Five-fold Friday: Amanda's happy ending; a lifetime of debt; red zone remedies; Your secrets aren't safe with IRD ; Reader's choice personal financial books

Five-fold Friday: Amanda's happy ending; a lifetime of debt; red zone remedies; Your secrets aren't safe with IRD ; Reader's choice personal financial books

Personal finance editor Amanda Morrall (email)

1) Savings and spending

I disclosed a few months back that in moving to Auckland from Christchurch, I had unwittingly put myself in the poor house having grossly underestimated the massive rental increase I'd be facing among other costs related to big city living. To my own horror and embarrassment, I calculated a $7,000 shortfall.

I was besieged with some fantastic advice and recipes about how to balance my accounts including one suggestion that I move into a retirement home where I could enjoy war stories and endless cups of tea in exchange for cheap rent and free motorised scooter access. Blessedly I avoided that fate (I'll be checking in on my own accord soon enough) and went to battle instead with my budget. It was ugly but I've come out on the winning side partly as a result of a fortuitous outbreak of mould. That's right, mould saved my bacon. You see the hideous spawning spores of green and black (gone now due to a miraculous ventilation system) inspired a robust rent renegotiation.

Between my sizable rent reduction and revised calculation of food costs (I'd been budgeting for a family of four instead of my current three - a reality I was unwilling to accept perhaps) I'm back in the black. My financial nightmare turns out to have been just that -- a nightmare which ended happily with a wake-up call and righting of ledgers. And I didn't have to hock granny's silver tea service either.

2) Credit and debt
New Zealand's retirement commissioner Diana Crossan challenged the banks this week to take some initiative in helping Kiwis to tackle "dumb debt.'' That's the debt that languishes on credit cards, hire purchases, car loans and such collecting high interest and rolling over month to month. There's something like $3 billion carried over each month in NZ. In the United States (where consumer debt is in the trillions) banks and other lenders have been forced to revise credit card statements so that borrowers are alerted to how much they'll pay back on a minimum repayment basis. In Australia, similar moves are afoot.

In New Zealand, it's status quo.Even BNZ, whose Australian parent NAB shifted it policies on credit cards, hasn't budged. (For the latest on credit card changes in Australia see this story in the Australian.)

Our interest rate watchdog Suhaimi put together this chart for me showing the comparative minimum repayment amounts set by various banks and how long it would take to repay $2,000 on that basis. It's a shocker.  The worst offenders (given their 2% minimum repayment figure) are Westpac, ANZ, the Warehouse and BNZ. Stay tuned for more credit card hijinx exposure. (Next week, we'll look at transfer balances and where that can leave you depending on who and how much you transfer over.)

 
Here's a cross section of  minimum repayment rates on standard Visa/Mastercards.

Lender ANZ ASB Kiwibank Westpac TSB DinersClub
Balance due $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Interest rate 19.95% 19.45% 18.9% 19.95% 17% 19.95%
Min.payment > % 2% 3% 5% 2% 5% 5%
or Min payment $5 $10 $10 $5 $10 $50
Min payment first mth $40 $60 $100 $40 $100 $100

 Now, check out how long it will take to repay that $2,000 on a minimum repayment basis and how much it will cost you.

This is what should be included on your statement in bold print, in place of the visual queue on minimum repayment amounts.

Lender ANZ ASB Kiwibank Westpac TSB DinersClub
Time to repay in mths 724 178 91 724 87 45
Time to repay in years 60.33 14.83 7.58 60.33 7.25 3.75
Interest ($) $8,910 $2,109 $870 $8,910 $748 $724
Total repayment $10,910 $4,109 $2,870 $10,910 $2,748 $2,724

And finally, here's what you end up paying if you repaid that $2,000 at a flat rate of $100 a month, instead of the minimum payment and how much you'll have saved by doing that.

Lender ANZ ASB Kiwibank Westpac TSB DinersClub
Time to repay in mths 24.52 24.37 24.21 24.52 24 24.52
Interest paid in $ $452 $437 $421 $452 $368 $452
Months saved 699 154 67 699 63 20
Savings with interest $8,458 $1,672 $449 $8,458 $380 $272

If you want to run the numbers on your own credit card debt, try this calculator or this one, we used them on the scenario above to check their accuracy and they both checked out with the same results.

