[Text on screen: ANZ logo, Māori Millionaire Presents How We Money]
Voiceover by Te Kahukura: Welcome to How We Money. Brought to you by Māori Millionaire and ANZ. A six-part series designed to help you make better money moves and achieve your financial goals. Each month will drop a simple, practical episode to help you build confidence with your cash. Māori Millionaire and ANZ care deeply about financial wellbeing in our communities, which is why we want you to not just listen but to take action. If you do one positive thing after every episode, that's six powerful steps forward. Let's get into it.
Te Kahukura: Nau mai, hoki mai e te whānau. Today we are here with Shelly Palman. She is a money coach, and I'm really looking forward to hearing all of her insights about debt management and things that we can do better. So, nau mai haere mai e hua. Welcome to the show.
Shelley: Kia ora, thank you for having me.
Te Kahukura: I am so excited for our korero today. I wanted to just get started a little bit about who you are, where you're from.
Shelley: Thanks. Yeah. So, my background is in corporate insolvency, actually. So, for the first 10 to 15 years of my career, I spent time burying companies and yeah, figuring out what went wrong in the past. So, I had my little kiddos and took a little break from the workforce. And then I stumbled into enable.me and money coaching. So, this is my 10th year. I'm entering into ten years of helping people do the hard stuff. You know, the mahi to get them ahead, to help them achieve their financial goals, but also to hack themselves, to help them to understand why they behave the way they do around money. And I think for me, that's the bit that is super, super satisfying as a money coach and financial advisor. So, I love what I do. I'm so passionate and I'm so happy that you've chosen me to be here talking about this today. So, thank you.
Te Kahukura: Thank you for being here. I'm really excited for our wānanga today. You know, in your experience with insolvency or helping people navigate having debt, you know, in my own experience, it felt quite debilitating. It felt quite…I was ashamed of the position I had got myself into and the things that I had done. What have you learned about working with people in these positions? About that shame and the process of being able to make some, you know, take some steps to improve their position?
Shelley: Money feeds into every area of your life. And so, people's identity, it could be their income, you know, it could be linked through to the type of house they have, the job that they have and, and the kind of, the way they're perceived by others. So many really sadly infiltrates a lot of the way we feel about ourselves and our identity. So, when people are saddled with debt and if it's that type of debt where it's kind of what we call the bad debt, and I know we're going to start talking about that a little bit later. Understandably, there can be that sense of shame around that. And I think like anything, there can be a sense of shame around other areas of your life. So not just money. So the way that you look. The, you know, the job that you have or you know, your physical, your weight and things like that. So, you know, if it's becoming a problem and a real issue, issue for you and you're feeling that sense of shame, you've got to share the problem with others. And so, for some, it might look like a trusted family member or a close friend. But I think really that first step is to share and start talking about it. So being vulnerable is one of the ways we connect with others. And so, opening up and having that sense of vulnerability around your finances really, really hard for a lot of people.
I'll always be humbled by when I meet people for the first time, and they really have to expose everything about their finances. So, what they earn, do they have any debt to the level of their mortgage? What are they spending they get? We get into real nitty gritty with people about that kind of thing and for people to really front up and be vulnerable about that. That shows a sense of, you know, I think power. You know that the fact that you can own it. So, once you start to own it and you understand the extent of the issue that you're dealing with, open up about it and share the issue with others. That sense of shame can start to recede.
Te Kahukura: So, there's so much power and vulnerability. And I agree, you know, a problem shared is problem halved. One of the things that I found quite difficult was, I guess, talking to people who might also be in the same situations as me. And so, I would talk to them and say how overwhelming it felt, but it was almost kind of justified that that was like normal and like, this is just how it is. So do you think that it's important to, I guess, be mindful of who you're talking to when you open up about these things. And how would you, I guess, decide, like, who's a good person to open up to about these things? And if maybe there's no one in your immediate life who I guess has a financial situation that you're desiring. Are there any other people or like online or resources that you think would help someone to, if they're in that state where they feel like there's no one in their immediate life who they can talk to about this?
Shelley: You're so right that you need to be surrounding yourself, and environment is really, really important. And when we're talking about wanting to be better within yourself, so you're trying to improve your situation in any sense. Environment is a key part of forming good habits. So, if your environment is everybody around you has short term debt and that becomes the norm. You need to start casting it further afield. I want to reference James Clear and the ‘Atomic Habits’. Right? And that environment piece you're trying to form, healthy money habits or healthy fitness habits or whatever it might be. So, seeking out, there are so many resources online. There are so many. I mean, you jump in, you can do a quick search and you're going to find all sorts of budgeting services, budgeting resources. There are a lot of free resources out there. Most banks will have free budgeting tools and financial resources that you can kind of seek, but I think those support groups too. So, there's a really cool organisation called Money Talks. It's government funded. It's something where they will triage your financial situation and actually connect you through with a financial mentor. So now you're in that space where you're connecting with the people that are going to be compelling you around those healthy money habits. So that financial mentor, someone you can call or have online, someone that's going to encourage you in that space. So, I think casting your net, possibly some online support groups, there's got to be that kind of thing out there. For when you're trying to be better than what you are at the moment.
