Simply can't afford to live in NZ

[MotherBear]

Having just spent the best part of 3 weeks in NZ, living the life rather than doing the tourist thing, I must admit to being somewhat puzzled about this whole cost of living topic. Shopping for everyday foodstuffs never failed to make my heart flip every time I was presented with a till receipt that showed a 3-figure total (dollars, that is). Converting it back into ?s made it look a bit healthier but, nevertheless, I wouldn?t say it was cheap there. No doubt my mistake was grabbing things that either we can?t get in the Middle East or that are much better quality. If we were already living in NZ and the novelty of those things had worn off, I?m sure it would be easier to budget and have the time to research items that are cheaper and better value for money.

Going back to the ?puzzled? bit, I found it strange to see MANY nail bars around Hamilton when kiwis are supposedly so hard up. Just how many people can afford to regularly have their nails done? In all my travels I?ve never seen so many places that deal exclusively with nails and their upkeep. It just doesn?t add up if, as has been stated on here, kiwis are living on the breadline. Another thing was going out one evening for a meal and finding the restaurants and cafes pretty busy. It wasn?t a weekend either, more middle of the week. The place we went to, an average main meal cost roughly $28 without starters or desert and, by the time we were leaving, it was doing a roaring trade. Going out for meals just isn?t something you do when you don?t have 2 cents to rub together. People were riding round in pretty decent cars most of the time so, there again, I was encouraged to see some evidence of a decent standard of living. I have no doubt that there are still many people who haven?t got the knack of handling their finances for one reason or another or are genuinely poor but, at the same time, NZ doesn?t appear to be totally lacking in at least some degree of affluence.

Starting a new life in NZ is like taking a giant leap of faith where you leave your safety net behind you. Some people are prepared to do it, others aren?t because they fear the cost would be too much to bear. It?s horses for courses and neither is the wrong way to go if you?ve done your research thoroughly beforehand. It?s a personal choice - some people can happily budget and thrive on ?making do?, whereas others prefer not to go down this path and cling onto what they feel are the good things in life that only money (i.e. a good salary) can buy. For me, the good things in life come under the heading of quality of life rather than material possessions (not that I am opposed to them, of course [smiley=Blush.gif]) and, although I know we?ll have to be very careful with our money when we live in NZ on a UK pension that isn't index-linked, we are mentally prepared for this as we feel there will be other benefits to enjoy, like the smiling faces of shop assistants who often like to chat or at least greet us with a cheery comment or two (something we?re not used to here) and the helpfulness of people when we need advice or assistance. I?ll talk more about my impressions of NZ following my second visit in another thread tomorrow, when my head has recovered from the droning and vibration of 4 flights and hours hanging around airports [smiley=119.gif] .

[macfod]

MB
Glad you had a good time!

After four months we are slowing down from comparing currency when spending.

You are right people seem to spend a lot when out and cafe/restaurants /stylists are always busy -
I do find supermarkets quieter though than what I would have expected -perhaps its just there is less people!

Houses locally are between $200-?350k which I suppose is dearer than expected!
Did look at a great beach house with AWESOME views for ?300k -but it was very basic on heating but two sections for the money.

Renting is expensive here because of the UNI, with $250-300 the weekly average.

Food is cheaper as you can imagine ,especially meat-but I suppose not compared with lower salaries.

Wages vary with as we have found employees being well cared for.
All get four weeks as full time or part time now 8% of their income for holiday pay as well as 5 days sick pay etc
Kiwis are not savers and tend to spend and enjoy..great ;)

And thats the thing - quality of life

What you get here is a different lifestlye-at a price in monetary terms and its a huge decision for anyone with plus's and minus's..

On our part-we love it and have never been happier with more friends and just friendly happy people that are genuine and pleased at anyone coming to live here.

I must be excited awake at 4.30am on a sunday morning! 8-)

[moggy]

Housing was expensive, Dining out/Food was expensive, Taxation is ridiculous (40%) of income above 60k if I recall correctly.

Taken out of context that appears high, but the UK is the most heavily taxed western nation when all taxes are taken into consideration.
There is no national insurance contributions to pay, don't forget to add that onto your taxt bill
GST (ie VAT) is 12.5% not 17.5%
There is no water bill, this is included in your rates
Rates are less in dollars for a 10 acre place then they were in pound for a small house in the UK
You don't have to have private health insurance either

When you add up all the tax you pay, it is a lot less than the UK

As for eating out being expensive, I don't know what places you ate at, but we find eating out incredibly cheep.
[/quote]
[quote]
It seems more people are finding this out and coming to the same conclusion but no one seems to be asking WHY everything is so expensive.
[quote]
People are not asking why things are so expensive because on the whole they aren't so expensive. But don't believe me, I only live here and earn and buy the stuff.

