Before we get into it, it’s important to know that this blog doesn’t give financial advice. Investment decisions are important and if you need help you should talk to a financial adviser.
My name is Tracy and I am the DebtFreeDiva. Owning a business at 18 was tough, but I did it. I poured everything I had into the business but unfortunately it wasn’t meant to be. 6 short years later I had to close the doors permanently and I found myself in $94,000 worth of consumer debt on an average interest rate of 21%. I was facing bankruptcy. Due to the implications of bankruptcy, I made the decision to pay back all of the debt. I originally went to a budget advisor who told me it would take 16 years to pay it all back.
In November 2019 I became debt free – in only 3 short years. The total amount I paid was $113,375.40.
I wasn’t a natural saver and I wasn’t very good at managing my finances, but I had to learn. And fast! So, I embarked on a massive financial journey and life overhaul to not only pay back my debt but also become switched on with my finances.
13 months later in December 2020 I became a first home buyer. I applied all the same concepts I learnt from my debt free journey to help me on my home ownership dream. However, when it came down to it I would not have been able to do it without my Kiwisaver fund.
KiwiSaver funds – a key financial tool that every New Zealander is entitled to, but do we really know what it is and how to best utilize it?
I enrolled in a KiwiSaver account at the age of 16 – and I honestly didn’t really know what it was at the time. I thought it was a retirement fund (like the ones that is talked about in popular American shows). I was working a part time job at the age of 17/18. I didn’t take much notice to the 3% I was losing from my pay, and I didn’t even think about how cool it was that I was getting another 3% from my employer.
When I opened my company at the age of 18, I also didn’t really think about the benefits of having a fund. Since I was taking drawings (as my form of income) it was up to me to put money into my KiwiSaver account. Which I didn’t do either, I still had no idea about it.
When I started my financial journey in December 2016, I had started reading up on budgeting and debt reduction but oddly I couldn’t find any books in the library about KiwiSaver funds. I was working full time at this point and could see the contributions coming out on my payslip. I also knew that my employer was paying contributions towards this balance – and I kept getting this weird free money payment in June each year. I certainly won’t be one to scoff at free money so I didn’t argue at all.
So when did my KiwiSaver fund become front and center for me? Only in December 2019 when I had become debt free and had set my sights on buying a house.
When should my KiwiSaver fund become front and center for me? Back when I was 16 and had started contributing. Whoops.
Deciding I was going to buy a house was easy, coming up with the deposit was the hard part. I had started looking at home ownership after Covid-19 when the prices were absolutely skyrocketing. There was absolutely no way that I would have been able to save the extra needed every month to keep up with the growth. My KiwiSaver fund made up 40% of my deposit. Honestly, without it, I would have not been able to achieve my dream of home ownership.
When I found out I was allowed to use my KiwiSaver fund to buy my house, I applied the same skills I learnt from my debt free journey. Education was the first step. It was so easy to find the information online, but what was staring me in the face was harsh. I had stayed with a default provider and I only had my funds in balanced funds. This meant I was paying more fees than I had to and I was earning less gains than I could have. How frustrating!! Just as Covid was starting to take hold across the world – investments started slipping. I had a chat with a friend of mine and I moved my funds to a conservative fund in a different fund provider (to pay less fees). The conservative fund was to ensure that my balance wasn’t as badly impacted by the market dip – I knew I was going to need those funds in the next 12 months so I wanted to hang onto as much as I could.
All of this information I read up about online, it didn’t even occur to me to go to a financial advisor because my perception was that they just help with increasing your investment funds. How wrong I was! I had no idea that there were experts in this field.
Everything I have spoken about I had to learn – most people have absolutely no idea what a conservative or balanced fund is. And most people have absolutely no desire to learn what it is… until they are trying to pay for a house…
There are a few things I personally would have done differently if I was to do it all over again:
- I would have bumped up my contributions to the highest amount as early as possible. I didn’t really need money when I was that young – it was just play money. I wouldn’t have missed an extra $10 a week or so.
- Change my fund to a growth fund as early as possible. Then switch it back to a conservative fund when I started getting serious about house buying.
- Consult with a financial advisor! There are so many people and platforms out there who are willing to help you make the most of it. These people are specialized in the field and can absolutely help you on your way.
This is not financial advice; this is what I personally would have done differently
My KiwiSaver fund really to help me achieve my home ownership dream, because it allowed me to get on the property ladder. Without these extra funds I would be struggling to keep to a savings rate that would have allowed me to keep up with the rising house prices.
What’s next for my KiwiSaver fund? I have moved it back into an aggressive growth fund and made sure I am putting my 3% contributions (along with my employer contributions) in the fund. Once I have paid off my mortgage I aim to increase my contributions and speak to an advisor to ensure it’s in the fund that’s best for me and my growth fund.
Get your finances sorted
What works for Tracy won’t work for everyone, and like we said, this isn’t financial advice.
If you’re struggling to save, we’re here to help. Sorting out your KiwiSaver is an easy way to start a regular saving habit, and because the money is invested on your behalf, your funds can grow substantially before you use them to buy a home or retire.
Our financial advisors are real humans who give you transparent explanations when it comes to your financial strategy. Try our fund finder quiz, or send us your questions or comments. We are here to help!