Personal Finance: Looking at the Big Picture
Written by R. A. Stewart
Financial planning requires vision. It is looking beyond your current needs and circumstances and making provisions for your future. A person who sets up his finances in a way that he or she knows where there is money is going and what it is being saved for is a mature and responsible person. Someone who spends all of their discretionary savings without any thought to the future is a selfish and immature individual. I say that because if they have not left anything in their estate and expect their family to pick up the tab when they have passed on, then that is selfish of them.
Joining a superannuation scheme in order to make provision for when you stop working is the sensible thing to do. It is also the responsible and mature thing to do. New Zealand, as do other countries have incentives for contributing to a retirement scheme. New Zealand’s scheme is called “Kiwisaver.” Unfortunately, the National government (in New Zealand) has watered down the incentives in order to balance the books, but it does not affect the make provision for your future principle.
In New Zealand, withdrawals can be made from Kiwisaver for house deposit. There are restrictions on this such as one needs to have been contributing to Kiwisaver for at least three years.
The benefits of saving money cannot be understated. If you want to purchase a car and you have no money saved whatsoever, you have two options: start saving or borrow. If you choose the second option then you are financially dumb because you are paying more for the car than the sensible saver who pays cash for it.
There are the costs of keeping the car on the road on top of what you have already borrowed for the car so if you were not able to save money before you had a car you will struggle to keep your head above water afterwards.
You may have your retirement scheme all sorted and have no intention of buying a car, but you will need a lot of money at some point, whether that be for getting married, having kids, a medical expense, or other emergency. The sensible thing to do is to be prepared for all of these.
If you enter a relationship with someone and they do not even have a penny to their name then that should serve as a massive red flag. Be aware that if as a couple you apply for a home loan then you will be turned down if one of you has a bad credit rating.
Whether you have any material goals or not, there will always come a time when you need money for something, whether that be for a bond for a flat, house repairs, medical bills, new car, and so on. The willingness to save your discretionary money for unforeseen expenses requires vision. It is the responsible thing to do. A person with no vision will spend everything they have without any thought for the future.
Having an emergency fund is a good idea. One which is separate from your personal bank account. This will provide some kind of cushion from financial shocks which will occur from time to time.
It is all about looking at the big picture and how being a good manager of your money will make life a little less stressful later on.
About this article
The contents of this article are of the opinion and experience of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. You may use this article as content for your blog/website or ebook.
Read my other articles on www.robertastewart.com
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