How can you stay on top of your finances? According to research by the Commission for Financial Capability, there are some mistakes that Kiwis commonly make with their money. Here are some behaviours you can build, to avoid those mishaps and support you on your financial journey.
Lack of planning
Remember – not having a plan in place is like trying to drive to a new location without a map. A sound financial plan can help you understand your unique financial picture and capabilities, and create room in your budget for changing circumstances (like a medical emergency, or change in income).
Building behaviour: Goal-setting
Setting goals is a good starting point in financial planning. Think about where you want to get to, and foster the habit of planning for those goals. And as your adviser, we are here to help you towards those milestones, so don’t hesitate to reach out.
One of the reasons for not planning ahead is having a short-term horizon. When you only think about the ‘now’, the longer-term goals (like a dream home, or retirement) can fall off the planning radar.
Building behaviour: Practise looking at the bigger picture
Try adopting a 10-year view. Imagine you’d like to buy a car and think about what it costs. It may be a certain amount at the start, but with your ‘10-year-view glasses’ on, you can better estimate the actual costs of running and maintaining the car and, therefore, what you can afford to buy today.
Lack of understanding of debt
According to the Commission for Financial Capability, many people take on debt without understanding the nature of the commitment – like contract specifics and interest rates.
Building behaviour: Know the full cost of your loan
Before any financial decisions, try to learn more about the nature of debts; how they work out over their lifespan, and how interest affects your repayments. For example, you may be tempted to choose a longer term, to stretch out your payments and pay less each month – but the longer the term of your loan is, the more you’ll be paying in interest overall.
Lack of monitored spending
The importance of having a budget cannot be overstated. Without it, you might spend more than you earn and be generally unaware of your financial situation. You are also likely to overspend due to peer influence or emotional reasons.
Building behaviour: Start budgeting and spending mindfully
Mindful spending means taking the time to make conscious financial decisions, being fully aware of how your money is being spent, and being thoughtful about the way you spend it. It can help you towards your financial goals and realistically plan for the future.
Not asking questions
Sometimes you may hesitate to ask questions. But remember – when it comes to making complex decisions about your financial future, no question is too small or trivial to ask.
Building behaviour: Seek information and professional advice
Doing your own research and seeking quality information online from reputable sources can be a good way to start. But remember, you don’t have to go it alone. We’re here to help and welcome you to ask any questions you may have, big or small.
Like to discuss your plans?
As financial advisers, our goal is always to help you towards yours. So, if you have any questions, please get in touch anytime.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.