24 Nov Spring clean your finances in 6 steps
As we emerge from the Covid winter of discontent, spring is a great time to review your financial situation with this quick six point checklist.
1) What are your financial goals?
What, when, how? Do you want to be mortgage free 5 years earlier, retire, save for a holiday, or start investing?
2) What are you earning?
Whether from salary or Super what is actually coming in the door each month? If this number needs a boost- consider a ‘side hustle.’ Click here for some inspiration. A Side Hustle Story
3) What are you spending?
Assess your spending and place in three buckets:
50% Fixed costs – rent, mortgage, insurance, transport and groceries
30% Discretionary/ fun money – clothing, entertainment, gym membership
20% Getting ahead money – extra savings, extra mortgage payments.
If this is not achievable, trim your getting ahead money to 10% or 5% but try to get started.
4) Optimise KiwiSaver
Do you know who your provider is and what kind of scheme you are in? Check out the fees you are paying and the long run performance of your fund:
Ensure you are in a suitable asset allocation – if you are young you should seldom be in a Conservative fund unless you are close to buying your first home.
What is your contribution rate? You now have more options: 3%, 4%, 6% 8% and 10%. Can you save more? Just remember that KiwiSaver is not liquid. Apart from the first home withdrawal it is difficult to access your funds before the age of 65.
Are you self-employed or on parental leave? Set up at least the minimum contributions required to qualify for the government contribution; $1,042 per year or $87 per month will qualify you for $521 from the government.
5) Pay off high interest debt
I could have put this at number one, it is so important. Credit card debt and high interest vehicle and personal loans can grow into a real problem. Very often you pay way more in interest for something that is worth much less by the time you own it outright.
6) Establish an Emergency Fund
Again, this could have been my number one tip. Try to build up enough to cover unexpected expenses like the dentist or car repairs or even more vital – a new mobile or lap top. Work on covering several months of your fixed costs for even more security.
Although you earn next to no interest on cash the point is fast access to liquid funds when you need them, not investment earnings. Term deposits are also not liquid and you may be charged break fees.
Congratulations, if you got through the first six points here is number seven
7) Start investing
Talk to a Saturn Adviser to Create a Richer Life
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By Jean Strock
Authorised Financial Adviser
The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate personalised financial advice from a qualified Authorised Financial Adviser to suit your individual circumstances.