70. Our Money, Our Future
PODCAST TRANSCRIPT: Episode 70 - AUG 24, 2022
In a recent podcast, you will have heard me asking for any switched on 20 somethings to get in touch if they wanted to share their good money habits on my podcast. While I have had some wonderful people get in touch, you will have to wait for future episodes before you hear about them. Because today’s guest Freya, which is not her real name, is the reason I was asking! Oh, and I’ve changed her husband's name, too; he wanted to be called Axel. Great name!
Now Freya emailed me saying that while it was great to hear every episode, as a 33-year-old wahine, if at all possible, she wanted to hear from younger people, particularly women who manage the finances in their own households.
I thought about this quite deeply and wondered if the reason I speak with older people was that I’m late 40s now and just naturally come across older people. This may well be part of it, but the other part I’ve concluded is that it seems to me, from someone who speaks with a lot of people away from my podcast about their daily money habits, many spend their teens and twenties doing a lot of things with their putea that we later realise, with the clarity of hindsight, that they were detrimental to our wealth. We then spend our 30s turning things around, and then by our 40’s, 50’s and beyond, we build upon our good habits, thereby building our wealth. At which stage, they are happy to share how they did it.
I know that this was my reality for sure.
And after musing this over in our emails, I asked Freya what HER money story was and was it one that she would be willing to share in the hope she can help the rest of us out. Thankfully, she said yes, so today, I want to share her story.
Freya and her husband Axel are Auckland based, but they didn’t start out there.
Born and raised in India, they both made the move to New Zealand in 2015, when they were both 27.
In India and straight out of college with a freshly minted bachelor's in marketing and communication, Freya got a job at an international FANG company. In case you are wondering what that is. A FANG company includes the companies Meta/Amazon/Netflix, and Alphabet. She said it was an awesome first job and an awesome work environment. Everyone was fresh out of college, and it was like moving into a college dorm. She spent five years there, loving the people and the company but, over time, hating the job itself. Many times she thought of quitting, but each and every time, friends and colleagues would talk her out of it, flabbergasted at why she would consider leaving such a prestigious global company. Saying useful things to her like “Freya, are you crazy?”
But there is more to life than work, and while she worked in digital marketing in one Indian city, her boyfriend lived two flights away in a different city in India, working as a chef in a large international hotel.
Both were in good places professionally, but five long years of a long-distance relationship really does take its toll, and in hindsight, she has no idea how they even made that work. Their decision to get married prompted a change for both of them. They decided it was not fair for one or the other to give up their job. So, they decided collectively to both leave their positions and move back to their home city, find new jobs, but then work to move out of India completely.
And I’ll get their financial flop out of the way early on. Although we both debated if it was indeed a flop at all.
When she left the FANG company she worked for, she owned some of their stock, which she sold to pay cash for their wedding and honeymoon. It was a fabulous wedding and an incredible honeymoon to a dream destination, and yes, that stock has since gone up in value, but the memories that the money helped to create will leave a bigger impression on them.
From the get-go, these two are completely united in all aspects of their relationship, BUT it has been a learning curve.
Freya said that her husband WAS a spender and always found it hard to hold onto any money. So, prior to marriage, she set him a test. She asked for a diamond engagement ring, which sounds kinda pricey. She didn’t care about the ring, though; she wanted him to demonstrate that he could save and provide for her and saving up his hard-earned money for a specific purpose proved to himself and Freya that he could.
While with a laugh, she said that he is still a work in progress, he now falls into the saver camp. I often talk to people who tell me with certainty that they are either a spender or a saver. I don’t really buy into this because, as Axel has shown, it is easy enough to change if you want to. You just have to have a reason to change, and a fiancee intent on teaching you a lesson is a good motivation indeed. Since their marriage, all decisions and money are shared equally, and from the beginning of the conversation, I could see how this united attitude to their partnership helped them make decisions much more easily and far more quickly.
Maybe it was because Freya herself is quite a straightforward person, but having more recently spoken with many people who were in relationships yet kept money separate, there was a stark difference in how Freya and her husband planned things. Because they were financially united, they didn’t need to give any headspace to individual financial planning and then merging those different situations. “Our money, our future” was the clear goal, and I could see that they were able to react and pivot far more quickly. I’m not sure how many times in my notes I wrote the words “WE DECIDED”, but it was a lot.
