Last week I paid for an upcoming ski holiday in Canada. The trip isn’t until January but it has to be paid in advance. Skiing in Canada is my idea of nirvana, so it wasn’t too painful to see the thousands of dollars flowing out of my account; after all, it’s going to a good cause.

But this week, my car decided it needed a wheelbearing replaced plus a wheel alignment and new spark plugs. Then my dentist informed me that my eight-year-old root canal has failed and will need to be redone. It felt like my bank account was haemorraghing and the rescue helicopter was out to lunch.

As I write this, I’m texting with a friend who is sitting in an all-staff meeting being informed there will be mass redundancies due to bad management of the business. Just like the wheelbearing and the tooth, it’s out of his control.

But he’s feeling fine about it, because last time he was made redundant, he picked up another job straight away, so he put the redundancy money into an emergency fund and hasn’t touched it since. That’s a rare – and comforting – position to be in.

We live in an uncertain world and we’re subject to outside forces that will mess with our finances – if we let them.

Building an Armageddon Fund – an emergency fund for when stuff like this happens – is a lofty and intimidating goal for many people, but it pays dividends when the proverbial hits the fan.

What would you do if, right now, you lost your job, had a health emergency or illness, if your car died or you had a major household mishap?

Having money to cover emergencies means peace of mind and less stress, and having a financial safety net means you can avoid having to use high-interest sources of money (such as credit cards) just to get by. It also means independence (read: not having to beg your family, friends or partner for money)!

How to build an emergency fund

Financial institutions don’t necessary make ‘emergency fund’ accounts, but you can easily create your own. You want it to be highly liquid so it’s easily accessible, which is vital in urgent situations. Make sure you have a debit card so you’ve got instant access to the cash.

Financial experts say you should have three months’ worth of living expenses in your emergency fund. Some even say you should have eight months’ worth. But after three months’ worth of money, your cash is better off sitting in higher-interest areas. So consider having two funds: a short-term, highly liquid fund and a longer-term, less accessible but higher interest fund.

It can be hard to get started building an emergency fund; after all, there’s always something else you’d rather spend the money on. Start by setting low goals, at least initially. Aim for, say, $250 within six months.

“But I don’t have any spare cash!” you say. OK, but if you’re living paycheck to paycheck, it’s even more important for you to build up an emergency fund. First, click here for ninja ways to trim your expenses and free up some cash. Then commit to putting away $10 each week. That’s $520 in a year, plus whatever interest it has earned. That’s the cost of the mechanic bill I mentioned at the beginning of this blog. Puts it into perspective, doesn’t it?

Once you’ve got the fund built up, don’t touch it unless it’s a genuine emergency. A new flat-screen television (or a ski trip to Canada!) doesn’t qualify.

Then sit back and relax, knowing that your next financial crisis is already taken care of.

The post How to build an emergency fund (and why you need one) appeared first on Credit Simple NZ.

When it comes to managing our money, and staying out of financial trouble, Kiwis are beating the Aussies hands down, according to new analysis we’ve run, which shows that the number of people declaring bankruptcy has reached a five-year-low, dropping by 15% last year compared to 2016.

And if that isn’t enough cause for celebration, we have approximately half the number of bankruptcies, per capita, compared with our friends across the ditch.

CreditSimple.co.nz spokesperson Hazel Phillips said the five-year bankruptcy low is a positive sign for the New Zealand economy. However, with the change of government and housing prices continuing to rise, Kiwis need to continue making conscious budgeting decisions.

“Our economy has been steadily rising over the past few years, which helps create jobs, boost personal finances and bring bankruptcy levels down,” Ms Phillips said. “The outlook is still good, but there are a number of changes that people should bear in mind: this year we have a new government, new legislations being passed and it’s difficult to predict what will happen to our economy.

“It’s crucial that Kiwis continue to budget and ensure they have an emergency fund to fall back on if personal circumstances suddenly change.

