Kia Ora!
Thoughts from Elise
Sending aroha to all the communities and families affected by recent flooding. It’s going to take a while for the damage to be fully known and then rectified, kia kaha everyone.
I took time to ease back into it all after a couple of weeks spent with family and friends. I’ve started the year with a focus on me, working on changing some belief systems to enable me to serve you all better and to get some more balance in my life, working, exercising and progressing the house renovations.
Putting your own oxygen mask on so that you can help yourself, your whānau and your community is key. I’ve been working through an audio book called Atomic Habits by James Clear, which has been a real eye opener into my personal habits. If you feel like you need to change up your mindset or way of living, I highly recommend you give it a read.
Since completing the investment strand at the end of 2022, I’ve gained accreditation with a couple of fund managers and am now working through some more options. I have some options available for clients to earn around 4.5% in an on-call account, if you have a savings account that is earning you less give me a call to find out more.
I’m working on some other things to support you all in conjunction with new investment products, I’ll keep you posted.
An election date has been set and we have a new Prime Minister. It will be with interest that we watch for changes and election promises. As Cameron Bagrie, a leading NZ Economist says, we need strong political leadership to get us through and make some of the tough calls that need to be made. Issues need to be confronted, from increase in crime, increasing poverty and the decades of under investment in infrastructure on top of the challenges being thrown at us through climate events. There is plenty for us to do and be aware of.
I’m up in Wellington catching up with some clients and family for the first week of February, give me a call if you’re Wellington based and would like to meet.
In this newsletter we are going to talk about:
Your Year Ahead – Your Choice – 5 questions to ask yourself
With the steady increase in interest rates since mid-last year, many households are feeling the pinch. For those that bought their first home when interest rates were in the 2% range, it is no doubt a big adjustment for both expectations and budgets.
How Do I Refinance My Mortgage?
Mortgage refinance is just another name for moving your mortgage to a different lender. Not to be confused with a restructure, which is just changing the structure of your mortgage with your current lender.
Property
Property prices are continuing to drop, and the indicators are that the market has not bottomed out yet. A number of property investors are now facing the need to pay tax bills so more rental properties are coming on the market, which is going to add heat to the shortage of rentals and continue to put pressure on rent prices. This does however create opportunities for first home buyers.
CoreLogic has reported that the building cost inflation has hit a record annual high of 10.4%. New build consents continue to remain high, however the key building issues are the supply chain constraints along with finance for the builds.
https://www.landlords.co.nz/article/976521209/cost-of-building-a-new-house-skyrockets
KiwiSaver
Inflation is holding steady at 7.2%. There are some signs of a decrease in the coming quarter, with the likes of migration becoming increasingly a net positive, the reopening of the Chinese economy, and lower energy costs.
The US market is heading into a recession, marked by large layoffs announced by big players such as Microsoft and Spotify. The domestic market is not reporting layoffs at this stage, but the Warehouse has already indicated that their results will be down from earlier forecasts.
If you’re intending to buy a property and use your KiwiSaver within the next 24 months, let’s have a chat and make sure you are in the right fund. Otherwise, stay the course! As always if you have questions, please talk to us.
Banks
Banks are continuing to increase short-term rates and ASB has been the first bank to start to reduce 3, 4 and 5-year rates.
Tony Alexander is suggesting that the 1-year rate is likely best if you are looking to fix for now.
The stress test rates for banks are over 8%, at 8.6% or higher. High inflation and the likelihood of recession makes employment less certain; lenders are responding with even more cumbersome application requirements. If you need finance, talk to us well before you need the funds, as the preparation and lead up to getting the finance is critical.
If you are experiencing pressure on your household finances, please talk to us sooner rather than later. We have options but if you default on payments those options are reduced. Seek help well before you need financial support and remember Building on Basics operates with no judgement. There are several factors that are outside of your control that you need to battle, we can help.
