Just about everyone will tell you should buy a house.
In the not-too-distant past, NZ house prices were 4 times the average wage.
Now they are more like 8 to 10 times the average wage.
If house prices are very high, the benefits can become negative for the family unit.
Take a typical young couple, Jim and Jane - Jim earns $60,000 and Jane earns $40,000 - a combined income of about $7,000 per month after tax. If they can raise a mortgage of $350,000 at say an average 7%, the repayments will be $3,145 per month. So far so good.
They buy a house and all is well till Jane stops work to have a baby. Her income stops and even with the maternity benefit, their total household income after mortgage payments leaves them in a tight position.
Jane rushes back to work as soon as possible, puts the baby in care, but that takes a big chunk of her wages, so things are still tight.
All it takes is for mortgage rates to rise, the car breaks down, illness, redundancy, accident or other unfortunate event.
Is this too close to financial strangulation ? The result can be marriage failures, children not getting the best family life, the parents under all sorts of pressure, and so on.
On the job front, Jim has to have a job, tied to an employer, even kow towing to his employer because he has to have a job. There are potentially huge personal costs and massive social costs to NZ too.
But must we live this way?
Perhaps It Is time for a big rethink about how we do things in NZ.
There has to be a better way.
We must do better for our own sakes, and the for the sake of our children too.
No doubt some people will say “What's the problem? We scrimped and saved to get into our first house, and we eventually got there financially."
It is generally agreed some self-help and personal determination that leads to success is highly desirable.
But houses now cost 8 to 10 times the average wage, not 4 times as it was in the past.
The key is to START in a better position by being smarter.
Don't accept the status quo just because that's what everyone else does. You don't have to do the same.
And you don’t have to be a rocket scientist either to work all this out. Be patient, be a thinker, and make haste slowly.
Find a different way.
Well-paid offshore jobs – even better if they have free accommodation and are tax free.
In NZ try and find something that includes free accommodation.
I met a motelier this week in the lower North Island who says he cannot find a reliable honest manager – he is offering free accommodation in return for 2-3 hours work daily – could be quite good for young families, and allow young mothers to be at home.
Convert Mum and Dad’s garage to a flat and live there and save.
Put a removable “granny flat” on Mum and Dad’s property.
Buy two flats instead of one house – live in one and rent the other one out.
Buy a house that has a sleepout that can be rented out, or has room to build one.
Or a house can be divided into accommodation for you and a flat to rent out.
Nb. be careful not to overcapitalise on the property.
There’s always a way – you just need to be inventive, open minded, and not necessarily accept the status quo.
Supplied by Alan Clarke, financial & retirement adviser, & author. His second book is virtually complete, & he also writes regular articles for the media & on line – see www.acfs.co.nz
Alan is an independent authorised financial adviser (AFA) FSP26532 & his disclosure statement is available on request and free of charge.