Why Am I Not Wealthy?

Our guide explores why financial success eludes many New Zealanders despite high living standards. We look at the expectations versus the realities of wealth and offer insights into the habits of the affluent and common pitfalls that prevent financial growth.

Updated 14 October 2024

Summary

As New Zealanders, we live in a country with some of the most breathtaking scenery, a high quality of life, and some of the highest happiness scores around the globe per this 2024 study. Yet, despite these advantages, many New Zealanders still feel behind financially and often ask, "Why am I not wealthy?"
Often, the New Zealanders who ask this question are hard-working, well-educated, reasonably high-income households that have done everything they were "supposed to". These days, there seem to be too many middle-aged New Zealanders who are facing a bleak retirement. Sometimes, they realise this too late in life.
It's well documented that living on NZ Super alone is usually not enough for most New Zealanders (especially if they don’t own a house). As a result, building wealth is essential to ensuring a good, happy and healthy retirement.
This guide explains the hidden snares of modern life that often hold hard-working New Zealanders from advancing financially. Our approach is compassionate and understanding; we recognise that everyone's life is unique and don't bring any judgment.
Whether you are navigating financial waters with a partner, where spending and saving habits may not always align, or managing the demands of parenting and other responsibilities, costs continue to increase.
Pre-relationship debts and soaring rent or mortgage payments can create significant strain. Car costs are also out of control and limit the ability to accumulate wealth. This guide explains these challenges and offers practical, actionable strategies to help you achieve a more secure financial future.

This guide, the first of its kind published in New Zealand, covers the following:

Know This First: Understanding the main habits of wealthy New Zealanders is essential to help emulate their success. Wealthy people don't need to start businesses or work 60+ hour weeks - the reasons behind their fortunes usually come from discipline, sacrifice and the value of every dollar earned and spent. The reasons include:

They spend significantly less than they earn: Typically, most New Zealander millionaires are economical and frugal and avoid extravagant lifestyles they can’t afford. They value quality over prestige. These New Zealanders strategically invest in ways that preserve and enhance their family's wealth, including investing in their children's futures - like education.
They efficiently manage their resources: Millionaires are meticulous with budgeting and planning their finances. They start saving and investing early. Regular investment practices, often automated, are the keys to long-term growth and wealth building.
They prioritise financial freedom over social esteem: Self-made millionaires invest little in societal status but much in financial wisdom. This includes opting for a well-maintained pre-owned vehicle over the newest model and always purchasing outright without loans. Car finance, along with personal loans and unpaid credit card debt, holds back hundreds of thousands of high-earning New Zealanders – the wealthy avoid this altogether.
They choose high-income, growing career paths: The higher your income (and the better paid your industry is as a whole) is throughout your life, the easier it is to grow wealth. Pursuing careers in engineering, finance, dentistry, law, medicine and real estate (among other professions) can significantly enhance wealth-building chances, though success can stem from any field, even those considered mundane or common.

MoneyHub Founder Christopher Walsh shares his comments on why many New Zealanders work hard but won't become wealthy:

For many New Zealanders, Wealth is not a simple reward for hard work. It's a complex game of financial strategy that often feels out of reach. Despite their tireless efforts, they find themselves trapped in a cycle of living paycheck to paycheck, with little to no savings, and no sign of financial freedom in sight.

The harsh truth is that without a clear understanding of financial planning, investing, and the discipline to spend less than they earn, many will continue to see wealth as unattainable. Too often, immediate gratification and social pressures lead to poor financial decisions. This includes buying a new car on finance, upgrading to a bigger house with a heftier mortgage that gives little or no breathing space, or succumbing to the latest consumer trends. All of these types of decisions can take you back financially.

While home ownership is always thought of as positive, being so stretched financially to cover an arguably unaffordable mortgage can mean there's no opportunity to invest and save. Many New Zealanders end up owing a mortgage at 65 with the home as their only asset, making retirement tough. This is why keeping things modest helps to move you forward financially.

The road to wealth demands more than just hard work; it requires a shift in mindset from spending impulsively to investing wisely. It's about making money work for you, not the other way around. Ignoring the basics and living for the moment will, for many, mean life is about working to pay bills for brief moments of excitement - it does not need to be like this. Our guide is published to help make sense of the mistakes commonly made and help

Christopher Walsh
MoneyHub Founder

What is Considered “Wealthy”?

