Make Your New Years Financial Resolution Cut The Credit Card
While Kiwis are committed to getting fit and feeling great by cutting back on alcohol, cigarettes, and pounds, ANZ Chartered Accountants also recommend cutting the credit card.
2022 offers a fresh start in many ways and CA ANZ recommends that they use the New Year to also focus on their finances and prepare for success as New Zealand leaves another weird year behind.
CA ANZ Financial Services Leader John Cuthbertson FCA said January offers an opportunity to set new goals and develop healthy financial habits.
âThe past two years have been incredibly difficult,â said Cuthbertson.
âSome people have lost their jobs. Others were fortunate enough to build up a solid savings pool or pay off their mortgage.
âWhatever the scenario, as the economy recovers and businesses and markets regain confidence, we have five tips to improve your financial health in 2022.â
1. Pay off the debt
Household debt to GDP has reached an all-time high.
âNew Zealand household debt has increased dramatically over the past two years. It’s not necessarily a bad thing if you can pay off that debt, âCuthbertson said.
âMany of us have racked up debt over the past couple of years to make ends meet, so now is the time to reset and get that debt under control.
âWe suggest that you focus on small debt to begin with, as small accomplishments keep you motivated, and prioritize high-interest debt, as it hurts you the most. Also, be sure to pay off non-deductible debts first.
“And if you are having serious financial difficulties, you can call MoneyTalks, a free financial helpline for advice and help on 0800 345 123.”
2. Commit to a savings objective
âA lot of us have the best intentions of saving money, but when payday rolls around we can get carried away and quickly spend what’s in our account – making us think, ‘Well, I will try again next month â.
âTo avoid this cycle of good intentions but lack of self-control, we recommend setting up a direct deposit on payday.
âThis means that when the money falls into your account, your designated savings amount is immediately wiped out.
âLook for a savings account with a competitive interest rate (where possible these days) and aim to build at least three months of income as an emergency fund in your savings.
3. Consider your investment options
âThe idea of ââinvesting is intimidating for some. You can invest in stocks, bonds, managed funds or real estate, to name just a few asset classes.
âWhile it can be difficult to explore, it’s worth doing your homework and weighing the potential investment options that are right for you.
âBut beware of investment opportunities promising quick, big returns – if it sounds too good to be true, it probably is!
âAs always, there is risk when you invest, so talk to a professional financial advisor before making any decisions, and do your homework too. That doesn’t necessarily mean believing everything Twitter or TikTok tells you!
4. Ask your accountant for advice
âChartered accountants have taken years of education and professional development to get to the point where they can advise you on the best way to structure your finances. People who are trained in addition to financial advice can also make sure that your money is working hard for you.
âFor example, you might be able to make voluntary pension contributions and get tax relief on them, when and in what order to pay off debt, and the tax implications of different investments.
“We can also help you navigate a complex tax situation if you have just moved to another country, which is certainly possible for many people after the pandemic.”
âWe can help you with investment suggestions for that excess cash, if you have any.
5. Indulge yourself when you reach your goals (within reason)
“What’s the point in being successful if you don’t like it?” Within reason of course.
âIf you’ve reached your savings goal or paid off your credit card debt, celebrate with a good meal or a special leisure activity. You will help local businesses and feel that you deserved the reward, âconcluded Cuthbertson.
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