There is a great opportunity right now for everybody in the work force to improve their financial situation. Unfortunately, the majority of people will miss out on this opportunity through not taking the right action.
From 1 October, income tax rates will be cut and Government benefits will be increased. While GST will also be increased, most people in the work force will be better off. For example, someone on a gross income of $50,000 will have around $20 a week extra as a net result of the changes. There is a useful calculator here which gives you an estimate of the net benefit based on your income.
Most people will allow the extra dollars each week to slip away on extra spending. It only takes a coffee a day to see it all disappear. Working on the old theory that you don’t miss what you have never had, the best financial decision you can make right now is to estimate your net benefit from the changes and make a proactive choice about what to do with it.
There’s an order of priority with the choices you have. If you haven’t yet joined KiwiSaver, make that your first priority as this will give you the highest return on your money. Next on the list is paying off your credit card or hire purchase, so set up an automatic payment for the extra amount. If you have no short term debt, set up a payment into a savings account to build up an emergency fund. If that is already under control then increase your mortgage repayments to repay your debt quicker. The next priority is to make sure your retirement savings are on track. Finally, if you have all these things in hand, it’s yours to spend as you wish!