Arghhh – having to pay interest on the credit card!
Filed under: Avalon's Money Thread, Cost of living, Interest Rates, Credit Cards & Mortgages in NZ
Well, for the first time in five and half years – I cannot pay off the whole balance on our credit cards, and we will be paying interest.
This is quite depressing.
I guess I should be happy that its only likely to be a few months where we have to pay, and that we have been able to organise our finances so well for so long that we haven’t had to do this thus far while we have lived in New Zealand. But still – its damned annoying.
Especially since the interest rate is a whopping 19.95%
So – from here on in – hard nosed budgeting and spending restrictions to get us back on track as fast as possible.
Why has this happened?
Some really big bills I’m afraid. Despite the emergency fund, which I still have some left of, we have had some really big expenses come through and no income. The emergency fund is coving our living expenses and top ups on the rentals, but it cant cover:
- Some large medical bills.
- Set up costs for Hubby’s contracting business.
- Legal fees
- Buying furniture for an apartment in the city. (and yes – even though we have 2 houses worth of furniture – it still turns out we need a few things – that was a depressing moment!)
Hubby has income coming in now, but almost all of it is paying the setup costs: new computer, travel, phones, internet bills, city pad – it all adds up.
And at least this time I actually know what I’m doing. I know how to work through the budgets, I know how to cut costs, and I know how to stick to the harder decisions. One thing I am sure of – that debt is not going to be there long. Ill be paying money into it as soon and as often as I can.
I’m just not sure how to cut my coffee budget
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What if economists ran the world?
With all this talk of politicians fiddling their expenses and paying for all sorts of entertainment with taxpayer funded credit cards, there’s some question about whether other people could run the place better.
I was listening to a Freakeconomics radio podcast (From the 24th March, you’ll find it on iTunes) the other day about how great the world would be if we ditched politicians and let economists run the world.
humpfh
Anyway, it went something along these lines;
Economists, mostly ignored.
[A small affectation normally reserved for great things like The Hitch Hikers Guide to the Galaxy.]
Milton Freedman – a great man, with high intellect and amazing theories about how to run the optimum capitalist economy.
Which the then new president of Estonia adopted whole heartedly.
And then discovered that Freedman never had any experience of putting any of these economic ideas into practice.
So undeterred by this lack of practical experience to look at, those young crazy Estonians went ahead with the reforms.
Like privitisation, abolition of import duties/taxes, and a flat tax rate for all sources of income.
Sound familiar? Like NZ’s free trade deal with China, negotiations for similar with India, and the fervent dream of a free trade deal with the USA.
And Nationals’ changes to taxation which are bringing company, trust & personal tax rates into alignment. So perhaps we’re already living in an economists dream society?
Moving on. What would an exhaulted US economist do if he got the keys to the White House?
Abolish the Education department
Abolish the minimum wage
Legalise all drugs
ohhh interesting – now you might think this is a cunning plan to then tax the sale of drugs – just like cigarettes & alcohol. But no, alas it’s only on the theory that the Govt. spends a lot of money trying to control illegal drugs, so lets legalise them and we can stop spending all that money. So scrap the DEA also.
At least we could sell tickets to wrestling matches of Economists vs Teachers.
& legalisation of prostitution
Hmm – taxation here too perhaps?
Nope – apparently it’s all about supply & demand.
Prostitutes cost a lot of money, well apparently the one’s economists visit do anyway, so if you legalise prostitution (removing the barriers to trade!) then more ‘girls’ will enter the industry, there by bringing prices down.
Next.
Change the Federal Reserve, so it only has one thing to look after. Inflation.
No dabbling in Wall St, and all the other stuff they interfere in.
Although really you don’t need the Fed to do anything, just let the free markets run things.
[that'll be the free markets that have screwed the world economy so badly in the last few years then?]
Okay, so what does Milton Freedman’s grandson think?
Well, he is off setting up island nations so that people have a free choice about which nation they want to live in. These nations would be run by business people who would hire economists [really?!], to help them setup societies that are attractive for people to live. Unlike the countries run by our current world Govts.
Hiring economists with big brains and lots of great ideas – is that really a good plan?
