Credit Scores – Now With Instant Access

In New Zealand you’ve always been able to see your credit score, however you had to be prepared to wait a while and fill out some tedious forms and watch the mail box. I never bothered because I’ve never been denied credit so I just assumed it was OK.

Credit simple have come along and they make checking your credit score really easy, like just type in your drivers license number easy. In about 3 minutes I had my credit score, a respectable 740 putting me in the top 4% of people my age (and beating my husband by 8 points which he is absolutely gutted about). Nice I guess. Actually I’m kinda proud, I wanna put it on a t shirt! However New Zealand doesn’t do too much in the way of adjusting your mortgage rate based on your credit score so I’m not going to be offered a super low mortgage rate tomorrow despite my brilliant score.

New Zealanders on the whole don’t really understand credit scores that well and hardly anyone knows about them.

– 92 per cent of Kiwis don’t know their credit rating
– 72 per cent don’t know what a credit rating is
– Only 13 per cent have ever ordered their full credit file
– But when asked 84 per cent of people said they were “interested” to know theirs

Credit simple have done a pretty good job of promoting the new service and all of a sudden my social media feeds are filled with people checking out their credit scores, some are bitterly disappointed and others still not quite understanding what its all about.

The comments on twitter and Facebook would have been hilarious if they didn’t show up how ignorant we are of credit scores. So far I’ve seen it assumed that..

  • your star sign affects your credit score
  • your gender affects your credit score
  • the score is calculated based on the information you give to the website to identify yourself
  • that credit simple is using the website to track down people for debt collectors
  • its a giant social experiment to see how many people will put their identity details into a website

star sign does not affect your credit score!

I guess its nice to see a bit of skepticism when it comes to divulging information online. That is some small consolation.

Check your credit score online NZ

 

Credit simple are also coping a bit of flak for adding links to credit card and loan offers. Some are seeing it as preying on those with bad credit, but advertising is advertising. I expect to see adverts everywhere and when you are getting free instant access to your credit score then of course there are going to be adverts to offset the cost of running the site.

Instant access to your credit score (with no penalty) is long overdue. I think its great that this company was forward thinking enough to get rid of the ridiculous delays.

Most Kiwi’s only find out they have a bad score if they get denied for consumer debt and now there’s a little bit of a buzz around it. Anything that gets people to take a more active interest in their finances is a good thing in my book.

 

 

Burned by the $100 Pizza – A Split Bill Tale

Social outings can be disastrous when you’re trying to watch your spending, especially restaurants and bars. Most of the time I am a happy little introvert who likes staying in anyway but sometimes there are occasions you just don’t want to miss.

My family asked us out for dinner last week, I had been watching my spending so I did have some money left in my checking account. I was delighted that I could afford to go. Spending time with people I love and eating yummy food is a favourite activity.

My aunt chose an affordable restaurant, a gourmet pizza place. We checked the menu ahead of time and decided we could share a grilled duck and onion relish pizza (OMG yum) plus a glass of wine each. The total would come in well under $50 if we didn’t get tempted by any other tasty dishes (or the second glass of wine!).

At the end of the meal my Aunt announced that we will split the bill equally amongst the adults. I’m astounded as she often talks about her finances and I thought maybe she was watching her budget too. Even worse I feel too shy in front of my family to say anything. I caved and paid my share of the bill which came to ~$95 and some change. I have just paid $100 for a pizza and 2 glasses of wine and I feel terrible.

$100 Pizza split between 2 people
The most expensive pizza meal I’ve ever had. Ever.

So whats the solution? In this instance I will let it go because whats done is done, it was a special night out with some pretty amazing news being announced. (So I want to remember the night as a celebration!) Certainly I don’t want to be remembered as quibbling over the bill. However I learnt some important lessons.

For any transaction, know how you will be charged and don’t let others decide how to spend your money for you.
Lesson learned.

In future I will call ahead to the restaurant and see if they allow individual bill. Some places have let me order at the counter and bring my meal to the table with the rest of the group or pay separately at the end. I’ll also be upfront with family at the beginning of the meal. “Hey I’ve only got $50 for eating out tonight so I’m just going to split a pizza.” A little communication goes a long way.

It did get me thinking, what if I have been guilty of doing this? Have I ever put someone in the position of spending more than they wanted to? Perhaps I could be more sensitive to my friends and the social activities I suggest. For example I plan for spending some money every month on craft beer. I love it, I brew it, it makes me happy but I possibly have friends who get a little annoyed when I recommend going to the latest craft beer place, the beers are way more expensive than standard brews.

We all have different priorities for spending money and my must do craft beer experience is someone else’s $100 pizza.

