Financial planning lessons for holiday season — and beyond
The big Santa is up at Havelock New World, and the Christmas tree sculptures have been affixed to the fountains in Hastings — an unmissable sign of the impending jolly holiday season.
It can’t be far away until we hear the regular tunes . . . Snoopy & The Red Baron are already lurking somewhere, I just know it.
Whether you’ve been looking at the encroaching baubles and tinsel with excitement or disdain, you’ll be aware of the ever-shrinking gap between now and Christmas Day (and if you celebrate it with children, you’ll be doubly aware no doubt). What was once a hazy idea of public holidays and hosting the wha¯nau is now mere weeks away. Are you ready for it?
We’ve developed a wee routine for getting holiday ready in our house. Part of it’s holding the kids back from setting up the tree too early . . . and getting them thinking about their earnings strategically, because their personal spending will rocket over summer.
We also make sure we’ve got some things well ahead of time. I have already bought the meat for our Christmas Day feast, thanks to some recent sales — and I acquired wine for sharing three months in advance at auction. The extra time can allow you a bit more freedom on price because you’re not caught in the rush when items are in high demand.
For myself, I like to start reflecting to narrow down my New Year’s goals as the time gets closer. I also keep track of how many working days I have left so I can be sure to end the work year on a good and productive note.
Any prep you can manage to remove stress from the big day —
Nick Stewart
utilising any help you have in the kitchen, putting money away early or buying gifts throughout the year, and setting expectations around the day — can really help keep the blood pressure on an even keel.
We can think about retirement planning as a similar concept on a larger scale. It comes around quicker than you think, whether you’re ready or not. And the longer you leave it, the more stressful it gets — and the more money you’ll need as a lump sum to cover the associated costs.
In order to effectively prepare, it’s important to first consider how much money you’ll need each year during your retirement. There are several approaches out there to determine this amount, but at the end of the day, the dollar figure you think you can get by on in retirement is a personal choice.
For a quick approach, experts estimate that you’ll probably need 80 per cent of your pre-retirement income if you wish to maintain a similar but more-modest living standard in your retirement. Of course, you have to consider inflation, too – even outside today’s rampant inflation levels, it’s inevitable that inflation will slowly rise over time. $100 today will not buy $100 worth of goods in the future.
You also have to consider where your income will be coming from during your retirement. We’re already seeing living costs outstripping NZ Superannuation, and the situation probably won’t improve with time.
KiwiSaver is an excellent tool for padding your retirement, particularly if you’re contributing over the minimum — it’s only a small dent in your pocket now to contribute higher than 3 per cent, but it’ll add up over time for a richer potential reward. You should also make sure you’re in the right fund for your phase of life and goals — it can make all the difference!
If you’re a disciplined saver and you already have a stash, consider investment as a way to buffer against inflation. While it’s good to have some savings accessible in case of a rainy day, the compound interest you get from leaving your money to sit in a bank won’t outdo inflation (or account fees) over time. A diversified global investment portfolio can help keep your money working hard for you, and again, this can be created with your values, goals and timeframe in mind. The sooner you start, the better.
The key here is consistency and patience — much like making a Christmas fruitcake from scratch. Feed it a little bit, often, over time, and it’ll be much richer in flavour than something baked the night before.
If you haven’t started thinking about your financial future and retirement yet, now is good. Making a solid financial plan is key to living a comfortable life once you stop earning. Talking to a trusted financial adviser can be a great first step . . . and they’re a lot easier to track down for a chat than the big man in red.
The information provided, or any opinions expressed in this column, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an authorised financial adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling
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