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Top questions...

Who can I talk to about money?

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What is the safest KiwiSaver fund?

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Where's good to put savings right now?

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How can I stick to my budget?

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Should I save or clear debt?

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What you were wondering...

Answers to your top 10 money questions

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Spending plans

Do I really need a budget?

A budget is really just a plan for your spending – it’s a big help in making sure you spend on what you really want. It's far too easy these days to find ourselves spending on things we never intended – a bit here, a bit there, and there's nothing left to help us get ahead financially. Here's Sorted's budgeting tool to start your plan today.

Should I save or clear debt?

Say you've got an extra dollar in your hand – where’s best to put it? Wherever gets you the most back. That's typically paying down debt, especially if you're carrying costly debt from a payday lender, store card or credit card. Remember that it’s important to save up a starter safety net first, though. Paying debt off is almost like getting a "sure return" of that high interest rate, and the interest on savings is typically much lower. Here’s more on how you can tackle your debt today.

What should I budget for?

Your goals, definitely. A budget is simply a plan to flow your money towards what you want, to live your best life. Budgeting helps for many reasons: to make sure we don't spend more than we earn, that we have enough for bills, to make ends meet. But the key thing with budgeting is to make a surplus – to have extra money left over and not a deficit. Once you do, you've got money to aim at whatever goals you'd like to set. Here's where to start your budget.

Do I pay down debt first or get an emergency fund going?

Saving for an emergency fund or a safety net of $1,000 is a great place to start, and then you can tackle any high-interest debt you're carrying. If you focus only on tackling your debt and an emergency pops up, you can end up having to borrow more. With a safety net, however, you can handle those unexpected events like a car repair or trip to the vet, without sliding further into debt. The goal is to get out of debt for good, so here's more on starting your safety net.

Why should I plan my spending?

Using a budget to plan your spending and sticking to it not only helps make ends meet, it enables you to reach goals for the short, medium and long term. Most things we'd like to achieve in life take money, and that money needs saving if we want to avoid too much debt. Once you've got a surplus in your budget, you can make sure it gets saved automatically into separate accounts, where it can build towards what you want. To get you started on thinking about some goals today, here's our goal planner.

Who should make a spending plan?

Budgets are for anyone who is managing money coming in... and going out. Most of us who have to make choices about our money can benefit from a budget. It's not just for those of us having difficulties making ends meet. A budget helps us feel in control, instead of just wondering where our money went. Here's our budgeting guide to help you start your plan today.

How can I stick to my budget?

It helps to have a plan! To build a great budget that you can stick to, it helps to first know your numbers. By tracking your spending, you’ll start to see where your money is going, and you’ll be better placed to make decisions about where you really want your money to go.  The key is to capture everything you spend for a month or two to get your full spending picture. There are several apps designed to track spending on the go. You can also download your past three months of transactions from your bank, which really helps to see the patterns. Here’s more on money tracking.

Where's good to put savings right now?

It depends on your plans for the money you’re putting aside and how soon you want to use it. Term deposits with a bank, credit union or building society are convenient for saving. They’re relatively safe places to park our money and earn a bit of interest, but returns on bank deposits aren’t as high as other types of investments. You’ll also typically be taxed more on term deposits than PIEs like KiwiSaver, as they are taxed at different rates. Here’s more on investing in term deposits.

Who can I talk to about money?

In order to not follow random money tips from just anyone, it helps to get professional, independent personalised financial advice. (It doesn't have to cost an arm and a leg.) Here's our guide to getting advice. Whichever kind you need, it helps to shop around, meet with a few advisers and find a good fit. For independent financial advisers, see Mary Holm's helpful page. For advice about debt and budgeting, you can discuss your situation – even anonymously – with the team at MoneyTalks, which runs a free helpline. Easily chat online, call 0800 345 123 or text 4029 today.

Are budgeting and planning the same?

The word "budget" can make us feel like our hands are tied, so it's better to think of it as a plan for spending. First up is to see whether you are spending more or less than you've got coming in. If you’ve got a surplus, you can funnel your extra money towards what you want, and achieve your goals. To help start your plan today, here's our budgeting tool

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Debt & loans

Are loans good?

