76. Part-time work. Full-time life.

PODCAST TRANSCRIPT: Episode 76 - Nov 30, 2022

This week I’m sharing the financial life of Coromandel couple Ngaio and Ben, these are not their real names as they wanted to protect their anonymity. When we spoke in October of 2022 Ngaio was 32, Ben was 33. 

In my mind when I think of this couple I refer to them as the “Tiny House bike people”. They are super adventurous fun couple and have found a really good work life balance. She said that they both love to work, but not too much. Ngaio and I have emailed back and forth and caught up for a chat over the last year or so and they struck a chord with me because I love seeing examples of life enjoyed a little bit differently to most, in their case, choosing to build and live in a tiny home, work part-time and do a lot of adventures, which often include a bike.

They are a really good example of not needing a million bucks to live a great life. Although their wealth is growing, they make do on far less than that and are incredibly content. I think you are going to enjoy this episode.

Both Ngaio and Ben were born in the Coromandel and met for the first time when they were both High School age, but it was only later, when they both went down to Study at the University of Otago that they became a couple. 

For Ngaio, when she thinks what role money played in her life as she was living at home with her parents and growing up, she said that she just always assumed that they didn’t have a lot of money. She said it was a default assumption, but accurate and she would describe her parents at that time as frugal rather than broke. She understood there was not much to spare, but for all the basics needed to live a good life, no problem. They always had everything they needed, it was just that they never needed for much. Her parents had their own home, but it was located on shared land, a commune of sorts where many other families also lived on the same plot of land.

She said that back in the 1970’s the government was actively encouraging communes so her parents and about 10 - 15 of their mates got together, pooled their money, and paid cash for a cheap block of land in the Coromandel. It was a hilly bush block which had previously been farm land but was now uneconomic for farming. Everyone moved onto the land, began encouraging the bush to regenerate, and just went about building their own home, each paying $5 a week in rent to pay for all property rates and shared amenities. It was quite a unique situation to be raised in, and looking back, it blows her mind that it all came together because a bunch of mates at a festival decided to make it happen. And given society today, it’s a bit of a crack up she said that the government supported this lifestyle choice too.

Her and her younger sister were born on this property. Her Mum was a nurse working part-time and for a period of time her Dad was on a disability benefit due to an injury, before getting back into work later in life. She said that a lot of the people in the group were on some sort of benefit which in many ways really suited their communal lifestyle.

Ben’s upbringing was very different to hers. His parents built and owned a cafe in a beach town. There was lots of surfing and sailing, and with his younger brother, like Ngaio, he also had a great childhood. His whānau were a bit more open about discussing money than hers, and they owned their own home and the land it sat upon as well as the land and business they had. Money was always available, but not heaps and heaps of it. 

The words “Frugal but Plenty” accurately summed up each of their upbrings I think.

When they were both at school they ended up playing a lot of sport together and their love of physical challenges is a big part of their life today. 

They were both in a secondary school outdoor adventure team that competed in the Hillary Challenge. It’s a huge physical and mental test to take part in this team event and she said that it's super competitive and it takes over your life for a couple of years, in a good way, and they were super into it and it developed their love of multisport. 

They both saw their schooling through to the end of Year 13. Ngaio headed straight off to university while Ben took a gap year, so because of the one-year age gap, it meant they started university at the same time.

During his gap year, Ben was a hammer hand, working with his best mate who had begun an apprenticeship in the building industry, and he also headed down to Canterbury to do a lot of snowboarding, supported also by some cafe work.

They started at the University of Otago in 2009, both enrolled in PE. In total, both each did five years of study with Ben graduating with a Bachelor of Physical Education and a Bachelor of Applied Science. Ngaio pivoted away from PE after her first year as she decided that it didn’t have a great work future in it and graduated with a Bachelor of Science and a Masters of Dietetics instead. They both finished their study at the end of 2013.

They both stayed in a Hall of Residence in their first year. She remembered that the deposit was $5,000 and she thought, crikey, how am I going to pay for that. But a successful scholarship application took care of that and her student allowance, which she received for the full five years of her study, covered the rest. She is not sure how Ben paid for things but he probably just paid from money saved working, she said he always had a stash of cash available. Unfortunately, due to time constraints, we didn’t dive too deep into Ben’s finances in those early years. 

When they got to 4th year, they moved in together, her student allowance of about $200 covered her living expenses. She remembers contributing $50 for a weekly food shop, $100 on rent and the remaining $50 covered everything else as she doesn’t remember having to dip into her summer savings which stayed tucked away in her bank account.

