Boomers. We love em. Friends, parents, aunties, uncles, cousins - heck maybe even yourself. We thought we’d chat to a few, and see if they could share their top tips about managing money. After all, they do hold the bulk of New Zealand’s wealth.
Tip number one - Money doesn’t grow on trees.
Who hasn’t heard this one before? Turns out, it’s true. Over a nice glass of buttery chardonnay, they told us to...
Start early, save regularly – Save small amounts often.
Warren Buffet (okay, not technically a ‘boomer’) once said, “Don’t save what is left after spending; instead spend what is left after saving”.
Saving as little as $20 a week can create a very nice nest egg thanks to something called compound interest. A lot of the time, saving small amounts earlier in life will have a greater impact than saving larger amounts later on.
Make a budget, and stick to it.
To figure out how much you can comfortably put away each week, start with putting a budget together. Setting out a realistic plan will help you figure out the difference between:
How much you earn (e.g. $400 per week after tax)
How much you want to save (e.g. $20 per week)
The cost of your expenses each week (e.g. fuel, rent, food, phone bill etc).
A budget also helps you stay accountable for your spending, and checking in regularly will help keep you on track towards your savings goals.
Tip number two - Avoid hire purchase and pay-day loans
These types of loans typically carry high interest rates, and if you don’t pay them off on time, debt can start compounding against you and become a bit of a trap.
Long story short, you may end up paying a lot more for the items than you need to. If you’d saved up and purchased them with money from your bank account, you’d be much better off.
If you can’t avoid it, don’t miss any repayments, and try your best to pay it off as quickly as possible.
Tip number three - Don’t spend money you don’t have (yet).
Buying things on lay-buy has become quite popular, making it easier to get things now, and pay them off in weekly installments, instead of all in one go. It makes financial sense on paper, but only if you have massive self control. A key issue is the encouragement you’re getting to purchase something that you might not normally buy - also known as impulse buying. And in some cases, you are potentially spending money you haven’t earned yet.
Tip number four - Invest in your retirement
Superannuation is currently available for every Kiwi here in New Zealand, once they hit 65 years of age - regardless of whether they’re still working or how many assets they have.
But this doesn’t necessarily mean it’s here to stay. It could be risky to assume this support is going to be available in the same form for the next 10, 20, 30+ years.
The government is trying to make New Zealanders better at planning their own retirement, by putting in place initiatives that encourage saving, such as KiwiSaver.
While you can also withdraw KiwiSaver for your first home, you should be thinking long-term about your retirement, and making sure you have a nice little nest-egg building away in the background throughout your working life.
Newshub has written a pretty good article on how much you may need for retirement, which you can find here.
Tip number 5 - Learn about property and consider it as an investment
Real house prices have increased almost three-fold in the last 18 years, proving to be a good investment for many Kiwis.
Regardless of whether you’re currently in a position to consider purchasing a property, starting to learn about how the property market works in New Zealand is useful. Look at house prices in different areas, evaluate how the market has performed historically, and learn about the basics, i.e. how rental returns work.
The majority of Kiwis need to borrow money to buy a home, so it’s crucial to understand the basics of how a mortgage works. We’ve written a blog on this here.
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And there you have it. Boomers have had a good run at this money stuff, and if we can put into practice some of their wisdom, we’ll most likely be a lot better off for it.