![successful saving](/sites/default/files/2024-08/saving-successfully.jpg)
By Sheryl Sutherland*
The wonderful people at this website assist me in my writing by giving me topics they think will be of interest to readers. They suggested ‘saving’.
I rolled my eyes, bored, and agreed deferentially. The problem as I see it is ‘saving’ is not a concept that we are unfamiliar with. Check out sorted.org.nz or mindfulmoney.nz to calculate and read to your heart’s content. You know (assuming you are earning a reasonable wage) to create an emergency fund, get your KiwiSaver sorted, tackle debt, insure your assets and earnings, set goals and plan for your retirement – six simple steps.
Sadly, in New Zealand today, many cannot even get to save a fund for an unexpected expense, let alone move on the steps two to six.
If you are in the lucky group who can squeeze a few dollars into savings, what is stopping you? You’ve read all the articles, watched the talk shows, heard your peers discussing it, but have never managed it. It’s not lack of knowledge or access to assistance to gain a degree of financial literacy that is stopping you - it’s your attitude. Sure, you mean to get on to it, but just can’t seem to. The problem is one that we rarely discuss – the momentum we need to get us going, the nudge.
In fact, a book has been written about this called “Nudge”, (surprisingly) subtitled “Improving Decisions About Health, Wealth and Happiness”. The authors take the premise that we are all susceptible to biases that can cause us to blunder into making bad decisions about (among other things) personal finances, mortgages, credit cards and so on.
They further suggest that we need ‘choice architecture’ to nudge us in the right direction. Here in New Zealand, we are fortunate that we are nudged towards KiwiSaver by government legislation; but there is nothing nudging us to save in any other aspects of our financial lives. We all have inertia when it comes to financial planning – it’s boring, there is never enough money no matter how much you earn, and we need to deal with our biases, all of which we have acquired unknowingly.
I could write a book about our attitudes to money and our unidentified biases – oh wait, I have! Sex and food are the most discussed topics in relationships and life. The most emotionally charged topic, and the most important, is money. Yet it is the most neglected. I’m not talking about “I’m broke”, “I can’t afford…(fill in the gaps)”, I’m talking about how much we earn, how much we own, how much our parents earn or own, what our friends financial lives look like.
The first thing ...
The first thing you need to do before you start on saving is not so simple; identify your feelings and biases around money. We all have different beliefs – are you a hoarder or a spender, a worrier or an avoider? If you can’t figure it out, try and isolate your money messages; these are the messages you have internalised from your parents, peers and the media. As Jess McGawley said “Parents are good at preparing the money for the person; they are less good at preparing the person for the money”.
Examine your money messages by considering questions such as:
- How did your parents discuss money – openly, calmly and rationally, in anger or behind closed doors?
- What did your education in money consist of?
- What are your money taboos?
- In conversations, do you refer to money negatively?
- Do you see money as controlling you?
Talk to some outside observers. How do they see your relationship with money? Try a view from say your parents, your friends, or your siblings – they will definitely have an opinion. Good luck!
Controlling and being aware of your attitudes and biases are the keys to a great financial life. Consider the following questions – there are no right or wrong answers, it’s just food for thought.
- Do you spend more money on your friends than you can afford?
- Do you find yourself buying more presents for others, or spending more on birthdays and on holidays than feels right to you?
- Will you spend money on others but rarely on yourself?
- Have you ever bought something, then decided when you got home that it really didn’t suit you, but neglected to return it to the store in time to get your money back?
- Do you give to charities to impress people, rather than because you really believe in their cause?
- Have you sometimes “forgotten” to pay off personal loans from friends with the same regularity that you’d pay off a credit card?
- Do you often buy/go out to dinner simply because you don’t feel like cooking?
- Have you sometimes paid your bills late when you didn’t have to?
If you find that the answer to many of these questions is yes, you need to learn to be more respectful of your money.
Try to keep a notebook in which you record all your financial activities, how you feel about each transaction, and why you made the decision you did. The first step to controlling your money is knowing exactly where it’s going and why.
Or, try this one simple thing – give yourself a cash allowance, no cards at all. When it’s all gone that’s it! Don’t think of this as odd, according to the RBNZ director of money and cash Kiwis are carrying more cash now than ever before with around $8.9 billion in circulation, up from $7.9 billion in 2021. Not quite a major shift to digital just yet.
*Sheryl Sutherland is director of The Financial Strategies Group, and author of Girls Just Want to Have Fund$ – Every Women’s Guide to Financial Independence, Money, Money, Money Ain’t it Funny – How to Wire your Brain for Wealth, and co-author of Smart Money – How to structure your New Zealand business or investments and pay less tax. You can contact her here.
10 Comments
I think always living within ones means is a great start. Is it a need or a want? Don't be sucked into the loop of trying to impress others and see materialism for what it really is. Ask yourself "do I want to live a life of financial freedom and independence as it can come in many forms. How will I achieve this? Set out a plan and make it habit forming, make it a way of life. Living for today and overly gratifying oneself can be a great way of robbing your future self. Convince yourself that you that you have a future and don't live for today yet remember to still have some fun along the way!
You need to isolate your savings , work on increasing the % of your income that you save by working longer or increasing your income (higher pay rate/cut back on outgoings ) regularity is a must , its a marathon not a sprint ... If your a newbie start small and go from there, dont set impossible goals, just aim for regular the rest will fall into place as your nest egg evolves. Stay away from credit...it is not your friend, it is an enemy....
Its down to personality RP, I am happy on way less than the average punter on things like second hand clothes and not spending money on new phones every year along with very limited holidays. Things have changed for me over the last couple of years but its hard to break old habits and open the wallet to frivolous spending.
Good points, agree with commenters too.
A big mistake I’ve witnessed people make (well IMHO) is the “put it on the mortgage” attitude. You know, “my house made $100,000” group. New car, boat, toys, add it to the mortgage. Then they wonder why they never have savings.
Personally I’m not a fan of more debt just because you can or it’s cheap, I think talking about it is a great thing, will be sharing this article. Thanks.
The secret is to have assets which produce income that let you buy that you want.
People that see the equity in their house increase 100k and so they borrow it and buy 100K car are dumb. First thing that happens is that they are losing 20-30k as soon as the car is off the lot. Then they are paying interest on 100K of 8% on a car that is rapidly depreciating, whilst adding >8k per year to debt repayments.
The right thing to do is to properly save money and have generate additional actual money for you, not equity you can borrow from the bank. So, if you have a million bucks saved, and you get 80K in interest/dividends in a year, then you have a decision to make that is low risk, i.e. you can spend it and have the car, and still have your million bucks, or you can save it and earn an additional 8k or so next year from the reinvested savings. Personally I would re-invest (because there is no real value in cars), take the 8k extra next year and maybe by a second hand car with that and be done with it.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.