Marlborough Express - Weekend Express
Howdo you compare?
When it comes to money we share all kinds of stories at the Commission, from the inspirational to the heartwrenching.
Like the guy who found a job, was getting a regular income and starting to feel the weight lift a little from his shoulders as he got a bit more control over his money. It meant he was able to turn his thoughts to saving for the future.
Until the day his car broke down.
He knew it was going to cost him an arm and a leg to get it fixed so he had two options: borrow the money at eye-watering rates or do nothing and risk losing his job because he wouldn’t be able to get to work on time. Either way, his hopes of saving for retirement had taken a hit.
It’s a story that’s repeated in homes around New Zealand every day. All it can take is one unexpected bill to throw people off course. This is why, when we talk about savings, we start with the importance of having a buffer or emergency fund.
Some websites and articles say you should save three months of wages, which is a good rule of thumb but not always achievable, so we think a month is more realistic to aim for. But how do you start?
Three quarters of people who join our financial capability faceto-face programmes tell us they have little confidence dealing with daily money matters and feel like they have no control over their financial situation. Many live week-to-week or paychequeto-paycheque.
But some found that they could squirrel a little away if they did a few things differently, such as: sat down and worked out a spending plan to see exactly where their money was going; decided what on their list were needs and what were wants; worked out which wants they could manage without; then set a savings goal to aim for.
It meant they could put a little aside each payday in a separate account for that moment when an unexpected bill arrived.
The same steps can help people get through Christmas and help parents cope with all the costs associated with the start of the school year, without running into debt.
One person told us: ‘‘I now control my money, not it controlling me.’’
Once you’ve got the short-term covered, it frees you up to think about the long-term and what, in particular, you can put aside for your future self, which will give you a more comfortable retirement.
KiwiSaver offers an excellent way of investing for future you. If you’re an employee it’s seriously a very attractive option: you contribute 3 per cent of your salary, your employer generally matches you with another 3 per cent (that’s a pay rise to me) and the government chips in too: for every dollar you save, it will add 50 cents up to $521 every year.
Best of all it gets taken out of your wages before you see it – out of sight and out of mind – which means you can get on with the other important stuff life throws at you today.
If you’re self employed or a contractor, it’s still worth considering. You won’t get the employer contribution but the government will give you $521 if you save $1,043, which is $20 a week. That’s a 50 per cent return on every dollar you invest!
The first step to achieving any of this is to make a start on that spending plan. Sorted.org.nz has a budgeting tool that makes the job a lot easier. It takes time, but it’s worth it, so grab a cup of tea and a pile of recent bills and give it a go. This week stuff.co.nz is running a special series looking at household spending. Go to stuff.co.nz. click on ‘The Receipt’. Enter your details in interactive spending calculator, and see howyour spending compares with people like you.