Well, the interview continues with this economist who decided to take charge of toilet training their young child. Applying economic theory of effort & reward, every time the child went to the toilet, they got some M&M’s.
It worked. For two days.
This 3 year old child had rapidly figured out how to get the maximum quantity of M&M’s for minimum effort.
hmm – perhaps we need three year olds running the country so they can figure out how to work all the systems we have in place to optimum effect? You sure don’t want a brainy economist in charge who can be outwitted by a three year old.
So what would happen to the world if economists were in charge?
The worlds supply of chocolate would rapidly end up in the hands of children, while the adults sat there befuddled wondering what the heck had happened.
And interest rates went up.
Filed under: Banks, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ
Mr Bollard did as he was told by almost everyone that he would do and put the base rate in New Zealand up to 2.75%
I wait with baited breath to see what the banks do and how much is going to cost us all. Honestly – I do!
I thought it was worth sharing some gems from the article on stuff though – because its the kind of thing that is said so often, makes no sense, and doesn’t get challenged:
“With the domestic recovery on track, we expect the RBNZ will continue to hike the OCR steadily in 25 basis point moves at each meeting, barring a substantial deterioration in New Zealand funding costs as a result of the European soverign (sic) debt crisis.”
Um Ok, my mortgage has to go up becuase of something of that happened in Greece? I don’t live in Greece – I live in New Zealand! What next – a butterfly flaps its wings in Mexico and Im declared bankrupt???
Cameron Bagrie, chief economist at ANZ New Zealand, also expects the OCR to hit 5 percent over time.
I predict that one day I will die. I wonder if I can find someone to pay me to state the blindingly obvious. Rates go up, rates go down. At some point it will hit any number of numbers. Pick one – you too can be an economist!
“Along with ongoing growth in Australia and recovery in the United States, this has so far offset weak growth in some other export markets. Against this backdrop, New Zealand’s export commodity prices have increased sharply over the past few months, boosting export incomes.”
Sorry – even I cant turn that into plain English!
But basically – the banks will probably increase the amount of money they now want off you – cos NZ money just got more expensive. The reason they didn’t drop the rates when the OCR dropped was because Overseas money was too expensive. Either way – we get screwed.
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Why exactly should interest rates in New Zealand go up?
Filed under: Banks, Cost of living, Economics, Interest Rates, Credit Cards & Mortgages in NZ
The reserve bank meets tomorrow to tell us all whether our interest rates are going up. I’m not really sure why they need to bother because as usual the papers and so called “experts” have already told us they will be going up.
But why?
Well basically Reading through an awful lot of very boring guff, it’s because things are getting better financially for New Zealand. And what better way to celebrate than for some arse to tell us our mortgages have to get more expensive. I mean- it wouldn’t do for us to go out and try and spend some of the extra money we all apparently have burning a hole in our pockets!
I know life isn’t meant to be fair, but come on Mr Bollard. This year we are already getting an increase in GST, and due to the new emissions trading scheme the power companies are going to increase our power bills and petrol is going to have more tax on it, even Air New Zealand is upping the cost of flights to cover it. And it’s not as if the banks are charging fair mortgage rates in line with the the reserve bank anyway. The bank fixed rates are the same as when the OCR was twice what it is now. And yet it almost worth betting real money that an increase on Thursday will be a perfect excuse for the banks to charge even more.
I just don’t get it.
They giveth with one hand and they nick it straight back with the other!
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Will KiwiBank become an AussieBank.
Filed under: Banks, Property & General Investing, Retirement, Pensions and Kiwisaver
There are rumours that the NZ (National) government are thinking of selling some State Assets. Which for many people is the worst thing a government can do and brings out all sorts of diatribes. I’m in two minds about it myself – I think it’s good to have assets – even if you are country, but also you have to be prepared to sell them if they are basically not working for you, or you are in financial trouble. There’s just no point having a boat load of shares looking pretty if you cant afford your mortgage this month.
But when it comes to government assets – a whole load of issues come up. Which as far a my admittedly not-politically-astute mind can grasp comes down to Labour wont sell them – National will. In fact just prior to the financial world crash – the NZ government at the time (Labour) went so far as to buy back KiwiRail which had previously been privatised and was failing, at a massively over inflated price of $690m when it was worth about $369m.
