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'Tis the season to get your financial house in order. Amanda Morrall looks at five matters for financial housekeeping as 2012 comes to a close

Posted in Personal Finance

By Amanda Morrall

Hard to believe 2012 is almost behind us. With the silly season at our doorstep and only four weeks left in the year, now is a good time to do a review and put into motion some goals, restraints and structures to make 2013 as financially fruitful as possible.

Here's five suggestions to get your financial house in order. If you get overwhelmed by all five, do just one this weekend and work your way through the list before 2013.

1) Budget

If your circumstances are changing in 2013, or even if they aren't, take some time to evaluate your outgoings and incomings, prune the unnecessary spending and find creative ways to grow your income. There are no shortage of free budgeting spreadsheets and apps available, but for the ultra lazy here's a link to one such resource on offer from Westpac. Another one I like is the Money Planner calculator from Sorted.org.nz.

2) Specific savings goals

Banking all that money for the sake of it without having any identified goals is aimless. Reflect on your short, medium and long-term goals and attach some specific figures to them along with a plan on how to achieve these targets. Check your bank for any savings tools or resources they have and incorporate them into your banking routine. ASB's Save the Change (which rounds up purchases to an amount of your choosing and directs the excess into your nominated savings account) is a goodie. Westpac's Impulse Saver app is another good way to save when the mood strikes you. However, the best method by far is establishing a fixed amount to come off your pay cheque and adjusting your spending around that, assuming you have already calculated your essentials.

3) Investing

I know some of you aren't big fans of the Government's partial privatisation plan for our state owned entities. Perhaps you'll be encouraged by recent analysis of the NZX50 (reported yesterday by Radio NZ). Share broker Forsyth Barr crunched the numbers and found that an investor who went into NZ shares during the global financial crisis in 2009 would have made an average annual return of  around 14% over the past four years. The estimated return includes share price gains and dividend growth and is second in performance only to the Australian share market, finishing ahead of U.S., Japanese and British sharemarkets even. You can listen to the full report here by Radio NZ's economics correspondent Nigel Stirling.

Once again, here's the link to the Government share offer website which has an  A-Z guide for investors.

4) Retirement

How much will you need for retirement? That depends on what kind of lifestyle you want. If you are satisfied with a bare bones, no frills existence, then perhaps you'll be able to make due on New Zealand Super alone (although I wouldn't bank on the rates staying what they are now). See chart below.

Category

Weekly rate

Fortnightly payment (net)

Gross

Net

Single, living alone

$400.07

$348.92

$697.84

Single, sharing

$367.45

$322.08

$644.16

Married person or partner in a civil union or de facto relationship

$302.40

$268.40

$536.80

Married or in a civil union or de facto relationship, both qualify

Total

$604.80

$536.80

$1,073.60

Each

$302.40

$268.40

$536.80

Married or in a civil union or de facto relationship, non-qualified partner included on or after 1 October 1991

Total

$572.58

$510.18

$1,020.36

Each

$286.29

$255.09

$510.18

Married, non-qualified partner included before 1 October 1991

Total

$604.80

$536.80

$1,073.60

Each

$302.40

$268.40

$536.80

Qualified partner in rest home with non-qualified partner in the community

$287.56

$256.19

$512.38

Hospital rate

$47.31

$42.38

$84.76

Take a moment to calculate how much you could potentially have in your KiwiSaver account by age 65 here. See how the amount squares with your desired lifestyle and financial requirements, which you can also calculate here on Sorted's website.

5) Net worth

Finally, to help measure the gap between what you've saved and how far you need to go, take some time to calculate your net worth, the difference between your assets and liabilities. You can read more about net worth and why it's important in this previous story I did, or go directly to the calculator, also on Sorted's website here.

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

7 Comments

#3 No mention of risk? and

#3 No mention of risk?
and the key is averages...so it depends on your picks....pick wrong and you could be down 14%...and its done by a share broker....really independant that one....no...no...no vested interest....none....nada.....
#4 My mother-in-law only has the state pension and her savings.  She has a low cost sheltered accomodation and no real outgoings, yet she tells me she's drawing down her savings.....
regards

#3 is cherry-picking,

#3 is cherry-picking, Amanda.
 
If you were in the game '07-'08, it's completely different. Anyone can chop-start a graph at the low point.

True but it's worth noting

True but it's worth noting anyway. We had the same discussion in our office. Still maintain that despite all the doom and gloom there are some good opportunities outside of residential property.

Agreed. With a zero-sum

Agreed. With a zero-sum see-saw, it's all in the timing - when you get on and off.
 
We have to be watching the biggest debt-implosion, biggest wealth-shift-to-supposed-safety, ever. That is going to distort a lot of things, particularly share-markets. The Dow went from down near 6000? to over 12,000. You'd be forgiven for assuming that to represent a 2x increase in profitable activity. There isn't, so much of it probably represents flight-to-safety, mixed with wishful thinking. Same with the current inflation of house 'prices'.
 
We haven't see the end of the process. A lot of folk are going to be confused by the numerical 'dollars', vs the declining purchasing-power of same. All the QE going on can't result in anything else.

PDK is spot on with that

PDK is spot on with that Amanda...
Share portfolio pre Dec 2007 had minimum 35% wipe off  like watching a blackboard being wiped...50 %+ for some o the baddies.
Don't even ask about Pike River....soul destroying .
 and so what the Market was saying to me was get back in there boyo, never mind your bruises, broken bones , gaping fleshwounds, the only way out is back in.
Right now , on the fundamentals I'd have to agree with you , yes there are opportunities....but...and this is the big butt...........many returning burnt investors re-enter with a different mind set, a very timid or skittery attitude, poking and pulling funds at the sniff of potential risk.
So what you have is an investor that operates with a fear mentality through lack of trust and confidence.
 It is also worth noting that someone who is say 29 to35 will have a different strategy to someone who is 50 to 65, the latter has to embrace more risk to recover from  previous positions or simply to gain any advantage the time no longer allows them .
 Investing in the market is never a one size fits all, even those using fund managers (appointed by them) should at least have a complete understanding of their risk spread so as to be informed or aware of  the potential for loss they wittingly or otherwise accept as a term of participation.
 That said.....yes ...if your going direct , due dilligence, offset  risk through spreads, and at least hold 10K of power shares if only to offset the hammering your about to take on your electricity bills.

Thanks Cristov. Yes, a good

Thanks Cristov. Yes, a good reminder for people to understand the whole gamut of risks they face when investing least of all the risk related to the party they are entrusted their money with as the RAM incident has underscored once again.
Have linked to this several times amid this discussion but something people might find useful is Mary Holm's new guidebook on risk "Upside, Downside" which also tackles KiwiSaver. Interested parties can download it for free from the RBNZ website. Here's the link below.
http://www.rbnz.govt.nz/news/2012/4899492.html
Personally, I think anyone living in a draughty, cold house should invest any discretionary income into buying insultation before they invest in power companies. Better long-term returns on money saved and improved health outcomes for the family. Health is #1 huh?
 

"Privacy is now a completely

"Privacy is now a completely dead concept, from both a legal and a practical point of view. If you want to retain privacy, you now have no alternative to relocating outside the US."
http://www.marketoracle.co.uk/Article37803.html
And are you safe from the grasping fingers of the US govt here in NZ...well are you?