NZ Herald 10 November 2018

AGosh, tough times for you. You don’t need money worries on top of the other adjustments you’re making. But the financial stuff is not nearly as tricky as you might think. I’m sure you’ll get on top of it in short order.

Your best first step is to check out FinCap at www.fincap.org.nz. They used to have a long unwieldy name — the National Building Financial Capability Charitable Trust. But on September 30 they said: “Today a refreshed and revitalised national voice of New Zealand’s 200 financial capability and budgeting services, called FinCap, is launched.

“Every year, 60,000 Kiwis facing financial hardship visit financial capability and budgeting services for free help. This is provided by 1,200 financial mentors working in 200 agencies in communities from Kaitaia to Invercargill.”

FinCap runs a free financial helpline called MoneyTalks, which assists people by phone, chatline, text or email. But you’ll probably want to meet a financial mentor face to face. You can find one near you on the FinCap website.

The organisation is a charity supported by the Ministry of Social Development, so nobody is trying to push products or services at you, and the people you deal with should be trustworthy.

Once you gain confidence to run your own money, I’m sure you’ll never let yourself get back into a situation where your partner does all the financial stuff.

Other readers might learn from your story. It’s one thing letting one person in a couple do all the shopping or gardening. If that person is no longer there, you’ll cope. But everyone needs to take an interest in their finances.

And if you’re the spouse or partner who does all the money, please get your partner involved. If they’re not interested, show them this Q&A.

ASecond question first — about renting out the flat. You’ve got the basics right about income and expenses.

On the mortgage interest, an Inland Revenue spokesperson says that it’s generally deductible, “but it isn’t a simple yes or no answer. For example, if the remaining loan only relates to the rental property then interest would be deductible. But if there have been mortgage top ups for trips or cars and the like over the years, it may not be deductible.

“It would be best for your reader to consult a tax professional where they could work through the history of the mortgage to see if the interest is deductible. Referring her to the website would also be useful.”

Inland Revenue’s website, www.ird.govt.nz, is actually far more accessible than many people expect. If you do a search on “rental property” you’ll find some good info.

Okay, now to whether you should rent and hold, rent and sell, or stay put. You could make a case that any of those options looks best financially. It depends on what happens to property prices, term deposit rates and rents. Nobody can accurately predict any of those.

Also, you can’t predict whether you’ll get good reliable tenants.

One argument against selling now and buying again later is that you’re out of the property market. If prices fall in the meantime, you’ll do well. But if they rise, you’ll lose.

By contrast, if you stay in the market — either by continuing to live in the flat or by renting it out — if property prices rise, you’ll pay more for your new house but get more when you sell your flat. And if prices fall, both prices will be lower, so again you’ll be okay. Your risk is reduced.

However, you don’t much like the idea of being a landlord. That matters, especially if your husband would also be reluctant to take on landlord duties. And staying put clearly lacks appeal.

There’s lots to be said for doing what you want to do — which seems to be selling now and buying later. Life’s not all about optimizing your wealth and cutting back on risks. And while nobody ever knows where Auckland house prices will go next, it doesn’t feel likely they will keep soaring over the next few years.

Nor should the fact that your clutter would be unattractive to buyers discourage you from selling now. Many people get rid of non-essential stuff while their house is on the market. Put it in cartons from the supermarket, and store them at a friend’s or relative’s place or in paid storage. With any luck, it won’t be for long.

Get that flat on the market at a price you would be happy to receive, and start thinking about where you would like to rent for a while. But if you go that route, don’t dwell on house price rises while you’re renting. And please don’t write to me to complain!

AYou raise a good point.

What you’re talking about is the residential care subsidy that the government pays to a hospital or rest-home to help cover the costs of long-term care for someone over 65.

To qualify for the subsidy, you have to have assets — investments and so on but not personal belongings — below a certain amount. The idea is that if you have more assets you pay for the care yourself until you’ve used up enough of your own money to reach one of the asset thresholds.

If you’re single or have a partner in care, to get the subsidy the total value of your assets must be $227,125 or less.

If you have a partner who is not in care, the total value must be less than:

• $124,379, excluding the value of your house and car.
• $227,125, including the value of your house and car.

Given that almost every house is worth way more than $100,000, every couple who owns a home will surely choose the first option. The partner not in care can then continue to live in their home.

But if a couple doesn’t own a home, they will of course choose the second option. They will have to spend their savings on residential care until they have $227,125 left, including their car.

And as you point out, the return on that amount wouldn’t cover rent for the person not in care. For example, if it was invested in term deposits at 3.5 per cent, it would earn less than $8000 a year — and that’s before tax. Last week’s couple was expecting to pay about $30,000 a year in rent.

Of course the partner not in care could also gradually use up the lump sum — not just the interest — on rent. And they might be content to live in a smaller apartment. But still, the money would probably last less than ten years.

They would still receive NZ Super, but that doesn’t go far if you have to pay rent out of it as well.

For some people, the residential care subsidy wouldn’t really be an issue. While the couple last week expect to have $350,000 to $400,000 if they sell their home, others would end up with well over $1 million, and some with more than $2 million.

If one partner in such a couple needed long-term care, they would have plenty of their own money to pay for it — unless the care continued for many years.

Still, it’s something everyone should keep in mind, so thanks for your letter.

And by the way, for people who qualify for the subsidy, there’s an income assessment as well. Some of the income you receive, including most of your NZ Super, will go towards your care.

For more on all this, see this page.

AI doubt if any members actually love learning about their investment going down! But it’s good to hear they didn’t panic at the recent market wobbles. I just hope that continues when there’s a serious downturn.

I also hope other banks enable KiwiSaver members to turn off seeing their balance whenever they do online banking — and that members take advantage of that. Seeing your KiwiSaver balance once a quarter is often enough.