Advice matters
Spring clean your finances in five steps

Spring is here, and with all that’s been happening within and around our lives, this year is not like any other before. For many New Zealanders, the sudden uncertainty has been a ‘wake up’ call – a reminder of how interconnected personal and financial resilience are, and the importance of being proactive.

So just like you do a ‘spring clean’ of your home, why not take this opportunity to spruce up your finances? Here are some helpful tips from our SHARE advisers to give your money a 360-degree treatment.

Find your ‘point A’

As a starting point, take a financial inventory of all your assets and liabilities to determine where you currently are. These can include:

  • your savings
  • your credit cards
  • your mortgage
  • your insurances
  • your credit score
  • your KiwiSaver funds
  • any other investments you may have.

Write down what you owe, what your regular repayments are, and so on. Try to be as detailed as possible; this information will help you identify where to focus your efforts. It may also be a great opportunity to get your paperwork in order and store it in a drawer (or a hacker-proof virtual folder, of course).

Declutter your financial life

It wouldn’t be a spring clean without a good declutter. Now that you know what you have, think about what you need or use.

For example, do you have more than one credit card in your wallet? If so, it can be difficult to keep track of all the different repayment dates. You may consider consolidating credit card debts and cancel those cards that are no longer needed. If done properly, debt consolidation can help you reduce monthly repayments and free up funds for other expenses.

Insurance is another good area to declutter. Whether you have one or multiple policies, we recommend reviewing your cover on a regular basis. Our SHARE insurance advisers can help you assess your needs and make sure that you have an appropriate level of protection – not too much and not too little.

Assess your spending habits

Here’s where you’ll start delving into the details. Go through your bank statements (or use a spending tracker app for better convenience), and check where your money is going. Are you happy with your spending habits? Do you think you can make adjustments here and there? Is impulse buying taking a toll on your budget?

When it comes to saving or spending, even small amounts can add up quickly. So, by identifying your ‘money leaks’, you can start to address them and take action.

Make saving automatic

If you’ve found it challenging to budget in the past, be kind to yourself. We’re all different and what works for your friends may not be as effective for you.

Some people are comfortable with the 50/30/20 budgeting method, which involves allocating half of your income to essentials (bills, food, housing), 30 per cent to personal expenses, and 20 per cent to savings.

Other people prefer the zero-based budget strategy, which means every dollar is assigned to a budget category (like retirement savings or personal expenses), and unused funds can be rolled over to a different category at the end of the month.

If these methods sound a bit too labour-intensive, automating savings can be an option. It’s a great way to ensure money gets put aside on a regular basis without having to think about it. Once you know your budget, you can choose how much you’d like to save and set up a direct transfer to a separate savings account. And of course, you can set up as many accounts as you wish, one for each savings goal you may have – including building an emergency fund.

Take control of your debts

We’ve already mentioned credit cards. More in general, if you have debt (big or small), it’s important to focus your efforts on repaying it as fast as possible. Debt always involves some form of repayment with interest, so if you’re not paying it down, you may be wasting important resources that could be spent (or invested) otherwise.

Having said that, not all debt is bad for you. When managed appropriately, for example, a mortgage can be an affordable means to get on the property ladder. But again, repaying it as fast as you can is key to reducing the overall interest costs.

Not sure where to start? There are different methods you can try, like ‘debt snowball’ (paying down debt by going from smallest to largest loan) and ‘debt avalanche’ (paying down from the highest to the lowest-interest debt). Our SHARE advisers can help you find a strategy that’s suited to your needs, goals, and style.

It’s time to dust off your goals

Setting goals is a key way to add purpose and forge new directions, but even the best of plans can lose momentum. The important thing is to not let things slide.

Take a moment to think about your financial goals – your needs, your wants, your nice-to-haves. It could be buying your first home, protecting your family’s future, or perhaps funding the retirement lifestyle you’re envisioning. Whatever your destination is, having a realistic plan to get there can make all the difference.

Our SHARE advisers are here to help you create a realistic roadmap to achieve your objectives, one short-term step at a time. Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.