Te Kahukura: I couldn't agree more. And I think sometimes it's hard to find those, like in-person things. And as much negativity as there is about like our phones and usage, I think that there’s also. So, like we've never been in a time where information has been so readily accessible for us. So, we can like, leverage that. We can use that to our advantage. And even just like the people we follow online, I feel that has a huge impact as well. So, I also love ‘Atomic Habits’. Absolutely love that book so much. I wanted to touch a little bit about KiwiSaver, because most people you know will know that you can withdraw your KiwiSaver for financial hardship. Can you just talk to us a little bit about that? And I guess the potential implications of that, is that a good idea if you're in debt, how does that all work?
Shelley: Yeah, I think it's a real last ditch effort, the KiwiSaver withdrawal. And it's not something you can just tap into. And I'm just going to take my KiwiSaver out just like that. There's a huge process that you have to go through to do that. Generally, it's really, really, really genuine hardship, you know, and you're about to foreclose on your home, you know, mortgagee sale. You can't feed your children. You know, that is the kind of hardship circumstance where you might tap into your KiwiSaver. It's not a I racked up a whole heap of consumer debt, and now I just want to get rid of it with my KiwiSaver. That is not. That would not be approved. So, it's not really an option unless it's quite dire. And there's a big process that you have to go through to do that. So, I think it is an option for some people.
I wanted to take it back a step though, because, you know, generally when people find themselves in financial hardship, it's for a reason. And the reason could be quite different. So, for some it's I've lost my job. There's been a redundancy that's been huge over the past couple of couple of years with unemployment running really high. And so that is what I would consider to be a temporary blip. So, you've lost your job. There's no income coming in. There are benefits that you can apply for, emergency that that kind of thing. But you know, generally there are a lot less and perhaps what you were earning before. And so that would be what I would consider to be genuine hardship, where it's circumstances outside your control as opposed to your living outside your means and you need to do something quite strategic or drastic to change potentially your circumstance. Does that make sense?
So, when I say living outside your means you your cost load is higher than the income that's coming in. And if you're in that space, you can't continue to be in that space. It's not a sustainable model. So, what can you do practically to start to live within your means? So, we could talk about potentially understanding. You know, accommodation is such a large expense for most of us. We generally find that the accommodation spend as a percentage of outgoing is between about 35% and 50% of what people's expenses are. So, it's huge. So, getting really creative, like can you move back in with family. You know, I mean, I know with living with the mother in law may not be overly palatable, but, you know, is there some friends or a house sharing arrangement that you can kind of enter into to reduce that cost load. So, you know, from a practical perspective, sitting down and understanding what are your outgoings, you know, and this is where you tap into all those beautiful tools that you can find online around writing a budget. You know, I like to call a budget a spending plan.
Te Kahukura: Yeah, I call it a money plan also.
Shelley: A Spending Plan, you know, because money is a finite resource. You know, there is a limited amount coming in. And no matter your circumstance, we need to find a way to live within your means in terms of what's coming in. So, sitting down and actually writing down what are your fixed costs, you know, and this is kind of how you do a budget. This is where you start with writing a budget. You sit down and you go, right, how much is my rent? How much is my power? How much is my phone? And you literally list out every single fixed expense that you have. Then your understanding, well, between that and what's coming in, what is the difference? And the difference is what we would call your discretionary spend. So that is the stuff you, you know, things you spend your money on that make you happy. And so, you've got to decide, well, what are those things? And we call them non-negotiables. So, what are those things you spend your money on that you're not willing to give up, that give you that quality of life that make you happy, make sure those are factored in. And it could even just be, I like to buy a red lipstick, you know, and have that, you know, $30/$40 every six months or whatever. That makes me happy to wear red lipstick. You know, it can be little things like that. And you make sure that that's factored into the spending plan and then we're understanding is there anything left over, over and above that? I don't care if it's $5 a week. You've got to get into the habit. Our little friend James Clear, with his habits – the habit is more important than the amount. So, we've got to get into that space where we identify a little bit of money, and then we start that habit of setting that aside and get it out of your bank, get it somewhere into a different bank or somewhere different where you're not going to be able to touch it.
So that's a really practical thing that people can start doing now. You can jump onto your bank's website, you can download a budgeting tool, you can start to list out those expenses, and then you can understand, well, am I in a situation where I am living within my means, or do I need to make a big correction around my housing or anything else?
Te Kahukura: There's actually a budget like template that people can use, and the link in the show notes and what I find is when you go through and actually do that, it is so helpful. I can't tell you. When I first started my financial journey, I had this mindset that, you know, I was doing the best that I could like, you know, living is expensive and all these kinds of stuff. And like, I'm not wasting that much money. But I tell you, when I printed out my bank statements and I highlighted it and I colour coded every single section, I was absolutely shocked at how much money I was spending on non-necessities, really, but my mindset was, nah, I'm not really spending that much, but because I didn't actually have the numbers, have the data, you know, I was basically just, like, lying to myself. And I think that being able to take this, like before photo of your finances, just like people do on a health journey. It allows you to just see where you started so that as you progress in your journey, you can look back on it and you can go, wow, I've grown so much. I've improved so much because I think in my own experience, the more you move ahead, the more the, the more you see people who are doing better than you. And so, it can start to feel like, oh my gosh, like I'm still not doing enough. But you know, the only person I like to compare myself to is like who I was yesterday, who I was last year. And like, how much have I grown since then? So, I find, you know, listing out those numbers. Doing a financial before photo is so helpful not only to just know the numbers, but also to, you know, to look back on it in time to come.
