GOLDEN RULES

Central Otago Mirror - - CLASSIFIEDS -

There are some fi­nan­cial prod­ucts you should live with­out.

All are a drain on your fi­nances, and some are down­right toxic to your long-term wealth.

There’s been an ex­plo­sion in du­bi­ous and poor value fi­nan­cial ser­vices, es­pe­cially loans and in­sur­ance.

If you have any of these fi­nan­cial prod­ucts, you need to take a long, hard look at your money life, and con­sider do­ing things dif­fer­ently.

OVERDRAFT: An overdraft is fine for small busi­nesses, but for or­di­nary peo­ple, it is some­thing you should grow out of us­ing quickly af­ter join­ing the work­force. Money spent main­tain­ing an overdraft is bet­ter saved, to make you richer. If you lurch into overdraft month af­ter month, start bud­get­ing.

CREDIT CARD COVER: Peo­ple who carry debt on credit cards worry how they would re­pay it if they were made re­dun­dant, in­jured, died or fell sick. So they pay the bank for loan in­sur­ance. Credit card debt is to be avoided. It makes banks richer, not you.

FU­NERAL IN­SUR­ANCE: I’m not a fan. I know fu­ner­als cost a lot, and many peo­ple do not want to leave a bill for fam­ily mem­bers. The best thing to do is to save a lump sum. If you have a de­cent emer­gency ac­count to en­able you to cope if you lost your job, you have enough for your own burial. Just make sure there’s a will so your fam­ily can get the money, if you drop dead.

PAY­DAY LOANS: These are short term loans with ex­traor­di­nar­ily high in­ter­est rates. In our un­equal so­ci­ety some peo­ple strug­gle to get from pay­day to pay­day, but high in­ter­est loans only make things worse.

BONUS BONDS: If you think of it as a re­place­ment for buy­ing lot­tery tick­ets, it’s not Avoid ex­tended war­ranties Only buy nec­es­sary in­sur­ance Avoid debt, and debt in­sur­ance

the end of the world. It gives you a chance of win­ning a mil­lion, with­out spend­ing a for­tune in weekly in­stal­ments. But as an in­vest­ment, Bonus Bonds suck. The only sen­si­ble amount of Bonus Bonds to have is not many.

‘‘BA­SICS’’ HEALTH IN­SUR­ANCE: These are su­percheap health in­sur­ance poli­cies aimed at young peo­ple. They work like this. You give the in­surer money, and it gives some of it back to help pay for mi­nor med­i­cal treat­ments. This is silly. In­sur­ance is there to pay for the things you can’t af­ford on your own, like hav­ing a back op­er­a­tion, or re­build­ing your house af­ter a fire.

STORE WAR­RANTIES: The Con­sumer Guar­an­tees Act means shops that sell you ap­pli­ances that break down within a rea­son­ably short pe­riod of time have to fix or re­place them. There’s no elec­tri­cal ap­pli­ance that should break within three years. Make them pay in such cases.

KIWISAVER DE­FAULT FUNDS: Su­per low-risk KiwiSaver funds for peo­ple who do not choose a fund for them­selves. Every­one needs to make a KiwiSaver choice. If you haven’t, I pre­dict you will re­gret it come age 65.

MO­BILE PHONE IN­SUR­ANCE: If you buy a mo­bile phone you need to in­sure be­cause you could not af­ford to re­place it, if you lost it, you have spent more than you can af­ford on a phone.

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