There’s no magic in becoming financially fit. But Credit Simple’s Four Pillars of Wealth approach can help you get there. Going from debt to building wealth is easier than you might think. We guarantee there are people around you earning no more than you do who are well on their way to wealth. Here’s how to become one of them:

Pillar one: spend less

Do you know your needs from your wants? It’s only you who suffers if you’re not honest with yourself. Start by kicking the porkies we all tell ourselves into touch. Do you find yourself saying: “I need it” when in fact you ‘want’ it. You don’t need it.

The first step to escaping the ‘needs’ versus ‘wants’ trap is to keep diary for a month and list every last cent you spend. Expect to be shocked when you analyse this diary. Most of us have no idea how much moolah we fritter away. While you’re in honest mode take a long hard look at your supermarket receipts. You’ll probably find that half of what’s in your trolley is a want, not a need.

Pillar two: earn more

By spending less you’re becoming richer. You can supercharge this by earning more.

Never say never. There are many ways to earn more. You can ask for a pay rise, get a promotion, find a new job, or moonlight. Make sure that you have a written career plan and you’re ticking off milestones to the next step up the rung that you can grow into.

If there really honestly isn’t any extra to be made at work, look for ways to make money on the side. That could be anything from selling stuff on TradeMe to babysitting or starting a part-time business from home.

When you get that extra money don’t let spending creep swallow your extra earnings. Make sure you bank a good chunk of your pay rise to benefit none other than your future self.

Pillar three: pay off debt

Carrying a balance is normal right? Well, no, not really …

But paying off the debt requires a plan. That’s probably to pay off those with the highest interest first. Some people, however, choose to clear the debts that give them biggest psychological boost to dispose of. Celebrate when you hit milestones in your journey to becoming debt free.

Shocking as it may sound, some people still wait until they have the money to buy what they want. If you can retrain your brain and think like this your debt will disappear a whole lot faster.

Pillar four: save and invest

Once you’ve freed up some spare cash and paid off your debt it time to start saving.

Don’t just leave your money in the bank. Good investments such as KiwiSaver, property, shares/managed funds, and bonds grow faster than inflation. According to the Morningstar, the average balanced KiwiSaver fund grew by 8.6 per cent in the five years from 2011 to 2016. That’s way higher than inflation even when pesky KiwiSaver fees are taken into account.

Providing you’re sensible, spread your risks and hold your investments for the long term, your money will buy far more for you in retirement than it could now.

Getting started:

At Credit Simple we know you can get ahead. But don’t chew off too much at once. Work your way through the four pillars one step at a time. Habits take time to change, but you can do it.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post Going from debt to building wealth: Your way to a richer future appeared first on Credit Simple NZ.

Step One: Spend money you don’t have

First of all, you probably want to spend lots of money. More money, in fact, than you’ve got in the bank.

Let’s say you’ve got a good job and you’ve found a place to rent in the Auckland market and you’re happy with your lifestyle. Why not crank it up to the next level by moving out of your flat, buying a bigger car on HP and maybe going on that overseas’ holiday. You know, the one you can’t afford. It’s OK because that’s what credit cards are for, right? Get some new luggage, and hit the road for the highlife. Don’t worry about paying off the card, get another card and use that to sort out the first card and you’ll be away laughing. Sure you’ll be paying for it later, but that’s what Tomorrow You has to worry about, right? Live for the moment.

Step Two: Spend money on things you don’t need

Have a think about buying some more stuff while it’s on sale. If you’re going on holiday, don’t forget to buy lots of things you just can’t get back home. OMG did I tell you the trick about taking a suitcase inside a bigger suitcase so you’ve got two for the return trip? Guaranteed winner every time.

Also, if you have more stuff than you’ve got space, get yourself a lock-up container to store your extra couches, beds, dressers, dining room tables and exercise gear in because one day you might need that extra furniture and hey, it’s only money, right?

Step Three: Join the gym

And get a wine club membership and subscribe to some online services that automatically renew every month or year and which you hardly use and get pay TV and never check your mobile phone bill or your electricity bill to see if you could get a better deal. Just don’t worry about that stuff. You’ll be happier not paying attention.

Step Four: It’s all too hard

Remember, you’ve probably got 20 or 30 years to go before you retire so you’ve got heaps of time left to sort that out.  Or if you’re already in your 40s and saddled with a mortgage and car repayments and those credit card interest rates it’s still OK. You can just say it’s all too late and there’s no point starting now. After all, a little bit goes a long way when you’re old and surely the government won’t let you starve, right?

Step Five: I don’t really need to retire anyway

And let’s not forget, the government is talking about moving the retirement age to 67 or something so you probably won’t get to retire anyway. It’s all ages away so you’re sure they’ll have it all figured out by then and besides, your great uncle told you once that he hated retirement and missed going to work every day so y’know, this is the perfect excuse not to retire. Instead, you can always get a second job and deliver pizza or something like that in the evenings. Yeah, that’ll be fun.

Anyway, retirement planning is boring and it’s a long way away and I’m having far too much fun spending money now so let’s not look too closely at that bank statement, OK?

The post Five ways to screw up your retirement: a lifelong project appeared first on Credit Simple NZ.

If you’re anything like the average Kiwi, you see retirement as something that happens after you turn 65 (or, *cough*, 67). You stop working, live off the pension, and you’re Officially Retired.

But it doesn’t have to be that way, and there are people all over the world challenging ideas about post-65 life. Here’s five things you should know about the New Retirement.

Your finances can be on FIRE

One of the ‘new ways’ is called FIRE  –  Financially Independent and Retiring Early. You don’t have to wait until you’re 65 to retire  –  there are people doing it in their 30s! The retirement age is tipped to go up, but that doesn’t mean you have to do what everyone else is doing.

Resources on early retirement abound

There are heaps of FIRE bloggers all over the world. Blogs about FIRE (such as Mr Money Mustache and Mr Tako Escapes) are encouraging people to sort out their finances early and be more frugal with money with a view to having more independence, sooner.

Minimalism is a winner

Part of becoming financially independent is downsizing your life and your expectations. There’s a whole movement on minimalism not just in the world but also right here at Credit Simple.

Home sweet home

You don’t need a mortgage-free house in Auckland (or in Wellington). You just need a mortgage-free house. Some of the smartest cookies out there have sold up their city property to live like kings in other (very sunny and picturesque) parts of the country.

KiwiSaver is still a no-brainer

Even if you’re going to retire early (yay!), KiwiSaver is still a no-brainer, particularly if your employer is contributing 3% (rather than having a total remuneration package) and to glean the $521 tax credit each year if you make the contribution threshold.

The post Are your finances on FIRE? (That’s Financially Independent, Retiring Early) appeared first on Credit Simple NZ.

We haven’t paid into the Cullen Fund for seven years

Heard of the Cullen Fund? It’s named after Michael Cullen, who was Minister of Finance in 2001 when the fund was set up. It’s also called the NZ Super Fund, and it’s designed to partially fund our retirement pension. The fund is currently $33.1b. In July 2009 the National government stopped contributing to it, and if that hadn’t happened, it would have been $52.6b in January this year (according to the NZ Super Fund). So there’s basically less money to go around for pensions, and population statistics show there’ll be more people needing retirement support in the years to come. It’s a good idea to have your own game plan for retirement.

Your employer doesn’t have to pay your KiwiSaver

If you’re in KiwiSaver, your employer is legally obliged to contribute 3% on top of your regular pay. They can’t get out of this, and if your employer isn’t paying, you should ask some hard questions about why. Your employer shouldn’t reduce your take-home pay because they have to make a contribution on your behalf. However, you do have the option to negotiate through ‘good faith bargaining’ to get a salary package where your employer’s contributions are offset against your pay. You might do this if, for example, you want to put that money into a house deposit instead, or if you don’t see yourself waiting until 65 to retire. Read your employment contract with a fine tooth comb, and question anything around KiwiSaver if it doesn’t sound right. There’s more at the KiwiSaver government website, and in this NZ Herald article.

But KiwiSaver is pretty much a no-brainer investment

KiwiSaver is one of the best investments around in terms of instant return on your money. Two reasons. Firstly, your employer matches your 3% contribution, and that’s money you otherwise wouldn’t get (unless, like we said above, you negotiated a different package). And it’s a 100% return on your investment. Secondly, if you contribute at least $1,042.86 each year, you get the $521.43 tax credit from the government – also a pretty solid investment. Read more about the benefits at the KiwiSaver website, and we also like this analysis by a Kiwi blogger.

If you were born after 1972 you’ll retire at 67 not 65

Did you catch this one recently? The current National government (which isn’t paying contributions to the Cullen Fund, see above) wants to raise the retirement age. That’s actually sensible, because research shows people are working longer than ever and life expectancy is increasing, and with a fatter chunk of the population heading for retirement all at once, it’s likely we won’t be able to afford pensions for everyone. So if you were born after 1 July 1972, you’ll be affected by the changes. Read more on the New Zealand Superannuation Fact Sheet.

If you’re a tradie, the argument isn’t 65 vs 67, but more like 45 vs 50

Are you in a physically demanding job? Many people who are active in their working lives day to day will be worried by the proposed changes, above. However for tradies, the argument isn’t retiring at 65 versus 67, but more like how soon can you possibly retire. E tu Union national industry organiser Joe Gallagher spoke about the proposed changes, saying many people won’t physically be able to physically continue their jobs until retirement. “By their late-40s they’re starting to break. Their knees, elbows, backs are all feeling the wear and tear.” So if you’re in a tough job physically, it’s even more important that you get your ducks in a row for retirement.

The post Five simple facts about retirement for Kiwis (and why you need to get your ducks in a row) appeared first on Credit Simple NZ.

Have you got your free five hundy for the year yet? That’s $521 free money of yours sitting at the Inland Revenue Department (IRD) waiting for you to claim it. Here’s how to milk your KiwiSaver.

The big five hundy

What? Yes, every single person in the country aged over 18 can get $521 a year back from the government. But you’ll need to be in KiwiSaver to get this tax credit (read more on the IRD website).

When you sign up and start contributing, the government tops up your savings at 50c to the dollar for every buck you bang into your KiwiSaver, up to $1,042 each year. There aren’t many times in your life when you see any of your tax come back to you, so take advantage of it.

If you earn $34,762 or more and contribute the minimum 3 per cent to KiwiSaver, then you’ll qualify for your big five hundy without even having to think about it. But if you aren’t contributing at least $1,042 each year, you’ll need to top it up.

If you’re 25 now and make your minimum contributions every year that annual chunk of free money will grow to around $50,000 by the time you retire. (Imagine how many fancy holidays, dinners out, and other fun you could have with that money.)

You don’t even have to work to get your five hundy; you only have to be 18 to qualify. If you’re a student, stay-at-home parent, unemployed, on sickness benefit, or only work part time, you still qualify so long as you deposit up to $1,042 into your KiwiSaver before the end of June. You can do it using your online banking and paying the money to the IRD with the word ‘KiwiSaver’ in the reference.

But wait, there’s more

If you work and you’re not in KiwiSaver, your employer is pocketing three per cent extra pay that could be lining your KiwiSaver. That’s because Kiwi employers have to match your contributions up to three per cent of your pay.

To qualify you need to join KiwiSaver and commit three per cent of your income to your retirement savings. We know it can be it hard to give up what feels like three per cent of nothing on a low salary! But that three per cent is relative small and will have a huge impact on your financial future. So try your absolute best to juggle your spending to do it. You’ll be grateful later when you go to buy your first home, or kick back and relax at age 65.

Wait: there’s even more!

There’s a whole lot more ‘free’ money up for grabs year after year. This is the really smart bit. Money invested in KiwiSaver grows little by little by little and before you know it doubles and doubles again.

Because the earnings on your KiwiSaver are automatically reinvested they compound over time. Famed brainbox Albert Einstein called compound interest the “eighth wonder of the world”. It’s a bit like a snowball, which given time gets bigger and bigger if it keeps rolling.

If you keep at it, you might even become a KiwiSaver millionaire on money you might have blown otherwise. Who can complain about that?

Oh, and one last thing

Wanna buy your first home? After at least three years of saving in KiwiSaver you’ll be up for more free moolah called a HomeStart grant. After five you could get a free grant of $5,000 per person or $10,000 for a couple to buy your first home, or double that if you’re buying a brand new property. There are of course some rules, which you can read about here.

What you need to do now (before June 30)

You’ve probably heard all the excuses of why people haven’t joined KiwiSaver: “I don’t trust the government”, “I’m too poor”,  “there’s no kick-start any more”, “I’ll never live to 65”, and so on. Don’t be fooled. There’s too much to lose by not joining.

Repeat after me: “I want free money, and I’m going to open a KiwiSaver account today / top up my contributions / restart my contributions.” You can do it without going bonkers just by by controlling your frivolity money, and sending a bit of it over to KiwiSaver.

The post Free money, anyone? Cash in with KiwiSaver appeared first on Credit Simple NZ.

I banked a cheque the other day (yes, I know! Some people are still using cheques) and as I stood there at the counter, the teller asked me if I had my KiwiSaver with the bank.

“No, it’s elsewhere,” I said.

“Why don’t you bring it to us?” he asked.

“Because I’m with another bank and their fees are lower,” I said. 

“But you should have your KiwiSaver with your everyday bank,” he argued.

Now this made me a bit angry pants. Generally speaking, there’s zero benefit to you as a consumer to have your KiwiSaver bundled with your everyday bank. Sure, some people can’t handle the idea of dealing with multiple banks, but let’s be clear: you don’t get a kickback from your bank, or a thank you card at Christmas, for having it all together in one big financial lump.

The bank, of course, does benefit; they get your extra business. 

