Checklist: How to get financially prepared

04 February 2020

Have you played ostrich for too long? It's time to take your head out of the sand and have a good look at your finances.

recent survey revealed that just one in two Kiwis have prepared a budget in the last year. And, the same survey suggested that more than 30% of all New Zealanders have NEVER prepared a personal budget!

Budgets can feel a bit like being on a diet. You feel like everything fun is off the menu, and it's easy to get disheartened if you go over your spending limit. However, not having a budget might mean you lose sight of how you're spending your money - and you could be spending more than you earn. You might end up in a financial spiral - living payweek to payweek with no idea how to cover that upcoming bill, let alone start saving to get ahead.

Creating a workable budget is the first step towards financial success. It means that you're in control of your money and able to weather any financial bumps in the road without getting derailed.

Here’s a quick checklist of things you can do to get prepared:

Take back control

Getting your finances under control requires some up-front work. However, gaining clarity on your expenses and spending will help you identify areas where you can make changes.

  • Do a 360: Find out where all your money is being spent. Have a look at your day to day spending – is there anywhere you could reduce spending or make cutbacks?
  • Consolidate debt: Identify all your debt and see if you can bundle it together. Paying back just one loan instead of three or four will reduce interest repayments, and you’ll chip away at your debt faster.
  • Set a budget: Once you’ve worked out all your expenses, set up a budget to track your expenditure. It could be as simple as a spreadsheet, or a more in-depth budgeting tool.

There's loads of budgeting apps and tools that can help you get started with a budget. Not sure where to begin? Check out mybudgetpal - it's a customised budget tool to help take the stress out of managing money.

mybudgetpal is a really simple, easy-to-use tool that helps create the foundations of a good budget - giving you back control over your finances. Designed by Booster, mybudgetpal is free to use - no subscription required!

Build your buffer

If you were suddenly unable to work, could you cover all your expenses until you got back on your feet? How much do you need as a backstop to see you through a financial bump in the road?

  • How much? Start by identifying your monthly costs for critical expenses:
    • Rent or mortgage payment
    • Food
    • Utilities (phone, power, water, rates)
    • Insurances
    • Vehicle costs
    • Debts

Once you have that figure, work out how much you can put aside each payday to start your emergency fund.

  • Start an emergency fund: This is a fund to help with unexpected bills or costs. Putting aside just $25 per week adds up to $1,300 over a year. Make it $75 a week and you’d have a much larger amount saved - $3,900. OK, so it doesn’t happen overnight – but it will happen!

Get KiwiSaver savvy

Your KiwiSaver account is not like a bank account. You need to make sure it’s working for you now so that you have the retirement you’ve dreamed of.

  • Free money: Well, not quite. But if you contribute just $1,043 each year into your KiwiSaver account, the government will contribute $521.43 as well. That’s about $20 a week. You can top up your contributions to make sure you’re hitting that target. Check here for more info.
  • Check your tax rate: Are you on the right tax rate? It’s important you check this so you don’t have any nasty surprise tax bills at the end of the year.
  • Fund type: Depending on your goals, being in the right investment fund will help grow your savings. Find out more about fund types.

Protect yourself

New Zealanders have a tendency to be under-insured. Risk insurances, such as life, trauma or income protection can help you and your family stay afloat during an unexpected illness or job loss.

  • Get the right advice: Working with a financial adviser will help you identify what you need and the right level of cover for you and your family now. They can help find the best policies and customize a package that fits your budget.
  • Compare apples with apples: It’s all too tempting to go for the cheapest deal online, but it pays to read the fine print and make sure you’re comparing like with like. Getting the wrong cover could mean you’re not covered when you make a claim.

Ready for financial freedom

Working through this checklist will help you get on top of your spending and start taking back control of your money. By paying yourself first, you'll get into the savings habit quickly and easily.

Before long, you’ll be well on your way to financial freedom. You'll be better equipped to handle any unexpected financial bumps - and enjoy life, whatever it brings.

By Rachel Southby

Rachel is our Content Specialist. She loves words, coffee, books and shoes. Not necessarily in that order. She's also interested in how the power of consumer choice can lead to positive changes in business and industry.