There's no one universal definition of "Wealth”. Generally, being "wealthy" can be measured using either a quantitative metric (e.g., dollar income, dollar wealth) or a qualitative metric (how you feel, do you have "enough").
Wealth can also be viewed in isolation or absolute terms (e.g., just your own wealth for your life) or compared to peers (e.g., my wealth versus your wealth, or my wealth versus the median or average wealth).
For some, being wealthy could be:

Owning your own home outright
Having a million dollars in the bank in a term deposit
Being financially free
Not having to work to live
Being richer than your parents
Being richer than everyone else (e.g. top 10% Net Worth in New Zealand, as outlined in this 2022 Stuff.co.nz story)
Being richer than everyone else that’s your age (e.g. top 10% Net Worth for your age cohort)
Making more money than everyone else (income as a proxy for wealth)
Being richer than everyone else on your street

Ultimately, being “wealthy” is a state of mind - it’s not always some specific number or comparison, but a mindset.

Common Reasons Why New Zealanders Aren't as Wealthy as They Think

While comparison is the thief of joy, there are some key points that New Zealanders can learn and benefit from by asking the question, "Why am I not wealthy, and how can I become wealthier?"

To understand how wealth is built, we can look at others who have researched this area. Insights on building wealth from The Millionaire Next Door (authored by Thomas J. Stanley and William D. Danko) suggest a few key behaviours that help people consistently create wealth at all ages and demographics. The main takeaway from the book is that 80% of millionaires in the US earned their wealth themselves, which could be extrapolated to other developed countries (like New Zealand). This challenges the notion that wealth is predominantly inherited - and that anyone can become wealthy by implementing the right behaviours over enough time.

Common reasons why New Zealanders fall behind in creating wealth include:

Intergenerational Financial Dynamics (e.g. taking care of ageing parents)

The dynamics of financial support within families often involve complex, reciprocal relationships where parents and children may provide support at different times. This support can include financial assistance, caregiving, or other forms.

With life expectancy in New Zealand continuing to rise per Stats NZ, many New Zealanders spend more of their mid-life (e.g. 30 - 50 years of age) time and money caring for their ageing parents (usually in their 70s - 90s). While supporting your ageing parents is likely the least you can do (given they spent 20 years of their life supporting you as a child), it doesn't come without cost.

Things like rest homes, retirement villages and round-the-clock nurses/support all add up over time - and these costs may need to sit with the adult children (who almost always have obligations and responsibilities like paying a mortgage, supporting young children or working two jobs). The rising cost of raising children and healthcare (for older New Zealanders who want to go down the private healthcare track) also doesn't help many New Zealanders who are in their prime wealth-building years.

Political and Economic Climate

Younger generations (Gen Z and Millennials in particular) face distinct economic challenges influenced by decades of political decisions. Whether it's inflated house prices as a result of low-interest rates (that benefit older generations who already owned assets before interest rates dropped) to stagnant wages that impact those on lower incomes the most (who are typically younger blue-collar or hospitality workers), It's never been tougher for younger generations (through no fault of their own).

Coupling this with recessionary times, layoffs (even in “safe” government jobs), wider job insecurity and the inflation/cost of living crisis, it’s no wonder that New Zealanders feel less wealthy than they should be. These economic conditions have led to increased financial dependency on parents (particularly for early New Zealander adults in their late teens or early 20s), as younger people find it more challenging to achieve milestones such as homeownership, which were more accessible to previous generations at the same age.

Cultural Expectations and Responsibilities

Cultural norms significantly influence financial relationships between generations. In some cultures (such as in Asian, Māori or Pacifika cultures), it's common for parents to financially support their children well into adulthood, including helping with major expenses like education, home purchases, and even weddings. In exchange, these adult children are more likely to help and support their ageing parents (almost like a reciprocal care agreement).

Conversely, in other cultures (particularly European cultures), there is an expectation that adult children will become financially independent as soon as possible. These cultural expectations can shape the extent and nature of financial support and the perceived obligations of family members to support one another.

Economic Disparities and Housing Market

The disparity between income growth and housing prices has become a central economic issue affecting younger generations. Housing prices have risen exponentially in many places, far outpacing wage growth and inflation.

This has made it increasingly difficult for younger people to enter the housing market without significant financial assistance from their parents. The resulting economic strain can lead to delayed milestones, such as starting a family or saving for retirement, further exacerbating generational wealth gaps.

In a nutshell, unless you owned property before it started to rise drastically in the 1990s and early 2000s (which is impossible given that most young New Zealanders were just kids), you were left at a disadvantage.

