Fresh Zealanders are increasingly choosing to live on the road, prompting debate about financial planning and the future of housing, according to recent discussions among financial advisors and individuals embracing a nomadic lifestyle.
A recent query to financial advice columnist Mary Holm highlighted the growing trend of individuals opting for caravan living as a long-term lifestyle choice. One individual detailed a five-year journey traveling and working around New Zealand even as residing in a caravan, with a rental property providing income. This prompted a discussion about whether to sell the property and invest the proceeds, or continue the current arrangement.
The core question revolves around the financial risks and benefits of maintaining a property versus investing the capital elsewhere. While no definitive answer exists regarding whether property values will outperform investment returns, advisors emphasize the importance of diversification. Having all wealth tied up in a single asset, such as a house, carries inherent risks, including potential storm damage, local market downturns, or unforeseen maintenance issues like asbestos or leaks.
Investing in managed funds offers the potential for broader diversification across industries and countries, mitigating risk. Funds as well provide easier access to capital in emergencies or for regular income streams, unlike property which requires a sale. But, some argue that remaining in the housing market, even if prices fluctuate, is a sound strategy, as the ultimate goal for many is to return to homeownership.
The discussion also touched upon the practice of “shrinkflation,” where manufacturers reduce product sizes while maintaining prices. Stats NZ acknowledges this practice and has enhanced its methods for identifying and accounting for shrinkflation in the Consumer Price Index (CPI), though it notes there are currently no specific regulations addressing the issue in New Zealand.
Another case involved a couple inheriting nearly $2.9 million in cash and two mortgage-free homes. The inheritor expressed feeling overwhelmed by the responsibility of managing such a substantial sum and sought advice on finding a trustworthy financial advisor. Experts recommend choosing advisors who are fee-only, avoiding those who receive commissions based on investment choices, and interviewing several candidates before making a decision.
A separate letter raised ethical concerns about individuals utilizing the student loan scheme as a source of interest-free investment funds. The writer argued that this practice undermines the original intent of the scheme, which was designed to facilitate access to tertiary education, not to provide investment opportunities for those who can afford to pay fees upfront. The practice, while potentially legal, raises questions about fairness and responsible leverage of taxpayer-funded initiatives.