[ExPat]

Moggy,

You're comparing UK living with NZ living. I'm comparing US living with NZ living. My tax rate is about 20% and my pay would be significantly higher in the US than in NZ.

Let's do some hypothetical math.

If I earn 150k USD in the US, I would need to earn the equivalent of 210k NZD in NZ to be "even" yet when I factor in the tax rates it gets worse:

20% US Tax rate on 150k = 30k in taxes. 40% NZ Tax rate on 210k = 84k. I'm simplifying because both rates are actually marginal but it's easier to lay it out this way. But the highest paying jobs comparable to the one I have now in NZ only pays about $110k NZD. So I would cut my income in half simply to move to NZ then cut it in half again to pay taxes. My net income would be 1/4 of what I earn in the US now.

Now let's factor housing. I live in a 4 bedroom house in one of the largest cities in the US. The current cost for such house is about 200k USD which isn't difficult to pay for with 150k in income. But the equivalent house in NZ (Christchurch) would cost about 400k NZD which would be difficult to pay with 100k NZD taxed at 40%!

I really don't know or understand how people in NZ get by but a few people we spoke to said they lived off of credit cards and most had 50k in debt on credit card.

So it seems that if we wanted to move to NZ, the best course of action is to spend the next 10 years earning money in the US and accumulate (10 x 150k = 1.5 million) then pay cash for housing and other expenses down in NZ.

Again, this is all dependent on your existing lifestyle and what you are accustomed to. If you've never had something then you won't miss it but if you've had it, you don't want to lose it.

Finally, I know someone will point out things like "free" medical care in NZ whereas in the US, you need to pay for insurance but when I did my calculations, all those other variables cancel out. For example, in the US, you can write off (e.g. deduct) the interest expenses on your mortgage off your tax bill. It may seem strange but you are rewarded by the US Government for having a larger more expensive home as the tax write off grows as the mortgage grows. I don't believe such a thing exists in NZ.

While NZ medical care may be "free", I only pay $130/month for 90% coverage of all medical expenses. This covers all family members.

[Maggiemoo]

This is such an emotive topic isn't it? ?I think its very refreshing to have some real debate about what makes NZ work for some people and not for others. ?I am sure most of you here are aware that we have made the decision to head back to UK early next year, and one of the main reasons for us is that financially it doesn't make sense for us to be here. ?We are really struggling financially, which we never really did in the UK. ?Before anyone weighs in and tells me I should budget more carefully and drive 30km to save 50c off a bag of apples, can I please say that I am very very careful with what I spend at the supermarket, but I am just not prepared to compromise on certain things (like decent nappies and wipes for my kids - the cheap ones bring them out in the most hideous rash, and I am not prepared to inflict that on my kids for the sake of a couple of dollars). ?I did a small shop at New World the other day, just for things like milk, bread, baby wipes, household cleaning products etc etc, and it came to $115. ?I came home and "did" the same shop on Waitrose online, and it came to ?50. ?

Before we came over here, my husband (who works in IT) was earning approx ?300 a day, and only worked 3 days a week. ?Now he brings home the equivalent of about ?350 a week working 5 days, so we are much much worse off, and he is on a very very good wage compared to many others I know here, both ex-pat and kiwi. ?

Obviously we knew that wages were lower, but we have been surprised by how much an everyday shop costs - wine is now a treat rather than a normal addition to the shopping basket!!! ?The other thing that has really hit us hard is the high mortgage rate here, we have a smaller mortgage than we had in UK, but pay more than we did in the UK, again when you relate this back to the wages we get, its hard to make ends meet. ?No wonder the figure of 70% of income being used to pay mortgage is not uncommon here.

Also going back to something MB said in one of her posts - there are an awful lot of smart new cars being driven by New Zealanders, this does not necessarily reflect on their ability to actually be able to afford them!! ?When we went to trade in our lovely estate car for one of those people carrier things that I always told myself I wouldn't ever have (!!), the guy at the garage said that it was very very unusual for someone to pay cash for a car, 99% of the ones he sold were to people who were financing themselves to the limit, and he couldn't give us a discount for cash as they don't make money on them!! ?I can well believe a previous poster's comments that some Kiwis owe around $50k on credit cards and the like, I know a lot of them!! ?We too could go down that route, but for the sake of my kids and my sanity, I'm not going to!!

