Tune in to be recession-ready
This year is likely to be a very challenging year for many Kiwis as we deal with high inflation, higher living expenses and increasing mortgage interest rates.
For many, it probably feels like we are in a recession already. While there are many challenges ahead, I thought it might be useful to dust off this greatest hits album I developed to help plan for and keep ahead of the curve when it comes to managing your money.
It comes with a warning that if you don’t like the 80s hits then this might not work for you. But who knows, if you do a little work now on some of the areas below, the winter might be just a little brighter and warmer than you expect. Plus, you get a unique money playlist to remind you of what you’ve achieved.
Slice of Heaven – Dave Dobbyn / Under Pressure – Queen and David Bowie
We all want that slice of heaven and many of you may already have it. The question is when will you pay off the home loan and what happens if mortgage rates go up? You could be under pressure. Spend some time reviewing your loan now and throw a little more on it if you can. You might be very surprised at what just a little extra a fortnight might do to reduce your mortgage term.
Wouldn’t It Be Good – Nik Kershaw / Highway to Hell – ACDC
Good debt and bad debt. Credit card debt is B.A.D (a great 80s band), so if you pay it off before interest is applied, all good. But if you just pay the minimum then ACDC knows where you are going. By all means give the credit card a good slapping and maximise the rewards, but keep away from that high interest cost by paying your card off every month. Or at the very least, get the balance down. Try to avoid buy now, pay later schemes as well.
Dancing in the Dark – Bruce Springsteen / Sweet Dreams Are Made of This – Eurythmics (bonus track Don’t Stop till you Get Enough – Michael Jackson)
This is all about building your savings and investments from each pay day. If you don’t want to be worrying about your power bills when you decide to finally stop work, then review what you can save today so you can enjoy tomorrow. KiwiSaver is the easiest place to start, but the 3% minimum contribution isn’t going to get you there. A rule of thumb is 10% but it doesn’t all have to go into KiwiSaver – check out other investments, like managed funds, that can allow access to your money if needed but still get it working harder for you than the bank. Michael is bang on with this one: if you don’t it will be BAD.
Independence Day – Comsat Angels / Livin’ On A Prayer – Bon Jovi
I have snuck these bangers in to help you focus on why you need to have a budget. No-one likes a budget but without one you won’t be able do much of what we have already talked about. Own it and stick to it. It’s more fun than going to the gym.
Celebration – Kool and the Gang / Money’s Too Tight To Mention – Simply Red
Yes, this relates to the dreaded R word being retirement. Many say they won’t retire but what if you don’t have a choice? Having a plan and getting good personal financial advice from a financial adviser to make it happen is incredibly important. If you can’t afford an adviser then check out Live Sorted.
I bet you spend a heap of time whenever you plan a holiday, rather than just hoping it will be all right on the day you go to the airport. The same goes for your non-working years. Don’t underestimate just how long you are going to be around.
Heroes – David Bowie / 2 Out Of Three Ain’t Bad – MeatLoaf / Give a Little Bit – Supertramp
Having a savings buffer to deal with life’s challenges is essential to your financial wellbeing. Anything from the car breaking down to more serious issues like losing your job, poor health, and accidents can all impact your finances. If you don’t have a buffer then you will need to borrow money at a higher cost of interest rate or put it on the mortgage (if you have one) which can add up if it’s over a number of years.
As a Heroes benchmark, aim for three months of your salary as a minimum. That said, two out of three ain’t bad, but even just having a little bit set aside, say a month’s salary, is a good start.
Bridge Over Troubled Water – Simon and Garfunkel / The Gambler – Kenny Rogers
How many times have you heard on the TV or news that a house has burned down and the owners didn’t have any house or contents insurance? It’s incredible and can have a massive impact on your financial future. Simply put, having insurance is a bridge that gets you over the event to a new beginning, anything else is just plain gambling.
Hallelujah – Leonard Cohen / Don’t Leave Me This Way – Communards
Death is rarely a popular topic of conversation around the barbecue and if it’s yours, that’s not so cool either. However, life insurance is there for the loved ones who will need your financial support even after you have gone. The songs say it all, but it is important you have the right cover! Get a review and check you are insured based on your personal circumstances.
Bonus Track – Money for Nothing – Dire Straits
For goodness sake make sure you contribute enough to KiwiSaver every year ($1043) to get your $521 member tax credit; You have to the end of June to get your maximum credit. Dire Straits couldn’t say it any better.