Money: Investing in well-being

By Mary Holm

Money Matters


Q: I feel like JFK junior flying in a plane too sophisticated for me. I can't see through the fog. I want to fly efficiently through the next eight years or so (pension at 65?).
On board I have a 20-year-old, somewhat laid-back, student. I may be able to let him off in a year or so.

My plane is $195,000 in a bank account earning 4.2 per cent after the sale of the family home following a divorce.

My son and I live with my "partner" in his mortgage-free home, rent-free. I housekeep and have a small part-time job (it gives my son a weekly allowance of $50).

Our tenuous relationship deteriorates by the minute as money has become an ugly issue. The most benign little purchase I want to make is challenged belligerently.

We differ dramatically in our views of money. I want to make a living; he wants to make money to travel, etc. He believes we do not have enough money.

For a year or so he will still have a reasonably paid job. He pays the bills and gives me $120 a week for groceries and food. I know he is not happy about this and neither am I. I cook well and economically.

This is where I need your help please, Mary. What to do with this amount sitting in the bank?

He strongly believes in buying property and earning income from renting. But these properties are, in my opinion, forming a glut on rentals. Invest the money, then?


A: Buy your freedom. Leave him.

I'm not saying you're right and he's wrong. But your attitudes to money are so different that it seems unlikely you'll settle into a blissful retirement.

It would be good to try counselling, if you're both willing. But if that doesn't work, you do have the wherewithal to go it alone.

Your standard of living will drop. But, I suspect, your self-esteem and control over your life will soar. It's worth it.

If you leave, I suggest you spend, say, $100,000 on a mortgage-free low-maintenance apartment or unit.

What about income?

You can earn considerably more than 4.2 per cent on your remaining $95,000 if you go into term deposits that run for several years, or Government bonds. (Ask a stockbroker about the bonds.)

Beyond that, you're right in thinking you'll be eligible for New Zealand Super at 65. Until then - and possibly for some time after that (NZ Super isn't huge) - you've got your part-time job.

Can you work more hours? Or take a second job? Instead of cooking and housekeeping for your partner, could you get paid to do it for someone else?

Another idea is to take in a boarder or flatmate.

As far as your son goes, I'm afraid he's out of the plane now. If a mother can help out a kid of 20, that's great. But not at the price of her well-being.

If you must continue to give him a little support, make it an interest-bearing loan. Chances are that in five or 10 years time he'll be much better off than you are. He could certainly pay you back then.

While you're thinking about all this, keep your $195,000 and the interest on it in your own separate account, rather than mingling it with your partner's money, says Auckland barrister Margaret Lewis, who advises on marital and de facto property issues.

Then, if you leave, your partner won't have a claim on that money.

What about any claims you might make on his property? Assuming you're in a de facto relationship, it hangs on whether you've enhanced the value of any of his assets.

Housekeeping doesn't count. But if you've done substantial maintenance, such as painting part of the house, that might count. It would pay to have a chat with a lawyer.

Q: We recently (6 months ago) commenced investing in the Calan Healthcare unit trust. Recent notices in the Herald advise of the pending listing of the company on the stock exchange.

Can you explain the possible effects this may have on our investment - unit trusts vs shares in a publicly listed company?

It would seem to me that our position will be less secure given our limited investment to date. Should we, as small investors, reconsider our investment?


A: No. Despite various claims made, the differences between listed and unlisted unit trusts don't seem to amount to much.

And Calan Healthcare Properties Trust says that if it lists, things will continue pretty much as normal. The unit trust structure won't change, and your units will still be called units, not shares.

Quarterly distribution payments will continue, although their timing might change a little. You'll still be able to reinvest those distributions - an excellent way of speeding the growth of your investment.

Calan says the main reason it's proposing the change is to make it easier for unit holders to sell.

Currently, the unit trust doesn't buy back units. If you want to sell, Calan tries to match you up with someone who wants to buy. But, it says, "There is not an assured supply of buyers."

If Calan lists, it's more likely that the big financial institutions, both here and overseas, will consider buying into the unit trust.

This, in turn, means that the big institutions, sharebrokers and the media are more likely to look into what Calan is getting up to.

You'll probably read more about your investment in the Herald, you'll see the unit price listed daily, and with the investment under more scrutiny, you should get a fairer price if you sell.

It sounds as if you're concerned that the value of your units may be more likely to drop fast if the share market plunges.

That's always possible, although it seems highly unlikely in the near future.

If a crash does happen, just hold on to your units. Their price should move back to reflect the value of the trust's properties pretty quickly. Bargain hunters will see to that.

If you want to know more, go to the meeting on August 23, where unit holders will vote on changes that will allow Calan to be listed.

There's also lots of information in the Notice of Meeting that has been mailed to you. You might not want to take in all 100 pages, but the summary at the front should be helpful.
* Got a question about money? Send it to Money Matters, Business Herald, PO Box 32, Auckland; fax: (09) 480-2054; or e-mail: maryh@journalist.com. Letters should not exceed 200 words. We won't publish your name, but please provide it and a (preferably daytime) phone number in case we need more information. We cannot answer all questions or correspond directly with readers.