Managing your finances & investing like a pro

manage your finances and invest like a pro nz
Managing your finances & investing like a pro

From basic financial planning and budgeting to saving for the future and investing your money, we'll help take you from broke and in-debt to secure and building wealth!

Balancing your finances is simply a matter of controlling your income and expenses in a way that not only allows you to live well but also makes provision for unexpected events while building wealth for the future.

What you’ll find in this guide:

  • Part 1: Sorting out your finances.
  • Part 2: Understanding debt, loans and banking.
  • Part 3: Saving, investing and generating wealth.

Part 1: Sorting out your finances

Learn how to budget

Learning how to budget in New Zealand couldn’t be simpler with hundreds of free budgeting tools and countless non-profit organisations ready to show you how. If you need to learn budgeting skills you can sign up and attend one of hundreds of free seminars and workshops across the country and learn from leading experts and mentors.

What is budgeting all about?

Budgeting involves considering your income and expenses and allocating set sums of your income to expenses so that your money is sufficient to cover all of your expenses as well as prioritise savings and investments.

Examples of budget categories include:

  • Housing: this includes your home loan or rental.
  • Transport: fuel, car maintenance or public transport costs.
  • Debt repayments: car loans, payday loans and credit cards.
  • Utilities: electricity, internet services, phone bills and mobile phone contracts.
  • Food and consumables: one of the highest expenses for most families is food and other consumables.
  • Insurance: car insurance, health insurance, life insurance and household contents insurance.
  • Annual expenses: birthday expenses, holidays, Christmas and New Years.
  • Entertainment: from your Netflix to your weekly trip to the cinemas.
  • Retirement: For example, NZ Super is a government backed retirement savings plan and can be boosted with a Kiwisaver account.
  • Savings and investments: From emergency funds to stocks and bonds, this is the part of your budget that is designed to help you build wealth.

Struggling to make ends meet?

If you’re earning less than $74,000 per annum or less and are struggling to make ends meet you may be eligible for financial assistance and should research this option.

Not only will this enable you to live more comfortably but the assistance may help you pay off your debts and bring some much needed balance to your finances and life. The New Zealand welfare system is also there to support those who have lost their jobs, are elderly or others who are struggling financially.

Budgeting is the first step towards getting out of debt & building wealth

Regardless of how much money you’re earning, if you’re living above your means and spending all of your earnings you will not be able to either get out of debt or invest money and build wealth.

Living within and below your means is the first step towards getting out of debt and saving money to start putting towards investments like properties and stocks and bonds.

Part 2: Understanding debt, loans & banking

When taking out any form of credit be it a payday loan to make it through the month, a personal loan to pay for a holiday you’re dying to take or a credit card to earn rewards, there are costs attached.

These costs may not seem to be too much when we consider that we can afford the loan repayments or easily manage to make the minimum credit card payment every month but, sadly things are not that simple.

One loan may be relatively easy to manage but when you consider your home loan, vehicle loan and then add in a personal loan and one or two credit card payments per month, we very quickly start falling into that spiral of debt everyone’s always talking about.

Never go into debt without reviewing your budget & ensuring affordability

Before taking out any loan you should not only ensure that you use a loan calculator to ensure you can afford the monthly repayments but you should always include additional expenses and costs that will come along with the loan. What additional expenses and costs?

If you’re looking for a car loan, remember that you need to pay the maintenance, insurance and running costs of your new car. If you think you’re ready to buy a home remember that you need to pay maintenance costs, rates and a host of utility and service bills too.

Steps to take & questions to answer before taking out a loan:

  1. Is this loan necessary? Are there any ways that I can avoid taking out a loan?
  2. How much do I really need?
  3. Review your budget and ensure it’s up to date.
  4. Using your chosen loan amount, use a loan calculator to work out your monthly repayments.
  5. Add the repayments to any additional costs you will incur.
  6. Work this loan amount into your budget.
  7. Determine if you can afford the loan based on what your budget looks like with the loan repayments.

Avoid high-interest debts

High interest debts such as payday loans and credit cards may seem harmless when balances and amounts are so small but they add up and really cost you big in the long run.

This is particularly true if you take one more than one short-term loan at a time and do this on a regular basis. If you want to become debt free and build wealth, breaking the habit of taking out payday loans and using credit cards is necessary.

Review your banking charges & fees

Many of us never go through our bank statements to see what we’re actually paying in total monthly banking fees and changes. Why?

Simply because a few Dollars here and there doesn’t seem like much and, whose got the time anyway? Well bank fees and charges is not something any financially savvy Kiwi needs to be avoiding.

