Ep. 1 - Sam Stubbs: How to Make Your Money Work For You

BY SOPHIE CHUNG

For all the motivated and ambitious kids who are feeling a little stuck in today’s economy.

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5 AUG - 2021

Money made simple - here’s the 101 on how to build wealth.

Sophie: Thanks so much for your time today. I’m so excited to be kicking off our Chatty Chums podcast with you. You’re the face of ethical finance in New Zealand and you’ve created an inspirational platform that strives to help Kiwis build wealth. You’re like the late Jack Bogle of New Zealand. It’s such an honour to be picking your brain about investing money and how to make it work for us.

Sam: Thank you. I’m so old, I’m almost late myself.

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Sophie: I was thinking we could start with some questions about your first ever business. From what I’ve read, you were only 12 years old and you started in my neighbourhood in Sunnyvale, right?

Sam: Myself and a friend at school - we used to do this thing called scrounging, which means on a Saturday morning, we’d go around in our bikes and pannier bags and look in the jumbo bigs of all the light industrial businesses.

Back in those days, I’m so old now, in order to get a telephone - there were no mobile phones - the telephones used to have a rotary dial. You could only have one per house and it was installed by the post office.

The post office had a repair centre in Henderson which is close to Sunnyvale, where they’d throw out all the old phones and they’d also used to repair them. So, a couple of twelve year old kids turned up at the post office repair thing and said, “hey, would you mind if we go through your jumbo bin and get old phones?” They laughed because we were so young and they said, “if you want the odd new bit, we’ll give you that too.”

So, what my mate Eddie and I did was we took all these phones in our pannier bags on our bikes and we’d repair them and turn them into workable phones. And then we would go sell them around the neighbourhood as extensions - illegal extensions. People were only allowed one official phone but we would go around and install a second or third one. If we liked you, we would charge you $10. If we didn’t like you, we charged you $20.

Some houses had up to 9 extensions in bathrooms and bedrooms and that. That’s what we did. That was our first business. And of course, it was under the table cash. Our parents didn’t know what we were doing and yeah, that got me on the setting up your business route. It was awesome. It was great fun.

Sophie: You were only 12. How did you even fathom how to make money like that?

Sam: I don’t think it was my idea. I think it was my mate, Eddie’s idea. I just went along with it. I was his little lieutenant. Like all great business ideas, it wasn’t a new idea. It was just borrowed and we just got off and did it. And I think if you look at most successful businesses, very few of them are new ideas. Many of them are just what’s worked overseas and someone just picks up the idea and then makes it happen. Business success is 99% perspiration and 1% inspiration. Not the other way around.

Sophie: That is so true. What jobs did you do following your entrepreneurial phone line extension installation company?

Sam: Haha. Well, at the same time I was doing that, I was doing paper runs in the morning. And then I would pack supermarket groceries in the afternoon after school. Always seemed to have two or three jobs all the time. Back then, I’m so old, we got paid 99 cents an hour to pack groceries at the supermarket. And then I had various other jobs working in factories, I used to assemble vending machines, all sorts of things. A whole lot of jobs like being a builder and all that sort of stuff until I got to University. Then I started being a supervisor at a University hostel. Heaps of different stuff.

Sophie: How did you segway into finance?

Sam: Yeah, it was a really weird way. I trained as a philosopher. I studied political philosophy at school and I wanted to become a lecturer in it. And then I tried that for just a tiny bit and realised, ‘oh, that’s not me.’ So, I then went and thought ‘well, I’ll go and get a proper job,’ so I went to work for IBM doing computers for a couple of years and that was going really well. They were flying me around the world and that was really cool.

And then, you know what, back then, a thing called merchant banking or investment banking was starting to become a really glamorous career. In New Zealand, the premiere merchant bank was also funding the first America’s Cup and it was all very exciting. I looked at those people working there and I said, “well, they’re driving faster cars and going out with prettier girls than I am.” So, I wanted to get into that industry. For all the wrong reasons I went into finance. I did it for money and glamour and profile and fancy business cards… all that sort of stuff. So I went there and started working at a little investment bank, merchant bank is what it was called in those days. The rest is history. I spent my life in the industry, yeah.