Emotional and Moral Considerations

Financial decisions within families are often deeply intertwined with emotional and moral considerations. Many parents feel a strong duty to support their children financially, even if it means compromising their financial security or retirement plans.

Love, guilt, societal expectations, and personal values influence these decisions. The emotional weight of these decisions can lead to complex family dynamics and financial arrangements, highlighting the need for open communication and careful planning to navigate these challenges.

Our Retirees Supporting Adult Children guide covers the dilemma and thoughts on both sides to help explain this increasingly financially significant issue.

10 Reasons Why the Majority of New Zealanders Are Not Wealthy

Too few New Zealanders have a short-term financial focus. This means they prioritise immediate gratification over long-term goals which, almost always, hinder wealth building. This may manifest in frequent, impulsive purchases (such as last-minute flights to Australia or concert tickets) or failure to plan for future financial needs. If you want to become wealthy, it's essential to adopt a long-term perspective This means setting financial goals and developing a strategic plan to help you shift focus from short-term spending to long-term wealth accumulation. It's not easy, but it's essential to build true wealth. Our reasons that people get left behind financially are explained in detail:

Lack of Financial Literacy

One of the primary reasons New Zealanders may not be wealthy is a lack of financial literacy. Understanding the basics of budgeting, saving, investing, taxes, and managing debt is crucial for building wealth. Despite government promises in 2023, it remains to be seen if financial literacy will be introduced into the primary, intermediate and high school curriculums, and if it is, how succesful it will be.

Unfortunately, because financial education is not emphasised enough (although there are newer sources of information like Sorted in Schools), many young New Zealanders enter the working world without the knowledge to make informed financial decisions. This leads to more people getting into debt, not saving enough and not investing for their future.

High Levels of Consumer Debt

New Zealand has seen a significant rise in consumer debt, including credit cards, personal loans, and car loans - with half a million New Zealanders in debt arrears per a March 2024 RNZ report. Falling behind on interest payments can impact your credit profile and cause debt to snowball out of control, making it even harder to build real wealth.

For most people, their net worth is often deeply negative for the first few years after coming out of high school (usually due to student loans from university or trade school). NZ net worth data shows the median individual net worth for New Zealanders aged <35 years old at less than $40,000, meaning many are likely paying down debts and battling the cost of living in the early years (and only saving small amounts relative to what they will be saving in future).

High-interest rates on mortgage payments, car finance payments, and credit card debt can erode after-tax income, making it difficult to save or invest.

Additionally, the temptation to “YOLO” and live beyond one's means, facilitated by easy credit access, can lead to a cycle of debt that hampers wealth accumulation. Prioritising debt repayment and adopting a more cautious approach to borrowing are essential steps toward generating real wealth.

Our related guides covering Debt Problems and How to Pay Down Debt Faster have more details.

The Housing Affordability Crisis

The dream of homeownership is increasingly out of reach for many New Zealanders (young and old), with property prices soaring in recent years and mortgage rates increasing. As the graph below shows, price-to-income (P/I) ratios have exploded in the last two decades, going from just above 3X P/I and reaching a peak of almost 10X P/I in 2021 (before settling down to 7X P/I in 2024 - almost double what it was in the early 2000s).

Exhibit: NZ House Price to Income Ratio (Since 2002) - Source: Interest.co.nz

This means that house prices have raced up far faster than household incomes have risen. If house prices increased at the same rate as incomes, the price-to-income ratio would remain flat. For example:

If you could buy a $500,000 house on a $100,000 household income, your price-to-income ratio would be 5X.
If you could buy a $1m house on a $200,000 household income, your price to income would still be 5X.
In the above example, house prices doubled, but so did household incomes, meaning housing wouldn't be any more "expensive" relative to incomes. Based on the graph above, house prices today are more "expensive" relative to incomes than in the early 2000s (which might be attributable to movements in the OCR and the flow-on effect on mortgage rates).

Exhibit: OCR from 2000 to June 2023 - Source: MoneyHub

The high cost of entering the housing market not only prevents wealth accumulation through real estate but also forces many to allocate a significant portion of their income to rent (as generally, the higher the house price and mortgage rate, the higher the rent that needs to be charged to maintain the same rental yield on the property from the landlord’s perspective), leaving less available for saving and investing.

