A great opportunity exists right now for everybody in the workforce to improve their financial situation. Unfortunately, the majority of people will miss out on this opportunity through not taking the right action.
From October 1, income tax rates were cut and Government benefits increased. Although GST was also increased, most
people in the workforce will be better off. For example, someone on a gross income of $50,000 will have about $20 a week extra as a net result of the changes.
There is a useful calculator at www.taxguide.govt.nz which gives you an estimate of the net benefit based on your income.
Most people will allow the extra dollars each week to slip away on spending. It only takes a coffee a day to see it all disappear. Working on the old theory that you don't miss what you have never had, the best financial decision you can make right now is to estimate your net benefit from the changes and make a proactive choice about what to do with it.
There's an order of priority with the choices you have. If you haven't yet joined KiwiSaver, make that your first priority as this will give you the highest return on your money.
Next on the list is paying off your credit card or hire purchase, so set up an automatic payment for the extra amount.
If you have no short-term debt, set up a payment into a savings account to build up an emergency fund. If that is already under control then increase your mortgage repayments to repay your debt quicker.
The next priority is to make sure your retirement savings are on track. Finally, if you have all these things in hand, it's yours to spend as you wish.
Liz Koh is a financial adviser. Her disclosure statement can be obtained free of charge by calling 0800 273 847.
www.moneymax.co.nz
