Coping with job loss

QI am one of many Wellington-based public servants grappling with uncertainty in the face of possible job losses.

I would be grateful for your advice on practical financial strategies to mitigate against the risk and shock of potentially losing my job and possibly being out of work for some time, given the limited job market to reapply to.

I have a $300,000 mortgage and a small “oh shit fund” of $35,000. I currently contribute 6 per cent of my salary (while it lasts!) to KiwiSaver.

I am on a good salary. But as a solo parent of two tweens, I’m responsible for all the costs of running a household. I have to be very tight to make ends meet. The prospect of surviving with no income, even briefly, terrifies me! I’m asking on behalf of many in my situation in Wellington.

AIt’s not just Wellingtonians. All over the country, both government and non-government employees are worrying about losing their jobs.

It’s great to know you have an emergency fund. Your $35,000 should last quite a while. People without such back-up would be wise to start a similar savings account — even if it has to be used shortly. Other thoughts on what you can do now:

  • Polish your CV. There’s plenty of online advice on that.
  • Cut KiwiSaver contributions to 3 per cent of your pay. And consider reducing the payments still further — perhaps to $20 a week so you still get the maximum government contribution. Put the extra income into your emergency fund. But please resume full payments as soon as you get another job.
  • Try the budgeting tools on and other reliable websites. I don’t want to be condescending about buying fewer clothes, eating out less and buying cheaper food. You already know that. But you might be surprised to find some relatively painless other ways you can cut spending.
  • Do an internet search on “Financial Independence, Retire Early”, known as FIRE. This movement encourages people to save up to 70 per cent of their income, so they can retire young. You may be inspired by stories of how people drastically cut costs.

And here are ways to make ends meet when your income stops for a while:

  • Talk to your mortgage lender or broker — before you get behind with payments. You may be able to pay interest only on your mortgage for a while, or even pay little or nothing. This means you’ll pay considerably more interest over the life of the mortgage, and probably paying it off later. So do it for as short a time as possible. But it can really help.
  • Renters should talk to their landlord — again before you get behind with rent. Most landlords don’t want to lose good tenants, and may be willing to postpone your payments. If push comes to shove, move in with friends or family. It will be for just a while.
  • If things get really difficult, look into making a KiwiSaver hardship withdrawal. Ask your provider for info.
  • Suddenly you have more time than money. Put the word out to friends and family that you’re available to do odd jobs — and would appreciate fair pay for them.

And here’s what not to do: Run up debt. If you can’t help it, check if you can add to your mortgage or get a bank overdraft at a lower interest rate rather than using a credit card.

Importantly, look after your mental health. It can be easy to slip into gloom if you’re without work. Keep active, going for walks and meeting with friends. And if you clear out your cupboards or fix the garden, you’ll get a long-term benefit.

As one who has survived the death of two newspapers — the Chicago Daily News and the Auckland Sun — I know how it feels to suddenly have the job rug pulled out from under you. But things will come right!

Retirement costs here …

QI have been retired for many years and have some advice on monetary requirements in retirement.

If possible, have a debt-free house or apartment when reaching 65, and perhaps a newer vehicle. NZ Super is in most cases sufficient to cover living expenses, except for offshore holidays, although it may cover small holidays to say Australia or the Pacific Islands.

A financial buffer of say $150,000 is probably sufficient after 80, but some pensioners may say $50,000 to $100,000 is sufficient.

A council rates rebate is available for those with a smaller income, and free bus transport is available for those with a gold card.

So unless you have poor health, which dictates private health care rather than relying on the government hospital and healthcare system, I don’t believe a large sum is required. Some retirees may wish to assist their children, but this often encourages family dependence.

Of course, it all depends upon your expectations regarding future motor vehicles, holidays and lifestyle in your later years. Mine are obviously less than many of your correspondents!

ASome good points. It’s a great idea for every homeowner to check if their council offers a rates rebate or rates postponement.

Rebates reduce your rates if you’re on a lower income. But some councils offer rates postponements regardless of your income.

A postponement is like a mini reverse mortgage. The money is paid back when you sell the house, move to residential care or die — although you can repay it sooner. You pay interest, and it compounds over the years. But the interest rates tend to be lower than on reverse mortgages.

… or over there

Q78-year-old single old bloke here, who hates the cold. Ten years ago I decided there was no need for worldly goods. From millionaire to full-time pensioner was a reasonably easy step.

Gifted assets to family. Tripped around the world looking for a comfortable and warm place to live. Finally chose Siem Reap, Cambodia. Reminds me of NZ in the 50s. Very family-orientated, and respect for the oldies, affordable living. Can even save if I wanted to.