Shelley: Yeah, run your own race. It's only you that you're competing against, you know. And the ‘Joneses’ are highly mortgaged. They're highly they are riddled with short term debt. Those ‘Joneses’. So never, ever compare yourself to anybody around you. You run your own race, but you're so right that people are very good at overestimating how well they do or…and I've really found that. And almost without fail, 95% of people or clients that I meet for the first time are we're not extravagant. They tell me, how many times have I heard those words? We are not extravagant people. And then we start to actually drill into what they're actually doing. And it's really eye opening. And unless you do that exercise of, you can either go back and understand what you have been doing. And like you say, that's a really good way of going. This is me getting on the scales. This is me understanding where I'm at at the moment and what I'm doing. But then I want you to think about going down to the beach, picking up a really, really big stick, putting a really firm line in the sand and going, what I've done in the past is no indication of what I can achieve moving forward.
So really, really important to always be looking ahead and thinking, okay, you've made some money mistakes or, you know, whatever it might be in the past. But what I intend on doing moving forward is this. So, when you're writing a budget or a spending plan or whatever you want, a money plan, whatever you want to call it, I want us to, to take a step back and think about why. And this is really important too. So, we've got to have an understanding of why would I bother going through my bank statements, putting together a budget, tracking my spend. What is going to be that thing that motivates you? And actually, when I'm putting together a financial plan for my clients, that is the first place we go. I ask them to describe their ideal vision for the future. So, because I need to coach them through the rest of the 12 month period, I need to push on that vision. So, this is the reason why we are doing hard things. Because getting on top of money, losing weight, any kind of positive change in your life, it's hard. So, what is the reason why? What is going to be the thing that when you're in the depths of despair? No, I have to say no to that, fifth concert of the year that I really want to go to, because a lot of my friends are going there. This is hard stuff, right? But you've got to keep your eyes on the prize. Why you doing this? So that's a really, really key factor with any budget.
And I think visualisation, you know, manifestation is a little woo woo. But you know there's neuroscience behind it. And so much of how we behave around money has to do with. And I know we're going to talk about mindset a little bit later. But you know I'm going there in terms of money psychology. You know getting that, that, getting your head right and really understanding all of this, that's going to allow you to kind of move towards the goal rather than, you know, it's the carrot versus stick kind of scenario
Te Kahukura: That's incredible. So, you know, someone's identified this and they're struggling with debt. Then they, you know, do a financial before photo. They see where they are. They run their numbers. They've printed out their bank statement. They can see their spending habits. They can see how much debt they are in. Then they, you know, draw a line in the sand and then go, you know what…the habits that I've had. They're no longer coming with me.
Shelley: They don't serve you.
Te Kahukura: They don't serve you. Okay. And then you identify the why. What is your why? And just thinking about, like, some of my why's. I, my whanau is so important to me and I. You know, I think about my future tamariki, my future children. And I really want to be able to provide the best, you know, resources for them. And I think that money isn't everything, but I think that it helps contribute to all of the things that are important for me. You know, hauora, education, all of so many things. Money is, you know, a huge correlation between and so we've identified the why, now, where does someone go next? You know, I'm thinking, okay. You know, they might be in debt. How do they kind of figure out, like, is this good debt? Is this bad debt? Like, would you be able to explain a little bit about what good debt and bad debt is, how does someone know the difference?
Shelley: Yeah, so good debt versus bad debt. Bad debt is consumer debt. Generally, we would call it short term debt. And generally, it's high interest high repayment short term. It's, it's generally used for buying something that's going to depreciate. So, it could be for example a car loan. It could be just kind of credit card debt that's spiralled. It's that buy-now-pay-later type stuff. Generally, you're, you're looking at around about a 20% or more, particularly with like we've seen consumer debt add up to sort of 49% like really predatory type stuff. It's the reason why there was some law change a couple of years ago around that kind of lending. But…
Te Kahukura: Can I stop you for a moment? Would you be able to just share briefly the consumer debt for those that don't know, what is that and what are some like other examples of that for people who might not be aware?
Shelley: Yeah, so it's, it's like buying a TV and you're buying it on credit. So, it could be clothing, you know, you go into the shop or you do a bit of online shopping and oh, look four payments of whatever can be for food. Yeah. Yep. That's it. Yep. So, you're using a credit card. You're either buying stuff and you're using somebody else's money, not your own, you know. And so if it is something that you shouldn't be buying or that you it's more of a want than a need, you know, some people do have to sadly, or they get themselves into a position where they do have to use it for needs. You know, that's a really hard case, but often it's connected to a want - something shiny? So that's what I would say is bad debt as opposed to good debt, which is something that, you know, your money that you're borrowing to buy something that's either going to go up in value or that's going to enhance your ability to earn. Open up an opportunity, say for example, a business loan. So, and enables you to make a living or a student loan. So, it's going to allow you to kind of lift your income over time with a new job role. So that's what I would consider to be that good debt side of things.
Te Kahukura: So those depreciating assets just for, for people who aren't aware. I like to think of it. When you buy a new vehicle, you drive it off the lot already. Instantly. I can't remember exactly. I think it might be like 30% or something ridiculous like that. As soon as you drive the car off the lot, it goes down in value. So, say, for example, you've borrowed $30,000 to buy a vehicle. You drive it off and say, that's $9,000 knocked off. Just throwing random numbers out here, you owe $30,000, but your car is only worth $21K now and so even if you were to sell it, there's still that gap. So, things that go down in value would be in that bad debt category.