3) Real-estate

Some long over-due relief (or at least certainty) this week for Christchurch homeowners in the worst affected earthquake zone. The Government announced a plan to buy as many as 5,100 homes off home owners in the identified 'red-zone' where rebuilding has been ruled out. Banks were quick to rush in with special offers for those homeowners who will be looking to rebuild or buy another property.   BNZ even stepped it up a notch offering 2% above normal deposit rates. (See Gareth's Vaughan's story here).  Residents will be wise to weigh the options carefully and explore the full spectrum of offerings, as well as their terms and conditions and consult with at least two mortgage brokers and insurance specialists.

4) Death and taxes

Gift duty is getting buried as part of the Taxation Administration and Remedial Bill. But among the other changes also slated to take place is a "relaxing'' of IRD's policy on taxpayer secrecy. Several parties, including the Privacy Commissioner, have challenged IRD about the upcoming changes but they've mostly been rejected.

IRD argues that the rules need to be softened so that it can share information more freely with government departments. In loosening the vaults on private information, the IRD will also be able to fight back against "aspersions" cast by taxpayers through the media.

How and under what circumstances it will wield this newfound power remains to be seen. KPMG tax specialist John Cantin anticipates IRD will release a standard practice statement outlining such details.

On the overall 'relaxing' of the rules around the more liberal sharing of taxpayer information, KMPG has some reservations. Cantin said the main concern is that it could turn taxpayers against the system, more than they already are. For that reason, they suggested there be more research done in the public's willingness to accept these changes before they're pushed through. IRD is supposedly looking into it but the bill is moving fast towards royal assent.

Hands up everyone; are you for or against the IRD having loos(er) lips on taxpayer secrets?

5) Books & Film

Readers' choice this week. I asked a few of our regulars to send me their top picks for personal finance books. Add your own favourites to the comment stream.

Here's "Gummie's Starter Pack of Essential Investment Books" : Peter Lynch's "One up on Wall Street" (click here to read a review on The Motely Fool).Philip Fisher's "Common Stocks and Uncommon Profits" (click here to read a bio on Fisher published by Forbes) James O'Shaughnessy's "What works on Wall Street"; and for those suffering from ADD , an easy peasy junior's booklet : Robert Cole : The Unwritten Laws of Finance & Investment . (To read a preview click here, takes a second to load from Amazon.com.)

And another three from "Scarfie":
 
Making Money" by Paul Clitheroe (To find out how Clitheroe made his fortune click here). "The Seven Laws of Money" by Michael Phillips. And "Richest Man in Babylon" by George S Clason. The voice over in this you-tube book tape is classic.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

55 Comments

Comment Filter

Highlight new comments in the last hr(s).

  "....more than they already are"....harrrrrhahahahahaaa

Bugger the system...the trick is to play by the rules set by the crooks and liars...aim to earn stuff all...aim to collect everything on offer....barter and trade...make do and grow your own...

Or you could set your sights on being an SOE boss and be in to receive the fat bonuses you decide on....plus the fat salaries.....

Not a book, but a tract that undermines any hypothesis put forward by a fiscal-only treatise:

http://www.theoildrum.com/node/8044#more

an excerpt:

"1. Peak oil may threaten the global banking and financial system since the Ponzi scheme of growth based on credit expansion requires a growing stream of cheap energy to fuel the real economy. When the stream of cheap fuel dried up, the real economy failed, toppling the global fractional reserve banking system that lay at the heart of the Ponzi scheme. Fractional reserve banking has now been supplemented by Quantitative Easing as a means of creating money to drive consumption of finite reserves".

Come on its Friday PDK, relax a little, have beer.

I don't think the Babylonians could have conceived of a fiat currency or leveraging, but I think they knew about conserving resources. I haven't read it for a while, but I is it contains just good common sense.

Cut Mr PDK a little slack , on another thread he's battling two gentlemen ( the Count and DavidB ) whom , unlike the Gummster , actually know some stuff ...... and can negate his alarmist histrionic social-environmentalist clap-trap !

