Even if you feel you’re on a good salary, you may still be wondering how you’ll be able to coverall your costs – and maybe have something saved for the future – as the cost of living continues to rise.
So, here are enable.me’s top five tips for staying on top of your finances and building financial resilience.
1. Build a cash surplus
A cash surplus is when you have money left over at the end of your month. Not sure where to find it?
First, look at where you’re frittering money. Fritter can account for up to 15% of your income and refers to money that’s spent on things that don’t necessarily make you any happier – like that second takeaway coffee, or that third drink on a Friday night.
Another area where you might be able to find a surplus is by cutting down on our lazy tax – the tax we pay for staying with our current utility company, for example. Instead, see if you can find a cheaper deal with another provider and make the switch.
This cash surplus can then be used to build a savings buffer and be put to better use, like paying off debt or investing.
2. Repay debt as fast as possible – including your mortgage
One of the biggest money sucks is interest payments on debt. So, while in an ideal world we’d avoid debt altogether, the next best thing is to pay off debt as fast as possible. If you have high-interest debt like credit card debt or personal loans explore how to pay these off as soon as possible. Then, once those are gone look at ways to pay down your mortgage. It’s amazing how much difference taking years off your mortgage makes to the amount of interest you pay.
Unfortunately, most won’t be able to rely on their KiwiSaver and/or the sale of their home to finance their retirement. So, you need to make up that shortfall elsewhere. Keeping your money in a savings account or term deposit also won’t cut it as interest rates are low and inflation is eating away at the buying power of your money. Investing – whether in property, managed funds, or other assets – is your best bet for growing wealth and building your retirement nest egg.
4. Stay on top of your finances
Even if you’re in the most solid relationship imaginable, don’t fully secede control over your money. If you have a joint bank account know what bills are being paid when, and how much they’re costing you. Know what assets you own, or which are owned by the bank. And get an understanding of how your investment portfolio is structured (if you have one).
It’s also worth chatting to your partner about money, their spending habits, and goals to make sure you’re on the same page – or can at least live with the differences.
5. Avoid credit cards and Buy Now Pay Later schemes
Studies show that people spend up to 83% more when paying with a credit card than if they paid cash. And that’s before you factor in the cost of interest if you don’t pay it off on time. And, while Buy Now Pay Later schemes may seem like a safer option as there’s no interest charged, the late fees can really bite, with one scheme charging up to 25% in late fees.
Being good with money doesn’t need to be hard, it just requires us to be a bit smarter with how we’re spending our money and making each dollar count – whether that’s by paying down debt faster, making a wise investment, or ensuring we’re not paying more than we need to on the necessities.
If you’re not sure where to start, book a confidential financial consultation with an enable.me coach who can help you determine where you’re at and advise you on how you can reach your financial goals.