At one point, I alluded to HER money in reference to something, and she pulled me up short, saying, “it’s OUR money. Everything we have is ours”. This surety is what is often missing when I meet couples who keep their money apart, and it has been my observation that couples who combine their incomes (because let's face it, EVERYTHING else in their life is combined) make faster progress.
So, finally, after five years of a long-distance relationship, they were married and living in the same city together in a rented house. They had bought new appliances and new furniture and had both started new jobs. But basically, he absolutely hated his new role and pretty quickly reached a point of “I’ve just had enough!”
They both decided that apart from their families, they had nothing holding or tying them there in India. If he was over his job, and both of them had skills that were internationally transferable, right NOW was actually the best stage of life to move overseas and try their luck somewhere else.
From deciding to go, to actually getting on a plane and going took just six months.
Why leave India, though? What was so wrong with their home country?
I’m always intrigued how and why people up sticks and move to a whole new country. I would assume that the differences between India and New Zealand would be vast, so why Aotearoa?
Working in hospitality meant Axel's work/life balance was terrible, and he often worked long hours, seven days a week. If they stayed, even though they now lived together, they would still not be seeing much of each other. Added to that, Freya said of herself that she is not a typical Indian, and she has never felt quite like she belongs there, so she wanted to try somewhere else to see if she could find a fit.
Initially, her husband wanted to move to Australia, but Freya was not at all keen. He thought Ozzy would be worth it because he had a few friends who had moved there, and at least if they moved there, they would find a few familiar faces. That was not reason enough for Freya, so they looked to Aotearoa instead, a country she knew even less about, but what little she did know was positive.
So, New Zealand it was!
Freya had done her bachelor's in marketing and communication in India, and she wanted to do a further year of study in New Zealand so she entered the country under a student visa. That also enabled her husband to get a work visa, working in his profession as a chef. As soon as they were both able, they started their journey to becoming citizens and fast forward to 2022, and they have both recently received citizenship to New Zealand. And I’m really pleased to say, that once they moved here and got settled, Freya said that she feels like she has found her tribe. How good is that! I just love that willingness to go out and explore, and I’d encourage anyone listening to have the courage to go out and change your own situation if the one you are currently in is not feeling quite right.
As you might expect, moving to Auckland, New Zealand, was a real shock to the system. For one thing, she said, New Zealand is very expensive, and alongside her full-time study, she was restricted to working just 20 hours a week.
Her husband got full-time chef work pretty fast, but it was very, very different to what he was used to, and it was low wage. He is a highly trained and skilled chef who has worked as an executive chef with a high-calibre employer, working with a quality team of professionals. He was the boss in India, she said, used to barking out the orders, not taking them. But over here, she said, and it sounded pretty harsh to me, he was a nobody, many rungs down the ladder working in more of a small family establishment. It was a very, very humbling experience, she said. But as these experiences often do, it actually turned into one which has given him huge personal growth. He has long since left that first job and moved back up the career ladder and into a more hands-off role in the food industry, now working in aged care and earning $65,000 a year, but Freya said he is a lot more humble now. That experience has made him a lot more empathetic towards staff as he goes about training them and taking care to make sure that they are happy in their jobs.
Living in New Zealand as I do, the class system of any country is a bit lost on me, but Freya explained that in India, she came from lower middle class and her husband from the upper class. I actually googled it and learned that your pay bracket dictated your class. So back there, their standard of living was considered quite good, and things were quite cheap by comparison, and that left them a lot of disposable income. Coming to NZ was so hard, and it meant that they could barely survive on the pay they brought in. Freya said she is naturally very frugal, but even she was not used to that level of frugality, and it was a really stressful time, making do week to week.
That experience of living on the poverty line has however been quite foundational in moving ahead financially. That first year here was a lesson in survival. And they barely survived, making just enough to make ends meet. She considers themselves extremely lucky that there was no emergency during that time because she doesn’t know quite what they would have done if there was.
Prior to her year of study ending, she worked hard to make sure she moved straight into a job. They needed to earn more money as quickly as they could. So when she received a post-grad diploma in business with a marketing specialisation, she immediately started an excellent first job in digital marketing for a not-for-profit Auckland-based employer. It was a role in quite a specialised business, one that let her be creative, which she loves. Think: social media, digital ads, website ads and the like. But, the downside is that not-for-profits don’t tend to pay as much, and she started on just $60,000 a year.