So the first head on the chopping block this time round looks to be KiwiBank.
Now I’m not sure of all the pros and cons of the case – but what I can tell you is I’m pretty bloody disgusted at the sheer amount of bunkum being spouted about the effect this would have on new Zealand if it was sold. It’s a bit like the plonker who said that if we used credit cards we would lose our sovereignty to Australia. The way the opposition is talking it up – a float of KiwiBank and sales of shares to New Zealanders will ensure that KiwiBank is owned by the Aussies. Or even worse – in the hands of greedy “foreigners”.
And thus – ordinary Kiwis will lose out on something that they own.
But here’s the thing:
Firstly – if the Shares in KiwiBank are sold to Kiws – then it will only end up in the hands of “greedy foreigners” if the Kiwis sell the shares to make a fast buck. So who would really be the greedy ones?
Secondly – do Kiwi’s really “own” Kiwibank? If we do – where the hell are the profits we should be sharing in? The government gets a cut – which technically I guess Kiwis get back in the form of government spending – but c’mon! That hardly the same as being a shareholder and having a stake in the company – or getting dividends.
Thirdly, we also “own” most the electricity companies in New Zealand, or rather as with KiwiBank the government owns them. And how are rewarded? With ridiculously high electricity prices which just go up and up and up while the companies we “own” make more and more profit. Its estimated that we have been overcharged by the electricity companies we “own” to the tune of $4.3 Billion in the past 5 years. Hmm – yes – ownership of companies via the government is really working for us.
So all in all – when you hear about the horror of selling national assets – don’t necessarily believe what the papers are telling you. If you disagree with privatisation – fair enough. But just take a moment to wonder if you are being fed a line that is somewhat an exaggeration. That’s not to say that selling KiwiBank (or anything else) is a good idea. Just that it wont cause the destruction of life as we know it.
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The NZ budget what does it mean for you
Filed under: Cost of living, Economics, General Budgeting, Property & General Investing
Well honestly – pretty good things for anyone thinking of emigrating. Because no matter what else changed income tax rates went down which means you get to keep more of the money you worked your butt off to earn. And whether people agree or not- I personally believe that that should be the case.
So lets the good bit out the way now – what are the new Income Tax Rates:
Now that has to be good news for earners.
As for us personally – well using the calculators shows that if we were just earning the same 152k that hubby earned we would be doing quite well out of the new rates.
On current rates – Hubby earns $12,666 a month before tax and loses $4093 in tax. On the new rates he loses $3423 in tax, leaving us a respectable $670 a month better off.
There are some downsides. For one GST is going up in October from 12.5% to 15%. But while that’s not brilliant news for a lot of people for many people this is a tax that you have some control over paying. If you don’t spend you don’t pay it. So for the people who want a less consumerist lifestyle when they come to NZ, and are prepared to send less than they earn this works out really well.
There’s a bit if a hit for us property investors in that we can no longer claim depreciation on the building we are renting out. So this will reduce our tax losses and therefore our tax refund. However this is likely to be outweighed by the fact that we will have less tax screwed out of us in the first place.
I still firmly believe that we would have to pay a huge amount less in tax if governments in general would stop spending like there’s no tomorrow because they see us as a constant source of ready funds.
All in all though- this budget basically seems to me to be a really good thing for almost everyone. I have always believed that NZ was a great place to come if you wanted to get ahead financially. Most kiwis look askance at such a suggestion because they think the taxes are astronomically high here. I guess when you come from the UK 40% plus 11% NI plus the gob smacking plethora of hidden taxes- it seems like a breeze here. But then kiwis think 6% mortgages are cheap!
Perception really does depend on where you are looking from.
Your downside is still going to be the pathetically low wages, but I’ve discussed several times that you can do something about that.
It’s more complicated for us because of our rentals, but that requires a sit down with some coloured pens, a calculator, our last few years accounts and lots of coffee. Basically – we are saving a whopping $8,036 a year in tax on the new rates. But right at this moment I don’t actually know how much extra we will have to find to keep hold of the rentals with depreciation on the building gone. I don’t think its going to be as much as we are saving but I’ll let you know what I find.