OMG the Sky is Falling – Useless Media Panic

Our national newspaper is kinda sucky. Since the digital age they are all about click-baity headlines and celebrity gossip with a few bastions of journalistic integrety trying their hardest to break through garbage. It seems like most editors have been fired and fact checking is now a relic lost to the golden era of newspapers.

This recent dip in the market was covered by the business sections with new articles during the day, oh crap sky is falling, oh wait don’t worry we’re bouncing back, NO ACTUALLY PANIC because this afternoon investors sold everything!

Sharemarkets! everybody Panic screenshot-2016-09-13-21-46-24

“Fear returns” and “relief rally” are highly emotive and even in someone like me, who has been investing in shares since before the GFC, it still elicits a stirring in the gut.

My strategy is to just keep on keeping on. I’m investing in the sharemarket for the long term i.e more than ten years. I mostly hold index stocks and the companies I have bought individual stocks of seem solid enough (well nothings set in stone I guess) and I’m not worried about any of them going bankrupt overnight because of jittery markets. I still make my monthly contributions and if its gets too depressing looking at the share prices, I just stop looking so often.

Being well diversified keeps the panic at bay and helps me sleep at night. My investments are in multiple type of index funds and in multiple countries. I also have other types of assets like property, P2P loans and forestry.




It helps to be mentally prepared for dips in the market, imagine your net worth falling, imagine losing 10%, 15% 30% 50% of your net worth! And then think about what you would do in those scenarios. By thinking through worst case scenarios you’ll be emotionally prepared when they happen and less likely to make a gut reaction. You’re more likely to behave logically because you’ve “practised” how to react.

Another way to protect yourself from these sky is falling articles is to gain some insight into the way these sites work, they want clicks so the headlines are deliberately shocking. Brent Sheather wrote an insightful piece on the half truths and outright lies that appear in media finance commentary and that might help immunise yourself against being swayed by “expert opinions” in news media.

Of course maybe the best solution is just to just stop reading the business section?

 

 

 

How to be an Effective Saver

We all want to be super savers, but how do you get “good” at saving? Practise is a big part of it, you can’t help but get better at what you do often. Until the savings habit becomes a deep ingrained part of your psyche I thought I’d help you out by sharing some of the strategies I’ve used over the years to help me be a better saver. They’ve worked well for me but everyone has a different savings mojo.

Computers are our friends, let them do the work for you.

Automate – We already have so much to think about so make life easier on yourself and automate your savings. Have a portion of your paycheque go straight into your savings account. There’s no chance that you’ll forget some weeks and it won’t become a chore you have to remember to do every time you get paid.

Why are you even saving?

Save with purpose – Set savings goals, you might need an emergency fund, long term savings for retirement an short term savings for big ticket items, house deposit or a holiday. Keep emergency funds and long term savings separate. Savings for retirement need to grow so never dip into that stash of money. And how about taking it a level deeper, yes retiring early and establishing an emergency fund are excellent reasons for saving. But why do you really want an emergency fund? Why do you want to retire early. Take some time to think over the kind of financial situation you want for yourself and why.

You are your own worst enemy

Keep those dollars at arms length – If a nice fat bank balance is too tempting for you then open a savings account that is a bit trickier to access. Try another bank or an online only account. You don’t want to be able to flick money over to spend instantly when you are faced with temptation. If it takes a day to transfer over hopefully that will dissuade you from some impulse purchases! Don’t link the account to any cards.

 Bank your windfalls

Add pay rises to your automated savings – you won’t miss what you’ve never had. So don’t let pay increases lead to lifestyle inflation. Instead up the automated savings amount to match the pay increase.

Money

Grow cash GROW!

Money’s got to have a job, no lazy money! – Once you’ve built up some savings put those dollars to work. Don’t leave tempting piles of cash around as you might start to feel those dollar burning a hole in your pocket. A huge balance might make you feel wealthier but you can’t spend those dollars just yet, you need to grow them even more! Invest the cash into income producing assets, shares, index funds, property, bonds etc.

Squeeze out a few more dollars, you can do it!

Save everyday – Did you skip buying your lunch, did you negotiate a discount on a regular bill? Transfer those day to day savings out of your transaction account and into your savings as you go. Not only do you get the great feeling of scoring a deal your savings balance goes up as well. Twice the rewards!

Saving gets easier the more you practise, but one final thought. Saving can also become exhausting. A little mad money for guilt free splurges will help keep you sane and keep your savings on track. Good luck!

 

August Expenses – Prepaying a Future Holiday and Eating all the Foods!

