Is Investment Property The Missing Link In Your Retirement Plan Strategy?

Property investment in New Zealand offers incredible opportunities for savvy investors looking to build long-term wealth and importantly, provides those without the means to own a home, a home to live in.

Recent years have been tough for many owning investment property, but the fundamental demand versus supply remains - as our population grows, housing demand grows with it.

This guide will walk you through the core fundamental elements of property investment, revealing how strategic approaches can help you navigate the up and downs of New Zealand’s real estate market.

Whether you're a first-time investor or looking to expand your portfolio, you'll gain valuable insights into maximising your property investment potential.

The above illustration is from a real client Planolitix depiction comparing the difference owning an investment property can make for their future cashflows. Without a property, they would be spending more than what is coming in during their retirement years, indicated by the red arrow.

With a property, this particular example netted a projected $1,734,000 in additional equity plus a $52,000 income addition at retirement.

Key Points

• Understand the power of financial leverage in property investment.

• Learn how to generate consistent cashflow.

• Explore strategies for building equity and wealth.

• Maximise return on investment through smart property selection.

• Develop a comprehensive investment approach and diversify now for your retirement portfoilo.

This chart tracks the monthly median house price over the last 30+ years. The data is sourced from the REINZ and is displayed at https://www.interest.co.nz/charts/real-estate/median-price-reinz, and is disclosed regionally. The green line represents the moving average of these values over this period since 1993.

How Can You Master Property Investment in New Zealand?

List 1: Understanding Financial Leverage

Using leverage is the cornerstone of successful property investment in New Zealand. By strategically using borrowed capital, investors can amplify their potential returns and expand their investment portfolio beyond immediate cash resources.

When you leverage property investment, you're essentially using a small amount of your own money, or equity from existing property, to control a much larger asset.

In the New Zealand market, this typically means using a mortgage to purchase a property while only contributing a portion of the total value as a deposit.

For example, with a 20% deposit, you can control a $500,000 property while only investing $100,000 of your own capital.

The magic of leverage lies in its ability to multiply your investment potential… If the property appreciates by 5%, you're not just gaining 5% on your $100,000 deposit, but on the entire $500,000 property value.

This means your actual return could be significantly higher than traditional investment methods.

Key points:

• Leverage allows control of larger assets with minimal personal capital.

• Potential for amplified returns through strategic borrowing.

• Enables faster portfolio expansion.

• Requires careful risk management.

• Dependent on strong credit history and financial stability.

List 2: Cashflow Strategies

Like your budget, cashflow from your investment property is the lifeblood of a successful property investment strategy in New Zealand. This means ensuring your rental income is as high as possible compared to your your total property expenses.

Your expenses include the mortgage payments, rates, insurance, maintenance, management, and accounting costs.

To achieve consistent high cashflow, investors must carefully select properties in high-demand rental markets. University cities, growing metropolitan areas, and regions with strong employment sectors often provide the best opportunities. Consider properties that attract reliable, long-term tenants such as professionals, families, or students.

Rental yield is the measure we like to use, and it becomes crucial in this strategy. In New Zealand, aim for properties that generate at least 4-5%+ annual gross rental yield.

This means if a property costs $500,000, you should target annual rental income of $20,000-$25,000 to maintain a healthy cashflow.

There are 2 types of yield we focus on when assessing cashflow for a property.

1. Gross Yield | Gross yield is the total amount of revenue your property generates before any costs are taken into account.

2. Net Yield | Net yield is the amount of take-home revenue after all associated costs have been deducted – such as tax, rates, mortgage repayments, insurance, maintenance, and more.

Source: https://webrear.mbie.govt.nz/theme/mean-weekly-rent/map/timeseries/2024/new-zealand?right-transform=absolute

Key points:

• Target properties in high-demand rental markets to avoid high vacancy.

• Calculate comprehensive rental yield. We like to look at Net Yield as the primary metric to avoid underestimating the true cashflow return the property will provide.

• Consider property management as utilising a manager is the most efficient way for most investors to avoid the risk of tenancy problems and ensure your property will be achieving market rent over time.

• Factor in all potential expenses, with a small buffer for unforeseen costs arising

• Ensure you can afford the shortfall of the cashflow top-up that’s likely to be evident through the first few years of ownership. Stress test yourself for affordability if interest rates rose to 8%.

• Maintain a buffer for unexpected costs. Treat your property cashflows like you would your personal cashflows.

List 3: Equity Growth Techniques

Equity growth represents the increase in your property's value over time, creating wealth through capital appreciation. In New Zealand's real estate market, strategic property selection and improvement can significantly accelerate equity growth.

Focus on properties in areas with strong economic fundamentals, infrastructure development, and population growth. Suburbs near major cities, emerging technology hubs, and regions with planned transportation improvements often experience faster equity appreciation.

Strategic improvements can also drive equity growth. Simple upgrades like adding garaging, improving energy efficiency, or enhancing street appeal can increase property value beyond the cost of improvements.

Key points:

• Research areas with strong growth potential. This also decreases the risk of tenant vacancy as tenant vacancy hits your bottom line more than most other factors.

• Invest in property improvements where applicable, or buy at below market value.

• Monitor local infrastructure developments.

• Understand market cycles as values don’t always go up! Property investment is a long term game. Read this article here.

• Maintain properties in top condition to get in front of maintenance getting on top of you.

List 4: Maximising Return on Investment

Return on Investment (ROI) combines multiple factors including rental income, capital appreciation, and tax considerations. In New Zealand, sophisticated investors look beyond simple property prices to comprehensive financial performance.

Calculate your total ROI by considering your cashflow top-ups after tax considerations have been applied, and potential capital growth. If you want to get really savvy, consider the ‘Real versus ‘Nominal’ growth historical averages for your forecasts.

A real value (with property in mind) is an after inflation growth value. With the modelling we do for clients, all projections are in real values, as opposed to nominal values to give you a true value of your investment against the buying power it could have in the future.

“Next, compare this potential returns against other investment options like stocks or bonds to validate your strategy. You’ll see the power of leverage makes this asset class pretty hard to beat.”

Tax efficiency also plays a crucial role in maximising ROI. New Zealand offers various investment property tax considerations, including potential deductions for mortgage interest, some other operating costs, and chattel depreciation.

Key points:

• Calculate comprehensive ROI. If you haven’t got your own, ask us to analyse the property your looking at in Planolitix and our exclusive property analysis spreadsheet - see below and click here for a bigger view for an example of the type of property our network can source (2x 3-bedroom houses, subdividable in Rolleston).

• Consider both rental yield and capital growth.

• Understand tax implications by seeking specialist property accountants.

• Diversify investment strategies.

• Regularly review and rebalance your portfolio.

List 5: Risk Management Strategies

Successful property investment requires robust risk management.

This involves thorough due diligence, maintaining financial buffers, and creating contingency plans for potential market fluctuations.

Investment property doesn’t suit everyone. Please read and understand these risks before buying and seek financial advice to ensure it’s the correct asset for your retirement plan.

• There are always risks with any investment, particularly property as it is not a very liquid asset and can be difficult to sell if required. To reduce this risk, careful due diligence is advised and I'd recommend utilising the services of a respected property finder for your purchase. A property finder with a proven track record removes lot of your risks associated with purchasing the wrong property, in the wrong area, from the wrong developer.

• Interest rate increases above the assumed 5% average retail rate can put pressure on your cash flows and in the worst case, force you to sell. Please ensure you have adequate resource for this event.

• Tenant vacancy can also put pressure on your cash flows. This is why we suggest budgeting for 2 weeks per year of vacancy, and recommend purchasing in locations with populations over 20,000 with good growth expectations, close to schools, work and amenities etc.

• Tenant risk, or the tenant not treating their property as their own, is a risk. We always advise using a well established, successful property manager who thoroughly checks tenants in, during, and out, to mitigate this risk.

• Insurance and comprehensive property management can also mitigate potential challenges. Ensure you have appropriate landlord insurance, regular property inspections, and reliable tenant screening processes.

• Always use a qualified accountant that preferably specialises in investment property and tax before making property investment decisions.

• Like any market, property values don't always go up. Assume there will be fluctuations, with valuations moving upwards, sideways, and downwards over time. Think in period of 10 years plus as property is not a short term investment.

• We’ve personally built an investment property portfolio over the last 20 years and can attest that your purchase needs to be the right one for you. Please seek advice from a qualified investment adviser who specialises in property investment before diving into purchase of this asset class.

Key points:

• Implement comprehensive risk assessment.

• Maintain financial buffers.

• Use professional property management, accounting, and advice services.

• Learn the basics of business and market cycles and stay informed about the current stages of the market by aligning yourself with an experienced professional team.

Conclusion

Property investment in New Zealand offers remarkable wealth-building opportunities for those who approach it strategically. By understanding leverage, managing cashflow, driving equity growth, and maximising return on investment, you can create a robust and profitable property portfolio.

Want to dive deeper? Jump into a strategy call with me to see if property investment is for you.

FAQs

Here are the top questions about property investment in New Zealand:

• Is property investment suitable for beginners? Yes, with proper education, advice, and strategic planning, beginners can successfully invest in property.

• How much money do I need to start investing? Typically, you'll need a 30-40% deposit if using collateral from your home, or a 15-25% deposit if you’re using cash, plus additional funds for associated costs.

• What are the tax implications of property investment? Consult a tax professional, speak to us for who we think is appropriate.

• How do I choose the right investment property? Research market trends, location potential, rental yields, and future development plans.

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Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk (click here) 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

The projections listed above simply illustrate the outcome calculated from the input values and the assumptions contained in the models. Hence the figures can be varied as required and are in no way intended to be a guarantee of future performance. Although the information is provided in good faith, it is also given on the basis that no person using the information, in whole or part, shall have any claim against Lifeline Assured Ltd (Bridge Financial), it's servants, employees or consultants. This information is intended as general advice only and does not take account of individual needs or financial circumstances. Intending purchasers should do their own assessment or consult a licensed investment adviser.

The 8th Wonder Of The World - Compound Interest!

There’s a financial equivalent to a superpower that can totally transform your modest savings and contributions into a substantial personal fortune one day…it just works silently and consistently in the background.

Compounding interest is often called the 8th Wonder of the World, originally described this way by Albert Einstein, and for good reason. This epic concept has the potential to turn even small, consistent savings into life-changing wealth.

I’m going to take you on a trip into what I feel is the base understanding for all things investment. We'll break down how this financial magic works, why it's so powerful, and how you can use it to build your own wealth strategy.

What is Compounding Interest and How Does It Work?

The Basic Mechanics of Compounding

Compounding interest is like a financial snowball that grows larger and faster as it rolls down the hill of time.

Unlike simple interest, which calculates returns only on your principal amount, compounding calculates returns on both your original investment and the accumulated interest from previous periods.

“This means your money doesn’t just grow – it grows exponentially.”

Now, let's break down how this works…

Imagine you invest a cool $1,000 with an annual return of 7%. In the first year, you'll earn $70. But in the second year, you're not just earning 7% on your original $1,000 – you're earning 7% on $1,070.

