Tuesday, April 16, 2024

Six Ways To Get Financially Fit i: Expert Advice On How To Look After Your Money, Starting Today

A lot of financial advice is aimed at, well, rich, middle-class men and there’s a reason why so many women feel left out of the loop when it comes to the whole money conversation. But there are simple lessons you can start now that bring financial freedom later – here is some expert advice from a woman who’s dedicated her career to helping women become empowered, financially.

Glenys Wilson, a Principal at Mercer NZ who heads Financial Advice and Education, is all too aware of how hard it can be to get women in their 20s and 30s to care about a retirement plan. “When I was 21, I remember someone coming up to me in the staffroom to talk about superannuation,” she says. “When you’re 21, or 25, and someone wants to talk to you about retirement and how you need to have a million dollars plus in your retirement fund, your eyes just glaze over.”

Glenys Wilson

However, with over 20 years working in the financial advice space, a lot of her day job is helping panicked people when they suddenly find themselves in a situation they never thought to plan for: retirement, being suddenly left without a partner, losing a job.

Empowering women with the knowledge to take control of their finances is very, very important work for Glenys, because it’s women who are often left out of the financial conversation altogether. The statistics, she points out, are not in our favour. “Around 60% of women worry about money every day, or rate their financial literacy as low. And 62% of women don’t feel prepared for retirement,” she says. “Those numbers are high.”

The other statistic that’s a bit of a wake-up call is that less than 5% of women use a financial advisor but Glenys says seeking financial advice, early on, can make all the difference when it comes to setting you up to be financially stable throughout your life. But there are some key lessons that she says can help anyone – as she puts it – “get their shit together, financially”.

Pay Yourself First: The Key Change Most Women Need To Make

“This is the most fundamental thing and it’s the same whether you’re talking about Sharesies, or KiwiSaver, or emergency funds, or whatever,” Glenys says. Paying yourself first means putting some money into your KiwiSaver or your savings account before you put money anywhere else. “Most people – and especially women – will pay for the groceries, the kids’ school supplies, everything and anything and then there is never any money left over,” Glenys says.

“It’s essential to start early because a small amount early is much better than a big amount later.”

“Women will say to me, ‘there isn’t enough money’/’I don’t earn enough to save anything’. And I will always say to them, you have to set yourself up so that you’re in a KiwiSaver or an investment account or a small savings account and that money has to come out first.” The saving practices that you start early can make the biggest difference as to what level of financial freedom you enjoy for the rest of your life.

Start Saving As Soon As You Can

It comes down to a key lesson about money, Glenys says: “It’s essential to start early because a small amount early is much better than a big amount later.” She cites one client who set up an automatic payment into her KiwiSaver and then $10 a week into a savings account. It’s not an amount you’ll most likely miss in a week but the total amount of that money over your working lifetime – plus compound interest – is a game changer at retirement age.

Plan For A Rainy Day (In Covid-19, It Rains Often)

Having three months’ salary in a savings account is a good idea because you never know when an emergency will strike. “If you need to get away from your partner, if you’ve lost your job, it’s Covid-19… whatever, at least you know you’ve got three months’ money set aside,” Glenys says.

However, keeping large chunks of money – aside from an emergency fund – sitting in a bank isn’t as smart as you might think, because interest rates are so low. “If you don’t want that money tied up – for instance, if you put it into KiwiSaver, you can’t get it out until you’re 65, you should start an investment account or put money into [something like] Sharesies.”

Make Reducing Debt Your Priority

It’s wonderful to have financial goals or saving targets, Glenys says, but if you’re in debt, then reducing that number needs to be your first priority. Compound interest is your best friend when it comes to adding to your savings over time, but it’s an utter nightmare when it comes to your credit card debt.

“You get people who amass credit card debt and they only pay off the minimum, and the balance keeps getting bigger and bigger and they can’t work out why,” Glenys says. “But you’re not paying off any of the principal, you’re just paying off some of the interest.”

“One of the things I say to people – and they get very upset – is that the best thing they can do is cut up their credit card and get rid of it.”

“If you’ve got a whole lot of debt, one of the best ways to consolidate debt is to roll it into your mortgage, if you’ve got one – because that’s the cheapest money you can have,” says Glenys. “Things like credit card debt have very, very high interest rates on them, so you can consolidate them with your mortgage. If you don’t have a mortgage, just try and reduce your debt as fast as you can.”

And stay away from using your credit card. “One of the things I say to people – and they get very upset – is that the best thing they can do is cut up their credit card and get rid of it.”

Why KiwiSaver Is A Game Changer

The biggest advantage of KiwiSaver – and it’s an advantage you don’t get with any other investment vehicle – is that you get your employer contribution on top of your own. “That’s immediately doubling your contribution.” You also get a credit from the Government each year into your KiwiSaver. No other investment vehicle gives you that as well.

If you’re self-employed, you can still get money back from the government if you make your own annual contributions. But make sure you’re paying attention to what type of fund your money is in. Some of the saddest conversations, Glenys says, are with people who are approaching retirement age and never paid attention to what their KiwiSaver was doing – and have missed out on a lot of potential money because of that.

“A lot of people got signed up automatically, and when you join, if you don’t make a choice about what fund to go into, you go into a reasonably low risk fund – which is not a good place if you’re in your 20s, 30s, 40s and even your 50s.” If your KiwiSaver is for your retirement, going with a growth fund can bring you more risk but also far more reward over a longer time period.

Don’t Leave The Finances Up To Your Partner

If I had a dollar for every time a female journalist made a joke about marrying rich so they never had to worry about making money, I would have enough money to put directly into an investment account because I paid attention to Lesson #1. But Glenys says that leaving the finances up to your husband or partner can come back to bite you in the case of a break-up or sudden bereavement – like the risk of being unable to access a joint account if your husband dies unexpectedly and his name comes before yours on the account.

Getting accounts in your own name is very important, Glenys says. “A lot of women will find that difficult because of their husbands,” she says. “But having dealt with so many women who feel so empowered and so good when they get themselves financially sorted, I just shout it out there to everyone.

“Don’t feel that it’s all about a big mystery. The industry I work in has tended to use jargon that people don’t understand but go and talk to an advisor. There is no such thing as a stupid question – so don’t be afraid to ask a lot of questions.”

The content of this article has been provided by Glenys Wilson, part of the Financial Advice team at Mercer (N.Z.) Limited (Mercer) for general information only. The information does not take into account your personal objectives, financial situation or needs.Before making any investment decision, you should take financial advice as to whether your intended action is appropriate in light of your particular investment needs, objectives and financial circumstances. Neither Mercer nor any related parties accepts any responsibility for any inaccuracy. Past performance is no guarantee or indicator of future performance.

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