Review bank statements, add up fees, & charges

You must review your bank statements monthly and check to see how much you’re paying as a monthly account fee, extra charges for services, dishonour payments, penalties and so on. If there are any charges you do not recognise or understand, call your bank and ask a consultant to go through these with you.

Upgrade or downgrade your everyday bank account

If you find that you’re paying too much in charges and services fees, consider upgrading your account to one which includes such services as part of the monthly account fee. If you find that you’re paying a high monthly account fees but do not make use of the services that form part of your package, downgrade and save!

While you’re at it why not compare banks and accounts? You may find a NZ bank that offers a transactional account with lower fees and charges!

Part 3: Saving, investing & generating wealth

Building wealth begins with creating a budget, repaying debt, saving money and ends with investing your savings. Since we’ve already had a look at how to create a budget, how to avoid taking on debt and pay off existing debt we will now look at how to save money and how to invest these savings as a beginner.

Saving money first, spending second

Arrange for a debit order to automatically transfer money from your transactional account and into a savings account on the day that your salary or wages come in.

This will ensure that you don’t get the chance to spend that money and that you make saving a priority. These savings can be used for higher reward investments such as buying shares, bonds or investing in property.

Set long & short-term goals

Whether it’s for saving or investment returns setting long and short-term goals is the best way to achieve wealth.

Your short-term goals could include saving a set percentage of your income or achieving a savings goals which you can use to invest in higher reward investment opportunities like stocks and bonds.

Long term goals could include achieving a certain ROI on all of your investments, attaining a retirement savings goal or even reaching a financial milestone like paying off all of your debts.

Investing your money in New Zealand

Term deposits

Savings accounts or term deposits are the most basic and well known ways to invest your money. With a notice savings account you earn a better interest but cannot access your money unless you either provide the bank or credit union with a notice or pay early access penalty fees.

You can use a term deposit to save money for a deposit on a property, retirement or just for general savings that you can further invest for higher returns at a later stage.

KiwiSaver retirement savings

If you have no other form of savings, this is one which you should take advantage of. With KiwiSaver you put money towards your retirement and your employer and the Government do too! These savings are invested in a fund and you can access this money after the age of 65 or when purchasing a home.

Buying shares or stocks

This form of investing has the potential to yield high returns for investors but comes with a higher risk attached to it. To buy stocks as a beginner it is always best to make use of the services of a broker. Always use a reputable broker and make sure to check reviews on the brokerage before investing.

Lending money on a P2P or P2B platform

Peer-to-peer loans have become extremely popular in New Zealand with major platforms like Harmoney and Lending Crowd generating massive profits for their investors.

To invest your money on a P2P or P2B platform is simple, all you need to do is visit the website and sign up as an investor, choose your level or risk and reward and you’re all set!

Invest in bonds

This is one of the more complicated ways to invest your money and should be done only after thorough research has been done. Bonds are issued in order to generate cash for a government department, corporate institution or bank and these bonds can be bought or sold on the NZX debt market.

In exchange for your money you are paid a fixed rate of interest over the term of the bond. There are minimum investment amounts which start at $5,000 and just as with stocks, bonds may depreciate in value and be affected by market conditions.

Invest in property

Investing in property is one of the more complicated investment ideas in this list as it can either require skill in buying and selling property for a profit or the ability to invest and wait until the value increases to where a sale would generate a substantial profit.

Buying property, fixing it up and selling it for a profit can generate huge profits but you must have a substantial amount of money to get started or be able to get a property loan from a bank. If you’re new to property investing always start small or find a mentor who is willing to assist you.

Investing in funds

Funds are simply pools of money put together by a bunch of investors into some of the above investment options. Funds can have a fund manager that invests the money as they see fit or can be invested into a market index such as the top New Zealand companies.

To start investing in funds you can contact a fund manager and they will take your through the options you have at your disposal. Your KiwiSaver savings are usually invested into a fund of some sort as well.

Investments to avoid as a beginner

  • Cryptocurrency: we’ve all hear of cryptocurrency investment nightmares and successes and whatever your stance may be on this controversial investment, beginners should stay far away from any form of digital currency investment.
  • Large property investments: If you’re new to the property market you should shy away from large property investments.

Whether you’re just trying to make it through the month or have been working hard to put money away and start investing, all financial success starts with setting achievable goals and creating a budget that allows you to achieve these goals both in the short and long term.

Set those goals, create a budget and get to work on building wealth for you and your family!

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