To this day she said that Ben and herself just don’t spend a lot of money, being low spenders is just their natural default and they have both been like that forever. More recently she has realised that this is quite a unique thing. It’s helped too that their fun was also cheap. When they were studying, once they had themselves kitted up with the outdoor gear they needed, like a sleeping bag, tramping pack and tent, you are sorted. It meant that an extravagant weekend away was $80 spent on food and petrol, the rest of it was all you. How far could you legs carry you? The most expensive things she said were their flights home to be with family in the holidays.

When she reflects back on those years she often thinks her education might not have been worth it money-wise, but definitely life-wise it was well worth it. Outside of study, they spent a lot of time maxing out all the outdoor opportunities available in that region of the motu. And because of their time at university, they have a lot of good mates, and they all still stay in touch. 

Collectively, ten years of study and living does not come cheap and we delved into the financial side of things a bit more.

Apart from the odd ride to uni to begin a new year (which was no mean feat given you have to drive the length of the country), she doesn’t remember their parents helping them out financially. During the long summer break over Christmas, they returned home, and I would assume they lived for free, to work and make some money for the coming year. His summer job was skippering boats and she worked in a cafe.

She said that what she could have done with these summer savings was put it towards course fees, but she never really ever thought about that and just borrowed the money on a student loan instead. During term time they didn’t really think about working, they were too busy. They kept their weekends free to get out for some amazing physical adventures, like tramping.

Having done a lot of tramping myself when I was at Otago University, I understood why they would make that a focus, but I still asked if they could have factored in some work during the year.

That was a “no” because she said that work would have been just an added complication to her life, which was already pretty full with studying and living. Plus, holiday breaks were short, so not too much time to work, and then it was hard to factor in work around exams and what have you. Students have the problem of needing to find well-paid work that fits in with their erratic yearly schedule which is a really tough thing to do. There are intense times of study peppered with holidays of a few weeks at a time and I agree that it’s hard to find an employer who is looking for that type of person. 

But on the other hand, I’ve met plenty of students who also find a way to work and study concurrently so they can pay as they go as best they can. It’s a choice.

So, all that to say that for the most part, they paid for their education using student loans. As mentioned, Ngaio also received a student allowance for her entire five years, which offset a lot of costs. Ben only qualified for a student allowance in his final year of study. Ngaio also received a couple of scholarships that helped out. If she had her time again, she would apply for more scholarships as she thinks she probably could have won many more. 

They readily took on student debt because everyone else was and she said that there was no concept of what a student loan even was. As far as she was aware, it is interest-free debt and everyone has one, or everyone she talked to did. She said “Oh well, easy as. You just fill out the loan paperwork and it happens”.

From a conversation I was not part of, but overheard recently, right when I was writing up this podcast actually, between a school careers advisor and a parent, nothing much has changed for many students when I heard this advisor say, in such a factual manner, “the kids just have to get loans and they will pay them off for the next 20 years. We all had to do it”. To say I was horrified at hearing this was an understatement. And its why you won’t hear me stopping banging on about how to avoid student debt anytime soon because, sadly the alternative view to debt, saving up and paying cash, is still not actively discussed in schools.

For Ngaio, no one talked to her about how to pay cash for study, there were no conversations about advantages and disadvantgages of debt, or even how you pay off your student loans once you finish your study. It was just ‘this is how it is done’. 

Ngaio was fortunate that the government provided student allowance (that you don’t have to pay back) which fully covered her livings costs. Given her frugal upbringing, she made it stretch a long way and she found it easy to live on that, but she loaned the money to pay her fees and course costs.

She said that her loan balance was looking OK, until the last two years of her study when her course fees went up and she can now see that had she put some of her summer earnings towards her fees she could have come out with a far smaller loan balance. So that is her advice to future students: get scholarships and work if you can, using that income to pay cash as you go as best you can because it will reduce the amount of debt you sign up for.

At the end of their study, Ngaio had a student loan balance of about $50,000. Ben’s was $65,000. So, a total debt of $115,000 for this fresh-faced young couple, both now educated and ready to hit the job market. 

And I asked how she felt about this debt when she graduated. She said that she was not stressed about her loan balance at all. For the most part, she still isn't. And I guess, why should she be? Everyone appeared to be in the same position. Today, eight years after her study ended, as a couple, they still owe $60,000. 

Coming back to the careers advisor I overheard, the one advising 18 year old kids to take on huge amounts of debt. My eavesdropping revealed that it was all pretty simple, really as I listened to them explain that the kids take out debt to get an education, which in turn will get them a high-paying job. Then, it’s pretty much as simple as those 12% deductions from their full-time wages from the job they started straight out of uni paying the debt off over twenty years. Too easy! 

This of course assumes that everyone will do that.

When Ngaio and Ben attended their graduation and caught up with their mates, everyone had a job. But as a trained dietician, Ngaio found that there were not that many jobs for new graduates, so she thought screw it, I’m going to have some fun!

