BUDGETING BASICS COURSE

With this course you will cover:

1) The Basic Principles of Money

2) Bank accounts and setting up a Bill Pay System

3) Budgeting – completing a budgeting template

4) Credit Cards – their benefits and pitfalls

5) Lending – Personal Loans and Securities used by the Bank

6) Deposits – Products and Interest Rates

7) Financial Goal Setting

8) Tax Return

9) Financial Education

10) Summary – Checklist

11) Resources

BASIC PRINCIPLES OF MONEY

The following Seven Money Principles are based on a book called The Richest Man in Babylon written by George S. Clason. The book was originally published in 1926 but the principles are still as true in today's world, as they were when they were written. The book states that 'Money is plentiful for those who understand the simple rules of its acquisition'. The principles are:

1) Start Increasing your Savings

2) Control your Expenses

3) Make your Money Multiply

4) Protect your Assets from Loss

5) Make your Home a Profitable Investment

6) Insure your Future Income

7) Increase your Ability to Earn

1 – Start Increasing your Savings

The first principle talks about first establishing what income you are bringing into your hand each month. If you are already aware that the income you are bringing in is not giving you enough to start saving, then you need to look at how you can increase your income or reduce your expenses. Note: If you are not sure if you are able to save any of your income you can complete the budget template found under the Website's Products Tab.

His principle challenges you to, for every ten dollars you receive, only take out nine dollars for use. I know this sounds minimal, but you will quickly see your savings starting to increase. It will feel good to see, and you will have the satisfaction that you are growing your savings. Next you need to identify what you desire most. Is it entertainment, a new technological toy, or yummy food? At the time these things may seem important but you need to realise that these things are quickly gone, old and simply forgotten. Or is it substantial belongings such as a house, land, money in the bank or a new investment which will bring in extra income that you really desire? You need to understand that the dollars you bring in will satisfy the first desires whereas the dollars you save will help to bring in the latter.

2 - Control your Expenses

When looking at your spending you need to consider if there are some expenses which you can reduce or cut out completely? You need to analyse what spending habits you currently have and consider if they are getting out of hand. Are any of these expenses unnecessary? If so, you need to cut these out straight away.

3 - Make your Money Multiply

This can be as simple as putting your money into an interest bearing savings account. There are also many other ways to multiply money, which are covered in the 'Grow Money' course.

4 - Protect your Assets from Loss

Once you start owning things that you consider to be an asset, then you need to protect them. One way to do this is through insurance, but this may not be the only way. Depending on the asset type, there may be other methods to protect your assets such as getting a security alarm for contents in your home, or installing fire alarms/sprinklers to protect your home from major fire damage, or one we often underestimate is income protection insurance to ensure you continue to meet your asset loan repayments if you loose your job. Another form of Asset protection can be setting up separate legal entities, such as Family Trusts, in which you may transfer your Assets into. For more information about Legal Entities, it may pay to seek Professional advice from your Accountant or Solicitor.

5 - Make your Home a Profitable Investment

In some writings you will read that your home is not considered an asset but a liability, as it does not create you income. A home is often seen to just use up money in maintenance, rates, insurance and other expenses. However, there is sometimes a way for you to gain an income off your property. This can include utilising things such as a bed and breakfast facility, a boarder, an office space, or a workshop. All of these things can start to earn you an income which then turns your home into an asset rather than a liability.

6 - Insure your Future Income

Insuring your future income could mean income protection insurance or much more than that. This could include anything such as an on-going business which is managed by someone else, or investments that will continue to give you an income even when you are getting older and can no longer work. This type of income is called a passive income. This means that the income comes to you whether or not you are working.

7 - Increase your Ability to Earn

In other words, you either need to further your skill level, or gain new skills. You need to continue your financial education through experiences, books, courses, seminars etc.

BANK ACCOUNTS AND SETTING UP A BILL PAYMENT SYSTEM

Description:

A bank account is a place to keep your money until you need to use it.

TRANSACTION ACCOUNTS

All banks offer different fee structures for transaction accounts, so it pays to shop around. For example, one bank may charge you for every transaction you make (withdrawal or deposit), whereas another may only charge for withdrawals or specific types of withdrawals. They may have a number of free transactions and then charge per transaction after you have reached your limit; for example you may get five free transactions per month, and thereafter you are charged 20 cents per transaction. With a transaction account you may use your ATM card regularly to make all your purchases, or you may withdraw cash per week and work on a cash basis. So depending on your personal habits, you should choose the bank which offers the fee structure that will work best for you.