Throughout their careers, she has consistently earned more than Axel, so while she studied, they were both really missing her income, and they were both holding their breath for her to get a job, and once she did, they let out a collective sigh of relief. She ended up staying with that organisation for 2.5 years before reluctantly leaving in search of a higher income.
She moved to a global utility provider, now earning $95,000 a year and has now been there for four years. It’s the same role as her previous job but with a larger organisation comes bigger budgets and more responsibility, but it’s a job that she is really enjoying.
After our chat, I was explaining our conversation to my husband Jonny, and in a way, to sum up, their character I said that it was as if these two hit the tarmac in Auckland and just started running. Imagine that YOU were plonked down in a completely different environment, with enough money to get you started, but then the rest is all on you. They just had to get a move on.
They launched with a plan and speaking with Freya for a couple of hours, I could see she is a woman who likes to create a plan and execute it. And boy, do I admire those with the courage to pick up sticks, jump on a plane and start a new life. Not only that, but it’s a life they keep improving on with education and movement into better careers and better incomes.
When they first moved here, the reality of renting a house was a huge shock compared to back in their home country. For Freya, showing up to view a property with 100 other people trying to rent the same house was a shock. As was the process of renting and having someone show up and inspect your property every three months, and she found it invasive, not to mention a little over-the-top ridiculous. The one-bedroom house they rented was mouldy and god awful, she said, and they had no idea who the owner even was, only seeing a property manager while they were there.
They were not happy with renting at all.
They heard horror stories from friends of being kicked out, arguments with landlords and, of course, rising rents. Freya feels that shelter is a human right, but New Zealand has little protection for tenants, and it made them feel very insecure in their rented house. The power, she said, is so much in the hands of the landlord, and you are really at their mercy which is no way to live. That insecurity only worsens when kids come along.
Therefore, their first goal, once she finished her study and got a job, was to begin the process of saving up a deposit to buy a house because they had decided that they didn’t want to bring any future child home to a rental property. She said that she got obsessive about researching the housing market and how the process worked in New Zealand, and I think that if you want to get a house in NZ, you need to be obsessive in your research.
She has always been a saver, and she has always handled their money in their marriage. He has less interest so is not part of the day to day of money handling, but he trusts her decision-making and still plays an active role in decision-making when required. After that first year of living on very little, when they were both working full time, they just started saving.
As soon as they gained New Zealand residency they were allowed to then join KiwiSaver and they both immediately signed up meaning they got an extra payment from their employer and also the small, but useful annual government contribution.
It took them three years from that point to save their house deposit.
Because I have a bee in my bonnet about people draining their KiwiSaver to buy a house and then having zero retirement savings AND a huge mortgage, I asked how she decided to use their KiwiSaver and where she saved the additional money they would need for their deposit.
Around the time she joined KiwiSaver, she had also started to learn about FI, so she decided to also start investing outside of KiwiSaver, specifically for retirement. And she still has those investments. So she is ass about-face on this one - sorry, I couldn’t think of a more delicate way to put it. They were saving for their house deposit in their retirement fund and for their retirement in a share portfolio.
Even though they didn’t have much to spare, she began making small investments, specifically for retirement using Sharesies (which at that time had just started), while also saving the bulk of their money in the bank for their home deposit, and also saving for a home deposit within KiwiSaver via their incomes.
While they have since moved to using Investnow and Australian company Stake (who is in competition with Sharesies), she found that making this tiny start at the same time as really aggressively saving for a home was really educational and gave her a foundation to build upon over time. That education is still unfolding today.
They started saving the bulk of their house deposit in a Kiwibank notice saver account, which was the highest interest account she could find at the time, and it gave them the flexibility to keep adding to the pot, saving up $75,000 over three years.
But just in case you think they just breezed through those three years, think again. It was SO HARD, Freya said. They were covering all of their normal expenses of rent, utilities, food, transport etc., plus saving hard. Keeping that momentum up for years on end is tough going.
