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If you’ve never had a budget, or if you’ve tried and given up on one before, it can be easy to get overwhelmed. Visions of complicated spreadsheets and living on nothing but 2 minute noodles make the idea seem at best, snore-inducing and at worst, overly restrictive. But the truth is it takes very little effort to get a basic system – ‘money buckets’ – in place. This is great news, as it can mean the difference between major savings and none at all.

If you’re hesitant to set up a budget, or even if you have one now that’s only kind of working for you, here’s a solution that may just work: separating you money into ‘buckets’.

What is a money ‘bucket’?
The concept of ‘money buckets’ has been doing the rounds of the personal finance blogs and media for a while now, and it’s a simple one: instead of a complicated line-by-line budget that accounts for every cent, you simply split your income into large ‘buckets’, setting up a separate account – and automatic transfers – for each. That way, you automate your saving and spending so it becomes easy to save: it’s that simple.

Step 1: Track how you’re spending now
For a week, or better yet, a month, track your spending. You could log this manually in an app or sync one with your bank account, but actually, many banks in Australia and New Zealand have this function built in to their online banking already, categorising all your transactions for you. However you choose to do it, you’ll soon see trends emerging, and you’re ready to move onto the next step.

Step 2: Choose your categories and decide how much goes in each
Once you have all your info, it’s time to come up with a few broad categories that reflect a realistic picture of how you want to spend and save. For example, you could have categories like rent or mortgage and bills, emergency savings, groceries, eating out, fun money, travel savings and debt. Less is definitely more – fewer categories makes for a simple budget that’s easy to stick to, making it easier to save. Once you’ve set your buckets, decide what percentage of your income needs to go into each. Assuming you’re not spending more than you’re earning, this needn’t be vastly different from how you’re spending now.

Step 3: Open an account for each bucket
With a different account for each type of spending and saving, you’ll know exactly how much you have in each bucket. Many financial institutions offer an option for multiple accounts linked together, and you can even give them customised names so you can see, at a glance, how much you have in each of your ‘buckets’.

Step 4: Set up your automatic transfers
As with many things in life, set and forget is the surest path to success. Make sure you set up direct debits for each of your buckets so your money is moving where you need it without you needing to think about it. Many companies will let you split your salary this way, or you could have all your income go into one account to begin with, with regular transfers set up to move money between accounts automatically.

Step 5: Regular check-ins
Whether monthly or quarterly, it’s a good idea to check your buckets regularly to make sure they’re where they need to be. That way, if you find one overflowing while another is almost empty, you’ll know it’s time to tweak your transfers to better match your spending and saving goals.

So what are you waiting for? It’s time to let your savings take care of themselves. Get started on your money buckets to see how automating your finances can help you save towards your dreams.

The post This could be the secret to better budgeting appeared first on Credit Simple NZ.

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As the long weekend kicks off, it can be all too easy to fill your time with fun and frivolous spending. But before you know it, Monday night rolls around and your bank balance is looking more than a little depleted.

Luckily, it doesn’t take much to reset your default setting from ‘spend’ to ‘save’ for a few days, and the savings can be pretty significant. Read on for our tips to boost your savings in just a few days.

Skip 1 thing
You probably have a pretty good idea of which is your biggest discretionary spend. But what would happen if you skipped it, just for this weekend? It’s easier than you think.

For example, for many of us, a big money suck can be eating out. With 4 days off, you could find yourself eating out a couple of times a day and think nothing of it. With even your local cafe or Thai restaurant setting you back at least $20 a head. If you’re a couple or a family, you could save hundreds of dollars.

Only use cash
Studies show that when we use cash rather than cards, we feel the loss of money more. This is because cash is a physical, tangible thing you have to give away to pay, while credit and other payment methods feel hypothetical or even non-existent.

Switching to cash not only makes it easier for you to mentally track your spending, but if you take out a set amount at the beginning of the long weekend, it makes it much easier to stick to a budget.

