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.

Question time: do you flash, or do you stash, your cash? Or do you mix it up and go both ways?

Although we’re trying to save, we realised recently the dollars aren’t mounting up like we’d like them to be. So, in what might appear to be a counterintuitive move, we decided to pay to get financially fit.

Yes, that’s right. We got a financial personal trainer from enableMe. It’s just like the gym! But with less active wear.

Show me the money!

To start, enableMe looks at where you are now and what’s preventing you from getting ahead. Which, if you’re like us, is probably something you can’t see because you’re a bit emotionally attached to your money and your right to spend it on fripperies, so you can’t see the cash for the ATMs.

Our initial consultation was with Pippa Hogg, from the Wellington enableMe team, who asked us if we were savers, spenders or plodders. We are the beigest of the three – the very unsexy-sounding plodders.

With great humour, and a probing manner that would put the CIA to shame, Pippa walked us through what we currently pay each year for basically everything. She then asked about our plans for the future (house, family, retirement, llama breeding, etc).

It transpires my partner and I have different ideas about what we should be spending on things (like food), and there were things we had hugely underestimated. It also become apparent we were fibbing to ourselves about some costs –  I told Pippa with some pride that I don’t buy more than two lunches each month, then promptly did that three times the following week.

We also thought we had a good arrangement for our personal and joint accounts, but no, Pippa didn’t agree. She did however manage to not laugh in our faces about our ‘system’.

Using this information, enableMe can then design a plan and budget for us to start and build on, and work with us to make sure we get there.

They’ll also hold us accountable. In a nice way.

While you could do some of this yourself, there’s a good chance that you won’t stick strictly to your budget or hold yourself accountable if you veer off course when tempted by shiny trinkets. So while you might be thinking this is codswallop, we don’t need to pay for this help, we know that if we want to save, yes we do.

Probably the biggest eye opener is what enableMe calls ‘frittering’ (not a corn fritter fest – I checked). Frittering is what you spend without realising. Pippa’s examples include:

• interest
• late payment fees
• coffees and lunches
• reliance on credit cards
• bank fees
• hire purchases.

It’s like she knows me.

Recognising that like a diet people will stick to their financial regimen if they’ve got delicious things to look forward to, enableMe’s clients choose three non-negotiables (e.g. family activities, gym, coffee, Netflix, more cats) to ensure that although they’re saving, they’re still living. And their personalised plan is structured around those things.

Pippa sums it all up by pointing out that improving your financial situation doesn’t require you to get a massive pay rise, it’s about making what you do earn work better.

Looking to the future, if we do get a mortgage, enableMe can help there too. In fact, they modelled an example demonstrating how we could pay one off in seven years instead of twenty. I’m sure you can understand why that’s quite captivating.

Reference checks

To ensure we were making the right decision, I badgered two current enableMe clients I’d met to tell me how they’d found the process. 

Bridget Jones*, 39, joined enableMe five months ago. She’s single, doesn’t want kids, is renting but would like to buy/build eventually. She’s already made back the enableMe fee, and her savings and house deposit have grown faster than she thought they would in that length of time. She says, ‘I’ve always been a good saver but I was frustrated because I just wasn’t getting ahead – now I am. I’m also thinking twice about purchases that previously I would have bought without thinking.’

Wonder Woman*, 52, has been with enableMe for about two years. Married with three teens and a mortgage, she and her husband wanted to get a handle on their finances. As a couple they also had two different approaches to how they operated financially – and now they have one. ‘We’d been to other financial advisors who just told us to sort out our priorities. EnableMe worked with us to decide how much we could spend, they sorted out our accounts and we wouldn’t be where we are today without them.’ She says the best thing about enableMe was how non-judgemental they were.

*Not even slightly their real names.

Now I’m an enabler

There’s a significant fee if you want to carry on after the initial consultation but we decided to go for it. And because I know you want to see us save heaps so I can buy you all a wine, I’ll blog again in a few months on our financial fitness levels (hopefully better than my actual fitness levels).

You can learn more about enableMe on their website, where you can also watch a video of founder Hannah McQueen in action on FairGo helping a family sort out their finances.

And if you’re interested, enableMe is offering a discount for Credit Simple readers on an initial financial consultation. Fill out the online form using the code ‘Credit Simple’ and pay only $100 plus GST (usually $300 plus GST).

The post We road-test a financial personal trainer. It’s just like the gym, only with less active wear appeared first on Credit Simple NZ.

Hey Gen X! Here’s what you need to know about your money and finances before you turn the big 5-0.

The next decade and a half is going to tick away fast and some of us need to grow up and get serious about our finances.  You don’t want to be stuck at home eating baked beans whilst your friends post their fabulous post retirement travels on social media do you?

Home truths about your finances as you get older

You and me both (none of us is perfect) need to face up to some home truths:

Same old, same old doesn’t work. If you have no savings, or shock horror still have debt it’s not going to disappear miraculously. A lot of naval gazing and some hard cold change is needed.

Poverty can come to those who ask for it. Are you staring down the barrel of poverty in retirement? That’s what’ll happen if you still have car loans, HP, credit card balances and other sorts of debt (such as spending hidden on the mortgage). If that’s the case you’re not going to be able to retire come 65/67.  Do you really want to work ‘til you drop?