SAVINGS ACCOUNTS

Your savings is very important to you and so you should be rewarded by being paid the best return possible. Notice I said return. The highest interest rate is not always the best return. For example, a bank may pay you 3% per quarter on your savings, whereas another bank may pay 2.5% per month calculated on a daily basis. If you are adding to your savings account on a regular basis, you will want to be earning interest as soon as it goes into your bank account.

There are many different savings accounts available, so the first few questions you need to ask yourself are:

1) Will I make regular transactions on this account – how often am I going to withdraw and deposit per month?

2) Do I want access to the account at all?

3) Will I be making regular deposits to the account but few withdrawals?

4) Do I need the money any time soon?

5) What return (interest rate) can I get for my money?

6) What fees does the Bank charge?

How to compare it:

Banks	Account Fees	Activity Fees	Interest Rate (for Overdrafts)	Miscellaneous (Other Interest/Fees)
ABC	$5.00	Unlimited Withdrawals		Overdraft facility Available

How to go about opening a Bank Account:

1) Visit a variety of bank's websites. Use http://www.google.co.nz/to search for each bank.

2) Look for the Transaction or Savings Account tabs and read about the various accounts the bank offers, and fees they may charge (complete the above table if you want to compare).

3) Once you have made a decision about which bank will work best for you, complete the online form on how to open a bank account.

4) Apply for an online ID so that you can use internet banking.

5) Once your internet banking ID arrives (either via email or by mail) go online to activate it and get familiar with how it works.

6) Now you can set up your Automatic Payments or send off the forms for Direct Debits (e.g. for rent, rates, power, phone).

7) You will also need to set up your Bill Payments, so you have the bank accounts of your payees (people you pay on a semi-regular basis e.g. a family member, your accountant etc) at the ready. Remember: setting up automatic payments and bill payments may cost you as some Banks may charge establishment fees - find this out with your Bank as the fee per payment could be as much as $5 to set up. This would add up quickly when you are first setting up your Bank Account.

Pitfalls or Tips:

Check your statements monthly to see what fees you have been charged, to ensure the fee structure is the same as you think you have signed up for.
If the charges are per transaction, to keep fees down, work out how many transactions you will do in a month. If the number of transactions are large as you use your ATM card for everything, you may want to consider taking cash out per week and pay for some things by cash rather than ATM card e.g. your lunch or coffee purchases.

When Should I Review or Change my Account:

Whenever you have a change in your circumstances, such as a new job, a pay change, or new living arrangements, you should review your bank accounts. Also, banks put out new products regularly so you may want to review your accounts on an annual basis to ensure you have the best accounts possible.

Examples/Templates:

Bad Example

Tony just chose a bank he liked because a friend banked there. At the end of each month he was being charged between $5-$15 Bank Activity Fees.

Good Example

Shelia looked on the internet at a couple of banks and compared their fee structures. One bank charged a blanket fee of $5 for all transactions whereas another bank charged $0.25 cents per transaction. Shelia realised that she wanted to use her card for many transactions and soon worked out that the $5 flat fee was going to be the cheapest option. She could easily budget for the flat fee, whereas the fee-per-transaction structure could blow her budget if she used her account for too many transactions.

BUDGETING

Description:

An estimate or plan of your income and expenditure which is designed for a particular purpose.

Why do I need a budget?

If you want control over your money, then you need to know how much you are getting in (income), where it is going (expenses), and how much money you have left (surplus) which can hopefully be used for saving. If you have no surplus money, or less than your expenses, then you are in debt and not in control of your money.

How do I get out of debt?

If you are in debt then you need to review your expenses to see if there are any areas in which you can reduce your expenditure and increase your savings. For example, you could:

Cancel your sky subscription
Reduce internet usage or find a more suitable plan
Change your power company or reduce your electricity usage
Limit take-away food and eat at home instead
Shop at fruit and veggie markets or try growing your own (see gardening on a budget article)
Lock your credit card away for a set time frame
Avoid unnecessary shopping and limit yourself to what you need not want
Reconsider your living arrangements; for example you could look for cheaper rental accommodation or share with others
Look at your transport options; is there suitable public transport nearby?

Or you could increase your income by:

Selling any unwanted items on trade sites or by holding a garage sale
Reviewing your living arrangement to see if you could take on a boarder or flatmates who could share the expenses such as rent, power or line fees
Make an area for Storage Space (such as your garage) and rent it out
Finding more work by doing odd jobs which you could find from sites such as http://www.sjs.co.nz/ or http://www.taskmonkeys.com/. Such jobs could be:
- Computer repairs,
- Administration,
- Book keeping,
- Tutoring,
- Cleaning,
- Gardening,
- Labouring,
- Weekend work for small business
Increasing your income from your current job by working overtime, increasing your hours, or by gaining a promotion
Or by increasing your income by finding a new job

How do I complete a budget?