This might seem small initially, but over a few years, then decades, the difference will blow your mind.

The Time Factor: Why Starting Early Matters

Time’s the most crucial ingredient in the compounding recipe. The earlier you start investing, the more time your money has to grow. Consider two scenarios:

A client of mine, let’s call her ‘Sandy’ (out of respect for her preference to remain anonymous), starts investing $200 monthly at age 35, continues until he's 65 (so 30 years of contributions)

Result = $415,858 (based on a 10% annual return…calculator here)

VS

‘James’…starts investing $200 monthly at age 25, continues until he’s 35 (so only 10 years of contributions), SAVES $40,291, then just lets it fly until age 65…

Result = $703,053 (based on a 10% annual return…calculator here)

Surprisingly, even though English contributed for a shorter period, he ended up with a ton more for his nest egg due to the extra years of compounding.

This shows the incredible power of cracking into this early, just time work its magic.

Moral of the story? Get anyone you know who’s young to start dripping it in TODAY!!! It’s time in the market that counts the most.

Practical Strategies to Maximise Compounding (without the fluff)

To truly leverage compounding interest, consider these strategies:

1. Start investing as early as possible

2. Choose investments or KiwiSaver funds with consistent, reliable risk vs returns history (click to understand what this is)

3. Reinvest any monetary giftings, dividends or returns

4. Be patient! and avoid withdrawals!

5. Increase your contributions over time as your salary increases

The Psychology of Compounding

Compounding isn't just a mathematical concept – it's a mindset.

It requires discipline, patience, and you need to shift your mindset to thinking long-term instead of the fleeting ‘spending my profits as they arrive’ approach.

So many people struggle with compounding because it doesn't show results straight away.

The magic happens in your later years when your savings start to grow exponentially.

Real-World Examples of Compounding POWER

Let's look at some more scenarios:

$5,000 invested annually at 7% return for 40 years could grow to approximately $1,142,920!

$500 monthly investments with a 8% annual return could reach around $1,356,278 after 40 years!

A one-time $10,000 investment at age 25, left untouched until retirement, could grow to over $450,000!

Potential Pitfalls to Avoid

While compounding is powerful, be aware of:

• Market volatility

• Inflation

• Inconsistent investing

• Spending your profits

Tools and Resources for Compounding Success

• Retirement calculators (click here)

• Investment tracking apps (click here)

• Financial planning software (click here)

• Robo-advisors (if you like average results)

Conclusion

Compounding interest is your best financial strategy mate – it's the most important concept in the financial world.

By understanding and implementing these principles, you can achieve that cushy future that seems so out of reach at first glance.

Remember, the best time to start investing was yesterday, the next best time is now.

FAQs

Q: Is compounding interest guaranteed?

A: No, compounding returns depend on the performance of your investments. While historical market returns provide a guide, future performance is not found in a crystal ball.

Q: How often does compounding occur?

A: Compounding frequency varies – it can be daily, monthly, quarterly, or annually, depending on the investment type.

Q: Can compounding work with small amounts of money?

A: Damn straight! Even small, consistent investments or contributions can grow significantly over time. That’s exactly what you KiwiSaver is doing.

Q: What's the difference between simple and compound interest?

A: Simple interest calculates returns only on the principal, while compound interest calculates returns on both the principal and accumulated interest.

Q: Are there risks involved with compounding investments?

A: Yes, all investments carry some risk. Diversification and a long-term perspective can help mitigate these risks. Seek advice to avoid the pitfalls and add more to your nest egg.

P.S. I’m a believer that life is subtly pointing us in the direction we should go, but it’s up to us to actually listen.

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Hope this helped!

Chris George | Personal Finance Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

How To Protect Your KiwiSaver From A 30%+ Drop, And Avoid The Oh Sh*t!!

As your KiwiSaver fund gets bigger over time, and as you age and get closer to retirement, you’ll likely care more and more about the performance of your KiwiSaver fund.

If you apply these concepts I’ve learnt the easy way, and the hard way, they’ll serve you well in the good times and particularly well the bad times, helping you reach your financial goals.

1 | Understanding Phases Of The Business Cycle

Reading this first section serves an important purpose - It provides the base for understanding how to make more and risk less with your hard earned savings.

Gross Domestic Product (GDP) serves as a key indicator of economic health. Any fluctuations in GDP can signal shifts in the business cycle. Although the length of each business cycle can vary, it is generally categorised into four distinct phases:

1. Growth/Expansion

   • This is when the economy is booming, with rising employment and consumer spending. Businesses expand, and everything seems to be on the upswing.

2. Peak

   • Here, the economy hits its highest point. Growth stabilises, but inflation can creep up, leading to higher costs.

3. Recession

   • This is when economic activity declines. We see falling GDP and rising unemployment, and businesses often cut back on investments.

4. Trough

   • This phase represents the low point of the cycle before the economy starts to recover.

These cycles are influenced by various factors like consumer confidence, interest rates, and global events. 

““Understanding the business cycle , keeping a cool head through each phase of the cycle, and staying a course that is true to your wealth and retirement plan is crucial for retaining your hard earned savings.””

2 | Understanding The Phases Of The Market Cycle

1. Accumulation

   • This phase follows a prolonged bear market and is characterised by renewed investor optimism. During accumulation, stock prices are low, but perceived value is high. This phase aligns with the expansion period of the business cycle.

2. Mark-up or Uptrend

   • In the mark-up phase, investor enthusiasm surges as the market trends upward with increasing trading volumes. Valuations begin to rise, approaching historical averages. This phase is often referred to as a bull run, culminating in the market's peak, known as the bull market peak.

3. Distribution

   • At this stage, the market reaches the peak of the bull run. As the initial excitement wanes, many investors find themselves stuck in this phase, where prices struggle to rise and trading volumes decrease. This period can last a while, and even minor negative news can trigger significant sell-offs.

4. Mark-down or Downtrend

   1. This phase represents the opposite of the mark-up phase, where investor optimism turns into disappointment and extreme pessimism takes hold. A sell-off occurs, causing prices to plummet as confidence erodes and sentiment turns negative. The market enters a bear phase, eventually reaching a bear market trough, at which point prices stabilise and a new market cycle begins. Ultimately, market prices reflect human behaviour and decision-making.

The market would be easy to predict and navigate if it followed the business cycle. Instead it leads the business cycle as investors price into the market what they expect to happen in the future with the business cycle.

“Understanding the business cycle and keeping a cool head through each part of the cycle is crucial for making the best gains without the least risk. These cycles trigger a mixed bag of emotions, but they’re all related to only two - Fear and Greed, and we need to keep these in check.”

3 | The Psychology of Investing - Understanding Your Emotions

If you really want to nerd out, read Mastering the Market Cycle: Getting The Odds On Your Side, by esteemed economist Howard Marks.

However, if you can't be fussed reading it and just want a summary, he highlights that many of the extreme reactions—both positive and negative—within business and market cycles stem from investor psychology.

For investors, and anyone with a Kiwisaver fund where the balance size is starting to matter for them, recognising these fluctuations over time is essential for mitigating the risks associated with these unpredictable shifts.

During mark-down and recession phases, the media often amplifies this fear, and in turn the fearful psychology of the population compounds and growth assets such as shares and property spiral downward.

“To the investor, it feel like there’s no end in sight. Adding to that, a serious downturn can last for years. Understanding how your emotions can fluctuate through different market phases, and recognising these emotions within yourself, is one of the most important concepts to remember throughout your investment journey.”

4 | Understanding Drawdowns

This chart shows TEN years of price fluctuations for a Growth Kiwisaver Fund with one of the better performing providers in New Zealand.

The performance history above looks similar to the market cycle graph we studied before with ups and downs over time.

This chart shows the good times with the GREEN arrows (mark-up phase), and the hard times with the RED arrows (mark-down phase).

I've then highlighted the percentage gains in GREEN, and the percentage losses in RED.

We express the percentage losses with the term 'Drawdown'.

5 | Understanding Black Swan Events

In the investment world, we refer to events like the GFC (Global Financial Crisis) back in 2008 or COVID-19 in 2020 as ‘Black Swan’ events.

When COVID-19 hit, many who had their savings in Growth or Aggressive allocations watched their hard earned money plummet by over 30% in only two months.

Some funds with heavy exposure to indices saw drawdowns of 35% plus.

The transition from peak to to trough was extremely quick with the emotional shock and unknown consequences of what was the first global pandemic in one hundred years.

The unknowns of the situation caused a lot of fight or flight reactions - Those without help and knowledge had it tough - Emotions were on high alert, which led to panic, which led to poor financial decisions.

A lot of people changed into more conservative allocations right at the bottom of the trough. This solidified their losses as the market shifted into expansion not long after. It was an easy mistake to make if you didn’t have guidance.

The more astute Kiwisaver fund managers experienced Growth Fund drawdowns of less than 25% during the ‘Black Swan’ market event of COVID-19.

The best performing Kiwisaver provider achieved a mitigated 18% drawdown for their growth fund which was a better result than many balanced funds across New Zealand.

It then bounced back faster with stronger gains than those that took bigger hits. This portrays the result of excellent active management.

What I noticed as an adviser, is that it was those people with larger Kiwisaver balances that were most at risk of making incorrect, emotionally charged decisions.

The larger the Kiwisaver balance, the bigger the drawdown in dollars, and the harder it was for an investor to keep to the course and hold strong.

This is a good example of why an investments allocations need reviewing periodically.

If a fund experiences a large drawdown during a mark-down phase, and does not have an exceptional performance through the following accumulation phase of the market, it will take the balance longer to crawl back to its previous high. This usually returns less for the investor through the following mark-up phase into its next peak.

“Pulling off successful mitigation of the drawdown is one of the biggest advantages an active manager can hold over its competitors.”

Let’s go back a little bit further in time.

Look at how the S&P500 was affected with the DotCom bubble then the GFC (Global Financial Crisis).

How would you be feeling if you woke up tomorrow and your Kiwisaver balance had fallen by over 50%?

6 | So, How Do We Prepare?

If you’re in your 30’s or 40’s, or even 50's, you may experience several black swan events before you retire. 

We need to a) establish your risk profile i.e. what drawdown percentage you'd be OK with, then b) consider how long your investment horizon is, i.e. what is the amount of time before you will be using the savings, and c) balance these factors against your overall financial goals in Planolitix.

Once we have A, B and C understood, we can determine a drawdown potential you’re personally comfortable with, then balance it against the drawdown potential your long-term plan and objectives suit.

As an adviser, I look back through the history of Kiwisaver funds, and establish the drawdown percentage appropriate for you.

I can then structure your Kiwisaver allocations to your needs so you are ready to go before the next black swan flies in.

Adding to that tailored approach, the Kiwisaver providers I work with allow us to structure your Kiwisaver across multiple risk allocations and markets, not just one.

“This mitigates the drawdown potential further, allowing your savings to climb back faster after the accumulation or trough phase, then allowing the next growth phase in the market cycle to grow your money faster.”

7 | How To Choose A KiwiSaver Fund?

This video explains the #1 thing to check when you choose your Kiwisaver fund.