Shelley: Absolutely. Absolutely. Yeah. And good debt is also, you know, when we get into the space we call it leverage. You know, and it's a this is a kind of financial concept. But you know, it leverage means that you're borrowing to buy something that's going to go up in value, but you're not using your own money. So, it's going to create you an income. So, leverage is good. We could probably you can probably park that for an investing conversation later. But yeah, I mean focusing on the bad debt that is the thing for you to prioritise clearing as quickly as possible.
Te Kahukura: Amazing. So, we've identified, you know we want to get out of debt. What are those first steps someone would take to start their debt repayment journey?
Shelley: Yep, so, write it all down. You can't attack the debt unless you understand what it is. And so, you'd be surprised by how many people I meet that they just have no idea of the extent of it. I can think of an example Te Kahukura, of a client that came in to see me where they had $250,000 of consumer debt, short term debt, high interest short term debt, and none of it was potentially there was a car loan in there, but it was just living outside means. And this person was a very high income earner. So, it was a maybe a sense of identity. You know, and their partner had no idea about this.
Te Kahukura: Keeping up with all of your friends who are earning, you know, high incomes and just living outside of your means, that must feel so heavy and scary?
Shelley: Yeah, their guilt was huge and obviously their partner had found out about it. And yeah, they came to see us to address, like, how can we get out of this? The partner was amazing. We really rallied and we…but the first step, honestly, is just to write it all down. And we did in that session with this particular client and more came out before the next session. You know, it just it becomes they were in it, what we would call a debt spiral. So, it was really, really, really hard conversations, tears. Yeah. So, he was really vulnerable around it all. And they really banded together and they worked with us to get what we would call a debt attack plan. So, lots of different ways around attacking short term debt. So, first step is to write it all down. We want to understand how much the interest is for each of those loans or those credit cards. We want to understand the balance that is owing and we also want to understand what are those repayments that you're making every month, because there's a couple of issues with short term debt, and one of them obviously is high interest. You're paying a lot of money, you're paying double, triple sometimes the value of what you purchased. And so that's the number one issue. But the other issue is high fixed repayments on the loan repayments. So, with short term debt it's generally over a short period of time because whoever you're borrowing from understands that this is a depreciating asset. So, you know if it's a car loan and the value drops, we've got to get that car loan paid off, you know, within 3 or 5 sometimes seven years. Depends. So those are the issues with it. So, we write it all down. We understand each loan and how much and the interest rate and that kind of thing. There's a couple of methods that we talk about.
There's a couple of methods that we talk about with attacking debt. So, one of them is debt consolidation. And one of the one of the issues with having multiple debts is that sense of it's out of control.
Te Kahukura: Yeah. And it's just overwhelming. There's like payments to all of these different people and yeah.
Shelley: Yeah, exactly. So, putting it all together. You know, it may not be that you're reducing the interest rate, but at least it's just one monthly repayment and one company that you're dealing with, not multiple companies sending you reminders for the payments at different fortnightly and monthly. You know, that's really stressful. So, from a stress perspective, that can be a really good way of kind of going. All right. It's just one company. One payment. If I've done my budget well, I can make that repayment. And this is the period of time over which I can make it. So that in itself, you've got a plan around that, that you know that you're going to eventually clear that debt. So that would kind of be one way of, of dealing with it.
There are some mountain related ways of getting rid of short term debt. For those of you out there who are into skiing or mountains, um, one of them is what we call the ‘avalanche’ method, and the other one is the ‘snowball’ method. So, the avalanche method is where you pick on the highest interest rate debt first. So obviously we don't want to pay as much interest. You know that's kind of the priority to attack. So that's the debt that you focus on first, and you get that gone and then you start on, on the next one. So, another really good method of debt reduction is what we call the snowball method. And this is the one that I prefer because it feels really motivating to, to pick bits of debt off. So, you start with the smallest debt. And you know that could be a $200 Afterpay. And you might think, okay, I can pay off $50 per pay cycle off that it's going to take you four pays. Amazing. Get that one gone. Then you work on the next one and the next one and the next one. And remember that's one less repayment you have on that particular debt per month. So, once you've picked that one off and the next one off, whatever you were paying per month on those particular loans or bits of debt you can now channel towards clearing the next. So, I like the snowball because it feels really motivating. If you've got a cluster of like five or six or more debts or different loans sitting there, it just simplifies over time really quickly and you feel like you're making progress.
So, consolidation, avalanche, snowball, lots of different ways. Possibly it's something you could do in conjunction with a financial mentor or a money coach. You know, it's all of the stuff can be done on your own if you're really motivated to do so. But getting that support, I think can help you stay the course. So, there's, you know, there's lots of different methods, but it's also the sticking to the plan, I think, is where people can come unstuck. And that's where we can segway to talking about money mindset if you like.
Te Kahukura: Yeah, yeah definitely and I think that also, you know, is why that why is so important. And so, one of the things that has, has helped me is like as part of my morning routine, reminding myself every day, you know, even now I still do it. Why do I why do I care about business? Why do I care about doing these things? And so I think if you're in that state, like reminding yourself every single day of the why and the vision is helpful, and then the other thing that I also like about the snowball method is that when you are in debt, it's almost like your self-trust tank is quite empty because there's this, you know, you might feel the shame, you might feel the burden, all of the things. And so, I find that having an approach where you can pay off one thing at a time, you're building that self-trust tank. And the more self-trust you have, you're like, cool, I paid that debt off. I paid this one off. Like, I can do this next one too, because you've just proven to yourself that you can just do even if it's the smallest one, even if it was like literally $50 bucks to your mum, whatever it is, you know, it just helps to improve your self-trust. And from there it can, you know, improve your overall money mindset. So, you know, I would love to, to touch on that, I guess.