Our related guides include:

Inadequate Savings and Emergency Funds

Many New Zealanders lack sufficient savings or an emergency fund, with almost 40% not having $5,000 for emergencies per this 2023 Newshub story. A lack of emergency funds leaves many New Zealanders vulnerable to unexpected expenses or changes in employment (like layoffs, restructures or burnout resulting in resigning from work).

Without a financial cushion, many are often forced to rely on high-interest debt in times of need (e.g. credit card debt), further hindering their ability to build wealth. Cultivating a habit of regular saving and establishing an emergency fund is essential to provide financial security and a foundation for future wealth.

Our related guides include:

Emergency Funds
Hardship Assistance
20 Easy Ways to Save LOTS on Household Bills

Not Taking Advantage of Free Money (e.g. KiwiSaver)

KiwiSaver offers an instant 100% return on any money you put in (assuming your employer matches the 3% minimum contribution). While you can’t withdraw this money except in unique circumstances, KiwiSaver provides a valuable opportunity for New Zealanders to grow their wealth over the long term through employer contributions.

However, not all New Zealanders fully utilise these schemes, often pausing contributions or opting out altogether. Maximising contributions to KiwiSaver can significantly enhance one's financial well-being in later life (but we recognise KiwiSaver may not be right for everyone).

Our related guides include:

Lifestyle Inflation

Lifestyle inflation, where increases in income lead to proportional increases in spending, can prevent individuals from accumulating wealth. As salaries rise, so do non-essential items and luxury goods expenditures, leaving little room for savings or investment. If you've been on a lower income for a while and you suddenly get a pay rise, the mental benefits of spending a little more to upgrade some of your spending areas (food, housing, gadgets, etc.) can be fine, but it's when this spending gets out of control is where problems arise.

For example, if you got a pay rise but increased your spending in all categories such that you weren't at a higher savings rate, you're in the same wealth-building position as if you didn't get the pay rise at all (because you're not saving any more - and may even be working more or have more responsibilities). Conscious efforts to maintain a relatively modest lifestyle, even as income grows, can free up resources for true wealth building.

Overreliance on Single Income Sources

Relying solely on income from employment can limit wealth accumulation, especially if that income is not invested or saved effectively. While we're not saying every New Zealander needs a side hustle or second full-time job, relying on one job alone can present limited upside (given your base salary isn't likely to double every two years). If anything happens to the business or team, you might get laid off or made redundant without any alternatives.

Diversifying income sources through investments, side hustles, or passive income streams can provide additional financial security and opportunities for wealth growth above and beyond your main job. Exploring avenues for income diversification can reduce reliance on a single source and enhance overall financial stability.

Not Investing Enough Or Having Enough Exposure To High Growth Investments (E.g. Shares)

Investing in the share market can be a powerful tool for wealth accumulation, especially if you're young (<40 years old). With inflation sitting at mid-single digits, the only way to prevent purchasing power from eroding is to invest in higher risk/reward assets that can grow at a rate faster than inflation. Equities provide the potential for higher returns compared to traditional savings or term deposit accounts.

However, many New Zealanders are hesitant to invest in the sharemarket due to a lack of knowledge or fear of losing their capital (which hit many New Zealanders hard in the late 80s). However, with many podcasts and resources now free and online, coupled with the huge surge of interest in brokerage platforms in New Zealand, educating oneself about the basics of investing in shares and starting with small, manageable investments can help overcome these barriers and open up new avenues for wealth creation.

Our related guides include:

Living in High Cost of Living Areas

If you're looking for a higher salary, chances are your employer will want you to work out of their main offices (usually in city centres like Auckland and Wellington). However, these areas often come with a steep cost of living, including higher prices for housing, transportation, food, and other daily expenses.

The inflated costs can consume a significant portion of people's incomes, limiting their ability to save and invest. Even with a larger income than what you would get if you worked in a non-megacity like Auckland or Wellington, you may not be any better off from a savings perspective, given the relentless drain of high living expenses, making it challenging to accumulate wealth.

Pressure to Look the Part (“Keeping up with the Joneses”)

There's some sort of false social expectation for most people to display their success through material possessions and lifestyle choices. This can lead to excessive spending on luxury goods, upscale residences, and social events to maintain a facade of wealth and status.

This pressure to conform to a high-spending norm can detract from saving and investing, as substantial portions of their income are diverted towards maintaining an image rather than building actual wealth.

Additionally, New Zealanders can sometimes fall into the trap of spending their incomes on items that depreciate over time (such as vehicles and clothes). This spending behaviour results in a cycle where money flows out as quickly as it comes in, leaving little for investments that could generate future income or appreciation, such as stocks or real estate.

