In a 2023 study, the Financial Services Council found that 50% of Kiwis worry about money daily or weekly and 87% are worried about inflation. And while we can’t help with all your worries, we can help protect you from life’s uncertainties. But first, we want to help you understand the fundamentals of financial security, strategies for achieving it and the importance income protection plays in it.
The basics of financial security
Before you jump into planning your financial future with guns blazing, you need to make sure you are implementing strong financial habits now. So, we’re starting with the basics because this financial behavior, is how you’ll be able to achieve your goals.
- Budgeting → You’ve probably been told many times how important a budget is. Despite this, only 32% of households have a budget (and that’s not even thinking about who’s actually following one). Keeping a budget budget is important because it helps you understand your cash flow management and can determine areas of improvement quickly (like overspending on food).
- Saving & Investing → Putting money aside is essential for planning for your financial future. This is funds for emergencies and your long-term planning. Since you’ll know your budget and cash flow, you’ll know the exact amount you can afford to move into a savings or investment account. Setting up automatic payments for this helps to keep your hands off it and ensures it’s saved for a rainy day.
- Debt management → Managing your debt is important to get ahead and plan your financial future. Focus on paying down any high-interest debt like credit cards, buy-now-pay-later schemes, and other loans. Mortgages can be good debt, but they are also can disguise poor habits and enable us to fritter away money - optimise your mortgage structure and payments.
Understand the basics? - now what?
Now we know the basics of what we need to do to plan for the future. We need to understand our cash flow, get rid of bad debt, and build up a savings or investment account. So, what does your financial future look like?
- What are your goals → You’re reading this blog, so you probably have an indication of what your financial goal is. It could be buying a home, education, travel, retirement, or something else. No matter what it is, you need to have a goal to stay focused on why you are working toward something.
- What’s your plan to get there → Now you need strategies, and for some people, this comes naturally. Realistically how are you going to get to your goal? Is there a way to get your money working harder for you using growth strategies? Can you tighten your budget to work toward this goal?
- Monitor and adjust → Finances aren’t a ‘set and forget’ thing as our lives are always changing. Regularly check in and make adjustments as you can. Financial priorities may need to change over time or sudden events may force spending in other areas of your life.
Why and when does income protection come into the picture?
Income protection insurance is a valuable tool for safeguarding financial security, especially in the face of unexpected challenges. Here’s why and when you should be considering income protection;
- When you may need to think about income protection → Most people are worried about losing their income - so if this is you, you’re not alone. But, there are circumstances where a loss of income hurts a bit more. This is usually when you have large debts, kids to pay for, are relying on one income for a family or you are on your own and there’s no one to support you if you can’t work.
- What income protection can help with → Having Income Protection not only helps with peace of mind but means that while you are unable to work due to illness or injury, you can still have the money coming in to carry on with your life even though you’re not earning. It covers more than accidents so will protect your income when ACC won’t.
Achieving financial security requires careful planning, execution, and willingness to adapt to changing environments. But it’s key to understand that planning for your financial future requires protecting yourself now, and ensuring you aren’t taking steps backward. By understanding the basics of financial security, and implementing strategies to reach financial goals, you can build a solid foundation for a secure future.
This blog is provided for information purposes only. The content of this blog is not intended as a substitute for regulated financial advice. If you would like financial advice, please seek a financial adviser's opinion.
