Create a budget, save for emergencies, and prioritise paying off high-interest debts. Maximise KiwiSaver contributions and explore government incentives for first-time homebuyers. Invest wisely after building an emergency fund. Consider education for career growth and regularly update your financial plan.
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“I’m a retail worker who earns less than 45k a year, I struggle to decide between saving what little I’m left with each week or affording small hobbies that bring me joy. I want to break free of this cycle, and I’m not sure where to start; I put 10% into Kiwisaver but can’t quite afford a first home. Should I look to invest? Even without much start-up? Or should I be considering taking out a student loan and trying to pursue a career path? Any advice people might have for me is welcome, even harsh criticism!”
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Budgeting and Emergency Fund: Start by meticulously tracking your income and expenses to create a comprehensive budget. This will give you a clear picture of where your money is going. Prioritise essential expenses such as rent, utilities, and groceries. Identify areas where you can cut back, like dining out or entertainment expenses. With a clear budget in place, allocate a portion of your income to build an emergency fund. The emergency fund should cover at least 3-6 months’ worth of living expenses, ensuring you have a financial safety net in case of unexpected events like medical expenses or job loss.
Prioritise Debts: If you have high-interest debts, such as credit card debt, prioritise paying them off as quickly as possible. These debts can erode your financial stability, so allocate extra funds to tackle them. Consider using the snowball or avalanche method to pay off debts, depending on your preference. The snowball method involves paying off the smallest debt first to gain momentum, while the avalanche method focuses on the highest interest rate debt for cost-efficiency.
Savings and Investment: Continue contributing to your KiwiSaver, as it’s a valuable long-term savings tool with potential employer and government contributions. Additionally, explore government programs and incentives designed to help first-time homebuyers, like the HomeStart Grant. Save diligently for your first home, and consider increasing your KiwiSaver contributions over time. Once you’ve built your emergency fund and are debt-free, start considering investments. You can begin with minor contributions to diversified investment funds or portfolios. Consult a financial advisor for personalised guidance on investment options that suit your risk tolerance and financial goals.
Education and Career Path: Pursuing education to enhance your career prospects can be a wise long-term investment. However, it’s crucial to weigh the benefits against the potential cost. Research educational opportunities, including scholarships, grants, and part-time study options while working. If taking out a student loan is necessary, evaluate your ability to repay it and the potential return on investment for your chosen career path. Seek advice from a financial advisor to assess the financial implications and make informed decisions regarding education and career choices. Remember, financial planning is a dynamic process, so regularly review and adapt your financial strategy as your circumstances evolve. Your dedication to managing your finances will pave the way for financial stability and future opportunities.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
