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Money Maven Blog by Sheryl Sutherland, Authorised Financial Adviser and Director of The Financial Strategies Group

Recommended Reading

Recommended Reading by Sheryl Sutherland: Girls Just Want to Have Fund$ - Every Women’s Guide to Financial Independence, Money, Money, Money Ain't it Funny - How to Wire your Brain for Wealth, and Smart Money - How to structure your New Zealand business or investments and pay less tax.

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Thursday, 15 November 2007

Finance and investments

Many people don’t begin their retirement savings until they are about 40- the mile stone that I refer to as “the age of reason”. It’s when you finally stick your head over the parapet, and, whether you’re male or female, think, ‘My god, 20 years have gone by and what have I done with my money? Not very much’ not surprisingly it’s at that point that people start thinking quite seriously about doing some saving.

I agree with a recent report done by the New Zealand institute of Economic Research which found little evidence of a savings problem among New Zealand households. The savings problem is not as bad as it’s been painted. The truth of the matter is that it’s where we are saving that is the real issue. Most of our savings these days are going into highly geared investments like property. We tend to run as a herd, and going against it, like not buying rental property is hard.

In my latest book-Money, Money, Money, Ain’t it Funny I highlight the difference between economic theory, where people make rational financial choices and practice, where spending is influenced by taste, whim, peer pressure, pride, envy and other considerations. Most people don’t save enough money; most of us have counterproductive financial habits which mean that ultimately most people are in fact broke when they retire.

How you save and how you invest is up to you. Brent Wheeler, a respected economist believes that investing in equities is the best choice for people planning for retirement. “I’m telling them to invest as much as they possibly can in equities, and to do it for seven years-plus. For retirement savings, that’s actually not a long time frame. There have been many complicated mathematical studies done which prove that historically, over a longer period, equities will outperform all markets, and that includes the property market.”

Whether you are biased towards property, cash deposits, shares or bonds, financial advisors say that getting educated, and in particular seeking out people with good track records in investing and investment advice are the keys to making good decisions in the current market.

Wheeler believes that if kiwis knew even a fraction as much about investment as they do about home renovation, many would be much better off. “To restore an Edwardian villa to some semblance of a nice trade off between what it was, and what we expect today, while reflecting what has happened to it over 100 years, is 90 times more demanding and involves a heap of more difficult judgments than saying, ‘Is it a good idea to leave this money in the bank?’ and ‘Why am I shifting it?’ or any other investment question. And that’s how people should be attacking investment-not trying to do anything too smart.”

Wheeler favours investment offshore. Homeowners have sufficient exposure to both the property market and New Zealand’s small economy, he says. “As individuals, we have huge exposure to this tiny economy sitting on a rock at the bottom of the world. We are heavily invested in New Zealand, which doesn’t spread our risk very much at all. After your house, your next investment should not be in New Zealand.”

I agree with Brent, the best returns will come to those who make the most of their investments in equities’ that are offshore. The New Zealand market has been doing well, but it’s not even two percent of the world market. A lot of the sectors where we expect growth are either not available here, or if they are they are in quite a small way.

Read more in Money, Money, Money, Ain't it Funny (Longacre Press, $29.99)

And check out www.brentwheeler.com


Why do we treat money differently depending on its source? A dollar is a dollar after all. I heard a story yesterday in my nail salon, the technician had a client text her to say she had won $1000. Forty minutes later another text arrived reporting on the loss. It reminded me of an apocryphal tale which does the rounds in that gambling capital Las Vegas.

The legend of the man in the green bathrobe.