They both picked up some work so that they could save up enough pūtea to go travelling overseas for six months. Some good mates joined them for three of those months and they had, she said, a glorious time. 

So, not much going towards their student debt during that first year out of uni.

They tripped about a number of countries sticking to a strict budget of $140 NZD a day. They did some WOOFING where they could, living for free in return for some mahi on the farm. They met up with international family and also did lots of tramping, adventuring and sightseeing. 

They kept a journal of costs and went through phases of writing down expenses to keep them on budget. They found that some countries were really expensive, and they had to spend more, while others were super cheap. By default, they always chose the cheapest option without being too crazy, but their frugality worked out well she said. 

They even managed to come home with a little money left over. 

They returned to Aotearoa in late 2014 and lived for free in a cabin out the back of Ben’s parent's cafe. 

Ngaio started up a fun project with her sister where they spent the summer setting up and running a bakery business after having been inspired by her travels to do so. 

They baked sourdough bread five days a week, and I was intrigued how and where they did this. 

Ngaio said that when you step away from your life a bit, your options open up, opportunities present themselves. 

They knew someone who had just started a cafe and had bakers ovens and they asked to rent them in the morning before the cafe opened. So, they would set to work at about 3 - 4am and then bundle up all of their delicious bread and go off and sell at local markets and campgrounds. 

Their cafe rent was cheap as, but the early starts were kinda brutal and she said that if she ever went down that path again, she would just work normal hours, having the bread ready for sale at midday. It would be a nicer lifestyle she said.

They made very little money, just $1,000 - $2,000 each over the summer, which is low considering they would have made $5,000 to $6,000 each just working in a cafe BUT it was a cool and memorable experience to work alongside her sister and was well worth it.

By this point, after having spent years working around boats while growing up, Ben was a fully qualified skipper and had a job driving tour boats. He was considered the ‘big earner’ of the two, earning about $30 - $40 an hour before tax.

By this stage they were over a year out of university, had enjoyed an O.E, and were enjoying making a bit of income. It was 2015 and they were 24 and 25 years old. I asked if they were working their way up to something career-wise that would begin to use their tertiary education.

She was looking for a job as a dietician, given that is what she is qualified to do.

In the winter of 2015 she did get a fixed-term internship, working as a dietician for a regional health organisation. This role gave her valuable work experience while enabling her to look for permanent full-time jobs elsewhere. She eventually found one way down South working at the hospital in Invercargill and she made the move down there, starting in 2016. She knew absolutely nothing about the place before going there.

Ben though, he was not keen on going so far South to start his professional life, so that was a bit stressful she said, convincing him to follow her, which he did once the summer ended in his current job.

I greatly admire people who pack up and move to other regions in New Zealand, or other countries, because as Ngaio explained, it can be quite a culture shock. There are big differences between Cormomandel and Invercargill, with the weather only being one of them.

The people are different, there was much less cultural diversity than she was used to and it's a big farming region, with lots of blue-collar work, which was different again to home. Initially she struggled to fit in, everyone she came across was established in the community and had their own mates. 

She did go flatting to meet some people and she did discover that Invercargill has a really good outdoors and climbing community which she became a part of. 

Soon she was finding the positives and one of them is that they have the Invercargill Licencing Trust, which funnels money from alcohol sales into community sports facilities. She took good advantage of these services. Plus, they were on the doorstep of Queenstown, Fiordland and all its ski fields, tramping and water activities. 

Once she settled in she found it a much more exciting place than she realised. And as for the weather, she simply said, you adapt. 

She worked full-time, earring about $48,000 and it went up a few grand a year for the two years she worked there. 

When Ben came down he worked in local tourism with the council, so like Ngaio, he really started using his degree too and really enjoyed his job working on local events for young and old and tourism campaigns, such as the very well-known - if you are into motorbikes - Bert Munro Rally. 

Their financial life continued to develop. As is quite common, it’s just kind of gently evolved. When they flatted together at uni they had one joint bank account to pay for food, and since that time, right up to today, they have never had any other joint bank accounts. But, when they started travelling together, they started talking about “our money” instead of mine and yours. So, although separate, they think collectively she said, something that I think is really important. It was a sister of mine Liz who summed it up well when she said that you can create an unbreakable team and hit more shared goals if you think of your money as one. You share everything else, why not money. What’s the big deal. It is very true.

And given they were both working full time in Invercargill, what did they do with their pūtea?

Those 12% student loan deductions were taken from each and every paycheque and the slow debt payoff had begun. It just automatically happened in the background and I’m sure that like many, they just adjusted to receiving income that had already had a 12% slice taken out of it.

They went away a lot during the weekends, getting into the great outdoors and exploring. But she also said they saved ‘shed loads’ of cash too. But apart from creating a couple of term deposits, she said they had no idea what to do with their money. They talked about buying a house in Invercargill, something to live in while they were there and rent out if they left. At that point they had accumulated about $50,000 - $60,000 in savings and that would have been more than plenty for a deposit on a house in that region. 