8 | Understanding Retirement Planning

Keep in mind that ALL of these Kiwisaver and investment concepts are just one part of the puzzle and applying them won’t be all you need.

First of all, and most importantly, you need a plan. We call it your 'Wealth and Retirement Plan'.

Without a plan to work backwards from, you’re just guessing as to how to correctly structure your Kiwisaver.

We use technology to understand what elements need to come together for you to achieve financial independence by retirement, and confirm at what age that might be. 

This tool helps us understand what your financial goals and ambitions are visually, so we can structure your Kiwisaver risk appropriately i.e. we need to answer questions like ‘should you pay off your mortgage first or invest?’

Without the right tools to help you establish a plan, it’s simply guesswork. You're simply flying blind.

This video below briefs you on the planning tool we use with our clients.

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Hope this helps!

Chris George | Personal Finance Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

How Much Do You Really Need For Retirement?

Retirement planning isn't just a financial task - it's a journey towards your dream life after years of hard work, and believe it or not, it can be fun!

Many Kiwis find themselves lost in a sea of numbers, wondering how much they truly need to retire comfortably, and associate financial planning help with high fees and boring discussions. So they procrastinate getting it sorted, year after year, never seeking help with the most important part of their financial world…planning.

This comprehensive guide will demystify the foundations of retirement savings, breaking down complex financial concepts into actionable insights that will empower you to take control of your financial future.

Key Points

• Discover the true cost of retirement in New Zealand

• Learn personalised strategies for calculating your retirement savings target

• Understand multiple income sources beyond traditional savings

• Develop a holistic approach to financial planning for your golden years

Understanding Retirement Needs: A Comprehensive Breakdown

1. Current Lifestyle and Expected Expenses

Retirement planning begins with a brutally honest look at your current lifestyle. A (very) general rule of thumb suggests you'll need approximately 60-80% of your pre-retirement income to maintain your standard of living. However, this isn't a one-size-fits-all approach.

Consider your current monthly expenses carefully. Break down your spending into essential and discretionary categories. Essential expenses include housing, food, healthcare, and utilities. Discretionary expenses cover travel, hobbies, dining out, and entertainment.

For the average Kiwi I work with, monthly retirement expenses can range anywhere from $4,000 to $15,000. The way people live and the money they spend varies hugely and depends on a whole bunch of factors but primarily boils down to lifestyle and location. Urban centers like Auckland will naturally have higher living costs compared to smaller towns.

“With living costs varying so broadly, your answer to this question will be truly unique. There’s no normal.”

Key points:

• Conduct a detailed expense audit

• Project future living costs

• Account for inflation (historically around 2-4% annually)

• Build a flexible budget that allows for unexpected expenses

• There’s no normal expenditure

2. Life Expectancy and Retirement Duration

Our life expectancy in NZ has been steadily increasing. As of 2023, the average life expectancy is around 82 years, with many people living well into their late 80s or 90s. If you retired at 65, and lived until 100, your retirement savings would need to last potentially 35 years, if not more.

Consider your family health history, personal health habits, and current fitness level. A healthy lifestyle can significantly extend your active retirement years. This isn't just about financial planning—it's about planning for quality of life.

When we project your life expectancy, and retirement needs in Planolitix, we use an expectancy of 100 years with the expectation that medical technology should only be improving from here in.

Key points:

• Plan for 35 years plus of retirement income

• Consider health and lifestyle factors

• Build in a financial buffer for unexpected health challenges

• Stay physically and mentally active to potentially reduce healthcare costs

3. Income Sources in Retirement

Diversification is key when it comes to retirement income. Don't rely on a single source of funding.

Primary income sources include:

• NZ Superannuation (currently around $27,000 annually for a single person or $41,000 for a couple)

• Kiwisaver withdrawals

• Personal investments

• Rental income

• Part-time work or consulting

Many retirees are now creating multiple income streams as the cost of living is historically so high. This might mean continuing part-time work, developing a small business, or generating passive income through investments.

It’s important to establish your expectations for how you see yourself spending in retirement at this point of your life so you work backwards to work out how much you’ll need down the track.

Key points:

• Maximise Kiwisaver contributions

• Explore diverse investment options

• Consider passive income strategies

• Stay flexible and adaptable

4. Housing and Accommodation Costs

Housing represents a significant portion of retirement expenses. Some retirees choose to downsize, while others prefer to stay in their family home. Each strategy has financial implications and need to be examined against each other using the right tools.

Downsizing can free up significant capital. Example: If you freed up the equivalent of $500,000 (in today’s money) realised from downsizing your home at age 70, this money could be invested to produce an income. Alternatively, staying in your home might mean lower moving costs and emotional comfort.

Consider:

• Mortgage status

• Home and/or property maintenance costs

• Potential rental or boarder incomes

• Reverse mortgage options (always seek professional advice if this is you)

• Retirement village alternatives

5. Healthcare and Insurance Considerations

Healthcare costs typically increase as we age. While New Zealand's public healthcare system provides significant support, additional private insurance can offer peace of mind.

Note: If you plan to retain your health insurance through your retirement years, you need to plan for the premium cost in your forecasted expenses at that point of your life by understanding what maximum your excess could be with your insurer at that point of your life. The idea is to be self-insuring by that stage by maximising your excess and minimising on the lower cost modules of your cover, like specialists, dental, optical etc. Again, always seek advice around this before implementing any changes.

Estimated annual healthcare costs for retirees can range from $2,000 to $10,000, depending on individual health conditions. Factor in potential costs for:

• Regular medical check-ups

• Prescription medications

• Potential mobility aids

• Dental care

• Specialist treatments

6. Investment Strategy and Risk Management

Your investment strategy should evolve as you approach retirement. In your 30s and 40s, you might have a higher-risk portfolio. As you near retirement, gradually shift towards more conservative investments.

A balanced approach might look like:

• 50-60% in stable, low-risk investments

• 30-40% in moderate-growth assets

• 10% in slightly higher-risk investments for potential growth

7. Lifestyle and Personal Goals

Retirement isn't just about survival - it's about thriving and living the life you dreamed about. What does your ideal retirement look like? Travel? Hobbies? Have a nice car? Supporting grandchildren?

Budget for:

• Travel experiences

• Continuing education

• Hobbies and personal development

• Potential family support

Conclusion

Retirement planning is a deeply personal journey. There's no universal magic number, but with careful planning, strategic thinking, and ongoing adaptation, you can create a robust financial plan that supports your desired lifestyle.

These days we’re lucky enough to have access to technology which takes the guesswork out of your future planning and proofing. Reach out to me if you’d like one on one strategy session where we can go through how Planolitix can help your future, and therefor your ‘now’.

FAQs

Q: How much should I have saved by retirement?

A: Aim for 10-12 times your annual salary by retirement age. For a $100,000 annual income, target $1,000,000 to $1,200,000 in total savings.

Q: When should I start planning?

A: Ideally, start in your 20s or 30s. However, it's never too late to begin. The key is to start now and be consistent.

Q: Can I retire earlier than 65?

A: Yes, but it requires aggressive saving, smart investments, and a go getter attitude!

Q: How often should I review my retirement plan?

A: We advise our clients to review annually to bi-annually, or after major life changes.

---

Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

Pay Off The Mortgage...Or Invest?

The age-old financial dilemma of mortgage repayment versus Kiwisaver investing has never been more complex than in today's New Zealand economic landscape.

Through all market phases and cycles, I’ve helped people navigate the intricate world of personal finance. As you’d expect, this has helped me understand the nuanced decision-making process that goes into balancing debt reduction and investment growth.

Navigating your financial journey is like sailing a complex ocean with the wind against the tide. Your mortgage is the anchor that keeps you grounded, while KiwiSaver is the wind in your financial sails. Just as a skilled sailor balances multiple elements to navigate successfully, you must balance debt reduction and investment growth.

Key Points

• Understand the financial implications of mortgage repayment

• Explore KiwiSaver investment potential

• Learn strategies for balanced financial planning

• Make informed decisions about your financial future

Understanding the Financial Crossroads

The decision between paying off your mortgage and investing in KiwiSaver is not a simple mathematical equation. It's a complex financial strategy that depends on multiple personal and economic factors. Years of financial consulting have taught me that there's no one-size-fits-all solution to this financial puzzle.

New Zealand's unique financial landscape adds another layer of complexity. With housing prices varying dramatically across different regions and KiwiSaver offering government and employer contributions, the decision requires careful consideration of multiple variables.

Think of your financial strategy like cooking a perfect meal. Paying off your mortgage is like creating a solid, hearty base – your financial foundation. Investing in KiwiSaver is like adding the right spices and garnishes that make the dish truly memorable. Too much of one ingredient can throw off the entire recipe, just as an unbalanced financial approach can derail your long-term goals.

“The optimal strategy often involves finding a balance between these two financial objectives, rather than pursuing an all-or-nothing approach.”

The Case for Mortgage Repayment

Paying off your mortgage faster offers several compelling advantages. The psychological benefit of reducing debt can be incredibly motivating. Each additional payment reduces the principal amount, potentially saving tens of thousands of dollars in interest over the loan's lifetime.

In the current New Zealand economic environment, mortgage interest rates play a crucial role in this decision. If your mortgage interest rate is higher than potential KiwiSaver returns, focusing on mortgage repayment might make more financial sense. For instance, a mortgage with a 6-7% interest rate could justify prioritising additional repayments.

Building home equity provides a form of financial security that goes beyond pure monetary value. Increased equity offers future borrowing options, potential renovation opportunities, and a sense of financial stability.

Additional mortgage repayments can significantly reduce your loan term. A few extra payments each year can potentially shave years off your mortgage, providing long-term financial freedom.

The Advantages of KiwiSaver Investment

KiwiSaver offers unique benefits that make it an attractive investment option. The government contribution of up to $521.43 annually and potential employer contributions create a compelling case for an investment that can’t be liquidated very easily.

Different KiwiSaver funds provide varying investment strategies. Conservative funds offer stability, while growth funds present opportunities for higher returns. The ability to choose a fund that matches your risk tolerance and financial timeline is a significant advantage.

The flexibility of KiwiSaver is another key advantage. First-time homebuyers can use their KiwiSaver funds for a home deposit, and the fund provides a structured approach to long-term retirement savings.

A Balanced Strategy: Why Not Both?

The most sophisticated financial approach often involves a balanced strategy that incorporates both mortgage repayment and KiwiSaver investment. Real-life case studies demonstrate the effectiveness of this approach and for most clients I come across, this makes the most sense.

Consider three distinct scenarios:

Case Study 1: Sarah, Age 32, Christchurch, Young Professional

With a $450,000 mortgage at 5.5% interest, she found the best outcome for retirement in Planolitix (our planning software) by:

• Increasing her mortgage repayments by $200 monthly.

• Maintaining consistent KiwiSaver contributions at 6% (plus her employers 3%), revising her providers and allocation strategy.

• Planolitix result at age 60:

  • Saved $87,910 in mortgage interest, reduced her mortgage term by 5 years.

  • Gained an additional amount to re-invest of $1,063,000 at age 60 from KiwiSaver savings.

  • Achieved $42,000 of extra income for retirement (in today’s money).