" Peak oil " is his & steven's raison d'etre ...... ( ignoring the proven 6.9 trillion barrels of the stuff , a 227 year supply ! )

....... understandebly , PDK's usual sense of bon homie , is absent .

[ ....Yes Mr scarife , the " Richest Man in Babylon " is a brilliant little book ... Read it 3 or 5 times ! .. ]

Gummy, can I interest you in a new motor? Amazingly adaptable humans, aren't they?

And guess what, there's not a socialist in sight! Huraaah!

http://www.wired.com/autopia/2011/04/rolls-royce-102-ex-phantom-electric...

Crikey Dick & Jane : What an amazing Roller , DB  ...... and the company is ahead of its customers' demands  , anticipating that governmental regulations will force it towards electrification ...... Brilliant !

.... ahhh , the socialists are not insight , because they're still over at the Trabant factory , attempting to re-attach  it's doors with duct tape .

Actually trabants are supposed to be a lot of fun to race.....

NB the roller will go no where, to hvy....

regards

Gummy, I can see it now. You and I in the back of a chauffeured driven electric Roller zooming through the night, when all of a sudden there’s a bump! We both look at each other, puzzled, and you exclaim.  What was that? A socialist. I reply.  

Cheers

that Roller comes 'power source not included'.

There's always trouble getting to Solla Sollew.

To start with GBH 6.9trillion is including all the hvy oil "reserves" of Canada and Venezula... In terms of conventional crude ie that which is probably only ever going to be economic to extract, its about 2.1 to 2.3trillion barrels....trouble is the cheap and high quality stuff is now is serious decline output...we are at the magic half way point....The latest thought though is that although we are at the 1/2 way mark we are actually not going to get all of that next 1 trillion, it may because of economics be only 1/2 or 2/3rds that...

So instead of 7 trillion and 227 years its more like 700million barrels....I'll leave the maths to you...

DavidB has shown no understanding of basic Maths let alone any understanding of science instead refers to ppl as "socialists", sorry but I cant see any evidence that he has the quals he claims to based on the nothing he says....

At the end of the day the information is out there on the web by highly qualified real ppl...who show real data, logic and research and are very hard if not impossible to refute....make your own mind up based on that.....

regards

Read a book 3  or 5 times. PDK would only need to read a book once to fully understand what he was reading, and even if he did re-read it he wouldn't lose count.

PDK does not need to read anything . He already " knows " all that he needs to . I've seen him comment disparagingly on articles here , which he admitted he didn't read . And when queried on that , he replied that he already " knew " the author's mind , therefore there was no requirement to waste time on reading the actual document which he was trashing  .

This topic has degenerated into a pissing contest. In fact there are two topics which are inter-twined. (HP and PB) and (PDK and Steven) with added comments from Dr.DavidB. Some of the technical minutiae is a bit dense and difficult to follow. That's because one would have to have followed every post over the past 2 years. PDK uses compact "Function Speak" which takes time to decode. A new arrival would wonder what it's all about. Some of the difficulty is due to the inter-changeable notions of available global supplies of energy and what is or will be obtainable by New Zealand now and in the future.

My colleague, Dr.DennisC (BSc Hon (Chem Eng) PhD London) is an expert in energy, petro-chemicals and oil. His CV includes a stint at the Atomic Energy Authority ... and his thoughts on these matters over the years ... are .. there are two categories of oil .. "easy to get" and "hard to get" .. of the easy to get oil, the top half of an oil well is easiest to get, and the bottom half becomes expensive to get in terms of both costs and time, because it has to be pumped out by pumping water in and then left to settle then clensed and de-contaminated. He considers we are in the bottom half of the easy to get category. (PDK is correct in his assertion that the energy cost of obtaining energy becomes greater). The hard to get group is tar sands, shale oil, and deep sea etc etc.

He agrees with the 200+ years of reserves but considers that to be on the optimistic side, with a large proportion of that in the "hard to get" category ie Shale Oil deposits and Canadian Tar Sands. What this boils down to is the "cost" of fossil fuel based energy is increasing and will continue to increase.