She said that both Ben and her are very similar in their attitudes to spending money, neither feel the need to spend that much and because of that, whenever they work, surplus money just accumulates which gives them a backup supply in times of need.

Sadly in 2016 they entered one of those phases of life where having a backstop of money means decision-making is a little easier.

Tragically and suddenly, Ngaios's Dad passed away in 2016, when she was just a year into her job in Invercargill. It was an incredibly hard time being at the bottom of the country away from good friends and whānau, but she stuck it out, even though, due to grieving, she said she was not doing her best work. 

She took a couple of weeks to be back at home with family, but on autopilot, she returned to work, trying to get back to normal. Trying to think everything was sweet as and would continue on as normal. But, unsurprisingly, just 2 - 3 months later she was a mess, because something that traumatic has a habit of catching up with you.

She just couldn’t think clearly and for some reason she said she thought quitting work was not an option, although it was, but eventually Ben convinced her to do just that. 

After two years in Invercargill, they returned to the Coromandel and took some time to process all that had happened. She realised that from a financial perspective, she didn’t need to work, so she took a break and again paused employment, there was enough money to just stop and focus on what is important. 

They kept life simple, and went back to the cabin at the back of the cafe. She worked in hospitality a little, and got her hands in the soil with a gardening gig as well which she really enjoyed. Ben went back to tour boat driving which earned more than enough to support the both of them.

The sun slowly came out again and good things began to happen. Early in 2017 Ben proposed and they now had the excitement of a wedding to plan for and they also jumped on a plane and went to Vietnam and Thailand for a few months.

Ngaio said it surprised her how much she enjoyed planning their early 2018 wedding and getting married. In total they spent $5,000 on their wedding, $2,500 of that money was gifted by family. It was a great excuse to get everyone you like together and have a great party, it was a huge amount of fun. They looked she said, bloody fabulous in their wedding clothes that they had custom-made in Vietnam and she enjoyed lots of DIY projects in readiness for the big day. 

I very much picked up from Ngaio that they work to live. Not the other way around. Because of their non-consumerist natures, they live on less than most, currently about $35,000 - $40,000 a year or between $673 - $769 a week, meaning that they don’t need to make as much money as some to live a good life. 

Because I’m the worst interviewer in the world, I really do just have a good yarn with people, I completely forgot to ask what they actually earn a year, but given the amount they spend annually and the fact that they currently have a 60% savings rate, I’ll leave you to do the math.

When they moved back to the Coromandel she was concerned about finding work in her career in the rural area where they wanted to live. Most of the work was in hospitals and they are always located in towns and cities. So, although she thought that it might not be the best career move, she started her own private nutrition business, but she didn’t enjoy it too much. Given that most healthcare in New Zealand is subsided or free, people are generally not excited about paying full price for care and it felt weird to charge a fair rate for her services.

So she kept scouting around, looking for opportunities and managed to secure full-time work in 2018 with the health provider who gave her a start a few years prior. It worked out well and she is now able to bike a longish commute to and from work. 

Their next issue was housing. They bounced around living with friends and family or house sitting, but they really needed a more permanent solution. She said that finding a house to rent in their area, a North Island seaside town is an expensive nightmare because it's a holiday location. Although there are plenty of houses, they seem to be either a holiday home or an Airbnb, not leaving many places for locals to live.

They started by buying a caravan to live in, which they were able to park on Ben’s parent's property, it's a rural site with a nice outlook. They then came across the concept of Tiny Houses and thought they looked awesome. Both of them are moderately handy people, and she thought they could probably figure it out and build it themselves.

If you can find somewhere to put them, I think that Tiny Houses are an excellent and affordable housing option. People I know who live in them absolutely love them, but you need to find a permanent and legal spot to park them.

They have a verbal agreement with Ben’s parents to occupy the site and they pay $100 a week rent for the land they sit on. Their home does not require a building consent and that was important to them as they didn’t want to interfere with any plans that his parents might have for the land. Also, they are not sure if they want to stay there permanently and could pack up and go if needed. They also now have a saleable asset if their plans change too.

They lived in the caravan while they built, not ideal during winters, but all part of the challenge, and it took them two years to build their home at a cost of about $65,000. They cash flowed the entire build from their incomes, taking on zero debt. When they moved in, they sold up the old caravan, even managing to make a profit on it she said. Their home has two sleeping spaces and tones of room for friends to come and camp. They connect to the grid for power, but are off-grid for sewage.

As with any building project, it took them longer to build than expected, but by then they were both working full time, were still doing a bit of travel and juggling work and building. That consistent income allowed them to just pay the house bills as they come in. Given you are building a tiny house, the bills are far smaller she said. 