Anyway, enough of my rant and rage about money!! ?

I'm off to eat cheap chocolate!!

Maggie

[kokopeli]

A good post there Maggie. At first I thought you were going to make a like-for-like comparison on the shopping basket, but you've put it in a wider context that makes good sense :)

As for your people carrier, you don't need a dog guard for it do you? I've got one coming that might fit...... ::)

[MotherBear]

Anyway, enough of my rant and rage about money!! ?

You can rant and rage all you like about money, Maggie. ?Everyone's experience is a valuable contribution to the forum so that others can work out if they will be able to survive the NZ financial black hole that so many fall into.

I really wish I could find the magic answer to why some can manage and others can't. ?Perhaps it has something to do with families who don't have very young children being able to bring 2 wages into the home. ?At the moment I don't see any evidence that the government or immigration service are addressing the problem that they are losing many migrants due to financial shortfalls. ?It's a pity that they don't have an advice service where migrants who are struggling can turn for help before finally throwing in the towel and heading home. ?This service could ensure that migrants are aware of all the benefits they can claim and try to work out what is going wrong. ?It would be worth a try because migrants spend so much money gaining the right to live in NZ and then, after being back in their home country for a short while, often regret having left NZ. ?With a little assistance, they could possibly have found a way to remain in NZ. ?

It's very daunting to set up a new life in a different country and there should be some government-funded support body to fall back on, so migrants can have the best possible start. An interesting venture for an enterprising company?

Maggie, I wish I could wave a magic wand and make everything come good for you and Ken as you've both already invested so much time and money in this venture. ?I don't know if, once you're back in the UK, you'll regret having left NZ, but that would be so sad and I really feel for those that this has happened to. ?As you are, you're between the proverbial rock and a hard place.

As an aside, I don't know if I got my sums wrong, but $115 = roughly 41.86 GBP which would be slightly cheaper than Waitrose at 50 GBP. ? ?

[kokopeli]

You're right with the sums MB, but I think the illustration was set against a wider context...

I would advise anyone planning to move to NZ to read "Pay Zero Taxes - A Tax-Smart Guide for All New Zealanders" by Peter Sibbald, published by Reed Business. ?ISBN number 0-7900-1037-2. ?It's full of practical advice on how to reduce your tax burden. ?I'm not sure you can actually get your NZ tax bill down to zero, but there is a lot you can do to avoid the heftier levels.

Reading back over this thread, I would add that we've been shocked by how much house prices have risen since we started planning our move to NZ in 2004. ?Our next door neighbour bought their section eighteen months ago for $90,000. ?The same sized sections just across the road were advertised last week at $225,000 and beyond. ?:o ?

We can't afford to buy at the moment, so I've started a rumour that NZ house prices are going to crash in 2007. ?All the indicators are there... rising interest rates, spiralling debt, lower migration.... ? ;D

[MotherBear]

Reading back over this thread, I would add that we've been shocked by how much house prices have risen since we started planning our move to NZ in 2004. ?Our next door neighbour bought their section eighteen months ago for $90,000. ?The same sized sections just across the road were advertised last week at $225,000 and beyond. ?:o ?

We can't afford to buy at the moment, so I've started a rumour that NZ house prices are going to crash in 2007. ?All the indicators are there... rising interest rates, spiralling debt, lower migration.... ? ;D

This is very true. You only have to read through the Property buyers?info thread on here to see how prices have gone up and up. There have been several wobbly bits where they thought the rise was slowing down or stopping, but I don?t think it?s actually happened.

Unfortunately they tend to blame the likes of us expats for the rise because we?re coming into the country with big bucks from house sales in the UK and buying up a storm. It?s happening here in the Middle East as well because property is now available to outside buyers and is being snapped up as holiday or second homes. It?s gone really crazy. It was the same in Spain, too, although that has cooled a little now.

I feel very sorry for those struggling to get on the property ladder. Whereas I wouldn?t want to see our house price drop dramatically, I feel there should really be some help for first time buyers.

[KiwiHopeful]

I hope you don't take this personally, ExPat, because I intend it in the spirit of debate and not as an ad hominem attack. ?I feel that there is a lot of misinformation in your post that needs to be addressed.

