Ten steps to financial success

DIVINE HELP: Financial educator and researcher Dr Pushpa Wood has sought the blessings of the Hindu goddess of wealth, Lakshmi.
DIVINE HELP: Financial educator and researcher Dr Pushpa Wood has sought the blessings of the Hindu goddess of wealth, Lakshmi.

Money Week kicks off with Dr Pushpa Wood sharing her tips for financial security.

Ever since I was a child my parents told me that if you respect the goddess of wealth, Lakshmi, she will reward you beyond your expectations. So I decided the best way to do this was to understand what goddess Lakshmi really meant to me and how would I make sure that she always had her hand of blessing on my head.

So how have I done this? By living by some very simple rules when it came to money.

As you get older you can either try/test your theories and share them with others, or you just simply disregard everything that was taught to you in childhood or live a life as you want. I chose to live by the first assumption.

Since its beginning I have been an ardent supporter of the Money Week, not because I am preoccupied with money or because I am part of the movement; rather due to the fact that I strongly believe that we have to take the money conversation out of the cupboard. Being wealthy or being financially comfortable and secure is not a sin. It is a necessity. We do need to know the role of money in our life, regardless of how we choose to live.

The modern world does not forgive lack of knowledge, level of discomfort or ignorance in money matters, and in most cases the consequence are far reaching. So it is our individual and collective responsibility to ensure that we are well informed, comfortable in asking money-related questions and are prepared to say "no" when we feel the deal on offer is not good enough.

Moreover, living like the Joneses when we clearly can't afford to is not a good idea.

So over the years what have I learnt about money that I am prepared to share? Here are Pushpa's top ten tips to make money your friend:

1 Think about what you need (rent/mortgage; food, energy) before what you want. Know how much money you have to spend each week/each day on these needs. Prioritise your spending and set goals to save for your wants.

2 Be inclusive in setting financial goals for your household - involve everyone in your household. Make a habit of having a plan for every dollar you have.

3 Include children. They are learning from what you do and what you do not do in your financial planning and spending. Involve them in creating a grocery shopping list for the household and give them a weekly budget for this.

Don't forget to take them shopping with you and hand them the shopping list and a calculator. It is their job to stay within the agreed budget.

You need to be really strict with this exercise. It is a good practice for all of you in decision-making, prioritising and living within your means. The reward for children is that if they manage to save any money from the allocated budget, they get to make a decision on how to spend it or save towards a "want" goal.

4 Little and regular saving goes a long way. One dollar saved each week will give you $52 for your emergency fund. Cutting down on some of your regular spending habits like buying a coffee or lunch each day can save you hundreds of dollars at the end of the year. Making rather than buying your morning tea and lunches will make a big difference to your weekly budget. Buying in bulk also saves you a lot of money.

5 Remember, if you don't save today, you can't have a lifestyle you want tomorrow. Years pass by very quickly. Save for the pleasures of retirement. Any retirement subsidies will only provide minimal necessities.

6 Some needs fluctuate seasonally. Take advantage and put aside the money you save during summer on your power bill for your emergency spending during the year.

7 Give yourself a set amount of pocket money each week on the same day. You then need to live within that amount and any saving you make at the end of the week goes into your savings account for birthday or anniversary gifts or holidays. Start fresh with the same amount each week. The idea is to get into a habit of living within your means and saving.

I give myself the same amount of pocket money every Monday morning. Before I put the new amount in my wallet, I empty my wallet and whatever is left from the previous week goes into my money box. I start each week with the same amount. Over the years I have noted that as the amount in my money box grows, my determination to spend less each week and save more grows. At the end of each year, my money box provides me enough spending money for my overseas trip.

8 If you must have a credit card, learn to use it for your benefit, not to add to your worries. If you can't pay it in full, avoid using it. Like a knife, use it wisely and it is a useful tool. Use it incorrectly or unwisely and it has the potential to hurt your financial health.

9 If you are paying off debts, especially a high-interest debt, make it a priority to pay it off as soon as you can. This can amount to a huge saving.

10 Invest in knowledge about money - the same way as you would like to know all about your friends. When you make a new friend, you also constantly think of ways of keeping them for the long-term. The same goes for money - once you have got it, make sure you keep it with you for as long as you can.

And finally, remember money may make your life comfortable but it does not necessarily give you happiness. You need to find a fine balance between generating enough income to meet your needs and wants, but not at the cost of work-life balance.

Dr Pushpa Wood is director of the Westpac-Massey Fin-Ed Centre and has recently been appointed to the new Advisory Council for Financial Dispute Resolution Service as a community representative. She has previously worked for the Commission for Financial Literacy and Retirement Income as an education manager and contributed to discussion documents on financial literacy for the OECD. She is currently leading a research project on young Maori women and their spending habits.

Sunday Star Times