Money Week: Four steps to feeling secure
When you think about being a bit better off financially, it can mean much more than just having lots of disposable income. It might also be about protecting yourself and your family from the unexpected, being able to handle surprise expenses, and also about supporting your future through your choices today. Developing wealth is about more than just making money; it’s about setting up good habits, having a little bit more of a focus on your wealth and making good decisions.
In support of NZ Money Week, here are 4 steps you can take to start growing your wealth, and help you feel safer about your finances.
1. Getting on top of debt.
Taking steps to reduce and control your debt is the first step towards creating wealth and it’s good to have a solid plan of attack. Firstly, it’s good to look at your spending and make sure you’re not spending more than you are earning.
You can use our Track My Spending tool to make sure you know where your money is going and that you’re only spending what you’ve planned to.
You could start paying off debt with the highest interest rates first, then work your way down to the lowest – this will save you paying more interest in the long term. Alternatively you could pay the debt with the smallest outstanding balance first, working your way through to the highest – this may give you the most satisfaction and encouragement to keep going! You can even look at a combination of both strategies, paying off your smallest debt first for the quick win, then looking towards your higher interest debts.
If you’re managing multiple interest rates, payment times and amounts on your debts, it could also be a good idea to consolidate these into one easily managed loan. Organising your finances smarter could save you money and help you get back on track sooner.
Read more about an ASB debt consolidation loan and see if this is right for you.
2. Start an emergency fund.
Once your debt is under control, it’s a good idea to look at how much you can start to save. The first thing you might set a goal for is an emergency fund. This is an amount of money saved for financial emergencies, such as losing your job, illness and medical bills etc. It depends on your situation but roughly 3 months’ worth of expenses should be covered for this.
It’s a good idea to keep this separate from other savings goals, so you’re not tempted to dip into it. Another consideration when determining the level of your emergency fund is the insurance cover you have when difficult times hit. If you’re appropriately covered, you’ll probably require less in your emergency fund than if you aren’t fully covered.
Here are some more tips on saving towards a goal.
3. Save for a rainy day.
Having a rainy day fund allows you to save for short term goals that you know about such as new furniture, appliances or a holiday! It’s a great way to help and test your saving skills.
Depending on what you can afford and based on your short term saving goals, contributing a regular amount into a rainy day fund helps you make better decisions, and could save you from getting into debt to fund these things.
We’ve put together some helpful tips on budgeting to make this easier.
4. Making the most of your savings.
Getting in control of your debt, and building up a savings surplus is the gateway to investment. Just because you may not consider yourself an investor, doesn’t mean that it’s not for you.
Once you’re feeling like you’re comfortable with how much you have saved for emergencies, and you’ve got a nice buffer in place for a rainy day, it’s a good time to think about how you can start to make your savings work a little harder. The first question is deciding what you are trying to achieve.
With a goal in mind, or an outcome for the future decided, the next step is to think about the timeframe you’re looking to invest for. How much time you have to invest will determine how much volatility (ups and downs) you can tolerate to get the best returns for your goal. Your goal and timeframe will help steer you towards the best type of investment.
These goals don't have to be all about retirement or your first home – it could be saving for a trip of a lifetime, a wedding, or even putting aside money to help your kids through university.
If you’re ready to start thinking about investing, check out the ASB website for the range of options we offer.
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This blog does not have regard to the financial situation or needs of any reader. As individual circumstances differ, you should seek appropriate professional advice.
ASB’s lending criteria and terms apply. ASB Debt Consolidation Loans cannot be used to repay an existing ASB personal loan or repay loans from friends or family.