Q: Can you recommend an organisation which is providing budgeting and money management services operating in the financial interests of the mentally unwell?
I suspect a sibling has debts which are diminishing his ability to function in any reasonable way. The person has no inclination to be open or honest with me or other family members. He is, however, not completely beyond approach, being an aspiring businessperson with a keen interest in financial success.
It would be beneficial to his family relationships if we knew that someone in a professional capacity had an overview of his financial position, assuming he volunteered to participate in a financial audit and, if need be, a plan to improve his financial health.
Is there anyone who does this sort of thing? How are they funded? Rate and likelihood of success? Any special powers of investigation?
A: The organisation to go to is MoneyTalks.
"Our free MoneyTalks helpline listens and provides advice and support to anybody who wants help with their money," says Clare Wilson, MoneyTalks Team Lead.
"We share information, provide choices and connect people with local services such as foodbanks, health services, consumer rights and employment services. We help people to communicate with Work and Income, fill in KiwiSaver hardship applications, find ways to save, or manage debt collectors.
"We understand food is the immediate need, and it's much easier to korero and plan with a full tummy! Our financial mentors are knowledgeable and passionate about making a difference. They are there to coach and walk with the person on their journey."
Financial mentors are available throughout the country. See the MoneyTalks website.
In answer to the questions at the end of your letter:
• MoneyTalks is part of FinCap, a non-government organisation funded by the Ministry of Social Development.
• "Rate and likelihood of success? Depends on the client's willingness to engage," says Wilson. "Being open to talking about options with others is the key stepping stone. Financial mentors offer long-term session assistance, and are trained beyond budgeting to allow them to appreciate the needs of different people.
"Rarely does a client have just one need, so we work with many community organisations to allow us to respond to all the different things someone needs help with.
• "Any special powers of investigation? Yes, with a privacy waiver from the account holder, a financial mentor can renegotiate repayments, interest rates and contract terms based on the affordability of the individual debtor. Sometimes in the case of a client with mental health needs, a debt may be cancelled altogether as the debtor was not in a position to reasonably understand the contract terms when they signed."
Wilson adds, "MoneyTalks has a Building Financial Capability (BFC) Champion who is able to case manage clients in dire situations where information and communication would assist a client's relationship with Work and Income. We work with specialist advocates nationwide to allow clients to connect with a buddy for ongoing assistance too."
All this sounds great, but how do you get your sibling to accept the help offered? It might be best if you make the first contact with MoneyTalks, and discuss how they might be able to help.
Says Wilson, "We offer a strengths-based approach. This means we look to build confidence of individuals by giving them the time they need to talk with us, via phone, email, online chat or txt.
"The sibling may find it easier to use a different communication approach which gives the person time to respond, rather than a phone call which can be daunting sometimes. Offering to support someone by walking their journey with them and spending time together builds trust, rapport and understanding."
Good on you for taking this on. I hope it goes well.
And I'm sure many other readers and their relatives would also find MoneyTalks' services useful.
Help for home buyers
Q: I wonder whether the help we gave to my daughter and son-in-law some years ago to have their own home would help others.
We purchased a home of their choice and our budget, using the equity in our own home. They were to be responsible for all outgoings and maintenance and hopefully to buy it themselves eventually.
We had a separate bank account set up into which the mortgage was to be paid by them and debited by the bank. It worked out perfectly, and if it had not, then the house was owned by us, so there seemed to be no risk. We did trust them and had a good relationship, which is probably necessary.
Any equity gained in the property was to be theirs. In fact, they didn't buy it off us. We "gifted" the property to our daughter over time. It was sold after 13 years and they kept the very considerable capital gain.
They have since used the money to buy another home.
PS. We were not by any means wealthy and our home was our only asset. Hopefully this example will help others.
A: I like this idea. While many people won't be in a position to do something similar — perhaps because they have several adult children — for those who could manage it, it sounds great.
I especially like that you owned the house. So if the young ones didn't make payments, or separated, you could always sell.
You're not the only ones with this sort of plan ...
Tax and the house
Q: We sold our house last October and moved into our bach and paid it off. We had planned to buy a rental in Wanaka with the rest of the proceeds. The Wanaka house would have a mortgage.
We were going to rent the house to our son and his partner for the next five years to cover the mortgage payments. We planned to sell the house to them after five years or so, sharing the capital gain with them.