To apply that to New Zealand .. NZ  is not self-sufficient in oil. It is reliant on importing oil. The cost of that is going to increase (exponentially? I dont know). Which brings us to the proposition that has been put forward .. growth and expansion at the outer fringes .. automobility .. affordability .. the propositions of which have assumed a never ending, in-exhaustible supply of oil. That may be true globally, but at what cost. If the population of NZ continues to grow both naturally and via immigration the demands on imported oil will increase. The cost of that oil will be influenced by (a) the increasing global costs of extraction (b) increased demand from increase in NZs population, which then (c) increases the price further for the existing population. So .. is NZ in a position to expand ever outwards in it cities? Consider .. if 100,00 new migrants come to New Zealand, buy a house on the outer fringes and buy cars to travel and get to work, how do you pay for the cost of imported oil that they will demand?

If Labour are in government when those 100 000 new immigrants arrive , they will not create any increased demand for oil , Finance Minister steven is gonna give them all electric- Trabants !

Will there be any oil-based bitumen-asphalt roads in the newer suburbs for them to drive their electric cars on or will there be special electric-slot-car type roads

After Labour  crush  the dairy industry through an onerous ETS , the redundant Filippino milkers will be re-assigned to constructing solid concrete roads , as they have at home .

While perhaps not as doomsday as some may paint, there are some scientific realities that are going to be very difficult to overcome, you and David don't seem to grasp that. I wish I had as much blind faith in technological innovations and 'the market' to solve these problems, must make it a lot easier to sleep at night. :-)

Socialists and religious devotees have blind faith .... Capitalists operate on a rationalistic optimism ....

.... And to the Gummster  ,"  peak-oil " is a tadge alarmist , when the known supplies will last us 227 years ( at  the current consumption rate ) .

GBH - is it really you ? - Rogie - Roger Thomson from Loburn ? - I cannot believe Roger T. writing such stupid comments  -  all day long - on a sunny wonderful day - where he normally does a lot of gardenwork - planting strawberries and others - men - hopefully you aren't Ali-star's Thomson's brother - who also produces heavy, stupid $120.- p/h periods - freakently ???

Warmer climes , Walter Kunz , of Kaikoura . ...... Planting cacao , mangos , mahogany & teak ! ..........

.......... and yes , it is difficult for the doomsayers to be outed by the truth  . But  the truth shall set you free my friend ,  if you fully embrace it , and if you send $ 49.99 to Gummy's Home for Wayward Ladies .

Even Bernard " Woody " Hickey sees the error of being such a grumpy depressive curmudgeon . ...... If Bernie can step out into the sunshine , to become a rational optimist , what is stopping you , Kunst ?

*snork*!

That's more like it GBH, turning everything into an evil worldwide socialist conspiracy against poor downtrodden capitalists who only want what's best for everyone!!! :-D

All the capitalists I've ever met or read or heard of have a fanatical cultish belief in the 'free market' even tho there is no such thing as a free market and never has been. Of course Mr GBH will blame that on 'socialists'!!!

LOL.

Bernard - it seems the "negative thumb" isn't working.

Have a heart , Walter , our comrade , Mr LOL , needs time and nurturing . We must gently lead him into the soothing sunlight of capitalism .......

...... the Kiwi education system ( within & without school ) has taught him to be a leech upon society , indeed , a parasite upon his fellow man .

If you & me , Kunzie , cannot convince him of the joy of creation , innovation , entrepreneurship , and dare I say it , " profit " ...... then give him the " thumbsy down " ....

Gees Gummy, third time in a week, surely you are due at least a campaign medal?

I have even been promoted to 'regular'. Not sure how that happened.

Dietary fibre? Yeast in a live pint?

 

I never read anywhere about the Italian banks having their trading suspended because they faell heavily on Euro fears.

 

jonlivesey

45 minutes ago

 

 

The Markets reacted fairly viciously to yesterdays non-events.   Major Italian Banks - Unicredit and Intesa Sanpaolo - had their trading suspended because they fell so sharply on Eurozone exposure fears.

Meanwhile ten-year Bonds in all the PIIGS rose yesterday, which is a pretty sinister sign on a day which was supposed to "resolve" something.

People often comment here from the viewpoint that opinion is important.   What is really important is what markets *do*.

The plain fact is that if investors withdraw their investments, that's it.   Investors are the judge and jury combined, and there is no appeals court.