[Short message from Te Kahukura]
Te Kahukura: Very quickly et te whanau. If you are enjoying today's podcast episode, make sure to share it to your story and tag us. All right, back to the show.
[Podcast resumes]
Te Kahukura: In those moments when someone is feeling completely overwhelmed, they're feeling debilitated and I just remember how horrible it felt to be so overwhelmed by my state. And as you said, it's often not just money. It's often your whole entire life. You know, I think about Te Whare Tapa Whā and it for me, it felt like every single element of Te Whare Tapa Whā…my mindset, my physical, my social, my, uh, my physical. Oh my gosh, my mindset, my spiritual, my physical and my social, all of it was a mess. And so, what are some of those initial steps to…people should take, or people could take to improve their money mindset?
Shelley: I think it's understand your money mindset and we start to get into money personalities. At enable.me we realise that. That's one of the first places we go, is to understand the psychology that feeds into why people behave this way. And you can be really good with money, and it can still be a negative thing, believe it or not. So, I work with a lot of clients who are what we would consider to be a saver. You know, reuse teabags. You know, those types of people.
Shelley: Yeah, I'm actually a saver, but I'm not an extreme saver. I mean, when I'm running my hot water to heat up my cup for my coffee, I make sure I catch it in the jug so I could boil that for later, like little things, you know? But you know, the money, personality we start to understand. So, it's part of that journey of understanding yourself, understanding what makes you tick so that you can seek out help around improving that. So, when we're when we're talking about that in a money sense, we actually have a financial star sign document, which I can share with you later. You can link to that if you like. Really cool. So, there are kind of three areas that we look at with people when we're trying to understand their money personality. So, the first one is your spending personality. So are you energised by spending money or do you actually feel a little bit sick when you buy stuff. So, the shopper or the saver. And there's an in-between. We call it a plodder. It's kind of neither here nor there, but the shopper, actually, there's a there's a dopamine hit when they spend the saver, there's actually an injection of cortisol. So, they actually feel a little ill when they're swiping their card. So those are the that's the kind of starting point in terms of, you know, how do you behave around money if you are that shopper type? Generally, that's the Afterpay type person. You would see that consumer debt that, you know, they have to have. There’s lots of I need, but it's really more of a want. So, shoppers really need guardrails. And for shoppers it's really important to understand the why and the goal. So, in the moment of the spend they've got to be reminded of why they're doing this. So that's critical for it that shopper personality type.
Then we start to talk about your willpower. And this is really interesting too. And there's a amazing author called Gretchen Rubin. She's written a book called ‘The Four Tendencies’. There are four different personality types, but it's how you respond to expectation, either from yourself or through others.
And it's kind of we imagine it to be like stick ability and willpower and how people are going to respond to it. Are they, are they going to stick to a plan, or are they likely to fall-off-the-wagon with that plan? And when we're coaching people to be better with money, it's really good to know which of those willpower personalities they are. So, you can jump online and figure out which one you are, and then you can hack yourself. So, if you're a shopper and you're actually someone who requires a lot of accountability, so you need that external accountability, you're going to need to work with a coach or align yourself with somebody, a friend who's really disciplined. So again, there's that environment piece coming into it. So really understanding how you behave around money and your money mindset. Then you can go, okay so what are these guardrails. I'm a shopper I need external accountability okay align yourself with someone who's disciplined. Just if you can't trust yourself with, with Afterpay, you know, remove it from your phone.
Te Kahukura: Delete it!
Shelley: Yeah. If you need to get rid of a credit card, you know that. You know, the trust really just isn't there. Generally, I've found people don't change their spending personality. They don't suddenly go from being a shopper to being a saver. So, shoppers need to be really careful to inspire themselves and to align themselves with people that they know are going to be good and help them achieve really healthy money habits.
Te Kahukura: That's really interesting you say that people don't often change it because in my experience, I have very much changed. Like so, I used to be a spender. So, I very much found, you know, a lot of gratification in buying new clothes and getting my nails done and I justified it as like self-care, when really it was just kind of filling a void. And then throughout my financial journey, it's kind of changed where, there was also a time, where I was very much in like the scarcity mode of like no save, save, save because I'm scared of going back to that period.
Shelley: You’ve crashed out of financing, rather than the lifestyle change.
Te Kahukura: Yeah, and so now I feel like I have a very healthy relationship towards money. So, I feel like I've been like on both ends of the spectrum, but that's not very common.
Shelley: Possibly you've really found that inspiration or that motivation, like you were saying before, like there's a family, real family connection or driver for you to provide for family, like whether that be now or future children or whatever. So, for you, you've really got a powerful motivator, I think. And that's, that's really pulling you towards being better with money in the now.
Te Kahukura: Yeah. So that's really helpful, I guess, for others, because I think there's a lot of people who, you know, who want to be better, but not because they want it for themselves. Maybe that's part of it. Maybe they're sick of the stress. But I think that there's a lot of tane also who feel the responsibility to provide for their whanau and so, if they can use that as a motivator, then that can help them to grow through this journey.
Shelley: Yeah, wahine too.
Te Kahukura: Yes, yes, definitely. You know, on the other side of debt, I think when you're, when you're stuck in it, you know. I can't remember who was talking about. It might have been you when I was listening to episodes about you and your journey. When you're inside the glass jar, you can't see the label. So, when you're inside it, when you’re in debt and you want to take this like, you want to zoom out a little bit and, you know, see what is life going to be like on the other side of this? What is it like? What does it feel like? How are people going to feel once they overcome this, when they get out of it? Because they think sometimes it's hard to have hope. It's hard to have faith when you're in those positions. And I get a lot of messages from people in our community who are really, really struggling and, you know, single mums who are trying to do their best, but they're just really struggling with the economic climate at the moment and cost of living and low incomes. And I think Māori and Pasifika are disproportionately earn less. So, when you're in those states, you know what is …how can you give them hope that they can get through this? And what is life going to look like on the other side of this?
Shelley: Yeah, and I think for those people that are in those real debts, and for a lot of us, it doesn't matter who you are really…having kids, you know, I mean, dropping income, you know, having, having that the cost, but also the mental load and the time and the energy. Like it's a really, really tough time no matter who you are. And I think but when you are in those depths of despair and you're trying to understand, well, how can I get out of this? It's, it's easy to say, I have hope, and you can think about what it might be on the other side. It's going to be amazing and visualise and all of that. But I think find somebody who's done this, align yourself. And it could be someone online. It could be a friend. Anybody really. And what was their story? I mean, you've got a really good story Te Kahukura…you know, like, what was your story and what did you do and how, how you were and the person that you are today. And look what you did and how inspiring that's going to be and the work that you're doing is so, so important because people can see that and you're very real and that's a real life example of someone who didn't behave very well around money, you know.
Te Kahukura: I didn’t.
Shelley: Yeah, exactly. But now you, you have, and so finding someone who's done it, a case study, a real life example and either working with them or following them or whatever. But I think once you are and you have to, unfortunately, there’s no alternative but to bring yourself out of this, you can't just be in a debt spiral forever. You can't. It's not sustainable to constantly be living outside your means. There needs to come a day where you are actually on the other side of it, and generally it can be when the kids are older, you know, and there's less expense and you have a little bit more ability to earn or whatever, but you've got no option but to not put one foot in front of the other. And I think particularly those single mothers, you know, they're brave and they're strong and they are so resilient. And it is just day by day putting one foot in front of the other. And again, if there is that habit of $5 every pay cycle and you're building that and then we start to get some wins, you know, you might have a child leave home and, you know, we're not paying school fees anymore. We can add to that $5 and make it ten, you know, and just start to take those little wins and start to really spiral up rather than spiralling down. But the opportunity when you are in that space where you've moved through clearing, if there is sort of short term debt or a really hard period of time, think about the opportunities and this is where we come back to the vision and the zooming out, a love that you said that because we do need to, to step back and go, well, what am I aiming for here? And what's going to inspire me to keep going in the hard times and we just put one foot in front of the other.
Te Kahukura: Most definitely. I love this. In one of the reasons why I actually started Māori Millionaire was because I looked in the finance business. As much as I love, you know, our financial educators in New Zealand, I found it quite hard to see myself in them, you know, as a wahine Māori and so I think that finding expanders, I call them expanders, people who have possibly grown up in similar, you know, situations as you who have been able to overcome similar obstacles as you because it, it rewires your brain to find evidence that, well, if it's possible for this girl, it's also possible for me and obviously everyone has different circumstances and all of that, but I think that it's helpful to find expanders, you know, people who you relate to who have been able to do what you want to do. And it just yeah, it creates the evidence and it helps you to remind yourself, I've had so many people message me and say things like, what would Te Kahukura do when they're thinking about, you know, different things? And I think that's cool because it's just showing that, like, we can all do this, you know, no matter what. Ahakoa te aha, no matter what, we can find a way, you know, through this.
Shelley: It's called confirmation bias. So, yeah, you're looking for things that are what you want to confirm your beliefs. And you can do that in a positive or negative sense. Yeah. So yeah seeking out confirmation of positivity is going to be a really good way of helping you to get there.
Te Kahukura: Yeah and I actually just wanted to touch on that briefly about like the negative way because I've also had it happen the other way where I thought I was a huge blamer. So, I blamed the system, I blamed adults, I blamed past things in my life for why I was a mistake that I was. And what I found was that I only found evidence of this because I just kept on searching for it. I was like, it's this persons fault, it's this person's fault. And I had to switch my mindset to think about the good things, think about, you know, you can overthink the bad things. You can also overthink the good things. And so, I had to start brainwashing myself and I did that through podcasts. Like I would listen to episodes like this every single day when I worked and I would just brainwash myself to believe it's possible and it really helped me.
Shelley: Your mind is not you - disconnect the mind from Te Kahukura. You can tell it anything and so the more you feed it, and the more positivity and optimism that you feed it, it believes it and then it seeks out confirmation of such. It's a, it's a pattern piece in the brain. It's fascinating neuroscience.
Te Kahukura: I want to go back to debt, briefly and actually talk about, you know, good debt. How can…what are some examples of good debt and how can this be used to potentially help someone in their wealth journey?
Shelley: Yeah, so good debt might be taking on a student loans. So, if you found yourself in a situation where you didn't quite get the education that you wanted, you could do some part time study or full time study. So, student allowances, if you can make that work. But taking on a student loan is a good example of good debt because yes, it's debt in this country, it's at 0% under most circumstances.
Te Kahukura: As long as you’re here in New Zealand.
