Make a resolution to be wealthier
For all the surprises, drama, anguish and change caused to our lives by Covid-19, there were positives we can take from 2020 to build on in 2021.
I think we can mostly admit to being more caring for and aware of those around us, even those we don’t know.
Supermarket sales stats and anecdotal gym numbers tell us we’re more health conscious when it comes to food and exercise. And various surveys have told uswe’re also more conscious of what we’re doing with our money.
If you’re into New Year’s resolutions, these are all worthy of being near the top of the list. They are for me, but it was the money one that got me thinking. Here are some resolutions you might consider:
Save more
There are countless ways of doing this, but one of the easiest is to automate savings into a separate account. This means you never see the money, so it’s as if you never had it. Employers may allow you to divide your pay at source, or you can set up an automatic payment from your current account. The important thing is to set up a savings regime, however small.
Attack those credit cards
Nothing is scarier than looking at your credit card balance after Christmas. Pay down your credit cards or get into a habit of paying them off inside the interest-free period. And don’t add any new ones. Those issued by chain stores are the easiest to get sucked into and often attract the highest interest rates. Or resolve that if you can’t pay for it by cash, don’t put it on a card. Inmost instances, people put purchases on their card because they don’t have the money to pay for them, and when you think about it, it’s crazy – especially for a disposable item.
Cook more meals at home
This is one of the big trends to come out of the pandemic and maybe something you’re still doing. It can also help seriously with budgeting. It’s not only a much cheaper way to eat but it can also be fun, and can be made easier by using a boxed delivery service, where you can simply heat their meals in the microwave or prepare the meal yourself using the supplied ingredients.
Refinance your mortgage or pay it off faster
With interest rates low, now is a great time to review your mortgage instead of just rolling it over when it matures. Look for a lower rate, but if you’re on a fixed term still, therewill likely be a penalty to break it. Another bank with a lower rate may offer a cashback that will cover your break fee. Paying it off faster can be as easy as switching from monthly to fortnightly payments or making extra lump-sum payments, which come off the principal. Keep payments the same when rates drop.
Being fit for purpose
Are your investments suitable for your life stage? Are you in your teens, just started your first job and prepared to take a few risks to reach your goals faster, or are you nearing or past retirement and want to make sure your money is safe for life without a big income?
This should be something you should check at significant milestones.
Health-check your Kiwisaver
The biggest factors determining how financially comfortable you’ll be in retirement are how well your fund is performing and the fees you’re paying.
The best way of determining both is to compare themwith other funds. There are free comparison tables around, including those run by the Sorted, Interest.co.nz, Morningstar, and Canstar, to name just a few. Also, can you pay more into it?
Insurance
Understanding the protections you need at your different life stages means your insurance should not be a lock-and-leave mentality. At some stages you may like to have income and disability insurance, while at others this isn’t as relevant. Ask what would happen if your partner could no longer work, or is health insurance a priority?
Create a budget. Stick to it
Tracking your spending can help you understand where your money goes and make it easier to identify areas where you can cut back. Write down all your fixed expenses – rent/mortgage, groceries, transport, power, subscriptions, insurances, mobile phones – then you can see how much you have left for nice-tohaves, such as eating out, entertainment, clothes. Oh, and don’t forget that savings plan.
Start an emergency fund
Covid-19 should also have taught us to be prepared for anything, and that should involve having a fund set aside for the unexpected. This could be simply another savings account. It could be saving three to six months of living expenses. In a variation of this, a Wellington friend of mine has cash hidden in her house in case the power is cut to Eftpos machines in an earthquake.
Get advice
As always when making financial decisions, seek independent advice from an expert. They know what they are doing and canmake this journey so much easier for you. I’m that New Year resolutions person – and I’m still on my financial journey (with my adviser), and our focus this year is on my savings programme (which has made me conscious of my Christmas credit card spending). It doesn’t really matter what area you select – just select one. That could be the start to improving your financial health, wealth and wellbeing.