KEY POINTS:
Q. What are some of the most common mistakes people make with their money?
A. People see a larger salary as the key to creating wealth. In reality though, the key to creating wealth is knowing how to hold on to money. The size of your income doesn't matter if you are spending it all. We see this far too often with clients who have six-figure salaries but spend more than what they earn. It comes down to changing people's personal habits and preconceptions around money.
Q. What are some of the most common mistakes people make with their mortgages?
A. Many people focus on interest rates as the most important feature of their mortgage. When I got my first mortgage I realised even though I got the most competitive rate at the time, the discount translated into negligible savings over the term of the loan. Another mistake is just relying on the bank's advice and assuming it's impartial and unbiased. It pays to do your homework.
Q. Where is the best place to go for advice?
A. It's essential to have a qualified professional consulting you - and that processes and costs are transparent. For example, enableMe provides a solution that brings together a team of experienced professionals in accounting, tax, law and financial planning. The service adds value to the average New Zealander by providing realistic solutions. These can achieve savings of up to hundreds of thousands of dollars in interest and through minimising tax costs.
Q. Are the banks and brokers really that conflicted when it comes to mortgages?
A. Banks and brokers are encouraged to provide a larger mortgage with maximum term. The mortgage size and term (usually 30 years) are major contributors to cost. In a bad situation, they can mean people end up paying back as much as three times of what they borrowed. If your goal is to minimise interest costs, the information you get from anyone incentivised to do the opposite makes it hard to view that advice as having your needs as top priority.
Q. What factors should I consider when choosing a good financial adviser?
A. You should choose someone qualified as a financial planner, who works with experts of other disciplines tax, accounting and law. It's also important they disclose information around the fees and commissions. They should also be able to give you examples of people in similar situations to yours, and clearly demonstrate how their service has benefited others. Always get advice in writing.
Q. What do you recommend as a good way of improving my financial literacy?
A. Education! enableMe runs seminars to build financial literacy by teaching people about money and mortgage management. Another point is to seek out a balanced viewpoint, and remember there is no one magic solution for getting rich. It is easy to be distracted by people who loudly extol the virtues of their financial decisions. At the end of the day, money can be hard to make and easy to lose.
Q. Why should I have to know everything about money? Isn't it easier just to let someone who knows what they're doing look after it?
A. You don't have to know everything but it is important to have a bassic understanding. It's your money that you've worked hard for - you have a right to make informed decisions. And again, you should get advice but you've also got to be able to be wise to the person giving you information. Ensure they are appropriately qualified and have your interests at heart - and not the commission they're receiving on a product.
* Check it out online at: www.enableme.co.nz or look out for McQueen on the upcoming TV One series, Property Climbers.
