Eight steps to financial fitness

Just like physical fitness, financial fitness takes a bit of work. Here are some training tips to get you ready for the money marathon of life.

  1. 1

    Understand your assets and liabilities

    Do you know how much you’re worth? (We’re talking in a money sense here, not in a self-worth kind of way - you know you’re priceless).

    Knowing your net financial worth is a useful starting point when assessing your financial fitness. To do this, you need to work out what your assets are (like your savings, your car, house, KiwiSaver etc) and minus what you owe (credit card debt, student loans, personal loans, home loan etc). If you’d like a hand working it out, try Sorted’s net worth calculator.

  2. 2

    Know where your money is going

    If you have trouble making your money stretch, or if it slips through your fingers without anything to show for it, it’s time to start tracking your spending.

    Take a look at your internet banking over the past month or so to see what else you've been spending your money on. Once you know what you’re spending your money on, you can identify if there are things you can cut back on.

  3. 3

    Set financial goals

    You can’t reach goals you haven’t set. If you want to save a deposit for a house, go overseas or buy a new car, you need to plan for it. If you need motivation, take a look at our Goal Tracker to visualise how long it will take you to reach your goals.

  4. 4

    Put your finances on autopilot

    Set up your banking so your bills are paid and your savings are put aside automatically. Automatically channelling money into savings takes the temptation out of having the money sitting in an everyday account, and setting up automatic payments for bills means there’s less admin for you to worry about on a monthly basis. It also means you’re more likely to be able to take advantage of prompt payment discounts some companies offer.

  5. 5

    Live below your means

    If you get a pay rise, don’t increase your spending at the same rate. Instead, funnel that extra money into savings, investments, or paying down debt. Even if you’re lucky enough to earn a champagne income, try to maintain a beer lifestyle. Don’t waste time, and money, keeping up with the Joneses.

  6. 6

    Check your credit report

    What appears on your credit report will affect how willing banks or other companies are to lend you money or approve you for a hire purchase.

    Your credit report will include information on your payment history for credit cards, mortgages, hire purchases and car finance. It might also include your payment history on things like your phone or power bill.

    You can get a copy of your credit report from any one of New Zealand’s three credit reporting agencies: Centrix, illion, and Equifax. It’s free, unless you want it urgently, in which case a fee will apply.

  7. 7

    Make a will

    Having a will is a way of looking after your loved ones if you pass away. It gives you the opportunity to say who you want to inherit your money and assets, and if you have kids, to say who you’d like as guardians.

    Even if you don’t have a lot of assets, a will can save your family a lot of hassle during a time of grief. If you die without a will, it’s called dying intestate. In this case, the law decides who gets what.

    If you already have a will, but your circumstances have changed since you made it – maybe you’ve got married or divorced, entered into or ended a de facto relationship, bought a house or had a child – then you should take another look at it.

  8. 8

    Check your insurances

    As life changes, so will your insurance needs. It’s a good idea to review your insurances every now and again to make sure you’re covered for all the important things. Calculate how much cover you might need with the Life & Living Insurance estimator over at nib.co.nz and Cordell's home sum insured calculator.

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