The first step in creating your budget is to write your income and expenses down; preferably on a computer spreadsheet as a digital version is easiest to update when something changes in your circumstances, such as a pay rise or an unexpected expense (e.g. car breaks down and needs some repairs etc). So, where should you start? There are plenty of templates online which you can use to complete a budget, such as https://www.sorted.org.nz/a-z-guides/budgeting or alternatively there is a very straightforward template on our Website, under the Products Tab.

Tips to consider when making your budget:

Over estimate your expenses. Then, if there is a surplus, save the difference.
Use your bank statements and bills for the past couple of months to help complete the budget template.
Consider fluctuations in cost, such as your power bill being higher at the peak of winter, public holiday months being more expensive as you have more leisure time, and finally consider the times when you purchase important gifts.

When should I review or change it?

For the first month review your budget daily and make changes if necessary so that your budget is correct and realistic for you to stick to. After the first month reviewing your budget then weekly or monthly should be sufficient. Once you have truly mastered your spending habits, then reviewing your budget should be done when you have a change in circumstances such as a change in income or expenses.

Budget template and examples:

The budget template (found on our website, under the Products Tab) includes two examples which you can use as a guide when completing the template yourself.

An example of what can happen without a budget:

Eva did not like to budget – she found money difficult to understand and so did not bother to work anything out or plan for her monthly expenses. The only problem with Eva's relaxed attitude was that the bank was reversing her automatic payments and charging her penalty fees when there was not enough money in her account. The landlord was now on her case about rent arrears and threatening to evict her, and the power company had already cut off her power.

Eva was getting very stressed with never having enough money and her credit rating (ability to borrow money) was being damaged, so she wasn't able to borrow money to get her out of the situation she found herself in.

An example of how a budget is useful:

When Jack moved out of home he decided to set up a budget for himself as he knew he would now have a lot more expenses, such as rent, power, phone, internet and possibly Sky, to pay for. Jack got paid fortnightly and wanted to ensure he had enough for his monthly commitments. The only way to ensure this was by completing a budget of his expenses and creating a separate bank account which he could put money into to pay his bills. He also made sure he did not have ATM access to his bill account so he could not mistakenly take the money out. He then set up an automatic payment which transferred enough money from his salary account to this bill account every fortnight, the same night his pay went in. Jack never missed a bill now. He no longer needed to worry as he knew exactly where he was each pay day and how much money he had left to spend on himself.

CREDIT CARDS – THEIR BENEFITS AND PITFALLS

Description:

A card which allows the card user to purchase goods and services immediately and pay the balance of the purchases at a later date. The card is provided by a bank or financial provider who will charge interest if the card user does not repay the full balance on the due date. The balance not paid is considered a loan by the Bank or Financial provider and they will charge interest (calculated daily) on the money the card user is borrowing. Remember: if the balance on the card is not fully repaid on the due date, interest will be charged on any further new purchases, from the day the purchase was made.

Why a credit card can be handy?

30 – 55 days credit, interest free as long as the balance is paid in full. If the balance is not paid then all transactions made from the payment date are charged interest as soon as the purchase is made.
Credit cards are more secure than cash as you can cancel them if they get stolen, and you will not be liable for any misuse after you have notified the bank.
You can install a direct debit from your bank account to repay the balance in full on the due date.
In effect, you are borrowing the bank's money for a time before the balance is due. When the balance is due you can repay it in full or the bank allows you to pay a minimum amount set out by the Bank - be aware that if you only pay the minimum balance, the Bank will charge you interest on the remaining balance and any future purchases on an on-going basis until the balance is paid in full.

Hint: If you are purchasing over the internet, you may require two credit cards, one used for the internet and the other for everyday purchases. You may want to keep the limit on the card you use for internet purchases quite low, as if it was to be misused for fraud, you could be liable for up to the limit of the credit card (although you may not be liable as long as you notify your Bank of the fraud immediately – check your Bank's Terms and Conditions).

How to compare credit cards?

Go onto each bank's website and compare fees, limits and debit interest rates. Do any credit cards pay credit interest? If you are planning to travel overseas with a credit card, you many want to know how many ATMs/merchants accept your credit card worldwide and if you used your credit card what would the exchange rate charges be, etc.