Case Study 2: Mike and Emma, Ages 42 and 41, Auckland, Mid-Career Education Professionals

With a $550,000 mortgage, they implemented a strategy to:

• Maximise their KiwiSaver government and employer contributions.

• Make an additional $300 of monthly mortgage repayments (50% of their surplus funds after their mortgage and P&I mortgage expenses).

• Maintain their KiwiSaver contributions of 6% each, but revise their allocation and risk vs reward strategy.

• Add an investment fund incase they can retire earlier than age 65, contributing 20% of their surplus funds.

• Purchase a high yielding investment property using the collateral from the equity in their home, investing 30% of their surplus funds into topping up the shortfall of their rent minus the OPEX (operating costs).

• Increase their existing low-level of income protection they purchased years ago, extending it to pay until age 65 (worst case), then stop their premiums going up every year with a level premium, long-term savings estimated at $41,256.

• Add beneficiaries to their life insurance, so the money would get to each other within a couple of days, instead of being handled by the lawyer and taking weeks.

• Planolitix result by age 65:

  • Saved $155,976 in mortgage interest, reduced their mortgage term by 6 years.

  • Gained an additional amount to re-invest at age 60 of $69,167 (investment fund) then another $1,320,000 at 65 (KiwiSaver).

  • This was modelled to achieve $55,603 of extra income for retirement (in today’s money).

Case Study 3: John, Age 55, Information Technology Professional, Approaching Retirement

With a $200,000 mortgage, optimised his strategy by:

• Focusing on debt reduction by increasing his mortgage repayments to $500 per month.

• Shifted his KiwiSaver to a better provider, reduced his risk with a mix of conservative (20%) and a balanced fund (80%) without losing potential returns, and reduced his contributions to 3%.

  • Once his mortgage was paid, he then focused on building up his KiwiSaver contributions.

• Planolitix result by age 70:

  • Saved $32,200 in mortgage interest, reduced his mortgage term by nearly 5 years and got the monkey off his back.

  • Gained an additional amount to re-invest of $521,000 at age 65.

  • This was modelled to achieve $10,680 of extra income for retirement (in today’s money).

These cases illustrate a crucial principle: the most effective approach is rarely about choosing between mortgage repayment or KiwiSaver, but about creating a balanced, personalised strategy that considers your unique financial circumstances.

Professional financial advice helps you create a personalised strategy that considers your unique circumstances, risk tolerance, and long-term financial goals.

Factors to Consider in Your Decision

Several key factors should influence your decision between mortgage repayment and KiwiSaver investment:

1. Your current age and proximity to retirement

2. Current mortgage interest rates

3. Your risk tolerance

4. Overall financial stability

5. Potential investment returns

Younger individuals might lean more towards investment, while those closer to retirement might prioritise debt reduction. Your personal financial situation will ultimately guide the most appropriate strategy.

Consider your overall financial health. Do you have an emergency fund? Are you managing other debts? These factors should inform your decision about mortgage repayment and investment.

Regular financial reviews are crucial! We aim to review your situation about every 1 to 2 years because your optimal strategy usually changes as your personal circumstances and economic conditions evolve.

Conclusion

The decision between paying off your mortgage and investing in KiwiSaver is not about choosing one approach over another. It's about creating a holistic financial strategy that provides security, growth, and flexibility.

FAQs

Q: How much should I contribute to KiwiSaver?

A: Aim to contribute at least enough to receive full employer and government contributions.

Q: Can I use KiwiSaver for my first home?

A: Yes, KiwiSaver can be used for first home deposits under certain conditions.

Q: What's the best KiwiSaver fund?

A: The best fund depends on your age, risk tolerance, and financial goals. See this video here to understand how to choose a Kiwisaver fund.

Q: Should I make extra mortgage repayments?

A: Consider your interest rates and overall financial strategy. And, use technology to take the guesswork out of it. See here.

Q: How often should I review my financial strategy?

A: Annually to bi-annually, or after significant life changes.

---

Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

Top 5 Tips To Save Big On Income Protection Insurance!

Unless you’re working in the industry, the in’s and out’s of Income Protection insurance can often feel like a financial maze without an exit.

The minority of people get it and protect the #1 asset in their financial world, their income, but the problem is…a lot of people don’t, and it’s a ticking time bomb for their retirement plan.

As an adviser who’s spent years understanding income, life, trauma, disability and health insurance dynamics, I'm here to focus in on income protection insurance with five of the most powerful strategies that can help you save money on this cover, without compromising your financial security.

Strategy 1: Reduce Your Payment Period

The payment period is a critical factor in determining your income protection insurance premiums. This is the duration for which you'll receive benefits after making a claim. My research and conversations with thousands, reveal that strategically managing the payment period can lead to significant cost savings.

Typical policies offer payment periods ranging from 2 to 5 years, or even extending to age 65 or 70. By choosing a shorter payment period, you can dramatically reduce your monthly premiums. For instance, selecting a 5-year payment period instead of a ‘to ager 65’ period could result in substantial savings.

However, this strategy requires careful consideration of your financial situation and should be run through planning software to make sure it’s safe to do (see video here). You'll need to assess how long you realistically need income replacement. Consider your existing savings, potential alternative income sources, and long-term financial stability.

The key is to balance premium savings with your financial risk tolerance. While a shorter payment period can save money, ensure it doesn't leave you financially vulnerable in a critical moment.

Key points:

• Payment periods range from 2 years or multiple years i.e. to age 65

• Shorter periods reduce premiums

• Assess your financial replacement needs

• Balance savings with financial security

• Consider long-term financial stability

Strategy 2: Choose a Longer Waiting Period

The waiting period – the time between becoming unable to work and receiving insurance benefits – directly impacts your premium costs. From my experience, this is one of the most effective ways to reduce your income protection insurance expenses.

Waiting periods typically range from 4 to 104 weeks. The longer you're willing to wait before receiving benefits, the lower your monthly premium. For example, extending your waiting period from 4 weeks to 13 weeks could reduce your premium by 20-30%.

This strategy requires a robust financial foundation. You'll need sufficient savings or alternative financial resources to support yourself during the waiting period. We recommend having 3-6 months of living expenses saved if you're considering a longer waiting period.

Carefully assess your emergency fund and financial stability before choosing a longer waiting period, and speak to a financial adviser first. While the premium savings can be attractive, you don't want to put yourself in a financially precarious position.

Key points:

• Waiting periods range from 4 to 104 weeks

• Longer periods significantly reduce premiums

• Requires strong emergency savings

• 20-30% premium reduction possible

• Balance savings with financial risk

Strategy 3: Adjust Your Coverage Amount

The amount of income you choose to protect directly influences your premium costs. Most income protection policies cover 50-75% of your gross income, making it unnecessary to insure 100% of your earnings.

Carefully evaluate your essential living expenses and existing financial resources (see video here (4th down)). If you have additional income sources, substantial savings, or a partner's income, you might not need full income replacement. Reducing your coverage to a more realistic amount can significantly lower your premiums.

Understanding different premium structures is crucial. Some policies offer stepped premiums (which increase with age) or level premiums (which remain consistent). Each has advantages and can impact your long-term insurance costs.

Review your policy annually and adjust coverage as your financial situation changes. Life events like marriage, having children, or changing jobs might necessitate coverage adjustments.

Key points:

• Cover 50-75% of gross income

• Assess actual income replacement needs

• Understand premium structures

• Review coverage regularly

• Consider existing financial resources

Strategy 4: Bundle Insurance Policies

Insurance providers often offer significant discounts for bundling multiple policies. Combining income protection with other insurance types can lead to substantial savings and simplified insurance management.

Many insurers provide multi-policy discounts ranging from 8-13%. These discounts not only reduce your overall insurance costs but also streamline your insurance portfolio by consolidating policies with a single provider.

When bundling, maintain a critical eye on coverage quality. Don't compromise on essential protection just to save money.

Consider working with an insurance adviser who can help you find the most cost-effective bundle that provides comprehensive coverage across different insurance types.

Key points:

• Bundle multiple insurance policies

• Discounts of 8-13% possible

• Simplify insurance management

• Maintain coverage quality

Strategy 5: Understand Level vs. Stepped Premiums

The structure of your premiums can significantly impact your long-term insurance costs. Understanding the difference between level and stepped premiums is crucial for making a cost-effective choice (see video here).

Stepped premiums start lower but increase as you age. While initially more affordable, they can become substantially more expensive over time. Level premiums, conversely, remain consistent throughout the policy's life.

If you anticipate needing long-term coverage, level premiums might save you money in the long run. Although they start higher, they provide more predictable and potentially lower overall costs over many years.

Evaluate your long-term insurance needs, expected retirement age, and financial projections when choosing between these premium structures.

Key points:

• Understand stepped vs. level premiums

• Stepped premiums increase with age

• Level premiums remain consistent

• Consider long-term insurance needs

• Project future financial situation

Conclusion

Saving on income protection insurance premiums is about strategic planning, understanding your personal risk profile, and making informed choices. By implementing these five strategies, you can potentially save significant money while maintaining essential financial protection.

FAQs

Q: How much can I save by implementing these strategies?

A: Potential savings range from 15-30% of your current premiums.

Q: Is it safe to reduce income protection coverage?

A: Only reduce coverage after carefully assessing your financial needs and risks. Speak to a financial adviser or book a strategy call with me today.

Q: How often should I review my income protection insurance?

A: Annually, or after significant life changes.

Q: Can I switch insurance providers to save money?

A: Yes, but have an adviser help you compare policies carefully to ensure equivalent coverage.

Q: Do all insurers offer these savings strategies?

A: Strategies vary, so seek professional help to compare multiple providers.

---

Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

How To Manage Your Cash Flow Better!

CashFlow Modelling is the financial lifeline of personal and business success.

As an Adviser who’s navigated through so many client financial challenges, as well as help people develop their cash flow and retirement plan since 2011, I understand how critical effective cash flow management can be for just about everyone in their working years.

This comprehensive guide will provide you with the valuable lessons I’ve learnt. It summarises them into practical, actionable strategies so you can take control of your financial health and create a more stable financial future.

Understanding Cash Flow: The Basics

Cash flow is more than just a financial buzzword – it's the lifeblood of your financial well-being.

In its simplest form, cash flow represents the movement of money in and out of your personal or business accounts. My own financial journey taught me that understanding cash flow is crucial to achieving financial stability and reaching long-term financial goals.

Once you start using our planning software Planolitix, you’ll start to grasp how this can outperform just about any other strategy for maximising retirement savings.

Many people mistakenly believe that cash flow is only about how much money you earn. However, it's equally about how you manage, spend, and save that money. Effective cash flow management involves creating a strategic approach to your finances, understanding your income streams, and controlling your expenses with different bank accounts that serve different purposes.

The first step in managing cash flow is developing a comprehensive understanding of your current financial situation. This means creating a detailed breakdown of all income sources and tracking every single expense. I learned this lesson the hard way – after years of financial uncertainty, I realised that true financial control begins with complete transparency.

Cash flow management is not about restricting your spending but about making informed financial decisions. It's about creating a balance that allows you to meet your current needs while also planning for future financial goals.