They have lived in it for two years and she said it’s a definite upgrade from the caravan. I bet it is. They are not 100% secure, given they are on someone else's land, but coming home to their own home each day is fantastic she said. The house is smaller of course, but they spend a tonne of time outside anyway, developing fantastic gardens, so it’s perfect.

Now, one thing I have not mentioned yet is KiwiSaver. They joined as soon as it started back in 2007, so they would have been teenagers at the time. She said their Mum’s told them to join, and it pays to listen to your Mum.

Ngaio ended up in an ANZ conservative default fund, which in hindsight, was a bit of a bugger, Ben did slightly better, joining a default fund but a growth one.

How did they choose?

They did an online quiz about their risk tolerance. Which is both bad and good. If you are 17 years old, money is hard to earn and when a quiz asks you how much risk you are prepared to take with that hard-earned pūtea, most kids would say “I don’t want to take too much risk thanks”. 

So, this meant that Ngaio’s KiwiSaver in particular languished for many years, missing out on an excellent period of share market returns. Ben would have fared better by being in a growth fund. 

A few years ago she moved to a balanced fund. Then as she started to learn about investing and started to do more research into KiwiSaver providers, going above and beyond an online quiz with her research, she made her third move over to Simplicity KiwiSaver and into a growth fund. 

He changed to an ethical growth fund with KiwiSaver provider Pathfinder. 

He is paying higher fees than her, at 1.29%, plus a $27 a year fee compared to her .31%. That almost one percent difference is HUGE over the life of the investment.

An easy way to think about it is that if Ben’s fund returns 10%, he loses 1.29% in fees. Which sounds ok ish. But if his fund has a rough year, maybe it only returns 3%, he loses almost half of his return, 1.29% of that, in fees to the provider. And if he has a negative return, well, he still pays those 1.29% fees on his fund balance. So, if his actively managed fund loses him money, he still pays a high fee. Fees matter a lot over time.

They talk about all this, it’s so good to hear that these conversations are happening in their whare. Ngaio said that she told Ben he was paying high fees with his provider. His comeback is that she is potentially investing in tobacco with hers. 

Touché. They happily agree to disagree by the sounds of things.

Ben’s KiwiSaver balance is about $44,000 while hers, due to her breaks from work sits at about $34,000. The fact that he was in a growth fund while she was in a conservative fund will also account for that difference.

When we started talking numbers, she was pretty quick off the mark, thanks to the spreadsheet she has created to track their money and this now gives her a bit of a timeline of their net worth and progress.

Because it is all manual she said she goes through phases of tracking their spending and net worth hard for three months so they can focus on chasing FIRE and then phases of “this is a lot of work and I really cant be bothered”.

She wants a better system and at one time she actually tried PocketSmith for a year and a half but said she didn’t spend the time to figure out how it all works because she just can’t be bothered so much. She kept reverting to her Excel spreadsheet, with intermittent bursts of close attention to spending and earning to see if they are on track.

For example, she looked at the income and expenses for the month of August and calculated they spent $4,000. But $1,000 of that was on car repairs, so normally it would be $3000, so a bit of a bumper month she said. Annualised that would be $48,000, but without the car repair, it would be $36,000. She took a closer look at the months of April, June and July and if she annualised it, they would spend about $30,000 a year.

So, it’s not an exact science but it gives a darn good general guide. 

Personally, I don’t mind how people budget, just that in some way shape or form they do and they find a system that works for them.

But my budgeting tip is that every single year there will be an outlier event, such as their car repair. A holiday. An appliance needing to be replaced. So when I look at my spending I always include those costs when determining future spending. I find that there is always a big one-off cost on the horizon and we rarely know what it is until it hits.

Ngaio likes to know what their finances are up to and how much their basic life costs because it gives a sense of: OK we spend this much on groceries, this much on X, Y or Z. Keeping an eye on things prevents lifestyle creep she said. That information is useful to know if she wants to have time off work. She knows how much to save up to get her through. Or, if they want to buy something bigger, she can use her spreadsheet to work out how long it will take to save X amount of money.

Her tracking of money really began on their O.E. but her spreadsheet began at the beginning of 2019, the same time that she learned about the FIRE movement and this led to a lot of kōrero about what they are doing with their money. 

They had a chunk of cash and they looked at the price of houses, thinking they really should buy one, and both thought “oh goodness, I don’t really want to go there”. The prices were too high, the debt levels were eye-wateringly high as well and they never quite got around to buying, nor were particularly motivated to.

So they were stumped about what to do with their money, neither had any good ideas beyond a term deposit once they had ruled out property.

