By Amanda Morrall
1) Don't try this living in NZ
There's some enterprising folks working and writing in the personal finance space.
The sky is the limit when it comes to financial challenges; debt reduction speed tests, getting rich quick or slowly, living below your means, getting by without having an income. The list goes on.
Well here's one test of frugality that I definitely won't be trying in NZ, well maybe if I find myself 10 kg over weight.
Living off $1.50 a day for food. Read the lessons learned here from one blogger brave enough to try this experiment via Mint.com.
2) Crisis ahead
According to new research out of the US, close to half of Americans lack sufficient savings to cover basic expenses if they were to lose their main source of income. New Zealanders aren't that much better.
According to research from the Financial Services Council only 15% of New Zealand could comfortably survive six months if their primary income were cut off; 26% would not be able to pay their bills after just one week and 54% have insufficient savings to last 4 weeks after being made redundant.
In short; "The majority of New Zealanders are financially living close to the edge and unemployment, sickness or retirement could put them quickly over that edge,'' warns the FSC's chief executive Peter Neilson.
Matt Miller, writing for the Washington Post, argues that a savings deficiency is a red flag for the looming retirement crisis. Here's an excerpt below.
By definition, a retirement crisis begins with a savings crisis. Consider: According to research summarised recently by the New America Foundation, “nearly half of Americans (43.6%) do not have enough savings to cover basic expenses if they were to lose their source of stable income. These 132.1 million ‘liquid asset poor’ Americans include many members of the middle class and upper middle class: more than a quarter of households earning between $55,465 and $90,000 per year — the entire range of which is above the median household income of $50,054 — have less than three months of liquid savings. Over 30% of all households do not have a savings account at all.”
3) Shell shocked
It ain't easy being a financial advisor. Especially during tough financial times.
The Wall Street Journal, reporting on new research looking at the psychological impact of the GFC on advisors, found that 93% displayed symptoms of post traumatic stress disorder, with advisors managing larger sums of money (US$20-$40 million) suffering from severe forms of it.
4) Real cost of retirement
Not long ago the Centre for Personal Finance Education (Massey University) released some rather bleak statistics on retirement. Specifically they worked up a real budget based on how pensioners are living to construct a picture of what a "no frills" retirement looked like, living off New Zealand Superannuation alone.
Most disturbing was that the bare bones budget didn't factor money that would have to be spent on rent or mortgages. The assumption being that in old age, most of us will have clear our debts to the bank. For details and a financial break down read my earlier story here. See also my interview on TVOne's Good Morning show here.
It was a sobering report that probably didn't get as much attention as it properly should have from the people who should be most concerned about it.
Across the Tasman, an industry body called the Association of Superannuation Funds of Australia puts together similar reports as well as updates them on a regular basis. Have a look at the break down on their latest report available here from their website.
5) Compulsory savings
All of the above is a good argument for having compulsory savings in New Zealand. Kirk Hope, chief executive of the New Zealand Banker's Association, makes a case for it in this guest column published by the New Zealand Herald earlier this week.
Have a lovely weekend all.
Like what you've read? You'll enjoy the book better. Here's how to order a copy of Amanda's book Money Matters: Get your Life and $ Sorted. The book is also available in ebook format as well via Amazon and is replete with hyper links to help you get your finances in order.
You can also follow Amanda on Twitter @amandamorrall; check out her previous Take Fives here; Find out what she's up on on her own blog here.
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