But, she said, they went pretty hard at it because they had the goal in mind to buy a house, and with every purchase, they always asked the question, “do we need this” before buying it. Whenever they could avoid a purchase, they put that money away into their savings instead.
They scratched together a 10% deposit, but he was adamant that they should try to get it up to 20%. Doing this also tied in with the fact that they had to be in KiwiSaver for three years before they could draw the money back out, so it gave them a bit more time to save.
In the end, they pulled together a $135,000 deposit using $30,000 from their three years of being part of KiwiSaver, a $30,000 gift from his parents, and the remaining $75,000 came from their savings. So, on their own, they saved up $105,000 over three years.
They had been doing a lot of looking at houses and getting a feel for what things cost, and they set their max budget at $700,000.
They put in an offer on a house, and the agent was hustling them to bid more, and they did, going up to their $700,000 max. The pressure was on to go higher to $720,000, but they stuck to their plan, and they walked away. And she was relieved that they did. Freya came across as a really decisive person, and because she had been calculating mortgage costs etc., she knew they could go no higher than $700,000. Preferably less.
After the first lockdown between March and May of 2020, when people were spooked and wondering if house prices would drop, and their friends were telling them they were crazy, they put in a $685,000 offer on a house, and it was accepted.
They moved to New Zealand in 2015, and they moved into their own home in 2020.
She is very happy with their three-bedroom house, a 1940s villa; it has great vibes, she said, which is such a Kiwi thing to say; it was well-fenced for their dog, and for the first year, they keep saying, “I can’t believe we live here”. It used to be a rental property, but after evicting the tenants, a perfectly legal thing for the homeowner to do, of course, the owner renovated the house for the new owners, Freya and Axle, before putting it on the market. So, all they had to do was move in. They had very few possessions due to moving from a one-bedroom to a three-bedroom home, so they had to buy some things in the first year, but other than that, the house was good to go. No expensive DIY projects for this couple.
Since moving in, their quality of life has greatly improved, she said.
I asked about insurance, and she said that they carry house, contents and car insurance and are currently looking into getting life insurance. I was actually surprised they didn’t already have it, as I think it's important to have just enough cover to pay off all your debts and leave a chunk left over while the remaining spouse gets back on their feet if one of you were to die.
I also asked about their mortgage structure.
When they first got their $550,000 mortgage, the interest rate was a historically low 2.1%. From the get-go, they have paid a higher amount than the minimum expected by the bank. They recently re-fixed the bulk of their mortgage, the total balance of which is now down to $469,000, at 4.8%. So rates have increased a lot in quite a short period of time.
They have a portion of that amount owing, $50,000 on a floating rate, using a revolving credit or redraw structure.
Currently, this $50,000 is fully paid off with ‘spare funds’.
$50k of spare funds? That’s a lot of spare funds, so where did that come from?
An overseas uncle has since lent them $30,000 to offset their interest costs, plus they have saved up an additional $20,0000 on their own via savings and the sale of a vehicle. They will need to pay Uncle back that money in time.
So, if you are doing the math, they currently owe $449,000 on their home.
This uncle's business sounds unusual and potentially problematic, but she said that to them, it is not at all. She has a high level of trust with her uncle; he has done really well financially over the years and has been advising her on investing and good money management, and he wanted to help out. There is no contract, no legal document, just a level of trust. I wish them well but would add a note of caution that you need to be wary of these sorts of handshake deals.
Their intention is to have their mortgage paid off within 14 years. But she will see how they go, she said; it depends on how high the interest rates rise. When it was at 2.1%, they were, and still are, making payments as if it were a 6% interest rate. So, currently, they are still overpaying their mortgage, but Freya said that if it gets over 7%, they will have to tighten their belts and make some adjustments to their spending.
I bet that their bank is delighted with all the stress testing she has been doing herself, working to pay down her debt aggressively while lending is cheaper, but also working out how they will adjust if rates go higher. That’s what you have to do, prepare for that scenario.
So, now they have settled into paying off their mortgage, making the appropriate payments at the appropriate times. They are also both back in KiwiSaver, with provider Simplicity, after taking their balances down to $1,000 apiece. Her balance currently sits at $8,500, and his at $7,500. Hers will continue to grow faster than his due to her higher income, and unless the government makes any more changes, this money will now remain locked in until the age of 65.