 

This is a very nice article that neatly summarises what skeptics have been predicting for the past two years.

And there is nothing here that anyone in the UK needs to worry much about.   Estimates of UK Bank holdings of Greek debt range from about E6bn to about E12bn, which is very small compared to French and German holdings.

To be cynical, London might even *benefit* from Greece leaving the Euro and defaulting, since individual Greeks aren't all that poor, and there is going to be very significant capital flight from Greece, but also from the Euro area in general.

As I noted below, the Italian markets have already woken up to what a disaster this could be for them.

Competing against British Banks is always a bit like playing poker against a rich man.   He can always survive a run of bad cards better than you can.

I think that in five years, UK Banks will own most of the Irish banking system, and probably significant chunks in other EU countries as well.

 

http://blogs.telegraph.co.uk/finance/andrewlilico/100010653/greece-is-go...

 

 

What they are trying to do is to play it all out over a few years, to allow Banks to apportion loses gradually, rather than experience cold turkey.  And talking of Turkey, was there last year and it seems fairly economically robust, may be in hindsight, EU should have invited Turkey in rather than Greece

Thanks Andrewj, this should be  known to everybody here in NZ!

And more importantly, we should hold our government to this principles:No more borrowing - no more fractional banking!

And a shimmer of hope, the movers and shakers in the corridors of power in the US start to listen to sensible advice too!

Thanks Andrewj,

Isn't that the next big war, call it World War III. The people against the finance sector (who produce nothing) and the politicians who no longer look after the peoples interests.

 Know which side im going to on.

First indication I've seen that the billion+ dollar spend in Accommodation Supplement may be coming under the microscope;

He told the Weekend Herald that the new social housing unit, due to start in the Department of Building and Housing on July 1, would be asked to propose a new system of subsidising housing costs to replace the current income-related rents for state houses and accommodation supplement for the private sector within the next six to 12 months.  

http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10734409 

But why find a new system of subsidising housing costs - just announce the withdrawl of the current one at sometime in the future and watch house prices and rents plummet.

 

.

Not my read Kate.

Best indication of future behaviour is past behaviour. The Nats are keen to prop up the house market and pass subsidies across to the landlords. 

Why would they get rid of the Landlord's accomodation supplement.?  Much more likely to get rid of state housing stock. 

Remove the ability of low income people to access affordable accomodation and provide a restricted supply scenario. Thus enabling  the landlords to jack up the rent. As the Landlord's subsidy is tied to the "market rent", hey presto, the taxpayer will be on the hook for even more of the Landlord's pass through subsidy from low income tennants.
 

More importantly, from the NACT's perspective, will be that the housing market has been propped up.

 

 

Well, yes, but I live in hope!

:-)

 

In hope that lots of solo parents wouldn't be able to afford to rent in main centres?

Take away the DPB while you're at it.  That will teach them and those landlords who offer them housing!

You miss the point, muzza - if the government got out of the rental market by way of these subsidies - private rents will come down - significantly.  The government is the nation's lagest tenant (by defacto subsidy)  in the low end rental property market.

"The Nats are keen to prop up the house market and pass subsidies across to the landlords."

My interpretation is that the Nats know the housing market is an economic problem and want it propped up till after the election. I'm not convinced that they want it propped up indefinitely.

 

Well Phil Heatly was on telly this morning talking about this new policy direction.  Sounds like they intend to push some existing state house tenants into the private sector - giving them accommodation supplements (instead of the income related rents in the state sector) - thus freeing up more state sector housing for more folks who will be on the income-related rents.  If anything, it sounds like the objective is to move more taxpayer dollars into the private rental market!

:(  :(  :(

 

Maybe the state sector housing is 'worth more' now, and selling it may be advantageous.

Use the money to build better in 'less expensive' locations (tic)... Gerry Mander suggests so...

Let people with the abiity to pay a mortgage buy the old stuff cheaply - affordability done, and keeps it all going for a while longer.

Easy....

 In early 2009,  Kevin Rudd called for a new economic approach that he termed "social capitalism" which includes "a system of open markets, unambiguously regulated by an activist state, and one in which the state intervenes to reduce the greater inequalities that competitive markets will inevitably generate.

