Happy New Year! We hope that you have had a fantastic time over Christmas and are enjoying a least a few days off.
It’s January, a time for reflection about last year and looking ahead at self-improvement for this year. Once you have worked through the diet and exercise goals (they always seem to be fairly near the top of my list), there’s the money planning for the year.
Here are the Three Critical Rules of Money Management that you need to incorporate into your planning.
- Spend less than you earn. Okay stop rolling the eyes, I know this is obvious! Every adviser in the finance world tells you this is what you have to do to get ahead. Until you get this rule under control you will never reach your important financial goals like being debt free, stress free retirement or whatever it is you see in your financial future. *So why don’t most of us do it?
- Know where your money goes. Seems simple enough but not a lot of us nail this. If you are a detailed person, you will really enjoy tracking your money, what comes in and where it all goes. But if tracking isn’t for you, there are other options. You do have to do some number crunching first and then you can start allocating pools of money to various categories and set up your bank accounts to reflect this. There are a number of good Apps to help you with this. If there is no money in a particular account, you can’t spend!
- Pay yourself first. If you are in KiwiSaver (for us Kiwi’s) or in any other sort of retirement saving scheme where savings are taken directly out of your income, you are making a good start on this. But is it enough? A good rule of thumb is at least 10% of your income needs to be tucked away for retirement.
* The average household in New Zealand spends between $1.06 & $1.08 for every dollar of income