The Kiwi’s Personal Finance Resource Guide

The Kiwi’s Personal Finance Resource Guide

For most people with a 9-to-5 job and a limited knowledge of finances, managing personal expenses can be a tall order. 

But we’re here to help! Though we can’t alter your work schedule, we can certainly provide you with a basic grasp of financial skills and concepts.

In its entirety, this guide aims to cover the basic facets of personal finance by breaking them down into learnable skills, starting with income and spending, and moving on to saving, investing, and future preparations.  

Now without further ado, it’s time to walk you through essential personal financial skills, starting with income monitoring. 

Tracking Your Money

Tracking Your Money

Before we shower you with investment tips and the like, it’s important to know how much money you’re actually making and where it’s going.   As a basic means of tracking your money, you can actively keep a record of all your financial accounts.

Many people get by just fine using a standard finance journal that contains expenses, payments, and general transactions.  But, if you’re a bit more tech-savvy you can take things a step further using an Excel spreadsheet.

Quite recently, Microsoft has released an add-on to Excel known as Money in Excel.  This software optimizes the program to connect to your financial accounts and track your expenses automatically.

If you’re not familiar with how to operate Excel, or you’d prefer to have a hard copy of your finances we’d strongly recommend going with the pen and paper method of finance tracking.

But, keep in mind, it becomes quite difficult to manually track your finances when several accounts are involved.  Throw in an investment portfolio or checking account and you’ve got a surefire way to lose track of your money!

To make things easier you could use a finance app… or better yet, hire an accountant if you can spare the money.  For reference, we have articles that offer excellent accounting options for those in Wellington, Auckland, and Christchurch.

Using Credit Cards and Tracking Expenses

If you have a credit card, you should know that purchase tracking is actually an area where a credit card can have some advantages.  Since all your transactions will be covered by the bank, you can have a spot-on record of all your finances at any given time.  

In addition to accurately tracking your purchases, a credit card can also help you develop your credit score, which certainly helps with loans. 

What’s more, even those with bad credit can still find a credit card in New Zealand, which can be a good first step to improving that credit score (assuming you use it responsibly, naturally!).

From travel and student credit cards to low interest and cash back credit cards, there are tons of options available.  As a matter of fact, there are even low-cost credit cards and airpoints credit cards for those in search of more affordable alternatives.

It should be noted, however, that these cards are tools and not finance fix-alls. They should be used wisely and applied for sparingly.  

If they are misused, keep in mind, credit cards can actually end up hindering your finances with heavy debt.

Saving Money with a Budget

Saving Money with a Budget

With your income and financial accounts in order, you can focus more on optimizing your spending habits and maximizing your savings.  The simplest way to accomplish these two tasks is to create a budget and stick to it.

Here are several budgeting techniques you can try:

Fixed and Flex Technique

Setting a budget and allocating income towards specific expenses helps you avoid overspending on nonessential items.  There are several methods to set up a budget but in this guide, we’ll be presenting three of the most effective budgeting styles.

The first budgeting style is known as “fixed and flex” and it is characterized by grouping your expenses into two basic categories.  As you can guess, these categories are fixed and flex, with the former referring to must-haves and the latter referring to wants.

To find your fixed expenses, we suggest gathering a list of bills, grocery receipts, rent notices, credit card payments, and other recurring costs. Once these things have been gathered, it’s as simple as adding up all your recurring expenses to find your fixed budget.

Subtract this fixed budget from your monthly or weekly income and you now have your flex budget.  This method of money management ultimately provides you with a way to meet your needs and still have enough left over for your wants.

For those with a strong will and reasonable spending habits, this method works quite well for day-to-day expenses.  Unfortunately, it falls short in that it doesn’t necessarily leave room for savings.

The only way to actually save with this technique is to allocate some of your flex budget.  This is difficult if you’re easily swayed by sales, budget deals, and the like, so it’s best to keep this in mind.

The 50/30/20 Technique

This particular budgeting method is better suited to those who want to consistently save a certain amount of money.   Unlike the previous method, which splits expenses into two categories, this method opts for three.

The 50/30/20 method splits expenses into percentages of your income with, 50% referring to necessities, 30% going to wants, and 20% going towards savings and debts.  Depending on your financial situation, these percentages can also be slightly altered.

While there is less wiggle room for fancy dinners, purchases, and other expenses, this method provides a reliable means of reducing debt and adding to savings.  Those who have trouble limiting their spending will find it easier to adhere to this method’s stricter rules.

Those in debt may also find this method to be ideal since it still leaves some room for non-essential purchases.  The fact that you direct a specific percentage of your income to each track also means you won’t have to worry about lengthy expense calculations.

