Times are getting tough out there, interest rates are increasing and cash is getting tighter for most households to spend on the things they enjoy. But that doesn’t have to be the case for you.
Whether you’re a homeowner and staring down the barrel of new interest rates that are about to hit your home loan, or if you’re renting and starting to feel the pinch of inflation.
This guide on how to manage your money during these times will help you put a plan in place to make sure you can stay afloat during these rough seas.
1. Look into reviewing your budget and planning ahead of time.
It’s easy to set up your budget and then forget about it. That’s why it's important to check in every once in a while to see how you’re tracking and if you need to make any changes.
Review your budget categories and label them as nice-to-haves, needs, and non-negotiables.
- Nice-to-haves are items that can be removed from your budget.
- Your needs are things that you can’t fully remove but that can be reduced, like power and wifi, with a little bit of research and finding better rates.
- Non-negotiables include things that you can’t live without, like groceries and rent or mortgage repayments.
Now see what you're left with when you remove your selected nice-to-haves and reduce your needs.
Test out if you can afford the new mortgage repayments at the increased rate by starting to pay that future repayment amount into a separate bank account. This will give you some good guidance on how you’ll survive when increased repayments do kick into play.
2. Look into an offset mortgage.
If you’re struggling to make ends meet, look to see if you can use an offset mortgage to pay down your loan.
What’s an offset mortgage? This is where you can offset the interest repayments on your mortgage with a savings account balance you might have or even a family member might have. These accounts can then be linked to your mortgage.
Example: Say you had a $100,000 mortgage and had $50,000 in savings in the bank that was used against that mortgage; then you’d only pay interest on the remaining $50,000 that’s left. A great video explaining this is here:
https://www.instagram.com/reel/CpJu1ovsvpi/?igshid=YmMyMTA2M...
3. One man's junk is another man's treasure, sell some items lying around the house.
Who doesn’t love an extra bit of cash from things that we buy and then forget about a month later?
Have a look around your home and see if you can sell anything on Facebook Marketplace or TradeMe. Use the rule that if you haven’t used it in 3 months, then it might be something that you can live without.
Living a simplistic, clutter free life often also cleans our mindset on how we manage our money as well.
Use this money from selling items to pay down your mortgage or even save towards an emergency fund when you need to access cash to pay bills or when unexpected expenses pop up. It’s always good to have a backup plan.
Work out how much more your repayments will be when new interest rates kick in and see if you can split the difference by selling items.
4. Keep savings amounts the same, including KiwiSaver contributions.
Remember to always keep the big picture in mind, this is only a season in your life where things might get a little tight financially. You have plenty of runway in front of you, so make sure to always prioritise actions that make your future look brighter. Specifically, your savings and KiwiSaver contributions
Make sure to prioritise and try to keep your savings and KiwiSaver contributions the same during these turbulent times. Your future self will thank you for it.
Even if you do reduce your savings and Kiwisaver, sure, you’ll be left with some extra cash flow per week, but just like reviewing your budget, see where this cashflow is being spent. If it’s on your list of "nice to haves," then you may need to weigh up your options and see if that money could be used somewhere else.
5. Make it fun and reward yourself as much as possible.
Times like these can be tough, and it can be a little uncomfortable to face the truth about money and talk about it openly with your partner or others. That’s why it’s important to try to make it fun.
Try to make managing your money fun by supplementing it with something you like doing; maybe go to a cafe and work through your budget, or talk to a friend or partner about putting a plan in place while enjoying a walk.
Often, when we enter a new environment, we think differently and have new perspectives on things.
Don’t forget to reward yourself. Rewarding yourself when you make good financial choices can be a great way to reinforce positive habits and help you stay motivated. By acknowledging and celebrating your success, you’re more likely to continue making smart choices in the future.
Rewarding yourself doesn't have to be expensive or extravagant; it could be something as simple as treating yourself to a nice meal, taking a day off work, or buying something you’ve been wanting for a while.
Have you registered for when we launch?
Register for when we launch to get early access and special deals and easily get more clarity on your finances. Sign up here.
Final words
Thanks for reading, if you have any feedback or questions on what you've seen so far, feel free to get in touch using our contact form or alternatively give us a bell at hello@budgetbuddie.co.nz
Disclaimer
This blog or any other information provided by BudgetBuddie is not financial advice. If you're needing financial advice please get in touch with a licensed financial advisor or professional.
