Budgeting Basics

Getting started

Know your spending habits.
Add up all your income and expenses to see how much you realistically need each week for different things, where you are over-spending and can cut back. One wicked website that’ll do this for you is www.sorted.org.nz. Even if you want to do the maths yourself, have a look at the site – they list expenses you might not think to include.
Set up an account for bills.
Once you have worked out how much money you need to put aside to cover all your bills (including rent, power, water, phone and internet), set up a bills account at your bank. You can organise for your bank to automatically put an amount of money you choose into this bills account every time you get paid. That way, you don’t have to remember to transfer the money every payday yourself, and you know that your bills will always be taken care of. For this account, don’t get an EFTPOS card, since you can set up an automatic payment, where the money gets transferred out automatically.
Set up an account for unexpected costs.
The real stress of money comes from those extra surprise costs, like car repairs, A & E bills, medicines, computer and phone repairs or clothing items for a job interview or one-off occasion. Having a separate account for these expenses too can be really helpful. To make sure there is money in this account, think about where you can cut back from. For example, how much do you put aside for buying your lunch or buying takeaways? Can you instead make your lunches and cook dinners more often and instead, put this money away each pay. How much money do you put aside for the movies? Can you instead watch more d.v.d’s?

Hire purchase and finance companies
​Don’t buy into the pressure – literally.More than ever, we’re under pressure to have the “right” stuff. Finance companies take advantage of this pressure and offer to “help” by lending you as much money as you want, when you want it. This may seem like a sweet deal, but as they say, if it sounds too good to be true, it probably is!
Know what you’re really getting into.Finance companies and hire purchase deals make money by having high interest rates. That means that you they charge you a certain percentage of how much money you borrowed or your purchase price on top of your borrowing. So for example, an interest rate of 25% per annum (year) when you borrowed $1000 would be $250 per year on top of that $1000 until it’s paid back. Minimum payments will hardly cover the interest, meaning you’ll be paying off your purchase for years and pay stacks more than the ticket price.
Separate “want” from “need”.Do you really need it, or do you just want it without having to wait? Think carefully before committing to years of debt. The constant and expensive repayments could stop you from doing fun things, saving and buying other stuff you actually do need in the future.
What are the alternatives?At the very least, go to your bank and try to get a bank loan first. Banks often have deals for financially strapped students needing cash for stuff like a bond when moving into a new flat at short notice. If the bank does turn you down, it might be because they think you’ll struggle with the payments – so consider saving for something if you don’t need it right away. Even saving half and borrowing half is a better alternative.
Interest-free deals.Some companies will also offer interest free periods, normally between one and three years. If you are able to pay off your item within this interest free period, then these deals are also worth looking at. A word of warning – be sure you know the interest rate in case you haven’t paid off the total by the end of the interest-free period. You also need to check the fine print and ask some questions – some ‘deals’ leave you getting charged interest right back to the purchase date at the end of the interest free period.

We’ve all gone to the supermarket for a few things, only to get to the till and somehow it’s added up to $40 at the checkout...
Here are some tips to help you save a bit of money when it comes to food shopping.

• Take a calculator. If you don’t like surprises and are shopping to a budget, then work out what you’re spending as you go

• Don’t shop when you’re hungry or in a rush. If you’re in a hurry, it’s easy to pick up a few extra things that each cost a few dollars and add an extra $20 to the bill. If you’re hungry you might pick up a bunch of tasty impulse buys that are expensive, not very healthy or that you never end up using.

• Plan your meals. If you go to the supermarket three or four times a week buying things for individual meals, you’ll spend far more than you will if you plan what you’re eating and stick to it. Supermarket products are often bigger than you need for one meal, so shopping meal by meal wastes a lot of food and money.

• Cut back on luxuries. When money gets tight, don’t just eat baked beans for a week. Cut back on the convenience foods and keep a balanced diet.

