We're all familiar with the saying "saving for a rainy day". For some, the rains have already started coming down.
ASB recently revealed that while on the whole New Zealanders' financial wellbeing has improved during the pandemic, the numbers still aren't encouraging. Thirty-eight per cent of ASB customers are living payday to payday, with around 40 per cent having less than $1000 in available funds.
In tandem with this, a Consumer NZ sentiment tracker recently reported that 15 per cent of New Zealanders have no savings, 27 per cent were anxious about the level of their savings, and one in 10 of the respondents indicated spending more than they saved over the past three months.
So, what's going on here?
"Stagnant wage growth and the rising cost of living means that many people are living pay cheque to pay cheque - they just can't get ahead. Unsurprisingly when we asked New Zealanders what they consider to be the most concerning issues, the cost of living came second only to the state of our nation's housing," Consumer NZ head of communications and campaigns Gemma Rasmussen said.
Indeed, housing prices and living costs have been hot topics lately; Treasury's 2025 house price projections were already outdone in September with no sign of slowing.
Adding to that, we've had the ominous storm cloud of Covid-19 rumbling around for a while now.
This year's localised alert levels have meant more freedom in most of New Zealand, with Auckland currently bearing the brunt of both cases and restrictions. This hasn't stopped prices on fuel, food and other essentials soaring across the nation.
This means regardless of intent or how good someone is at saving, it's much harder for the average person to do so in the current environment. And it's not just our ability to save being challenged; it's our ability to pay our debts.
Credit reporting bureau Centrix has identified a sharp rise in debt from sources like mortgages and credit cards in the past two months alone, aligning with the 2021 lockdown as it drags on for some parts of New Zealand.
Prior to that, arrears levels were relatively flat compared to last time. An interesting anecdote is that the majority of the new mortgages have been top-ups to existing debt – and not necessarily for house-related costs.
In short? We're doing better than last lockdown, but things are starting to add up.
There's also been a 25-40 per cent increase in the number of KiwiSaver payouts approved on hardship grounds (and a 5-10 per cent increase in complaints from people who were unsuccessful). And a lot of people approaching with these requests are apparently doing it to cover debt.
FSCL chief executive Susan Taylor said: "It is disheartening when you see that people are having to access those funds that are set aside for retirement to pay off current debts.
"[It] obviously [is] affecting their longer-term future and the amount of the money they will available when they retire."
So, how do we keep a weather eye on the horizon despite all of this?
Making a plan
The first step to getting your finances in order is having a clear grasp of your current situation. Start with what's coming in, what's going out, and what you want to achieve.
If you can, try to set up an emergency fund to provide a buffer for unforeseen circumstances. The rule of thumb is generally accepted to be three months' worth of earnings, but the exact amount should depend on your circumstances and financial obligations. Do you rent, or do you have a mortgage? Do you have people to provide for? How long could you keep up your current lifestyle if you lost your job?
If you have trouble with setting your goals too lightly or making them too hard, the SMART system can be a good way to proof your path to success by focusing your efforts.
When you set your goals, make sure they are:
Every win counts
Not all goals have to be long-term – small changes can make a big difference to your financial future.
Simple short-term goals you might like to consider include:
· Reviewing your KiwiSaver account to find out whether you're in the right investment fund for your stage of life. KiwiSaver scheme providers may offer several different types of investment funds, ranging from more conservative lower risk funds to higher-risk growth funds.
· Setting up separate bank accounts for essential spending, non-essential spending and saving. Some people find separate accounts can be a useful way to help them avoid debt, live within their means and develop a savings habit.
· Making a regular date with your partner to set money goals and agree how to achieve them. As well as preventing money-related arguments, joining forces can help you to achieve your goals more quickly. If you're looking to buy a home together, for example, you could both be entitled to make a first home withdrawal after three years of being in KiwiSaver.
· Taking some time to review what you're spending on takeaways, treats, power, mobile phone, internet, insurance and credit cards. Could you get a better deal?
Seeking financial guidance
Feeling in control of our finances is incredibly empowering, yet managing them can take time and skill, which in itself can be stressful. Remember there are all kinds of resources available to help you find your best options, be that paying down your debt or growing wealth.
Similar to getting a good idea on what your situation is, knowing who can best help you is key. Sometimes seeking assistance can be as simple as sharing your financial goals with those close to you, to help with accountability.
If your plan is more around future-proofing and growing wealth than handling debt, there's options for that as well. The best place to start is by sitting down with the professionals.
•Nick Stewart is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver solutions.
•The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz