Tips available on how to be financially savvy
A financial strategist and money coach is on a mission to help Kiwis be smarter with their finances.
Hannah McQueen (pictured above) is the founding director of enable.me, a service of qualified professionals who provide expert advice helping New Zealanders make wise money decisions. McQueen told NZ Adviser when she took on her first mortgage almost 20 years ago, she played banks off between one another to attract the best interest rate she could.
“I had a new mortgage of $360,000 and with the high interest rates at the time, I would’ve paid nearly $1 million to the bank. I thought this was madness and how could this be possible?” McQueen said.
“So, I went to my bank and asked them for options to pay off my mortgage faster. They said I could either shorten my loan term however that would increase my repayments, I could pay a 5% lump sum without any penalty, but I could not re-access my money, or I could put a percentage of my mortgage on a floating much higher interest rate.”
McQueen said none of these options worked for her, so she thought how she could structure her mortgage to have some flexibility with the lowest interest rate costs and the ability to re-access equity, so she decided to call the calculus department at the University of Auckland.
“We successfully worked out a formula to strengthen my mortgage and it saved me nearly $350,000 over the lifetime of my mortgage. I now had an amazing formula but no cash surplus to maximise my formula.”
McQueen said as an accountant, she was good at writing budgets, however she struggled to stick to one at the time.
“I wanted to better understand the behaviour around the economics component of financial success, not just the financial literacy, so this was when I started enable.me approximately 16 years ago,” she said.
“It is our job is to help people do better and get their money working for them. This translates to a 300% increase in savings for our clients and help them pay their mortgage off in 10 years rather than 30. We help our clients prepare for their retirement early on and facilitate using equity to buy investment properties or assets.”
Staying in control of your finances
McQueen said the first principle to financial success was being in control of what you were trying to achieve.
“You need to understand the trajectory you are on and work out how you are going to get to where you want to be,” she said.
“Many people struggle to do that accurately and it tends to be a misdiagnosis of where people are starting from. Because many financial decisions are emotional decisions, many tend not to accurately assess what they are working with, so the idea of taking control is critical to maximise your rate of progress.”
Reset your savings strategies according to circumstances
McQueen said when interest rates rise, people typically tend to spend less.
“As your costs extend, your surplus left over reduces, which means the stakes become higher,” she said.
“My advice is you should respond by adjusting your behaviours on the other side by resetting your spending plan, restructure your mortgage and have different income targets. You are in control of so much more than what you acknowledge.”
McQueen said as cost of living pressures and inflation continued rising, it’s a good time to look at opportunities and be light on your feet when it comes to household spending.
Find an expert to help make the right decisions
“Many people feel powerless at the moment and they do not have the right mindset/strategy/ behaviours in place,” she said.
“The key is you need to engage with someone to help take your power back. Many people are not bad with their money, they just can’t see how they can be better with it. My advice is work with someone who you are not emotionally connected with as they have a different line of sight so can set an action plan into motion.”
Enrich Retirement director Liz Koh told stuff.co.nz if people want to shake their debt in 2023, they might not be sure where to start.
“Work out what your debt is costing you because this can help to guide decisions about which should be the priority to pay off,” Koh said.
“It’s worth checking what the actual rate is that you’re paying – sometimes interest-free or low-interest deals have a time limit.”
Mortgage adviser Jarrod Kirkland, national manager mortgages of Auckland brokerage The Mortgage Lab, has compiled a list of helpful hints for New Zealanders wanting to buy a home in 2023.
“If you have decided to make the exciting leap into the property market this year, you may be unsure where to start,” Kirkland said.
Do you want to be smarter with your money in 2023? Share your tips and tricks in the comments below.