Bank	Credit Card Fees	Limit	Interest Rates	Interest Free Period	Credit Interest	Travel Facility
ABC	$70.00	$10,000	12.5%	55 days	2.0%	Visa or Debit Card

Remember: If you are unlikely to repay your Credit Card balance in full each month, then knowing the true finance rate you are paying (which includes debit interest, fees etc) to borrow money from the Bank is important, as you need to budget for this. Ask your Bank what finance rate you are paying.

How do I use a credit card?

When you buy something from a shop or online, you can provide your credit card number, the name on the card, and the expiry date, and the shop will debit the cost of your purchase against your credit card. When your credit card bill is due, the bank will send it out with a summary of all the items you have purchased over a set time period (say a month). The summary will include the cost of each item, the date you purchased it, and the total amount you owe the bank. There will also be a payment due date and the minimum amount you need to pay by that date. The credit card bill should also include the interest-rate you will pay on the remaining balance if you do not pay the bill in full. As the interest rate on credit card bills is higher than most other forms of lending, it is best that you pay the total amount owing. Another way to ensure your credit card bill is paid on time and in full is by setting up a direct debit with the bank, so that the full amount will automatically be taken from your nominated bank account.

Pitfalls/Tips:

Interest rates on credit cards are one of the most expensive forms of borrowings so it is best to pay your credit card off in full each month.
Set up a specific account to be debited for your credit card expenditure, then you are unlikely to get behind in payments, and you can set up a direct debit knowing the money is sitting in the account ready to go.
It works out cheaper to arrange an overdraft with your bank than to use the credit card as a short term loan (short term being 1-5 years).

Warning: Many people get caught in the trap of paying the minimum balance and over time this balance grows as it is easier meeting the minimum balance than paying the whole credit card off. Once in this cycle the card holder (you) will find the total balance of the card grows to an amount that you are unable to pay off, thus you are caught in the credit card trap. If you are a first time holder of a credit card you are in the best position to ensure every month you repay your credit card in full. As soon as you create a good habit like this, it is more likely to remain with you.

As for those of you caught in the trap it is difficult to break the minimum payment habit but it is possible and the best way is paying more than the minimum each month (even if it is only a couple of dollars to start with) and stop using the credit card. Pay cash wherever possible until you have your credit card balance back under control. Banks and other financial institutes do offer deals where you can put all your debt under one credit card with a cheaper interest rate if you cancel all your other Bank credit cards. It will benefit you if you do this, but still make sure you pay more than the minimum balance. Again be weary of making any new purchases on the credit card, as it may attract a higher interest rate than the deal you initially had with your bank/financial institute. Usually special deals for credit cards are one-off type deals.

When should I review or change my credit card?

If the bank changes the fee structure or the rules which do not suit you or if another bank is offering better terms.

LENDING – PRODUCTS AND INTEREST RATES

Description:

A sum of money borrowed from a bank (or other money provider).

Why you may need a personal loan:

Often there are payments or purchases you need to make before or soon after you receive your first pay cheque, like a vehicle to get to work if there is no alternative transport.

Lets take the example of a vehicle as a major purchase decision. Before you head out to purchase a vehicle it pays to ask yourself some important purchasing questions to identify exactly what type of vehicle you need. It has been done before where a vehicle is chosen for its looks and works out far more inconvient than intended as it did not meet many of the other user requirements, not to mention more costly to maintain as well. As it is a major purchase you will need to insure it. Some insurance companies have rules or expensive premiums if you are under the age of 25 and own a particular type of vehicle such as "turbo charged engine". Be a bit more practical and choosy when selecting your first vehicle and it will pay off in the long run. Sometimes it pays to spend a bit more money to get something that will suit your needs for years rather than a temporary fix, as it may work out cheaper in the long run. It is best to work out the pros and cons of each vehicle you view (e.g. cost of repairs, fuel economy, safety rating, your line of work, what you will use the vehicle for?) before you make a purchase. This same line of questioning should be used when deciding to purchase any large ticket item:

When purchasing a vehicle for example, you may want to review the following areas (see the table below to help you decide the pros and cons for a large purchase):

Will you have more children (will a roof rack and storage box be an option for the vehicle)?
What transport do you need to get to work (will you travel open road/around town; what distance will be travelled, where will the car be parked at home and at work?).
How economical is the car and what safety features does it have?
What is your line of work; do you need to carry tools for your trade?
What is your lifestyle; will the vehicle need to pull anything (trailers, bike racks, caravan, boat etc) or will you have dogs?
Can you get suitable insurance (what are the rules for insuring your vehicle, your age & experience, the excess)?

