 2022FY. I've also given more money than in prior years and helped a number of people too.

I don't tell you this to brag. I tell you this because someone reading this will be inspired to:

• Quit their job
• Put in a little extra
• Invest a bit more
• Contribute where & how they can
• Volunteer somewhere important to them
• Pay more tax
• Think bigger
• Understand that they're capable of so much more than their salary

When we make major life choices, we can inspire others to do the same or take actions they've been putting off.

Check out this feedback from someone i've been able to help during this time too:

Be bold to share your major life changes and decisions with your friend group, whether these are financial or non-financial, because you don't know who you will encourage.

People are getting bombarded by negativity and doom and gloom a lot, so remember to add some positivity and encouragement to the world where you can.

Now, perhaps not a goal many people would set (who wants to pay heaps of tax???!!!), but one I'm happy to have kicked.

The top tax bracket has about 3% of tax payers in it. You pay a high amount of tax once you get paid a lot. To get paid a lot, you have to deliver a lot of value to a lot of people.

Therefore, my goal was really about contributing a lot of value to the economy and the people I work with.

It has also been interesting to see how my dividends have crept up too, as I've followed my investing strategy and this has reminded me to stay patient with this methodology.

I have a long way to go, but I am ready for the challenge.

Inflation and tax rates are about to become political. It is easy to have an opinion on these matters. It's hard to go out and to be a person to try and solve them.

Remember we live in a country where if you are good enough, you can still achieve a lot and contribute a lot.

It's always easier to expect others to pay. It's hard to challenge ourselves to figure out how we can pay more.

Get after it, it's there for you 

I recorded an episode about this in my '30 in 30' audio lessons this month. You can find it here:
https://open.spotify.com/episode/32Xo5uI6zLDivXnZey0oPe?si=MhtnB5T6QmW0SQu_nq46wg

Have a nice weekend,

Luke

I was reading an article about money this week…funny that.

I thought you might be interested in some of the things that I saw. It was about the amount of money in different types of bank accounts at the end of December 2021.

Transaction accounts: $52.3billion

Term Deposits: $83.4billion

Savings Accounts: $79.9billion

The transaction accounts have increased in balance by around $25 billion since the start of the pandemic. Transaction accounts are everyday accounts for all of us.

Term deposits have dropped by around $20 billion. This is where people lock up their savings for a certain term (i.e. 6 months). Maybe they’ve become a bit unfashionable with the low interest rates and perhaps people have chosen not to roll them into a new term deposit when they have matured/become accessible.

Savings accounts have increased by around $20 billion since the start of the pandemic. Savings accounts can usually be accessed at any time.

This gets you thinking about what people are thinking?

Perhaps people don’t want their money tied up in term deposits because they want the certainty that they can access it. This makes sense because we’ve been living in so much uncertainty recently.

People may see that the term deposit rates aren’t attractive enough to have cash locked up.

Regardless of what people are thinking about, there is a lot of cash sitting in different bank accounts.

Who has all of this cash and what are they planning on doing with it?

That is pretty hard to know but you’d have to think that someone is going to be chasing it.

Whether that be an influencer trying to push the latest activewear or an investment fund manager offering the next great 10% guaranteed property deal.

It will be very interesting to see what this looks like in a year's time. Remember that this cash is effectively becoming worth less too, as inflation is eroding the ‘real’ value of it (i.e. the same level of cash can buy less as time goes by).

For some of you who like to hustle, you have to understand that people are sitting on large amounts of cash that they can access (it’s not locked up in stock markets or term deposits, for instance).

That means you can access it. Mow their lawns, look after their kids, help around the house etc. If you have value to add to a household, it might be worth asking if they’ll swap some of this cash rotting in a bank account for what you can do for them.

Of course, we know the older generations are collecting a lot of cash and assets. Eventually, this is going to be passed down and a lot of it is already changing hands as the bank of Mum & Dad come to the party for first home buyers.

Month end - March 31 is an accountants orgasm. It's when the financial year end climaxes and they get to start on a whole new experience of the next financial year.

For you it may not feel as explosive, but the end of the month should remind you that it is time to do your month-end process and tally up your assets - liabilities and work out where your money will be allocated next month.

This is an important step to remind you to stay focussed on your finances and review your progress. Don't skip this step - it is very important.

Thanks to everyone who tuned into the daily 30 in 30 podcasts this month. They were a lot of fun and I hope you took some inspiration from them.

Shout out to Matt and the team at Brew Co in The Mount who have been in touch to help support Keep The Change by covering the cost of this e-mail platform that sends the weekly lesson out. How good is that! There's a lesson here for youngsters keen to be influencers. It might take you 99 episodes, posts, tik toks for money to exchange hands. Get it done. When you're in The Mount, grab a bit of food or a refreshment from Brew Co.

Crush the weekend,

Luke