Ngaio started seeking information because she realised that they didn’t have a clue about wider personal economics beyond borrowing money for housing and they were thinking, as many do, we are almost 30, we should probably know how money works by now. To them, investing in the share market was this scary thing that dishonest or rich people do. She said that they definitely had a negative mindset about the type of people who were investors. 

She was really into podcasts at the time and stumbled upon two personal finance ones, Kiwi Mary Holm on Radio NZ, and American podcast ChooseFI. This was the first time she came across the concept of financial independence and it just blew her mind.

She was like, WHAT? This can’t be right!

The concept that you could invest enough into ETFs or Index funds that they in turn could provide you with the income that you need to live, without having to work. 

Mind. Blown!

I just want to thrash that out a little more, just in case this is a new concept to you too. 

In regards to financial independence, a large part of wealth goes into the share market. You might have housing too, but not necessarily. The premise is that you invest into just one or two broad-based, low-fee index funds that buy what is referred to as “the whole share market”. Think the top 500 American companies, the top 200 Australian companies, or here in NZ the top 50 companies in our share market. Instead of picking and choosing individual companies, such as Amazon or Tesla, you simply buy ALL of the top companies for that country. 

The top companies always stay in the index. The poor performing companies fall away and are removed, replaced instead by the better-performing companies. It is self-cleansing and the investor does not need to buy and sell, it’s automated by the fund managers.

Over a period of years you invest weekly or monthly a portion of your income into these investments. Over time your total pool of the money you put in grows, but not only that, the dividends each company pays get’s added to the pot, buying you even more shares. And because over time, I’m talking ten years plus, the entire share market only goes up, the value of each share you have purchased goes up in value too. Just like the housing market, the share market also has capital gains. 

When your investment balance gets high enough and you are ready to step back from work, you skim the cream from the top of these investments and use that money to live on. Your investment value will continue to grow despite this. It’s called The 4% Rule and if you only google one thing today, let that be it.

A quick bit of math for you to show it in action:

If you invest $500,000, you can safely sell 4%, or $20,000 a year of your investment and use it as income. 

You invest $1,000,000, you can safely sell 4%, or $40,000 a year and use it as income.

When Ngaio learned about this she felt she had found a secret that just could not be true, that it was some type of Ponzie scheme.

And although distrustful and a little bit scared, she kept on researching and she shared with Ben what she was learning. Even now, she said, that if she is completely honest she still feels a little that way, a little nervous. What if she is wrong she asked herself? This type of investing still plays on her mind. 

I once felt exactly the same way. If this was a legit way to invest, why was it not common knowledge? But, like Ngaio, I pushed on because I had to find something to do with money to let it multiply that was not housing. I have gone firmly down the ETF/index fund path and the longer I’ve been an investor, the more certain I’ve become of this as a viable way to growth wealth for my whānau.

This new knowledge was what prompted Ngaio to move her KiwiSaver to one with lower fees which is passively, not actively managed. While not an index fund or ETF described above, it’s moving in that direction and has many similarities. You are buying whole markets, not individual shares and the fund managers are not constantly meddling with the fund composition. 

They still had term deposits which were making nothing, they were more or less 0% interest meaning that you locked your money away for a period of time for little or no financial return. And this forced her and many others to look for other ways to grow their money. 

She kept researching, and although she said she was terrified to invest in the share market she decided to stick with her KiwiSaver provider Simplicity and open up a growth investment account outside of KiwiSaver and in both their names. It is exactly the same as her KiwiSaver fund but the money is accessible at anytime, you don’t have to wait until you turn 65 like you do with KiwiSaver. They started depositing money into it. And now its current balance is about $110,000. 

Using a fund like this means that from a retire early perspective, in the future, they could apply the 4% Rule and start to harvest some income from this investment. So, technically this $110,000 investment could already give you an annual passive income of $4,400. She began with a small dip your toe in the water contributions and then started investing more and more.

She also began a second investment, again in joint names, with the same provider, but this time in a conservative fund. This is where they invest money for that - possible - may or may not happen - still sitting on the fence house deposit. Its current balance is about $80,000

They have done this because they are still in two minds about property. They are torn about what to do. Where she grew up on shared land, after a time, the ownership of the land they lived on became an issue for their family. Therefore the security of owning the land you occupy appeals. Ben on the other hand looks at it more like buying an investment to rent out, it will get them on the property ladder, rent will go some way to cover the high mortgage, giving them future options, while they stay put in their beautiful tiny house on shared land for now. 

This is where we have got to with the housing market in Aotearoa, a couple who are torn about which way to proceed. They own the tiny yet movable house they live in and they love living in it, but they feel they are shooting their future selves in the foot by not owning land. She resents the fact that they would have to spend an outrageous amount of money to buy, in her words, a shite house. They have looked and would need to spend about $800,000 for an average house that needs work. Ngaio said that this seems like a dumb price which is way out of whack with what they earn, even if they did up their hours. 

