Why swimming naked could land you in intensive care
There's a well-known quote: you can't tell who is swimming naked until the tide goes out. In other words, you may live in an upmarket suburb and drive a flash car - but if you are up to your eyeballs in debt, you're not as well off as everyone thinks.
A new approach to New Zealanders' financial health, stripping away the outer garments cloaking our vital signs, is being used to assess our real position, not how rich we appear to be.
It uses a 'hospital' metaphor - showing one in five New Zealanders' money situation is so dire they need intensive care, while one in three could end up in the same position if they don't get help.
The categories were drawn up by the Commission for Financial Capability and Sorted - the free website dedicated to helping everyone get ahead financially. Retirement Commissioner Diane Maxwell says the taxpayer-funded Commission carried out research placing everyone in three groups: intensive care, on the ward and GP visits.
The research was based on interviews with 3500 people and a sample of 1900 Sorted users; it sought a flavour of people's readiness for retirement - a topic of increasing urgency as we get closer to the 2050 date when one in four New Zealanders will be aged over 65.
It found 21 per cent were in ICU financially, 30 per cent were 'on the ward' and 49 per cent were financially fit, needing only 'regular GP visits'. The results across the sample of Sorted users were better with 66 per cent indicating they were in the GP bracket.
Effectively, it means half the population can get by with the equivalent of a GP visit - a regular check-up on their financial situation and a bit of timely advice or information to keep them on track. Those 'on the ward' consist of about a million Kiwis, then the rest are in ICU.
Maxwell says: "If those 'on the ward' do things like using Sorted in the right way, using the calculators to see how they are placed and what they can do - it can make quite a big difference. They could move into the GP segment rather than down to the intensive care unit."
However, others in the 'on the ward' category are only one financial misstep or mishap away from the ICU - and Maxwell uses the example of friends of hers.
"They are paying a lot of money to rent a big house in a good suburb. If they wanted to buy, they would have to downsize considerably from their present house," she says. "They have big cars and live well, they probably drink too much bubbly.
"You'd think, on the surface, things are good - but they don't have assets or savings. It was Warren Buffett who came up with that quote about swimming naked and there are a lot of people 'on the ward' who are doing what my friends are doing."
Those swimming naked could be just one setback away from shifting into intensive care, in financial terms - and the overall research demonstrated a total of 51 per cent of Kiwis were either in poor financial health, needing urgent medical intervention, or in hospital - still coping but vulnerable.
Maxwell says the research also applied key factors like home ownership and debt - finding home ownership in the "intensive care" sector was only 30 per cent, compared with 75 per cent among the GP crowd.
You can see what sort of treatment your finances might need by answering six questions: https://www.sorted.org.nz/home/diagnose-your-finances/
The new-look Sorted can help those on the ward with recovery and keep those seeing their GP out of hospital. Those in most urgent need may need specialist help - but could check out the Money Personality quiz to get a better understanding of their financial behaviour.
Other tools to use:
Sorted's debt calculator helps work out how to become debt-free. The savings calculator shows they best way of putting your money to use.
Those on the ward may only need some additional support and treatment:
The net worth tool will illustrate how much you own, set against how much you owe. The budgeting tool will help give you plan where you want your money to go.
The Sorted mortgage calculator will demonstrate the massive impact paying off a mortgage quicker can have and, for those in need only of GP visits, the KiwiSaver account calculator can show how to save more - and what can happen when you do - while the Investor Kickstarter can define what sort of investor you are.
This is the final in a series presented with the CFFC. For more information on tackling your debt, sorting your money and seeing your future, go to the new Sorted website.
This is the final in a series presented with the CFFC. For more information on tackling your debt, sorting your money and seeing your future, go to the new Sorted website www.sorted.org.nz