KEY POINTS:
With retirement savings the hot topic of the day, Retirement Commissioner Diana Crossan offers some financial and savings advice.
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Freedom from money woes and a sound financial future is something most Kiwis aspire to but as a nation we're not always the best at achieving this goal.
Many New Zealanders could do more to ensure their money works for them. Last year we paid about $500 million in interest on credit cards - which is $500 million wasted.
So how can you ensure your finances, including any debt, work for, and not against, you?
Here is a guide to getting sorted.
Know your situation
Calculate your net worth and set goals to increase it. Note the value of what you own, then subtract what you owe.
Pay off debt
Get rid of your most expensive debts first, like credit cards and hire purchase. Paying off the mortgage quickly can save thousands.
Budget
Draw up a budget, stick to it and see if you can create a surplus to pay off debt or for saving.
Know the cost of your debts
Interest payments can greatly increase the total cost of a purchase.
Save for an emergency fund
After clearing the high debt, build an emergency fund of 2-3 months' income to help cover you for unexpected expenses.
Start regular saving
Again, once the high debt is gone, start regular saving, even if it's just a small amount, for short term goals (a deposit, a holiday, a lump sum to invest). But if you're on a low income, don't forget your first priority is life's essentials.
Protect your assets
Buy the right amount of insurance (house and contents, car, health, income etc) and review it regularly. Make a will, and investigate whether a family trust is right for you.
Plan for your retirement
If you have access to a workplace savings scheme consider it seriously (even if you still have debt), especially if your employer will make a contribution too. The Government's new workplace initiative KiwiSaver is available from July so review it now as to whether it suits your own situation.
Have an investment plan
Consider investing to make your money work for you - it isn't just for rich people. Options include long or short-term investments, bonds, shares, or property. The general rule is that the more you rely on your nest egg for regular income, the more conservative you should be.
Teach your kids about money
The earlier children learn, the better they will be at making their own financial decisions. Good habits they build in childhood could stand them in great stead for avoiding financial pitfalls as an adult.
Step Tools
For more personal financial information you can visit the Retirement Commissions free and independent website www.sorted.org.nz You will find comprehensive information and calculators to help you make these vital decisions, including:
* Net worth calculator
Use this calculator to work out your net worth (what you own, less what you owe).
* Goals worksheet
Use this online worksheet to write down your short, medium and long term financial goals and decide what your financial priorities are.
* Budget calculator
Put in your income and spending and this calculator will work out the difference.
* Quick KiwiSaver calculator
This calculator helps you work out how much money you will save through the KiwiSaver scheme - whether you pick the 8 per cent or 4 per cent contribution.