More details include:

Stealth Wealth
20 Money Habits That Keep You Poor

The Realities of Wealth – Must-Know Facts

1. Building wealth takes time. A lot of time

Getting wealthy won't happen overnight - seeing the fruits of your labour, sacrifices and focus often takes decades. Wealth creation demands dedication, compromise, and effort. By adjusting their allocation of time, energy, and spending habits, New Zealanders can start accumulating wealth and head towards financial freedom.
However, for most people, it will take decades to truly become wealthy (unless they have extremely high incomes, unusually low expenses, or get very lucky with investments).

2 Wealth is relative

What's wealthy to one person may not be wealthy to another. While you might not feel wealthy next to a neighbour with a 6-bedroom house, you'll almost certainly feel wealthy compared to the billions of impoverished people across Asia, the Americas and Africa.
All this is to say that wealth is relative - so sometimes it can pay to figure out who you’re comparing yourself to and try to take a step back and recognise how lucky we all are to be in New Zealand, rather than consistently comparing to someone else who has “more”.

3. Building wealth takes sacrifices

Building wealth means you have to prioritise things that may not yield the most fun at the moment - we can't have it both ways. We need to pick and choose where and when we spend. There's a right time to earn money and a right time to burn it.
You can still pursue true wealth whilst enjoying it today; you just need to be crafty with how you do that. Pursuing free experiences (like hikes with friends, walks in the park, cheap or free travel, volunteering etc.) can be a great way to continue saving and building wealth long-term whilst enjoying today.

4. True wealth isn't a number. It's a mindset and the ability to control time

Wealth is a mindset and a feeling - sometimes, being truly wealthy is just the ability to wake up and do whatever you want. Wealth is whatever we want it to be.

5. Wealth accumulation goes beyond mere income

Just earning a high salary isn't enough to become wealthy. Building real wealth involves financial habits, decision-making, and lifestyle choices that can significantly impact one's net worth. Above and beyond income, your savings rate, investment allocation, and timeframe play huge roles in creating wealth.

6. While everyone sees the "wealth", nobody sees the effort that goes into creating the wealth

It's easier to look at the richest New Zealanders and says they're objectively "wealthy" without looking at what they did to get that wealth. For example, many New Zealanders have had to put a lot of unpaid hours into building and selling multiple businesses to get to where they are.
Obviously, there will be others who have been gifted wealth via inheritance, but on the whole, we can't know the effort it took to get to where people have gotten, so we should hold judgment or be wary of trying to extrapolate their wealth to our life situations.

7. The blueprint (and maths) of becoming a millionaire is simple but not easy

Achieving millionaire status isn't overly complex, but it does require a lot of luck and effort sustained over very long periods (unless you win the lottery or get a huge windfall from inheritance).
If you earn a solid income, save a high percentage of this, and invest the remainder consistently over many years, you'll eventually become wealthy. It's just a matter of sticking to the basics and executing the strategy while avoiding poor-value purchases such as expensive cars (among others).

8. You’re probably doing just fine versus your peers

Social media arguably warps our expectations of what the typical New Zealander’s wealth is really like. Often, the most outrageous or controversial stuff will hit our news feeds first. Know that you're likely doing just fine in your wealth-building journey, and it's all in your head (mainly driven by exposure to social media). We're all running our race (even though social media tells us we're competing).

9. Savings are effective, but income is uncapped (and very important for true wealth creation)

While savings are important, you can only cut so far into your budget before you hit the "bone" (e.g. housing and food are essential and can't be cut entirely). In contrast, income is uncapped. Without solid income over long periods, becoming truly wealthy is hard.
For example, if you earn the minimum wage in NZ (around $50,000 a year), it will take you two decades to reach $1 million (assuming you pay no taxes and have zero costs or a 100% savings rate, which is impossible). While it will likely take you less time than this, given you'd be investing these assets that generate a return, the example is to illustrate that even a very high savings rate is ineffective if your income is too low (especially if you expect to have higher costs in future).

10. Wealth is abundance - and usually tied to your needs

If you don't need a lot to spend each year, you don't need a lot of net worth to feel "wealthy' - you're doing everything that you (and your family) want to do to keep you happy and healthy. That's true wealth.

Related guides:

Emergency Funds
Stealth Wealth
20 Money Habits That Keep You Poor
20 Easy Ways to Save LOTS on Household Bills