5 ways to check your financial health
Checking your physical health is relatively simple. That weak knee creaks a little more loudly than usual, or it suddenly becomes a little harder to read the lunch menu from a distance, so it’s off to the doctor you go.
Checking your financial health might not be such an instinctual process, but it’s just as straight-forward and just as important.
Keeping an ophthalmologist-checked eye on your finances can help you tackle some of life’s future challenges and put your retirement plans in top gear. Here are 5 things to consider when checking your financial fitness.
Your day-to-day income and expenses (your cash flow) is both the simplest and most obvious part of your finances. However, it’s also the one that we often spend less time thinking about due to its ordinary nature. After all, when was the last time you analysed your supermarket receipt?
To give your cash flow a checkup, take the time to go through your accounts. Use your credit card bill and debit card history to look at your income per month, then separate your expenses into two groups: essentials (such as groceries, mortgage payments, eye exams), and luxuries (such as holidays, entertainment, and new jewellery).
The first point to check is whether your income outweighs your expenses. This will help you determine if you’d prefer to save more each month, spend less on frivolities, or even if you’re able to spend more on the fun parts!
Superannuation is a tough nut to crack. You have to make decisions around when you’ll stop working, how much you expect to spend per year, whether you’ll be living like a nomad or staying put, whether you’ll be sharing costs with a partner, and how much you think you’ll need to save overall.
One study from the Westpac Massey Fin-Ed Centre looked at how much Kiwis were actually spending per week in retirement, and found that it depended on their lifestyles, their marital status, and their rural/urban living status.
For example, a ‘no frills’ lifestyle for a solo flyer outside of the metro area would be $569 per week. However, a ‘choices’ (AKA comfortable) lifestyle for a single person living in a major city would cost double that at $1,190 per week.
You’ll need to determine where you’ll fall on the scale, estimate how much you’ll need per week, and how much of that will need to come out of your personal savings. This Retirement Planner from Sorted could be a big help!
Looking into funeral insurance can be a helpful way to make sure your family is prepared for sudden expenses when you pass away. This can also help keep their savings plans on track instead of having them dig deep into their piggy bank for an unexpected expense.
The first step is to understand what funeral insurance really is, and with that information, you can choose your cover and your beneficiary, and tick this box off your planning list.
Similarly, estate planning is an important part of your financial wellbeing now and something you may wish to consider as early as possible. Estate planning includes setting up a will to formally declare how you’d like your assets divided (and by whom) after you’re gone, which can minimise conflicts and ensure your wishes are met.
It also includes making plans for the possibility that there may come a time when you’re not able to make decisions for yourself, financially or medically. If this happens, it’s good to have your wishes clear in writing, or at least to have chosen a power of attorney who can make those decisions for you.
To plan your estate, you can find will kits online, or speak with your lawyer.
Plenty of Kiwis carry debt into retirement. This is often in the form of a mortgage, but it can also be anything from credit card bills to vehicle financing.
As you move into a phase of life where you’ll no longer be earning a salary, but instead drawing on savings and NZ Super payments, debt may become more difficult to manage. There’s no time like the present to check your debt and make a plan to deal with it.
You may be in a position to sell your property and move into something smaller and more suited to your lifestyle in order to pay off the mortgage, or perhaps you’ll choose to cover your debt from retirement savings. If you’re stuck, a financial advisor is a good place to start for information about your options and expert advice.
Your financial wellbeing is just as important as your physical and mental wellbeing, which is exactly why regular checkups can help you stay on top of things and avoid greater problems down the line.
While you’re at it, you may want to consider how funeral insurance could fit into your financial preparation.
This is intended as general information only and doesn’t take into account your personal objectives, financial situation, or needs. No advice on buying or disposing of insurance is given. We recommend you consider the Policy Document prior to making a decision to purchase the Policy. You may also wish to contact a financial adviser who can consider your individual circumstances. This is an opinion piece only and does not constitute financial advice.
26 Mar 2021