IN THE KNOW —
Making 2022 the year you nail your finances We were all hoping that 2021 would hold better things than 2020… but thanks to Covid, we also all know how that turned out! to 15% of your income – which is a great rate of return if you can find it. Look for inefficiencies in tax and mortgage structures, late payment fees, unarranged overdrafts, outdated insurance policies and credit card interest. We pay ‘lazy tax’, too – where we simply haven’t bothered to shop around for a better deal or hit ‘cancel’ on an unused membership.
Develop systems to do the heavy lifting
If you reached the end of 2021 having worked really hard but without much to show for your mahi, you’re not alone. Uncertainty can make it more difficult to make financial decisions and while we know we can’t rely on this year being blissfully Covid-free, there are ways to make 2022 more financially fruitful.
Start with a performance review How are the decisions you’ve already made about how to use and invest your money serving you? Now is the time to review your KiwiSaver, any managed funds, index funds or direct shares you may hold, perhaps digital currencies, investment properties or other assets. What have they returned over the past year? What fees are you paying? Are those returns acceptable amid high inflation? What about the impact of rising interest rates? Do regulatory changes impact whether your investment property remains one you should continue to own?
Consider what keeps you up at night Before you race off in search of higher returns, you need to be confident that you have the stomach, the time, and the resilience to tolerate the higher risk that strategy entails. Will you sleep soundly, or worry all night long if there’s a market correction? What would losing some of that money mean for your financial situation? What are the chances you’ll need it in a year, in five years, or tomorrow? All of these factors must feed into your investment strategy.
Daily life erodes – and sometimes completely exhausts – your willpower, so you need robust systems to make sticking to your plan easy. For example, setting up a separate account for everyday food spending, or withdrawing it in cash, can help stop you overspending. Using a weekly meal kit service can help reduce the number of nights you resort to takeaways. Setting up your bills to be paid by direct debit can help ensure you always get the prompt payment discount.
Determine your mortgage strategy We all know that interest rates are on the rise – so you need consider whether your priority is the lowest rate possible to allow you to make progress right now – or whether you want the certainty of a longer fixed rate. But try not to get too caught up with interest rates in isolation – remember, the pace at which you repay your mortgage is what will make the most difference to how much interest you pay in total. That’s why you need to have a plan in place to repay it faster than the standard 25- or 30-year term. Rates are still low by historic standards, so if things are already tight, we have other problems to fix – and need to fix them quickly.
Mindset matters If you want to get ahead – you need to work on your head! In our experience, few things alter your money mindset faster than seeing results. So, get clear on what the goal is, what milestones you need to be hitting along the way, measure your progress towards each one, and crucially – celebrate those wins! The dopamine hit you get from seeing results will provide the encouragement you need to keep it up. If you’d like guidance and support in making and implementing a financial strategy, head to www.enable.me for more information or to book an initial consultation.
The power of finding the fritter If you’re chasing the best investment return, don’t overlook the gains you could make – risk-free – by focusing on your own financial management. Fritter can amount
Hannah McQueen is a financial adviser, chartered accountant, personal finance author and the founder of enable.me. enable.me, a NZCB National Partner, is a financial strategy and coaching, and financial advisory company dedicated to helping Kiwis do better. To book an initial consultation with an enable.me financial coach, head to www.enable.me
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