Finance

Hi slynkey girls. I’m pretty sure you all have been to the doctor at some point or another. It’s likely the doctor will take your blood pressure, ask about any concerns you have and prescribe or advise appropriately. And you will visit your doctor taking advice as a matter of course. Another check up which should be a matter of course is a financial check up.

Hie thee to a financial planner to get advice and a prescription for your financial health. This check up entails, among another things, an evaluation of good debts (mortgage) and bad debts (credit cards); your planner will look at your savings and assess your ability to respond to a financial emergency.

Some of you might feel this is as scary as taking all your clothes off for a physical so if you don’t like the idea of consulting a financial planner here are some DIY tips.

1.    Check to see if your net worth is growing.
Your net worth takes your financial temperature. To calculate your net worth simply subtract what you owe, from what you own. Liabilities are credit cards, hire purchase, department store cards and mortgages. What you own may be your house, car, jewellery and furniture.
 
Even if your assets don’t grow in value your net worth will improve if you are paying off debt. Increasing debt can be OK in some circumstances if for example you are advancing your education or buying a business.

Copy this down and add amounts for each:

ASSETS
Cash/ Deposits
Vehicles
Furniture
Home
Property
Property cont'd
Investments
Life Insurance Surrender Value
Other
Other
TOTAL 1:

LIABILITIES
Overdraft
Hire Puchase
Loans
1st Mortgage
Mortgage
Mortgage
Credit cards
Tax
Other
TOTAL 2:

MY NET WORTH IS (Total 1 minus Total 2):

2.    How are your savings and debt repayment ratios?

Don’t be scared but yes it’s time to do some number crunching; how much of your income is going towards debt repayment, how much to savings, and how much to an emergency fund. A good rule of thumb for you Slynkey girls is 33% - that is no more than 33% of your gross (before tax) income should be going to repay debt – all debt – that includes car repayments, HP payments, student loans and mortgages. You should also be savings at least 10% of your gross income and you should have at least three months income tucked away in an emergency fund.

3.    Are you spending more than you earn?
Calculate a monthly spending target and stick to it – use the excellent calculators at www.sorted.org .nz
If you are spending more than you earn you are using credit – and that credit is expensive! Plan a rapid repayment schedule and cut up your cards.

4.    What has changed in your life recently?
Have you married, had a child, graduated or won lotto? Any of these events could alter your financial roadmap.
 
5.    Do you have adequate insurance?
Evaluate your house contents and car insurance. Can you get cheaper premiums by increasing your excess?
 
6.    Next attend to your income protection or life insurance.
Do you have enough? Too much? Or - horrors – none or not enough. You don’t want insurance? You are your most valuable asset. Consider this:
An average income earner will typically earn over $1.4m through their working life. ACC does not pay in every circumstance and, interestingly, about one in 20 disabilities lasting six months or more is related to accidental causes. Here's the frightening part, two out of every five people are likely to be unable to work for six months or more during their lifetime due to a sickness or accident.

7.    What about legal issues?
Do you need to revisit your will? Or do you not have one?
 
Finally are you sleeping well? Has the recent market and economic turmoil affected your investments? You may need to restructure your portfolio.
 
And are you happy with where your financial life is heading? Have your outlook or goals changed?

Remember financial planning is not just about money. It’s about what you want and what goals you want to achieve in life, then you plan financially.

Consider this slynkey girls;
...what will help you the most is a plan – as the Cheshire Cat said to Alice.
If you don't know where you're going, any road will get you there