Sophie: Amazing. At what point after wanting the cars and the girls, did you have that epiphany of wanting to start something that was not for profit, something that was for other people other than just building wealth for yourself?

Sam: People like me who are very lucky in life - and I was just very lucky - lucky with my career and money and stuff. But you get to a point where you think, it’s not really enough. I was, you know, wealthy and had been very lucky. But I was looking in the mirror and I was saying, ‘look, I come from Sunnyvale. Am I actually looking after the people from Sunnyvale?’ And the answer was ‘no,’ I was just making myself wealthier and looking after other rich people. So I had a mid-life crisis and that was at about 45, where I looked and just said, ‘I don’t want to do this anymore.’ Actually, was it 45? It was late 40s. And so I took a year off and hung out, planted a few trees, did a bit of volunteer stuff.

Sophie: Yup. Frolicked in a paddock.

Sam: Exactly, exactly. And then I thought, ‘look, this is great. I like giving back but this isn’t making a big difference. I’m just planting a few trees. So how do I end up doing something that makes a really big difference?’

So I got together with a few friends at a pub and my partner then, Amanda, she was very supportive. And we ended up, the four of us, ended up starting Simplicity. We thought, ‘let’s become the gamekeeper turned poacher.’ Let’s take all that we know about the finance industry, and we’re all experts and professionals in it - let’s set up a disruptive business that’s not about making money for ourselves but making money for clients, operate as a not-for-profit, and let’s give 15% of all our revenue to a charity.

And so we just started doing it. Now that is not a new idea. There’s an organization called Vanguard in the United States which is the second largest asset manager in the world. We went to Vanguard and said, ‘can you help us?’ and they said ‘yep.’ So Vanguard agreed to manage all of our overseas assets and gave us a lot of free advice. It’s not a formal agreement. I think Vanguard would very much consider us to be a friend down here. And they’re certainly a great friend of ours overseas.

And then we started asking a whole lot of people to help us. Now, four and half years later we have 20 staff but we have 65 volunteers. And they’re accountants, lawyers, all professional people who want us to do well and help disrupt the industry and give a lot of money to charity. So it’s a different business. Some people call it a social enterprise, others call it a not-for-profit company. We’re owned by a charity so there’s a whole lot of different angles there but basically it’s all about making money for our clients and doing good and you can do both.

Sophie: Okay, that’s amazing. I didn’t know you collaborated with Vanguard. We’ll come back to the index fund side of things. Just to talk about property... I read in an interview from exactly a year ago that the tip you would give to a 20-year-old who wants to become a millionaire would be to buy a house ASAP and the most expensive house that they can buy as soon as possible. But now, with COVID, the property prices have skyrocketed. Now, you need to be on a 6-figure salary and also have a quarter million in terms of the deposit to buy an Auckland house. I feel like anything under a mill is unheard of. Does this advice still hold?

Sam: It’s a really valid question, aye, because it’s so hard to get a deposit for a house. So, the advice is actually the same. This is still the best investment you can make. And I’ll tell you why. We’ll talk about the deposit in a minute, right? Let's assume you have the deposit. The money you are borrowing to buy a house will be the lowest cost debt you’ll ever have. The interest rate is much lower on credit cards or personal loans. The banks will also lend you the money if you have the deposit so you get to have what’s called a leveraged investment at a very low cost. And about every 6-10 years, the price of houses doubles. Why is that?

Sophie: It’s so beautiful.

Sam: Yeah. In New Zealand, it’s because It’s a tax-free capital gain and so that’s a really good investment. Second, there’s only so much land and yet there’s more and more people chasing the same amount of land. Thirdly, it’s where people like to invest their money because they get to live in it and enjoy it. So not only is it a fantastic financial investment, it also means you don’t have to change flats all the time.

You’re not dealing with snarky landlords or all that sort of stuff. So it’s a very pleasurable investment to have. You get to enjoy it everyday as well as making money from it. So there’s a very good reason why New Zealanders want to invest in their first homes. You've got a tax advantage, you've got low cost leverage, you get to enjoy it, right? And so, owning a house and buying a house is still a great idea.

