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Financial Advice for Kids Leaving Home

admin — Sat, 28 Jan 2012 03:02:39 +0000

There are times as a parent when you look forward to the day your children head off into the world to make their own way. When that day comes, it often comes with worries about how your children will cope with life as adults, and in particular whether they will succeed financially.

Here are three basic principles to teach your children before they leave home.

Set a limit for spending on non-essentials. Money that we spend falls into two basic categories: what we spend on essentials (things we need, like housing and food) and what we spend on non-essentials (things we want but don’t really need, such as dining out or movies). The best way to keep a limit on spending on non-essentials is to have a separate bank account for it. Each week transfer a set amount into that account and keep your spending within that limit.
Put aside money for unexpected expenses. There are some essential expenses that occur infrequently, perhaps only a few times a year. Often these expenses are unexpected, such as medical or dental costs, or car repairs. Spending all your income every week means you won’t have money on hand to cover these costs. Transfer money each pay day into a savings account to cover unexpected expenses.
Stay out of debt. By following the two principles above, you should avoid being forced into debt to cover essential spending. The worst kind of debt is money borrowed to buy non-essentials such as new furniture, televisions and computers. This kind of debt is usually short term with high interest rates and the high repayments can prevent you from being able to set aside money for unexpected expenses.

Encouraging your children to use these principles should set them on the path to financial success.

Liz Koh is an Authorised Financial Adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847. For free eBooks, go to www.moneymax.co.nz and www.moneymaxcoach.com

8 Steps to Financial Freedom (Part 1)

admin — Tue, 13 Sep 2011 08:37:16 +0000

Living from payday to payday is nobody’s idea of an ideal life. What most Kiwis aspire to is to have a comfortable life free of financial stress. There are eight simple steps that will help take you on your way to financial freedom and here are the first four:

Step One – Spend less than you earn

The ability to spend less than you earn is the one thing that separates wealth creators from those who stay trapped in the cycle of living from payday to payday. Decide how much you want to save each payday to achieve your goals, and set a budget that will enable you to live on what is left.

Step Two – Join a subsidised superannuation scheme

One of the best returns you will ever get on your money is to enrol in KiwiSaver. You will be eligible for a $1,000 Government kickstart, a tax credit of up to $1,040 per year and an employer contribution. Some employers offer subsidised schemes that have equal or greater benefits when compared with KiwiSaver.

Step Three – Pay off short term debt

Short term debt, such as credit or store card debt, usually arises because you either have unexpected bills or you are spending more than you earn. Stop paying interest and make getting rid of short term debt should be one of your top priorities.

Step Four – Set up an emergency fund

Life doesn’t always go according to plan. Setting money aside for unexpected events, such as a drop in income through redundancy or sickness or increased expenses such as car repairs and dental bills, will help you keep out of debt and avoid paying interest.

Next week we look at the final four steps that will take you to your goal of financial freedom.

Don’t Eat your Money

admin — Sat, 06 Aug 2011 00:09:14 +0000

The biggest expense for a young family is the cost of housing. Rent and mortgage payments are fixed costs which can only be reduced by moving to a cheaper house, so when it comes to saving money we need to look at the next biggest expense, and that is the weekly shopping bill.

There is a wide range of food spending patterns depending on household income, the number and ages of family members, people’s eating habits and expectations about the standard of food they like to eat.

Whereas some people expect to dine on roast lamb and salmon, others are quite happy living on mince and sausages. Because there is so much variation, food is a prime area for finding ways to cut back and save.

One of the easiest ways to do this is to shop as infrequently as possible with, say, a big fortnightly shop of non-perishables supplemented by more frequent purchases of fresh food. It is important to buy the right kinds of food as well as spending the right amount.

Every year, the University of Otago publishes a Food Cost Survey which is available at http://nutrition.otago.ac.nz. Click on the consultancy section and then food costs. This survey calculates the weekly cost of purchasing a healthy diet for men, women, adolescents and children in major cities and looks at basic, moderate and liberal budgets.

It’s no surprise that food costs for a teenage boy are around $107 per week compared to $85 for a grown man! A moderate budget for a couple and two children under the age of five living in Auckland is around $255 per week. For a couple with two teenagers the cost is around $359 per week.

Use this guide to set a strict budget for your food, so you don’t eat your money!

Planning for Baby

admin — Wed, 27 Apr 2011 19:05:48 +0000

One of life’s great experiences is having a baby. The birth or adoption of a first child in particular is a life-changing event and brings with it a mixture of different emotions. Worries about money can offset the happiness a baby brings, so the loss of income and additional expenses need to be carefully planned.

