Are finances and wellbeing linked?

Many New Zealanders, if asked, say they are (reasonably) comfortable with their financial direction. However, deeper probing finds holes in this initial reaction. As we singularly grapple with a solution to the

Covid-19 crisis, so do all countries. Just look at the different way countries have handled this pandemic.

Primarily the angst governments have been dealing with, are the trade-offs between health and wealth. The choices are to put business on hold while we clean up the virus OR let the virus take its course and keep the economy and hence jobs trading.

Which way is right, only time will tell. Job losses can play heavily on the minds and health of those who are left wondering how they will eat and pay rent or a mortgage. Will they form a tale of health and diminishing wealth problems? Welfare could be a partial solution, but who funds that welfare?

A survey on ‘Money and You’ by the Financial Services Council (www.fsc.org – for full version) uncovered six key findings.

1. There is a strong relationship between money and wellbeing. Health, wealth, and wellbeing are connected, and money worries cause great stress for New Zealanders. Only

21.5 percent rated their financial wellbeing as better than moderate, with 31.8 percent rating their overall wellbeing as better than moderate.

One doesn’t necessarily need a lot of money to survive, but we do need it. The basics of food, health and shelter are mostly purchased with money. So, like the chicken or the egg, which comes first, health or money?

2. Younger New Zealanders worry more about money, are more stressed financially, and are least prepared for a loss of income. Sixty percent of respondents to the survey indicated they worried about money at least monthly. Generation Y were the biggest worriers. Generation X felt the least secure with their job security.

3. There is a lack of understanding of the language of money, which is preventing financial resilience and good, sustainable financial decisions. This is something that needs to be taught as a tiddler, refined as a teen, and actioned as at day one in the workforce. When asked the question, ‘how long do you think you would be covered for if you were suddenly unemployed/ unable to work?’ 37.5 percent responded ‘up to a month.’ Only

13.9 percent would last more than a year. In these days of uncertainty and an expected increase in job uncertainty – whether it be by pandemic or workplace changes – prudence would tell us to spend less and save more.

Unfortunately, that is not a message that has been given by the government or banks. The latter have encouraged additional borrowing for that overseas holiday or flasher car.

4. 70 percent of New Zealanders are unprepared for retirement. Only 5.6 percent were ‘very prepared.’ Paying only 4 percent into KiwiSaver is not enough, unless your inheritance is assured – this could be eroded by reverse mortgages, or rest home charges on your parents’ property. Australians have a much higher requirement for stacking away the dosh. We need to think that way too.

5. Despite understanding risk, New Zealanders are poor at using financial services to help manage them. Many don’t like to pay for advice. We want it all, but we want it for free. You can pick up so much from Google, but it won’t be personal to you. I speak to people of all ages and almost without exception they are not aware of how much money they don’t ‘need’ to spend. None of us want to live like misers, but many pockets have leaking holes, that are discovered with careful analysis of just where that sweated hard earned lucre has been wasted.

6. KiwiSaver is the gamechanger with over threequarters of New Zealanders investing via KiwiSaver. This could be the gateway to helping New Zealanders become more financially aware and resilient. Also. Don’t be afraid to invest outside of KiwiSaver e.g investment property and/or building your own share portfolio. You will be surprised at how you can become an ‘accumulator’ rather than a ‘dissipator.’

Unfortunately, finance is only fascinating for the few. Possibly the ‘she’ll be right mate,’ Kiwi DNA is part of it, but this is not a wholly Kiwi problem.

It also isn’t confined to the lower earners, who do find it difficult, if not impossible, to put money away for a rainy day.

The mantra is, ‘it is not how much you earn, but how much you retain.’ You can’t enjoy wealth if not in good health, but in health like in money, we never have a true idea of its value until we lose it.

*Disclosure: Care has been taken to ensure that any information is accurate.

No liability is accepted for its use. Inquiries are welcome.

Experienced in lending, risk advice and planning, Allistar Walker is a Registered Financial Adviser, Senior Fellow of Financial Services Institute of Australasia and partner in ResRei Financial Facilitators. His full disclosure is available free on request. He can be contacted at allistar@resrei. nz.