The issue is how do you get that deposit. It’s really hard, aye. And so I think there are two options here. One of them is that you would go live somewhere that you normally wouldn’t want to live to buy a cheaper house. To get on the property ladder. I know a lot of people don’t want to do that.

The second one is you might buy a really cheap house as an investment property and hold onto it long term. If you hold onto it for more than ten years now you get gains capital free and you rent elsewhere.

Or the third thing is you find a way to accumulate the deposit as fast as you can. And that’s where Kiwisaver is really useful because if you set up a Kiwisaver fund, and you put in as much as you can possibly afford - in fact, don’t put in as much as you can afford - put in as much as you can’t afford.

Start out in life by putting a lot of money in there and then it will go in there and you can’t get it out. You’ll adjust the rest of your lifestyle to your income. Remember, you always live to your income, right? If I give you $5, you’ll live on $5. If I give you $10, you’ll live on $10. Once you start living on $10, you can’t live on $5 again, right? That feels like poverty. But if you start out living on $5 and then you save the other $5. You’ll get used to living on $5, you’ll adjust your lifestyle. But you’ll be saving that money. And so, Kiwisaver is a great way to save for that deposit because you can get it nearly all out for the first deposit on your home.

So the advice for getting a deposit together is get a Kiwisaver account ASAP. Put in as much as you can afford to put in and a little bit more, right? So, for a lot of people starting it, I’d recommend putting in at least 10% of their savings into Kiwisaver and remember you can do automatic payments even more if you want to. You can put as much money as you want to in your Kiwisaver account. Remember also that the government will give you $521 a year if you put in $1042 - so there’s some free money there as well. And start that as early as possible.

Look, I tell parents, the day your kid is born - well, the week that they’re born - start a Kiwisaver account for them and just put in $1 a day and by the time they turn 18, that should be something in the region of $20-30k.

Sophie: Jack Bogle mentioned that he splits his investment for his grandchildren, he puts 60% in moderate and 40% into bonds.

Sam: So what Jack Bogle was recommending is you put your money into a balanced fund, basically. The balanced fund being 60% shares and 40% bonds. So what are bonds? Bonds are really simple. Just think about bonds as a fixed interest investment. Say you put a term deposit on for 5 years for a fixed amount of money, right? A bond is just a legal structure wrapped around that term deposit so that you can then sell it. It’ll be like going to your bank and putting in a term deposit then saying to your friend, “do you want to buy my term deposit?”

That’s what a bond is. You can sell it to anyone.

Sophie: I put everything in term deposits when I was at uni. I thought that was easy, clear, through a bank - but it was only like what, 3-4% returns? Are bonds a bit better than that?

Sam: No. Generally, they’re around about the same and sometimes they’re a little bit worse. Sometimes, they’re a little bit better. It depends on who is issuing the bond, who wants your money and how much they’re prepared to buy. You can get high dividend bonds or low dividend bonds. But most people generally don’t buy them. You can get government stocks and government bonds.

Sophie: And is it quite low risk, would you say?

Sam: The government is the lowest risk of all. Because what the government can do is tax you and I to repay the person who owns the bond. So government stock is the lowest risk investment of all and so they pay the lowest return of all. But most term deposits will return you about 1% right now. Bonds will return you about 1% as well. There’s not necessarily any advantage in buying a bond versus putting a term deposit on.

Sophie: That doesn’t seem like a very good deal...

Sam: Well, it’s just that with a bond, typically you buy a whole lot of it - you’re buying them in 50, 100, 200 (thousand), sometimes a million dollars. The advantage of a bond rather than going to ASB… say you put the term deposit on ASB and you said, “I want my money back now early” and they say, “Well, you can have your money back early but I’m going to penalise you,” right? With a bond, you’re just buying it and you pay the money and you get it, then if you want to sell it, you can sell it to someone else without a penalty.

Sophie: Oh ok. That’s cool. So it’s fine free.

Sam: Yeah, exactly. Exactly. So that’s one of the advantages of having bonds. Typically, bonds are bought by very large investors who buy and sell these things all the time.

