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Our ‘secret sauce’ for six financial resolutions
The New Year – It’s truly a magical time when we take stock, list our resolutions, and celebrate the promises of what’s to come.
The problem is, even with the best intentions, resolutions tend to quickly run out of steam...
So why not make 2019 the year of ‘sticking to your financial plans’? Our Team of friendly advisers have come together to share their ‘secret sauce’ for six common resolutions.
1. Saving more and spending less
Like to beef up your savings account this year? It might be time to take the reins of your spending, says Bonnie Timu, Financial Planning Adviser.
“How many times have you said to yourself, ‘Do I really need that? Probably not, but I really want it?’
Unfortunately, we have accepted that impulse buying is now a part of life as we are influenced daily by media, our friends and family to buy, buy and buy.
"‘Better to have it now as it might be more expensive if you wait,’ right? But if that idea was the best for us, why are we always behind the eight ball when it comes to money? Why are we only just making ends meet? Or worse yet, why can’t we make ends meet?
“Rather than listening to influences out there, we need to take back control of our own financial picture and start making some positive changes there. Look after you and your family with planning for the future, not just satisfying the now. Be a financial ‘smarty pants’ by saving more and spending less.”
2. Getting out of ‘overpowering’ debt
As New Zealanders’ high levels of household indebtedness prove, reducing debt is another great resolution to have.
Here’s our Mortgage and Insurance Adviser Ian Fraser’s recipe for getting out of high-interest debt faster:
“We will all know or have heard of someone who has been exposed to ‘overpowering debt.’ This is generally short-term debt that is too high in interest rate, or the fees that are charged tend to eat into any principal paid.
“To avoid this kind of debt, take the time out to explore your options, looking for a credit facility that fits your income, is easily managed online or on your cell phone, and entails minimal upfront costs.
“At Cole Murray, we have a number of providers looking to assist clients and provide more attractive interest rates and convenient repayment terms (up to seven years). At the end of the day, it’s important to achieve ‘flexibility’, reduce the strain on cash flow and repay the loan faster – while also maintaining a good credit history.”
3. Being on track for retirement
Are you on track for retirement, and will your savings last long enough? You may have pondered this question before, and of course, there isn’t a simple, one-size-fits-all answer to it.
What we have here, though, is some good advice from Cole Murray’s Wealth Generation Adviser Richard Maloy:
“When it comes to retirement planning, there is no magic number because everyone’s situation is different. The best way to go about it is to take a good look at your circumstances.
“What are your expenses? What do you hope to do in your retirement years? What will be your income sources and assets? With some of these questions answered and a basic budget completed, you can gain a clearer idea of what may be needed.
“Then, you can start making some projections forward. A good rule of thumb is to multiply the amount of income you need in retirement by 25 times. For example, if you require an income of $40,000 per year, a portfolio of approximately $1 million would be required to support the income over the long term.
“Keen to get your retirement on track? The best place to start is speaking with an adviser and getting a plan in place to help you work toward your goals.”
4. Getting mortgage ready
Do you feel it’s time to make your home ownership dream come true? Getting your finances ready for it is a good first step – but how?
Our Mortgage Adviser Steve Davies has a couple of quick tips for you:
“First of all, it’s a good idea to clear or reduce any short-term debt you have. And if you have no debt, make sure your savings account shows you can pay your rent and living expenses while also saving.
Remember: the two main factors affecting your application for a mortgage are your deposit size and your ability to service the repayments on your mortgage. Savings will increase your deposit, and because you will need to borrow less, your repayments will be lower.”
5. Having a plan for the ‘unexpected’
Life is by definition unexpected. But while we cannot prevent bad things from happening, we have the power to prepare ourselves and our finances for them. It could be through an adequate rainy-day fund, a well-thought insurance plan, or both.
Here are some thought-starters from Roseann McConnel, Cole Murray’s Senior Personal & Business Risk Specialist:
“The soaring Christmas holiday road toll was yet another reminder of how life can change in an instant. In this particular case, putting a plan in place for recovery costs and bereavement support can make all the difference.
“Whatever happens, having a plan won’t take away the heartache of course, but it will help. Be it Life Cover, Trauma Cover, Mortgage Cover or a mixture of all three, it’s important not to leave risk to chance. And seeing an adviser is a must: it doesn’t cost you anything and you get peace of mind, and more.”
6. Starting to invest
Looking to grow your wealth? Investing can be a means to achieve a wide array of financial goals, and the sooner you start, the better: it’s the power of compound interest.
Once again, our Wealth Generation Adviser Richard Maloy shares a couple of tips to get you going:
“When is the best time to start investing? Yesterday, but failing that, today.
“Einstein famously referred to compound interest as the eighth wonder of the world. So don’t put off starting to invest: an investor’s single biggest asset is time. And the great thing is the sooner you start, the less you have to save.
“Using the Sorted website, an investor who starts saving into KiwiSaver at age 20, earns $50,000 per year and lives to 91 could have an income over 50% better than the same investor that delays starting saving into KiwiSaver until they are 30*. Starting early and making regular contributions is the key.”
* Based on the underlying assumptions used by https://sorted.org.nz/tools/kiwisaver-savings-calculator
NEED HELP TO ACHIEVE YOUR FINANCIAL GOALS IN 2019?
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- Dollars and sense (No. 2) - Setting your financial goals
- How to make your New Year's financial resolutions stick
- Rainy day fund: how big should it be?
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