* Probably have to work harder
* Probably a more stressful life
* Heavy rush-hour traffic leading to 10- to 12-hour work days
* Potentially much higher earning potential
* Extensive access to "Big City" amenities and activities
* Higher house prices
* A huge mortgage may be needed
* Higher appreciation of house prices
All the problems with living in Auckland are historical.
The pros and cons of living in a 'Nice Rural' NZ City
* Limited career opportunities
* Probably a more realistic work load
* Probably a lot less stressful
* Less time spent in traffic, reducing the commute to and from work
* Lower earning potential
* Amenities and activities in smaller New Zealand cities can be quite good
* Lower house prices
* Won't need a big mortgage
* Lower house appreciation
Again, all the problems associated with living in rural New Zealand are historical.
The future may be different
The NZ housing market may be very different in the future so Mike and Millie should not base their decision on past house prices or possible future house price appreciation.
And, yes, it is a big decision
Not one I can make a recommendation on.
However, Mike and Millie are quite career driven, so if they choose to live in an area where there are limited opportunities, they may find that in their 50s and 60s they will regret it.
Debt & Mortgages
Too many people accept that the price of having a home is committing to a mortgage. I don't necessarily agree with this. My suggestion to Mike and Millie is that they consider buying two units instead of one house. They could live in one and rent out the other.
Wherever possible, getting someone else to pay a portion of the mortgage will contribute to being debt-free sooner. The pay-off to living less opulently today is securing a more comfortable tomorrow and probably sooner than one will expect.
Should we invest our house deposit?
They asked. My answer: If they invest what is essentially a short(ish)-term house deposit into anything but the bank, they could potentially gain a measly 3 to 4 per cent. Equally, they could lose 0 to 25 per cent if the market does not co-operate with their goals.
Make Wills and EPOAs
People tend to avoid them, and particularly the lawyer's bill, but they shouldn't. It will be bad enough if Mike dies, or Millie has a bad accident, or gets very ill.
Things could get even worse if the partner who is well or left behind, finds that the paperwork has not been done. Add young children to the mix and an unfortunate situation can become dire.
Life Insurance: Do it now
It is easy to get while both partners are in good health, but not so once Millie is pregnant, or if one of them contracts a health condition.
I advised Mike and Millie to get their life insurance sorted today and suggested they add major trauma or critical care to it. This will cover any serious illnesses over and above anything terminal (heart attack, cancer, liver or kidney failure etc.).
Last but not least, they must be sure to disclose any existing conditions on the application form or the insurer may not pay out.
Their life policies should be cross-owned, too. This will ensure that if one of them dies, the money will go directly to the survivor and will not be held up waiting for a rebate.
Emergency money
Insurance is one way they can protect themselves. The other way is to keep $25,000 or more in liquid investments (not locked in) so that they have lots of room to move in case of an emergency.
When they get a mortgage, they should put their emergency fund elsewhere. Why?
Because if they can't pay their mortgage, the bank can help itself to their other accounts.
Emergency money should always be under their control, and nowhere near anyone who lends them money.
Alan Clarke is a financial and retirement adviser and author. His second book, The Great NZ Work, Money & Retirement Puzzle, is available at acfs.co.nz Alan is an independent authorised financial adviser (AFA) FSP26532; his disclosure statement is available on request and is free.
