It’s a new year so its time to get your finances sorted out, here are a few things that can quickly and dramatically help you get your finances into shape.
- If you are an employee make sure you are a member of KiwiSaver and are contributing the minimum of 3%, your employer is legally obligated to match you dollar for dollar, meaning a risk-free guaranteed 100% return on your money. Note that they are only obligated to match up to 3%, nothing above.
- On the topic of KiwiSaver, secondly, make sure you put enough into your KiwiSaver to get the full member tax credit. This is one of the best investments you can make and will give you a guaranteed 50% return on your money. Each year the government will match your match your contributions 50c to the dollar up to $1,042.86, meaning when you get $521.43. You need to contribute this $1,042.86 by July each year in order to be eligible. If you’re not a member of KiwiSaver, its time to sign up. (Also quick tip check your fees!)
- Pay down your consumer debt. If you have multiple consumer loans or credit cards with outstanding balances start paying them down regularly. These can rapidly bury you in debt with many loans charging above 20% interest p.a. If you have multiple loans it may be worth considering debt consolidation. In other words, going and getting a loan at a lower overall interest rate to pay off all your other outstanding loans. This means you only have one payment to make each month and it will be at a lower overall interest rate than your other loans. For example, if you have a personal loan set at 13.99% and a credit card at 20.99% both with the same balance outstanding you are effectively paying an average rate of 17.49%. Depending on your situation you may well be able to get a lower interest rate loan to pay those off. Shop around and consider alternatives, like Harmoney which if you meet the criteria, offer loans at as low as 6.99%.
- Once your debt is under control and you are grabbing that member tax credit its time to start regularly saving a small amount if you can. If you haven’t worked out how much you spend, start here. Once you know how much you spend you can see if there is any left over from your income to save. If so set up a separate savings account, I would recommend one of the high-interest rewards accounts. Most banks offer these however to reap the benefits discipline is required as you are penalised for withdrawals. Set up an automatic payment for whatever amount you can afford into this account every payday, this helps with the discipline side of things and takes away the temptation to miss payments. Before you know it you will have a small nest egg growing.
Getting all of these steps under way will get you on the path to tidying up your finances, and help remove some stress – especially in the debt department. To find out more about the member tax credit go here.
NB. I do not endorse the use of Harmoney, it is simply one available option. Make sure you shop around for the lowest interest rate and best deal.
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