Here To Help
For many Kiwis, this can be a financially trying time, full of uncertainty. As Advisers committed to creating greater financial certainty, it is our responsibility to continue to provide you advice and service during these events so that you know you’re going to be ok.
We've been getting a few common questions during this time, so we have put together the following resource to help answer some of these. Please note, these answers are not intended to replace personalised advice, as every situation is unique. In all cases, please contact us and we will be more than happy to discuss your personal circumstances and what solutions may be available for you.
Common COVID-19 Questions
Your common money questions, answered.
Please note, these answers are not intended to replace personalised advice, as every situation is unique. In all cases, please contact us and we will be more than happy to discuss your personal circumstances and what solutions may be available for you.
How can I manage on less money?
A budget is the first place to start. We often use the following quote from Dave Ramsey with our clients,
‘A budget is telling our money where to go, rather than wondering where it went’.
If you understand your income and your fixed expenses, you can then understand your discretionary spending and where you need to cut back on some of these. They could include items meals out, nice food and alcohol in your shopping, coffees, movies, concerts, sports events, gym memberships, Sky, Netflix, clothing, gadgets, kids pocket money, donations, even your insurances! You can live without many of these and so you will find savings if you know where it is all going. Websites like Sorted have some great budgeting tools so this could be a good place to start if you are not quite ready to sit with one of our Advisers.
What if I can't afford my mortgage?
If you have an existing mortgage, understand your options to consider:
- Putting your mortgages on interest only. This will reduce the payments you need to make. You can do this even if you are on a fixed rate.
Extending your term – as an example if your mortgage is due to be repaid in 22 years, you can extend to 30 years, which will decrease your repayments.
- Asking for a mortgage holiday, but this should only be considered if you are in real trouble. This means you don’t have to meet your mortgage payments for 1-3 months, and the government has just asked banks to extend this to 6 months. However, you must be aware that the interest payments will be added to the mortgage, which means mortgage repayments could increase once mortgage holiday ends and the total interest paid could be more.
- Top-up your mortgage, if you have income and equity to do so (this before any job losses or you will start to struggle).
It is important to do what you can to make sure you can meet your mortgage commitments. If you are unable to do so, you run the risk of a mortgagee sale, where the bank sells your house in a quick-fire sale to get back what you owe them. You do, however, have the above options to consider to help you.
Freeing up cashflow from your mortgage, especially when mortgage rates so low, is a much better option than defaulting on your mortgage, borrowing on credit cards, or withdrawing from an investment which is currently in a market dip.
Understandably the banks are very busy at the moment as they are inundated with all sorts of queries.
If you would like some help with your mortgage to discuss these options and to apply for the best one for your situation, we recommend that you speak with a mortgage adviser.
Should I take a mortgage holiday?
A mortgage holiday actually means your interest is accrued over the 6 months and will end up taking a lot longer to pay your mortgage off, as principal and interest is not just put on hold, however it can still provide some temporary relief, as well as options which include going interest only or expanding your loan term.
Should I switch my KiwiSaver fund?
KiwiSaver can be causing a bit of concern at the moment but there are a number of important things to remember, like how long you plan to invest for. The temporary dip we are seeing now might not affect your end position and the goals you have for your investment. But it's important we don't make knee-Jerk reactions that could then cause a true loss.
Providers have stated that there is increased switching to more Conservative funds in the last week. While this might be a suitable course of action for someone using their KiwiSaver for a first home deposit, or for someone withdrawing under significant hardship provisions, longer term investors will “bank” the fall in markets into the price by doing so. That is, locking in the loss and reducing the opportunity for recovery.
History shows us that recovery is inevitable. It also shows us that changing strategy in the midst of a downturn does not pay off, and that those that stick to their plan come out better in time.
Why is my KiwiSaver balance dropping?
Uncertainty in international financial markets caused by the impact of COVID-19 is affecting the value of investments in many KiwiSaver Schemes and other investment products. Seeing the value of your investments drop can be concerning, particularly when you don’t know how long the impact of COVID-19 will last. The key thing when managing your KiwiSaver account or other investments is checking that you’re invested in the right fund for your long-term goals. Don't hesitate to reach out to us to check in on your personal situation.
What hardship support is there?
For many, this is proving to be a difficult time. When suffering financial hardship the options can seem few and far between. However, there are options. If you have a mortgage the banks may be able to reduce and/or suspend payments, if you have KiwiSaver you may be able to apply for a hardship withdrawal, and for general expenses and utilities many companies offer short term relief. It all starts with a plan, so start with a budget, and then after understanding the shortfall action can be taken as required to get you back on track. Unsure where to start? Give us a call.
What should I do if I can't pay my bills?
The best thing to do is to communicate with the companies or people that you have outstanding debts/bills to. Many of them have solutions in place to support Customers that fall on difficult times financially, and it is in their best interests to work with you. These might include extending repayment periods or increasing instalments to make up missed payments. The above assumes that you have re-visited your budget.
If you can still not manage your bills, you might be able to consolidate debt into more favourable terms, clearing many people you owe money too down to one that suits your circumstances. Mortgage top ups, are better than short term solutions as interest is significantly lower so you can pay it off faster. You may also choose to take KiwiSaver Contribution Holiday and put those funds into bills. As a last resort you could seek a Financial Hardship Withdrawal from your KiwiSaver.
Outside of that, being proactive about trying to generate more income can be an option. What do you have that you don’t need that you can sell? Can you pick up a few more hours at work? Once again, an Adviser can support you here.
Can I pause my insurance bill?
