How $2 Becomes $419,000

Hey team,

How do you turn $2 into $419,000? By stopping looking for the silver bullet.

Sometimes we’re so busy looking for the big swing, the change that really changes everything, that we miss the win right in front of us.

The win in front of us is easy to ignore.

It’s probably smaller, requires us to stick with it over time, but can also be an easy, daily habit.

Like the dad who realised he could give his daughter $419,000.

He decided to automatically put aside about $2 a day, into KiwiSaver for her. A little bit, that he doesn’t miss.

She’s three, so it has time, and can just build up, earn more, tick along.

And by the time she retires, just that amount itself should have built up to $419,000. That includes inflation, so it’s $419,000 of today’s money.

Not bad.

And I think it shows us something that many of us are missing.

Money comes with so much pressure to get it right, that a lot of us end up going into freeze mode.

We worry that we’ll pick the wrong fund, do something important at the wrong time, not have it perfectly optimised.

Or we worry that something we want to do won’t be enough, and so we just don’t do it at all.

The problem is that the very worst financial decision of all, doesn’t usually come from a bad move.

It comes from making no move at all.

Doing nothing feels safe, it feels like you’re not risking anything.

But it still has a price tag. It just comes in opportunities that you miss, by never trying for them at all.

And because those missed opportunities are less visible, it’s easy to close your eyes and tell yourself nothing bad happened.

But you still missed those chances to nudge ahead, and those chances could be the thing that makes all the difference.

When we instead take those smaller wins, we’re taking the paralysis out of it.

You build something, even if it’s not perfect.

And that something turns into something big, so much faster than you’d think it would.

This is often the secret to building wealth when life is busy, and money feels tight.

It’s not beating yourself over the head to have more discipline.

It’s taking the easy win that’s in front of you. Then looking for the next one. Then the next.

And if you run out of easy wins to sort out?

Cool, then move on to some harder stuff.

But there’s a lot of low-hanging fruit that we all ignore, because we think we should be looking for the silver bullet instead.

And in that hunt, we get the excuse for doing nothing.

Speaking of low-hanging fruit, what a perfect segue into how money and fruit can come together.

Feijoa is an app that’s built on behavioural finance tricks to encourage exactly this, to take the small wins, the painless changes, and do something with them.

They round up your daily purchases by a couple of bucks, and pop that into your KiwiSaver.

And you know why that’s more important than ever?

Because about 30% of working New Zealanders don’t put anything at all into KiwiSaver.

Which means, at minimum, they’re missing out on 3% from their boss (a free pay rise), and $260 from the government (a 25% return on investment, which is extremely hard to get elsewhere in the investing world).

But really, we all know that we should be doing things like putting money into KiwiSaver.

It just needs to be a little easier to make it happen.

There’s a whole lot of behavioural finance research that’s usually used by marketers to trick us into SPENDING money… but what if we could use it to help us get ahead, instead?

So I talked to Mark White-Robinson about the behavioural finance that’s behind his clever app, and how we can all start using those tactics on ourselves, so that we achieve the things we know we really want to with our money.

Check it out on the latest Making Cents podcast on YouTube here, or get it in your ears through all the podcast apps, including Spotify and Apple Podcasts.

If you’re looking for an investment at the other end of the scale, maybe you’re thinking about an investment property.

Because one listener wrote in to me to say that’s exactly what she was wanting to do, but hoo boy, she could not work out how she was going to make that happen.

She isn’t sure the numbers work out anymore. When housing has become so expensive, and you need to spend a lot to buy in, can you make that pay off?

These are exactly the right questions to be asking, and the answer is probably different from what she expected.

Because what Katie Wesney from EnableMe recommends, is that nobody actually buys an investment property in their own town.

Your own town is where your own home is, and really, it’s a risk-management strategy to look elsewhere if you’re wanting an investment property too. Hedge those bets.

Changing location can also be a way to make the numbers stack up far better, as average prices are very different up and down New Zealand.

What to know if you want an investment property in a different town, where the bargains can be found, and what separates a bargain from uh-oh-it’s-cheap-for-a-reason.

We ripped into all the details of what to know if you want to make this work.

It’s out on Thursday, so make sure you’re subscribed on Apple Podcasts, Spotify, or YouTube.

And if you have a question about anything money, email me! ask@francescook.co.nz

Until next time.

- Frances

P.S. I’m a financial journalist of over 10 years, and qualified as a financial advisor, specialising in investments.

However, please remember that this newsletter is general educational information, and not individualised financial advice. If you’d like to talk to a financial advisor, I have a podcast on how to find a good one.