Let’s be honest with ourselves, are you making life harder for yourself due to poor financial habits? What are your beliefs about money? Are you a strict personal accountant knowing where it all goes or do you pay for items freely, giving your bank balance little thought until it gets low?There are actually lots of simple things we can do to get our finances in good order. Here are some suggestions.
Do not fear, if your bank balance isn’t as rosy as you’d like. There are actually lots of simple things we can do to get our finances in good order. Here are some suggestions.
Here are some suggestions…
Pay yourself first!
The general rule is 10% of everything that comes into your bank account should be saved. There are lots of ways to do this without thinking. Enrolling in KiwiSaver is the best. The benefit to employees is that their employer also makes a contribution so it’s free money. Select the type of fund that best suits your time to retirement. The general rule is the closer you are to 65, the more conservative the investment fund. The minimum payment should be enough to obtain a dollar for dollar contribution from your employer. If you are debt free, increase the contribution to the maximum.
Get out of debt quickly!
Set debt repayments at the maximum you can afford. Reducing mortgage interest is the best tax-free and risk-free investment you can make. Even fixed rate mortgages usually allow some increase in repayments without incurring break fees.
Lyn from Hamilton has a mortgage tip – she recommends making mortgage repayments every four weeks instead of every calendar month. This increases the annual repayments from 12 to 13 a year, dramatically cutting both the term of the mortgage and the total repaid over the term of the loan.
We have previously written about having a buy nothing year. The essence of the story is that you buy nothing but the bare essentials (like ice cream and potato crisps – just kidding!) for a whole year, and put away the savings into debt repayment.
The essentials include:
- Mortgage payments,
- Utilities i.e power, telephone and the internet
- Basic toiletries
- Washing powder
Going out to the movies is off-limits, as is going to the pub, buying takeaways, restaurant meals, new clothes, holidays, gym memberships, lollies or choc’ bars. It sounds like
It sounds like hardship, but to many frugal folk it means there is more time for family, hobbies, gardening, or doing good in the community. It’s a great way to kick start some serious saving or revive the financial health of those who are heavily indebted. For those who think a year is too much like hardship, then try it for a month, then two, and so on.
Did you know that the average payout on a $1 investment in Lotto is 53 cents! Not only is that not smart, it’s downright dumb when the spending is by those who can least afford it.
Needs before wants!
Happily Retired from Rotorua writes, “Don’t buy it if you haven’t got the money saved. Then ask yourself if it is a want or a need? If a purchase can be delayed, then keep an eye out for sales – you may pick it up at a bargain price by waiting.”
Who’s the money waster?
All of your best frugal efforts may come to nothing if your other half in the household is a spender. If that’s the case, then you may need to take control of their finances to save the household’s finances! One reader says they did this by setting up a bank account and transferring across a weekly allowance.
A reader from Oamaru writes, “When my hubby and I were on a tight budget, we came up with the idea that we would not spend over a certain amount without receiving the other person’s approval first. We usually gave permission when asked by the other, but it gave us time to think if we really needed the item before getting it…a sanity check. We saved a lot of money in this way.”
Pay bills on time!
Don’t get behind on your power and telephone to avoid disconnection and re-connection charges, and if there’s a discount for early repayment then take advantage of it.
Cash not credit!
Avoid all consumer debt. If you don’t have the cash, you can’t buy it.
If you really want to accumulate significant wealth, there are actually three areas to focus on:
- Making money (getting a good job, work more than one job or start a business),
- Saving it (putting savings ahead of spending), and
- Investing wisely (like buying bricks and mortar rather than Lotto tickets).
By Frank and Dr Muriel Newman.
You can contact the Oily Rag community via the website at oilyrag.co.nz or by writing to Living off the Smell of an Oily Rag, PO Box 984, Whangarei.