It really depends on what they're for. Especially when you borrow for things that can increase in value, like your education, a business or a home, they can be life changing. But debt is like fire – it’s only beneficial when you keep it under control. Because of fees and interest charges, borrowing can end up costing much more than anticipated, and be incredibly hard to pay off. It needs to bring you wellbeing long after the initial fire has been put out, otherwise it may not be a great idea. Here's more on why debt is like fire.

How much debt is too much?

Taking on debt is risky, since in the future our situation may change and we might find it difficult to repay the loan. So if our circumstances did suddenly change, would it put us in real difficulty? If so, it's too much debt. A lender has ways of protecting themselves when loans go bad, including default fees and interest rates, and even the ability to write it off and sell it. The only defence we borrowers have if something goes wrong is our own reserves. Here's one borrower's story.

Can debt affect my mortgage application?

Yes, the amount of debt you're carrying, primarily higher-interest borrowings like on credit and store cards, can affect your chances of getting a loan, including a mortgage. One of the most important things that mortgage lenders look at is how much income you have available for loan repayments. If a lot of your income is already committed to other loans, the lender may decide to lend you less, or not at all. Here's more on what you can expect to borrow when you're buying a home.

Can loans be frozen?

Loans can be put on pause with something called a “holiday” or a “deferral”, but generally the interest you're charged does not stop for anyone. If you are struggling, the best thing is to immediately contact your lender and talk it through with them. The earlier you do this, the better. You might be surprised how willing they are to make things work for you and your loan. For example they may help you pay only interest for a while, or restructure your loan. For personalised help, contact the MoneyTalks team.

How does interest on a debt work?

When you borrow money, that comes at a cost – a tiny but mighty percentage of the loan amount called interest. That's how a lender makes money. An interest rate doesn't look like much, but over time it can add up to huge costs. When you're paying interest on a loan, it's important to repay more than the minimum amount if you can, to reduce the loan term and total interest cost. And when you're paying back a number of loans, it can help to target one at a time. Here are some debt strategies.

Which loans have interest?

Since lenders primarily make money from the interest we pay on loans, most debt includes interest charges. That said, when used in the right way, borrowing on credit cards and pay-later options like Afterpay can be interest free, and so a whole lot cheaper. Typically, the most expensive loans are payday loans, then store cards, credit cards, personal loans, car loans and mortgages (in that order). Borrowing may seem doable at first, but we end up paying much more for things than we intended because of interest. Start tackling your debt today.

How does debt affect my credit score?

Your credit score is a number that reflects your borrowing history, and lenders look at our score when they are deciding whether to lend to us or not. Managing our borrowing well can increase our score. Credit reports record any missed payments (defaults) and how long they are overdue. They also can show how much we've borrowed and whether we've made regular repayments or not. Our credit history also shows how often we've applied for loans, and too many enquiries can push our scores down. You can get your credit report for free by requesting it – here's where to find out more.

Which debt should I pay off first?

Aiming to be debt-free? It’s the high-interest debt that hurts most: payday loans, credit cards, store cards, car loans. That’s what we’re after first. When you have a number of loans on the go, there are a couple of strategies that help to take them down. The first is a "debt avalanche", where you list all your debts and target the highest-interest loan first (the most expensive). The second is a "debt snowball", where you work on repaying the smallest loan first. Find out which could work for you.

Can you extend a mortgage?

Yes, you are not stuck with the same set mortgage forever. Refinancing (or "remortgaging") is a normal part of home ownership, and many people do this every few years. Technically it's paying off one mortgage and taking on an entirely new one, either to change the terms of the loan (such as extend it from 20 to 25 years, for example), or to take advantage of a lower interest rate. For more about how to make refinancing work for you, see our new guide.

What loans do I qualify for?

Lenders make money when borrowers repay their loans regularly. So when we apply for a loan, they look at our ability to repay. They gauge whether we're a good payer by looking at our income and credit score (how well we have repaid other loans in the past). Although lenders have similar standards, they may have different amounts of money available to lend, and may vary which loans we qualify for at a given time. The first step to understand how much you can borrow is to request your credit history to see what lenders are looking at when you apply for a loan. See our credit report guide for more.

