Happy New Year!
2023 is here!! I’ve just arrived back in Aotearoa after popping over to Australia to see my mum for Christmas. I’m now off to St Arnaud, Lake Rotoiti for a few days to celebrate Sarah’s birthday and to spend some time in nature.
I took time in December to do some planning for the year ahead and to (successfully!) finish my Investment Strand course. I’m now busy setting up some agencies so that Building on Basics can provide you some more options of where and how to save your money. I’ll share more details on the changes planned for 2023 soon.
I’m not one for doing New Year’s resolutions, as it’s too easy to get caught up in the hype of the season. Instead, when planning for the year I focus on my ‘why’.
Being of service to others and helping people to feel relaxed about their finances is my big ‘why’. I’ve always been driven to help, I’m the crazy one that will volunteer to help people shift or lend a hand on a renovation. I love talking about and teaching financial literacy. I find it fascinating and often attend tax training sessions for fun. I know, there is something wrong with me ????.
Building on Basics’ services and support are just part of how I fulfil my ‘why’. What you may not know is that every time we do some work with you, we donate to B1G1 (Buy1Give1). Our donations contribute to both local and international initiatives whose work benefits communities and the planet. For example, for every KiwiSaver client we have, we contribute monthly to KidsCan Trust.
In this newsletter, instead of discussing the market I have some questions to get you thinking as you start a fresh new year. I would love to get your feedback and thoughts.
Knowing you want to buy a house is one thing, but getting there can feel like an overwhelming task. So, let’s keep things simple! Lenders look at three things when reviewing a mortgage application: income, deposit and financial history. Getting each of these areas into shape prior to applying for a mortgage will make the difference between a yes or a no from a lender. The steps below will help you get in the best position possible.
If you are fortunate and own your own home, think about your ‘why’.
We all need a roof or shelter of some form. Does your current property still serve you, your lifestyle and your family? Is your home too big or too small? Is it worth considering downsizing or is your family growing and you need more space? If you sell and buy in the same market, you’re not necessarily going to lose money.
Another ‘why’ reason is of course that property is an investment. When thinking about your home as an asset, are you using it to its full potential? With the tight year ahead there may be things you can do to ease any financial stress, such as getting a boarder in to utilise the spare room and/or following the Marie Kondo method to declutter the house. Not only will your home be a calmer, more productive space, you can sell and/or donate what you don’t need. This gives items a second life, saves people buying new, helps those in need and earns you some extra cash.
KiwiSaver’s purpose is to fund your retirement and, if relevant, to contribute to the deposit for your first home. That’s the surface level ‘why’, but if you’re needing motivation to contribute as much as you can to KiwiSaver, then it pays to think deeper.
It’s your KiwiSaver that could enable you to put down roots by buying your own home. A home you can decorate how you like, with no landlord’s rules or inspections. A home that is also an asset, helping you grow your wealth for your retirement.
It’s your KiwiSaver that could enable you to still visit loved ones once you retire, to have an active lifestyle with gym or golf memberships, or to frequent cafes. Contributing more and early to your KiwiSaver is what will make the difference between retiring and subsisting or retiring and living.
Retirement should be a choice based on your finances and not determined by age. So, if you have sufficient set aside by the time you are 60 you could choose to work less. Far too many people are reaching 65 and still needing to work to just be able to live week to week.
Let’s chat about your KiwiSaver and how you’re tracking towards your retirement.
Banks get a bad rap for making huge profits and being difficult to deal with. To be fair, if they did not make profits, they would not be here to serve us. The bank’s why is to make money providing banking services. Seems to me they have nailed their why.
Your why is that you need banks and banking services, think about how you are utilising the funding options. Banks no longer reward loyalty, so we can use multiple banks to get what we need from each bank. Be clear on your banking needs, especially if you are in business.
For better or worse, the Reserve Bank’s why is to manage the NZ Monetary Policy. They have a bunch of levers to pull to manage inflation, the value of the NZD and interest rates. Many of the levers they pull effect our daily lives and the way we run our businesses. It can take months and sometimes years before a change the Reserve Bank made has full effect.
It’s complex and there’re many other factors that can affect the policy outcomes that are out of the Reserve Bank’s control. Like our spending habits and government policy (although they can influence both). If we continue to spend using borrowed money, then the interest rates are going to continue to go up and will stay up for longer. The same goes for government borrowing!
Remembering why interest rates are increasing can help with feelings of frustration and stress. It’s all about reducing inflation. As one economist said: recession is a flu, inflation is cancer. If we must choose, of course we’d choose the flu.
Why are you in business?? Many start a business to have more flexibility with time and then find themselves working 7 days a week trying to stay on top of the admin.
So, is your business fulfilling your why? If not, what needs to change? What steps do you need to take to get there? How does your why also benefit your clients/customers?
Insurance can feel like a bit of a money drain. You pay money every month with no visible benefit. We all know why, it’s in case of an unfortunate and expensive unforeseeable event.
But if you haven’t recently, now’s a good time to check that your current insurance policies cover what you need them to. As life circumstances and lifestyles change, so do your insurance needs.
It doesn’t always mean you need more insurance; you could find that you need less than previously. A couple with a big mortgage and young kids needs to have life insurance that will cover the raising of the children and keeping the family home. But as time goes on and they become a couple with adult children and a small mortgage they will need to be insured for much less.