You're comparing UK living with NZ living. ?I'm comparing US living with NZ living. ?My tax rate is about 20% and my pay would be significantly higher in the US than in NZ.

20% seems very, very low, since the tax rate jumps to 25% at 30K and 28% at 75K for a single filer, and for marrieds it is 25% at 61K and 28% at 124K. ?

FICA also adds approximately 6%. ?Also 43 US states have some form of income tax as well.

If I earn 150k USD in the US, I would need to earn the equivalent of 210k NZD in NZ to be "even" yet when I factor in the tax rates it gets worse:

The proposition that 150K USD=210K NZD is problematic. ?Exchange rates vary, and the exchange rate between the US and NZ has varied considerably (you can check it here: http://www.oanda.com/convert/fxhistory if you like). ?The exchange rate is also meaningless in terms of saying, "I'd need X amount of money to have Y lifestyle," because the exhange rate is not tied to any real purchasing power in US versus NZ, but rather what some speculators think the currency will be worth. ?That is, even though the US dollar has fallen relative to the NZ dollar, there has not been a corresponding amount of inflation or deflation of consumer prices in either place.

20% US Tax rate on 150k = 30k in taxes. ?40% NZ Tax rate on 210k = 84k. ?I'm simplifying because both rates are actually marginal but it's easier to lay it out this way.

Again, this is a very conservative estimate of US taxes and the worst-case scenario of NZ taxes, and does not include all payroll taxes. ?Furthermore, the comparision is limited because it does not consider total tax burden. ?Property taxes, for example, can be very high in the US (and because they are not directly tied to the payer's ability to pay, are also very regressive.) ?I pay about $250 per month for my 1400 sq ft home on .25 acres.

But the highest paying jobs comparable to the one I have now in NZ only pays about $110k NZD. ? So I would cut my income in half simply to move to NZ then cut it in half again to pay taxes. ?My net income would be 1/4 of what I earn in the US now.

Again, the math is jiggled just enough to make the worst case scenario look even worse. ?Assuming (the incorrect) 40% tax rate, that still leaves 60%, and 1/2 of 60% is 30%, not 25%. ?But, that seems like a quibble in light of the larger issue.

Now let's factor housing. ?I live in a 4 bedroom house in one of the largest cities in the US. ?The current cost for such house is about 200k USD which isn't difficult to pay for with 150k in income. ?But the equivalent house in NZ (Christchurch) would cost about 400k NZD which would be difficult to pay with 100k NZD taxed at 40%!

The median (not average) home price in the US is about $200,000. ?There are many US cities where the media price falls below that (you can find a recent list here: http://tinyurl.com/2a77ag if you care to). ?However, comparing Indianapolis or Detroit or Buffalo to Christchurch seems unfair. ?Find me a city in the US on the coast within a short drive of the mountains (or similar recreation) or otherwise comparable to ChCh.

I really don't know or understand how people in NZ get by but a few people we spoke to said they lived off of credit cards and most had 50k in debt on credit card.

The average US household has $8K in credit card debt (http://tinyurl.com/dgrxs) and the personal savings rate in the US dipped below 0% in 2005 and hasn't climbed back out significantly (http://tinyurl.com/jchc7).

So it seems that if we wanted to move to NZ, the best course of action is to spend the next 10 years earning money in the US and accumulate (10 x 150k = 1.5 million) then pay cash for housing and other expenses down in NZ.

The figure assumes all income would be saved. ?But, yes, if one could save a significant chunk of their income, that would be a sensible plan from a simple financial perspective. ?However, it really is more complicated that that. ?It assumes a status quo of sorts with regard to inflation, exchange rates, taxation, property appreciation, etc. ?

BTW, I do not disagree with the basic premise. ?If my wife and I did not have significant personal savings in our retirement accounts and a good chunk of appreciated value in our house, I don't think we'd do this, unless we were still in our 20's!

Again, this is all dependent on your existing lifestyle and what you are accustomed to. If you've never had something then you won't miss it but if you've had it, you don't want to lose it.

Excellent point!
*I had to edit out some of the OP b/c I was running out of room!*

While NZ medical care may be "free", I only pay $130/month for 90% coverage of all medical expenses. This covers all family members.

That's a really, really good deal, considering that the total cost for most plans exceeds $800 per month. My wife and I pay more than twice your figure for a family of 4.