As a kid, you will probably have been taught about the beauty and the beast that is compounding interest.
With saving, you earn interest on your interest, so it compounds over time which is a beautiful thing. When you borrow, if you’re not paying the loan down, you’ll start paying interest on the interest, which can be a horrible thing.
The basic concept with either scenario is that a little bit saved or little bit spent can become significant over the long term. Little can be huge.
That same concept can be applied to your finances – when you worry about the small stuff, over time it can save you an enormous amount. enable.me’s financial advisers have compiled a list of places to start.
So here is an idea of the small areas where you can start to make improvements, which cumulatively can make a huge difference.
For some quick wins in your everyday expenses:
- Add up what you’re budgeting to spend each week on food, coffee, cafes, restaurants etc. and withdraw it in cash each week. Trial this for 12 weeks and you’ll naturally spend 20% less. Now you have your new benchmark – even if you go back to doing those transactions on your EFTPOS card.
- Plan the meals for the week before you write your list and head to the supermarket. Make sure you include easy ones for a few nights, to cut down on takeaways. If you struggle to stay within the budget at the supermarket, do your groceries online or do click and collect.
- Stop leaving the supermarket fuel vouchers a the bottom of your handbag – even small savings like that add up, remember?!
Next, take a look at your fixed costs, like power, gas, broadband and mobile providers.
- Check websites like www.powerswitch.org.nz to see whether you can get the same service for less.
- Switch your car, home and contents insurances tobe paid annually – this will save you about 7%. While you’re at it, if they’ve been in place for more than two years, consider reviewing them to check they’re still fit for purpose.
Then, it’s time to focus on what you’re paying the bank.
- Take a look at the fees they’re charging you and get in touch to see which ones you can negotiate down or away.
- Check out websites like www.interest.co.nz to check that you’re getting the best mortgage rates and if not, shop around. If you locked in higher rates, consider breaking your mortgage to take advantage of lower rates.
- If you’re paying credit cards, personal loans or hire purchases off, start overpaying those with the highest interest rates first, or consolidate them into a lower interest loan.
- If you’re in KiwiSaver, whip out the latest statement and take a look at the fees you’re paying. Don’t focus on the gross return, but net return, as fees can eat into your returns over the lifetime of your retirement savings plan. Check out the KiwiSaver fund finder at www.sorted.org.nz to see how your fund compares and consider switching if yours is consistently under-performing.
- Ensure you’re contributing at least the minimum to KiwiSaver each year to get the government member tax credit($1,042pa or $87/month)
Lastly, it’s time to put the microscope on your own spending.You need to work out:
- What your top 3 spending priorities or ‘non-negotiables’ are for both you and your partner.
- Your top ‘fritter’ points – where are the areas of spending that don’t make you any happier that could be identified and cutback? Where are you spending money that you were unaware of until you go through your bank statements?
Small changes, especially to regular expenses, soon add up. So now it’s time to take action! If you’d like to put your progress on the fast-track, get in touch to book a consultation with one of our Financial Coaches. (A fee applies)
Disclaimer: This blog post is for informational purposes only and does not constitute individual financial advice. If you’re interested in receiving personalised financial advice, you can book in a consultation with an enable.me coach. Costs apply.