Sophie: OK. So I’m definitely not at the stage and you would recommend people in their 20s and 30s to go 100% into a growth fund?

Sam: Most people in a growth fund. It depends on your personal circumstances and I can’t give personalised financial advice but most people, because you’ve got the advantage of time, you want to be in a growth fund because you’ll make more money over time because you take a bit more risk but you don’t have to worry because you don’t need to pull out all your money in any one time. But if you’re going to buy a house, it may be that you’re in a growth fund for a long time and then when you get round to where you’re house hunting and want to preserve the value of the deposit, you might want to go into a conservative fund just to make sure you’re not going to lose money if the market goes down or lose very much. It depends on your personal circumstances but you can go to any number of websites - sorted or moneyhub or whatever - they’ve got something called a fund finder. They’ll work out for you what the right fund for you is.

But as a general rule, you want to be more in growth and take advantage of the higher returns you’ll get from that.

Sophie: So say for example, someone in their 20s, they’ve saved about $50k worth of savings. And about three years ago, you could buy a house with that; 90% LVR. But now, there’s no way in hell you can do that. So, what would be your first piece of advice on how to make your money work for you when you only have $50k.

Sam: Sure. Well, if you did that, you might want to consider buying with somebody else, with a friend. So you can pool your deposits and then buy a house together. You’ll have two incomes to help pay that off so you can make it more affordable for you. You can go and get a loan from your parents or somebody else who can add to your deposit. The bank will always want the first mortgage repaid first before the person who has lent you the money. Or you can just wait - save like crazy.

Sophie: Can we save at the same rate as how fast the property market is going up though?

Sam: Well, right now, it’s crazy, isn’t it? And it’s really annoying that a whole load of people can’t do that. But houses won’t go up at this rate forever. They’ll level off or go down for a bit or whatever. You just can’t get all of this growth going on forever because it just becomes unaffordable for everybody.

Sophie: But even back in ‘08, ‘09, the drop wasn’t even that much, you know? It still, over time, goes up - it’s a little dip - it’s a drop in the bucket.

Sam: That’s right. So history tells you that in most circumstances, the property market will not drop more than 5%. Every now and again, it does. So in the Great Depression, it went down, gosh, 40-50%. And in 2008, the house prices went down by 20% - for a very short period of time. Just a short period of time. But you’re right.

As a general rule, it tracks up and when it goes down, it doesn’t go down by very much. And the reason is that as soon as it dips down, people start feeling really nervous. The economy slows down and interest rates go lower. So, it becomes more affordable to borrow, so people borrow and start buying houses again.

So one of the nice things about a house as an investment is that typically when it goes down, it doesn't go down by much. And even if it goes down, as long as you can still afford to pay the mortgage, you’ve still got a roof over your head, you’ve still got a place to live. When you own a house, you realise the advantages of not being forced to move.

Sophie: So back to partnering up to buy a house… Simplicity is now offering 1.9% interest rate. That’s only for first home buyers, right?

Sam: That’s right.

Sophie: If you were on, say, a $60k salary - which is, I feel like, an average salary for someone my age. And then they’ve got $50k in savings. Can they still apply for the Simplicity mortgage if they partner up with someone who’s already an investor?

Sam: Yes, they could, in theory. You’d need to go to our website and see what you could afford to borrow. We tend to be a pretty conservative lender. We like an 80% Loan to Value Ratio, which is why we can afford to do it at 1.9%, right?

There are some exceptions to that. But if you can get together with somebody and jointly to buy a house - absolutely. If that works for you, it may not work for you. But if that works for you, you can. And, of course, you have two salaries supporting that too which is useful.

Sophie: Yeah, well that’s how I do it. I mean, there’s no way in hell I could do it by myself, working in media and all.

Sam: *chuckles* Yeah, sure.

Sophie: There’s over 3000 companies that Simplicity has invested in across 23 countries. Can you explain what kind of companies these are and how they’re different between your index funds like conservative, balanced and growth?

Sam: Ok, sure. So if you think about our growth, balanced and conservative funds, you can either have them as Kiwisaver funds or investment funds. Kiwisaver means they’re locked in til you’re 65. You do get your government contributions, you do get your employer contributions.
So you get other people contributing to it but you can’t get your money out unless you’re buying your first home, are in hardship or retired.