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So how do you pay off a £950bn debt?
Thats the current government debt in the UK. Give or take a few million. Scary Huh? Compared to New Zealand which has a current debt of $25.6bn. or about £13bn at current exchange rates. But remember – New Zealand is a tiny country. So how much is that per person?
In New Zealand that’s about £3250 per person (keeping in £ to make it easier).
In the UK it works out at about £15,570 per person.
Now once you put it into terms like that it may or may not sound so scary to you. After all – we had personal debts of about £14,000 when we started our emigration journey, and it took us about a year to pay that off. So effectively the debt that the UK government has built up is just like 70,000,000 “Avalon and Hubbies” going on a spending spree.
This is on top of peoples personal debts in the UK which now are thought to be in the region of £1,460bn – so more than the UK government has racked up.
But at some point it all has to be paid back – and therein lies the problem. The personal debt has been spent on property, cars, clothes, food, and lifestyle. As individuals you can decide how to cut back – what is essential and what you have basically been frittering money away on just because you could and becuase you wanted to.
But Government spending is harder to cut back on becuase we all demand higher levels of service and benefits form the government and don’t see why we cant have it. And when Governments take drastic cuts and tell the people that the money just isn’t there – riots like we are seeing in Greece occur.
I wonder how much this has affected the UK election results? Theres a helluva lot of money to be paid back, and it is going to take someone with the strength of an ox to make the decisions necessary to get the country out of the crap. Who do you trust to do that? Becuase believe me, paying off a debt of about £14,000 is not an easy task. For individuals the mechanics are straightforward – there are ways and means of setting budget s and paying down debt. But even so the decision yo have to make are not always easy. There will be arguments. There will be fights. There will be blamestorming sessions like you would not believe. And then there will be anger as one or other of you realise you cant buy the things you want to buy anymore.
How do you scale that up and handle it in an entire country?
The New Zealand government is giving it a shot: getting rid of government waste, getting rid of excess civil servants (but then that can add to the unemployment benefit cost), and generally taking a big red pen to lots of paperwork and numbers. But New Zealand has also been pretty protected from the Financial fallout, especially when compared to many European countries – including the UK.
I don’t know who the best hope is for the UK. I am personally glad it’s not likely to be Gordon Brown as he does seem to have been pretty lousy as a finance minister and caused a lot of this – and his decision to borrow his way out of the crap is just insane. If its insane for us to to it – its no more right for a government to do it. The golden rule of problem debt is:
Never borrow more to pay it off.
So while the UK election plays itself out and we wait to find out if the Conservatives and Lib Dems can find a way to work together – I think its worth sparing a thought for the fact that they one helluva mess to sort out and they may have some tough decisions to make that will not please everyone.
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Mixing investing and immigration – is it sensible?
Filed under: Economics, NZIS & Immigration issues, Property & General Investing, Retirement, Pensions and Kiwisaver
Well, if you are the government of New Zealand trying to wangle investment funds out of foreigners – hell yeah!
If you are a retirement-age person with a million or so in funds that survived the economic meltdown? Ummm- not so much.
The thing that concerns me about both these policies (Parent Retirement and Temporary Retirement Categories) is that they are basically Investor Policies under a different name. And people need to be crystal clear on something:
you could lose that money.
The New Zealand Government are NOT guaranteeing that the investment funds will not lose value.
Now the upside is that you could make money out of this: but the investments are share market based – and there is risk involved here. My concern is that in general people coming up to retirement age are advised to move funds from shares into less risky investments to avoid the peaks and troughs you get with the share market.
As far as I know – the only really “safe” option is the government bonds – and that really isn’t much more than a straight bribe to the government in my opinion.
So my advice is this: if you are looking in anyway at either of these two policies – make sure that you take some stringent financial advice and you know what you are doing. Unless of course you really do have squillions sitting in the bank and you are just bored stiff staring at your large bank balance everyday.
If you are relying on those funds being there in full after the 2 or 4 years you have to tie it up – be very careful.
Share investments we have can cope with the ups and downs – we have time for things to correct. But think about this:
What would you have done if you had invested in this policy 5 years ago, and needed to take what was left of your $1,000,000 about 12 months ago?
