As much as you want to forget 2020, there are some important money lessons you can learn to make next year a wealthier one. From bad power bills, new mortgages, to better KiwiSaver, kōura presents 7 minor tweaks to fatten your wallet.
Most of you will want to take 2020, throw it in the compost and never think about it again. We get it. Before you do that, though, give yourself a moment to take stock of where you’re at. The best way to plan for your 2021 New Year’s resolution is to figure out where you went right (and... maybe wrong) this past year.
Follow this guide to give yourself a 2020 financial checkup, knowing that even a few small steps at year's end can make a jolly big difference for your wallet.
Review some of your household bills
You might be shocked at how much you can save by checking some of your power bills over the last year. Changing your broadband provider can save you up to $300 per year. You could save a similar amount if you review your power provider, too.
Heaps of this stuff never gets looked at, which keeps these companies rich, and you short of change. Power and broadband are effortless to switch. It can be done from your couch in a few minutes. That's potentially $600 a year that can go toward your retirement or emergency fund.
To help you, we suggest you review your broadband using Broadband Compare. Go to Broadband Compare
You can find the cheapest power provider using the Government website Powerswitch. Go to Powerswitch.
When was the last time that you reassessed your mortgage? Over the year mortgage rates have dropped like lead in water. Don’t stitch yourself up with bad terms you set a decade ago, take advantage of these unprecedented times as best you can.
The quickest bang for your buck will be reviewing your interest rate. Many people are sitting on a variable mortgage rate. This can cost them 1-2% more than a one- or two-year fixed-rate mortgage. You lose some flexibility but can save a tremendous amount of money.
If you want to test the market and get the best out of your mortgage, we recommend you talk to a mortgage broker. They'll be able to give you a look at the best options for you. The team at Vega Lend are a good set of people to go to for a little help and advice on your mortgage. Learn more about Vega Lend.
Plan for an emergency
How’s that emergency fund looking? Your emergency fund should cover a minimum three months of living costs — if you were the many Kiwis that had to dip into this, this year, a good goal for 2021 will be getting this fund back up to scratch.
Almost 40% of New Zealanders have no savings to fall back on. If they lost their job or were hit by a sudden expense, they would need to go into debt.
It's hard to save, and setting up an emergency fund isn't easy. But if you ever need it, it will be an absolute lifesaver.
The best place for those savings is a bank account or term deposit. They'll be accessible at any point in time, and the value won't change with the markets.
Create a budget
How’s your budget? What were you spending this year versus what you were making? Budgeting makes sure you'll have enough for the things you need and the things that are important for you.
An organised budgeting strategy helps you prioritise what you spend your money on. Far too many people spend without considering the downwind impacts of that cost, and it’d surprise many how much those takeaway coffees really cost them.
We've found a step-by-step budget process we quite like from My Money Coach. See My Money Coach's budget process.
KiwiSaver account review
Many of us think our retirement is sorted because we ticked the box to sign up to KiwiSaver scheme. Unfortunately, this means you're likely in the wrong type of KiwiSaver fund. You're unlikely to get the retirement you expect or deserve. Don't worry, you're in the same boat as 50% of all New Zealanders, and there's a way to fix it!
Have a look at your KiwiSaver fund selection. Does it match your objectives and your risk tolerance? What will your KiwiSaver give you for your retirement or first home? Do you need to change your contribution rates?
Kōura has a unique set of tools to help you understand your KiwiSaver account and make sure it suits your needs. Review your KiwiSaver plan here.
Debt and savings consolidation
One of the biggest money-makers for a bank is apathy. Their ultimate customer is someone with a mortgage, a large everyday bank balance, and a credit card.
In reviewing your debts and savings, think about what each piece of debt costs you. How does it compare to any savings/investments you have?
If you can, consolidate all of your debts under your mortgage. If you have savings and a mortgage, you might find you're better off paying down the mortgage. You'll save more in interest than you'll earn in part from your savings.
Talk about it
Money is a taboo subject for many. Having open and honest conversations about money helps us set and achieve our goals. Talk about your financial check-up with your partner. By talking about your check-up, you can keep yourself honest about how you're getting on with achieving your goals.
Want to give your KiwiSaver a check-up?
Try our personalised KiwiSaver Advisor!
Once we understand a little bit about you and your risk tolerance your personalised KiwiSaver advisor will let you know how much you will be getting for your retirement and how that compares with what you currently take home!