An insurance premium holiday means that you won't have to pay premiums for a period of time, but you won't be covered during that time either, which most likely is not ideal. There are further risks associated with this approach, so we are very hesitant to recommend it. Such a move could end up much more debilitating than the short-term saving and is rarely the best move. However, in some extreme circumstances it may be the necessary option. Start by calling us, and we'll help you find the best solution.
When will I have enough to retire?
We all have different timeframes and reasons for retiring. Often 65 is the accepted age as this is when we all become eligible for National Superannuation. However, more and more of us do not retire at age 65. Some have dreams and bucket lists to tick off and retire much earlier while others of us are now working much longer. There are a variety of reasons including needing or enjoying extra income, the mental stimulation of the work, the comradeship of belonging to an organisation or maybe your partner still works and you would prefer to carry on working rather than doing things without your partner. Some of us have physical jobs and our bodies just can’t keep going.
When we work with clients on retirement planning, we start by helping you to work out what is important to you and what is achievable. Remember, you can have anything you want, you just can’t have everything you want. From these discussions we can recommend an appropriate investment structure that should enable you to achieve your goals. This will include considerations such as; what income you would like to enjoy through retirement, are you a keen traveller, do you want to leave funds for grandchildren, can you unlock some equity by moving to a smaller home or do you have other financial goals? It all starts with a conversation.
Should I review my investments?
As you will have heard so often from your Lifetime adviser, we warn that life can take a U-turn at the most unexpected time. This is when you do what we have warned you about, quite simply don’t panic, ride it through and let us work together with you through some of the bumpy parts.
Investments go up, and they go down - right now we're seeing some decline, who knows how much or for how long, all we know is solid research tells us that diversified portfolios should weather these storms.
When we designed your plan we took into account your investment horizon, goals and risk tolerance in selecting the right fit for you, and that should still be relevant today if your objectives are the same.
Chances are, no action is required at this time. However, if you have any questions or concerns please don’t hesitate to reach out. If you like, we can revisit your current position, your goals and we'll make sure things are still on track. If not, virus-driven or otherwise, we'll look to make some corrections to your financial plan. This is what we're here for - financial advice - so if you have any questions from investments to insurance, give us a call.
Is there support for my business?
The government is doing what they can to subsidise lost income and support businesses during these times. The package being offered is continuously being updated to its important to stay abreast of what benefits you may be entitled to.
COVID-19 Wage Subsidy
Wage subsidies will be available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result. The scheme will be open to sole traders and the self-employed as well as firms.
If eligible, the employer will be paid $585.80 per week for full time employees and $350 for part time employees. This support is available for 12 weeks.
It is important to keep up to date with any changes to these subsidies.
Employer application via link: https://services.workandincome.govt.nz/ess/employer_applications/new
Self Employed/Contractor via link: https://services.workandincome.govt.nz/ess/trader_applications/new
General information via link:
There is some tax relief including:
- Increase the provisional tax threshold from $2,500 to $5,000.
- Increase the small asset depreciation threshold from $500 to $1,000 - and to $5,000 for the 2020/21 tax year.
- Allow depreciation on commercial and industrial buildings.
- Removing the hours test from the In-Work Tax Credit from 1 July 2020.
- Interest will be waived on some late tax payments with IRD.
If you do not have an accountant and need some advice on what this means for you, I'd be happy to put you in touch with someone.
What insurance do I really need?
You might be looking at those insurance premiums and asking yourself 'Do I really need all that insurance?'. Well, maybe not. Things change, and over the course of our lives our exposure to risk, and therefore our support needs from insurance, changes.
When we have debt such as a mortgage, or are relying on an income, we may need cover should we be unable to maintain our living costs for us or our loved ones. As we pay down debt and save money, we may be able to self-insure and reduce or even remove that insurance. The first thing we need to do is understand our exposure - and that forms the basis for our risk protection plan. It is important to review your insurances anyway, however even more important in this time to ensure your cover is still tailored to your current situation and fit for purpose.
It may be that you don’t need as much coverage as when you took the cover out, or perhaps there are needs that haven't been covered. Either way to give you peace of mind and comfort, our specialist insurance advisers can provide personalised advice on your life and that of your family’s.
If premiums costs are becoming difficult to afford, insurance providers have a range of options to try help clients through this time that your adviser can explain.
Should I buy a rental property?
Interest rates are appealing, but the property market is not immune to this current pandemic, it too will face some tough times. However, if a rental property has been in your financial plan not all hope is necessarily lost. Any good decision needs good planning, so again we need to start with looking at your whole financial picture and goals in order to decide the best course of action for you. One of our advisers will be happy to assist you in reviewing your current position and putting a plan in place for your future investments.
Is now a good time to buy shares?
We believe successful investing requires patience and discipline over the long-term. With this in mind, if you have a long-term investment horizon (say 10yrs or more), then NOW is always the best time to start investing! Equities (or ‘shares’) have outperformed cash, term deposits and bonds over the long term so we believe you should have an allocation to these within your portfolio suitable to your individual situation. There are also many strategic considerations during the current environment such as dollar cost averaging – why not have a chat with your adviser today?
Here at Lifetime, we’re not in the business of stock picking. We believe that outperforming the market is possible, but not likely. We work with fantastic fund managers whose philosophy aligns with our own and that combine the best elements of an active and passive approach to investing in order to help you achieve your long-term financial goals.
“The best time to plant a tree was 20 years ago. The second best time is now.” Chinese Proverb.
What is Lifetime doing to help?
We have now implemented our Working Remotely Business Continuity Plan and all staff are fully mobilised and all working from home. We are still here and contactable via email, phone, text and video conferencing - it's business as unusual.
We're here to talk about all your options and your financial future. If you would like some peace of mind on any of the above, please contact your Adviser direct, or our Client Care Centre.