Road-mapping your finances

For most of us there will be 3 stages in your financial life, these will be:

• Saving; whether it be your first car, holiday or first home you will hopefully have the discipline of a regular saving habit
• Debt; the big one especially when it comes to property, current estimates are most people will have a mortgage for 50 years
• Asset Building; this is mainly to  be able to give yourself retirement options, most of us will have Kiwisaver or something similar but on its own it is unlikely to be sufficient to allow most to enjoy their lifestyle without compromises

One of the ways to maximize your result is to try and keep the three stages as separate as possible. For example it is not going to be effective saving for your house if you currently have a car loan and some hire purchases, which are going to consume some of your income. If you are saving for a house focus on that and try to minimise any other debt.

Once you have the house focus on that and attack it. One of my pet peeves is people with a mortgage and bonus bonds, at best they are a gimmicky investment with returns typically less than inflation (bar the small chance of a ‘bonus’ payout). This money would be far better focused in paying down the mortgage. One reason is that it is very measurable. Pay an extra $200 a month into a mortgage will give a predictable result. Money in many other investments will have far less measurable or certain results.

With your mortgage gone you then have an ability to build some significant investments. A freehold property also gives you significant leverage meaning you can invest in assets of value.  On top of that the money that has previously been used for mortgage payments can now be used to invest.

The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans