Increasing Financial Capability / Tom Hartmann

Part One

Is it your smarts or your starting point that determines your success at building wealth – not likely! Tom Hartmann, managing editor at the Commission For Financial Capability joins me to discuss.

It’s easy to assume those who are wealthy are ‘lucky’. Lucky enough to have great parents, go to a good school, get a good education then a good job. In reality, true financial capability comes from keeping your eye on the prize – forgetting the past and driving clear on into the future.

Tom Hartmann, managing editor at the CFFC (Cat Frog Frog Cat, or more accurately, the Commission For Financial Capability), is joining me to discuss.

Currently, retired people cost NZ $38m per day – that figure will double before we know it. NZ is not a huge country, but we have a rat moving down the throat of a snake when it comes to the seismic demographic change to come. We have, or will have, a superannuation crisis. You can disagree over this, but for many, government super is a not a huge amount to get = $21,380 pa – that’s only 43% of the average income in NZ. Already, we are seeing retired people live in poverty, and this is going to get worse. This ‘not enough’ amount we’ll get in retirement could already be unsustainable for our government in the future too. What do we do when the cost of providing this exceeds the benefit it was designed to provide?

The CFFC is actively involved in helping Kiwi’s build financial capability, and their work via the Sorted website testifies to this. It started out as a free and unbiased resource but now, it’s evolving into something that is a force for change. Initiatives like ‘Sorted in Schools‘ and ‘Sorted at Work’ are two examples of how they are pivoting with targeted initiatives designed to create change pro-actively – this is awesome to see.

So, the problem? As a country, and as individuals, we all have to deal with a retirement crisis that will arrive at some point in the not too distant future. Let’s talk about it for what it is – a huge problem.

The current solution? Education is one of the solutions and the more that’s out there the better. Much of the free content out there however, and no one is innocent here including myself, often acts like more of a ‘sales funnel’. Great information, but designed to sell a providers solution or even a certain set of ideologies. The only true un-biased content is often built for the general audience only and may not in fact, be fit for purpose for the reader. Financial advisers are a great resource, but often it’s only accessible to a very small portion of society.

The best solution? I don’t think I’ve seen it yet to be honest, but the CFFC and Sorted as a resource in particular, is moving in the right direction. No matter where you are at your wealth-building journey, there’s a huge amount of content you should check out there.

The best solution to address our retirement crisis is not currently apparent to me though. Information is not enough, unless it leads to a change in behavior. I suspect that not until we see a closer working relationship between private sector initiatives with public sector governance, will we see a solution that’s effective for the majority of Kiwi’s – the important thing here is that we’re moving in the right direction though.

Part Two

You’re not in the intensive care unit, but you’re not just going to the GP for a routine check-up either – you’re in ‘The middle’.

Often the ‘middle’ get over-looked when thinking about who needs financial advice. Sure, many ‘middle class’ people are in good shape relative to those drowning in short term debt and spiraling out of control – but often this group of people have aspirations to do more, but struggle to get their act together. There could be many reasons for this, but perhaps they simply have not gone through financial puberty yet.

Having a good income does not equate to having wealth – in fact, it’s odd but often those with good income ‘leak’, and fall behind right when it’s critical to leap ahead.

Tom Hartmann joins me again in the studio to pick up the conversation we started last week.

If you find yourself financially left behind, have a think about one thing that you could do to turn your ship around. Often a series of not-so-awesome decisions put you into your current position. What could get you out of it could simply be a series of better decisions – there is hope. Perhaps for you simply doing a budget is all you need to do. If so, check out this budgeting tool from Sorted.

Perhaps you’ve left investing a little too late and assumed that it was something that only really wealthy or smart people do. The wealthy bit will take some time to grow, but perhaps you do need to increase your smarts a little (if you’re reading this I think you’re doing well already though!).

The great news is no matter where you are, you can make some good decisions today…you can learn something more today…and maybe even start to take action today too.

Hope you’ve enjoyed this episode.

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Where to find Darcy Ungaro:

Ungaro &Co (registered) financial advisers