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New Parents - 5 Things to Sort Financially

Financially, starting a family means a lot more than just having another mouth to feed. As a new parent you’ll need to do a complete review of your finances so that you can ensure you’ll be able to live within your means, protect your income and assets, and face the future with confidence.

Here’s a checklist to help you reach that goal.

Make your wills
Find a good lawyer, if you don’t already have one, and take along a complete list of your income and assets. Discuss with your lawyer whether a family trust would make sense for you. Putting assets into a family trust has both benefits – including protecting your assets from relationship or business failure – and drawbacks.

Make a budget
A realistic estimate of your outgoings will take into account weekly expenses, such as groceries and petrol, monthly expenses such as your power, water, phone, and broadband bills, and annual expenses such as your car registration and warrant of fitness, subscriptions, and memberships such as AA. It should also include an estimate of personal expenditure, both essential – clothes and haircuts, for example – and the fun stuff, such as eating out, going to the movies, or DIY. On the income side, you’ll need to include any investment income you get from your savings, and investigate any entitlements you may be able to claim, such as paid parental leave or Working for Families payments. Investigate where you can make savings. Energy providers, for example, are constantly jostling for market share and you may be able to make significant savings by switching. Buy in bulk where that’s cheaper – a variety of online nappy services will deliver to your door.

Review your insurance
Insurance costs need to be included in your budget. You’ll need to make sure you have policies that suit your needs and that you’re getting the best deals in the marketplace. Insurance is a complicated area and it’s a good idea to seek specialist advice on whether you need whole-of-life or term insurance, what types of health cover you’ll need (don’t forget to include baby!), and what types of income protection cover make sense. Remember that it’s not only the breadwinner who needs to be insured – if anything happens to the stay-at-home partner, he or she may have to pay for childcare, or stop working altogether. Check whether your mortgage agreement includes mortgage repayment insurance. Asset protection insurances includes home and contents and your vehicles. Some insurers offer almost identical cover, but premiums vary widely. Our experienced Financial Advisers will listen to your needs and advise on an insurance plan and products to suit you and your budget.

Establish an emergency fund
No matter how comprehensive your insurance may be, and how realistic your budget, you’ll need a buffer for when the unexpected strikes. You’ll still need to pay the bills until you receive insurance payments for a redundancy, you’ll need a new vehicle immediately if yours is written off, or you may have to travel to a funeral. If you don’t have a lump sum you can ring-fence straight away, make room in your budget for regular savings, either from your income or from money saved from your review of expenses.

Keep saving
There may not be much wiggle room in your budget, but it’s important to keep saving even modest amounts. Many new parents start a “college fund” for their child’s education – the sooner the better – but retirement savings shouldn’t slip down in priority. It makes sense to harness the maximum benefits available to you from a KiwiSaver scheme – a minimum contribution of around $1000 will entitle each of you to a government contribution of around $500. Make sure your money keeps working hard for you. Like power companies, banks and other deposit-takers jostle for market share – our Financial Advisers can provide you with straightforward, practical investment advice to help you achieve your goals.

The views and opinions expressed in this article are intended to be for general purposes only. To the extent that any of the above content constitutes financial advice, it does not constitute personalised financial advice for an individual client under the Financial Advisers Act 2008.
Before taking any action based on the above information, we recommend seeking advice relevant to your personal circumstances from a qualified financial adviser.
The information provided is done so in good faith. Every effort has been made to ensure the accuracy of this article but AdviceFirst Limited does not assume any responsibility for, and disclaims any liability arising from, use of the information.

A disclosure statement is available, on request and free of charge.

© 2016. AdviceFirst Limited. All Rights Reserved.

Newlyweds - 5 Ways to Save Together

There are many obvious ways in which the old adage, “two can live cheaper than one” is true. If you live in one household, you don’t pay double mortgage or rent; people living together use less power, water etc; you can make do with one microwave, or TV. And married couples – or so they say – tend to stay home more and spend less money on eating and entertainment.

But there are also ways couples can choose to organise their financial affairs to make savings, or to maximise their joint income, which aren’t available to singles.

Pay less tax
If you both have income from investments – bank deposits, dividends from shares and managed funds, etc – think about transferring some or all of them to the partner with the lower effective income tax rate. This works only up until both partners’ taxable income reaches the same effective rate, but the savings can be significant.

Pay less interest
Similarly, if one partner has debt – on credit cards or hire purchase agreements, for example – and the other has cash earning interest, it will generally make sense as a couple to use the cash to pay off debt. That’s because banks and other deposit takers/lenders pay a lesser interest rate to the people they borrow money from than they charge on loans, so the saved interest costs will be greater than the interest forgone on cash deposits.

Access higher interest
Banks and other deposit-takers are willing to pay higher rates of interest on larger deposits than on smaller ones, so consider pooling your savings to access higher rates. Again, there could be an advantage in concentrating deposits in the name of the partner on a lower effective tax rate. Do take tax treatment into consideration if you’re making joint deposits.

Review your insurance
Many insurers offer discounted rates to couples who have the same type of insurance with them. AA members, for example, will add a spouse at a discounted “associate member” rate. Insurers can also offer “couple” rates across a range of insurances – vehicles, and home & contents, for example. It’s also worth asking your AdviceFirst Adviser to find out what life insurers and health insurers can offer to you as a couple.

Working for Families
If you have kids, check whether you are entitled to Working for Families tax credits. The more kids you have, the higher the income cut-off, and it’s surprising how many couples on relatively high incomes assume they earn too much to qualify.

There are many other ways you can save money, and it’s worth going through your finances and spending item-by-item. If you both have the same online subscription, consider accessing it through one account. Link your loyalty cards to give yourselves greater spending power. Ask yourselves whether the cost of owning and running two vehicles is really worth the convenience.

The views and opinions expressed in this article are intended to be for general purposes only. To the extent that any of the above content constitutes financial advice, it does not constitute personalised financial advice for an individual client under the Financial Advisers Act 2008. 
Before taking any action based on the above information, we recommend seeking advice relevant to your personal circumstances from a qualified financial adviser.
The information provided is done so in good faith.  Every effort has been made to ensure the accuracy of this article but AdviceFirst Limited does not assume any responsibility for, and disclaims any liability arising from, use of the information.

A disclosure statement is available, on request and free of charge.

© 2016. AdviceFirst Limited. All Rights Reserved.

 

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