But if they don’t buy now, who knows what land will be worth in ten years time. Yet, buying a house now to rent to someone else, because they want to get a foot in the property market also feels unethical. The housing market is just too darn greedy. 

She knows first-hand of people who couldn’t ever get themselves into a position to buy a home, which they were OK with, they were happy to rent because it suited their lifestyle, but now they find themselves homeless due to low rental housing supply and extortionate rents. If Ngaio and Ben did ever buy a house just so they could get into the property market to give them future options, she would like to rent it to people like them, she wants to help someone like that.

In the meantime, though, they have stabilised their housing situation and instead of spending their income, they are investing hard instead and working towards FI and are doing pretty well at it too.

So, just to summarise. They have a number of assets.

Their Combined KiwiSaver balances are almost $80,000.

They have about $190,000 invested in two funds outside of KiwiSaver.

Their Tiny Home is valued at about $120,000 and they own that outright and could sell it one day if they wanted. 

They still have the liability of their student loans, collectively they still owe $60,000.

This means their net worth, which is assets of $390,000 minus liabilities of $60,000 is about $330,000.

Because she is tracking their money she has watched their net worth grow over and above what they add to their investments, due to those share investments rising in value over time. She said it feels likes cheating! With a 60% savings rate these two have a 100% chance of being early retirees for sure. 

They own just one car, which is worth about $5,000.

Between the two of their separate bank accounts they keep about $8,000 cash at any one time. He keeps a much lower buffer in his accounts, his reasoning is that if it's not there, he won’t spend it. 

They try to live off just one income, investing the remainder.

I did wonder, given that they have joint investments why they didn’t consolidate their banking but she said that they have just not gotten around to it and there is currently no inconvenience to having it this way. One day, if it ceases to work, they will change it. They do still share that one bank account and they each have a debit card for that account. They do not use credit cards. 

Another genius move if you ask me.

When I interview people, I always get hung up on consumer debt and student loans; I just can’t seem to help myself! It’s because I see the long-term impact of debt and the regret people feel when they get their money in order and look back at the interest they wasted or the drag that debt had on their income for so many years. 

The only consumer debt they have is their student loans and Ngaio said that she has thought about it a lot and has considered upping her payments and getting it paid off faster. But she thinks it would also be nice to not worry about it and she doesn’t like the thought of having to pay off $60,000. I get that. Who would. As long as she keeps working it will slowly get paid down. Given it is interest-free, her current view is that any extra money could go into an investment instead, which is exactly what they are doing. 

She said that Ben is pretty against paying off student loans early. His attitude is there is no point. She said they have big debates about it and their estimated payoff date is that on their current trajectory, it will be paid off in 7 - 8 years, when she is about 38. This of course supposes they both stay employed and are not enticed on too many more adventures which require stopping work because they need those regular PAYE deductions or voluntary contributions if they become self-employed to make those payments. 

Stepping away from their situation, I talk with lots of people with student debt and I’ll often ask an ex-student if they have accounted for life happening. Because it will and it only gets more complicated when you exit your study and continue to gather up all the necessities of life:

If you choose to have a child and stop work for a year, it will kick your student loan payoff day further down the road. 

What if you want to buy a property, the banker takes into account all of your debt and will reduce your lending as a result.

How about if you wanted to move overseas, your student loans will start to accrue interest after six months away. I would far rather use my international income to have a fabulous time than send money home for debt. Wouldn’t you?

When I had a student loan I paid interest, which is what motivated me to pay it off fast. The government then made them interest-free. How much will you complain if interest is reintroduced? A government giveth and the government taketh away after all.

What happens if you fall in love with someone else who has student loans? Double trouble and incredibly common.

How about if you never finished your qualification, or trained in a field you now no longer work it. Surely it must be tough seeing that money coming out of each paycheque. Still paying for something that is well in your rearview mirror.

This is why I think that focusing on the 0% interest rate is just too simplistic. Life doesn’t really work just using math. I’m just a fan of finishing what I started and paying back the money I borrowed. In my own situation, I did take on student loans and I enjoyed the benefit of the education I received, it certainly got me into a good well-paying career (which I no longer work in I should point out), the thought of having my paycheque cut by 12% every single flipping time for years to come annoyed me greatly. I just decided it was time to pay the piper and pay that money back and just close the door on that part of my financial life. There has never been a single part of me that regretted clearing that debt and because I hit the ground running, debt-free after uni, I could just look forwards and not backwards. When you keep debt around whether it be student loans or credit cards you are always pre-committing your future income for something you wiped your hands of years ago.

No thanks. But that’s just me. And the point of these podcasts is to give others listening to this some counterarguments to taking out debt or considering smashing it in the face once working, if you do have debt.

