It’s all very well and good to have long term financial goals, but having such large and distant goals can make things seem unlikely.
There is a saying that goes along the lines of “we overestimate what we can achieve in a day, and underestimate what we can achieve in 10 years”. I think this is extremely true. Every time I look back 5 years I am surprised at how far I have come […..]
As a blogger, I am always trying to create content that is beneficial to the ready. The problem with this is that it makes me appear like I know exactly what I’m doing. This isn’t always the case though.
So, in order to be relatable, here is a list of my biggest financial mistakes thus far. I know there will be more in the future too […..]
In one of my early posts, I discussed what financial independence meant to me. Within that article, I briefly raised the concept of savings rate and how it is an important metric to measure on your path to financial freedom.
But just how important a metric is it?
Saving money is so often viewed as a sacrifice.
In New Zealand, we have a paltry household savings rate of minus 1% per year. This basically means we are spending everything that we earn.
Naturally, most people would then view saving money as a sacrifice, since it means living a lifestyle that costs less than […..]
I used to have so much junk that I barely used. In the past I have splashed out untold amounts of money on things such as fancy golf bags, top of the range bikes, and impressive cell phones.
Why did I buy a pro golf bag when I am lucky if I play once a year? Did I think all of a sudden I would play more often or become as good as the pros?
Credit card debt has become so normal that we no longer call it debt. It is called a credit balance. Sounds much nicer doesn’t it? This was no doubt rephrased by the credit card industry to normalise debt. In a similar way Kentucky Fried Chicken rebranded to KFC because they didn’t want people thinking of the word ‘fried’, the credit card industry doesn’t want […..]
Just a quick thought experiment for you today.
I find it rather sad that after all is said and done, after 40 years of working at our job we are just an employee file number to our employer. Our employer moves on. They usually replace us, and we are all but a distant memory. Yet for us, our time in employment […..]
Last week we went over several tricks that marketers use to try and get us to purchase their goods and services. They are very good at getting into our minds and getting us to not think rationally.
Today, we will go over a few tips that may help to overcome the temptations and beat the marketers at their own game.[…..]
Have you ever looked around your house and ask, “why did I buy that?”. Or come out of a shop with a new powertool and later thought, “what was I thinking?”. Chances are you have fallen prey to clever sales marketing and product placement. I think we have all fallen prey to these moments of post purchase regret. With a growing range of products now available, the marketing is only getting more pronounced and difficult to avoid.
With Christmas fast approaching, I thought it would be a good time to […..]
This is the difference between what you own and what you owe. Basically, if we sold everything we own how much money would we have. Bob has $100,000 in investments, $20,000 in savings, $200,000 in house equity, and $50,000 in Kiwisaver. His assets total $370,000.
He owes $10,000 on his student loan and $350,000 on the house mortgage. His liabilities total $360,000.
Bob’s net worth is total assets ($370,000) minus total liabilities ($360,000) = $10,000.
Net worth is a good indication of what position of financial strength we are in. At age 23 a lot of us will have a negative net worth thanks to a student loan.
Some people do not include their house as part of their net worth calculation. The reason being that we all need somewhere to live and if we sold our house we would still need to pay for housing. I understand the point of view, but I still include housing. The reason being that equity in our house can be turned into cash by downsizing, renting out space, or even a reverse mortgage. I don’t include vehicles in my calculation though because I will always need a car and I can’t turn my car into cash flow.
It is your decision on what to include and what not to include, but the key is to keep your calculations consistent. If we keep the variables the same, then we can get a good gauge of our progress. It is quite motivating watching net worth go up. I calculate mine once per month, but you can choose any time frame that suits.
It is important to revise how much we are paying in insurance each year. Situations change and if ignored, we may end up paying for far too much or too little insurance. With the birth of our daughter we have had to reassess our life insurance premium and decided we need to add more cover. Whereas, our savings have increased over the last year so we have decided to have higher excesses for our house and contents insurance to save cost.
This could range from savings accounts to mortgages to debt. We need to intimately know the interest rates we pay and when they have changed. We need to make decisions on whether to invest or pay off debt on a regular basis, or which debt to pay off first.
For someone investing $10,000 per year in Kiwisaver at 7% returns with annual fees of 1.5%, they will pay $282,000 in fees over the course of 40 years. If we instead only paid 0.5% in annual fees, our fees would only be $112,000. Just by shopping around and paying attention to fees we have saved ourselves $170,000.
It is handy to know how much we have saved in our rainy-day funds. If we don’t know and something bad happens we could find ourselves having to go into bad debt. For more on ideal emergency fund numbers read this article. We all should know how much we have saved so we can determine how many months we can survive on our savings should something bad happen such as a job loss.
I know, not a financial number but still very important nonetheless. Our family is the only one we have, and we should keep in regular contact.
So there we have it, 10 important numbers that will get your personal finances on track. By tracking our numbers, we can save a lot of money. We can pick up mistakes in our pay checks. We can stop overpaying on certain expenses and fees. We can get better interest rates and credit scores. Not only can we save money, but it is also motivational. Watching our numbers get better ever year is a great motivator once we can see the progress being made. They tell us that we are heading in the right direction. If we don’t know what our numbers are then how do we know we are moving forward?
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here
Comments welcome below. How well do you know your numbers? Are there any other important numbers I have missed?
