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Do you feel free when it comes to money?

Financial freedom is not about being wealthy. It’s about feeling good about your financial situation – whatever that may be.

3 minute read

Just like the rest of your wellbeing, being comfortable, healthy, or happy when it comes to money is about how you feel. It’s not necessarily about how much money you have, or how much money you earn.

Financial freedom is different for everyone, but whether or not you feel free when it comes to money, generally comes down to a few important things.

• Financial security – are you comfortable you have enough money to make ends meet; can you pay your rent or mortgage, and put food on the table, for example? Do you pay your bills on time, and do you generally feel relaxed about your finances?
• Freedom of choice – do you have enough money to make decisions to help you enjoy life; like starting a family or going on holiday?
• Being prepared for a financial shock – what if you need emergency dental treatment, or something serious happens like you get an illness or injury that means you’re out of work for a while? Do you have a backup plan to help take away the financial burden at what's likely to be a stressful time?
• Being set up for the future – do you have long-term goals like living your best retirement life, and are you on track to meet them?

If you’re not feeling as free as you'd like to be, it might be worth making a few changes (where you can, of course). Here are a few things you could do to feel more financially comfortable, healthy, and happy. 

Build an emergency fund

Building an emergency fund can help you to stay out of debt if any unexpected costs come up. Set up a separate account and have an automatic payment go into it each pay day so you’re prepared if the car breaks down, or simply the going gets tough. The ideal goal is to have at least three months’ worth of wages saved, but aiming for any amount of savings is a good start. Don’t forget to make sure the amount you put aside fits within your budget, so you can still meet your day-to-day expenses.

Get control of your debt

Start by checking how much money you owe overall. List out all of your debts including the amount owing (balance), interest rates, minimum repayments, and what the term of the debt is. You can find the annual interest rates in your loan agreement or on your credit card statement. Now, order your debt by interest rate, starting with repaying the debt you pay the most interest on.

Once you’ve got a handle on how much you owe, you can start to prioritise your debt repayments. Either focus on paying off the highest interest‐bearing one, or smallest balance first. A financial mentor may be able to help you work out what’s right for you. One option is MoneyTalks – an independent and confidential service which is completely free. The financial mentors can help you with confidential advice, and talk you through your options for getting on top of debts and covering the essentials.

Not-for-profit organisation Good Shepherd NZ can also provide low-and-no-interest loans to assist with life’s essentials, including debt solution loans, as part of their DEBTsolve programme.

Work towards your bigger goals 

If you can cover all of your expenses with your regular income and still have money left over when it’s time for your next pay, think about putting it towards your bigger goals. Consider setting up separate savings accounts for each of your goals, like a ‘holiday account’ or a ‘new car account’. It’s always good to have something to aim for when you’re saving.

Think about the long-term and make sure you've joined KiwiSaver if you're working by enrolling with a scheme provider, and make contributions. In most cases your employer must also contribute at least 3.5% on top of your regular pay. You could also be eligible to get up to $260.72 from the Government into your KiwiSaver account each year. Just keep in mind you’ll only be able to access your KiwiSaver savings in specific circumstances, such as potentially helping towards a deposit to buy your first home or when you turn 65.

Look to cut down your spending

If you tend not to have money left over when it’s time for your next pay, think about ways to cut down on your spending on things like eating out and clothing. Put off buying high-cost items where you can.

Think about other ways to earn

Look into creating other potential sources of income on top of your salary or wages. This could be through setting up a side hustle, doing overtime at work, or investing with future earnings in mind. 

Look to better your net worth

Work out your net worth, which is the difference between the value of what you own and the total amount that you owe. If you know your net worth, it can help to track your progress and make financial goals. You can improve your net worth by reducing your debt, saving more, or both. Focus on increasing your net worth each year – 10% is a good goal to aim towards.

If improving your net worth isn’t a consideration right now, even making small changes might help you feel more in control. And when you feel in control of your money, you’ll likely feel free. 

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This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article.

BNZ Investment Services Limited, a wholly owned subsidiary of Harbour Asset Management Limited, is the Issuer and Manager of the BNZ KiwiSaver Scheme. Download a copy of the BNZ KiwiSaver Scheme Product Disclosure Statement at bnz.co.nz, or pick up a copy from a BNZ branch.

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