At the end of month I started to feel like my spending wasn’t really in line with what I wanted for myself. I slipped back into buying a lot of lunches and drinking in bars on weekends. Living large baby! I was also putting some of these purchases on the credit card and come pay day I was transferring way more than I was comfortable with to get the credit card balance back to zero. Time to be real with myself. I cannot afford to live like that and have the financial secure future I imagine.

There is $500 of easy money that could have gone into investments this month. Instead it mostly went in my mouth. (It was all delicious stuff to be honest). Between that and the grocery bill I do believe I can find an extra $600 next month to go into savings. It’s hard being focused all the time and its easy to just slip into the buy “whatever you think you need in the moment” mindset. With a little more thoughtfulness I’m sure I can do better.

I spent a lot on Fuel last month but I still have 3/4 tank as I’ve been catching the bus a few days a week.

I prepaid a trip to Nelson for the New Zealand Homebrewers conference in March next year. Even using airBnB accommodation costs are so high! Still it was 30% cheaper than a motel.

Still throwing money at the rental property to pay for a $2,400 heating unit.

And my last thought is thank fark I earn a decent wage and my extravagant spending habits don’t get me into trouble.  I often worry that New Zealand is becoming a low wage economy and I see lots of big corporations paying their workers very low wages, not even a living wage. They all do it and slowly but surely they are eroding the middle class and therefore their own consumer base. Companies want their workers poor and their customers rich, well guess what, your customers are your workers.

Screenshot 2016-09-04 15.09.07

 

Screenshot 2016-09-01 17.31.02

Small Time Dividends – Don’t let them Escape!

Today I got my Abano Healthcare dividend. It was approximately $29 or enough to buy a 6 pack of craft beer and 500ml bottle of something special on the side. Yum! But drinking my profits was never the plan (well one day maybe).

Abano Health share price graph
Its been a fun 6 months or so, I bought in around $6.70, thanks Abano

So no beer for me because I have the dividend re-investment plan activated. My money has automagically turned into 3 more shares. Every 6 months the dividends are used to purchase more shares on my behalf and any remaining money is rolled over till the next 6 months.

Dividend re-investment plans work really well in New Zealand for a couple of reasons.

  1. We currently  have no capital gains tax. This means that these small amounts of money aren’t going to become a pain in your ass years down the track when you need to calculate your capital gains on all the small share buys.
  2. Brokerage fees here are really HIGH! It costs a lot to make a trade so anytime you can buy shares for free is a win in my book.

So if you’ve been wondering what to do with all your little dividends get online and check if the company has a DRP or Dividend re-investment program. Its way better than receiving a cheque (argh so inconvenient!) or having the measly $29 sit in your account doing nothing and not earning its keep. Dividend re-investment is already happening for most of you in your kiwisaver accounts and probably in your index funds as well (unless you checked the dividend pay out box!).

Out of sight out of mind, it happens with out any extra input and that tiny dividend is no longer tempting you to buy some craft beer that your waistline doesn’t need! Make sure your money makes you more money by keeping it invested. It’s the aim of the FIRE game and it will get you the the finish line faster.

 

Frivolous Investments

I guess I must be feeling pretty flush because I just dropped $500 on a share in a craft brewery. As far as frivolous investments go this is pretty high on the list.

Parrotdog put out the call for 2 million dollars to upgrade their brewery to a new location with a taproom and takeaway sales. Being the craft beer lover that I am how could I resist? I love craft beer! Owning part of a brewery is like a dream come true. My share doesn’t quite entitle me to drink for free but I do get 10% off all online and takeaway orders.

However after looking over the share offer I found myself feeling a lot less optimistic about their projected growth than Parrotdog brewery. Their projected sales seem too good to true even with New Zealand’s exploding craft beer scene.

Consider this graph for instance, projections like this usually have me running of the hills! Which hills? I dunno, the safety hills?

Screenshot 2016-08-20 18.21.05

But I still made the purchase because craft beer is a hobby and it brings me joy. The creativity and camaraderie in the New Zealand industry is inspiring and its becoming less fringe and more mainstream by the day.

The investment was made knowing that it might never be worth more than $500 and it might even be worth less! I am at a point in my life where I can afford to throw $500 at a pet project, its like lending $500 to your brother in law to start a business….lets just call it a donation and not worry about ever seeing that money again.

Screenshot 2016-08-20 18.35.50

$500 is currently 0.083% of my current net worth but if I was only just starting the journey to FIRE and $500 was 1% of my net worth I don’t think I would risk it.

With crowdfunding platforms the world over becoming more popular these kinds of private off market listings are a lot easier for everyday folk to find and throw cash at. While its exciting to be part of these smaller businesses and start-ups the risks can be a lot higher and there seems to be less regulation. Its my first time investing in a company off market like this, so I’ll let you know how it works out. In the meantime, please purchase ParrotDog beer!