Take the zero-spend challenge
This one’s a game changer. For a single day (or even the whole weekend if you feel like an epic savings challenge), don’t spend a single cent and see what happens.

As an added bonus, you’ll find that (as long as you have a well-stocked fridge and ready access to a car or public transport) that the possibility for free activities are almost limitless. Make your own coffee, go for a run, fire up netflix, have some friends round or chill in your local library. It can be a really fun experiment.

Apply the ‘clean slate’ principle
If you spent Friday-Sunday on a bit of a spree, that’s actually ok – studies show that at the beginning of a week, month or any time that feels like a ‘fresh start’ is the perfect time for habit change.

With that in mind, Monday or Tuesday may be the perfect time to set up a new budget or set and ambitious savings goal, especially after a few days of spendthrift-madness.

So go on, take the challenge – enjoy a low-spend long weekend. It could save you heaps!

The post How to enjoy a low-spend long weekend appeared first on Credit Simple NZ.

Don’t believe you have to have a credit card. Paying interest sucks. It sucks the lifeblood out of your finances. That’s because unless you clear your entire bill within the interest free days, you pay interest.

That interest means you’re paying as much as 22.95% more than your mates at the mainstream banks for the same things, which has a detrimental effect on your finances over time.

Other (cheaper) ways to pay

Thankfully there are way more credit-free ways to pay than ever before that are far better for your bank balance. Here are some of the options:

Debit card. One of the arguments for needing a credit card is the ability to shop online. All banks now offer either Mastercard or Visa debit cards. They look like credit cards and can be used anywhere that displays the Mastercard or Visa logo, but you can only spend your own money, not credit.

EFTPOS. We all know how EFTPOS works. Now you can pay online with just an EFTPOS card through some banks at a number of etailers such as MightyApe, BurgerFuel and Smith & Caughey’s department store by choosing “Online EFTPOS” as your payment method at the checkout. A text is sent to your online banking and you approve the payment. The first banks to offer this were ASB and The Cooperative Bank. find out where you can pay with online EFTPOS visit Paymark’s website here.

POLi and account2account. Both POLi and account2account are payment methods that take the money direct from your bank account. Your payment is approved immediately. You can use POLi and account2account to pay online for goods at The Warehouse, Bunnings Warehouse, Xero, NZ Transport Agency, Air New Zealand and others. Despite the fact that this payment method is widely used overseas and offered here by trusted companies, New Zealand’s banks say that it’s not secure and users are breaching their terms and conditions if they pay this way. In the UK regulators forced banks to make customers’ data available to them, meaning they can use this type of payment system without fear.

Ping it. In the old days we did bank to bank transfer or paid cash for Trade Me purchases. Then Trade Me brought in Pay Now, which required a credit or debit card. Now they’ve added Ping. This allows you go pay with credit, debit, or straight from your bank account. The advantage of this is you only need an EFTPOS card to do it. The disadvantage is you are setting up a direct debit agreement with Trade Me and not all members are comfortable with that.

Pay later. Trade Me and other retailers are starting to offer buy now pay later schemes. You buy now, receive the item, and make interest-free payments over several weeks. Laybuy.com, PartPay and Trade Me’s Afterpay all offer this. The problem is if you miss a payment the charges can prove more expensive than interest. Non-payment can also put a black mark on your credit record.

Pre-paid travel cards. Pre-paid currency cards such as Loaded for Travel, OneSmart and Cash Passport work like debit cards when you’re travelling overseas. The catch is that you pay fees and commissions that make this an expensive way to spend.

PayPal. This online payment method that you can load up and spend with isn’t used all that often in New Zealand. If you’re buying from eBay and overseas stores you might find having a PayPal account useful.

Bitcoin. You can pay for a growing number of real life purchases using your Bitcoin wallet. I do own a very small amount of Bitcoin and look forward to the day when I can spend it and bypass my bank’s fees.

