When we see someone who is considered ‘successful’ or ‘well-off’ – maybe with a nice house, car or a lot of money - we often hear people saying ‘aren’t they lucky’. For the few who have won lotto, maybe had an unexpected inheritance or have been in the right place at the right time, maybe luck did have something to do with it.

But for the vast majority of those who are considered to be successful, it has probably happened as a result from years of hard work, smart decisions and a view to the future. Business owners have assumed risks and taken on personal liability for staff, premises and products or clients, have probably forgone personal income at various stages to support the business and increased their stress considerably in the process. Others may have deferred non-essential purchases to allow for faster debt reduction, increased savings and longer-term financial security.

The lesson is - making money is hard, spending it is easy!

Every dollar you earn can only do one job – if you spend $20 on a lotto ticket, you cannot use the same $20 towards an extra loan repayment. The lotto ticket buys instant gratification and a slim (one in 3.8 million!) chance of a big prize. The extra loan repayment will save many more times that in interest over many years and repay your loan a bit quicker. Not as exciting, but definitely a better use of your money.

Your regular spending should be covered in a budget to allow you to see where the money is spent and identify any areas for improvement or reductions in costs. The aim of a budget is to have money left over.  It’s not about how much we make – it’s about how much we keep! Major purchasing decisions should be part of a longer-term plan. Take the time to do your homework before any financial commitment, consider the best way to achieve your goals or any alternatives and always consider the longer-term implications.

Debt can help get you into a home, car or business but at some point will need to be repaid. Kiwis are buying homes later in life, at higher prices requiring larger mortgages and often overextending our finances to get the home of our dreams. A reduction of household income through a change of family situation, disablement or redundancy can be all it takes to put many under significant financial stress. While insurance can help in this situation, smart financial decisions are needed to avoid excessive risk in the first place, build financial resilience and make the most of your money.

There is a growing concern that many of us will be reaching retirement with significant debt and using KiwiSaver to repay loans rather than funding a comfortable retirement. Does your plan include a goal to have debt repaid well before your planned retirement?

Take some time over these holidays to unwind and make a plan for you and your family to get ahead. There are some great free resources at sorted.co.nz to get you started or you can contact us for a chat on your financial future.