Diana Clement: The Covid crunch - how to give yourself a money makeover

More than ever this is the time to ensure your money is being used effectively. Photo / 123RF

Opinion

Lockdown is great for creating spare time. If you've been meaning to do a money makeover, now is the time.

Many of us had crash financial diets during the first lockdown but returned to our old ways afterwards. Like all diets, you have to turn the best bits into lifestyle changes, says Jose George, general manager at Canstar NZ. Lock in the good things and don't revert back to old ways.

If you can, make it fun

Figure out some strategies to game yourself into doing a makeover. You could, for example, make a to do list. Cut that list up into strips and drop them into a jar. Choose one every afternoon when you've finished work. Another strategy that I use for jobs I don't want to do is to make that list, put it in order of difficulty, then invert it and start with the easiest tasks to get some early wins on the board.

Analyse incomings and outgoings

More than ever this is the time to ensure your money is being used effectively. Most people's spending has changed this year. Take your last month or three months spending and analyse it carefully. Even "essentials" such as utilities should be up for consideration, says George. Shop around for a better deal. If your bank has an app such as Westpac's CashNav, or ASB's My Money use it. A personal finance app such as PocketSmith or YNAB enables you to drill down further. Or simply export your spending to a spread sheet and slice and dice it. You're looking for inefficient spending or ways in which you might be fooling yourself, especially if you've made changes to your spending pattern this year.

Check your credit cards

Do you really want that Air Points credit card right now? Have your finances changed and you need to move to a low-interest card? Maybe you weren't running a balance previously so the interest rate didn't matter. Compare cards at websites such as Canstar.co.nz or Interest.co.nz.

Manage your mortgage

Take a really close look at your mortgage, especially if you're on a mortgage holiday, or your income is insecure. Could you get a better rate with your existing bank or another provider? Should you split it into a mix of fixed and floating rates? Can you pay down extra now to give yourself breathing space should you lose your income in the future? Your bank's staff should be able to help with advice. Or consider going to a mortgage broker who can shop around on your behalf and make sensible suggestions about how to structure your mortgage better.

Update your Will and/or trusts

Over time our lives change and sometimes our Wills and/or trusts don't keep pace. Get your documentation out, sit down and think: "Do I really want my money going to my son's partner" or whatever the situation may be. Trust laws are changing. If you need to know more, check out a very good article by my colleague Tamsyn Parker.

Work on your retirement plan

If you're young and paying into KiwiSaver week in week out you're probably on a trajectory to a comfortable retirement. If you're aged over 40 and haven't worked out how much you'll spend each year in retirement and the savings needed to get there, you need to. Sorted.org.nz's retirement planner can help you fill in the gaps.

Finally, get yourself some money makeover templates to make this all easier. The more of these worksheets and tools you complete the better your understanding and the ultimate makeover will be. I never believe in reinventing the wheel and NZ Money Guide author Lisa Dudson has a bunch on her website at Acumen.co.nz/free-stuff. Dave Ramsey's The Total Money Makeover Workbook is packed full of them as well. Of course Sorted.org.nz has online tools that can help you work through different parts of a money makeover.