Making good financial decisions now will determine how well you can provide for yourself and your family in the future. It’s therefore vital that you have a good handle on your financial situation and seek help that is tailored specifically to the needs of you and your family. The examples are fictitious but the issues are real to all Kiwi’s.
David & Aroha are both in their mid 30’s living in Wellington with their 2 young children. David is an employed IT Consult-ant while Aroha works part time teaching. They have a $380,000 home loan with no established savings or retirement funds.
David and Aroha are at a stage where most people feel the greatest financial pressure of their lives. They have high debt combined with reduced income, while they raise their young children. A rainy day fund is therefore really important to have stashed away for any surprises that should happen. The financial pressure is hard enough without having to worry about how the mortgage is going to get paid because of redundancy, so 3 months’ expenses should be the goal for peace of mind.
With children and a busy schedule, having a weekly meal planner could save David and Aroha both time and money. If they shop for their groceries online they’ll buy just what they need, and avoid the impulse buys on things they don’t!
Communicating this financial pressure is also key to spreading the burden, and a money date is a relaxed way to get some time out from the children. At this date it’s important they look at reviewing their spending over the last three months and identify areas where they are over spending. It’s amazing how much can be saved just by cutting down the morning café call – one coffee per working day is $1,170 per year! They should focus on changing one expense each time they sit down.
TOP TIP— Spending is a lot easier than saving but if you know exactly where your money is going, reaching your financial goals will be much simpler.
Martin & Stacey are in their early 50’s living in Napier. They’ve owned a successful retail business for the last 12 years. They have a $75,000 home loan plus a freehold rental property in Taupo and have started to save into shares. Their 2 adult children have moved out of home.
Martin and Stacey have worked tirelessly for years to set themselves up and it’s important now they keep their eyes firmly on the prize for their next phase! Some call it luck, they call it hard work.
After the past 20 odd years been totally focused on their children while running their business enterprise, it’s a good time to review their financial goals for the next 15 years. They should ensure they have a grasp on their outgoings and should be actively looking for saving opportunities, as it’s very easy once children are financially independent to spend money on unnecessary items.
So how do Martin and Stacey get ahead and reach these goals? They only have 3 options; decrease their expenses, increase their income, or choose option 2 and look at higher risk investment strategies. (Stay tuned later in the series)
It’s also essential that Martin and Stacey don’t just rely on the business to sustain their current situation. They need to have a dedicated financial plan in place that sets out their combined money goals, and although their disposable income has increased they still need to spend thoughtfully. They can reward themselves as you don’t know what will happen tomorrow and still springboard themselves up for a successful retirement.
TOP TIP— Take control of your spending, focus on your long term financial goals, and make hay while the sun shines from your consistent income.
Robert & Marilyn are mid 60’s and have recently retired. Robert was a lawyer in Auckland while Marilyn raised their family. They have 3 children and 7 grandchildren. They are debt free, own 2 rental properties and have substantial funds on deposit for retirement.
Robert and Marilyn have set themselves up well and are in an excel-lent financial situation at retirement. They have made sensible investment choices and now receive substantial income from their rental properties and investment returns, plus they also receive the pension. It is important they have a reasonable rainy day fund available so Robert and Marilyn feel they can spend within reason, without stealing from their longer term nest egg.
People in this situation can sometimes be reluctant to reward them-selves for hard work, having spent many years making sustainable spending choices. However, now is the time to enjoy their success! They still have their health, so should be encouraged by their family to go overseas and see the world.
Saying that, you never know what’s around the corner. Up till now, Robert has had full control of their money, as Marilyn has not been interested. If something was to happen to Robert, it’s important that Marilyn understands and gets involved in their financial decision making. Seeking advice or discussing the assets they have would have real benefits, whether it be with a qualified adviser or a trusted family member. Neither party should feel like they have been left alone without money knowledge.
TOP TIP—No matter what the financial situation, both parties need to be on board when it comes to money. It’s never too late to start and it’s too important to ignore.
This information is of a general nature and is not intended to be personalised financial advice.
Source: RIVAL Wealth