managing finances proactively

2023 is predicted to be tough financially for a lot of people in Aotearoa. Recent historically low interest rates, together with easier access to finance helped push asset (particularly house) prices and consumer demand (and inflation) to historical highs. But this set of circumstances, influenced strongly by the temporary global financial response to Covid-19, was never going to be sustainable.

Now, going into 2023, we are left with the remnants of a good time - albeit short-lived - and the start of a financial hangover in the form of:

• higher cost of living and pressure on wage inflation

• declining asset (house) prices

• expectation of rising unemployment

• rising interest rates.

Many financial commentators expect that the current economic situation will start to moderate sometime during 2024, but this statement comes with uncertainty. In challenging circumstances such as those expected this year, it’s worth spending time considering how to proactively manage your financial situation.

WHAT CAN I DO?

Acknowledging that everyone’s financial circumstances will be different, some practical options/actions that can be taken to manage the changing financial pressures that will be facing us all in the coming year include:

Updating and reviewing your whānau budget: reassessing, or re-prioritising spending for necessities, trimming spending on discretionary items, and avoiding use of credit cards which incur high interest and can enable impulse buying.

Identify ways to improve your revenue. The current workforce shortages mean that for those who are working less than 1.0 FTE, there are a number of potential additional sources of income including second midwife care, locum work, postnatal modules, or additional shifts.

Talk to your bank about maximising your savings and cashflow and/or minimising the impact of debt, including:

• Reviewing the schedule of necessary regular payments so they are manageable (e.g. smaller, more regular payments may be more manageable when cashflow is tight).

• Managing your debt by reorganising and consolidating your accounts, and avoiding credit card debt.

• Assessing your interest rate situation and what is best for your whānau in the shortand medium-term (i.e., fixed, or floating rates).

• If you have surplus cash, investigating how it can best be invested, and for how long, in order to maximise your return.

One of the many challenging decisions you need to make is how to balance the tension between ensuring you have enough money to meet priorities (such as the need to maintain a minimum level of spending on necessities) and the need to save money for the longer term. Recent events in Auckland and the wider North Island demonstrate that a minimum level of insurance cover for valuable assets such as homes, contents and cars, is a necessity. For self-employed midwives specifically, kit insurance and income protection insurance are also in the mix. When considering longer term savings, the MMPO is receiving an increasing number of questions about KiwiSaver and whether or not self-employed community midwives should be signed up to it.

WHAT IS KIWISAVER AND WHY SHOULD I JOIN UP?

When you join KiwiSaver (which is recommended), you choose a contribution rate of your before-tax pay that is affordable and maximises your long-term savings potential. The amount of this contribution can be changed depending on your circumstances. For employed core midwives, their employers are also required to contribute at least 3% of before-tax pay.

The government provides incentives to encourage people to save for their retirement through KiwiSaver. These include an annual member tax credit of up to $521.43, as well as a first-home deposit subsidy for eligible first-home buyers.

Self-employed community midwife KiwiSaver members are eligible for the $521 government contribution if a minimum of $1042.86 per annum is added to their KiwiSaver account (effectively giving members a 50% return on investment). This is why we recommend everyone should sign up as one of the tools in their long-term savings plan.

As community midwives are also technically their own employer, they are able to determine the amount or percentage of income they invest in KiwiSaver. Depending on individual personal circumstances, investing more than the minimum of $1042.86 required to access the annual tax credit each year may not be worth it. If you are carrying debt in the current environment of high interest rates any surplus money (over and above the minimum $1042.86