Shelley: If you stay in New Zealand. But yeah, so it's at 0% which is great. But you know when you're improving yourself. So that's that kind of that sense of self-worth to because again I can do this, I can get educated, I can get that degree or whatever it might be, and that's going to lift my income. So, you've taken on debt, which, you know, you kind of feel like debt is a bad thing, but the kind of debt that you've taken on is opening up opportunity to lift income. So, a student loan is a really good example of that. Another good example of good debt is, you know, potentially business loan. You know, it might be, you know, a coffee cart or something like that. You know, it's going to buy you an income with business debt. I use the concept of leverage. And it sounds like a really big word, but it just means borrowings. But you're leveraging, which means you're kind of propelling yourself forward. So when you're in business, you're actually leveraging off the efforts of other people because you pay them a set amount, but you actually receive any profit over and above that if it's a profitable business, which we hope it is, but, you know, you can take on debt, you will have to pay for that, but, you know, have an interest rate on that debt. But again, it's creating you that income and it will be tax deductible against the income you're receiving. So, a business loan, assuming the business is a good business can also be an example of good debt. For some of us, getting on the property ladder is a really good way to achieve security of housing. And this is going to become a bigger issue, I think, in this country is that that housing instability piece. So getting on the property ladder and becoming mortgage free as quickly as you possibly can is kind of still the way to make it work, because ultimately, when you don't want to work anymore or when you can't work anymore, we've got to be in a space where we don't have to pay for accommodation because it adds so much more onto your cost load, and the NZ Super just isn't enough to cover it. So, you know, getting on the property ladder, getting a mortgage. You know, we've got to be really smart about getting that mortgage paid off as quickly as possible. You know, that can be another example of good debt. As long as you don't overdo it and take on too much.
Te Kahukura: I love that so much. So, I just wanted to touch a little bit on leverage. And I guess for like people who haven't heard the term before, how I kind of think about it is if you can make money from someone else's money, so borrowed money - you're able to grow, you know, you're able to do more with that. As an example most people probably can't afford to buy a house in cash, whereas if you invest in a property and you're able to use borrowed money from the bank to make a return on that, then you're able to do more than what you would do if you could only use cash to buy assets. The other thing I wanted to just touch on quickly for anyone who’s considering going into study, I guess like my mindset. My little caveat with that is, I think that so many of us will go into study but don't necessarily consider, like, what are you actually studying? And, and is it actually a potential income stream or a sustainable, you know, kind of thing. So as an example, I thought that going to law school, I could be a lawyer and I would be successful and, you know, people would respect me and I saw lawyers made a lot of money. And as much as I am passionate about, you know, law and things like that, it wasn't I was more motivated by those things. So, I would just encourage anyone who's considering going to study to consider, is this actually going to be, you know, a good investment? Is this something I truly want to do, or am I just listening to other people who are telling me to go and do this? Because I can also see how for some people, if they are just professional students and I've, you know, met a few who are just like constantly doing different kind of things, it could potentially be in the bad debt space, where they're just, you know, depending on what it is obviously, and what they're doing with that.
Shelley: Yeah, it’s definite caveat. And when I see people where they've got a student loan and they've still got a low income, it's like, hey, what was the deal here? What gives? Like why, why did you do that. Like, you know, you wanted to become or do this this degree or whatever, but why. What was the motivator behind that? So I like that caveat because I have definitely seen that in the past where studying for studies sake, not because it's necessarily going to lift income. You know, that's really a privilege to be able to study for studies sake, because when you're studying, you need to create the time for that. And for some that looks like dropping down what they need to earn or earning less or not earning at all. So yeah, I totally agree with that point.
Te Kahukura: So, I wanted to ask you a question that people are asking all the time, like non-stop. Should I pay my mortgage off or should I invest? What’s the answer? What should someone be considering if that's a question that's playing in their mind? Maybe they've got a little bit of wiggle room and their finances. Should it go towards paying off the of their mortgage or should they invest in something else?
Shelley: So, this is a question I get asked all the time, like every day almost when I see people. And I think the reason why investing has become more of a buzzword, I think, I think it's to do with social media. There's a lot of people out there talking about investing. It worries me a little bit, I have to say, because when we're talking about investing or anything really in a financial sense, I want people to take qualified advice, you know, especially when it's something really big, like taking on a debt or, you know, investing in some shares or something like that and there's a lot of accessibility now with a lot of kind of apps and platforms that you can invest really, really easily and quite substantial…there's no, I don't think there's any limits around how much you can invest. So, it worries me a little bit that there's a lot of information and a little bit of misinformation that is not coming from a qualified financial advisor around investing. So, I'm just going to say that. So just be a little bit careful when it comes to investing out their people. It is a bit it can be a bit of a minefield and we're not trying to pick what's going to happen. So that's where it can get a little dangerous. But the question was should I invest, or should I pay my mortgage off? We all really need to be investing, and I call that sort of part of that wealth creation, because you can't just muddle your way through life and then hope to live off the New Zealand Super. So there needs to be an accumulation of money, and you need to invest that money to make sure it grows at a higher rate than inflation. So, then you need to start looking at, well, how much is this investment returning me versus how much I'm paying on my mortgage? So generally, as a rule of thumb, I would be saying get rid of the mortgage as quickly as possible ahead of investing, particularly if you're contributing to KiwiSaver, because if you're contributing to KiwiSaver and you all should be for those salary paid people out there. I'm so in favour of lifting KiwiSaver contributions it's amazing that is investing. You are already doing it when you have a mortgage. Paying that mortgage off as quickly as possible is actually a guaranteed return. So, if you're taking some money and you are investing that over and above your mortgage repayments, you better hope the return that you're getting on those funds is more than what you're paying on your mortgage after fees and tax.
