It's never fun, and no one likes being confronted with the number of times they got coffees or takeaways – but reviewing your spending on both big budget and small items can help you streamline things.
It's not necessarily about cutting things out. Reviewing your spending can help you realise ways you can spend more efficiently. And if you are heading in a scary direction, it can help you identify the behaviours that are getting you there.
Think of it like putting 98 into your car, then learning you could have been using 95 without any adverse effects on the engine. It may not be the most significant of changes but knowing that, and putting it into practice, can certainly save you a few dollars at the pump each time.
Put the extra to work
Review the amount of cash you have in your various checking and savings accounts. Typically, three to six months of living expenses is a good amount to have handy in case everything turns to custard (as we've unfortunately seen happen to some this year).
Beyond that, your spare cash could be working harder. Instead of earning next-to-nothing in the bank, consider investing the excess cash into your portfolio if you have one. The aim of the game is to set yourself up so that your dollars will still have buying power in the future, even with the inevitable inflation.
Set your retirement goal
For some, it can be hard thinking about retirement when it is a way off, but setting and working towards a goal for your retirement today will improve your lifestyle later.
Especially for employees, KiwiSaver just hums in the background, funnelling their savings and investing it for the future.
It's a good idea to spend some time in the New Year checking on your progress, reviewing your investments and making sure you're getting all the KiwiSaver benefits.
If you are contributing the 3 percent minimum, increasing your contribution rate to 4 per cent or 8 per cent of your (before tax) wage is an effective way to get to your saving goals faster. Remember, your employer is also adding that all important additional 3 per cent contribution on your behalf.
Get your tax right
Paying too much tax won't help you to reach your retirement savings goal, so it's important to get your Prescribed Investor Rate (PIR) right.
This defines the amount of tax you'll pay on your KiwiSaver investment income – if it's too high, you'll be paying tax you won't be able to claim back; if it's too low, you'll need to file a tax return and pay the outstanding amount.
Review your insurance needs
Take a good look at your insurance covers for personal, home, auto, liability, etc., to be sure that you have appropriate cover – and that you're not overpaying.
Establish whether you could increase some excesses to save on premiums or check if you have some unnecessary "extra" features in your policy that are an additional expense.
It also pays to compare insurance covers periodically - especially where you have a good claims record - as companies adjust pricing frequently to acquire new customers.
If in doubt, seeking impartial advice from an insurance adviser should help provide value for money cover, and peace of mind.
Once you've made your resolutions remember to check in regularly and measure your success. Remind yourself of why the goals are important and don't lose sight of the result.
File these in your safe place (like the notes on your smart device) and in a year's time, pull them out to review. A lot can happen in 12 months and it's easy to forget what was important then, and why.
Always remember to celebrate the small wins along the way, and to be proud of your progress. And if you're getting a little lost trying to get your financial house in order, sitting down for a chat with a trusted fiduciary is always a good place to start.
Happy New Year.
•Nick Stewart is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX certified financial planning and advisory firm.
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. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