I asked our man at the bank why I should have my KiwiSaver with the bank. What benefits would the bank give me?

“It just makes sense to have it all together,” he said, shifting uncomfortably in his seat, realisation dawning that the woman who had just banked a cheque (I KNOW  –  A CHEQUE) might have been born at night, but it wasn’t last night.

I gave him a hard time for a while, and I hope he won’t continue trying to persuade people into bundling their KiwiSaver, “just because”.

I’m not the first person to experience this. Journalist Tamsyn Parker wrote about it for the NZ Herald, where Financial Markets Authority spokesperson Paul Gregory said that people approached by their bank to switch their KiwiSaver business should ask for three reasons why they should switch and then ask the bank to back up those reasons with evidence.

“If they say they have the top performing fund in the last five years ask them to prove that. Make the person work for the business.”

Banks have an obligation to represent their KiwiSaver scheme in a way that’s accurate and balanced, and above all, they should put the customer’s interests first, says Paul, and remember that bank tellers may get a commission for sales they make.

Personal finance writer Diana Clement says:

“I’m horrified to hear this. As far back as 2014 the Financial Markets Authority put banks on notice for using underhand tactics to lure customers’ KiwiSaver accounts away from their competitors by using the ‘do you want KiwiSaver with that’ approach.

“The FMA investigated and found that banks were using all sorts of tactics such as asking customers if they would like to be able to access their KiwiSaver information online alongside other bank account information, without explaining that this will mean the customers must transfer their KiwiSaver to the bank. Or, signing customers up for a credit card, personal loan or other products and providing a KiwiSaver transfer form alongside other documentation for signing, leading to customers inadvertently agreeing to transfer their KiwiSaver to the bank.

“Tellers don’t the skills and training to provide adequate advice for individuals to make a decision at the counter about the future of their retirement savings. If you’re approached in this way about your KiwiSaver account, proceed with caution.”

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post Does your bank reckon you should have your KiwiSaver with them, all under one roof? Read this first appeared first on Credit Simple NZ.

There’s no magic in becoming financially fit. But Credit Simple’s Four Pillars of Wealth approach can help you get there. Going from debt to building wealth is easier than you might think. We guarantee there are people around you earning no more than you do who are well on their way to wealth. Here’s how to become one of them:

Pillar one: spend less

Do you know your needs from your wants? It’s only you who suffers if you’re not honest with yourself. Start by kicking the porkies we all tell ourselves into touch. Do you find yourself saying: “I need it” when in fact you ‘want’ it. You don’t need it.

The first step to escaping the ‘needs’ versus ‘wants’ trap is to keep diary for a month and list every last cent you spend. Expect to be shocked when you analyse this diary. Most of us have no idea how much moolah we fritter away. While you’re in honest mode take a long hard look at your supermarket receipts. You’ll probably find that half of what’s in your trolley is a want, not a need.

Pillar two: earn more

By spending less you’re becoming richer. You can supercharge this by earning more.

Never say never. There are many ways to earn more. You can ask for a pay rise, get a promotion, find a new job, or moonlight. Make sure that you have a written career plan and you’re ticking off milestones to the next step up the rung that you can grow into.

If there really honestly isn’t any extra to be made at work, look for ways to make money on the side. That could be anything from selling stuff on TradeMe to babysitting or starting a part-time business from home.

When you get that extra money don’t let spending creep swallow your extra earnings. Make sure you bank a good chunk of your pay rise to benefit none other than your future self.

Pillar three: pay off debt

Carrying a balance is normal right? Well, no, not really …

But paying off the debt requires a plan. That’s probably to pay off those with the highest interest first. Some people, however, choose to clear the debts that give them biggest psychological boost to dispose of. Celebrate when you hit milestones in your journey to becoming debt free.

Shocking as it may sound, some people still wait until they have the money to buy what they want. If you can retrain your brain and think like this your debt will disappear a whole lot faster.

Pillar four: save and invest

Once you’ve freed up some spare cash and paid off your debt it time to start saving.

Don’t just leave your money in the bank. Good investments such as KiwiSaver, property, shares/managed funds, and bonds grow faster than inflation. According to the Morningstar, the average balanced KiwiSaver fund grew by 8.6 per cent in the five years from 2011 to 2016. That’s way higher than inflation even when pesky KiwiSaver fees are taken into account.

Providing you’re sensible, spread your risks and hold your investments for the long term, your money will buy far more for you in retirement than it could now.

Getting started:

At Credit Simple we know you can get ahead. But don’t chew off too much at once. Work your way through the four pillars one step at a time. Habits take time to change, but you can do it.

The post The four pillars of wealth: Your way to a richer future appeared first on Credit Simple NZ.