Or our investment funds, which you can put your money in and out of as much as you like. Each one of those funds have the same 3000 investments. It’s just that if you’re in a growth fund, you might have more Apple shares than if you're in a Conservative fund with less Apple shares. If you’re in a growth fund, you’d have less fix interest than in a Conservative fund. But it’s the same investment, it’s just different numbers of them depending on the fund.

And all of those funds charge exactly the same fee. There’s no difference in fees which is quite a bit different to our competitors who like to charge you more for a growth fund. Because you make more, they think they should be able to charge you more. We don’t believe that. We think you should pay the same fee regardless of the fund you're in. And those 3000 companies are typically the biggest 3000 companies in the world. So we do it by size.


And in New Zealand, there are 34 of them that we invest in. They’re all listed on the NZ stock exchange. And then we also invest a little bit of your money, particularly if you’re in a growth or balanced fund, into Icehouse Ventures. They’re involved in about 50% of startups in New Zealand. And we’ve pledged $100 Million to invest in 5 years in high growth companies in New Zealand. So there’s a lot of really exciting high growth companies because we think that they’ll do very well collectively over time. So that’s what we’re invested in. It’s pretty simple.

Sophie: So, with apps like Sharesies, Hatch, there’s so many now. What kind of advice would you give to someone who is wanting to do it themselves in terms of tips on what kind of companies you need to look for in the DD process?

Sam: Well, look, I have a very strong view on this which is that you should not be investing directly. Unless you have a competitive advantage. Unless you know something that the rest of the world doesn’t know. Simplicity is a non-profit company, we don’t make any money here. We’re owned by a charity. We’ve invested in a way that we know will make the most amount of people the most amount of money over the longest time. That is called index investing - so just picking the largest companies and investing in them according to their size and then charging the lowest fee.

You can invest directly if you want to, you may want to learn about investing as an education exercise with Sharesies and Hatch and so on. You can also buy index funds through them as well. But in terms of buying individual companies, use that as a learning and education exercise and maybe a bit of gambling money rather than thinking necessarily about them as - well, of them, some will be good long term investments, but it’s very hard to work out which ones you would buy or sell to beat the market.

History shows you, Jack Bogle and Vanguard will tell you, you can not beat the market after fees if you’re paying a high fee, because you don’t know more than the market. Remember you’re betting against the entire accumulative wisdom of every company and every investor around the world when you’re trying to beat the market. You may have particular insights or particular intellect that does allow you to beat the market. But history says the chances of that happening are very low, particularly over a long period of time.

A lot of people get lucky once but over time, the longer and longer it takes, the more and more you can’t beat the market particularly after fees because most fund managers and most of these platforms will charge you fees that will erode your gains over time.

Sophie: Yeah, massively. After this answer, I kind of know what your answer will be but what are your thoughts about people putting their life savings into things like Gamestop?

Sam: It’s like cryptocurrency, right? You can invest in it if you want to but it’s not an investment, it’s gambling. So unless you have a competitive advantage in knowing something more than the market does. Otherwise, it’s like taking a gamble because who knows? Let me ask you a question. Do you know where the market is going tomorrow?

Sophie: Well, no. No one knows.

Sam: No one knows. Right. You know that on any one day, 50% of people will be right - the buyers will be right but for every buyer, there’s a seller, so the seller will be wrong. If the market goes up, half the people will be right and half the people will be wrong. But the problem is that they all pay fees. So what will actually happen is the sellers will be wrong plus the fee they pay. The buyers will be right, less the fee they pay. A little less than 50% of people are right, every one day. And that compounds up. You have to remember you redo that everyday, right? You might buy a share on one day and you might win and then the share might go down.

Sophie: It changes every minute.

Sam: It changes every minute. It’s very very very hard to beat the market. Trust me, I’ve spent my whole life in financial markets and what I realised is when I didn’t want to make money for myself in doing this from the jobs I was working at, when I was actually just wanting to make money for the customers - it was very simple. You say you go and become what we call a passive investor. You just buy index funds, you charge the lowest fee. That’s how you make the money.