By the third day of their honeymoon in Las Vegas the newlyweds had lost their $1,000 gambling allowance. That night the groom noticed a glowing object on the dresser. Upon closer inspection he realised it was a $5 chip they had saved as a souvenir. The number 17 was flashing on the chip’s face. Taking this as an omen, he put on his green bathrobe and rushed down to the roulette table where, not surprisingly, he bet on number 17. He let his winnings ride and eventually he was worth $7.5 million. Unfortunately the floor manager intervened, claiming the casino didn’t have the money to pay should 17 win again. Not to be deterred, the groom caught a taxi to another casino where he bet all on 17 again, when it hit it was worth $262 million. Needless to say, with such luck he bet again, only to lose it all when the ball fell on 18. Broke and dejected, the groom walked the several miles back to his hotel. ‘Where were you?’ asked his wife. ‘Playing roulette!’ he replied. ‘How did you do?’ ‘Not bad, I lost $5.’The groom felt that his winnings were not real money, and so the losses were not real losses. This tale told in some parts of Nevada as gospel truth demonstrates one of the most common and costly money mistakes: our tendency to value some dollars less than others and to waste them. After people have experienced a gain or a profit they are willing to take more risks. Gamblers refer to this feeling as playing with the house money.

How do you treat your money?


“In a society where the rights and potential of women are constrained, no man can be truly free. He may have power, but he will not have freedom”

Mary Robinson, Ireland’s first woman president.

There has been a slew of reports and commentaries of working women; why the women in the workplace figures are different, women as working parents (Why do men as working parents never get a mention?) and the glass ceiling.

It appears that unemployment is down by 2000, but 12,000 full time jobs held by women have vanished-the assumption is that these positions have morphed into part time positions. The new Women’s affairs minister Steve Chadwick, claims that women will really only get equality when we have really “good childcare arrangements”

What a load of rubbish. The only way we will achieve “equality” is through equal sharing of power. Economic power comes from full acceptance in the workplace; that means a change in culture. The changes may be overt- no longer rewarding aggressive workplace behaviour or covert, utilising feminine or generic powers. We need to see more women on boards in government, both national and local. And lastly we need to promote ourselves and our work; we are far too willing to stay in the background.

Who's counting?

The myth, the math and the sex.

I was intrigued to see that Kiwi women have more casual sex than any other nationality-and more casual sex than men. This fascinated me as I thought the maths was wrong.

The general consensus seems to be that it is men who are promiscuous by nature-spreading their genes far and wide while women are genetically programmed for monogamy.

One recent US survey concluded that men had a median of seven female sex partners; women four. A British survey said that men had 12.7 and women 6.5. But, bear with me here is the problem. It is logically impossible for heterosexual men to have more partners than heterosexual women. Their survey results cannot be correct. What is going on and what is to be believed?

I have toyed with various scenarios to explain this discrepancy. Firstly, the data is self reported, do men exaggerate and women minimise? Are men having a lot of sex with prostitutes when they travel to other countries?

I guess when we have Big Brother checking our sex lives this conundrum will be resolved-until then the surveys are self fulfilling prophecies-except in New Zealand!

Everyday Money

If you recall my post about the charges against Chris Taylor of The Jones’ organisation you will be pleased to note that the charge was dismissed. I guess Comedy Central, oops the REINZ had an attack of rationality. The good news is that the cowboys are about to be run out of town by Sheriff Clayton Cosgrove, with the introduction of an independent body to oversee licensing complaints, disciplinary and enforcement procedures and give out consumer information.

Does money make the world go round?

We are frequently asked to provide financial help to those less fortunate than ourselves but I sometimes wonder if our generosity is misplaced. I am not keen on labels but I guess I would be classed as an ethical liberal. So what should I do with my financial support?

One economic commentator suggests that we should find somebody who is both poor-not just looking poor in the hope of attracting generosity- but busy doing something productive and useful. Give them the money-thus you can accomplish the most efficient transfer of wealth.

Musings and Amusings

From the Kennels

If you are a dog lover then you know your dog reads your mind and now proof is here in the results of an experiment at Canterbury University. In fact Michelle McGinnity went so far as to suggest that dogs have the ability to draw conclusions from what they observe.

I recently did a poll on www.slynkey.com, as follows:

Who handles the finances in your household?
My Partner
C) The Dog

Thinking that to respond “The Dog” would be ridiculous but....maybe not!