• Buy budget brands. Each supermarket sells budget brands, and often the products are just as good as more expensive ones. Make sure that when comparing prices, that you are comparing the same weight of food. E.g. A 300gm tin for $3.00 is less value for money than a 430gm tin for $3.90. There is often a ‘per 100gm’ thing on the supermarket price labels that you can compare across products.

• Supermarkets aren’t always the cheapest. Supermarkets are places of convenience. Places like the Mad Butcher and Export Meat Warehouse sell much cheaper meat than is available at supermarket. Fruit and vegetables can be half the price of supermarket on a Sunday morning at the markets.

• Pick n mix bulk bins. Bulk bins with grains, dried fruit, nuts and other things can be good value for money where there are a lot of basic foods, plus you get the amount that you want, not a prepackaged amount.

• Plan your meals around cheap, staple foods. Using rice, beans, noodles and lentils in your meals are a way to bulk up your meals, use less meat (which can be expensive), stay healthy as well as save money.

• Learn to cook. It works out much cheaper to make sauces and meals from scratch than buying pre-prepared ones. It is also better for you and tastier – plus you’ll impress your friends with your culinary prowess.

 

Ins and Outs of Insurance

Owning a car or buying things like stereos, laptops, cameras etc is a big investment. For a lot of people it is important that these assets are protected from damage and/or theft and so it is always a good idea to look into insurance plans, so that if something happens, you might be able to get some of your money back or your gear replaced. 
There are several types of insurance. Many young people mostly think about contents and car insurance.
​
Contents insurance
This covers household contents and personal belongings. When you live in a flat with people you don’t know so well security can get a bit lax… windows left open or unlocked… maybe unfamiliar people visiting? You may not have considered getting insurance for your gear – but it’s a decision that could save you thousands.

Insurance doesn’t just protect you from thieves. It can also cover unpredictable events like a fire, earthquake or flood. Some companies won’t insure individual rooms in flats, so shop around. 

The amount you’ll have to pay each year for a policy depends on where you live, your age, the number of people in your flat and how much of your gear you want included in the policy, but expect to pay at least $180 a year. Don’t worry if you can’t pay the full amount up front – most companies have an instalment option.

If you’re under 21 and living in a hall of residence, your may be eligible for limited cover under your parent’s contents insurance. Get your parents to check their policy before you go organising one for yourself.

Tips:

• Make a list of your possessions – clothes, jewellery, xbox, ipod, electronic gear etc… Make sure you note the serial numbers on your electronic gear and the approximate value of each of your items.
  
  
• Keep receipts from large purchases as proof of ownership (computer, stereo etc…). If you’re really keen, take photos of valuable items.
  
  
• Ask about a package discount if you already have car, health or life insurance with the insurance company.
  
  
• If you have a burglar or smoke alarm, tell them – it will get you a small discount.

Car insurance
Having your own car is awesome, but the expenses like car repairs, warrants, regos and car accidents are not awesome. Unfortunately if you are 25 years and under, car insurance can be expensive, but you’ll probably be really grateful you invested in it after that little “ding” in a carpark.
There are different insurance types that entitle you to different levels of coverage and at the very least you should get third party insurance which will cover the damage to another vehicle should you be found to be in the wrong.
Some factors that will determine how much you will end up paying for insurance are:

• Previous accidents
• Type of license you hold
• Age
• Who else will be driving your car
• Are you the only owner of the car
• The type of insurance you want (e.g. third person, third person theft and fire, standard)
• Excess (which is the initial amount that you pay to contribute to the total cost of any claim).

Where to find out about insurance options?
Your personal bank will most likely provide insurance options and there are a number of insurance companies out there. You can have a talk to others about the insurance providers they are with and how much it costs. Make sure you shop around.
If you are unsure of any aspect of what you’re signing up for – just ask, anyone and everyone – it’s better to be fully informed before committing to a policy and avoid possible disappointments when you actually need to use your insurance.