Sophie: Talking about low fees, I guess we need to talk about banks. You’re super passionate about how much you hate banks.

Sam: I actually really like banks. The idea of banks is fantastic. Banks have been around since our whole history. What I hate is how much money they make off New Zealanders. I’m going to give you an example and pick up some coasters here.

I’ve got three coasters. Let’s say each one of these is 1%, right? So you know how you talked about putting your money in the bank and you got 1%? So let’s say you supplied the money to the bank at 1%. But you know how banks do mortgages at 3%, right? So, someone is paying 3% - of that, 1% of it is going to the depositor who put the money in the bank, 2% is going to the bank. You see that? So you say, “Hold on. I’m paying a 3% mortgage. So every $3 I pay to the bank, $2 goes to the bank and $1 goes to the person who put the term deposit in the bank. Crazy, right?

This 2%, which is called a net interest margin, helps make them over $5 Billion dollars in after tax profits every year. And that has been historically 20% more from the average Kiwi than they’ll make from the equivalent Australian. The big banks in New Zealand are milking New Zealand customers. And then in their Kiwisaver funds, they charge in many cases, three times what we charge. None of them have outperformed us in the past three years. So they charge you more to deliver you less. So I certainly don’t want to destroy banks. I love bankers and they’re my friends - I just don’t like the business model which rips off New Zealanders.

Sophie: What’s your ultimate goal for Simplicity? Is it to replace those Australian banks?

Sam: Yeah, I want us to be the biggest financial institution in New Zealand. That means looking after more Kiwisaver money, making bigger returns, dealing lower cost mortgages; we’re going to do a whole lot of other things over the next few years as well which we will be announcing over the next few years. Basically, we call ourselves a dignity company. What we mean by that is we want to give people dignity in retirement, dignity of owning your first home - how you do that is you give people choices. If you have choices in life, you have dignity. Or think about it the other way, if you don’t have choices in life, it’s hard to have a dignified life.

How do you give people choices? You make them richer. Money. Money gives you choices in life and choices give you dignity. So what we want to do is make the most money for the most New Zealanders. And even now, four years on; we started at my kitchen table four years ago; we’re looking after $3.3 Billion, each day, we’re saving New Zealanders about $75,000 in fees and each day we’re giving about $4.5k to charity.

Everyday, including the weekends, tick tick tick tick tick. It adds up to about $24 Million in fees saved per year now for our members and $1.5 Million to charity. Now, that’s with only 2% of market share as we’re fighting the banks - they’re big competitors. The more and more market share we get, the more we can give back to New Zealand. That’s our aim and in the process, hopefully becoming the biggest charity in New Zealand as well.

Sophie: So what’s the ten year plan for Simplicity?

Sam: We might become a bank without calling ourselves a bank. So here’s what we might be able to do for you. Right now, we can look after your Kiwisaver, we can look after any investment funds, we can give you the lowest cost floating mortgage rate in the country. We might be able to house you, we might be able to put you in long term rental accommodation, we might be able to sell you life insurance, we might be able to give you what we call a reverse mortgage which means we might be able to give you money based on the value of your house, we might be able to kick out those vulture payday lenders who are charging high interest rates, we might be able to do money transfers at much lower fees. There’s a whole lot of things we can do.

You know Jeff Bezos, head of Amazon, here’s a fantastic phrase - “Your margin is our opportunity.” If you look around the finance industry, there’s big fat margins everywhere. So Simplicity will be where we can reduce that margin and give you more money and choices and dignity in life. So that’s our ten year vision. Who knows what we will do when but we certainly made a good start.

Sophie: So at the moment your fees are a tenth of what the banks charge?

Sam: About one third, on average.

Sophie: Which is a lot over time.

Sam: It means that the average New Zealander will be $65k better off in retirement using current fees, fee differential, over the rest of their lives. Our aim will be to make that bigger of course, but at the moment that’s what it is. Our average Kiwisaver member now is saving $365 per year in fees.

Sophie: Will you have credit cards? Personally, despite the alluring points and gifting, I don’t have a credit card because it’s just this black hole of debt.

