Katy Brown
Katy is also thinking about borrowing to buy a car now that she has a job. She wonders about OE too.
Issues for the family
The following section sets out some of the main issues for each of the families that would need to be discussed with a financial adviser and some of the possible solutions or options to be considered. Specific solutions would require much more detailed knowledge of each family’s finances as well as discussions about their goals and priorities. Even so, this shows just how many issues there are to be considered and where the advice of experts may be helpful.Katy sounds very Generation Y, but to really enjoy life she needs a bit of financial discipline. Her goals might be:
- Pay off the credit card debt
- Set some clear personal goals that separate wants from needs.
- Buy a car.
- Take OE.
- Start saving to have choices for the future.
Paying off the credit card has to be the top priority as it will be very high interest. Debt repayment should come before lifestyle. Once the credit card is back to zero, Katy should aim to pay off the balance in full every month, setting up a direct debit makes this easy.
Katy should also consider joining KiwiSaver as funds invested now will compound substantially over the 40+ years until retirement.
As for the car, see the comparison in the box. Buying a car by borrowing will mean Katy is choosing not to save and that her OE dream may remain just a dream.
As for the “what ifs”:
- If Katy is flatting, she should have tenant’s insurance for her personal effects.
- While she doesn’t have dependents or much debt, it is cheaper to take out life insurance when young, and this guarantees cover if a health problem emerges later.
- Every adult should write a will and before any OE, an EPA is very useful to allow others to manage any bank accounts or assets in NZ.
