Budgeting
Planning & budgeting
Saving & investing
KiwiSaver
Tackling debt
Protecting wealth
Retirement
Home buying
Life events
Setting goals
Money tracking
Plan your spending with a budget
Getting advice
Studying
Get better with money
What pūtea beliefs do you have?
How to save your money
How to start investing
Find a financial adviser to help you invest
Your investment profile
Compound interest
Net worth
Types of investments
Term deposits
Bonds
Investment funds
Shares
Property investment
How KiwiSaver works and why it's worth joining
How to pick the right KiwiSaver fund
Make the most of KiwiSaver and grow your balance
How KiwiSaver can help you get into your first home
Applying for a KiwiSaver hardship withdrawal
How to use buy now pay later
What you really need to know before you use credit
How to get out of debt quickly
Credit reports
Know your rights
Pros and cons of debt consolidation
Credit cards
Car loans
Personal loans
Hire purchase
Student loans
Getting a fine
What happens if I start to struggle with moni?
How to protect yourself from fraud and being scammed
About insurance
Insurance types
Insuring ourselves
Wills
Enduring powers of attorney
Family trusts
Insuring our homes
Losing a partner
Redundancy
Serious diagnosis
How to cope with the aftermath of fraud
Separation
About NZ Super
This year's NZ Super rates
When you’re thinking of living in a retirement village
How to plan, save and invest for retirement
Manage your money in retirement
Find housing options in retirement
Planning & budgeting
Saving & investing
KiwiSaver
Tackling debt
How to use buy now pay later
What you really need to know before you use credit
How to get out of debt quickly
Credit reports
Know your rights
Pros and cons of debt consolidation
Credit cards
Car loans
Personal loans
Hire purchase
Student loans
Getting a fine
What happens if I start to struggle with moni?
View all
Protecting wealth
Retirement
Home buying
Resources
Videos
Podcasts
Just wondering
Help with the cost of living
In need of financial help
Booklets
Glossary
Blogs
View all
14 September 2016
Reading time: 4 minutes
Posted
by
Tom Hartmann
, 1 Comments
Here’s someone you should know by now: that individual you wake up with every day, that special person you’re closest to.
But you find it hard to relate. You reach out, they withdraw. You try to imagine what it’s like to be them, feel what they feel. Yet in your mind, their face fades from focus.
No, it’s not your partner, not your spouse – it’s you. It’s your future self. It’s that far-off version of you who will be profoundly affected by the everyday decisions you make now.
It can be difficult to see your future self – so much so that in our minds our future selves rate on a par with total strangers. This poses some real challenges for building long-term wealth.
“When it comes to setting money aside for our future selves, the fact that we see them as strangers makes it more difficult, since saving feels like giving money away to someone you don’t know,” says Retirement Commissioner Diane Maxwell.
Conversely, if you show someone a rendering of what they’ll look like 30 years from now, they start to connect. Your choices, especially the ones you make with money, will have a lasting impact on the way that person will live. What will their lifestyle be like?
We surveyed New Zealanders to see how well they could visualise their future lifestyles. When asked if they could estimate what groceries might add up to (the basics, a few frills, not counting booze) during their years of retirement, people really couldn’t say.
Only 11 per cent guessed correctly that the sum would come to close to $290,000. For more than half of those surveyed, that estimate was either “more” or “a lot more” than they expected.
The good news is, while the amount we may need in the future for the basics may be shocking in total, we also tend to underestimate what we can achieve in the long run in terms of savings and investments. With the right settings in place, we may very well be able to meet those seemingly overwhelming costs of retirement.
As part of the same survey, we asked New Zealanders how big a nest egg they thought they could build with KiwiSaver. Overall, most didn’t expect how large a KiwiSaver balance could grow over the long term.
For example, let’s say your average salary over your career is $65,000. You contribute 3 per cent to KiwiSaver, beginning from age 18. How much would you have by age 65?
Just over a quarter (28 per cent) thought it would be $100,000 or less. Just over two-thirds (69 per cent) estimated the balance to be under $300,000. Only a small number (13 per cent) guessed fairly accurately, estimating the balance between $300,000 and $400,000.
Our estimate put the balance at $357,000. Hearing this, over half of respondents (55 per cent), said that amount was either “more” or “a lot more” than they anticipated.
What if the scenario was the same, but contributions were lifted to 8 per cent? Our calculations came in at $651,000. However, only 22 per cent of those surveyed correctly picked it would be between $600,000 and $700,000.
How many New Zealanders would pay more attention to their KiwiSaver contributions if they could see how much it could be worth to them in the future?
The stranger in your bed, after all, should really be no stranger at all. One way to bring the future in focus is to set goals and targets. Sorted’s new goal planner makes it easy to do just that – you can simply swipe some into the short, medium and long terms to chart where you’re headed and what’s important to future you.
Because the only distance between us and our future selves is time, it also helps if we remove time from the equation sometimes. So let’s ask: “Which would you rather see yourself with – $600,000 or not?” It’s an easy answer.
With a few savvy choices, our future self’s lifestyle is looking better all the time. Don’t be a stranger…
Use verification code from your authenticator app. How to use authenticator apps.
Code is invalid. Please try again
Don't have an account? Sign up
Or log in with our social media platforms
A Sorted account gives you a personal dashboard where you can save your tools, track your progress and you'll also receive helpful money tips and guidance straight to your inbox.
Or sign up with our social media platforms
Comments (1)
Comments
20 October 19
Girls read and absorb. It's that easy. And sign up with a Kiwisaver provider because they will make your money make more money.
No one has commented on this page yet.
RSS feed for comments on this page | RSS feed for all comments