Interesting read Rogie: http://en.wikipedia.org/wiki/Social_capitalism

Did the chill of the southerly wake you up Walter?...Rudd wanted Rudd to control..."the greater inequalities"...by which he means that 'sameness' is a goal worth robbing for.

That's the problem with Socialists Walter....they actually believe there is something wrong with some people making a 'better' go of life than others.

They refuse to accept that in every group of people, some will be smarter and faster while other will be slow and dim....Socialists want to make everyone slow and dim because that way it is easier to control the masses.

Do you want a nation of Rudd's Sausages Walter.....? or Goofy's Sausages....

 

 Wolly zh, zh – you Kiwis are negatively tiring sometimes – making progress isn’t the real goal, but hammering other people’s comments. I’m talking about advantages content and form of social capitalism not people/ parties unable to implement it.

Read more here: These countries also score highest on measures of macro and micro-level social capital, which makes their economies run more smoothly.

  http://www.hha.dk/nat/WPER/02-15_gts.pdf

I think you will find that ties in nicely with some of my posts Walter, so I quite agree with you.

Just voting Labour or National is a complete waste time because our political system needs a complete overhaul. Debating the merits of either is just trivia.

I have Scandinavain ancestry and they are at considerably more mature and stable as a society. We are of course the exact opposite, immature. 

Nice post Walter... completely agree. Also Scarfie (and I think Sepherial is making the same point). The current party system is an obstruction. Maybe a start could be made by publicising those issues that individual members agree on and promote  'across party lines', and supporting/soliciting individual arguments from them.

It reaches the point where one cannot vote without accepting 'the whole package', crossing your fingers, and hoping.... not working is it. There are individual voices - but they get 'tarred and feathered' with their 'party colours'. We expect too much, and are then disappointed.

Does Scarfie's 'maturity/immaturity point' come from the political system or the population though? I actually believe it is the former.

Over the years, many of the commenters here have suggested  more representative systems.

I'd bet that no one has any expectation of ever seeing this. 

The Gummster has said , for some time now , that we need to get away from the failed old party form of politics ..... we need truely independent thinkers in parliament , and each one answerable to an electorate ....

..... in fact , I feel so strongly aboot this ..... I'm gonna campaign hard to bring it in ....

First thing to do , is to register with the electoral office as a new party ........

Hi rony...  Colin Riden suggested the same, Mr Bear, so that's two. Are you standing for office was the question then I think... Or was it about the inclusion of a 'no confidence' vote, maybe coupled with compulsory voting...   

Bernard's server is at loggerheads with his software...things are not working as they should.

 

 

Kate, I've just watched Q and A on channel 77 and the government is wanting to remove a lot of people from the State Housing register and for private providers to fill the need.  If the governament did away with an accommodation allowance there would be a lot of accommodation problems in the main centres, I suspect mayhem.  You are too simplistic if you think otherwise.

Yep, that was my interpretation as well - more money to go to the private sector by way of Accommodation Supplements.  Already costing $1billion+ ... bigger than the unemployment benefit, bigger than the sickness/invalids benefit. 

It would be very interesting to know what percentage of household tenancies are receiving some kind of taxpayer subsidy in order to afford their rental accommodation.  If say that equated to 50% of all tenancies - then surely if the government stopped propping up the market with these subsidies - the maket would have to charge less in order to keep the tenants?

The government wouldn't want to do away with it "cold turkey" - just announce that the subsidy will be progressively lowered/removed over a period of time - giving tenants and landlords plenty of time to renegotiate based on the forthcoming changes.

 

 

I assume its a quiet way to prop up the PIs....mostly National voters who are probably bleating...

I think I agree with doing away supliments longer term....the tenant doesnt care as long as someone else pays and the landlord gets the $...

regards

You neglected to mention the biggest subsidy of all, the National Spuerannuation.

Accommodation subsidy pales in comparison

And your point with respect to the Landlords subsidy is?

Possesion of credit cards is really exciting and helpful since you have easy access to purchase what you wanted to but keep in mind that as soon as you enter the world of credit cards, it becomes very simple to buy today what you can't manage tomorrow. If ever you're alraedy in the stage of credit card dependency, you are welcome to read and get some tips on How to break your credit card dependency.