Many sayings have a second part which goes unsaid. For example, “curiosity killed the cat” is followed by “and satisfaction brought it back.”
When thinking of your wealth journey, it is easy to be bogged down in thoughts of when you should have started investing, saving, or otherwise putting aside for your future self – perhaps you had a better paying job previously, or a period of life where you had less bills than now. Some may fondly remember the time before our current cost-of-living situation and wish they had those days back.
After all, the best time to start your financial journey was yesterday.
Often we learn this the hard way. Even countries are not immune to the fallacy of failing to plan for the future, as we see in NZ with mounting bills from weather events on top of recovery from the pandemic. While these acts of God are unpredictable, it does highlight the lack of action taken by our Government while interest rates were low and borrowing was cheap. Now NZ is forced to borrow at current high rates to restore already insufficient infrastructure, while some foresight during the previous years could have set us up better for future.
With weather events coming fast and hard in 2023, it’s a scary thought. One day of flooding cost Auckland $2 billion,[i] and of course Cyclone Gabrielle caused an estimated $13.5b of damage ($2b in the Hawkes Bay alone).[ii]
The money doesn’t come from nowhere, there is no magical money tree and printed cash is merely Fiat currency, built on trust which one day will need to be repaid.[iii] While it’s of course absolutely needed for recovery, it is a shame that growing cost was not anticipated as part of global changes and growth (despite earlier calls to take advantage of that low-cost environment while we could and invest with an intergenerational mindset).[iv]
Austria, for example, launched inaugural 100-year bonds in 2017. At the time they were touted as an amazing investment opportunity for investors, paying a coupon of 2.1% which saw demand soar. It attracted demand for more than eight times the available supply. Of course, when the proverbial hit the fan just a few years later, investors lost out. Bonds and interest rates are typically inversely related... when rates rise, bonds can take a sharp tumble (which is why it is best to diversify asset classes, among other things).[v]
The Austrian Government? They already have the money from the sale of those bonds, and a long time before they need to worry about those bonds maturing. Not a bad way to make hay while the sun shines.
That brings us to the second part of the saying. While the best time to start will always be yesterday, the next best time is today.
Hindsight is 20/20. Perhaps those Austrian investors chasing a hot ticket would have cooled their heels a little with the wisdom from today. Perhaps that uncle who claims they bought Apple shares and sold them for pennies would have held on. But yesterday is gone, and we can’t act retroactively; investors must think for their future.
A well-constructed financial plan will make allowances for periods like the present. The right plan will help you see past the daily news headlines so you can stick it out to get to the good times on the other side. Uncertainty is a constant. But if there were no uncertainty, there would be no return. And while the good times don’t last forever, neither do the bad.
A final quote: A journey of a thousand miles begins with a single step (Lao Tzu, Chinese Philosopher). It can be daunting to see those thousand miles stretching before you, waiting for you to take that first step. A fiduciary can help create a plan with your goals, situation and timeframe, a carefully detailed plan, curated step by step, so you can stay focused on what’s important to you rather than riding out every climb and descent along the way.
If you’re looking to get started on your journey, or for a second opinion on your financial plan, contacting a local, trusted 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 & KiwiSaver scheme solutions. Article no. 324.
· 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
by Nick Stewart (CEO and Financial Adviser at Stewart Group)
[i] https://ourauckland.aucklandcouncil.govt.nz/news/2023/09/consultation-on-auckland-s-cost-share-deal-with-government-now-open/
[ii]https://en.wikipedia.org/wiki/Cyclone_Gabrielle#:~:text=It%20is%20the%20costliest%20tropical,billion%20(US%24975%20million).
[iii] https://money.com/what-is-fiat-money/#:~:text=Most%20countries%2C%20such%20as%20the,any%20value%20on%20its%20own.
[iv] https://businessdesk.co.nz/article/finance/where-is-the-money
[v] https://www.elliottwave.com/Interest-Rates/We-Warned-You-Ahead-of-Time-Austrian-Century-Bonds-Big-Losses