Creating a Comprehensive Budget

Budgeting is the cornerstone of effective cash flow management. When I first started my financial journey, I made the mistake of creating overly complicated budgets that were impossible to maintain. And most people I come across who have created a budget, spend more than what’s in their budget.

The key is to create a simple, realistic budget that you can actually stick to.

The 50/30/20 rule has been a game-changer in my financial planning. This approach suggests allocating 50% of your income to essential needs, 30% to wants, and 20% to savings and debt repayment. However, this is not a one-size-fits-all solution. The percentages can be adjusted based on your individual financial circumstances.

Technology has made budgeting easier than ever. Numerous apps and tools can help you track expenses, categorize spending, and provide insights into your financial habits. I recommend using a budgeting app that can connect directly to your long term retirement plan. That way you can see how spending adjustments over time as life changes, alter your retirement savings outcome.

Regular budget reviews are crucial. See here how we can help. Set aside time monthly to review your budget, identify areas of overspending, and make necessary adjustments. This proactive approach allows you to stay on top of your financial situation and make informed decisions.

Strategies for Increasing Income Streams

Diversifying income streams is a powerful strategy for improving cash flow. In today's gig economy, there are numerous opportunities to generate additional income. My personal experience taught me that multiple income streams provide financial security and flexibility. That’s why we broker Kiwisaver, Investments, Life, Income and Health insurances. Aside from being holistically appropriate for our clients, it creates a hedged income for Bridge Financial as we are paid directly by the provider.

Consider exploring side hustles that align with your skills and interests. This could include freelancing, consulting, online tutoring, or creating digital products. The key is to find opportunities that don't require significant upfront investment and can be managed alongside your primary income source.

Passive income streams can be particularly effective in improving cash flow. This might include rental income, dividend-paying investments, or creating digital products that continue to generate revenue after initial creation. While these often require initial effort and investment, they can provide long-term financial benefits.

Investing in your skills and education can also lead to increased income potential. Consider taking courses, obtaining certifications, or developing skills that can lead to promotions or higher-paying job opportunities.

Expense Management and Reduction Techniques

Effective expense management is crucial for improving cash flow. This doesn't mean living a life of extreme frugality, but rather making smart, intentional spending decisions. I learned to differentiate between necessary expenses and discretionary spending.

Conduct a thorough audit of your current expenses. Look for subscriptions you no longer use, negotiate better rates for services like internet and phone plans, and find areas where you can cut back without significantly impacting your quality of life. Small savings can add up to significant amounts over time.

Implement the 24-hour rule for discretionary purchases. Before making any non-essential purchase, wait 24 hours to determine if it's truly necessary. This simple strategy can help reduce impulse spending and improve overall financial discipline.

Consider using cash or a prepaid card for discretionary spending. This can help you stick to a predetermined budget and avoid overspending. The physical act of spending cash can make you more conscious of your spending habits.

Building an Emergency Fund

An emergency fund is your financial safety net, providing peace of mind and financial stability. My personal experience has shown that having an emergency fund can be the difference between financial stress and financial resilience. Particularly when events like Covid-19 or the GFC roll around every few years.

Aim to build an emergency fund that covers 3-6 months of living expenses. Start small if necessary – even saving $50 or $100 per month can build a significant buffer over time. Automate your savings to make the process easier and more consistent.

Keep your emergency fund in a easily accessible account, but separate from your primary checking account. This prevents you from using the funds for non-emergency expenses while ensuring you can access the money quickly if needed.

Treat your emergency fund contribution as a non-negotiable expense. Prioritise building this fund before allocating money to discretionary spending or additional investments.

Conclusion

Effective cash flow management is a journey, not a destination. By implementing these strategies, you can take control of your financial future, reduce financial stress, and create a more stable and prosperous financial life.

FAQs

Q: How quickly can I improve my cash flow?

A: With consistent effort, you can see improvements in 3-6 months.

Q: What's the most important cash flow strategy?

A: Creating and sticking to a realistic budget is the foundation of good cash flow management.

Q: How much should I save in an emergency fund?

A: Aim for 3-6 months of living expenses.

Q: Can I manage cash flow on a low income?

A: Yes, the principles remain the same – track expenses, create a budget, and look for ways to increase income.

Q: How often should I review my budget?

A: Monthly reviews are recommended, with a comprehensive annual review.

---

Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

What Is This Crypto Hype? And Should You Buy Bitcoin?

I’ve watched Cryptocurrency transform from a niche technological experiment to a global financial phenomenon that is undoubtedly capturing the imagination of investors worldwide.

There’s been some turbulent waters with the all of the cryptos but the biggest of them, Bitcoin, seems to be a household name.

In this article I share my personal insights and experiences, and from those, the critical considerations to help you make an informed decision about whether Bitcoin and Crypto belongs in your investment portfolio.

Understanding Bitcoin: More Than Just a Digital Coin

My journey with Bitcoin began in 2015, when cryptocurrency was still a mysterious concept to most people. I remember sitting in a small coffee shop, listening to a passionate tech entrepreneur explain blockchain technology. At the time, Bitcoin seemed like something out of a science fiction novel – a decentralised digital currency that existed beyond traditional banking systems.

Bitcoin is more than just a digital coin; it's a revolutionary technology that challenges traditional financial systems. Created in 2009 by an anonymous developer known as Satoshi Nakamoto, Bitcoin represents a decentralised form of currency that operates without central bank control. This fundamental characteristic makes it both fascinating and controversial, attracting both passionate supporters and skeptical critics.

The technology behind Bitcoin, blockchain, is perhaps even more groundbreaking than the currency itself. It's a transparent, secure, and immutable ledger that records transactions without requiring a central authority. This means every transaction is verified by a network of computers, making fraud extremely difficult and providing unprecedented transparency in financial transactions.

From my personal experience, understanding Bitcoin requires more than just knowing its price. It's about comprehending the technological innovation, the philosophical principles of decentralisation, and the potential long-term implications for global finance.

The Volatile World of Bitcoin Investing

My first Bitcoin purchase was a nerve-wracking experience. I invested $500 in 2017, watching the value skyrocket to $4,000 within months, then plummet back to $2,000. This rollercoaster ride taught me that Bitcoin investing is not for the faint of heart. The cryptocurrency market is notoriously volatile, with prices that can swing dramatically within hours. I was trading currencies using leverage at the time and that volatility was nothing compared to crypto.

Volatility is perhaps the most significant characteristic of Bitcoin. Unlike traditional stocks or bonds, Bitcoin's price can fluctuate by 10% or more in a single day. This volatility presents both incredible opportunities and substantial risks. While some investors have made millions, others have lost significant amounts of money in short periods.

Risk management becomes crucial in Bitcoin investing. I learned to never invest more than I could afford to lose completely. This principle became my golden rule after witnessing friends who invested their life savings, only to see their investments evaporate during market downturns. I only invest my ‘play money’, and NOT my ‘retirement money’ with this in mind.

Depending on the situation and risk tolerance, we generally recommend treating Bitcoin as a speculative asset rather than a stable investment. Allocating only a small percentage of your investment portfolio – typically 1 to 5% can provide exposure to potential gains while limiting potential losses.

Personal Investment Strategies

My Bitcoin investment strategy evolved through years of learning and sometimes painful experiences. Initially, I made the mistake of trying to time the market – buying when prices were high and panic-selling during downturns. This approach was what I was used to as I started my trading in currency markets.

It’s fundamentally flawed for Crypto and leads to consistent losses.

Circa 2015, trading currencies and early crypto.

Dollar-cost averaging emerged as my most successful strategy. Instead of trying to predict market movements, I began investing a fixed amount monthly, regardless of Bitcoin's price. This approach smooths out the impact of volatility and removes emotional decision-making from the investment process. Some exchanges allow for dollar cost averaging. Jump into a strategy call with me to learn how I’ve found offer a good service.

Diversification became another critical component of my investment approach. While Bitcoin formed a small part of my portfolio, I ensured it wasn't my only investment. Spreading risk across different assets – including traditional stocks, bonds, and other cryptocurrencies – provided a more balanced investment strategy and has definitely served me well.

Security is paramount in cryptocurrency investing. After experiencing a minor hack early in my journey, I learned the importance of using secure wallets, enabling two-factor authentication, and storing significant amounts in cold storage (offline) wallets.

Technological and Economic Considerations

Bitcoin represents more than just an investment – it's a potential technological revolution in financial systems. The concept of decentralized finance challenges traditional banking models, offering faster, more transparent, and potentially more accessible financial transactions.

However, Bitcoin faces significant challenges. Environmental concerns about the energy consumption of Bitcoin mining, regulatory uncertainties, and scalability issues remain substantial obstacles to widespread adoption. These technological and regulatory challenges mean that Bitcoin's future is far from guaranteed.

From an economic perspective, Bitcoin serves different purposes for different people. For some, it's a speculative investment. For others, it represents a hedge against inflation or a way to transfer money across borders without traditional banking fees.

Understanding the broader economic context is crucial. Bitcoin's value is driven by supply and demand, media sentiment, technological developments, and global economic conditions. Staying informed about these factors can help make more educated investment decisions.

Deciding whether to buy Bitcoin is a personal decision that requires careful consideration of your financial goals, risk tolerance, and understanding of the technology. While Bitcoin offers exciting possibilities, it also comes with significant risks. Approach cryptocurrency investing with education, strategy, and a measured perspective - and seek advice tailored for your personal situation.

FAQs

Q: Is Bitcoin a safe investment?

A: Bitcoin is a high-risk, high-reward investment. Only invest what you can afford to lose and thoroughly research before investing.

Q: How much Bitcoin should I buy?

A: We generally recommend allocating 1-5% of your investment portfolio to cryptocurrency, book a free strategy call to see if this applies to you.

Q: Can Bitcoin replace traditional currency?

A: While unlikely in the near future, Bitcoin continues to challenge traditional financial systems and may play an increasingly important role in global finance.

Q: How do I securely store Bitcoin?

A: Use a combination of hardware wallets for large amounts and reputable online wallets for smaller, more accessible funds. Call us to understand your options.

Q: Is it too late to invest in Bitcoin?

A: It's never too late to invest, but approach with caution, education, and a long-term perspective.

---

Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

5 Tips To Successfully Navigate Income And Career Transitions!

Planning for income and career changes is so crucial in today's ever evolving professional landscape.

As the job market continues to evolve rapidly, professionals must develop adaptable strategies to maintain financial stability and career growth. It’s not just the economic uncertainty we need to plan for and think about nowadays, it’s the robots taking jobs.

This guide walks you through the essential steps I’ve learnt from the outside watching in. It will help you effectively manage your career trajectory, anticipate potential changes, and build a robust financial foundation that can withstand professional transitions.

Here are the 5 key strategies for planning income and career changes over time:

1. Understanding Your Current Career Landscape

The first step in planning for career and income changes involves conducting a thorough self-assessment of your current professional situation. This means critically examining your current role, skills, industry trends, and potential future opportunities.

Many professionals make the mistake of remaining stagnant, believing their current position will remain stable indefinitely. However, industries are constantly evolving, and technological advancements are rapidly transforming job markets.

