Enjoy the MoneyBlog? Stay up to date with the latest news and information with your free subscription to the MoneyClub. Sign up in the box on your right.
Lisa is the best selling author of
Recent KiwiSaver Changes
As to be expected the government announced changes to KiwiSaver in the latest budget.
The key changes are:
From 1 July 2011 the Member Tax Credit (MTC) will be halved from $1 to 50c for every $1 contributed by members, up to $521 per year – half the current maximum. So the government will give you 50c for each dollar you contribute up to $1,042 per year. You still get some free money, although not as much as before.
The minimum employee contribution rate will rise from 2% to 3% on 1 April 2013. This means if you are currently only contributing 2% then another 1% will come out of the money you receive. So if money if really tight then you may want to start planning for slighly less in your paycheck.
The minimum employer contribution rate will rise from 2% to 3% on 1 April 2013.
The tax-free status of employer contributions will be removed on 1 April 2012. These will be taxed at the employee’s marginal tax rate. This is a bit of a kicker as what its means is that instead of getting the full 3% your employer puts in, its now less because some is taken out for the tax man. For those on a 30% marginal tax rate it means that you will end up with about 2% from your employer going into your KiwiSaver account as the extra 1% the employer has to put in now goes to the tax man.
There is no change to the $1,000 kickstart all members receive for joining, the first home subsidy and other KiwiSaver provisions.
Despite these changes KiwiSaver is still a great way for you to save towards your retirement.
Do you really need a credit card?
Shock horror why would I pay cash for things when its easier to use my credit card I hear you say! The answer is simply that – using credit is just far too easy. I read about some research in the US a few years ago that found that we spend 20% less if we pay cash instead of using credit. The act of handing over cash makes us think more than simply zapping it on the plastic. One of the early credit cards, which also became a well known advertising slogan, was called your Flexible Friend. You could argue today that it has become far too flexible.
A common response I get when I suggest people start using cash is “what about loyalty programs, I get points if I use my credit card”. Get over it, do you know how much is costs you to get those points? I am not suggesting that you don’t use loyalty programs but what I am saying is that if you are buying something that you don’t need and justifying the purchase with the fact that you get points then maybe you need to reconsider your spending.
Every day in some form or another, whether it’s a one on one consultation with a client, talking with friends, speaking at an event or just lookíng at the media I am exposed to people who are struggling financially. That doesn’t necessarily mean that they are struggling to pay their bills, in many cases they are regardless of their income, more that they are not on top of their financial lives and have a lot of stress around their finances.
I believe the high use of credit is a big part of the challenges so many people are facing in their financial lives. Its all too easy putting things on credit and we are often not conscious of what all the spending is doing until well after the fact.
Using cash makes it easier for you to be in control of your money. Why don’t you try using cash instead of credit and see what happens. It might be in the form of giving yourself some pocket money or spending money each week for discretionary items so that you have a limit on what you spend. It might also be in the form of saving up for items you want and paying cash rather than putting the item on some form of credit. People not paying interest on consumer debt because they don’t use it I guess is my utopia, because I know the heartache it will stop.
You might think that’s its not practical for you, but give it a try. In my experience someone without consumer debt and who is more in control of their money is a much less stressed person.
Providing a lifeline
Sadly one of my clients passed away this week from cancer. He was only in his early 40s and had been battling the disease for almost a decade. He left behind a wife and three young children. The only saving grace for his wife, if you could call in that, was they had a good chunk of life insurance. At least at such a difficult time she doesn’t have to worry about money and paying the mortgage and will be comfortable financially in the future.
I was talking to one of my friends and he told me about someone he knew that also had terminal cancer and the insurance company had contacted her to say she was due a payout. They had seen an article about her in the local paper. She hadn’t informed the insurance company because she felt it was admitting defeat to the illness. We of course need to decide what is right for us however having the funds before she passed could provide a higher quality of life for her.
NZ is the most under insured country in the western world. So many of us have such as issue paying for insurance. Unfortunately its not one of those things you can go and buy when you need it, as when you do its usually too late.
A general rule of thumb is that you need the most insurance when you have debt and dependents. When you have built up a good asset base you can consider reducing the cover you have. Its important that you do review what you have on a regular basis. I often find people are over insured in one area and under insured in another.
If you would like a free independent review send me an email and I will refer you onto professionals that I have worked with for many years and are not going to sell you something you don’t need. lisa@acumen.co.nz
Join the free