All this on NZ Super, which is paid gross amount, ie no tax deduction. I pay for medical insurance in case of serious hospital requirement (within pension budget) and usually manage an annual trip when airfares are cheap (March).

With the joys of the internet (free, included in rent) I can chat online to family and friends often and keep up with world news, watch movies, TV etc.

ASounds great. Almost too great. “Can you really get untaxed NZ Super?”, I wondered, so I asked the Ministry of Social Development.

“How much Superannuation a client living overseas can get depends on:

  • what country they live in
  • what arrangement or agreement New Zealand has with that country,” says Harry Fenton of MSD.

“If clients live in a country that doesn’t have a Social Security Agreement or special arrangement with NZ, such as Cambodia, they may be able to get a full NZ Superannuation payment, depending on the number of months they have lived in New Zealand between the ages of 20 and 65.”

He adds, “To qualify for payments overseas the person would need to be qualified for NZ Super before they leave New Zealand and ordinarily resident in New Zealand when they apply. Clients don’t pay New Zealand tax on these payments, however they may have to pay tax in the country they live in.”

For more info on the rules, go to this page on the Work and Income website.

Rewarding rewards

QI’m writing about Visa rewards. Previously I spent my rewards on things I didn’t really need, until I discovered that you can transfer them to your KiwiSaver account. Brilliant! I know of people who have lost rewards because they expired, so this is much better. I’m with the ASB, but perhaps other banks will let you do the same.

I also recently learnt that some of my Fly Buys points would soon expire. I never accumulate enough to buy anything worthwhile, so was delighted to see I could donate them to the City Mission. I was very happy with that. I only wish there were more charities to choose from.

AThanks for telling us. A quick online search shows BNZ and Westpac also let you transfer rewards into KiwiSaver — although in all cases it’s into the bank’s own KiwiSaver scheme. Other banks may too.

Donations of rewards are also offered by several credit card providers. Interested readers should ask their provider.

Instead of insurance?

QReferencing your 66-year-old correspondent last week, I agree with ceasing life insurance, thereby saving about $4,000 per annum.

On health insurance, my wife and I are 70. We maintain comprehensive health insurance costing us approximately $20,000 a year. We keep it to ensure ready access to health services at times and places that suit us, rather than relying on the public health system.

If your correspondent ceases life insurance and purchases health insurance, the $4,000 a year saved would be offset by a new premium cost of anything up to $20,000 per annum. After excluding cover for pre-existing conditions, is the increased cost warranted?

For those on tighter budgets, are they better to save as much as they can — say the $4,000 for your correspondent — and setting it aside as an emergency fund? If a health condition arises, the option remains to seek private care to the extent of the emergency fund, otherwise relying on the public health system. Back to you!

AHealth insurance for an older couple doesn’t have to cost $20,000 a year. If you get cover for, say, just surgery and specialist fees, and choose bigger excesses, that will cut costs. Still, the bills are big.

Your suggestion of what is sometimes called self insurance is certainly better than doing nothing. I’ve had letters from people who say it’s worked brilliantly. But it’s not so good if you develop an expensive problem soon after you start your self insurance account.

On the other hand….. Read on.

Public v private

QOn medical insurance, the standard of service from private and public systems is also important.

We cancelled our health insurance when we retired at 65. It was just getting too expensive. Since then I’ve had two total knee replacements via the public health system.

I had a three day stay in hospital for each knee operation. They will not let you leave hospital until you can bend your knee 90 degrees. When I left hospital I was given a sheet of exercises to do daily to get me back to normal.

After that I had twelve free weekly physio sessions at Green Lane hospital. Then once a year for two years I returned to the hospital for a checkup and a chat about progress with the doctors.

A friend of mine had the same operations using private surgeons. He spent one night in hospital, (well he did have his own room), was not given any 90-degree tests before he left, was not given any indication what exercises he should do, and no physio sessions. He was told to report back in a year to see how things were going.

Most people assume going private is better. The only advantage, it seems to me, is you can more or less choose when you get your operation. The public system was better for me in all other respects.

ASorry, but It’s not valid to draw a conclusion from one comparison. Maybe your friend had fewer needs than you. Still, many people have stories of great service in the public health system.

Says another public system user, “I just got a colonoscopy and had fab service and not too much of a wait. I was stoked.”

On the other hand, a third reader writes, “At 75 I’m still holding health insurance. Received claim paid advice for last year from my insurer — $102,000 paid for mitral valve replacement and extras. Can’t describe how grateful we are.”

Being able to “more or less choose when you get your operation” can make a huge difference in some situations. There are too many stories of people waiting many months for non-life threatening operations in the public system.

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Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.