Money Mindfulness
Mindfulness is the basic human ability to be fully present, aware of where we are and what we are doing. It involves not being overly reactive or overwhelmed by what’s going on around us.
Money can be the cause of much stress, both personally and within relationships. You can feel like you’re not earning enough, spending too much, haven’t invested well. You can ask yourself questions like “what happens if I lose my job? What happens if I lose my ability to earn”? “How will I survive in retirement?”
That anxiety can be triggered more acutely in times of great change or uncertainty, like we are seeing at the moment. Costs have been increasing rapidly and job certainty is going to become more concerning in the coming months.
Fear, greed, and a lack of understanding can be a recipe for disaster when it comes to making decisions around finances. It’s just the disaster isn’t instant and for a while can feel really good.
How can you become more money mindful?
Well, to be fully present and aware of where you are at you need to complete a detailed budget. I’m sure we just lost some readers as soon as I mentioned the word budget. Most people I’ve met don’t like to budget, and therefore don’t.
Being aware of what you spend, and your financial position is the most powerful tool you can have to simply understand your finances.
As part of investment planning, we ask our clients what sort of income they would like in retirement. We’ve had a client say, “I’d be happy with $1000 a week”. We get to know our clients spending fairly well over time. Where we feel that some are unaware, we have asked them to spreadsheet their expenses for at least a month and come back to us. In this particular instance, our client was spending $20,000 per month. This was an enlightening moment for this client as they had no idea they were spending this much. It meant they could examine where they could reduce spending and create a more realistic financial plan.
We’ve been doing this for a long time and most people have no idea of their actual spending, so don’t feel like you’re out on your own. Often the biggest barrier is that people simply don’t want to know where they are at. They are afraid of what they will find. If you are one of these people, then you need to decide if you want to change? If you’ve been to a doctor about your health, a nutritionist about your diet, a personal trainer about your fitness then, you’re open to change. Why haven’t you done a budget? No one else even needs to know. There are free tools like the budget pal from Booster that connects to your bank accounts and monitors and reports on your spending. You can find it here mybudgetpal (booster.co.nz)
Once you understand more about your finances and how you spend, talk to an adviser to help with planning your goals.
Cyclical bottom at hand
There are an increasing number of signs suggesting that the substantial decline in residential real estate turnover and prices may be coming to an end – not that this gives any indication regarding how firm the coming upward leg of the cycle will be.
In seasonally adjusted terms the number of dwellings sold around the country rose by 11% in April. Turnover was still exceptionally low, and the annual number of sales may still fall below GFC-related levels. But more buyers are starting to appear, especially young people.
Investors remain largely as absent from the market as has been the case since tax rules were changed just over two years ago. But both mortgage advisers and real estate agents in my monthly surveys firmly note that first home buyers are taking advantage of lower prices, rising incomes, good job security, high listings, and the absence of many other buyers to make a purchase.
House prices nationwide were flat in April after falling just 0.1% in March and falling 1.1% on average each month since December 2021 in seasonally adjusted terms. Prices are almost 18% down from their peaks in November 2021 and on average wage rises since just before the pandemic started now exceed the change in house prices between then and now.
From my monthly survey of residential property investors, we can see evidence of increasing plans to raise rents as good tenants are getting easier to find. This development is likely to reflect the uptake of long-term accommodation by tourists and returning students. Also, New Zealand’s population is receiving a solid boost from record (non-pandemic) flows of 65,400 in the year to March.
A year earlier the flow was a loss of 19,000 and this record switch around of migration movements has yet to enter popular awareness, focussed as many Kiwis are on going to Australia. Once awareness rises of the population surge, we can expect many people in the large queue of buyers which has built up over the past two years to decide there is no point waiting any longer for lower prices and enter the market. The scene is being set for a firm market in Spring – maybe even earlier.
For additional information on the economy, housing market, and interest rates, you can subscribe to Tony’s free weekly Tony’s View publication at www.tonyalexander.nz
Disclaimer: This blog is meant to be informative and engaging, hopefully not a cure for insomnia. Please don’t take this as personalised financial advice. Discuss your situation with an Advisor. This is where I need to say past returns are no guarantee of future returns.
- Posted by Isbister
- On May 16, 2023