Face Value: Being frugal is a plus
BNZ's community finance head Frances Ronowicz thinks people should be less judgmental of those on lower incomes.
The BNZ has pledged $10 million to be lent out in low and no-interest loans to help people avoid falling into the clutches of loan sharks, and Frances Ronowicz oversees the not-for-profit project in Auckland.
The tougher side of living in the big smoke is familiar to Ronowicz, as she joined the bank from Instant Finance, which lends to people in the region's poorer parts. Her experiences there left her critical of the snap judgments better-off people make about those struggling to get by.
What did you learn about money from your upbringing?
I have an inherent need to keep and reuse leftovers from a meal - probably because my mother could make a meal out of nothing and we just never wasted food. My parents also had a huge, positive impact on my work ethic, which means I live by the philosophy that you prove yourself by doing your best and putting in the best effort possible.
Who has been your greatest financial influence?
In recent years my husband, who is a banker, has probably had the most influence on my spending behaviours, and has made me look at money in different ways. For example, a few years ago we decided the best option was for us to sell our property and rent while the market conditions were depressed, rather than invest capital in the improvements we wanted to make to that home. It seemed uncomfortable to me to rent rather than pay a mortgage but by watching the market closely, we were in a better position to move quickly when we found the appropriate home. In hindsight we timed the market well.
What was your first paid job?
My father was an upholsterer and was the foreman in a factory that manufactured lounge suites. I would go there before and after school and make buttons - 2c a button was the going rate as I recall. My sister and I would share weeks about. The most exciting part for me was that Dad always rode a motorbike to work so we had our own helmet and would get a ride to the factory on the back of the bike.
What you did with your first pay cheque?
My first fulltime job was with Honda Cars Palmerston North as a receptionist. From memory I had to repay my mother some money she had lent me to buy suitable clothes for the job, and I let myself splash out before setting a budget after that. I remember the words "save half, pay board, the rest is yours . . ."
I am not sure if that was actually what happened but I still like the principle.
What's a financial danger you would warn people about?
I have a personal dislike of financing depreciating assets over a long term. Term has a big influence on the total amount repayable, and people often underestimate this. A $5000 vehicle over a three-year term might cost you about $40 per week and the total interest around $1600. If you were tempted to buy a slightly more expensive vehicle, say $8k and pay it back over a five-year term, it would cost you around $48 per week, which doesn't sound much but the interest cost would jump to around $4700. I would suggest buying the cheaper car and, if you can afford the extra $8 per week, then increase your payments and own it quicker.
How do you teach your own kids about money?
Recently I realised my 7- year-old had little understanding of the cost of the things she wanted. So, I have tried to introduce pocket money (half to save, half to spend) and if the item is more than what she's saved, she has to pay mum back. We're not quite at the stage of introducing interest; I might leave that until a bit later in life.
What did working at Instant Finance teach you about the "real world"?
Never judge a person's position or choices based on your own values. People make choices, both good and bad . . . for a number of reasons. Often people are forced to make decisions under stress which they would not normally have made, and sometimes they simply have a different set of values and priorities to you.
What are the biggest money mistakes people make?
I wonder if we have fallen into the trap of financing too many of our wants rather than our needs. Which wouldn't in itself be so bad if we didn't want so much, and the wants weren't constantly changing, like buying the latest smartphone.
When you splash out, what's it on?
Entertaining friends and family - I really enjoy being the hostess and supplying a nice meal and a bottle of wine.
- Sunday Star Times