Understanding money Is key

We ask a range of experts what one thing you should do to get on track in 2022. Susan Edmunds and Daniel Smith report.

There is no shortage of advice available on everything from how to improve your credit score to how to save more money. But if you want to turn your financial life around in 2022, what are the things that will really make a difference?

We asked a range of experts to give us the most important piece of advice they could think of.

Glen McLeod, Edge Mortgages

Glen McLeod urges people to have a financial plan for the year ahead and understand their spending habits.

People should set money aside each time they are paid to go towards their goals or expenses, he says, such as planning for next Christmas, any travel they want to do or the house deposit they are working towards.

‘‘Pay down short-term debt; save up for purchases rather than using Afterpay, hire purchase or credit cards (unless you purchase for the points and then clear the balance); review all existing debts; review all insurances; review utility providers; and review your bank statements. Knowledge is power and when you understand your spending it will help you work towards your goals.’’

David Boyle, Mint Asset Management

David Boyle says some people have more money available to them than they normally would, due to being stuck at home during lockdowns and because travel is not possible.

‘‘The one thing that Covid has done for many Kiwis who have maintained their jobs and incomes during past two years is they have more savings than ever before. So my suggestion to those Kiwis is to invest that excess (or at least some of it) and make those savings work harder than just letting them sit in the banks.’’

Financial adviser Liz Koh, Enrich Retirement

Liz Koh says paying off debt should be top of the list.

‘‘Interest rates are rising and this will have a significant impact on people with large mortgages. Cashflow will become very important.

‘‘Get rid of the most expensive debt first, which is usually credit cards and store cards, then work on ways to pay the mortgage down faster.

‘‘If I am allowed a second thing, that would be to build up emergency money.

‘‘We are at a turning point in the economic cycle so it will pay to be in as strong a financial position as possible as we go into next year.’’

Christopher Walsh, Money Hub

Christopher Walsh also favours paying off debt.

‘‘Lockdowns have shown what we can (and can’t) live without. There is too much personal debt out there, with credit cards being a money pit.

‘‘All of these balances can be paid off. While most of us, at least in the short term, can’t change our salary, we can control how we spend our money. Paying down debt is a privilege very few achieve – but there is help and support to allow everyone to do it. With money comes freedom and increased happiness’’.

Sam Stubbs, Simplicity

Sam Stubbs suggests doing something for someone else.

‘‘In the month someone significant in your life is born, set up a KiwiSaver account in their name, put it in a low fee growth fund, and pay in $50 a month. When they turn 18, there could be $18,000 in there. What a start to life.’’

He also urges people to avoid debt where they can. ‘‘Never, ever, borrow money or have a credit card, unless you are buying a house.’’

Tom Hartmann, Sorted

Tom Hartmann would have you save money with a clear purpose.

‘‘If there is one thing we would recommend, it is to dial up what is called your ‘meaningful savings’ – flowing your money towards paying down debt, building up funds for future goals like retirement or buying a property. Other saving is good but meaningful savings truly improve your overall wellbeing and get you ahead financially.’’

Katrina Shanks, Financial Advice NZ chief executive

Katrina Shanks is in favour of planning well. ‘‘Take the time to think about your needs and goals, and make a plan to achieve them. Start the journey today.’’

Financial adviser Martin Hawes

Martin Hawes recommends people get a very clear view on what it is they are looking for, whether that is a thing (a new car) or a way of life, or changing some poor habits that are getting them into stress. ‘‘The barrier to getting what you want is seldom knowing what to do – in many or most cases this is fairly obvious.

‘‘Instead, the barrier is usually having the motivation to do some thing(s) that you do not want to do and then having the discipline to carry on doing it.

‘‘The trick is to do this new thing (that is, adopt a new behaviour) for long enough so that it becomes a habit.

‘‘For example, if you are overspending on a credit card and that means you cannot save for a house deposit, the new behaviour needs to be that you put that card away.

‘‘If you have a powerful enough dream of home ownership, you will have the motivation and discipline to stop using that card to buy stuff and to save instead. It starts with the dream of what you want: if that is clear enough, the rest becomes a lot easier.’’

Joe Taylor, BetterSaver Joe Taylor says most New Zealanders don’t realise that by retirement, KiwiSaver could be their biggest asset.

‘‘It is well worth making sure you are in a fund that is going to help you make the most of your investment. It could help you retire with an extra halfa-million dollars.

‘‘While it is helpful to count pennies and not go overboard on the Christmas shopping, you can make a far bigger impact on your financial future by swapping into the right KiwiSaver fund. It will make a huge difference to your future, without you having to tighten up your wallet too much over the holiday period.’’

Kristen Lunman, Hatch

Kristen Lunman says you need to start investing. ‘‘Working and saving will not lead to financial independence for most people; you have to make what you save work for you. The best time to start investing was

yesterday and

the second-best time is today.’’

Sharon Cullwick, NZ Property Investors Federation

Sharon Cullwick says her father had a question he asked before buying anything. ‘‘Do I want it? Do I need it? Can I do without it?’’

She says you will often find you can do without it.

She recommends people check their credit histories and do everything they can to improve them.

‘‘Pay off old loans and if your credit history shows up things that you are not aware of, speak to the organisation that filed the details and work on a repayment schedule.

‘‘For the next three months keep a record of everything you spend your money on. Include all incidentals, coffees, childcare, school fees, eating out, food, power, phone, entertainment, parking etcetera.

‘‘This will give you an understanding of where you spend your money,’’ she says.

‘‘Open three bank accounts – one for saving, one for everyday living and one for ‘luxury’ spending. Into the savings account put 10 per cent of your income as soon as you receive it.

‘‘Don’t spend this money unless it is on something that can generate more. Work out how much you need each week to pay the bills and put this in your everyday account.

‘‘Luxury spending is money you can spend on anything you desire. However, once it is gone, it is gone. Do not take money from your other accounts.

‘‘If you have an expensive item you want to purchase, save for it and pay cash. You could find a debit card is helpful with this account. I am not too fond of budgets as I find them too restrictive, so this allowance system works well for me.’’

Dean Anderson, Kernel Wealth

Dean Anderson says it is never too late to start a good financial habit.

‘‘Remember, the average firsthome buyer age is 35, so don’t feel pressured based on what you read or see around you.

‘‘You have got time on your side so use this to set up a regular savings or investment habit that will get you towards those goals, be it purchasing a first home or building long-term financial

independence.’’