Financial Freedom - is this in your future?
Despite a tough 2007 seeing analysts and media moguls touting a decrease in consumer confidence, Paymark (who processes all the electronic transactions in New Zealand), heralded a record 110 transactions per second between 12pm and 1pm on Christmas Eve.
Boxing Day was on par. For the total period, an excess of 1 billion dollars was spent.
With 90% of New Zealanders owning a debit card and only 22% feeling comfortable with their level of debt [Open Door, Issue 1, Wizard Home Loans publication], it’s worrying to think just how this spend will affect the average Kiwi in 2008, especially considering that despite the rise in interest rates last year, growth in sales for the Christmas period reached 4% . With the temptation to spend ever-present, it’s important to think about not only recovering from your 2007 holiday expenditure, but simple ways to lessen the blow of 2008’s silly season spend.
$ For Thought
The average amount spent by New Zealanders on Christmas is $922 . In addition to Christmas, there’s New Years - travel, accommodation, event tickets, etc - so in total, you could be looking at a splurge of around $2000, if not more. Many New Zealanders will put this on their credit card, with the aim of paying it off as soon as possible. However, even though most intend to do this, some are just making minimum payments, just enough to keep the bank at bay. Even if you pay it off by mid-March, the interest, worked out on an average rate of 21%, will have cost you over $500. Instead, consider saving $50 a week for 42 weeks leading up to Christmas. By the time it rolls around, you will have saved over $2000, along with some additional interest. And if you put the money saved onto your credit card before spending it, you’ll make the most of any points based rewards system your card offers. If you’re reading this thinking, “It’s all good in theory”, try reminding yourself about the money you’ll be giving to your bank - 25% of your total holiday spend. And how many hours you will have to work to earn this amount.
Sneaky Saving Strategies
Do you find it hard to leave your savings untouched? Here are a few alternate ways to save money.
Join your favourite supermarket’s Christmas Club. If you start putting $15 per week towards this now, you will accrue over $600 by December. This will cover the lunch on Christmas Day plus a few bottles of bubbly, depending on guest numbers.
Although small change has gotten even smaller, its still adds up. Buy a large clear glass cookie jar and allocate some money from your weekly coffee or lunch spend, in a jar at home. Based on sacrificing two coffees and one bought lunch per week (total $20), you’ll have saved $1040 in a year (or around $800 if you start now). Label the jar with the date you plan on taking it in to the bank to help motivate you to add to it rather than take away from it. Keep it out of sight and out of mind to help ensure you do not keep taking money out of it.
Clean out your wardrobe and sell any decent items which you’ve not worn for longer than 18 months, via your local second hand clothes dealer (such as Double Exposure or Recycle Boutique), or Trade Me. Getting rid of designer items can be especially worthwhile.
Are you really going to use that giant waffle maker or foot spa? Sell unused gadgets and kitchen utensils which have become white elephants. You may not get a lot for them, however every dollar counts (you can put it in the Christmas kitty), not to mention the bonus of extra cupboard space and a reduction in items to pack next time you move house.
The Bigger Picture: an investment for your future part one
Is 2008 your time to shine in the property market?
Last issue Lisa Meredith touched on how confidence can be a barrier in helping you gain financial stability and that in New Zealand, women see property investment as the preferred means of acquiring financial stability.
Debt should be respected, not feared. Used wisely, it can help create a platform for you to leverage off, benefiting you in the future. The more equity you have in one house, the sooner you can leverage into another. Seek advice on the best options for you and ask questions. It’s better than faking knowledge for fear of looking silly.
In the following months, we’ll provide you with some guidelines on how to approach house buying for investment with confidence.
Super sleuth
List some suburbs which you see as potential growth areas. Visit on weekends, perhaps have the odd coffee or brunch there, noting things such as how busy the area is, the demography, construction. Don’t be afraid to make small talk – people will candidly discuss pros and cons of the area, more readily than a real estate agent. In addition to amenities, note schools, public transport access and check the local council’s website for planned upgrades to infrastructure.
Dedicate some time to collate and review property publications from relevant areas and keep an eye on prices of anything which could potentially suit you to buy. Also research the local weekly rent average. If you plan well, you can attend an Open Home or two before or after your coffee. If you know a builder, offer them lunch in return for them giving their opinion on any home you may be seriously interested in. In the house market, what you know can be just as beneficial as who you know.