Five tips to get your finances sorted
The path to financial freedom starts with just a few simple steps.
Argh, money! Where to start and what to do with it — especially with so much going on in our lives, it's often the last thing you feel like thinking about at the end of the busy week. But the truth is, sorting out your finances doesn't have to be difficult and overwhelming — we promise.
The big secret is just getting started. Here are five quick, simple things you can do right now to set yourself on a path towards financial freedom.
1. Pay yourself first
If there’s one thing we should all start doing today, it’s this one. Most people – especially women – will pay for groceries, the kids’ school supplies, everything and anything before we take care of ourselves. But paying ourselves first can make a huge difference for us in the future, and all it takes is making a few small adjustments to our banking.
Start by setting up an automatic payment that comes out of your wages each week before you spend it on anything else, and set that money aside in a separate account. The amount you pay yourself doesn’t have to be a lot – the important thing is to get into the habit of saving as early as possible, even if it’s just $5 or $10 at a time.
If you’re not sure of how much you can afford to set aside each week, there are some great budgeting tools online that can help. Just remember: time and consistency are our friends, so start today with whatever you can and keep going.
2. Sort your KiwiSaver
Alright, say it with us: “I need to be in the appropriate fund for my age and stage of life”.
So what does this mean? Basically it means the risk level of your KiwiSaver fund should reflect a) how old you are, b) where you are in life, c) what your plans are for the future, and d) your own personal attitude to risk.
For example, if you’re relatively young and just starting your first job, you might be best in a high growth (or higher risk) fund so you can benefit from potentially bigger returns over your career. Or, if you’re about to buy a house and want to use your KiwiSaver investment for your deposit, you probably want to look at a lower risk fund so your money is more stable just before you take it out.
We can’t emphasise enough how important it is to make sure your KiwiSaver money is in the appropriate fund for your age and stage of life. Being in the wrong fund could potentially mean missing out on hundreds, even thousands, of dollars by the time you retire, and the earlier you start, the more benefit you’ll see thanks to the magic of compound interest. So take the time – just 30 minutes is all it takes really – to look at how you’re investing right now.
At Mercer, we also provide free KiwiSaver investment advice on the Mercer KiwiSaver Scheme through our Financial Advice Team. So if you’re wanting a bit more expert help on this, don’t hesitate to reach out.
3. Consolidate your debt
No shame or judgement here: debt is a fact of life, and the more we talk about it and share our knowledge around it, the quicker we can all work towards sorting it out.
If you have a mortgage, you may be able to roll your debt into it, since this is usually the lowest rate you’ll have available to you. If you don’t have a mortgage, you may still be able to roll all your debts into one, preferably into the one with the lowest interest rate, or start chipping away at each of them with more going towards a debt with the highest interest rate.
For help on calculating and repaying your debt, Sorted’s debt calculator is a great free online tool you can use. And for more tips and resources on managing debt, check out our article on the topic here.
4. Start an emergency fund
From an unexpected car repair to a shock medical bill, we never quite know what life will throw our way. In these events, having an emergency fund can make a huge difference – think of it as your parachute, your car air bag, or your secret escape door.
An emergency fund can give you a buffer for life’s unexpected bumps. Ideally, your emergency fund should have enough to cover you for around three-to-six months, and should be in an appropriate savings account in your name which you can access quickly.
5. Start an investment account
Savings accounts are great if you want to have access to money at short notice, but over time, tax and inflation can often eat into the value of any interest those accounts earn. To grow your wealth in the long term, having an investment account is usually a better option.
Plus, there are heaps of excellent online investment platforms that allow you to do this yourself. Or, if you want to take the work out of it, you could look at a managed fund, which is similar to your KiwiSaver fund but one which you can access more easily.
At Mercer, we offer Flexisaver which has the benefit of being managed by a skilled team of experienced investment experts – all you have to do is set up an auto-payment each week or month and watch your money work hard for you. The important thing is to do this early and regularly for the best results.
When you join The Table and switch your KiwiSaver account to Mercer, not only do you get full access to the ever growing resources on this platform, but as a Mercer member you get free access to our in-house team of financial advisers.
Ultimately, make these changes in whatever order you want, however suits. But it is about starting somewhere. Because if you can sort the basics, you’ll give yourself a solid foundation for financial freedom for the rest of your life.
The above article is general information and does not purport to give financial advice. The Mercer KiwiSaver scheme and Mercer FlexiSaver are issued by Mercer (N.Z.) Limited. Product Disclosure Statements are available free of charge at seatatthetable.co.nz.