6 Steps To Financial Wellness

6 Steps To Financial Wellness

Ah, wellness. While it’s a bit of a buzz word, it’s worth striving for, especially when it comes to your finances. The start of a new year brings motivation, resolution, and lofty goals for many, but true financial wellness is found in your daily habits and attitude; not in grand declarations.

So what does financial wellness mean for you? It could be any combination of the following:

  • Owning your own home/s.
  • Having money in the bank plus a generous emergency fund.
  • Being debt-free.
  • Having a range of investments.
  • Saving towards your retirement.
  • The freedom to live and work the way you choose.
  • Investing your money wisely.
  • Living with good financial habits.
  • Being savvy with your money.

Wherever you are in life – and regardless of your income – you can work towards financial wellness. 

 

Get honest about your spending.

“The real cost of a $4.00 a day coffee habit over 20 years is $51,833.79. That’s the power of The Compound Effect.” – Darren Hardy

(We highly recommend  The Compound Effect book).

We’re not suggesting you give up takeaway coffee completely, but cutting it back to once a week will make a significant difference.

Determine what you truly need vs what you want, and sit on things before making big purchases. The push to spend is everywhere – from advertisements and social media to pressure to “keep up with the Joneses”. The only way to make a lasting financial change is to examine and reset your spending habits.

  • Avoid buying sale items unless it’s something you really need and have had your eye on for some time.
  • Never use hire purchase or put things on your credit card.
  • Shop consciously, not as entertainment (this applies to both online and in-store shopping).
  • Love something? Wait a few weeks and see if you still want it.
  • Make some small weekly changes to save some pennies, like making your own lunch and coffee at work most days.
  • Scrutinise your subscriptions like Netflix and Spotify. Alternating between streaming services will save you money.
  • Be mindful of money spent on entertainment, dining out, drinking, etc. Consider an entertainment allowance to reign in loose spending.

The Financial Diet  Instagram page has incredible tips and ideas to help you live better with what you have.

 

Tackle short-term debts.

We see many clients with multiple short-term debts like credit cards, personal loans, and hire purchases, and often this debt is a huge barrier to a first-home purchase. High interest rates can be crippling. 

Reducing and eventually eliminating short-term debt will free up precious funds to save and invest. Consolidating your debt makes repayments much more manageable – speak to one of the Finsol home loan team to help you create a plan.

If you already have a mortgage, you may be able to consolidate your debt with your home loan.

Once you’re in a good position with short-term debt (hopefully debt-free), stay there. If you really want something, be it a holiday or a new pair of shoes, save up and pay cash.

Credit cards are only useful for those who have the discipline to spend within an affordable limit and pay the balance in full each month. 

 

Clean up your bank accounts.

Close any old accounts that aren’t in use to avoid unnecessary bank fees. 

Practice good account conduct, especially if you want to take out a home loan in the future. Banks will scrutinise your past transactions (usually six months prior) during a mortgage application – reckless spending could leave you unable to secure lending.

 

Think bigger picture.

Where do you want to be in five years? Or ten? It’s all too easy to coast through life, but having clear goals will give you something to work towards and stop you from burning your income. 

Commit to financial wellness now and set your plan in place – your future self will thank you for it.

Our Top Tips

  • Change your KiwiSaver contributions to a higher percentage. If you don’t own property yet, KiwiSaver is an incredible vehicle to get you into your first home. If you do own a home, think of KiwiSaver as a nice little nest egg for retirement. 
  • Check your KiwiSaver investment strategy. Most people have their KiwiSaver accounts with the bank, and many of these accounts will be sitting dormant in a default fund. The right fund will have you sitting pretty at retirement time. For a quick, free KiwiSaver fund analysis, give our digital advice process a whirl  (it only takes five minutes).
  • Protect your assets – and yourself – with smart, quality insurance. 
  • Money in the bank is great, but money invested is better. The Finsol Wealth team can give personalised investment advice and help get you started.
  • Create a plan for your career. Could you start a side project to bring in some additional income? Do you need to take some time out to retrain to enter a new industry? How can you increase your income in your current field? Again, planning is key. 
  • Get on the property ladder if you can; owning rather than renting makes a huge amount of sense.

 

Ask for help.

Even the most financially savvy among us need professional help from time to time. Call in the experts for the following:

  • Your first home purchase
  • Home loan refinancing
  • Budgeting and planning support 
  • Personal or business insurance
  • KiwiSaver investment advice
  • General investment advice

Who to contact:

Insurance Adviser 

Always work with an independent insurance specialist who will put your needs first and find the right cover to fit your budget. Insurance is complex – it’s crucial to work with someone experienced.

Mortgage Broker

A good mortgage broker will help guide you towards purchasing a house – especially if it’s for your first home. If you’re not quite in the right financial position to buy, your broker can help you create a plan of attack. 

If you own existing property and wish to purchase more – or refinance – then a broker is your first step. Working with someone independent will allow you access to all of the different banks and lenders and enable you to secure a competitive interest rate.

Investment Adviser

So you want to invest, but where to start? Enlist a professional who can take care of your investments for you. Investment Advisers can also help you get your KiwiSaver humming.

Chartered Accountant

The right accountant is worth their weight in gold and can help you beyond basic tax advice. If you have a registered company then an accountant is essential.

If you’re a sole trader, you may not need an accountant.  Check out Hnry, a unique accounting platform that takes care of your tax obligations for you as your income flows in.

 

It may feel overwhelming to make financial changes, but the rewards can be immense down the track. Start small – just start.

“Small daily changes are the key to staggering long-term results.” – Darren Hardy

 

While we’re home loan and insurance experts, our blog posts are for general information purposes only and are not intended as financial advice. If at any stage you need personalised advice, get in touch on 0800 346 765, or email finsol@finsol.co.nz.