Diana Clement: Plan your way to a better financial future

Goals give you something to aim for. Photo / 123RF

OPINION:

People who plan, get ahead. That's definitely the case with money. If your finances are in a murky mess, create a plan. It will put problems on paper and reduce stress.

I'm talking about a holistic plan, not just insurance or investments. It includes your budget, your future goals and dreams, your career, your insurance, your investments and more.

Your goals may be to get out of debt, buy a house or business, to support your children into adulthood, being hands-on grandparents, travelling around the world or something else. The only way to start is with a plan. You don't want to be asking yourself or partner "are we there yet?" in 10, 20 or 30 years' time.

Do a stocktake

You can't make plans if you don't know how much money you have or owe currently. Try the net worth calculator on the Sorted.org.nz website to sum up how much you own and owe. If you prefer apps or simple spreadsheets, you can do that instead. Search "net worth calculator". Budgeting apps such as PocketSmith have built in calculators.

Brainstorm

Think long and hard about what makes you happy in life and how your finances/savings affect that. Consider the roadmap to get to financial security, whatever that means for you. If you can discuss this with others, all the better.

Working towards retirement

Consider whether you'll work all the way through to retirement or take time off for parental leave, sabbaticals, caring for parents or other reasons. Will you continue to work full or part time after the age of 65 when you qualify for NZ Superannuation?

Give yourself goals

Create written short-, medium- and long-term goals. It doesn't matter if you reach these goals ultimately or find a completely new route. What matters is you have something to aim for. That gives you purpose. Sorted.org.nz has a good goal planner.

A plan can help you avoid unnecessary distractions. Photo / 123RF

Put numbers to those goals

If you know how much you need to save and how that will grow over time your plan comes to life. Work out how much money your need in retirement. Will you be able to live on NZ Super? If not, how much extra per week, month or year will you need. Don't forget to include contingencies such as the car dying, or roof needing replacing. How are you going to reach those numbers?

Think about insurance

Work out what it will cost to cover yourself for contingencies such as losing your income through illness, or your home, car and other assets. The worst can happen and paying for insurance needs to be part of the overall plan.

Put your budget under the microscope

You are going to reach these goals faster if you review your cashflow regularly and plug any leakage in your budget. You do have one, don't you?

Seek outside help

Consider taking all this pre-prepared information to financial advisors who specialise in insurance and investments. They tend to do one or the other. According to the Te Ara Ahunga Ora Retirement Commission's latest survey into the financial capability of New Zealanders, two thirds of people make poorly informed choices about financial products. A good adviser will go further and help you identify your financial choices and goals, says Gillian Boyes, investor capability manager at the Financial Markets Authority. If you have money to invest or plan to build up a portfolio then professional financial advice is well worth it. Boyes says expect to pay from $250 for one-off advice up to $4000 for a comprehensive financial plan. Some advisers still offer "free" services. That means they're likely earning their keep from commission. Not everyone feels that's the right way to buy financial products because it may skew the advice.

Finally, put everything in writing and set a recurring date in your calendar to review your progress every year or two. Life and your priorities can change.