Financial Wellbeing: How to set yourself up for a lifetime

A June 2020 TVNZ article revealed the findings of a survey about Kiwis’ financial wellbeing. Carried out by the Financial Services Council, the survey results provide a unique look at our relationship with money and how it affects our decisions and wellbeing.

The Importance of Managing Your Finances

With so much uncertainty facing the world at the moment – the COVID-19 pandemic, economic stress, and worldwide uncertainty – one thing is certain, it is now more important than ever to manage our finances well.

"Overall, the research found a strong link between money and wellbeing with money worries causing stress for most New Zealanders. Given that just 21% of respondents described their financial well-being as better than moderate this suggests that money has a major impact on our health and well-being."

Richard KlipinChief Executive Officer of the Financial Services Council

Three Important Findings

Three survey findings of our financial wellbeing, habits and attitudes are particularly concerning:

  1. Just 20% of Kiwis could last only one week or less if they lost their job.
  2. Only 5% have enough money for six to 12 months.
  3. Nearly 60% have savings of less than $500.

These results highlight a major issue which suggests that the vast majority of people are at great financial vulnerability to the times.

The Two Worlds of Money

Which one are you in?

Always, and particularly in times like these, it is important to understand that there are two worlds of money:

  • Spending includes all types of debt, including hire purchase, credit card and popular ‘buy now, pay later’ loans, the likes of Afterpay, Genoa Pay and Zip. These often small value debts can easily accumulate if left unchecked.
  • Accrual is defined as savings and investments that receive growth in principal, interest and/or dividend payments. This approach grows our money and puts us on the path to financial freedom.

By developing a healthy mindset you can move your balance sheet out of the red and begin to turn it around into the beginnings of financial freedom.

How to Move into the World of Accrual

By regularly putting aside a portion of our earnings into the world of accrual, you assure that you’re prepared in times of temporary difficulty. You are setting yourself up for a lifetime of financial well-being and making the most out of change.

Temporarily without Income?

Here’s what to do:
  • Carry out a thorough audit of all spending. Group your spending into necessary and discretionary.
  • Make a plan that stretches your current resources as far as they can go.
  • Eliminate discretionary spending.
    Do you really need that $5 takeaway coffee?
  • Reduce your outgoings as much as possible.
    Can you get a boarder or flatmate and reduce your mortgage or rent and utility payments?
  • Then, put full energy into developing the mindset of getting back into income generation.

Once you are there, remember to begin putting aside a portion of everything you make.

With the right tools, you can establish a positive money mindset that will help you manage your money wisely and keep you moving towards financial freedom.

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