The risk is not having access to adequate resources to survive between roles, and we cannot buy redundancy insurance in New Zealand anymore (post Covid-19).

Career landscape analysis requires a multi-dimensional approach. You'll need to evaluate your current skill set, identify potential gaps in your professional capabilities, and understand the emerging trends in your industry. This might involve researching job market reports, attending industry conferences, networking with professionals in your field, and staying updated on technological advancements that could impact your career trajectory.

Technology and globalisation have fundamentally changed how careers progress. Traditional linear career paths are becoming increasingly obsolete, replaced by more dynamic, non-linear professional journeys. This means you must develop a flexible mindset and be prepared to pivot when necessary. Continuous learning, adaptability, and a proactive approach to skill development are now more critical than ever in maintaining professional relevance.

Understanding your career landscape also involves recognizing your personal strengths, weaknesses, and long-term professional aspirations. This self-awareness will help you make more informed decisions about potential career transitions, additional training, or skill acquisition that can enhance your marketability and income potential.

Key points:

• Conduct regular self-assessments of your professional skills

• Stay informed about industry trends and technological changes

• Develop a flexible and adaptable career mindset

• Recognise the non-linear nature of modern career paths

• Continuously invest in personal and professional development

2.Financial Planning for Career Transitions

Financial preparedness is a critical component of successful career planning. Creating a robust financial strategy that can accommodate potential income fluctuations requires careful budgeting, strategic saving, and diversified income streams. Many professionals underestimate the importance of financial flexibility, which can leave them vulnerable during unexpected career changes.

Building an emergency fund is the cornerstone of financial resilience. I generally recommend saving at least 3-6 months of living expenses to provide a safety net during potential career transitions. This fund acts as a buffer, allowing you to make strategic career decisions without immediate financial pressure. Additionally, consider developing multiple income streams through freelancing, consulting, or passive income opportunities.

Kiwisaver and Investment diversification is another crucial aspect of financial planning for career changes. This doesn't just mean diversifying your investment portfolio, but also diversifying your professional skills and potential income sources. Consider developing transferable skills that can be valuable across multiple industries, such as digital marketing, data analysis, or project management.

We help you analyse how diversified your investments are now…

…then help you define where you should be aiming to be by retirement.

Risk management is an essential component of financial planning for career transitions. This involves regularly reviewing and adjusting your financial strategy, maintaining a good credit score, and staying informed about potential economic shifts that might impact your industry. Networking and maintaining professional relationships can also provide valuable insights and potential opportunities during career transitions.

Key points:

• Create a robust emergency fund

• Develop multiple income streams

• Invest in transferable skills

• Maintain financial flexibility

• Regularly review and adjust financial strategies. See video here on how we model these potential changes for you.

3.Skill Development and Continuous Learning

In the modern professional landscape, continuous learning is not just an advantage—it's a necessity. The rapid pace of technological advancement means that skills can become obsolete within a few years. Professionals who commit to ongoing education and skill development are better positioned to navigate career changes and maintain their income potential.

Online learning platforms have revolutionised skill acquisition, making it easier and more affordable to learn new competencies. Platforms like Coursera, edX, and LinkedIn Learning offer a wide range of courses across various disciplines. Consider developing skills in emerging technologies, digital tools, and interdisciplinary areas that can enhance your professional versatility.

Professional certifications can also play a significant role in career planning. Many industries value specialised certifications that demonstrate advanced knowledge and commitment to professional growth. Research certifications relevant to your field and consider investing time and resources in obtaining them to increase your marketability.

Networking and mentorship are often overlooked aspects of skill development. Connecting with professionals in your industry, attending conferences, and seeking mentorship can provide invaluable insights into emerging trends and potential career opportunities. These relationships can also offer guidance during career transitions and help you identify potential skill gaps.

I have a large Linkedin connection base. Reach out to me if you’d like an introduction to anyone you see could help.

Key points:

• Embrace continuous learning

• Utilise online learning platforms

• Obtain relevant professional certifications

• Network with industry professionals

• Seek mentorship and guidance

4.Adapting to Technological Changes

Technology is fundamentally reshaping how we work, communicate, and generate income. Professionals who can effectively adapt to technological changes will be better positioned to maintain their career trajectory and income potential. This requires a proactive approach to understanding and integrating emerging technologies into your professional skill set.

Artificial intelligence, machine learning, and automation are transforming multiple industries. Rather than viewing these technologies as threats, consider them as opportunities for professional growth. Learn how these technologies can be leveraged in your industry, and develop skills that complement technological advancements.

Digital literacy has become a critical skill across virtually all professional domains. This goes beyond basic computer skills and involves understanding how digital tools can be used to enhance productivity, communication, and problem-solving. Invest time in learning digital collaboration tools, project management software, and industry-specific technological platforms.

Remote work and digital collaboration have become increasingly prevalent, accelerated by global events like the COVID-19 pandemic. Developing skills in virtual communication, remote project management, and digital collaboration will make you more adaptable and attractive to potential employers or clients.

Key points:

• Understand emerging technologies

• Develop digital literacy skills

• Embrace remote work capabilities

• View technological changes as opportunities

• Continuously update technological competencies

5.Building a Resilient Professional Network

Your professional network is one of the most valuable assets in navigating career and income changes. A strong, diverse network can provide support, insights, and potential opportunities during professional transitions. Networking is no longer just about collecting business cards—it's about building meaningful, mutually beneficial professional relationships.

After all, it’s probably how we met :)

Digital platforms like LinkedIn have transformed networking, making it easier to connect with professionals across industries and geographical boundaries. However, effective networking goes beyond online connections. Attend industry conferences, participate in professional associations, and engage in meaningful conversations with colleagues and peers.

Mentorship can be a powerful tool in career planning. Seek out mentors who have successfully navigated similar career transitions or who work in industries you're interested in exploring. A good mentor can provide guidance, share valuable insights, and help you avoid potential pitfalls during your professional journey.

Personal branding has become increasingly important in professional networking. Develop a consistent, authentic professional persona across digital platforms. Share insights, contribute to industry discussions, and showcase your expertise to attract potential opportunities and build credibility within your professional community.

Key points:

• Cultivate a diverse professional network

• Utilise digital networking platforms

• Seek mentorship

• Develop a strong personal brand

• Engage actively in professional communities

Conclusion

Planning for income and career changes is an ongoing process that requires strategic thinking, continuous learning, and adaptability. By understanding your professional landscape, developing financial resilience, investing in skill development, and building a strong network, you can navigate career transitions with confidence and maintain your income potential.

FAQs

Q: How often should I reassess my career plan?

A: Ideally, conduct a comprehensive career review annually, with quarterly check-ins on your progress and emerging opportunities. See how we model your expected career changes against what you’re long term plan looks like here.

Q: What if my industry becomes obsolete?

A: Focus on developing transferable skills, stay informed about industry trends, and be prepared to pivot to related or emerging fields.

Q: How much should I save for career transitions?

A: Aim to save 3-6 months of living expenses in an emergency fund, and continuously work on developing additional income streams.

Q: Are online certifications valuable?

A: Yes, many online certifications from reputable platforms are highly valued by employers and can significantly enhance your professional profile.

Q: How can I stay motivated during career transitions?

A: Set clear goals, maintain a growth mindset, seek support from mentors and peers, and view challenges as opportunities for personal and professional development

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Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

How To Invest Your Redundancy Package: Mortgage VS Kiwisaver VS Investments?

Losing a job can be challenging, but receiving a redundancy package presents a unique financial opportunity. You’ve just have to keep your chin up, and focus on the positives with a smart strategy.

I’ve helped many professionals hit with redundancies. This guide will walk you through strategic ways to manage and invest your redundancy payment, helping you transform an unexpected setback into a potential stepping stone for future financial success.

Whether you're looking to secure your financial future, pay down debt, or create a robust investment strategy, we've got you covered.

What Should You Do with Your Redundancy Package?

1. Immediate Financial Assessment and Planning

Receiving a redundancy package can be both an emotional and financial turning point. Before making any investment decisions, it's crucial to take a comprehensive look at your current financial situation. This means carefully evaluating your existing debts, monthly expenses, and overall financial health.

The first step is to create an emergency fund if you haven't already. We generally recommend setting aside 3-6 months of living expenses to provide a safety net during your job transition. Your redundancy package can be an excellent source for building this critical financial buffer.

Consider your immediate financial obligations and potential future expenses. This might include mortgage payments, existing debts, or potential costs associated with finding new employment or retraining. We have modelling software to help you with this.

A strategic approach involves breaking down your redundancy package into different financial priorities, ensuring you're prepared for both short-term needs and long-term financial growth.

Key points:

• Conduct a comprehensive financial assessment

• Create an emergency fund

• Evaluate immediate and future financial obligations

• Develop a strategic allocation plan

• Balance short-term needs with long-term goals

2. Tax Considerations and Strategic Planning

Redundancy packages come with complex tax implications that can significantly impact your financial planning. In many jurisdictions, there are specific tax rules that determine how much of your package is tax-free and how much will be taxed as regular income.

Consulting with a tax professional is crucial to understand the specific tax treatment of your redundancy payment. Some portions of the package may be tax-free up to a certain threshold, while others might be taxed at your marginal tax rate.

Consider strategies to minimise your tax liability, such as spreading the income over multiple tax years or making strategic investments that offer tax advantages.

Understanding the tax landscape will help you make more informed decisions about how to invest and manage your redundancy package effectively.

Key points:

• Understand complex tax implications

• Consult with a tax professional

• Explore tax-efficient investment strategies

• Minimize tax liability strategically

3. Investment Options for Your Redundancy Package

Diversification is key when investing your redundancy package. Rather than putting all your funds into a single investment, consider spreading your money across different asset classes to manage risk and potentially increase returns.

Stock market investments can offer potential long-term growth. Consider Kiwisaver, or investment funds that provide broad market exposure with good risk-adjusted returns (see here). These investment vehicles can be an excellent way to invest in a diversified portfolio without requiring extensive financial expertise.

Fixed-income investments like bonds or government securities can provide more stable returns and help balance the risk in your investment portfolio. These can be particularly attractive for those seeking more conservative investment options.

Real estate investments, either through direct property purchase or simply paying down existing debt, can offer another avenue for diversification and potential passive income.

Key points:

• Prioritize investment diversification

• Consider stock market index funds

• Explore fixed-income investments

• Investigate real estate opportunities

• Balance risk and potential returns

4. Skill Development and Career Reinvestment

Your redundancy package can be an opportunity for personal and professional development. Consider investing in yourself by funding additional training, certifications, or education that can enhance your employability or help you pivot to a new career.

Online learning platforms offer cost-effective ways to acquire new skills. From technical certifications to soft skills training, these investments can significantly improve your future earning potential.

Some professionals use their redundancy package as seed funding for a new business venture or freelance career. This approach requires careful planning and potentially additional skills development.

Investing in yourself can provide returns that go beyond financial metrics, offering increased job satisfaction, career flexibility, and long-term earning potential.

