How Often Should you Review your Finances?

Tue Dec. 15th 2015

Unfortunately, too many people leave years between reviewing their financial arrangements. I recently spoke to someone who had not looked at their personal finances for four years. Four years is a lifetime when it comes to your finances; look at this way – what were you doing in your personal and work lives the first time good old Richie McCaw lifted the Webb Ellis Trophy in 2011? What were your capabilities at the time and what were you main focuses and what are they now? Do you now have children or have the kids left home to start their own lives? Below are six basics to reflect upon:

• Change in income – for the better or for the worse
• Relationships
• Assets and liabilities – have you moved home or paid down debt?
• What you now need to protect
• Are you in a better position in relation to providing yourself with a happy retirement compared with the last time you took action
• What are your goals now

Ideally you should review every 12 months, and more frequently if you have short-term objectives such as savings goals. Do not hold back on contacting your professional advisers – after all, you being in better financial health is in their best interests. In order to advance yourself in relation to the six basic points above you should ask yourself the following:

• How much are you spending? Are you frittering money away?
• What is your budget now? Do you now have money to invest and to build your asset base? Can this extra money be used to reduce debt?
• What fees and bills are unnecessary? (bank fees to satellite TV)
• Are your family and assets adequately protected? Is your cover adequate or do you have too much cover?
• Do you have a Will?
• How much are you paying on debt? Is the structure of you mortgage correct? Do you need a 5 Point Health Check on your mortgage?
• Is your use of plastic cards as efficient as could be?

Set a firm review date to stick to which will help you build this habit and make changes as soon as necessary. Set goals and targets to meet by the next review dates such as investing a certain amount or building a deposit to buy a home.

All the small things add up to make a huge difference. One common mistake many people make is keeping the term of their mortgage at 30 years when refinancing their mortgage. You may have saved on the interest rate but you will end up paying tens of thousands more by taking your time in paying off the mortgage. How could you know how much extra you can repay without reviewing what you are currently spending?

You should remember that NZ Super will not be enough to provide you with even a satisfactory lifestyle in the future. The end goal is to get you and your family ahead in life and not face financial struggle in the long-term. No one would refuse the opportunity to retire happy. The added bonus is that when you are in an improved financial position you will only have more opportunities and experiences come your way.