1. Pay yourself first
Paying yourself first is one of the best things you can do with your money. Set your savings to autopilot. Work out how much you can save from each pay then set up regular automatic direct debits from your everyday account into your savings. This means the money is stashed away before you can get your hands on it. It’s a good idea to time the transfers to coincide with paydays to avoid overdrawing your transaction account.
Someone on the average full-time wage in New Zealand, which according to Stats NZ is $1273 p/w, will bring home $1008 after tax. If they pay themselves 15% from each pay then, over 12 months, they will save just under $7900. If they just waited to see what was left over by the time the next payday rolled around, there’s no telling how much lower that number would be.
2. Start investing early
The earlier you start investing, the better off you’ll be. That’s because compound interest has more time to work its magic and do the heavy lifting for you.
Compound interest is when your money not only earns interest on the original amount you started with but also on the interest that has already been added. It’s like making money on your money’s earnings. This can lead to your savings or investments growing faster over time compared to simple interest, which only calculates earnings on the initial amount.
3. Keep an eye on your spending
To some extent, your salary doesn’t solely determine how much you can save; it’s not just what you earn that counts, but rather, what you spend. The key, of course, is to spend less than you earn and save or invest the rest. You could earn a $1m annual salary, but if you’re living beyond your means and spending $1.2m per year, you won’t get very far.
4. Ride out volatility
If you invest in the share market – whether directly or through managed funds and super – you need to be prepared for the ups and downs. There will be good months and years, and bad months and years, but over time markets tend to recover. That’s why it’s important not to panic when the share market takes a dive. Tempting as it may be to sell when markets tumble, it means you instantly turn a paper loss into a real one.
5. Pay attention to your mortgage rate
Whether you’re a first home buyer or refinancing an existing mortgage, it always pays to shop around for the best interest rates. Currently, there’s a wide disparity between the rates on our mortgage comparison tables for similar loans.
For example, one-year fixed rates start at 6.99% and top out at 8.30% – for a $500,000 mortgage, that’s a difference of 1.31%, or $6550 in interest repayments over the course of 12 months.
So if you’re a canny consumer who is prepared to do your homework and search out the lowest mortgage rates, there are savings to be made, which can have a big impact on the amount you can save over the long term.
6. Always pay off as much of your credit card as possible.
Cost of living pressures have resulted in more Kiwis relying on their credit cards to get by. But, if you owe money on your credit card, it’s important to repay more than the minimum repayment amount listed on your credit card statement. Making just the minimum payment might help you avoid late fees but it can cost you thousands of dollars in interest and it will take you decades (yes decades) to pay off your debt.
About the reviewer of this page
This report was reviewed by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.