It’s Money Week, and we’re talking to well-known New Zealanders about their financial lives and the lessons they've learned over the years.
We continue the conversation with Westpac Chief Economist, Dominick Stephens, who opens up about what money means to him, his best investments, and some of the missteps along the way.
What were your parents like with money and what effect do you think it’s had on your financial habits?
My parents were pretty thoughtful with money, and I think that rubbed off on me a bit.
What was your first job and how much did it pay?
As a kid I gardened for my parents for $1 an hour! In my teenage years I got $10 an hour gardening for people in the neighbourhood. The “proper” jobs I had in my late teens and early twenties, like printer’s assistant or store security guard, all paid less than that.
What was your best financial decision or purchase?
Not buying a house in Wellington in 2007. House prices fell hard in 2008 and hadn’t recovered by the time we moved to Auckland in 2011. Also, instead of borrowing at the 10% mortgage rate of the day we paid rent equivalent to 3% of the house’s value. That saved us a lot of money to put towards a bigger deposit later, and also allowed us to raise our young kids in a better house than we could have afforded to buy at the time.
What was your worst financial decision or purchase?
Buying shares in an Australian biofuel company. The environmentalist in me loved the idea, but the Australian Government changed the rules shortly after I bought and the shares became virtually worthless.
Has there been a time in your life when you didn’t know how you were going to pay the bills?
Only in a self-inflicted sort of way. When I was twenty I decided to take a year off university to travel to South America. For a year beforehand I lived on less than the student allowance, including rent, and saved the difference. That was very tight but I did pay the bills. Once I was in South America, the budget for the whole ten months was just $6000. Trouble was, the New Zealand dollar plunged in value and I had no way of knowing that, so I unexpectedly ran out of money and ran into some pretty hairy moments! But although I had to live extremely frugally for a while, that is not the same as experiencing poverty. I was among some of the poorest people in the world, but unlike them I had choices and opportunities ahead of me.
What does financial freedom look like to you?
Financial freedom is sleeping well at night because you are not worried about money. It can be achieved by spending less than you earn. My grandmother was financially free because she spent less each week than her national superannuation. Some people on six-figure salaries are not financially free because they have taken on large spending commitments.
What’s been the most difficult lesson you have learned about money?
Those biofuel shares! It taught me the importance of researching the facts before making any investment.
What plans do you have for saving for retirement?
I plan to make sure my savings are well diversified and that a large portion of them are in overseas assets. Over a lifetime one of the risks we face is the little old New Zealand economy faltering and/or the New Zealand dollar falling in value, which could reduce the purchasing power of our savings. Denominating your savings in a variety of currencies reduces this risk.
What financial advice would you give to your younger self?
Salary is not the most important consideration in your early career. Far more valuable is the experience your early jobs give you.
You come into a surprise $100,000 windfall tomorrow. What do you do with it?
If I had debt I would put the $100K toward paying it off. If I didn’t have debt, I would add it to my savings. Boring, I know!