Diana Clement

Real Money

Diana Clement: Use a rainy day to sort your financial life

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A little effort now could give you a financial umbrella. Photo / Getty Images
A little effort now could give you a financial umbrella. Photo / Getty Images

The Met Service's long-range weather forecast predicted rain for today. What better time than a rainy spring day to do one of those financial tasks you're always putting off?

If, like me, the highlight of your weekend lately has been following the Rugby World Cup games, then you have until 9pm this evening and tomorrow evening to do one productive thing.

Shopping is out of fashion right now and there is no Saturday morning sport in the holidays. So repeat after me: "I will do something productive today." Even if you get one of these 15 things for October 15 done, pat yourself on the back.

1. Make lists. Make a "to do" list of financial loose ends - those things you have meant to do forever and haven't. Put them in order, with the most time-sensitive and/or lucrative tasks at number one, and start ticking them off. Lists can make seemingly daunting piles of work do-able.

2. Review your insurance. Once upon a time, we bought our insurance policies and tucked them in the bottom drawer. Thanks to the Christchurch earthquakes, a whole lot more New Zealanders either understand their insurance or have taken the time to review their cover.

Kiwis routinely insure their home contents for tens of thousands of dollars less than it would cost to replace them. Insurance can be difficult to fathom and it makes sense to use an insurance broker when you do this review. Their services are usually free and can help avoid heartache come claim time.

3. Test your risk tolerance. Some people simply can't sleep at night with money invested in the stock market. Others revel in the opportunities offered by equities.

It's possible to take a Money Personality Profiler quiz in Sorted.org.nz. Even better is a psychometric risk tolerance test such as the one at MyRiskTolerance.com. This is the type of test that good financial advisers use on their clients.

The only fish-hook with a test such as these is that novice investors don't often understand the results and can't match the right investments to their risk tolerance. Understanding risk tolerance is becoming increasingly important as Kiwis start to build up significant retirement savings in their KiwiSaver accounts.

4. Review your bank statements. Clare Mataira, manager of Hamilton Budgeting, recommends this to all clients, even higher-earners. "We get clients to code their statements for the main essentials such as food and petrol. Quite often they think they are spending, say, $150 a week on food, but the bank statement shows $200, including the small purchases." Reviewing bank statements also allows people to check that automatic payments are going out on the right day and for the right amount.

5. Get a better interest rate. Go to comparison websites such as Canstar.co.nz, Interest.co.nz or Depositrates.co.nz and see if you could increase interest rates by changing accounts, or banks. It's a good idea to drop the cost of fees into the mix before making a decision.

A simple telephone call can be all it takes to switch accounts. Sometimes, however, what is needed is a complete revolution in the way you bank. There are some clever products around, such as BNZ's TotalMoney accounts, ASB's Save the Change, Westpac's Payline Split and Sweepover services, and Kiwibank's Notice Saver. Revolving credit mortgages are also remarkably clever - but only safe in the hands of people who don't dip into the mortgage for lifestyle spending. Even if you're tied to your bank thanks to fee-free accounts linked to a mortgage, it's still possible to keep the bulk of your short-term savings in an online saver account with another bank that pays a higher interest rate.

6. Catch up on correspondence. Write those letters or emails to your financial service providers that you've meant to forever and haven't. It may just set your mind at ease, enabling you to concentrate on the more important stuff.

Often the effort of doing the job is less than the mental energy invested in avoiding it.

7. Do one thing you really don't want to do. We've all got tasks we can't face doing. Until recently, mine was to shop around for a better KiwiSaver fund than the one I chose three years ago. What a satisfaction that was to tick off as a job done. A good way to get started on one of these really daunting tasks is to line up a treat to be had when it's completed. My task last weekend, albeit not financial, was to clean my paths for the summer.

I followed up with a late lunch from the stalls at the Diwali celebrations in Auckland.

8. Write a will. Anyone who doesn't have an up-to-date will should be ashamed. Dying intestate can lead to family feuds. Seemingly nice, rational people can turn nasty when an estate is involved.

9. Prepare for your own demise. Is all your paperwork well-sorted for the person who has to trawl your house when you die? Have you told your beneficiaries what your intentions are? Who will look after the children? What life insurance cover do you have? Planning for mortality is one of those things that people put off indefinitely.

I wrote an article last year about this subject entitled "Don't let your money vanish when you go", which is still on the Herald website here. I've also found a useful, albeit American, worksheet at www.todaysseniors.com/pdf/Finances.pdf , which enables people to list all their financial records in one place.

10. Research ways to make extra cash. That may be anything from selling unwanted goods, increasing rents on investment properties, or moonlighting. Managing incoming cash does the same trick as earning more.

Financial writers like me harp on about spending diaries and budgets. They can do wonders for cashflow. So can journaling and finding out more about why you approach your finances and spending the way you do.

11. Review your gifting regime. Until the beginning of this month, individuals were limited in the amount they could "gift" to others in a year before paying tax. Those gifting rules have been scrapped. That means that people can, for example, gift all their assets to a trust in one go. This is not the sort of thing to do lightly. Get professional advice.

12. Reorganise your home office. Or set one up if you don't have one. You don't need to have a room dedicated to an office, but a corner with a desk, computer, in-trays and filing cabinet will make a huge difference when it comes to knocking those financial jobs on the head. It's no use trying to do this on the dining table from time to time.

13. Make a savings goal. If you don't have a budget or goals, it's time to commit these to paper. Writing a budget is actually pretty easy. There are lots of templates online that help you remember important things such as annual costs for insurance, house-washing or whatever you spend money on sporadically.

14. Plan your children's financial education. When was the last time you did something to help your children's financial literacy? Andrew Lendnal, Kiwi author of Gold Start: Teaching Your Child About Money, recommends a number of family activities to help children understand money.

Some of his exercises are very practical, such as a spending profile questionnaire for every member of the family.

A financial literacy activity can be as simple as paying jellybean interest. The children are given a set number of jellybeans on day one and earn more jellybeans in interest every day for the ones they haven't eaten.

15. Put a plan in place. Getting started on any big financial rearrangement becomes a lot easier if you sit down and plan what you are going to do in writing.

- NZ Herald

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