New Zealanders have done a lot of wondering about their finances since our world got turned upside down thanks to Covid-19. That "I'm wondering" about finances that is all over social media is the theme
Who took my KiwiSaver money?
This was the most asked that question over the first six months of the pandemic. The answer is no one. The world's share markets more or less went into freefall from February 21 and bottomed out just over a month later. Ups and downs and sometimes sharp falls and spikes are normal for investments. As those who held on have seen, most funds are back to pre-pandemic levels. All you had to do was hang tight.
Can the Government take my KiwiSaver?
No, no, no. The Government isn't holding your money. All it does is funnel your dollars from your employer, via the Inland Revenue Department as a collection agency to your private KiwiSaver provider. Your KiwiSaver is in your name and invested in shares, bonds, property and other investments. So even if your KiwiSaver provider went bust, you'd still own the investment.
Do I pay down debt first or get an emergency fund going?
It's always good to pay down debt. But as the commission's personal finance lead Tom Hartmann points out, everyone needs money aside money for life's unexpected expenses such as a trip to the vet or mechanic, or you could end up taking out more debt. Make at least minimum payments on your debt, but at the same time try to build up a modest emergency fund such as $1000. The exercise of saving should help you get into a pattern to pay that debt down.
How much should I be spending on fun stuff?
"Fun stuff" is anything you want, not truly need to live. You're on a hiding to nothing if you cut out all the fun spending. Earmark some fun money for spending each pay cycle. For couples, that's his-n-her's guilt-free money. A rule of thumb such as 50-30-20 for needs, wants and savings, works well for some people, says Hartmann.
How much should I save for retirement?
If you're 20 it's hard to imagine life on a zimmer frame. You could be retired for decades. If you save a little each payday then you'll have a decent retirement income. At the very least make sure you save 3 per cent into KiwiSaver regularly and check that your employer is adding another 3 per cent. If you can save 10 per cent of everything over your entire working life you're going to have a very comfortable retirement.
What insurance do I need?
As Hartmann puts it, only the crazy rich don't need insurance. The rest of us probably can't replace all our belongings, or pay to repair the Mercedes we just rear-ended at the traffic lights. It's a really good idea to insure against long-term illness as well. Benefits are pretty meagre. Choosing insurance means prioritising.
Going back to the "I wonder" questions, be wary of "advice" you receive on social media. It can be correct, but often it's horribly wrong and can be very bad for your financial wellbeing.
• For Money Week events visit Cffc.govt.nz/sorted/sorted-money-week. You can also check out Sorted's various tools for budgeting at Sorted.org.nz/tool/budgeting-tool, the Goal Planner at Sorted.org.nz/tools/goal-planner and investments/KiwiSaver at Tinyurl.com/SortedSmartInvestor