My husband is still working and earns a good salary. He's got another eight years until retirement. I don't work.
The new law changes for rentals have put paid to that plan as we'd have to keep the house for 10 years or pay tax. We are now at a loss with what to do for the best.
We'd still like to help our son, but need to safeguard our future retirement. If we don't buy another house, what do we do with the leftover money?
A: How about planning to keep the house for 10 years and then sell it to your son and partner, without paying tax on the gain in value?
Or you could plan to sell earlier, but only if the tax isn't too painful. Here's why that might be the case:
• House price rises might slow — or prices might even fall.
• Once your husband has stopped work, the tax rate applied to the gain will be lower.
• If you are sharing the gain with the young couple, presumably that means you will sell to them at below market price, making your gain smaller.
If all of that doesn't reduce the tax enough, wait until the 10 years are up. Otherwise, I suggest, you may be letting the tax tail wag the dog.
Q: I think you have mentioned this in the past, however it appears to have been lost in recent times. If you purchase a rental to make a capital gain, i.e. profit, then that profit has always been taxable, bright line or no bright line.
The bright line may make this black and white for the average investor. However, we should instil the fact that if you buy and sell to make money then the gains are income and attract tax no matter when you sell.
Hopefully IRD, with all the information they collect, have the resources to "police" property transactions (and others of course) fully, so that everyone pays their fair and proper amount of tax to contribute to society and one of the best countries in the world!
A: Help! Will I ever escape? I've been trying to steer this column away from rental property and capital gains tax. We've had too much on that lately. But you raise a point that does need to be made again.
Under the heading "Personal property held for sale or exchange", Inland Revenue's website says, "For tax purposes, this is any property that is not land. If it's bought with the main intention of reselling it, then the profit will be treated as the seller's taxable income.
"It's also possible that if you buy and develop an asset, intending to make money by reselling it (for example, restoring a car or a vintage guitar) then your profit may also be taxable income." This applies to shares, rental property, collectibles and other investments.
The trouble with this law is that it can be tricky to prove what a person's intentions were, back when they bought. As a result, I understand many people have wriggled out of paying this tax — which is why the bright line tests were brought in.
It's yet another reason for bringing in a comprehensive capital gains tax. There wouldn't be wriggle room and we would all know where we stand.
Q: I am not far away from being eligible for NZ Superannuation but I would like to continue working for a few years. However, I am getting mixed messages from my friends.
Some who are already retired tell me I can earn as much as I like and I will still receive my full pension. Others tell me there is a level of earning over which I will be taxed more heavily. I can't seem to find out the details around this. Could you explain?
A: NZ Super is always taxed. For someone who is not working, or they earn less from their job than the amount they receive from NZ Super, the tax rate is low.
But if you're still working, and your wage or salary is more than your NZ Super income, you need to look at the total amount you will earn in a year, including NZ Super. If that total is:
• Less than $48,000, your Super will be taxed at 17.5 per cent.
• Between $48,000 and $70,000, your Super will be taxed at 30 per cent.
• More than $70,000, your Super will be taxed at 33 per cent.
So yes, tax takes a big bite out of NZ Super for those on higher incomes. I wouldn't let that stop you from working, though. That would be another case of the tax tail wagging the dog.
Q: Last week's letter from the person unhappy in their job struck a chord with me. In 2000 I was in a job earning a figure similar to that quoted by your correspondent ($95,000-plus). Had the company car etc. I was in my early fifties, my wife was working, children at uni. Living the good life. Working long hours, 120-plus staff. Good fun.
One morning driving to work, I thought, "Why am I doing this? I hate this life." Went home that night and talked to my wife and decided with her full support to get out of there. We were okay but not super well off financially because of the way we lived.
This turned out to be the best thing I could have done at that time. Funnily enough, my wife took the same path less than six months later.
Since then I have had a number of lowly paid jobs, and we have operated our own business. But best of all, we had a life we enjoyed that we largely controlled.
We retired at 67 and are quite content. Not rich but comfortable. I believe if I had carried on the way I was going, I would either be in a box or in psychiatric care. Your advice to this person is exactly what I would support.
A: For those who missed last week's column, I suggested the reader move to another job, even though she would earn less.
Thanks for a thought-provoking letter. Today is May 1, International Workers' Day, so it seems appropriate for all workers to think about why we are working, and whether we're in the right job.
- Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to email@example.com. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.