Cash. What’s that you say? Sometimes ditching the plastic and spending cash is the most sensible option. Take it out at the beginning of the week, split the money between envelopes for different purposes such as shopping and entertainment and once each envelope is empty just stop spending.

There are other forms of payment coming on. For example Apple Pay has made it to New Zealand in a limited way and Alipay is on its way. However payments from both are connected to your debit or credit card so aren’t in effect changing the way you spend.

Of course credit cards do have uses when you have an emergency. But everyday things such as buying groceries or school uniforms aren’t emergencies. They need planning for.

The post Using a credit card for everything? There are other ways to pay appeared first on Credit Simple NZ.

Are you a deadbeat? When it comes to credit cards, that’s actually a good thing.

Yep, a ‘deadbeat’ is a term for someone who pays off their credit card in full and on time every month. Why a deadbeat? Well, if you pay off your card each month, the credit card company doesn’t charge you interest  –  so they won’t make any money off you. (Credit card companies also use the much more polite terms ‘non-revolver’ and ‘transactor’.)

As a nation, we typically owe around $6.5b in credit card debt from year to year. Of course, this figure fluctuates, and it’s only around a third of our combined credit card limit, but it’s still a whopping amount we’re paying interest on!

So if you’re not a credit card ‘deadbeat’ and you’re one of the many Kiwis who owes money on a credit card, it’s a good idea to clear the debt as soon as possible. There are a couple of strategies many people opt for  –  such as a balance transfer, which means you switch your existing debt to a new credit card company and usually enjoy a 0% interest rate for a period of time. Or you can consolidate your debt into a lower interest personal loan and pay it off more easily.

“There are lots of reasons for people’s credit card behaviour, whether they pay it off in full each month or they carry a balance,” says Credit Simple CEO David Scognamiglio. “Some ‘transactors’ like to use credit cards for their everyday spending so they can get the most out of rewards programmes and get extra treats. And some people simply don’t budget and end up using credit cards to get by.

“Whatever your situation and strategy, the best thing to do is pay off your credit card in full and on time each month, and try to see a credit card as a tool of convenience rather than an avenue for long-term borrowing.”

Being a deadbeat (*cough*, sorry, ‘transactor’) has never looked better.

The post Why being a credit ‘deadbeat’ is actually a good thing appeared first on Credit Simple NZ.

We love to hate insurance companies. But they do pay most claims. The trouble is that a lot of us don’t understand the basic concepts of how insurance works and we get caught by some mighty expensive fishhooks.

Imagine this scenario. You borrow mum’s car, but crash it while dropping a mate home. “No worries”, you say, “mum’s insurance will pay the claim”. The claim is declined because you breached your restricted licence by carrying a passenger. What are you going to say to mum about your little mistake, her written off car and the $10,000 damage you did to someone’s fancy fence? You’re probably facing bankruptcy in the eye.

That’s nowhere near all. There are many more insurance gotchas to beware of:

White lies

Your handbag is stolen. It’s expensive to replace the contents and you have a $200 excess. So you add a few extra things into the claim to cover it. The insurance company’s assessor or investigator spots something suspicious about your claim, because most of us are bad liars, and the company cancels the policy instead of paying out. If that’s not bad enough your name is added to the Insurance Claims Register as someone who has attempted fraud in the past, and you can never get insurance again even when you want to buy a house.

Criminal pasts

You, your son/daughter who live with you, partner or flatmate has a criminal past and it doesn’t occur to you to tell the insurance company. You may not even know about the convictions. None-the-less you’re not covered by your house contents insurance (or building cover if that conviction was for arson) unless you divulge this information. The insurance company’s argument is that it wouldn’t have offered you insurance at all or the rate it gave you if it had known that someone with said convictions was living with you.