So, if you're on a 5% interest rate, you kind of back engineer that you need to be closer to sort of 9% returns by the time you take out fees and tax on those returns. So, when you're investing and you're investing in the share market, as you know, the share market is very volatile. Shares can go up and down. And that can happen on a dime. When you pay off your mortgage as quickly as possible, you're not paying 5% on that mortgage. So, I would generally say in most circumstances on your lifestyle asset, which is your home. So, it's not really an investment asset. It's just a house that you need to get mortgage free on so that in retirement, you've got a safe and secure stability of housing when you don't want to work anymore. That would be the first port of call. That's the advice I'd be giving my clients. Be very, very careful investing over and above that.
Te Kahukura: I really love this, this korero. And I think when it comes to investing, obviously there is no guarantee that, you know, things are going to go up or that you can expect a certain return. But I think that there is, you know, some you know, this exactly what you're talking about. There is a guarantee that, you know, if you pay off your, your mortgage, you're not going to have to pay that interest. That's going to save you money and you can you can literally know that that's going to happen. And I also think, you know, the same applies for KiwiSaver, where I think of it like that. First, you know, $1,042, you're definitely going to get that $261 from the Government. If you have a job, you're also going to get that, you know, 3%, which is actually when this episode comes out, it might have gone up, but, uh, you know, you, yeah, you're going to get that guaranteed. And so, I think that when it comes to investing, some people I guess should be more mindful that you can't get guaranteed returns. But there are some ways where you can, you know, know that you're definitely going to get your Government contribution. You're definitely going to save money in interest.
Shelley: And that's the beauty of KiwiSaver.
Te Kahukura: Yes. Yeah. At the moment there are a lot of people who are very much struggling and, you know, they can't afford their repayments on their debts. They're just completely overwhelmed. They feel burdened by this. And for a lot of them they're like, you know, they hear about like creating a money plan and, you know, doing the numbers and they've done their numbers. They're not spending money on discretionary things anymore than not doing things that, you know, are quote unquote bad with their, with their money. They're trying their best, but they just feel like there's what else can they do. They're really struggling. For people who are in that position, what could they do?
Shelley: Yeah. And sometimes it's just gone too far. Like, it's really, really bad. And to try and even get a plan, you know, around attacking debt, there's just it it's never going to work. So as a very, very last ditch there is the possible option of bankruptcy. So again, it's not something to be taken lightly. You would really need to seek professional advice around, you know, what are the implications of declaring bankruptcy. You know, but loosely the processes is, you know, debts can be wiped. They look at your assets, your liabilities. They allow you to, you know, retain a car, but you kind of have to liquidate any other kind of assets that you have. But yeah, potentially that would clear a lot of the liabilities so that you can have that fresh start. But the implications of becoming or declaring bankruptcy are quite far reaching, and it's definitely not something to be taken lightly. It can affect your future ability to get on the property ladder, your credit history. You know, a lot of people can feel shame around bankruptcy. But yeah, if you're in that space where it's just feeling like insurmountable, it's an option to consider and you can go and seek professional advice as to what that might look like for you.
Te Kahukura: All right. E Te Whanau we have a short list of some money moves that I would encourage you to look at today, if you want to get out of debt, we want that before photo. You want to identify your numbers. Where is your money going? How much debt are you in? What is the interest rates. All of those really good numbers. Next, we want to talk to someone. We want to find someone who can help us find those expanders, people who have navigated what you have to, but have been able to overcome it. Find someone who can support you. Money Talks could be a great way to connect yourself with a money coach who could help you throughout this situation.
Handing back over to my friend Shelly, what would you be able to explain to us what good debt and bad debt is? Just as a reminder for anyone who missed it.
Shelley: So good helps you to buy things or do things or take opportunities where you're likely to receive income or buy something that's going to go up in value. Bad debt, generally associated with things that are going to go down in value or depreciate in value. So, we want good net, good debt, not bad debt.
Te Kahukura: Yeah, we don’t want good nits either.
All right and so just wrap us up. Are there any kind of final words you'd like to leave our audience with today?
Shelley: Yeah, I think so. Like, you're so right about kind of taking that picture of how you are at the moment and that you're going to move away from that and draw that line in the sand. But let's help to visualise like, who do you want your future self to be? Own up to it. Take those steps one at a time because your future self will thank you for it.
Te Kahukura: Hei whakakapi to taiwa korero, I just wanted to say thank you so much for your time today. I have learned so much. I found it so interesting to hear from you, and I think that so many people are going to find a lot of value in today's wananga. So, I just wanted to really thank you for taking the time out of your day to be here with us today.
Shelley: So welcome. It's been an absolute pleasure.
Te Kahukura: Amazing.
[Text on screen: ANZ logo, Māori Millionaire Presents How We Money]
Voiceover by Te Kahukura: Your money move today. List your debts in one place. The amount, interest rates and minimum payments. Clarity always comes before control. ANZ has some useful information to help you manage debt on their website and an awesome budget calculator tool too. I've linked to these in the show notes below.
If you found value in today's episode, please make sure to send this to a friend, whanau member or on your story too. Make sure to tag us.
The information in this podcast. Is for general information only and isn't financial advice. The views of the host or guests are their own and do not represent ANZ. ANZ and Māori Millionaire does not guarantee the accuracy or completeness of the content and isn't liable for any loss arising from its use. Please seek personalised advice before making financial decisions.