Financial misbehaviour disappointing
Ironically, a survey on New Zealanders’ financial behaviour was released just days before Christmas — a time of much financial misbehaviour, when everyone’s saying, “I don’t care what it costs, I’ve just got to buy something for Uncle Fred.”
It’s also a time when most of us are too distracted to absorb sober messages about how well or badly we’re handling our money.
So I suspect many people didn’t see the findings of the survey, which was done for the Commission for Financial Literacy and Retirement Income — a follow-up to similar surveys six and twelve months ago.
The Commission tends to have a “glass half full” attitude, and good on them. They zeroed in on the following findings:
- “92 per cent of Kiwis paid off their purchase agreements within the interest-free period (up from 85 per cent in November 2011).
- “39 per cent of Kiwis paid more off their personal loan than required (up from 30 per cent in November 2011).
- “54 per cent of Kiwis say they earned more than they spent over the last three months (up from 50 per cent in November 2011).”
However, now that we’re well past Christmas so I can’t be accused of being the Grinch, I think we need to acknowledge that some of the findings are disappointing.
As I read through the results, I found myself scrawling “too low” next to three items.
The first — and probably most important — is about the last bullet point above. If only a little more than half of New Zealanders earn more than they spend, that’s a worry. It’s fair enough for the 17 per cent of survey respondents who are retired, but not for the rest.
What’s more, the survey was done well before Christmas. Now, with respondents looking back over the last three months, the results would probably be grimmer.
As Charles Dickens’ character Mr Micawber said, “Annual income £20, annual expenditure £19,19,six (pence), result happiness.
“Annual income £20, annual expenditure £20, nought (shillings), and six (pence), result misery.”
I was somewhat comforted to see that almost half of those who didn’t earn more than they spent said their earning and spending were about equal. Only 21 per cent admitted to spending more than they earned. Still that’s up from 19 per cent a year ago. Here’s hoping the trend is downwards in future surveys.
The second “too low” item: 61 per cent of people with credit cards paid their bill in full in each of the previous three months.
That’s a bit better than the year before. But it still leaves nearly four out of ten people paying high rates of interest on money they’ve spent — all too often on things that gave fleeting pleasure, long forgotten while the bills linger on.
And again, I suspect the numbers would be worse if we included the credit card bill covering Christmas.
The third “too low” is about the use of unexpected money by people who have at least one debt, excluding a student loan.
About 73 per cent of these people used that money to repay debt. Great. But what about the others? A small portion said they faced penalties for early repayment. But most said there was something else to use the money for, or they just didn’t think of using it for debt repayment.
Okay, if the power’s about to be cut off, pay that bill first. But this was unexpected money, so people wouldn’t have been counting on it to pay the power bill. They simply blew a chance to get at least part way out of the debt hole.
Come on New Zealanders — we can do better.
Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding 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.