Drink driving and other road misdemeanours

If you don’t update your motor insurance company on policy renewal date that you’ve been convicted of drink driving or other serious offences you won’t be covered for that Ferrari you just hit. It happens. Make sure you also tell your insurance company about lesser offences such as using a mobile phone whilst driving or speeding fines. Better safe than sorry.

Pre-existing conditions

“Help, my husband has had a heart attack. We need insurance fast.” I saw this posting on the Trade Me community forums. Insurance covers you for the unexpected, not what you already have when you take the policy out. Buy before you die, as some people say. This catches too many Kiwis out each year with income or mortgage protection policies, life, critical illness/trauma insurance and perhaps the most surprising, travel insurance. A travel policy doesn’t cover you for illnesses related to conditions you’ve had in the past unless you declare it and pay an extra premium. That includes precursors to illnesses. Even worse, if you want to cancel your holiday or fly back early because granny just died, you won’t be covered if she died of a pre-existing condition prior to you booking. This one really does surprise people.

Gradual damage

The floor collapses under your shower. “No worries, I’ll make an insurance claim”. The trouble here is that insurance covers you for sudden events, not a slow leak causing a rotten floor. Landlords often get caught out with gradual damage claims because their tenants fail to tell them about the dripping tap. Some insurance policies have limited “gradual damage” cover, but make sure you’ve got it and you understand the cover.

Other fish-hooks on the insurance long line to watch out for include, goods in storage, belongings in transit, unattended baggage, electrical breakdown or failure, jewellery or valuables not ‘carried on your person’, invited guests or tradespeople thieving, lying about who is the main driver, failing to tell the insurer that the house is let or has Airbnb or other guests, not declaring modifications to a vehicle even including flash paint jobs or mag wheels, and withholding information that previous claims have been declined or cover refused.

Finally, read your policy, read your policy, read your policy. And if you think you have been treated unfairly then complain to the Insurance & Financial Services Ombudsman or other complaints resolution service.

The post Insurance own-goals: Mistakes that lead to declined claims appeared first on Credit Simple NZ.

Yep, you read that heading right. (Welcome to the Credit Simple blog, where I confess all my deepest, darkest money secrets.) For seven years, I cut my own hair.

Of course, it’s not as drastic as it sounds, but the end savings result is rather gobsmacking.

For seven years when I was in my twenties, I DIY’ed my tresses. Why? Well, I’m slightly introverted and I hate the small talk you have to engage in at the hairdresser. I’ve also got serious trust issues when it comes to people wielding scissors near my face. For these reasons I dread the experience of going to the hairdresser. It’s totes awks.

I had long hair, and you don’t really notice someone’s haircut when their hair is long. More to the point, you don’t notice if it’s been cut unevenly. So one day, unable to face the scissors and the small talk, I washed my hair, combed it out, and chopped a good inch off the bottom.

It didn’t look any different from a professional cut, and voila, I’d saved myself $80.

This was all before deal sites like Groupon, where you can pick up a $35 haircut occasionally. (If I’m honest, it was almost before the internet itself.)

I was recently expounding on the virtues of DIY haircuts to a group of students and we decided to run the numbers. According to Statistics New Zealand (which tracks these things as part of the Consumer Price Index), in 1951 a women’s haircut cost 3 shillings – roughly $8 in today’s terms. Bargain! Today, price sampling shows a women’s haircut ranges from $35 to $118, with a mean price of $63.

Taking that $63 price and assuming you’ll obey the hairdresser’s command to come back in six weeks, I saved $3,822.

I was rather poor at the time (the seven years spanned my university years and early working career) but I still think we should question the wisdom thrown at us from those who stand to make a profit  –  such as beauty services. Every six weeks is too much unless you have short hair (or if you’re uncontrollably hirsute), and if you can get a better deal (whether it’s through beauty apps such as Flossie or daily deal sites such as Groupon), grab it with both hands. Just be careful with those scissors.

The post I cut my own hair for seven years (and saved nearly $4,000) 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.