The best way to start is to have a plan
If you're going on holiday, heading off on your OE or deciding on a career, you need a plan so you know where you're going and how you're going to get there. The same goes for life.
Having a plan helps you set out the goals and objectives you want to achieve, while also preparing for those unforeseen events that happen while you're on the journey.
Planning now gives you choices in the future – how you'll deal with setbacks and how you'll enjoy your retirement years.
Getting started is always the hard part, but the CFFC has made it easy for you to begin with a number of resources both here and on our other website, Sorted.
Having a plan means you'll know what money you've got and where it's going. This knowledge means you can make better decisions and you'll feel more in control of your money – and your financial wellbeing.
Getting on track
For many New Zealanders getting into good shape financially is about ‘little and long’.
It’s not a very exciting message and it doesn't get the heart racing like ‘buy now, pay later’, but it works.
A little bit of saving early adds up, interest goes on top and then you earn interest on the interest – creating the magic of compounding interest (it’s such an amazing thing it should really have a better name, just quietly). Even if you stop adding to it, it keeps getting bigger.
And having savings feels good. Buying things feels good too, but that can wear off quite quickly. The pleasure of savings sticks around. Then when you finally spend it, that feels even better.
Setting realistic goals
Once you reach retirement age, you essentially play with the cards you have in your deck.
Acquiring new cards and new choices is challenging, as your ability to generate income in retirement can be more limited. It comes back to the recurring message that it's never too early to start preparing for later on in life when you may not be working.
Setting realistic goals and understanding what it takes to reach them is an important exercise – the earlier you do this the better.
On the Sorted website there are calculators that enable you to project your retirement income, match that with your expected lifestyle, and work out whether you're in good shape or if you have a few gaps to manage.
A simple projection of your desired income in retirement can quickly give you a sense of what level of savings you require to achieve that goal. We have found this exercise helps make the action that you need to take a little more concrete. It also helps you make choices now that affect your long-term future.
Knowing your goals and having an action plan is all about certainty for you in your retirement. Getting started early gives you more time to prepare, makes it easier and can help set you up to be happy and healthy later in life.