Sam: Credit cards are not a good idea. New Zealanders pay $1 Billion of credit cards per year and the merchants that you buy off have to pay the credit card companies a big fat margin when you buy something on a credit card. Also they can give you some points or whatever it is, loyalty or whatever. They all try to lure you into spending as much as possible and you think, ‘oh, it’s not costing me anything.’ It may not cost you directly but you’re paying indirectly. Because the people you’re buying stuff off, they have to put their prices up for everybody to pay those credit margins. You are paying more by spending with a credit card long term. In the short term, as soon as you get into debt, you get absolutely screwed. We’re not going to do anything for our members that are ultimately bad for them as good as it might be for our own revenue. It doesn’t matter to us as we’re a non-profit anyway. All of the benefits go back to our members, so why would we do credit cards if it’s bad for them.

Sophie: What about AfterPay? I feel like it’s spurring on really bad spending habits for Gen Zs.

Sam: Well, if there was a stronger word than ‘hate,’ that’s how I would describe AfterPay. I hate the idea that you get given something and you have to pay for it later on. Because once again, with AfterPay, you think, ‘I’m not paying anything more,’ but you’ve been lured into getting more than you can afford at the time. And the merchants are paying for it. The merchant has to put the value of the product up in order for them to get paid up front. Someone’s gotta pay AfterPay right. So someone pays and what they’re encouraging is excessive consumption. I hate that idea. It’s luring people into getting things that they can’t otherwise afford and then making them pay for it later or making the merchant pay for it later. But either way, why do we want to live in a world where people are getting stuff like that, that easily, which turns out to be so expensive for everybody else?

Sophie: What websites, books, podcasts would you recommend for people my age?

Sam: Hey, there’s so many, aye. It’s really cool. Gosh, what would I do. If there are three things I’d do, it’s read The Barefoot Investor; which I think is a really cool book, lots of people read it; if it’s one book I would read, it would be that. If there was one website I’d personally go to in New Zealand, it would be Money Hub and then it would be Sorted. And if you want to get more information, there’s some really cool podcasts out there.

Mary Holm, she writes a lot of cool books if you want to understand it in more detail. I think keeping it simple is important. Money is actually really simple so you’ll find what you want pretty damn quickly. I’d just make sure that it’s from an independent source. So I wouldn’t be going to any supplier’s websites. You can go to our website and we’ll give you an education series with some simple truths about money. And that’s really cool, about 20,000 people have done that. But somewhere like Money Hub is a mine of information - it’s fantastic. And it’s subjective and well written. It’s easy to understand, it’s easy to read.

Sophie: OK cool thank you for that. Do you have any other pieces of advice for people who want to make their money work for them?

Sam: Yeah, totally. In no particular order. Don’t get credit cards, don’t get debt, set up a savings habit. Kiwisaver is as good as anything and save as much as you uncomfortably can. The other way to save money is to not spend it. If you want to find out a great way of not spending money - this is going to sound like a crazy website - but go to a website called Mr. Money Moustache. They will tell you how to lead a more frugal and happy life. Not spending money is a really good way to save money. So, I would do that. I’d get into Kiwisaver straightaway and maximise the benefits in that. And then, I would get on with enjoying life. And the other thing is education, right? So don’t worry about student debt - get the best education you possibly can and the most education you can.

Don’t get into debt. Cut up your credit card, set up a Kiwisaver and save as much as you can as fast as you can. And get on with doing the best you can in your job. And you’d be surprised how fast it accumulates.

Sophie: It’s still pretty tough though.

Sam: Don’t get me wrong, it’s still really tough. Do you know what? It’s always been tough. When I was your age, it was tough. Houses are never cheap. They only look cheap in hindsight. Houses are always expensive and when they are cheap, you’re too scared to buy them. When the market crashes, you think the world’s gonna end and you don’t buy one, trust me. It’s what we call liquidity, the number of house transactions at the very bottom of the market are very very low. People get too scared. Look at it in COVID. How many people went and bought the equity market when the market dropped 20%. Everyone was too scared. They thought it was going to go down even further, right? So, don’t think that houses are particularly expensive now. They are but they’ve always been expensive. And they always will be expensive. They’ll never be comfortably cheap.

