Many financial decisions are time-related and many fail to review what they have in place and often continue spending money on solutions that do not work. A Financial Health Check begins the process of identifying “roadblocks” and unlocking potential.
Common pitfalls are:
- Not starting money management early enough. The difference between a person with $40,000 income saving into a Kiwi Saver at 4% + 2% employer contribution over 20 and 30 years is $172,160!
- Not reducing your mortgage faster. A mortgage is vital for most people. It is a debt and a product of a bank. Banks want to sell more product! You need to get out of debt as fast as you can, de-risk your life and grow your wealth. The less debt you have the less interest you pay and the less insurance you need.
- Not being in the right KiwiSaver Fund. When selecting the right Kiwi Saver Fund account should be taken of your total financial situation. The Financial Health Check will begin that process. You may be in a consistently underperforming fund or in one that does not align to your investor profile and personal situation. The FHC will help you decide what is your investor profile.
- Not doing anything! It is unlikely that a person reading this will be this type of person. The initiative has already been taken to get this far! The NZ Super retirement “safety net” is just that and retirement is a long time – 25 years?
- Not mending the “leaky spending bucket”. Ironically this applies to busy people on good salaries. Finding it hard to see where the money is going? Not having a review of spending is a great way to self harm yourself financially. There is a lot of psychology at work here. Not honestly and openly addressing this can harm both finances and relationships.
- Not diversifying Investments and taking too much Risk. Risk is a part of living. Nothing is certain as they say only death and taxes! But risk can be identified and managed. It is just a case of being informed and sensible.
- Not taking advice on Personal Financial Planning. Trustees and Estate Managers are required to exercise “fiduciary care” to be “prudent” on behalf of those they act. Individuals are free to do as they wish. Historically, and still significantly today, Financial Services have used commissions as a way of providing a service. Until recently this has not always had a top-level of transparency. This was because consumers did not see the value and sometimes they did not get value, just a product. We would estimate that 10% of consumers now are much smarter and can see that building a financial future requires not just building material but a financial architect. I am grateful to have survived the Christchurch Earthquake in my 14 level office building because it was built to Code! An independent advisory is able to focus better on advice (design).