The key thing you're looking for as you run your numbers is every little bit of extra money you can put to work. When you add up what you pay for housing, essentials like utilities and food, minimum payments on loans, and whatever you need to earn money like transport to work - what's left over to work with? There's got to be something.
Without any surplus, it's hard to make any headway. And the more you can find, by either increasing income or decreasing expenses, the faster and easier it will be to get ahead.
Step 3. Bank a buffer
Found your surplus?
Use it to build a small buffer - an emergency fund of say $500 or even $1,000 for anything unexpected that comes up, like a dental bill or a car repair.
Pay yourself first with each pay packet - preferably automatically - into a separate account until you reach your buffer amount. (Hint: sell stuff you don't need to get you there faster.)
Step 4. Take advantage of KiwiSaver
No one should be missing out on money they're due in KiwiSaver. For starters, pick the right fund for you and put in enough to get the government contribution of $521 each year. (Putting in $20 a week will get you there.) Put in enough to get your employer's contribution, too - but not anything more just yet. For the moment, you just want to make sure you're not leaving money on the table.
Step 5. Tackle high-interest debt
The next place to aim your surplus is towards any loans you have that are costing you dearly in fees and interest. (The student loan or mortgage can wait.) Not sure which to start with? Look into creating a debt avalanche or a snowball to take them down one at a time.
Step 6. Protect what's important to you
There's no point in sorting out your money and building wealth if it's all going to fall over should something bigger happen. This is where insurances, wills and powers of attorney provide cover from the storms. To help get them in place, good advice is gold.
Step 7. Chart your course, and set sail for your goals
At this point, you've used your surplus to sort out the short-term stuff.
It's time to set some goals further out on the horizon: a house deposit, tackling the mortgage, a bigger savings buffer to cope with more unexpected things like redundancy, a target for retirement, etc. Whatever yours are, that's where to put your surplus to work.
The good news is that there are many routes, financially speaking, to reach our destinations. As you sort out what's important to you and how to get there, may you find the fastest.
Get Sorted is written by Sorted's resident blogger, Tom Hartmann. Check out the guides and tools from Sorted - brought to you by the Commission for Financial Capability - at sorted.org.nz.