They also fulfilled another part of their plan, and that was to have a baby, and when we spoke, their daughter was nine months old, and Freya was back at work after a maternity leave break, and she explained to me paid parental leave as it stands today.
It’s been 14 years since I went on paid parental leave, and I think there have been some improvements since then, but you are still losing out financially if you stop to have a child, and you need to really get financially prepared long before the baby arrives. She gave me an update on how it worked for her. Paid parental leave is for 26 weeks, and you can choose to extend this leave WITHOUT pay for a total of 52 weeks. When she took leave in 2021, she received a maximum amount of $531 per week after tax. She said that from July 1st of 2022, this amount has since gone up to a maximum of $661 a week. How much you receive depends on how much you earn.
Now, there was one thing that Freya really wanted me to mention, something that she thought many women planning to go on PPL might not know about.
If you choose to take some annual leave from your employer, you need to know that your annual leave is paid out as an average of your yearly wage, she said. Freya made the calculated decision to take her annual leave, about 1.5 months worth, BEFORE her six months of paid parental leave. Because this way, she got her full pay. If you take it after your PPL has finished, you have had six months of lower income at work, meaning your leave entitlement significantly drops in line with your average income for the year. I think that conversations around paid parental leave from work must be had before you have your baby so that you can financially plan your time off.
Now that both she and her husband are working full-time again, their daughter goes to daycare, for which they pay $270 a week. To keep this cost down, they supply nappies and all food. Otherwise, they would be paying $320 - $350 at the same centre if the centre were to provide those things.
She was happy to go back to work, and her work is flexible, meaning she can start work at 7.30 am and finish at 3.30 or work from home if she wants to. So her husband drops their daughter off on the way to his less flexible 9 - 5 job, and she collects her in the early afternoon. I could see this working as their child transitions to school in the years ahead too.
While paying their mortgage, they also continue to invest. While on maternity leave for 7.5 months, she was surprised that she no longer received employer contributions to her KiwiSaver, but she was in a financial position that would allow her to make voluntary contributions, so that is what she did. Had she not made these voluntary contributions, she may well have missed out on the annual government top of $521. So, it's definitely something worth looking into.
She returned to work after 7.5 months because she was feeling ready to return, but also because it was not financially feasible to stay home any longer and she said that even though, due to her salary, she received the maximum entitlements, for her the paid parental leave was not even half of her normal wage.
In comparison, if she were to have a child in India, she would get six months of fully paid time off work. It's not from the government, it is from the employer, but it is mandated by the government, and had she been there, they would have been better off in that regard. But having said that, the cost of delivering the baby is free here, and you pay hospital costs in india. It was interesting to hear the differences between the two countries.
I asked Freya if she has signed her child up for KiwiSaver. No, she has not, but she has set up a Sharesies account for her to begin to save. She wants her to have the flexibility of having access to that money, and I can see how this might make sense when you have international roots. If her child ever wants to move to another country one day, as her parents have done, this money could move with her.
Freya’s daughter’s uncle puts $10 a week into her Sharesies account, into the Vanguard VTI Total Stock Market Index Fund, plus financial gifts given at her birth also went in here. While there are only hundreds of dollars there now, from tiny acorns, mighty oaks grow, and if this habit of investing never ceases, their wee girl has a very bright future indeed.
She said that she is looking forward to discussing money with her daughter and educating her about how money works, but she also said that she won’t tell her about this particular investment till she was 21, an idea that I tend to always disagree with. I’m a huge advocate of talking about all aspects of money with kids while they are at home because that is what gives them the tools to go out and handle their own money. Keeping an investment secret tends not to teach about investing, in my view, but it will perhaps teach what it’s like to win Lotto. And it is true that most people who win Lotto tend to spend it all within a short period of time.
In regards to their own investing, Freya helpfully send me a comprehensive list of what they are investing in and explained that they are moving towards investing in US markets because she thinks the New Zealand economy is just too small and not aggressive enough for their goals.
She is a fan of Vanguard and said she has a great deal of respect for Jack Bogle, the founder of Vanguard. She is using these investments as a way to learn and understand - and teach her husband, too - how investing in international share markets will make up a part of their net worth over time.
