Diana Clement: A financial prescription for an uncertain year

The pandemic will continue to play havoc with our finances for a while yet, it seems. Photo / 123RF

Who would have thought that we'd still be knee-deep in the pandemic come 2022? In March 2020 a friend predicted it would be "over in weeks". I thought it might, if we were lucky, be over by Christmas (2020). And here we are, with uncertainty hanging over our health, our jobs and our finances.

In uncertain times it's good to fall back on time-honoured financial rules. A financial prescription for an uncertain year ahead can help get us all through unpredictable events.

Go back to basics

First, analyse your past 12 months' spending then create or update your budget. A good budget is the best way to magic money out of nowhere, by highlighting changes needed. You may have direct debits and automatic payments, for example, for services you no longer need. It has become too easy to sign up for software-as-service, music or video streaming, and so on. It may be an insurance policy or gym membership that has passed its use-by date.

Shop around

Who knows when their current electricity, broadband or phone plan ended? That's usually an excuse for the provider to slowly increase the price, or not offer you the same juicy deals as new customers get. Multiple websites exist to help consumers find better utility providers and other services. Consumer's Powerswitch.org.nz is one. Canstar.co.nz allows you to compare bank accounts, insurance and several other products. Simply telling your existing provider that you plan to switch can sometimes elicit a better deal.

Don't panic

This is especially true of KiwiSaver. If your investments have been chosen with the 10+ years long term in mind, then they will survive a "crash" (technically called a correction) as they did in 2008 and then March 2020. The only people who lost money in March 2020 were the ones that panicked and moved their investments to conservative when the market was down. That locked in losses. Everyone else's diversified investments rebounded in weeks. Even with the GFC, $1000 invested in the NZX in mid-2007 would have fallen to $558 by the first quarter of March 2009 but was back up to $1000 by the beginning of 2011. Left invested that money would now be worth more than $3000. Most analysts aren't predicting a major correction for 2022. But crashes tend to come from left field. The moral from history is invest wisely and widely in the first place and hold your nerve.

Seek financial advice if necessary, there is no shame in it. Photo / 123RF

Get a review

Banks, budget advisers or financial advisers can review your current financial situation for you. I find that they all come up with clever ideas. They may ask questions that you've not thought of, or for that matter don't want to lift the lid on. Independent third parties really do help in many aspects of life. Money is deep-seated in our psyche and if you know you self-sabotage, consider getting couple counselling, psychotherapy or other psychological help. The drivers behind our spending and saving aren't always straightforward and/or something people can manage without professional help. I was chatting to an American immigrant over coffee, and she couldn't get her head around New Zealanders' aversion to seeking help. There is no shame in it.

Deal with that debt

Like everything else, it's easy to just stick your head in the sand about debt. The quicker you pay it off the better. That may mean consolidating it or finding ways to game yourself and tackle it. That's even the case with interest-free student debt. Paying it off means you're free to go overseas without having to pay interest on your student loan. It also means that when you can buy a property, your student loan isn't counted against you in affordability calculations. If you're struggling with debt, speak to a free budget adviser and contact your lenders. They have to offer you options by law.

Finally, read, learn and be open-minded about your personal finances.