This isn’t about Immigration Advice – its about financial advice. There’s a lot of money at stake here, and you need to ensure you don’t lose the lot.
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Kiwi Architect that understands Irony.
In the Weekend Dom Post, there’s an article about the building of the new Supreme Court in Wellington. Unfortunately I can’t provide a link, as it doesn’t seem to appear on the Stuff Website, so I’ll have to do this old fashioned way.
Apparently, in the midst of a recession, we needed to spend $80 million on a brand new building because it would have cost too much to refurbish the old building at $29 million. Because the refurb was supposed to cost “only” $11 million, and due to a budget blow out, it was decided to scrap that idea, and budget $65 million for a brand new building, which in the end cost the final $81 million. Only governments would think spending an extra $51million made economic sense.
And they wonder why so many of us find legal ways of paying them less tax to waste.
But that, oddly enough, isn’t the point of Irony.
This is what the old High Court Building looked like:
And the new building.
Now the irony:
The architect, Roy Wilson says that Open Justice was an important design feature.
“To allow justice to be done, and to be seen to be done”.
The top floor of the building has glass all the way round it, you see, so firmly grasps the concept of transparent justice – I get that.
But then – they stick a bronze arty-farty façade around the building (supposed to be “reminiscent” of Pohutakawas) – which effectively blocks off the glass windows, and hides justice. I guess they never thought of that.
Nor of the fact that planting a few real live Pohutakawas would not only have had a better effect, would actually look like Pohutakawas, be much more attractive than a butt-ugly bronze monstrosity, would be much more in keeping with “100% Pure” green credentials, and would have cost considerably less than $4.5 million in taxpayer dollars.
It must be so nice not to have to worry about where the money is coming from to pay for this stuff. Run out? Just take more in taxes!
I am at least grateful that the “demands” of the 5 (yes – just 5) judges that get to sit in this $80 million building for a rooftop garden was trounced.
There’s a bit of whinging because Prince William is going to open the building on Monday at a cost of $200,000. I think the fact that we have had to waste an extra $50 million in fulfilling the demands of 5 judges who wanted bigger offices is a much bigger worry personally.
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What’s the effect of the global financial mess?
Having some spare time in the house with the slightly crappy weather, I’ve been watching some of the TED talks that have been sat on the iPod waiting patiently for me.
One in particular was from John Gerzema, talking about the ‘post crisis consumer‘. Beyond some of the academic/economic waffle, and the ‘America is the world perspective’ it did contain some interesting observations.
First off is the (US) savings rate over the last 70 odd years from 1935 to 2005 (sorry the graphics are a little fuzzy), giving us confirmation that it’s in the last few years that average households have negative savings – i.e. no savings and money oweing on credit, while since the 1950′s it’s been in the 5-10% band
The blip in the early 1940′s is of course the war. But only because there was nothing to buy, rather than a patriotic drive to save money into war bonds as there was in the UK. It is interesting though, even when there were almost no consumer goods to buy, savings rates only averaged 20-25%.
Anyhow, while these numbers are now four years old it begs the question – ‘What are people doing now?’. Well the (startling) observation is that people are paying off debt. Because they don’t want to be beholden to the banks as much anymore. Which is good news. And more people are using debit cards to access money in their bank accounts, rather than using credit cards and borrowing the money. Again good news.
Of course, neither the banks or the credit card companies are happy with this – since they don’t get to bleed us all dry with interest rates and charges. But still, they’re not hurting yet and it’s early days in the whole economic recovery thing.
More interesting was the information about how people are dealing with the stress. While it doesn’t say what the sample population was here (Wall St executives still in jobs, as opposed to homeless families in some Detroit ghetto), and the percentages are more than 100%, so people are obviously doing a number of things, it does make interesting reading;
5% of people are dealing with the stress by buying more stuff. This is taken as a good sign, as we’re getting more savvy about what we buy, and we aint’ buying any old crap the marketing people want us to buy.
Still, draw your own conclusions. Good news for Nintendo, where people are playing video games and exercising (Wii), possibly with their family. Really good news for ISP’s and TV broadcasters.
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