Financial journalist Frances Cook explores what you should (and shouldn’t) know about money, and shares her best advice on how to make your finances work for you.
Money makes the world go round, but it’s also something that confuses many of us.
It’s not that surprising really — research from
Even worse, 82 per cent of school leavers say they wish they’d learned more, and feel out of their depth.
That vague feeling of unease and not knowing what to do tends to just continue through adulthood.
The confusion turns it into a sensitive topic which cuts to the core of many of our most vulnerable parts of ourselves. Ask someone how much they’re paid, and they’ll hear “how much are you worth”.
Ask someone if they have investments, they might hear “how smart are you”.
There are layers of emotions and cultural expectations piled on top of what we do with our money, and many of them are holding us back. Here are some of the most common money myths, and what you should know instead.
I’m just not good with money
If nobody taught you how to swim when you were a child, you wouldn’t expect yourself to magically know how as an adult.
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Advertise with NZME.So if you’re only just learning how it all works now, that’s fine. The important thing is simply that you start.
You can make learning about money a small part of your daily routine by following some (trusted) social media accounts. This way you pick up some tips and tricks while you’re relaxing, and it becomes a normal part of your day.
Before you know it, you’re interested in listening to a podcast about money, and maybe even picking up a personal finance book.
Start small, and build up.
Learning about money is hard, and good money management should be complicated
There’s a trick that particularly sucks in smart, successful people — thinking that doing money ‘right’ means it should be complicated.
After all, you’re used to working harder in other areas of your life, and that translates into better results. Why should money be different?
Except that the research shows us, over and over, that the less you do with your money, the better.
Learning a little more about money by listening to podcasts and reading a couple of books is all it takes. You don’t need hours of research every week, or to study for a Masters of Business, or to hire someone who has one.
Simple, automated systems like automatic payments into your savings are often the best way to make sure it actually gets done amongst the busy demands of life.
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Advertise with NZME.Regular, monthly payments into an investment fund like KiwiSaver, which you then leave alone, are often the secret to building up long-term wealth.
I don’t need savings, I have a credit card if things go wrong
A savings account is one of the biggest changes you can make that helps your mental health.
It sounds too simple to work, but don’t overlook these small wins. They’re often the best ones.
This is also one of those wins that works no matter what income you’re on. ANZ’s 2018 Financial Wellbeing Survey found two factors that had the biggest impact on people’s money happiness: 1, not borrowing for day-to-day expenses; and 2, saving some money regularly, even if it’s a small amount.
This had a big impact on money happiness across income brackets, for everyone from minimum wage workers, to six-figure earners.
So lock it in, and give yourself the gift of peace of mind. Because, to quote L’Oreal, you’re worth it.
I don’t need to talk money with my partner
Whether you like it or not, who you choose as a life partner is a financial decision as well as an emotional one.
You don’t have to do everything together, but you should at least know what each others’ goals are, and be ready to each do your part to work towards them.
If you’re only totally different pages, or unable to talk about money at all, that’s a red flag.
The number one cause of divorce is money problems, so it’s important to find a way that works for your relationship.
Try pouring out a glass of red wine together (or whatever treat works for you) once a week, and sitting down to calmly check in on how things are going with your money.
As long as you’re both happy with how things are going, that’s the important thing.
I need to know more before I get started
Women in particular often feel like they need to know ‘everything’ before they even start.
This particularly applies to things that are important for their future like starting to invest, or sorting out KiwiSaver.
Now, I obviously I think it’s good to know more about money, as I’ve dedicated my entire career to helping people figure it out.
But there’s also a trap that you delay doing anything until you feel ‘ready’. Most of us never feel ‘ready’.
Instead, I prefer people start to learn by doing. Put $5 a week into shares. Create a $20 a week autopayment into savings. Listen to money podcasts and read books while you’re doing it.
You might refine as you go, make some changes to your strategy, and that’s totally fine. None of us are perfect, and if you wait to feel like you are, you will simply never do anything.
Watch the pennies and the pounds will watch themselves
If you’re struggling to pay your bills, a big win will go further than a small win.