I’ve Paid off my Maxed out Credit card – Twice!

Some lessons in life are hard to learn. So hard that you have to learn them twice. Credit card management is definitely one of them.

The first credit card I got was handed over to me with little ceremony when I was a student. It was my second year and I’d moved out of the halls of residence and into my very first flat on Cook st.

My campus had a branch of the National bank down by the (man-made) lake (full of huge eels that would eat the baby ducks) and students were eligible for an interest free $1000 overdraft and a credit card with a $500 limit. For a broke student it was just free money, I figured it would be easy to pay back once I graduated and started earning my kick ass amazingly high wage. (Yeah right, turns out science graduates aren’t nearly as in demand as I thought).

Some of the $1000 went on text books, I bought a woolen electric underblankets (it was a cold town!) and heaps of beer, takeways and …….. well I can’t really remember where the rest of it went. It just went! I probably bought CD’s and cool posters for my room.

Poster- Picasso Print

It wasn’t long before everything was maxed out. Each week my student allowance came in plus a little side income from working in a lab downtown. I paid my rent and everything else went into the overdraft but before the next pay day the overdraft was maxed out again. It wasn’t till a I finished university and finally got a full time job that I was able to pay it all back. Each fortnight I had to call the bank and ask them to reduce the overdraft by a measly $50. I learned the overdraft lesson and never used one ever again. The weeks dragging by and the embarrassing calls to my banking manger left a lasting impression.

The credit card however had no such lesson, the payments to visa were to this vague external entity. I never met anyone from visa and I never had to call. In fact I think they even increased my limit once I started working full time.

Fast forward to 7 years later and I was still always carrying a credit card balance. I thought it was normal. By now I had a limit of $3000 and things were getting dangerously close to that limit. The first hint that I wasn’t exactly managing things was when I made my first call to visa. I wanted a limit increase for a trip to vegas “just in case”. Just in case what I’ll never know because they turned me down. I had made a large cash withdrawal the week before. I mistakenly paid too much off the card that fortnight and hadn’t calculated enough reserves to make rent! The bank wasn’t too impressed with my money management skills.

After the trip added even more debt to my card I decided I had to tackle the debt. Each pay day I paid the bills that had to be in cash (e.g rent) then every single left over dollar went on the credit card. No cash left in checking, everything was now on the credit card. It was a huge payment and each payday bought the promise of progress. But I still had groceries and petrol to buy so I would use the credit card. It was a 3 steps forward 2 steps back kind of deal but I got there in the end.

The second time I maxed out my credit card was way worse. It involved spending money on family, spending more than I earned on day to day expenses and having nothing to show for $12,000 worth of debt. Yep twelve grand. It happened over several years. I didn’t buy myself clothes or gadgets or things like that. But I bought movie tickets, takeaway pizza’s, groceries, dinners out and a trip to the Gold coast for my partner and their children. So in the end I had massive debt and no assets to show for it. Deeply ashamed I hid my debt from everyone. I carried on as if everything was normal with this huge debt anxiety in the background.

This time I transferred the debt to a credit card with 0% interest for the first 6 months. After 6 months I transferred to a card with the same bank with a low interest rate (about 1/2 the standard rate). It took me about 3 years to get it under control. During those years I paid my mortgage and invested in kiwisaver. I bought shares but I didn’t mange any cash savings. Once I got the balance down to $1000 I started to save cash. Actual cash reserves. Looking back I was lucky to have a good paying job and to manage the rest of my money so I never got behind in repayments. It never became an “issue” or stopped me from being able to afford rent, power, food etc. It could have been a lot worse.

Now I pay the balance in full on my card every time I get paid. Transfer over enough money to zero that balance and sometimes it hurts the checking account a little because I’ve spent more than I thought. Even now spending on the plastic doesn’t trigger the feeling of spending my own money. Its a future me problem not a today me problem.

So thats my consumer debt story, going through the painful repayment process taught me a lot about money and how I interact with with it. So for that I am grateful. (Obviously I would rather not have spent the money and have it investments but we’ve always got to look for the silver lining).

 

 

 

July Expenses – SPEND ALL THE MONEYS

Oh sweet July, thank you for my tax return which allowed me to pay $4000 off my mortgage in one hit. BEST FEELING EVER.  It was a one off so not accounted for in these totals.

