Having a large income does not guarantee financial stability or long-term success, says Nick Stewart.
Having a large income does not guarantee financial stability or long-term success, says Nick Stewart.
OPINION
Being “rich” and being “wealthy” are not as synonymous as you might think.
Being considered rich typically means earning a high income and may come with a lifestyle associated with high spending. Money comes but money also might go on keeping up with the Joneses.
There’s no real linefor when you would become rich. If we look at the tax rates, $180,000 and above is the highest taxable income. So looking at what New Zealand’s top earners bring in, we can see there is a lot of leeway here for what might be considered rich.
The numbers dwindle as earnings start to get drastically higher than the average – the number of people earning $180k is about 12,500, then $200k is around 8000 and $250k earners are an even smaller drop in the population bucket at 3500.
If you have two high earners in the same household (given most families have two people in employment), the combined income can easily double or triple the average.
Taking the time to seek a second opinion on your financial health can only give you more confidence, writes Nick Stewart.
Alas, having a large income does not guarantee financial stability or long-term success. Often it just lulls people into a false sense of security, where lifestyle creep can lead to excessive spending that is difficult to curb if and when the situation changes.
For many, it’s the classic Aesop tale of the ant and the grasshopper – while the ants worked industriously to build up stores for the winter ahead, the grasshopper made merry all summer and was caught short when the weather changed.
That’s not to say that high earners – or anyone else – don’t deserve to have fun or enjoy life in the moment. It’s just a huge risk to do so at the cost of your future stability.
Focusing on being “rich” and living the accompanying lifestyle won’t make you “wealthy”.
Being wealthy is about looking away from the immediate gains and taking a long-term, holistic view of your financial prosperity. It’s not about reaching a target but about making sure you can continue to live a meaningful life with loved ones and family – particularly once you are in the financial decumulation stage of life (retirement).
True wealth starts with changing your mindset to focus on the bigger picture and can take years to build.
It comes down to what you are centring your financial plan around. When you whittle it right down, your plan likely won’t be about a number at all. It will be about buying back time that you can spend doing what you want, with whom you want.
Of course, there are fiscal considerations. But it’s about how you approach them. Money isn’t a goalpost, where you will magically become happy and carefree if you can hit a certain score. Money is a tool that can be cleverly leveraged to build stability, safety and control – much like the ants.
As with any tool, and any trade, it’s best to come to the experts if you want to really stick the landing.
Stress can be toxic to your health. A build-up of cortisol is a recipe for living a shorter, unhappier life. Unfortunately, financial stress is a huge contributor to this. Either we worry about the money we have, or we worry about the money we don’t have, or even the money we think we should have by now or in the future.
Engaging a trusted fiduciary can help take the burden of this stress off your shoulders. A financial adviser understands your risk appetite and lifestyle and can provide face-to-face advice and services to help ensure you are in the best position to reach your financial goals.
They will help you to build a strong frame to support your financial house, so you can focus on more important things like family, friends and your well-being.
Building wealth is about more than your salary, and certainly more than the car you drive or the suburb you live in. If you would like to focus on your long-term wealth-building goals, or want a second opinion on your financial plan or investment portfolio, getting in touch with your local fiduciary is a great first step.
Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a financial adviser and CEO at Stewart Group, a Hawke’s Bay-based CEFEX & BCorp-certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, wealth management, risk insurance and KiwiSaver scheme solutions. Article no. 352.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a financial adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz.