Sophie: Do you have any personal stories of struggles so we don’t feel so alone?

Sam: Oh yeah, I totally understand. Look, it took me until I was 30 to buy my first house and I was in a pretty well paying job. It just takes a long time to get that deposit together. I think that your generation lives in this world where they see this Instagram world of perfection which is, pardon my language, it’s bullshit.

It’s not how people live. It’s not how people are. It’s an invented life of material wealth. Everybody struggles to own their first home. It is always tough. Everyone borrows the max and they get in there. But it is something that I encourage you to do even if it takes a few years longer and even if you have to buy a house with someone else, generally, it’s the best investment you can make.

I’ve met a lot of millionaires and a lot of billionaires in my life. Most of them have made most of their money from property. I have made most of my money from property. And I’m running a Kiwisaver scheme. Kiwisaver is useful, it’s fantastic, it’s so on. But one of the pieces of advice I have is if you can afford to own a home, you should try and get one and get on the property ladder as soon as possible. But, I totally appreciate and totally understand that it feels like it takes forever to get that deposit together. But remember, most people in their lives, were not owning homes in their 20s but in their 30s.

Sophie: So you had a well paying job while saving for your first home. Did you end up having to live in a slum to save money? I had a leaky wardrobe every time it rained, broken toilet, mouldy shower, the whole works. Did you have to do anything like eat chicken sausages and carrots everyday?

Sam: I used to live in a flat where I’d have to wear every piece of clothing I had in the middle of winter because there was frost mouth coming out of the bedroom because it was so cold. Everyone goes through that. And I’m going to sound like an old man here. I’m going to sound like a parent.

Those things are also character forming. If you don’t die *chuckles*, and don’t get really sick, the fact that you live in relative poverty for a while or what feels like relative property, you’re not starving to death - it’s actually really good and character forming long term.

Sophie: It’s so rewarding to reflect back on it. I don’t live in a mansion or anything Instagrammable like that. But I can still really really really appreciate and have so much gratitude for it because I’ve got something that was so much worse to compare it to. So, I feel like that’s part of the key to happiness is to go step by step, rung by rung, up the ladder rather than being slotted up there.

Sam: This is going to sound very old man and very entitled but… you know, I am wealthy. But I can tell you that after a certain extent, there is no correlation between money and happiness. In fact, usually it’s negative.

Sophie: It’s $200k, right?

Sam: Between $100-$200k a year and then after that, it’s got nothing to do with happiness. You might be happier if you earn more money but it’s not because you earn more money. It doesn’t cause it to happen and when you’re very wealthy, it causes misery.

Sophie: Because you have to protect it!

Sam: And you think that people are only talking to you because they want your money. And you become like King Midas - sitting on top of his pile of gold protecting it. And you can end up quite isolated and lonely. And after a while, things own you, you don’t own things. After a while, you accumulate these assets and you gotta look after them and they’re just a drag.

By the way, there are a lot of people who earn a lot more than that who are still very happy, right? Money brings you happiness. What I’m saying is after that point, it’s not because of the extra money, it’s just because of who they are as people, right? So it’s about who you are as a human being that determines your happiness once you’re out of poverty. Once you have enough money to reasonably buy what you need and what you want.

The richest person in the world at one stage, John Paul Getty, had this phrase. Someone asked him, “what’s it like having all these houses and cars.” He said, “You can only wear one suit at a time. You can only be in one car at a time. I can only be in one house at a time. So all of these things actually mean nothing to me. What matters to me is people.”

That was ironic because John Paul Getty was a bit of a prick as an individual. Even in his biggest house, he had a payphone for his guests, believe it or not. So what he did was completely opposite of what he said but what he said is still very valid. You do need that first house, right? The first house you buy will be the hardest house you buy.

Sophie: Just one more question. What’s the best advice you’ve ever received?

Sam: That’s a really good question. I think the best piece of advice I’ve ever received is that it’s the people in your life that matter. It’s not what you know, it’s who knows you.

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