They have been with Investnow for a few years, and they are invested in:
AMP NZ - because it was the lowest fee fund at the time
FNZ - which is the NZ Top 50
USF - the US Top 500
TWF - a Total World fund
Plus, an investment into a fund called VOO - which is also a Vanguard S+P500. Her thinking is to stop contributing to this, though, as it is a double-up.
With Australian investment platform Stake (which is similar to Sharesies) she has quite a list of ETFs and a few single shares. They chose to use them because they had been with Investnow for a while, and they got to a place of “where to from here”, they kept hearing about Vanguard, but Investnow had limited options compared with Stake, so they signed up with them. They have:
FAS - a US financial sector ETF
VTI - another Vanguard Total Stock Market fund
VONE - Vanguard 1000 ETF of top US companies
LABU - A Biotech ETF which she said is doing so well right now!
TQQQ - An ETF of chinese companies in the US
Waste Management - her only individual company share, which she purchased to test out. It’s doing well, she said, and she receives good dividends.
Plus, as part of that platform, you apparently get “free stock” if you refer friends to the platform, so she also has:
GoPro
DropBox
ABEV
And finally, she just has one investment with Sharesies now, some AirNZ shares which she bought during COVID for $0.90. She took a calculated punt, she said. I’m not sure how much she purchased, but her punt is yet to pay off, as when I was writing this up their share price was sitting at $0.65.
Across all of these investments, they have about $65,000 invested, and wherever she can, she sets up auto-invest and takes a hands-off approach. Until I asked her for a figure, she had not really focussed on this total amount, but when she did, she amazed herself at how far they have come in just five short years. I tell you, small investments, consistently made - even if they are diverse and double up - add up over time.
As for their total net worth, including the equity in their home, their KiwiSavers and their investments, it is probably sitting at about $450,000. Not bad, considering they started with $0 in 2015. Her focus, though, is on what they owe, not what they own, and she tracks that debt amount very carefully. Seeing that NEGATIVE balance of their mortgage motivates them to pay off the mortgage faster. I don’t think there is a right or wrong way to track your net worth, I think as long as you have a complete picture of your situation and it makes meaningful sense to you, then you are golden. Your net worth is simply working out what you own minus what you owe, and to do it, all you need is a sheet of paper and a calculator. Go and find out your own net worth if you don’t know it.
I find it interesting that for their daughter, they just buy one Vanguard fund, VTI. With that one fund, they are buying about 1300 stocks traded on the US stock exchanges, yet for themselves, they have quite the list of investments, many of which are doubling up on each other, plus some individual companies within the mix.
It will be fascinating to see who does better over time.
Freya in no way professes to be an expert. She is on a learning journey, and it started with reading up about share investing and speaking with people such as her uncle, who himself has done well as an investor. And then she just started, and she is paying attention to how each investment is going.
Her uncle is pushing her to invest in individual shares, and he spends a lot of time researching companies and ETFs for her and advising where to invest. He gives her hot tips of what to invest in, and sometimes she takes them, and some she doesn’t as she tries to work out what works for them. She said she is interested in INVESTING, not trading like her uncle does, and she wants long-term investments, not short-term volatility. I think that she is very lucky to have someone to bounce ideas off, but I’m equally pleased that, ultimately, they tread their own path.
Next, we got chatting about cars. They used to have two, but her husband now has use of a company car, so they sold one of their cars.
After that first really hard year in New Zealand, he, in particular, wanted to upgrade from the Mazda Demio they had been driving around in. Put simply, he just wanted a new car. Like, a new new car, because he wanted to treat himself after such a tough year, it was a celebration gift after a tough year AND getting residency.
And nothing says “let's celebrate” than taking on a car loan, right?
Yes, I am being sarcastic!
Freya said that she finally relented but that this new car had to have a set budget. They signed up to a $32,000 car on a up to five-year payoff plan, with 2.9% interest. Their payment was $270 a fortnight, or $135 a week. She said that when they finally paid it off, which was just recently, their total out-of-pocket cost was $35,000. Paying it off freed up $135 a week, which has been great from a cash flow perspective in these high inflation times.
When they bought it, she said he better be 100% sure about this car because this is IT, and there will be no other new cars.
So, I wondered if there was ever any buyer's remorse.