Key points:

• Invest in personal and professional development

• Explore online learning opportunities

• Consider career pivots or entrepreneurship

• Enhance employability through new skills

• Look beyond financial returns

5. Debt Management and Financial Consolidation

Using part of your redundancy package to manage existing debt can be a smart financial strategy. High-interest debts like credit card balances can be particularly burdensome and should be prioritised.

Consider paying off high-interest debts entirely or consolidating them into lower-interest options. This can provide immediate financial relief and improve your long-term financial health.

If you have a mortgage, you might explore options like making additional principal payments or refinancing to reduce long-term interest costs.

Debt management should be balanced with investment strategies, ensuring you're not sacrificing potential growth opportunities while addressing existing financial obligations.

Key points:

• Prioritise high-interest debt repayment

• Explore debt consolidation options

• Consider mortgage optimisation

• Balance debt management with investment

• Improve overall financial health

Conclusion

Your redundancy package represents more than just a financial settlement—it's an opportunity for strategic planning, personal growth, and financial reinvention. By approaching this moment with careful consideration and informed decision-making, you can turn an unexpected career transition into a pathway for future success.

FAQs

Q: How much of my redundancy package should I invest?

A: Typically, aim to keep 3-6 months of living expenses as an emergency fund, and then strategically invest the remainder.

Q: Are there risks in investing my redundancy package?

A: All investments carry some risk. Diversification and consulting with a financial advisor can help manage these risks.

Q: Can I use my redundancy package to start a business?

A: Yes, but carefully research and plan your business venture, and consider setting aside funds for living expenses during the startup phase.

Q: How long should I take to decide how to invest my package?

A: Take your time—ideally 1-3 months to thoroughly assess your financial situation and explore options.

Q: Should I speak with a financial advisor?

A: Yes, a professional can provide personalized advice tailored to your specific financial circumstances and goals.

---

Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

The #1 KiwiSaver & Investment Concept!

Many of us find choosing a Kiwisaver or Investment fund a complex and sometimes scary decision. And that's fair, it is your future that you're making decisions about after-all...and we’re not taught this stuff at school!

Understanding the basics of how to analyse risk-adjusted returns can simply simplify the process and swaps the 'Am I making the right call?' feeling to the certainty we all need. In this guide, I dive deep into the world of risk-adjusted returns, exploring how you, as a saver and investor, can evaluate fund performance across the New Zealand fund management landscape…way beyond simple return or fee comparisons.

You'll learn how to assess investments more intelligently, protect your portfolio and your future, and make more informed financial choices. And best of all, these principles can be taken to all investments…i.e. property, crypto, even business. It might just change how you think about money.

So, what are Risk-Adjusted Returns and why do they matter?

Risk-adjusted returns are a sophisticated approach to evaluating Kiwisaver fund and investment performance that goes beyond simple percentage gains.

Unlike traditional return measurements, this method considers the amount of risk taken to achieve those returns.

Imagine two Kiwisaver funds: one that generates 10% returns with minimal volatility and another that also generates 10% but with extreme price fluctuations.

Adjusting the returns for the risk helps an investor understand which of the two is truly more valuable.

We source a quarterly risk versus return chart that compares the Kiwisaver and Investment fund performance across New Zealand. As part of our analysis for clients Kiwisaver and fund management, we use these metrics. An example of how they can be used is below:

Key Components of Risk-Adjusted Returns

1. Understanding Kiwisaver Fund Risk Metrics

Risk-adjusted returns are fundamentally about balancing potential rewards with potential dangers. An adviser uses sophisticated metrics to evaluate how much return a fund is generating relative to the risk it is assuming.

These metrics provide a more nuanced view of the investments performance, allowing for more intelligent decision-making.

The primary goal of a risk-adjusted analysis is to normalise returns across different asset or investment opportunities. By considering factors like volatility, standard deviation, and potential downside, you can make a much more informed choices about where to allocate your capital.

Professional investors rely on multiple risk-adjusted metrics to create a comprehensive view of investment potential. These metrics help them compare investments that might appear similar on the surface but have dramatically different risk profiles.

Understanding these metrics requires a combination of mathematical knowledge and financial insight. If you use Kiwisaver as a retirement vehicle, I’d recommend looking beyond surface-level returns and digging deeper into the underlying risk characteristics of your investment.

Key points:

• Risk-adjusted returns provide a holistic view of investment performance

• Metrics help normalise returns across different investment types

• Professional investors use multiple risk assessment tools

• Mathematical and financial knowledge is crucial for accurate analysis

• Comparing risk-adjusted returns reveals hidden investment insights

2. Calculating Risk-Adjusted Performance Measures

Calculating risk-adjusted returns involves several sophisticated mathematical approaches.

The Sharpe ratio is perhaps the most well-known method, which compares an fund's excess return to its standard deviation. This helps you understand how much additional return you're receiving for each unit of risk taken.

We source this measure for our clients when they’re choosing a Kiwisaver fund(s) and/or different types of investments.

Along with other metrics, we look at the Sharpe Ratio comparison across the KiwiSaver funds to understand the ‘apples versus apples’ risk are taking for your savings. (I’ve blanked out the providers as these measures change over time.)

Another critical measure is the Treynor ratio, which evaluates returns relative to systematic market risk. Unlike the Sharpe ratio, it uses beta instead of standard deviation, providing insights into how a Kiwisaver or investment fund performs compared to the broader market.

The Jensen alpha is a more advanced metric that measures an investment's performance against a expected return based on the capital asset pricing model. It helps investors identify investments that are outperforming or underperforming relative to their expected risk level.

Modern portfolio theory has revolutionised how investors think about risk and return. By understanding these calculation methods, investors can make more sophisticated investment decisions that go beyond simple return percentages (see video here).

Key points:

• Sharpe ratio compares excess returns to standard deviation

• Treynor ratio evaluates returns relative to market risk

• Jensen alpha measures performance against expected returns

• Modern portfolio theory provides advanced risk assessment techniques

• Multiple metrics offer a comprehensive investment evaluation

3. Practical Applications in Kiwisaver and Investment Fund Strategy

Risk-adjusted returns are not just theoretical concepts but practical tools for real-world Kiwisaver and Investment fund management.

Institutional investors, hedge funds, and sophisticated individual investors (you) can use these metrics to build more robust portfolios that can weather market volatility.

By prioritising risk-adjusted returns for your Kiwisaver, you can create a more balanced and resilient investment strategy. This approach helps mitigate potential losses while still pursuing meaningful growth opportunities.

Diversification becomes more strategic when viewed through the lens of risk-adjusted returns. You can identify a Kiwisaver or investment fund that provides complementary risk profiles (they aren’t all equal), creating a retirement savings vehicle that is more stable and potentially more profitable over time.

Technology and advanced analytics have made risk-adjusted analysis more accessible than ever before, but you’ll need to team up with a trusted adviser to access them (schedule here).

“You now have powerful tools at your finger tips to evaluate and optimise your investment strategy with unprecedented precision.”

Key points:

• Risk-adjusted returns guide practical investment decisions

• Institutional investors rely on these sophisticated metrics, you can too

• Diversification becomes more strategic and intentional

• Advanced technology enables more precise risk assessment

• Balanced portfolios can be created through careful analysis

4. Common Mistakes in Risk-Adjusted Return Analysis

Many investors make critical errors when attempting to analyse risk-adjusted returns. The most common mistake is relying too heavily on a single metric or misunderstanding the context of these calculations.

Overconfidence can lead investors to misinterpret risk-adjusted metrics, assuming past performance guarantees future results.

It's crucial to understand that these measures provide insights, not absolute predictions.

Another significant error is neglecting to consider the specific investment context. Risk-adjusted returns can vary dramatically across different asset classes, market conditions, and investment timeframes.

Investors must continuously educate themselves and remain adaptable. The financial landscape is constantly evolving, and risk assessment techniques must keep pace with changing market dynamics.

Key points:

• Avoid over-reliance on single risk metrics

• Understand the limitations of risk-adjusted analysis

• Context is crucial in interpreting performance measures

• Continuous learning is essential for effective investing

• Adaptability helps navigate changing market conditions

Conclusion

Risk-adjusted returns represent a powerful approach to understanding investment performance. By looking beyond simple percentage gains and considering the underlying risk characteristics, investors can make more informed and strategic financial decisions.

FAQs

Q: What is the most important risk-adjusted return metric?

A: The Sharpe ratio is widely considered the most comprehensive risk-adjusted return metric, but no single measure tells the complete story.

Q: How often should I calculate risk-adjusted returns?

A: Regular review is recommended, typically annually, depending on your investment strategy and portfolio complexity.

Q: Can individual Kiwisaver investors use risk-adjusted return analysis?

A: Absolutely! Our tools and investment platforms now offer risk-adjusted return calculations for individual investors.

Q: Do risk-adjusted returns work for all types of investments?

A: While most effective for traditional financial assets, the principles can be applied across various investment types with appropriate modifications.

Q: How significant are risk-adjusted returns compared to total returns?

A: Risk-adjusted returns provide crucial context that total returns alone cannot, offering a more nuanced view of investment performance.

---

Hope this helps!

Chris George | Financial Adviser

Want more…?

👉This video explains how to WIN the financial game!📝

👉This video explains how a couple could accumulate an extra $1,200,000 in Kiwisaver over the next 25 years, without increasing their contributions or risk 📈

👉This video explains how to stop your income and life insurance premiums go up💡

👉Let's sit down and figure out how to map out a future you can look forward to…Click here or below to schedule a strategy call.

Note: Any information provided is for general and educational informational purposes only and is not personalised advice. Your circumstances are unique and there’s no templated road to a cushy retirement! For personalised advice, please book a Strategy Call.

KiwiSaver & Investment Diversification

Today, we're going to tackle a topic that's as important as knowing the difference between a kiwi bird and a kiwifruit. Kiwisaver and Investment fund diversification!

Now, I know what you're thinking. "Investment diversification? That sounds about as exciting as watching paint dry on a white wall." But fear not! I promise to make this journey through the land of diversification as entertaining as an All Blacks haka dance.

Let's start with the basics. KiwiSaver is like your best friend, always looking out for you and helping you save for retirement. But here's the thing: just like eating only pineapple lumps can lead to serious sugar cravings, relying solely on one investment option can leave you feeling a bit deflated.

Imagine your KiwiSaver as a basket filled with delicious treats. Now, if you only have one type of treat in that basket, like chocolate fish, you're putting all your hopes for retirement on a single sweet treat. What if it melts in the sun? What if your neighbour's dog snatches it? Disaster! That's why we need diversification—to spread our investment eggs across different baskets.

But wait, before you start filling your basket with an assortment of odd items like jandals, pavlova, and sheep, let me guide you through the art of achieving diversification in your KiwiSaver. Here are some tips to ensure your financial future is as solid as a DIY pavlova in the hands of a master baker:

1. Mix it up like a Pavlova Party: Just like a good pavlova needs the right combination of egg whites, sugar, and a dash of lemon juice, your KiwiSaver portfolio needs a mix of different investment types. Think of it as creating the perfect balance between conservative and aggressive options. Bonds, shares, cash, commodities, and even digital assets like Crypto - they're all invited to the pavlova party!