Reserve Bank
The Official Cash Rate (OCR) is at 4.25%, with the next review due on 23 February. ANZ are picking that the OCR will increase by a minimum of 0.5% but most likely 0.75%. The RBNZ indicated that if New Zealanders continued to spend using credit that we all would pay the consequences. We didn’t listen and so they’re set to tighten the screws some more.
They have been taking a conservative approach so far and there is nothing to indicate that they will go easy, so my call is that it will increase to 5% on the February 23.
The Reserve Bank is also looking at other tools such as more conservative debt to income restrictions. Many of the banks have already jumped the gun and put in place policies to reflect this.
Business
I mentioned back in November that the point of a business is to be a “cash machine”, i.e. make money. While making money is one of the main reasons anyone goes into business, the ultimate purpose of making money is to fund a chosen or ideal lifestyle.
You need to have enough finance to meet your commitments and to fund what you want to do with your free time. So, you need to make sales in your business, and then deliver on the sale, whether it be delivery of a widget or provision of a service.
Once you have delivered the widget or service, the most important thing is to then get paid!! Sending an invoice for the work that you have completed is one thing but there is a step before this, which is critical to ensuring you get paid.
Before you start the service delivery or hand over the product you need to have a written agreement detailing what you are going to provide, when you are going to provide it, and – my favourites – how much and when you will be paid.
The written agreement may be in the form of a quote, but the real strength is in the terms of trade so that when people do not make the payments you can send the clients to debt collection and get your costs recovered.
Service Contracts and Terms of Trade are one of the 20 or more things that are on the critical path for starting a business.
I have some spots available for my business mentoring service, get in touch if you need help launching or optimising your business.
Insurance
New Zealanders are among the most uninsured and under insured in the world. Many of us have a total dislike of the cost of the covers. It is not until something happens to us or someone near and dear to us that we understand the true benefit of the covers. Crowd funding sites such as Give-a-Little are full of situations that could have been avoided with some insurance.
So, take the time to consider your requirements, be clear on what cover you need and why. Then make a choice to carry some risk, self-insure or get the level of cover that your income and budget can afford to support your lifestyle and give you certainty when the unexpected happens.
So, let’s look at the benefits of life insurance.
Life Insurance – This is a policy that will pay out in the event of your death or if you are diagnosed with a terminal illness and have less than 12 months to live.
The primary point of life insurance is to:
- Repay debt, so that your loved ones or those responsible for your estate are not left with your debts to repay
- Pay for your funeral and funeral related costs, and depending on where you die you may need some funds to get your body repatriated
- Provide legacy funds to support those that you leave behind and enable them to grieve without any issues. This can be paid as a lump sum or as a monthly amount for a period
- Provide funds for your children (if relevant) to support their education.
If you have a young family, you may need more cover. As you go through the different life stages you may require less. Everyone is different and the amount of cover you have should be reviewed regularly.
Hot tip of the month
If you heat your house with a fire, make sure you get your firewood ordered now. It’s cheaper to get your wood in before the end of February.
This is also the best time to get your fire serviced. If you have a house fire due to a fault with your fireplace or chimney, your insurance may not cover you if you have not completed an annual chimney sweep.
Did you know?
We all know that the banks look at your bank statements when you are looking to get finance. But what are they looking at? Here are the top 3 things:
- What you are spending your money on, primarily what your regular outgoing commitments are.
- Whether you are using your account in a positive manner, i.e. paying your credit card and other accounts on time and making sure you are not going beyond your credit limits.
- Any irregular withdrawals where there is no explanation for how you are using the funds.
First Home Buyer Tips
Act as if you own a house now! It may be that you are renting and thinking about buying a property, and you have some surplus funds that you are living the good life with (and why wouldn’t you!)
But if you can use your accounts in a manner that shows you can afford the cost of a mortgage and that you are putting funds aside for rates, insurance and other household expenses, it makes it easier for us to support your finance application.
As a result, you’ll likely find that you are saving more which may speed up your ability to buy or give you more options for what you can buy.
We are always available for a chat about your situation.
Book a meeting at the Calendly link, or send us an email.
Until next time,
Elise and the Team