They could have afforded the car with cash, using money they were saving up for the house. But, and I’m putting words in her mouth here, spending your own money stings a whole lot more than spending someone elses and slicing up that expense into smaller fortnightly payments makes it much more palatable.
Freya tracks and keeps an eye on their income and expenses, and every month she consolidates everything into a spreadsheet so she knows exactly what is coming in and what they are spending. Seeing that $270 fortnightly payment ending means that money stays in their account and makes a meaningful difference to their cash flow. She said that making those payments for four plus years stung from a cash perspective, spending all that money, about $7,000 a year, on a car.
She said that HE now understands the pain of fortnightly payments, but he had to personally experience the pain to understand it. It was Lucas, who I interviewed in Episode #28 and again on #42 and #54 that I’ll always remember as saying that by signing up to car payments, or any payments, you are pre-committing your future income. So, you might look at your paycheque and see you earned $1000 for that week, but $135 of it has already been accounted for. The more things you sign up for on payments, the bigger the chunk you forfeit from your pay.
Car yards sell you the convenience of making payments, it’s ‘only’ $270 a fortnight, but for Freya and her husband, they ended up paying $3,000 more in interest, meaning another six months of payments. Which sounds freaking well inconvenient to me.
Enough said. I’ll get off my high horse now. But car payments suck, basically. If you can’t afford to pay cash for the car, you probably can’t afford the car.
Going back to thinking about their first year in Aotearoa, she never wants that stress again. She doesn’t want to be restricted ever again, so she now makes sure that they are overpaying their mortgage, keeping that revolving credit account topped up and putting money into savings.
If there is a big purchase to be made, they discuss it together, do a lot of research and look for deals.
But she said that in terms of money habits, she is not miserly; she will pay good money for quality. For example, she has a Dyson vacuum cleaner, and those things are not cheap, and a $1,000 Vitamix blender. Things that are quality and that they use every day and will last for years.
But there are other things she will compromise on. She loves Cross Fit, but it was costing them $60 - $70 a week or $3,120 - $3,640 a year and that was too much to spend with having both a mortgage and now a baby. So, over time she has bought enough equipment to have a proper functioning gym in the garage. And now that weekly gym cost is gone.
With skincare, she loves to make her own lotions and bars because it both saves money and is environmentally sustainable, spending just $30 on ingredients and making enough products to last the year.
In regards to ongoing expenses, Freya is always thinking, “what can I do to make it more affordable or can I eliminate it completely?” So, I think that when she said to her husband, you better enjoy that new car you bought because there won’t be another one on payments, I know she means it.
Another example of cutting costs, and I like this one, her husband loves whiskey. But he was bordering on spending too much on it while they were saving up for a house. So, instead, he spent $500 to set up a home brewing kit, and now he makes his own and has a fully stocked bar for $5 a bottle.
As for groceries, I was interested to know, given the cost of groceries is on the up, what they spend a month for two adults and a baby. They spend $900 a month, and they shop in three places. They do the bulk of their buying at the supermarket, then visit an Indian grocery store and buy fruit, vegetables and meat from a local shop. They both love to cook, and given he is a chef, they don’t find much value in getting takeaways and are often disappointed by the quality and price of restaurant food, so they prepare the majority of meals at home and eat out, maybe just twice a month.
She wanted to give a shout-out to her parents as they have been super frugal her whole life and taught her the skills of frugality and saving, which has been a huge positive for Freya. When I say taught, I mean they taught by their actions, not their words. Her Mum was often the sole income earner, and her Dad moved between jobs a lot, but apart from instilling in Freya the need to save for a rainy day, they never told her what to do beyond that. They never talked about money at home, not even to this day. Her and her brother didn’t grow up with that much and learned to save their pocket money to buy the things they wanted. But she also learned to make money of her own via baking cakes or chocolates to sell.
They showed her the negative side of frugality as well when they went to the extreme of feeling anxiety over spending money, saving money for no reason but not knowing about how to invest, instead, literally putting money under their mattress.
But she took all of this on board to find her own happy medium, and it’s made her self-reliant, and that was the biggest financial triumph, really. Small steps have bought them to this point. Drops of water become an ocean, she said. She said she became so focussed on her own personal finances because she didn’t want to be in that deprivation mindset, nor did she want to have to rely on her parents as she saw others having to do. She was adamant that she wanted to create her own financial security, and now, with her husband, that’s exactly what she is doing. Slow and steady as she goes will get them to their goals.