So the endless attack articles on ‘fritter’ spending makes no sense to me, particularly the obsession from some quarters about people daring to spend money on coffee. Sure, you can save money by cutting that out, but it’s often not the best place to start.
If you want to save money, target your big expenses first.
Big expenses have the biggest potential for big savings, and it’s less mental effort than weighing up every little spending decision across your day.
Your rent or mortgage, your food, your household bills, any subscriptions, your transport. These are often things you can cut back on once, then keep getting the benefits as the months roll on.
Saving $5 a week on coffee won’t make you rich, but figuring out a way to earn more, and then investing it, will.
That second part is also key. Cutting back is something we’re constantly told to do, but there’s only so much you can cut back.
Sometimes you’re better off to aggressively target a pay rise, and then put that extra money to work.
I can worry about KiwiSaver later
KiwiSaver is full of free money sweeteners, but you only get them if you contribute each year. You can’t go back and get them later.
If you put in $1042 a year, the government will match you 50 per cent, up to $521.
You wouldn’t turn down a $521 tax return would you? Because that’s basically what it is. $20 a week into KiwiSaver will get you that automatically.
Meanwhile, if you put in 3 per cent of your salary, your employer will put in 3 per cent as well. You wouldn’t turn down a 3 per cent pay rise, so why miss out on this?
Between the two of them you can more than double the money you put into KiwiSaver each year. It will then be invested, to go ahead and earn even more for you. But you only get these freebies if you put your own money in each year, before June 30th. So don’t miss out on it.
If I want money, it makes me greedy
People who say ‘money can’t buy happiness’ are, I’m sorry, lying. To you, and possibly themselves.
Being able to go to the supermarket and buy whatever is needed without stress, makes me happy.
The ability to take time off work and help out with your kid’s camp, might make you happy.
Being able to turn the heater on in winter without panicking about the end bill, makes most people happy.
All of these things take money.
Wanting to be able to take care of yourself and the people around you is anything but greedy or selfish.
In fact, it you have children, arguably one of the best gifts you can give them is the gift of peace of mind that they don’t have to worry about you as you get older.
There is obviously a limit on this, and greedy people exist. Trust yourself to understand the difference.
Bad people have money, and you have to do bad things to have money
Money isn’t good or bad, it’s what we do with it that matters. Money tends to amplify what’s already there.
So if you’re a kind, generous person, and come into money, you’re likely to use that money to do more kind and generous things.
If you’re a mean and selfish person, well, more money probably won’t stop you being a jerk.
Don’t hold yourself back from opportunities simply because you’re worried it will change who you are. It won’t. The mere fact that you’re worried about that means you’re someone who is likely to use extra money for good things.
Just make sure that you continue to hold yourself to the same high standards, and use any extra resources to nudge the world in the right direction.
3 Top Tips
If you do nothing else with your money, do this:
$20 a week into savings
Having savings to help out if you have a car breakdown or other unexpected expense can save you from a debt spiral. $20 a week becomes $1000 in less than a year. To make it a habit, set up an autopayment for the day after you’re paid.
Sort your KiwiSaver
It’s important to make sure you’re putting in enough to get your employer contribution, and government tax break. In most cases, if you put in 3 per cent of your income, you’re automatically sorted. Check with your boss, or payroll department.
What type of KiwiSaver fund is also important. Just changing from conservative to growth could mean you double your money by retirement, without putting in anything extra yourself. To figure out which is the best fund for you, head to the Sorted Fund Finder. It’s free, independent, and not trying to sell you anything. It can also help you figure out your options in just a few minutes, which is the quick help we all need these days.
You can find it by going to Sorted.org.nz/tools/kiwisaver-fund-finder.
Check regular bills, especially your power, for a better deal
New Zealanders end up paying for more their core costs than people in other countries, because we’re too loyal to companies.
Comparing the deals out there, and regularly switching, can save you big bucks.
Go through your bank statement for the last month, checking for unused subscriptions, and any regular bills that you could negotiate a better price for.
The best power deal can depend on how much you use and at what time of day, but Powerswitch.org.nz makes it easy to find the best deal for your lifestyle.