“Having a cushion of money to draw on if you lose your job or enter a tough spot financially means not having to rely on high-interest sources of credit, which can sting you more in the long term.”

Aucklanders need to be particularly careful, with more than double the number of bankruptcies than anywhere else in the country, followed by Christchurch, Hamilton, Napier and Lower Hutt.

Ms Phillips said Kiwis need to be realistic about what they can afford when getting a loan or mortgage and create a repayment plan from day one.

“If you begin to struggle and ignore your bills, it can significantly damage your credit score and can often be the start of falling into bad financial habits.

“There are free budgeting services available in New Zealand that can put you back on track and help you get out of the debt cycle. Asking for advice and getting budgeting help can make all the difference.”

Kiwis can check if their credit health is in shape by getting their credit score for free at www.creditsimple.co.nz. You can read up on everything credit score-related with this comprehensive guide over at MoneyHub.

If you need financial advice, FinCap can put you in touch with free budget advice services wherever you are in New Zealand.

The post Bankruptcies have hit a five-year low (but here’s why it’s smart to stay vigilant) appeared first on Credit Simple NZ.

Last week I paid for an upcoming ski holiday in Canada. The trip isn’t until January but it has to be paid in advance. Skiing in Canada is my idea of nirvana, so it wasn’t too painful to see the thousands of dollars flowing out of my account; after all, it’s going to a good cause.

But this week, my car decided it needed a wheelbearing replaced plus a wheel alignment and new spark plugs. Then my dentist informed me that my eight-year-old root canal has failed and will need to be redone. It felt like my bank account was haemorraghing and the rescue helicopter was out to lunch.

As I write this, I’m texting with a friend who is sitting in an all-staff meeting being informed there will be mass redundancies due to bad management of the business. Just like the wheelbearing and the tooth, it’s out of his control.

But he’s feeling fine about it, because last time he was made redundant, he picked up another job straight away, so he put the redundancy money into an emergency fund and hasn’t touched it since. That’s a rare – and comforting – position to be in.

We live in an uncertain world and we’re subject to outside forces that will mess with our finances – if we let them.

Building an Armageddon Fund – an emergency fund for when stuff like this happens – is a lofty and intimidating goal for many people, but it pays dividends when the proverbial hits the fan.

What would you do if, right now, you lost your job, had a health emergency or illness, if your car died or you had a major household mishap?

Having money to cover emergencies means peace of mind and less stress, and having a financial safety net means you can avoid having to use high-interest sources of money (such as credit cards) just to get by. It also means independence (read: not having to beg your family, friends or partner for money)!

How to build an emergency fund

Financial institutions don’t necessary make ‘emergency fund’ accounts, but you can easily create your own. You want it to be highly liquid so it’s easily accessible, which is vital in urgent situations. Make sure you have a debit card so you’ve got instant access to the cash.

Financial experts say you should have three months’ worth of living expenses in your emergency fund. Some even say you should have eight months’ worth. But after three months’ worth of money, your cash is better off sitting in higher-interest areas. So consider having two funds: a short-term, highly liquid fund and a longer-term, less accessible but higher interest fund.

It can be hard to get started building an emergency fund; after all, there’s always something else you’d rather spend the money on. Start by setting low goals, at least initially. Aim for, say, $250 within six months.

“But I don’t have any spare cash!” you say. OK, but if you’re living paycheck to paycheck, it’s even more important for you to build up an emergency fund. First, click here for ninja ways to trim your expenses and free up some cash. Then commit to putting away $10 each week. That’s $520 in a year, plus whatever interest it has earned. That’s the cost of the mechanic bill I mentioned at the beginning of this blog. Puts it into perspective, doesn’t it?

Once you’ve got the fund built up, don’t touch it unless it’s a genuine emergency. A new flat-screen television (or a ski trip to Canada!) doesn’t qualify.

Then sit back and relax, knowing that your next financial crisis is already taken care of.

The post How to build an emergency fund (and why you need one) appeared first on Credit Simple NZ.