Editorial: Ease this year’s financial worries by planning ahead now

Money can be a major pressure point over summer. Photo / Laura Smith

Opinion

EDITORIAL

The start of the year is often when people think about how they can improve their lives. People join the gym to get fitter or vow to eat more healthily.

It’s also a good time to think about your finances and to put a plan in place to ensure by next summer holidays you are in a better place - or are at least on track to achieve your financial goals.

Centrix data shows mortgage and consumer arrears have tracked higher in 2024. Those behind on mortgage payments were up by 10% as of October although they remain historically low compared to the period after the Global Financial Crisis in 2008/09.

Consumer loan arrears are also up. Arrears levels were 3.1% higher for the October month, year on year, equating to 12.14% of the active credit population.

And arrears are expected to rise over summer with the cost of Christmas, holidays and back-to-school spending putting pressure on households. Often it takes until March or April before many clear their debt and get back on track.

One way to avoid that is to put money aside throughout the year to save for the summer holiday period. Mortgage rates have been trending down, which means mortgage payments are likely to fall this year.

For those who have managed to cope with paying their mortgage at the higher rate, it’s an opportunity to keep payments at the same level and knock the mortgage debt off faster or use the savings to set up an emergency fund.

An emergency fund of just $1000 can be enough of a buffer for times when the washing machine breaks down or the car needs to be repaired, for example. It could mean the difference between needing to get a loan to cover the cost, which can have high interest rates.

For those who have an emergency fund already it’s a chance to weigh up whether you are on track with both short and long-term financial goals. That could be saving for a holiday or a house deposit.

On the longer term side, it could be re-starting KiwiSaver contributions if you’ve been on a break or considering if you are saving enough for retirement. Most people are contributing the minimum of 3% and for those who are employed, they will be getting a 3% employer contribution.

Getting a pay rise or a promotion can be an opportunity to increase contributions without feeling like you have less in your pocket. For those who are self-employed it could be setting up an automatic payment of $21 a week to ensure you get the maximum $521 Government contribution.

Even saving $5 a week will attract a $2.50 contribution from the Government. The hope is that when January 2026 arrives you will be in a better place financially at that time and into the future.

It’s can be hard to make changes, whether for health or wealth, but your future self will thank you.