As at early 2011, paid parental leave of up to 14 weeks is available providing certain criteria are met, as well as unpaid leave of up to 52 weeks, and special leave is available for such things as antenatal checks. Confirming your entitlement to paid and/or unpaid leave is the first important step towards planning your finances. Check with your employer and also the Department of Labour (www.dol.govt.nz). You may also be eligible for Working for Families Tax Credits so check your entitlement with Inland Revenue (www.ird.govt.nz).

Once you have established what your new income will be, it is important to prepare a budget. If your expenses are more than your income while one partner is not working, you will need savings to help you get by. You might also need to save a lump sum to buy furniture and clothes for your baby. If you have no savings you will need to cut back on your costs to avoid going into debt. A mortgage is often your biggest cost and you can talk to your bank about how to make your payments lower while you are on one income.

When you have worked out your new living costs, the best thing you can do while you are waiting for baby to arrive is to start living on your new budget as soon as possible. That way, you will have a few months to add to your savings, adjust to your new budget and refine it to make it work.

Seasonal fruit and vegetables – February

admin — Sat, 12 Feb 2011 22:46:48 +0000

Blueberries are expensive but full of flavour and easy for children (and adults!) to eat. Note too that frozen blueberries in the shops now are more likely to be NZ grown.

NZ grown stone fruit is in full flight – apricots, peaches and nectarines.

Vegetables in season now include:

Beans – all sorts – runner beans, butter beans (yellow) and short green beans (sometimes known as French beans)

Cauliflower, broccoli and cabbages. Red cabbage bakes a great coleslaw when sliced finely and mixed with red onion and a lemon or orange juice based dressing

Lettuce and other salad greens

So what about all the other fresh fruit and veg in the supermarket?

There are still imported plums and other stone fruit. Watch for these now our own stone fruits are in season. The imported fruits are often picked very green so they keep till they reach our supermarkets. They often don’t have a lot of flavour or juice and don’t keep well at home once they have ripened.

Pumpkins were harvested before last winter so best to buy small quantities as needed now as they won’t keep well after being cut.

Seasonal fruit and vegetables – January

admin — Wed, 12 Jan 2011 19:08:03 +0000

Berry fruits –strawberries and blue berries are the most common and strawberries are usually quite reasonably priced for several weeks. Raspberries, loganberries etc are around but can be quite expensive.

Citrus – lemons oranges, tangelos

New seasons’ apples start to become available, also apricots peaches, plums, nectarines – but watch for imported ones still.

You’ll also find black currants (these make wonderful jam), rhubarb and cherries

In the veg department you will find a range of fresh items, including aubergine, avocado, green beans, beetroot, capsicum, celery, chilli, cucumber, outdoor tomatoes, garlic, zucchini.

New season’s onions come in about now. With the ordinary brown onions you can tell the difference between the new and older onions that have been stored for a while by the shape and feel. New onions are firm to touch and are round. Older ones are going soft and are more oval in shape as they start to send out a shoot at the top. I try to dodge these and will only buy loose onions towards the end of the year so I don’t end up with soft onions that don’t cook well and you end up with a lot of wastage.

New potatoes are great for boiling and in salads.

Seasonal fruits and vegetables

admin — Wed, 12 Jan 2011 19:04:28 +0000

There is always a wonderfully colourful array of fruit and veg as you enter the supermarket. So how do you choose what to buy for your dinner from this range?

Personal or family tastes are the obvious starting point.

Cost and freshness are important factors too.

So how do you buy your family’s favourite fruit and vegetables without overspending your grocery budget?

The key thing to remember is that when there is a good supply of fruit or veg, the price will be lower. The plentiful supply coincides with the high growth season and good weather. Have you noticed that after a period of rain or stormy weather, the price of veg will skyrocket?

To avoid paying high prices, it’s worth learning and remembering what is fresh in what season.

You won’t get that information from the supermarket shelves as fruit and vegetables are imported from other countries when they are out of season in New Zealand. Often imported fruit and veg are not so flavoursome as those locally grown so if its flavour you want (and you can’t grow your own) check for the country of origin.

Here are some guidelines for New Zealand.

January

February

Supermarket shopping list

admin — Fri, 03 Sep 2010 02:36:34 +0000

Always take a shopping list to the supermarket. This way you will remember to buy everything you need and will help to reduce the temptation to spend up on unnecessary items and keep your budget under control.

Giving money to your children

admin — Fri, 21 May 2010 11:32:12 +0000

One of the dilemmas of being a parent is deciding how much financial assistance to give your children.

It is every parent’s desire to be able to provide whatever their children need to live a full and happy life, but how much do you give them? Can you give your children too much and what is the best way to help them?

