Money Matters

It's money week so this week we are going to talk about rhubarb (just kidding)… we are going to talk about how to put more of your money into your pocket and less into someone else’s.

Living off the smell of an oily rag means different things to different people. For some it’s about getting rid of commercial clutter and returning to simple wholesome living. For others it’s about eliminating waste and doing our bit to save the planet. But for most, it's about getting by when things are a bit tight and having some money left over for themselves.

There's lots of money advice on offer. Most of it is a bit too complex for our liking.

Money management is really pretty basic. Here are some simple rules.

Spend less than you earn. The first person you should pay each week is yourself. Put 10% of whatever you earn into a savings/investment account – we think of it as a wealth account. KiwiSaver has made this a whole lot easier. Those in employment should contribute at least 3% of their salary because up to 3% to subsidised dollar for dollar by your employer. That's free money and your 3% turns into 6%. That only leaves you with 4% to save to reach the target 10%. The best way to save the 4% is to have the money transferred directly into your wealth account by your employer – just like they do for your KiwiSaver contributions. That means whatever ends up in your day-to-day bank account is yours to spend.

Invest your savings with long-term gains in mind. For most people the best way to invest the remaining 4% is to make additional lump sum repayments off their mortgage. That will shorten the life of your mortgage and save you tens of thousands of dollars in interest. Only worry about riskier investments once you are debt free.

It's as simple as that. No doubt some will be saying as they read this, “But how am I going to save 10%?” The answer is by taking advantage of the free money offered via KiwiSaver and by living frugally.

There are endless ways to save money – some are significant on their own like stopping smoking, boozing less, and not buying things like household items and cars on credit. But in most cases the savings accumulate by doing loads of little things that together amount to a lot. The oily rag website – www.oilyrag.co.nz – has literally hundreds of money saving ideas.

Stephanie has some special tips when it comes to kids and money. "Let kids save for their own college fund by encouraging them from a very early age to earn money by getting paid for what they enjoy doing! Our little boy who is now three loves dogs, so we offered to walk the neighbours’ dog for $5 a week. It makes us get out for exercise and gives the dog half an hour of much needed attention while the owner is at work. I know it doesn't sound like much but each year he will earn himself $260 for his college fund so I'm calculating by the time he is 18 he will have well over $4,000 towards his college education – just from this hobby alone. Similarly our daughter enjoys baking so every week we invite her friends over for a baking session to make simple things like scones, biscuits, raisin buns etc. They are learning something new and having fun. The mums are more than happy to contribute $5-$10 for the ingredients and the pleasure of not having to mess up their own house. We put half in the kitty for the ingredients and half goes to my daughter’s college fund so she can save between $10 and $20 each week. If we are able to do something like this every week until she is 18 she would have over $8,000!"

Dee writes, "To teach our kids about saving on the outside of their money box we write down how much is inside and a target to be saved. Each week we count the coins and figure out how much needs to be saved to reach the target. Once reached we then put it into their KiwiSaver account. Our kids got pretty excited when they saw the government add $1,000 and then top it up each year with the 50% subsidy. They think it’s pretty cool."

You can send tips and join the Oily Rag mailing list by visiting www.oilyrag.co.nz – or you can write to us at Living Off the Smell of an Oily Rag, PO Box 984, Whangarei.