How to take control of your financial health

There's no time like the present to get back on track.

Many people are finding it increasingly difficult to juggle their dollars and cents, mostly due to the rising cost of living.

Credit card debt is adding to financial stresses and strains, with the Reserve Bank finding that household debt is now at 126 per cent of disposable income. According to Canstar research, New Zealanders were expected to spend $43 billion on their cards by the end of 2018.

A survey by Westpac in 2016 found that five in six Kiwis were facing financial stress, with one in six struggling with their personal finance.

ANZ research last year also found about a quarter of Kiwis have no cash savings. Many of us are losing our “financial resilience” – the ability to draw on adequate finances and support when an unexpected expense occurs.

“Finance is critical. Even if you’re not driven by money, it determines where you live and the choices you’re able to make,” says Professor Kristy Muir of the Centre for Social Impact in Australia.

She says that while people have enjoyed economic growth for the past two decades, “that’s in stark contrast to the experiences of many people because financial stress and vulnerability is on the rise. More people are finding it harder to pay the bills.”

The Commission for Financial Capability’s 2018 survey found 69 per cent of Kiwis were concerned about money, with 30 per cent losing sleep over their finances. It’s impacting our health too: 17 per cent reported feeling ill or unwell because of finances, while 28 per cent don’t access health services they otherwise might have.

(Credit: Getty Images)

Any time is a good time to take a closer look at your financial health.

Helen Baker, a qualified financial advisor and author of a guide to financially surviving divorce, knows what it’s like to summon up the courage to take a good hard look at your finances and start again after her four-year marriage abruptly ended when she was in her twenties.

“If you were worried about your physical health, you’d see a doctor,” says Helen. “You need to do the same with your financial health, but people put their head in the sand.

“And as with ill health, the longer you leave a problem the harder it can be to treat. You can always see an expert to look through your finances and if they are in good shape that will give you peace of mind. If you aren’t in the right financial position, you have the opportunity to make some changes and to become financially healthy.”

How to look after your finances if you’re single

(Credit: Getty Images)

“Being single, you are in complete control of your finances – you don’t have to worry about anybody else spending your money,” says Helen.

So, if you are single and without any major commitments, it’s one of the best times to start building your financial strength.

Helen recommends starting to build what she calls the five foundations:

Check that your insurance cover is adequate, including your health policy

Health insurance premiums are much cheaper when bought at a younger age, and as insurance doesn’t usually cover ‘pre-existing conditions’, starting early solves that too. You also need to consider home and contents insurance if you are buying a home, income protection if you are self-employed, and life insurance.

“Single people make the mistake of thinking that they can worry about all these things later – they’re young and have plenty of time,” says Helen.

“But it’s important to understand the power of time in any investment. If you put money into super or an investment and give it a long time to work, the outcome is better than if you do it later in life. It’s the compounding effect of interest and investment growth and income over a longer period of time that matters.

Tip: Avoid impulse buying, if you can. It’s a good idea to wait a month before deciding to splurge.

How to handle your finances when you’re married

(Credit: Getty Images)

“The benefit of being married is that you get economies of scale – you have one house and one electricity bill, but two incomes. So, this is the time to accelerate your financial position and use that economy of scale,” advises Helen.

But issues can arise if people in a relationship have a different approach to financial health – for example, if one is a spender and the other is a saver.

“The real problems begin when a couple stop talking about money, so they have no combined goals and no foundation for financial health in place. Both people in a relationship need to be involved in financial decisions,” explains Helen.

  • Sorted NZ says there are key issues to discuss about financial health in a relationship including your current financial situation – what are your income and expenses, assets and debts and your credit rating? Will one person be the financial controller, or will you share that responsibility?

  • Put both names on utilities so you share responsibility equally and have both names on loans for major assets, like your home

  • If you and your partner both have private health insurance, a couples plan or family plan is often cheaper and insurers also offer discounts if you cover all your insurance needs within one organisation

  • Have all details of accounts, loans, investments and insurances in one place so each of you can access that information when needed

Tip: Use a budget-tracking app that can sync between your phones. This way you and your partner have to account for any outgoings.

How to look after your money during a divorce of separation

(Credit: Getty Images)

Helen recommends focusing on the 4 Cs during separation and divorce.

“You need Clarity over your financial position. One person in the relationship may have managed the money and the other doesn’t know what their financial position is. They need to find out the situation and have clarity over that,” says Helen.

“From there you get some Control about how assets will be split up and you need Certainty about what will happen next and what you need to do to get ahead. Then you chip away at things, re-establish your financial position and get Confidence.”

There are four key financial stages during separation and divorce – pre-settlement, negotiation, post-settlement and a rebuilding phase.

“At pre-settlement stage, one person in the marriage may have decided it is over and that may be a shock for the other person,” explains Helen.

If the shock of a separation causes emotional stress and illness, income protection can provide financial support if you’re unable to work for a while.

Separating couples also lose the economies of scale of living together and, if one person hasn’t been part of the workforce for a while, re-training or upskilling may be needed.

Seek guidance from a financial adviser with divorce planning expertise who can advise on what assets you should try and retain.

  • List your assets and debts and close joint accounts and credit cards

  • Change your PIN and online banking password if your ex-partner knows them

  • Collect documents, including your birth certificate, passport, marriage certificate, bank and superannuation statements, insurance policies, tax returns and car registration papers

  • Once you receive a settlement, lock it down – don’t spend it. A new holiday may be tempting, but the money will disappear quickly

  • Invest the settlement well so you retain what you are left with and make money with that investment

  • Plan for the future

  • Put protection mechanisms in place in the next relationship, so you don’t lose what you have

Tip: Make it harder to shop online. If you have parked your credit card details at a store you visit a lot, delete your details.

Related stories