But, back to Ngaio, I wondered, given she has been investing for a while now, how she is settling in, and how does she feel about investing in the share market now? 

She now understands how it works. Her investments are not 100% in line with her values, she knows for example that she is invested in both Facebook and Amazon. Both being companies that if she had the choice, she wouldn’t invest in because she struggles a little with the ethical side of backing those companies. But, it still feels better than investing in housing and for them, it is the best option she can think of that will build their wealth up to where it needs to be to support their lifestyle. 

She wants her money to go forward and grow and it had been going backwards with a savings account, so she knows that while not perfect, this investment will work over time and the promise of being well off one day is very attractive. 

She has come a long way with her knowledge in the last three years. She said that she feels informed and is really happy that she has a good understanding of how investing and economics work. 

Now, I mentioned that these two are into cycling and are super active in the outdoors. They love travelling and going on adventures and they have worked themselves into a financial position where they can pursue their passions.

In 2022, like many of us post lockdowns, they were doing a bit of a life audit and she felt she wanted some time off work, to take six months to just live life, without work for a bit. So, she took six months of leave from her work. Because Ben works in tourism he could only manage about three months before returning to his job. When he works, depending on the season, he will work somewhere between 2.5 - 4 days each week. 

Due to covid, it was still too soon to travel overseas, so with a couple of great friends they loaded up their bikes and set of for a hot lap around Aotearoa instead. They rode for about three months.

Ngaio of course, created a budget for this adventure and they kept the costs down where they could, freedom camping or staying in cabins cheaply. They also did a whole lot of eco volunteer work and general good deeds along the way. The total amount that left their bank accounts over that three-plus month period (including their normal bills) was $8,000. She said that it averaged out at about $2,500 a month. Or $1,250 each per month.

In fact, when we spoke, she had only just returned to work, working just four days per week. And I have to say, she did sound particularly relaxed. To be able to take a mini-break at such a young age is a fantastically good idea in my view. 

Ngaio said she kind of wanted to see if she would enjoy having her time and calendar just completely open. She really enjoyed the break, but she has also enjoyed going back to work and having income coming in again and it was nice to work at a community level again, instead of at an individual level on her own. All in all her six-month mini-retirement was a really positive experience. And she managed to plant a lot of trees around their home to she said. 

During her six-month break from work, she lived off her savings and she stopped investing during that time. She had learned enough about dollar cost averaging to be a little gutted to do that, but she was not wholly sure how much life would cost during her time away from work.

Although she saved up her own money for her break from work, if push came to shove, neither would sit and watch the other starve she said. In hindsight she could have kept investing and maybe that is a lesson for next time. Ben on the other hand, because he was still working was investing. He’d set up an automatic payment which is now on autopilot.

There are so many ways to live a good life and I think that Ngaio and Ben have found their own path. She said they enjoy not working too much, and are both good with money, which gives them enough money to live very comfortably and have time to live their lives and do fun stuff. It is such a perfect balance in so many ways. Housing is a big stumbling block in New Zealand. All of us, whether renting or owning a whare just want a stable place to call home for whatever period of time that works for them and their unique situation.

These two had their educations in the bag, had found meaningful work and ways to travel and have adventures, but the housing piece of the puzzle was a bit more elusive. So, they created a unique solution to the problem. 

It might not be a permanent solution, although it would be awesome if it could be, but it allows them to tai ho for a bit. Their life as she explained it to me feels more in balance than most because all of their money is not in housing, and I think that buying a house and signing up to the hundreds of thousands of dollars of debt that will inevitably come with it has the potential to upset that lovely balance.

Which is why I’m so pleased that they have found a way to grow wealth outside of housing. 

Often Kiwis are just all about a house, it forms the entirety of their financial plan, except perhaps for a KiwiSaver account. They will get a house and quietly go about paying it off. Often they will upgrade to a better house or spend a fortune on the one they do have. They never quite move beyond housing, only to discover that all the equity they do have is tied up into an investment that can’t pay them an income. Not so with Ngaio and Ben. They have flipped the script in many ways, investing is leading the charge, the majority of their wealth is in investments. This is unique in New Zealand but if you listen with any FIRE content, their approach is much more in keeping with how others around the world structure their money. Housing forms the smallest part of their wealth because the purpose of a house is to be a home, not to make money. 

Their distaste of our expensive housing market forced them to find an alternative way to grow wealth and what do you know, it is working. They have the freedom to live a flexible life. Not many 32 and 33 year olds can up and take months off and cover all of their own living costs with no income coming in.

I think they have build a really solid financial foundation to build upon and I’m personally looking forward to keeping in touch and hearing how the journey of this chilled out Coromandel couple evolves. Thanks Ngaio for chatting with me and giving me and everyone listening such an insight into both yours and Ben’s Journey. Ngā mihi nui.