Screenshot 2016-08-03 18.13.44

Everyday expenses, are a little up this month since I was trying to remain in holiday mode (futile). Being back in winter and at work is all too bleak so I treated myself to some things. After about 3 years of buying bugger all clothing I splurged again this month on a couple of jackets, a winter and summer weight one both nice enough for work as well. As for the Household goods category, I replaced a duvet inner that had to be over 20 years old and was starting to fall apart. I bought a space heater for the teens room downstairs as its been pretty cold (ah I’m so nice. She has her very first job interview tomorrow). Car registration was due (annual car tax I guess for those non NZ’ers) it includes medical cover in the case of an accident and road maintenance .

So the odd transport cost because I caught an Uber home from my bosses 65th birthday. Spending money this month was contributing for a gift for previously mentioned boss. (She is awesome, she built her own house!). A movie date with my husband and loads of craft beers. Anyway I feel pretty spendy this month. I am trying to throw some money into my investment properties so I can get some improvements done. The Hamilton property needs heating installed which is planned for next month.

Utilities – I got a bit ahead on the power bill, so I didn’t have to pay much this month.

Screenshot 2016-08-03 10.51.39

As you can see I don’t exactly fall into the frugal category when it comes to spending. Sometimes I struggle with that and beat myself up over it. Other times I really need that little luxury in my life and no guilt over dinner out.  I’m sure it would be a different story if we had consumer debt or student loans to worry about, but thankfully we only have the mortgage to worry about.

8 Reasons I Hate Credit Cards

I can’t believe I said credit cards, plural. I mean who needs more than one credit card? New Zealand credit card users have 2.2 credits each. American users have 3.7 cards each! Actually I can think of a reason to have two credit cards, when my partner and I travel we take two cards (thats one each) from different providers in case a certain brand of card isn’t accepted or on the small chance there is a problem with transactions for one of the companies. People hacking the rewards/points often have multiple cards. I get it, the rewards are nice, its especially nice to be rewarded for your boring every day spending.

I use a credit card but I have a love/hate affair with credit cards. I love that they let me order things from oversea’s and collect airpoints. I hate that I sometimes forget purchases made on my credit card and have to pay more than I anticipated to get the balance back to zero.

  1. Credit cards are very dangerous. Its easy to view that line of credit as “money available to spend” and easier to forget that its not really your money. My online credit card always shows the available balance as $10,000! But that’s not right I don’t have $10,000! Its just $10,000 the bank is willing to lend me. This kind of psychological trickery really infuriates me. The balance should be ZERO.

    Evil credit cards
    Put it on the plastic, worry about it later.
  2. They get away with ridiculous interest rates. 21.95% interest WTF. Yep I’ve seen them that high. Why do we accept this kind of loan sharkery? Somehow this has become the norm. Interest rates around the 20% mark severely punish the inexperienced credit card user.
  3. No one tells the user that they are not supposed to carry a balance. You shouldn’t carry forward any credit card debt from month to month. If you are you should cut up the card NOW. You can’t get ahead paying 20% interest on debt each month.
  4. Minimum payment pfffft whatever. If you pay the minimum you may as well say ” I wanna stay in debt forever” cause paying the minimum don;t do jack towards the debt when the interest rate is 20%. But somehow seeing that minimum figure on the statement and then paying it actually makes us feel good, like we are fulfilling our obligations. More psychological trickery.
  5. The bastards will increase your limit without asking your permission enabling chronic spenders to get even further into debt. I once rang the company and asked them to reduce my limit and I was cooley informed that I better not ever ask for a limit raise as it may not be available to me in the future! Well thanks mate. I guess you don’t want financially responsible customers.
  6. I’ve yet to meet a person who was able to manage their credit card successfully from day one. Everyone I’ve been brave enough to talk to about it has at some point in their life carried a balance, had to pay interest, or let their spending get out of control. That learning curve has got a lot of young people into trouble over the years including me! Getting a credit card at 18 was probably one of the worst things to happen to me (financially that is!).
  7. The fee’s for accepting credit cards are high, much higher than using your regular eftpos/debit card. While the eftpos card transaction are charged at a flat rate per month (usually built into the equipment rental) retailers are paying 1.7% of the transaction in fees and its really hurting smaller retailers with slim margins. So who is really paying for your credit card rewards? Maybe the retailers are bearing that cost, maybe everything would just be a little bit cheaper if there were no credit cards.
  8. Transactions take a few day to show up in my online statement. I have a hard time understanding this as EFTPOS transactions show immediately and I can see where and when I spent my money. With the credit card the balance is updated instantly but the detailed transaction line showing when and where the purchase took place doesn’t show up for a couple of days. It really frustrates me as I like to track every expense and if I lost the receipt on the way home….(trust me this happens I am very disorganised) I have to try remember the exact details and then wait a few days before I can update my spending tracker.