Expense Tracking

This final method of budgeting is by far the most comprehensive form of money management available.  It involves recording every single one of your expenses and calculating their overall costs.

Among all of the methods discussed this one is by far the most time-consuming as it requires you to really examine your expenses.  The upside to this is the fact that you’ll have an innate knowledge of what you spend on.

This means you’ll be able to actively rearrange your budget should the need to do so ever arise.  If the thought of doing these things seems a bit tedious, then you aren’t alone as many Kiwis instead opt for the services of a financial advisor.

An advisor can do all of the above tasks while also keeping you updated on how to better allocate your income.  They can also help you achieve financial goals and plan for future expenses.

One key thing to remember when budgeting is that every financial plan requires restraint regardless of your income.  If you want your budget to work, it’s important to stick to it otherwise the whole point of managing your money is moot.

Borrowing Smart and Saving Often

Borrowing Smart and Saving Often

Aside from creating a budget, making smarter purchases can help reduce the income you direct towards expenses.  

Saving can be as simple as using coupons at the grocery store or opting for a smaller drink to go with your Macca’s.  In the end, even the smallest savings can add up to big sums of money at the end of the year.

Making a large purchase is inevitable sometimes, sure, especially if you’re buying something essential like a car or dwelling space.  

But just because they are necessary expenses, it doesn’t mean you can’t save money in the process. Sometimes, you just need more information or a little expert guidance.

In terms of housing, for example, real estate agents can help you find properties that fit well within your proposed budget.  

New Zealand is filled with many capable real estate professionals from Auckland and Wellington, all the way to Christchurch.  It’s worth noting that the additional help of a mortgage broker or home loan can also reduce the initial weight of a large purchase.

And then there are loans. Though some would warn against taking out any loans whatsoever, certain circumstances will sometimes call for a loan, usually for a necessary purchase or emergency expense.  

If you find yourself in need of extra money, a loan can be helpful… so long as it is handled responsibly.  By taking out a loan and paying it off consistently, you can meet your needs while also maintaining a reliable credit rating.

There are various loans available, from personal loans and unemployment loans to debt consolidation loans and payday loans.  Much like with credit cards, there are also loans for those with poor credit ratings.

It’s important to choose a loan that works for you since some types of loans will have higher interest rates and more convoluted payment terms than others.  Above all else, only borrow what you need in order to reduce the amount that you must pay off in the future.

Investing Properly and Preparing for the Future

Investing Properly and Preparing for the Future

Investing can be a helpful way to prepare for retirement and ensure a continuous income long after your job has come to an end.  In addition to this, investments can also help you meet your financial goals.

Digital Investing

Nowadays digital apps allow you to start investing from an early point in your financial journey.

To start investing you’ll need three things namely, capital, an investment platform, and knowledge of your preferred investments.

This article offers several useful investment platforms for Kiwis to choose from and you can start with as little as $100.  To gain a better understanding of the market we’d recommend brushing up on your investments and studying trends to help predict the future state of your investment.

If you’re not confident in your investment skills a financial advisor can offer useful insight into what investments would work best for you.  With the help of a qualified advisor digital investing can yield some favorable results.

Insurance Policies

Another form of investment that can be handy in a pinch is insurance policies.  Though it may not always be needed, insurance provides protection from unforeseen circumstances which could cause serious physical and financial harm if left unchecked.

Some common forms of insurance for Kiwis include house insurance, funeral insurance, life insurance, and health insurance.  If you encounter trouble choosing a specific policy, an insurance broker can also provide some helpful insight

For reference, those living in Wellington, Auckland, Christchurch, and Hamilton can make use of the linked articles to select a reliable insurance broker.  This should help you create a policy that meets your needs without exceeding your budget.

What Are Financial Goals For?

What Are Financial Goals For

Budgeting and spending wisely can take a lot of willpower and determination for some people.  So, to help strengthen your resolve and also give your money management purpose, it’s important to set financial goals.

These can be short-term goals like purchasing a specific item or long-term goals that pertain to saving a specific amount of money by a certain age.  No two people will have the exact same goal and it’s important to set something that will help motivate you.

In addition to giving you something to aim for, financial goals can also help financial advisors plan out spending and saving habits to make the journey a bit easier.  No goal is too small, but to make things achievable it’s best to set goals that work with your current income level.

As time passes and your financial standing improves, you can then set higher goals to attain.  If there’s one thing we’d like you to take away from this guide, it’s that a little money management can go a long way in helping you meet your needs and satisfy your wants here and there.

That wraps up our guide to personal finance.  We certainly hope that this will help you in your financial endeavors, be they big or small.