"I've never been keen on micro-budgeting, so I stick to three broad strategies.
"1.The first is that I set a 'zero' in our bank account that is way above rock bottom; our 'zero' these days is $10,000 (it hasn't always been so high), meaning that we avoid going below that amount with the same vigour we'd avoid going below the real zero in our account.
"2.The second is to paint a broad picture of our financial situation in conservative, or 'generous', terms several times a year. I calculate our income by rounding down by a lot (making it less than it likely is). For expenses I round up, again by a lot (making them more than they likely are).
"This creates generous, but practical, margins between our income and expenses. What's great about these margins is that I almost never have to dig into the 'zero' bank account (aka $10,000) or my savings/investments. If costs pop up unexpectedly, I've already accounted for them in my margins.
"3.The third is to scrape the excess in our bank account into investments. I include a savings goal as an expense in my budgeting, but I don't really pay attention to it. Instead, I set an upper limit on our bank account (at the moment it is $20,000) and once the money in our account climbs to that I scrape off the top $10,000 or so and send it into long-term investments. This means that we're fairly regularly adding to our investments without worrying about what the market is doing."
Now, Emma did not start out with a huge income. She started out as a single student, studied hard and got a grant to continue studying. After a while she married a nice fellow who was also a student, and it took some time before he graduated and worked his way up to a good income.
They have always rented but were smart enough to find subsidised accommodation and so have continued to save substantial amounts. Now they have two very young children. Despite this, Emma has continued to save regularly.
Rising property prices are unlikely to be a problem for Emma and her husband, as they know how to save and, once she graduates, they are happy to move to a country or city that fits both their careers, housing and lifestyle needs.
JOHN'S STORY
John is totally different. He left school at 14 and has always worked in rural New Zealand, earning normal New Zealand wages. He has never borrowed a single dollar, preferring to pay for everything with cash. Even his first home.
Admittedly John has never had children, but I doubt that would have stopped his supreme savings habits. He says the only downside is that nowadays he feels like the "banker" (giving, not lending) to his less successful relatives.
Recently John's investments hit a milestone, but he just gave a wry smile and went fishing.
BOTH REMARKABLE PEOPLE
Emma and John have never gone without anything, and yet they are both living full and rewarding lives.
It has been my privilege to have these two remarkable people as my clients, and I really enjoy listening to their stories whenever I get the chance -- indeed, I hang off every word.
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, FSP26532; his disclosure statement is available on request and is free.