Very often, giving money or gifts is associated with giving love and the first point to make is that the amount of love you give your children has very little to do with the amount of money or gifts you give them. Money buys neither love nor happiness. Parents who do not put limits on what they give to their children often do so for a psychological reason that has more to do with themselves than their children. Perhaps they feel guilty about not spending enough time with their children, or perhaps they want their children to have a better life than they had themselves. Single parents can find themselves giving too much to their children to help remove their guilt over their failed relationship.

It is the duty of every parent to raise their children in such a way that they are able to lead independent and successful lives, no matter how you might define success. An important part of parenting is instilling the values and beliefs in your children that will enable them to achieve what they want in life. There is an old adage ‘give a man fish and you feed him for a day; teach him how to fish and you feed him for a lifetime’. Giving too much to a child creates dependency and most importantly, it allows your child to develop a lack of respect for money that can lead to financial problems later in life. Lack of respect for money usually goes hand in hand with wastefulness, an inability to save for longer term goals and sometimes a life burdened with debt.

While most parents are prepared to make huge sacrifices for their children, this can be taken to extreme and some parents incur huge debts or forego their own longer term goals in order to give their children a good life. This is undesirable for both parents and children. Parents who lack financial stability may find that their ability to help their children becomes more limited over time and they are less able to help their children with really important things later in life such as buying a house or setting up a business.

Spending too much on your children is not desirable, but saving on behalf of your children also needs to be done with careful consideration. It is common for parents to want to set up an education fund for their children to cover the costs of going to university. If your child has access to an interest free student loan then it is best to make use of borrowed funds rather than use invested funds on which you are earning a return. The best ways of helping your children save for the future are to enrol them in KiwiSaver, which will entitle them to tax credits and employer contributions once they turn 18, and to help them save a deposit for their first house.

So before you give money or gifts to your children, think about what values you are teaching them, your own financial stability, and how you can best help your children achieve their longer term goals.

This article was written by Liz Koh.

Liz Koh is no ordinary financial planner. Sure, she can give you the best possible advice on how to manage your money and increase your wealth. But her mission is much broader. It’s to help you enjoy life—to the max! Find out more about Liz at Moneymax Coach

Make the most of your Money

admin — Sun, 25 Apr 2010 18:24:46 +0000

So you never have enough money? Looking for a way to get rich quick? Most New Zealanders end their working lives with a debt free home and not a lot else. That’s because they don’t know how to make the most of their money. The average New Zealander earns $35,000 a year and works for around 45 years. That means that in one working lifetime, he or she will earn around $1,500,000 in today’s money.

The problem is that for most people, this entire amount (and sometimes more!) is spent. It doesn’t need a mathematical genius to work out that simply saving 10% of your earnings every year will mean you can build up a fund of $150,000 – enough to provide for a comfortable standard of living in retirement. So where do we go wrong? Higher incomes don’t seem to solve the problem. Blame it on that fellow Murphy (we always need more than we have) or blame it on being human (we are just plain greedy).

Creating wealth is not about making more money, it is about using the money that you have wisely. It is entirely possible to become wealthy on an average wage if you follow a few simple rules.

Rule No 1. Be clear about what you want to achieve – set your goals! You can expect to earn $1,500,000 over your working lifetime on an average wage. Everybody has different priorities in life and only you can decide how you want to use this money. However, if you don’t set your goals it is unlikely you will achieve them.

Rule No 2. Don’t worry about your income, worry about how high your spending is compared to your income. Someone who earns $100,000 a year and spends $105,000 a year is in a much worse position than someone who earns $35,000 a year and spends $30,000 a year

Rule No 3. When you spend money, spend as little as possible on things that have no lasting value and as much as possible on things that increase in value. Someone who spends $10,000 on a car and invests $25,000 will be much better off after 5 years than someone who spends $35,000 on a car and invests nothing.

Rule No 4. Start saving sooner rather than later – time is of the essence! Saving is like going on a journey. If you want to travel 600kms and you have 10 hours to do it in, you can take a leisurely, safe trip at 60km/hr. If you have only 3 hours to spare, you will need to travel at a reckless 200km/hr to get there. It is no different with saving. To retire with $150,000, you can save at a slower rate and with less risk when you have 45 years to retirement than when you have only 10 years to go.

The sad truth is that while most people understand these simple rules, they choose not to follow them. So the choice is yours – continue as you are now and be dissatisfied with your situation, or make some changes and achieve your goals. Surely the answer is obvious!

This article was prepared by Liz Koh of moneymax.

Liz is no ordinary financial planner. Sure, she can give you the best possible advice on how to manage your money and increase your wealth. But her mission is much broader. It’s to help you enjoy life—to the max! Find more from Liz at www.moneymaxcoach.com