Get Sorted: Some things we're good at...

Coping with unexpected drops in income because of things like separation or redundancy can be difficult, but it can be done. Photo / Thinkstock

And some we’re not. Here’s where most people get caught out with money.

Let's say you went around the world and asked some locals to tell you what kind of people are good with money and what people are not. Chances are, no matter what the country, they would describe very similar traits.

We know this because it's been done: focus groups across 10 countries were interviewed and, whether they were richer or poorer nations, people came up with remarkably similar descriptions of who was skilled and who wasn't. This past week we were privileged to have behavioural finance expert Elaine Kempson here in New Zealand telling us about this work.

Here's what someone who's skilled with money looks like:

• You plan how you're going to spend and keep track closely.

• You live within your means.

• You plan for their future needs, whether expected like a wedding or unexpected like a car repair.

• You choose and use the right financial products for your needs, like the right KiwiSaver fund for you.

• When you make financial decisions, you base them on sound information.

Now, generally we are better at some of these things than others. Take planning our spending and keeping track, for example.

"Most people do this really quite well," Kempson says. "It's one of the skills most of us have."

Sure, we might need to get better organised, or cope with unexpected drops in income because of things like separation or redundancy, but most of us get this right.

And most of us, unless our income is really subpar or our attitude towards managing debt is problematic, can spend less than we earn.

But planning for the future? That's much, much harder. We live for today, we lack a savings habit, we suffer from plain old inertia. "People need a jolly good shove to do something," Kempson says.

We also get caught out when we choose financial products - we don't shop around, we rely on those selling to us for advice, and we get paralysed by all the choices out there. "We don't switch products, even when it's really bad," says Kempson.

Let's face it: we all need help sometimes. Which makes this review of financial advice legislation all the more timely.

Get Sorted is written by Sorted's resident blogger, Tom Hartmann. Check out the guides and calculators at Sorted - brought to you by the Commission for Financial Capability - at sorted.org.nz.