2. Don't put all your money in Hobbit Holes: While we love our Hobbiton, investing all your funds in a single asset class is riskier than wearing a sheep costume to a rugby match. Remember the old saying, "Don't keep all your money in one Hobbit hole." Okay, maybe I just made that up, but you get the idea.

3. Embrace Team Spirit: The All Blacks are renowned for their teamwork, and your investment strategy should follow suit. Look for a KiwiSaver fund that spreads its investments across different companies, industries, and even countries. Just like the All Blacks draw strength from their diverse team, your investments can benefit from a similar approach.

4. Keep an Eye on the KiwiSaver Menu: Just like you'd check out the menu before ordering at your favourite fish and chip shop, make sure you review your KiwiSaver provider's investment options. Check if they offer a range of funds that suit your risk appetite and goals. Think of it as finding the perfect combination of fish, chips, and the right amount of tomato sauce.

5. Time Travel with Dollar-Cost Averaging: If you have superpowers like Doctor Strange and can predict the future movements of the markets, please let me know! For the rest of us mere mortals, the technique of dollar-cost averaging can be a lifesaver. Invest a fixed amount regularly, regardless of market ups and downs, to average out your returns over time. It's like time travelling without the cool cloak.

6. Resist the Urge to Chase Unicorns: We all know that one person who's always chasing the latest trend, whether it's unicorn onesies or the latest investment fad. But when it comes to your KiwiSaver, avoid the temptation to chase after the mythical "unicorn investments" that promise sky-high returns with no risk. Remember, unicorns only exist in fairy tales, not in the financial world.

7. Keep Calm and HODL: In the crypto world, "HODL" stands for "Hold On for Dear Life." While we're not suggesting you invest all your KiwiSaver funds in Bitcoin, the principle of holding on to your investments through market fluctuations applies. Don't panic and sell everything when the market takes a dip. Stay calm and trust in the long-term growth of your diversified portfolio.

8. Learn from Rugby Legends: As proud Kiwis, we can draw inspiration from our rugby legends on and off the field. Just as Richie McCaw knows the importance of teamwork, discipline, and resilience, apply those lessons to your investment strategy. Stay disciplined, keep learning, and adapt to changing circumstances like a true rugby champ.

9. Seek Professional Advice: If you find yourself swimming in investment jargon and feeling as confused as a sheep trying to navigate a maze, don't hesitate to seek professional advice. A qualified financial advisor can guide you through the intricacies of investment diversification and help you make informed decisions.

So, my fellow KiwiSaver aficionado, remember that Kiwisaver fund diversification is not only important but can also be as fun and quirky as a flightless bird doing the haka. Spread your investments, mix up your asset classes, and embrace the wisdom of our rugby legends.

Together, let's build a solid financial future that's as delightful as a perfectly baked pavlova. Because when it comes to our KiwiSaver, putting all our eggs in one basket is strictly for omelette lovers.

Stay diversified, stay quirky, and keep saving!

Thanks for reading!

Chris George | Financial Adviser

How to get out of debt!

Debt causes stress, loss of sleep, illness and marriages to fail. And it simply doesn’t allow you to ever get ahead. Here are 6+1 things to do to get yourself out of debt.

1. Decide that you really want to. And your partner must agree to work with you on this.

2. Create an emergency fund of $1,000 as fast as you can. This is important or you won’t do step

3. Cut up or freeze your credit card since you now have an emergency fund. Why run up more debt?!

4. Pay cash for weekly living. Each week take out an amount for groceries, petrol and an allowance for you and your partner. Then you can never overspend. This will save you THOUSANDS!

5. Pay off debt smallest to biggest Ignore interest rates. List all your debts in order of size and pay them off smallest to biggest. This allows you to cross them off and gives incentive to keep going.

6. Sell stuff. Use Trademe and garage sales to sell anything you can find. Use this to pay off debt.

7. And the extra 1? That is to give your family a backup in case something strikes you health wise before it’s all paid off. This is life and disability cover so all debts can be paid for your family if you are not able to work or you die.

Define a family

What a huge difference 40 years has made to our lives!

In 1971, 8,700 teen girls (defined as girls under 20) got married – this was 32% of all brides. 40 years later in 2011, just 513 teen girls got married, being just 3% of all brides.

The average marriage age for boys in 1971 was 22, but is now just on 30 (for girls it is 28). Adding to changing trends is that de facto relationships are blossoming. 40% of those in cohabiting relationships now are not legally married. There are around 20,000 marriages in NZ annually and 10,000 divorces!

When you think of a “family”, the idea of two parents and dependent children comes to mind. However, this is about 40% of family households. Another 40% have no children either by choice, or the kids have left home. The final 20% is single parent families.

Recent law changes now mean same-sex marriages are possible and this can be expected to be a growing “family” group.

Things have certainly changed and the changes are accelerating. We are living longer, so time living post-kids will be decades now and those living by themselves is expected to grow to 30% of all households in the next 15 years. This is due to the death of a spouse and the survivor living much longer.

So what does this all mean to you living right now?

From a financial perspective it means there is no one-size-fits-all way to manage and protect your finances. And depending on how you define your own “family”, you must review your debt, budgeting and insurances over time and through life’s stages to suit the specific circumstances.

It means ensuring the ownership structures of your policies are correct as your circumstances change. It means checking the premium type is correct if you need your cover for more than 5-10 years. It means putting the correct long-term strategies into place now so you don’t get caught out later.

Reviewing regularly, every 2-3 years is a rule of thumb we go by at Bridge Financial. Please contact me to do so.

How life insurance has been around since 100 BC!

Life insurance started way back to 100 B.C., when Caius Marius, a Roman military leader, created a burial club among his troops.

When one died, other members would pay for the funeral expenses. Similar clubs followed suit, as Romans believed improper burials led to unhappy ghosts. Eventually, the clubs included a benefit for the survivors of the deceased.

After the Roman Empire fell, life insurance disappeared until 1662, when Londoner John Graunt saw predictable patterns of longevity in a defined group of people.

In 1693, astronomer Edmond Halley made the first mortality table to provide a link between life premiums and life spans.

In 1759, the Presbyterian Synod of Philadelphia set up the first life insurance corporation in America for the benefit of Presbyterian ministers and their dependent’s.

After that, life insurance took off to where it is today – an essential component of the financial well-being of any family.

A Smarter Investment

When you receive your insurance statement every year, have you ever wondered whether your insurances are a smart investment?

When these covers are purchased with the stepped premium type which increases every year with age, it's easy to eventually find yourself wondering if it is a smart investment.

Buying insurances is not just about choosing a bank or insurer, then working out what covers you need and how much of each type of cover you need. There is a third factor that is commonly forgotten and that is: 'How long do you need it for?'.

‘How long you need it for’ is a crucial question to consider when setting up a plan to catch you if you fall.

It's important to not only focus on 'today's cost', but also focus on the 'total cost' of the insurance. We tend to focus only on the cost today when buying so we end up comparing offers across multiple insurers or banks, aiming for cheaper premiums with top of the the best policy definitions.

While cheaper premiums and quality policy definitions are certainly a factor when you buy, they shouldn't be the only factor if you are wanting some of your cover to remain affordable long-term.

Level life insurance premiums can be utilised for the portions of cover you need longer term like income protection, trauma or a portion of your life and disability cover. The cost will stay affordable and you will save substantially with peace of mind.

ACC can’t help you!

What if you suffered a heart attack, stroke or cancer? ACC will NOT pay out on medical issues, even though you may have to take a year off work to recover.

As you know, while ACC pays a percentage of your income during the time you are off work due to an INJURY, but NO such payment is made for time off due to illness. This is why an insurance policy called ‘Trauma’ was created. It pays out a lump sum if you can’t work due to a major medical issue.

The amount it pays out is up to you. Many clients nominate an amount equal to a year’s income, some adding extra to pay for non-funded drugs.

The premium can be chosen at a level (fixed) rate until age 65 or 70 to keep it affordable long-term. The lump sum payment can be used wherever necessary...medical treatment, help paying the mortgage or putting food on the table.

What can you recall about ’71?

A lot has changed since then and most changes may not have been apparent. A UK survey* compared our lifestyles in 1971 to 2011 – a 40 year gap and this is their findings.

One-parent families nearly tripled in the 40 years from 8% to 22%. And the proportion of adults living alone almost doubled in this time from 9% to 16%. The proportion of one-child families has risen from 18% in 1971 to 26% in 2011. 

The proportion of women aged 18 to 49 who were married has fallen from 74% to fewer than half at 47%, while the number who were cohabiting with a partner but not married tripled in that time from 11% to 34%. The number of women who are single (never married) which has risen from 18% 43% in that time.

The point here is that while “families” have changed and you may not have children or may not be married, the reasons for insurance, savings and financial management don’t change.

The same unfortunate things can happen, property can still be lost due to an inability to service debt and surviving family will still suffer financially. I have clients in all the categories listed.

*UK Office of National Statistics www.ons.gov.uk

Big mortgages mean it’s critical that you have the right insurances

You buy a house for $750,000 with a large mortgage. Your neighbour buys the house next door for the exact same price and with the same sized mortgage.

But while you took out relevant insurances, your neighbour just took out enough life cover to match the exact amount of his mortgage.

Without warning, both of you have severe heart issues on the same day that result in having to take six months off to recuperate.

Your neighbour has his lender agree to relax the repayments while he was off work. You on the other hand kept paying the mortgage and didn’t notice the difference.

The end result is that your neighbour’s mortgage was extended in its repayment years and total interest. Yours actually came down quite substantially due to making a lump sum payment on it from your insurance pay-out. (No, you don’t have to die to collect insurance)

If something goes wrong, the bank will either want their money back or to come to an arrangement that adds years to your mortgage.

It is easy to simply agree with the lender on insuring your mortgage, but it may be that you have the wrong sort of insurances for your personal circumstances. I can review your insurances for free, so why not ask. It could save your house.

Seven common mistakes that busy people often make. You can avoid them – contact us today to find out how. We’re here to help.

1.     Paying for an annually increasing premium for covers you need long term. It is very important that you can afford your covers through the years when you need it the most and are not forced into cancelling early. Level premiums that don’t go up with age are available.

2.     Insuring the last and least likely event to occur before the age of 65 (death), but neglecting to cover the traumatic events that are far more likely to impact your lifestyle.

3.     Neglecting to insure your most valuable asset – your ability to earn an income.

4.     Paying more than you need to for your health insurance. Competitive options are now available that provide affordable protection against the medical costs that really matter – specialist’s fees, surgery and hospital expenses.

5.     Not structuring the ownership of your covers correctly. This can lead to a drawn out probate process, leaving the intended beneficiary waiting for the money they need.

6.     Not reviewing your insurance policies on a regular basis to ensure that they are still relevant and value for money. You can have a no obligation, independent review of your existing insurance free of charge.

7.     Trying to do it yourself, rather than tapping into the expertise and experience of a qualified, independent advisor who can identify the best options to suit your needs.

8.     An adviser stands in for you at claim time and knows the contracts. A good adviser is the most important part of your plan.