I think that no matter the country you grew up in, lack of talk about money at home is really common. Which is why, in regards to the investment they have set up for their daughter, I think that has to be talked about as she grows up, right alongside all the other money conversations Freya is looking forward to having with her child. To edit out parts of money won’t give a complete picture of how money works, and as Freya so eloquently summed up in our conversation, her parents didn’t SAY much, but she watched their every move. I’m just an advocate of sharing the good, the bad and the ugly - in an age-appropriate way- about money with our tamariki.
Because of that lack of financial education at home, Freya, like most of us, is still working stuff out now, so I’m just advocating making it far easier for the next generation.
Now, I’m nearing the end, and I had to ask what tools and resources she might recommend to others.
She said that when she started reading about the FIRE movement, it was a mind-blown moment, and if truth be told, she said she got a bit obsessed with it early on, and it gave her anxiety that they should be super frugal and going without their flat whites so they could invest that money instead. Just a little too hardcore. And it caused friction. So, she has eased off a lot, and now she is not so focused on FIRE, more on good personal finance in general.
She likes the podcasts:
Girls That Invest and She’s On The Money because they both are led by women, and both really good and cover a whole range of topics
She likes:
And The Property Academy podcast
Phew, I think that I’ve managed to cover most of what we discussed during our long korero. You might have noticed that I didn’t get to, well, most of the questions I normally ask. But as I always say to the guests I speak with, I like to just have a free-range chat and go where the conversation flows; generally, my list of questions goes out the window within the first ten minutes. But I’m still sure there will be some nuggets of knowledge for you to take away with you from my chat with Freya.
There was one question I remembered to ask though, and that was what she would do if $10,000 landed in her lap right now.
She said they would go on a holiday. It's been such a hard year what with a newborn, a puppy, and no family close to offer support. Having a baby during covid has not been easy. It’s actually been quite tough, so being able to go on a holiday and unwind, reset, recharge and come back refreshed would be really awesome.
I think that everyone listening to this is sending you a hug and warm thoughts right now, Freya; that first year of parenthood is really full on.
It goes without saying that I absolutely loved the long conversation that I had with Freya, and I just wanted to say a huge thank you to her and Axle for sharing so many details of their life with me. I know that it's a huge leap of faith for people to put their trust in me to represent their situation as they presented it to me, and I take it pretty seriously.
I follow Yoga With Adrienne on YouTube for my at-home yoga practice, and she often says at the end to “take a moment and let the nutrients of your practice settle in”, which in the beginning sounded a bit woo-woo to me until I finally got it. I kinda feel that way when I end a call with the likes of Freya. I just take a moment to let their story and the conversation we had settle in so that I feel I understand them.
Because although this podcast is about money, you will have no doubt worked out, some 70 episodes in, that money is just the tip of the iceberg. I am constantly interested in the thought processes people have around money and impressed by people who decide to uproot their lives to move somewhere completely new just to see if the grass is greener.
While many will stay in situations where they are unhappy, some will decide to change it. And they are prepared to put in the mahi upon arrival to make it happen. Freya originally got in touch because she wanted to hear more stories from people younger than her who are financially sorted, and I said to her at that time that while I am looking, they are hard to find. Instead, we all seem to evolve our money habits over time, building momentum with each year, and there don’t seem to be too many exceptions to this rule. Slowly and steadily, we each work things out bit by bit.
She and her husband are just such a work in progress, right? They have merged and refined what they learned from their parents, added in what their home country of India has to say about money and then upped sticks to New Zealand. Now they are adding Kiwi thoughts on money to the mix, meaning they are creating their own unique take on how money works for them. They are creating their own unique money recipe that draws on all of their collective experiences.
And as long as everyone is happy with where they find themselves and where they are going, then I think that they are a financial success.
Well, I didn’t quite mean that to turn into a soliloquy, but there you go! My thoughts and reflections on a fabulous new Kiwi who has happily found the tribe she was looking for all the way at the bottom of the world in a country she knew so little about, but the bit she did know was good! So, to our newest Kiwis with their freshly minted citizenship certificate, welcome home Freya!