You may end up unemployed or sick. It’s much harder to get a job or even an interview after the age of 50.  Employers prefer “someone more suitable”, which means “younger”. What’s more many Kiwis eat up their retirement savings after falling ill in their 50s or early 60s. Oh, and you’ll find it harder to get a mortgage the older you get. Banks won’t lend to people whose only income is New Zealand Super. Depressing huh? That’s why you need to save now and insure yourself.

Beware of what your boomerang kids cost you. Modern day offspring come flying back every time they need a handout or somewhere to live. If you do agree to help them buy a home or business, don’t expect that money back when you need it. The moral of the tale is that the time has come to put yourself first.

How to create a retirement pot of money

If that made you feel depressed, the good news is that you can do something about your situation. Start today.

Move from financial inertia to action. Get a budget, pay off your consumer debt, stop extending the mortgage, don’t mistake wants for needs. This is your last chance to get some serious savings behind you. Wealth comes through action not inaction.

Spend less. You can change. Look at your last bank statement, list everything category from most essential to least essential and start chipping away at the bottom half of the list. It might need a radical rethink. For example most middle income Kiwis could cut 50% from their grocery bills and be healthier for it. Start with the booze, meat and packaged foods.

Be a good Gen X and maximise your KiwiSaver. You may think KiwiSaver is a government plot, or you could invest better yourself. Nowhere else will you get a 50% return on your first $1042 from day one. If you’re employed you can also throw in your employer contributions. Just bite the bullet and do it. Gen X will be the first generation to build up some serious KiwiSaver money.

Consider buying a rental property or two. It’s good to diversify your savings and a rental property might work for you. Beware however: first-time landlords can make a lot of mistakes such as putting potential capital gain ahead of rental return and/or not pricing out renovations properly. Sometimes an ugly duckling such as a concrete block unit is a better investment than the best house on the block.

Be honest with yourself about your finances. If you’ve just read the bullet points above and said: “but I’m different”, or “that doesn’t apply to me” then go back and look for ways to make it apply to you. Change for the good only happens when you seek it out.

This might all sound a bit depressing. But it’s best to know, than to stick your head in the sand.

The post Worried about the retirement age going up? Here’s how to kick your finances into shape before you hit 50 appeared first on Credit Simple NZ.

The concept of ‘monkey see, monkey do’ is alive and well in Kiwi families, and that includes when it comes to our parents’ habits with money. When parents behave badly with money, guess what their children do?

As a parent, your role modelling is one of the most powerful indicators of how well your children will survive financially. Whether your children are two or 20 you can set them a better example.

Don’t see money and spend it

Do you see money and spend it? Is HP your friend? As a parent it’s your duty to educate your children about the difference between needs and wants. If you buy what you want when you want and call it a need, your kids are probably going to turn out poor. Show them how it’s built into the budget.

Build a career

Not working can send the wrong message to your child. Even if you can live on benefit, your spouse’s income, or investments, you might want to consider the effect this has on your child and their earning potential. A career is one of the four pillars of wealth. Yes, it’s great to have a parent at home during the younger years, but you don’t want your daughters in particular thinking that a man is their financial plan? That really can end in tears. Volunteer roles are valuable. But paid work sends a clear message to the next generation.

Avoid big barneys

When mum and dad fight over money it sends all sorts of awful messages to children. They may see money as stressful. Or that money is a source of power. Sit down and work out how to move forward united. That may mean giving each other monthly ‘his and hers’ money built into the budget.

Turn them into adults

One of your jobs as a parent is to turn your children into fully functioning adults. Yet we breed ‘kidults’ who don’t fly the nest. Or they turn into kangaroo kids that keep bouncing back home.

Start young

Give them regular pocket money from a young age in return for some chores. But if they misuse that money don’t replace it not matter how much your heart is breaking. Advise teens on the art of budgeting and encourage them to pay their student loan back as fast as they can. Beware of funding every cent of university, and think twice about going guarantor or providing the deposit for their first home. ASB’s website has more advice on starting kids young.

Don’t buy top of the range

We don’t want our children to miss out, but buying top-of-the-range everything sends bad messages. Make them work part time and contribute to their toys and gadgets.

Talk more

Life is busy, but if you take the time to discuss money over dinner, in the car, at the beach or whatever suits your lifestyle, you will help your children think before spending or borrowing. Each family has its own financial strategy. When we took our big overseas trip as a family the topic of our holiday budget came up more than once. For example, we ate most meals in our apartment in the evenings, and bought lunches in the market during the day. We also talked about how our relatively frugal lifestyle at home meant we could pay for the holiday from savings, which cost less than doing it on credit.

Watch your language

So you’re going to ‘invest’ in a new car, a new kitchen, or an extension to the house. Beware of using language that makes children think this is good spending. The reality is you’re buying the car because you want a better one, not need it. You didn’t choose the kitchen or bathroom for their return on investment. And you didn’t do a business plan or spreadsheet that proved it increased the capital value. You chose the design of your dreams – or the nearest to it you could afford.

So let’s all be good parents and think before we talk, act, borrow and spend. If we want our children to be better financial citizens we need to buck up our ideas ourselves. That way they won’t be hounding you for money for the rest of your life. Hopefully!

The post Parents behaving badly: How parents’ money habits can rub off on the next generation 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.