Terms
Premium
This is the amount you pay each year to have your gear insured. Premiums can be paid annually, or by weekly, fortnightly or monthly installments.
Discount
You can sometimes claim a discount for equipment that reduces the risk of damage or loss, such as burglar alarms. Other discounts may be available for people over a certain age and for having other policies (such as health and car insurance) with the same company. Most companies also reward you for being claim-free (no-claims discount).
Excess
This is the initial amount that you agree to pay for a claim, and the company will pay out for everything over and above that amount (up to the policy limit). For example, if you have an excess of $300, you will pay the first $300 worth of any damage and the company will pay the rest.
Replacement Policy
The insurance company will replace a lost or destroyed item with a new one or repair the item so it is ‘as new’. However, items over a certain age may not be replaced, and there is often an upper limit on what you can claim. This is specified in the insurance policy as the ‘sum insured’.
Indemnity Policy
​The insurance company will pay an amount based on the item’s age and condition immediately before it was stolen or damaged. It is usually equivalent to the amount you would pay for the item second-hand.

 

Government Assistance

Work and Income New Zealand
There is a range of income support available for young people whether you are working, studying, looking for work or under 18 and living independently from your family.
The best place to find out more are the Work and Income and Studylink websites. They have heaps more information and call centre folks or staff at your local WINZ are there to help.
Benefit entitlements vary depending on your circumstances, such as your age, where you live, if you have a partner or children and whether or not you work or study. For most benefits you have to be 18 or over and have lived in NZ continuously for two years or more, although there are some exceptions to this.

Youth Payment
Youth Payment is a weekly payment which helps young people between 16 and 18 who cannot be financially supported by their parent or guardian or anyone else due to family breakdown.
Youthline Auckland is a provider of the Youth Services so if you live in the Auckland region, click here to find out more.
If you live outside of Auckland, click here to find your local provider.

Youth Parent Payment
Young Parent Payment is a weekly payment which helps young parents aged between 16 and 18 years old.
Youthline Auckland is a provider of the Youth Services so if you live in the Auckland region, click here to find out more.
If you live outside of Auckland, click here to find your local provider.

Jobseeker Support Payment
Jobseeker Support Payment (which has replaced the ‘unemployment benefit’ and the ‘sickness benefit’) provides a weekly payment to people looking for work or people who want to work full time but can’t due to a health condition, injury, mental health issue or disability.

Supported Living Payment
Supported Living Payment (which replaced the ‘invalids benefit’) is assistance for people who have, or are caring for someone with a health condition, injury or disability.

Sole Parent Support Payment
Sole Parent Support Payment helps single parents and caregivers of dependent kids prepare for part-time work while providing financial help through a weekly payment.

Extra Help
There are also extra supplements available. You may qualify for some of these even if you are not on a benefit but may be on a low income.

Accommodation Supplement
Accommodation Supplement is a weekly payment which helps people with their rent, board or mortgage.

Disability allowance
Disability allowance can help you pay for ongoing medical costs related to a disability, including counselling costs. The application for this allowance must be supported by your doctor.

Community Services Card
The Community Services Card can help you with the costs of health care and some health services, like doctors and prescription fees.

Transition to Work Grant
Transition to Work Grant helps people with the costs of moving into a job, including clothes for an interview, living expenses before your first pay and job search costs. 

Temporary Additional Support
Temporary additional support is a weekly payment when can’t meet your essential living costs from what they earn or from other sources. This can include food, emergency dental or medical payments, or essential items like a washing machine or fridge.

Tips for applying for financial help

• When filling out Work and Income forms it is important to answer every question honestly

• If you make a mistake on the form, cross it out, rewrite the answer and sign next to it.

• Always make sure that you have all of the information and proof that is asked for, such as ID, bank statements, medical certificates, and earnings summaries. All of these things need to be the original documents – Work and Income cannot accept photocopies, emailed documents or faxes

• The more prepared you are for you appointment with the things that you need, the quicker you can get the money.

• Make an appointment to see a case manager before you go in to Work and Income. If you just drop in they may be booked up for the day and unable to see you.

• Be on time for the appointment, otherwise you may miss out and have to re-book.

• You can have a support person attend appointments with you, whether that be a family member, friend or social worker.

• For more info on any of the benefits listed above and many more options, click here