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Emily from Sorted

Debt or a savings stash?

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When faced with debt and creating a healthy financial life again, many think they'll pay off debt and then start building up a savings pot. Where in fact, it's been shown that to start saving and create a buffer is actually a better first step as it creates momentum and offers something to fall back. What are your thoughts? 

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One of the reasons I am bankrupt is because I never learnt the skill or discipline to save money for a rainy day. I never saw a reason to do so. Because I could always get lending in an emergency.

I was never encouraged to save.

But that is a huge regret in my life today. Eventually the lending stops and you end up with nothing.

Even though I am bankrupt, I still pay back the creditors, and I now am creating a savings pot, and putting money aside for emergencies. My utilities are in credit also. But bankruptcy restricts my savings to not more than $1200 at any one time for the three years.

I think putting money aside as a buffer should be something people do in the first instance, before they incur debt and certainly while they are paying it off.

Putting money aside should be something that is done on a regular basis regardless of whether you are borrowing money at the same time or not. It also gives you control of your life, and you don't need to stress if you lose your job.

If you have to stop adding to your savings pot to pay back debt, then you shouldn't have borrowed money, because you cannot afford it.

Lenders don't care if you are building up a savings pot. Because its not their goal to help you become financially independent.

That's how I know our society doesn't support true financial literally. We only need to look at the terrible hardships of people in retirement and the risky nature of investments to know that people should make savings compulsory and get a lot more educated. And I don't mean kiwisaver. While cash is built up, the next thing to learn is how to protect it.

I read one of Donald Trump's books and he said that there are sharks everywhere if you have cash, and they will stop at nothing to get it. That's why courts are filled with people suing others, quite simply for money.

No truer words have been spoken.

On parliament tv an MP mentioned the Reserve bank did some research into financial literally of NZer's and the result was that we have appalling (yes that was the word used) financial literacy.

What adults are being taught about money and finance, I say is parallel to teaching a five year old the alphabet. And its like the five year old is being taught by a professor of English. There is a huge knowledge gap between the people who have wealth and the people who don't. And its being exploited.

 

 

 

 

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I WISH this stuff had been taught in schools.  It's been a series of hard lessons, largely ignored in my irresponsible youth and into my 30s.  Now, am realising that savings = freedom, because if I lost my job, homelessness and figuring out what I can afford to eat won't come across my radar again.  Financial education in NZ should be a priority.  I also watch my younger colleagues taking on these huge mortgages because the bank says they can afford to borrow up to, say, $300,000, so there all maxed out and job loss and illness would tip them over.  Knowing what I know now, and it makes me shudder.

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When I tried to query the bank as to the lending they gave me, they sent me an uncommitted monthly income sheet.

Not sure what they deem to be actual uncommitted income, but the report they created for my income showed I had $1000 uncommitted each month, which of course justified their lending.

I was just breaking even paying my rent and utilities.

Its called Fudging the numbers. The bank got very nasty when I started asking questions.

I suspect that the banking ombudsman found them out, because I was awarded interest removal on the lending I had.

But I never got that compensation because I refused to sign the bribe from the banking ombudsman and that was to try and stop me making further complaints.

My hope is that one day the bank in question will pay back to the people of Christchurch, in cash, the interest those people would, like me have been entitled to as compensation for the wrongs of the bank.

The debt and mortgage industry is a huge billion dollar business. Innocent people are being exploited because of loopholes in our laws.

After the earthquakes the bank rang me and offered me substantial money all interest free for three months. For the rest of my life I will regret saying Yes. It really was a deal too good to be true.

I was already in debt to the bank. Even right before they sent the debt to the debt collectors, they tried offering me more debt - and wanted to consolidate the debt into one, and add more interest on top.

That would have guaranteed income for the bank for the rest of my life.

Now I've been forced into bankruptcy and the courts and the official assignee has added thousands in court costs and bankruptcy admin costs on top of the debt that I still owe.

Debt only gives the lender freedom. That is because you are giving them your cash again and again and again.

Cashflow is what makes people wealthy. Not fancy houses or cars.

Knowledge is what you use to learn how to create cashflow.

I love reading books about the stock market and publically listed corporations.

I've learnt a lot about how money works as well by reading books on banking and also investment banking.

I research monetary policy, laws and the financial markets, and the stock market crashes.

Those things will never be taught in school.

But that information gave me entirely new perspectives on how the financial systems of our country actually work. And explained a lot about why the government just doesn't seem to get the important stuff right.

NZ's financial system is first before anything else. Once I learned that I knew how fundamentally important it was to be able to create my own income (cashflow) and keep it safe.

 

 

 

 

 

 

 

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