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KiwiSaver

Who took my KiwiSaver money?

Try not to worry – KiwiSaver balances go up and down normally. So no one took your money. It can feel unnerving, but it's helpful to understand what's really happening with your account. In KiwiSaver your money buys investments like shares and bonds that go up and down in value, sometimes radically. Those sudden falls in value cause your balance to go down in the short term, even if you still own the same number of investments. It's all part of growing your money, and here's an estimate of how much yours can grow to in time.

Can KiwiSaver be used to pay off debt?

KiwiSaver is designed for two things: buying a first home and growing a nest egg for retirement. If times get tough, you can withdraw to keep food on the table. But typically it's not for repaying debt like credit cards, fines or infringement notices, debt collection agency bills, hire purchase debt for non-essential living expenses, holidays, or even travel to visit a sick relative. Here's how a hardship withdrawal works.

I'm self-employed. Is KiwiSaver a good idea?

Even though it's primarily designed for employees, independent earners can still get a fair bit out of KiwiSaver. It would be great if KiwiSaver worked a bit better for those of us who are self-employed. That said, independent earners can still get the government's contribution and returns from money being invested in KiwiSaver. Here are some helpful considerations when you're self-employed.

What is the safest KiwiSaver fund?

Did you know there are “defensive” KiwiSaver funds? They’re having a bit of a moment, as people discover them for the first time. They mostly hold cash and bonds, and out of all the five types of KiwiSaver funds, they protect you most from sudden drops in your balance. You won’t get the potential growth that you would in other types, but if you’re going to use your KiwiSaver money soon, especially within the next 1–3 years, they can be helpful. Here are all the defensive funds in KiwiSaver.

How does KiwiSaver work?

When you put money into KiwiSaver, it is joined by three more flows of money: from your employer, from the government and from the market (where that money is invested). This makes it so much more powerful than just regular saving. You don't have to be working to be in KiwiSaver, although you do need to be living in New Zealand and be eligible to live here indefinitely. Here's how to get the most out of KiwiSaver.

Where does KiwiSaver money go?

With KiwiSaver, your savings flow into a professionally managed fund and are used to buy units of investments such as shares, bonds or commercial property. The mix of different types of investments depends on the type of fund you’re in. There are five types of funds: aggressive, growth, balanced, conservative, or defensive, depending on the proportion of risky investments like shares each holds. You can learn more about types of funds here.

Which KiwiSaver fund is best?

Everyone needs to choose which fund to be in, so which is the best fund for you? It's important to pick your fund based on important criteria (not just because it's a familiar brand or something). If you didn’t actively choose a fund when you started in KiwiSaver, the government did this for you by putting you into one of nine “default” funds. This was to get you started, until you got around to making a choice yourself. But how do you pick one? First up is to find which type of fund is right for you.

Is it hard to switch your KiwiSaver?

No, it’s easy – about the same as switching your mobile or power provider, actually. You let your new company know you want to move to them, and they do all the work behind the scenes. There are two ways of switching with KiwiSaver: staying with your provider but moving to one of their other funds, or moving to a new provider. There are good reasons to switch, such as when you're getting closer to the time you plan to start spending your KiwiSaver money on a first home or in retirement. But there are also bad reasons to switch, such as because you heard about some other fund doing better than yours. Here's why.

Are KiwiSaver withdrawals taxed?

When you take out your KiwiSaver money, either for a first home, financial hardship, or to use to live on in retirement, that money is tax-free. Your KiwiSaver contributions are made after your income has been taxed, and the gains from your investments that you own in KiwiSaver are taxed as well. So that means when you withdraw for a first home or retirement, there is no more tax to pay on it. It's your money to use. To withdraw your KiwiSaver money, contact your provider directly.

How do I increase my contributions?

Anyone can put in as much as they want to KiwiSaver at any time. (Fair to say that the KiwiSaver providers would be happy if you put in more!) Employees have some preset levels to choose from though: 3%, 4%, 6%, 8% or 10%. You simply let your payroll or HR person know. How much of a difference will changing your percentage make? Have a look.

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