Banks generally have two interest rates for personal loans, a secured loan rate and an unsecured loan rate. The types of security the bank will look at using to secure the loan are things such as, the vehicle in which you are purchasing, any term deposits or shares you may have, your house, or the bank may ask for a guarantee from a family member or willing party who has assets which the bank is aware of. A secured loan means that if the customer was unable to repay their personal loan, and defaults on the terms and conditions of the loan, then the bank can call upon the security (such as their vehicle) and sell it to recoup the money left owing on the loan. Unsecured loans are loans where you do not provide any asset in which the Bank can use as collateral and therefore sell, if you do not make your repayments. As there is more risk for the Bank with an unsecured loan, the Bank will charge a higher interest rate for this risk.

How to compare loans:

Hire Purchase and personal loans are very similar; therefore, it pays to work out which type of finance is cheaper for you, whether a personal loan or hire purchase (Total Cost will be calculated on the real finance rate – the lender must disclose this in your loan documentation. This finance rate will include the cost of using the loan such as fees and the interest rate you will pay for the loan). Calculate as follows:

Type of Loan	Purchase Price (Cash price vs HP)	Interest Rate	Fees	Interest per Annum	Repayments (per month)	Years of Borrowing	Ask what the total interest you will pay
Personal Loan	$5,000	15.75%	$50	$787.50	$148.91	5	$3,984.60
Hire Purchase	$5,500	13.5%	$100	$742.50	$150.00	5	$3,812.50

How do I use a loan or go about getting one?

The steps to get a personal loan approval are quite easy:

Meet with a representative from your bank.
Complete an application form (it will ask you for all your personal details, the purpose (what you want the loan for), if you are going to provide security, how much if any is your deposit for the purchase).
The bank will complete a proposal and advise you on whether your loan has been approved or if they need more information.
If you are using a vehicle as security, then the bank will need the ownership papers and to sight a copy of your vehicle insurance (you may need to provide this within a timeframe after the purchase of the vehicle).
You will be asked to sign the terms and conditions of the personal loan and it will be witnessed by a bank staff member.
The loan funds can then be placed into your bank account, ready for you to purchase the vehicle, or other large item.
A Hire Purchase works a little differently as the company (seller) you are purchasing the item from could offer you a finance option so that you can use the item you purchased now, and slowly repay its' value off over a set period of time agreed by you and the seller. The seller will disclose the finance rate and the minimum repayment amounts you will be required to make.

Pitfalls/Tips:

If you can, save up for the purchases you want, as it is cheaper than paying interest on top of the purchase price.
Always ask the sales person if there is a discount if you pay cash – it may save you quite a bit of money.

When should I review or change my loan:

If you suddenly have more income (due to a pay rise for example) then it is better if you can put any extra money towards paying off your higher interest rate loans first such as a credit card or personal loan.

Examples/Templates:

Questioning your purchasing decisions before you buy is a very good habit to undertake (avoid buying on a whim and take your time when making a purchasing decision). The below table can help you to review your purchasing decisions and whether you need the item in question. It pays to define whether you need new or would "used" be a cheaper alternative as long as the item in question is fit for purpose.

Purpose of Item	Advantages of owning	Disadvantages of owning	Cash Price	What Financing Deals are available

TERM DEPOSITS – PRODUCTS AND INTEREST RATES

Description:

A sum of money placed in a bank or with a financial provider for keeping until a later date.

When do I need a deposit?

Once you have a lump sum of money saved, and you do not have any preferred investment option, or are between investments, then you may want to look at the bank's term deposits or on-call savings options.

How to compare term deposits:

Bank term deposits are considered low risk investments as they are backed by large trading banks which have high credit ratings (ratings provided from Specialist Rating companies such as Standard and Poor). Many banks have AA- ratings as they are considered very stable and are capable of paying their debts. If you want to check your bank's credit rating go to http://www.interest.co.nz/saving/term-deposits-1-to-5-years. This website will provide you with all the bank's interest rates as well. It is best to choose a bank or financial provider with a high credit rating if you want low risk.

How do I use a term deposit, reinvest, or go about setting one up?

Once you have been to http://www.interest.co.nz/saving/term-deposits-1-to-5-years to find the interest rates, you can calculate what interest you will get on your money. Follow this table to check out what interest you will earn after tax and inflation (the inflation rate can be found under http://www.rbnz.govt.nz/statistics/econind/a3/data.html).

Product	Amount	Term	Interest Rate	Tax Rate	Inflation	Interest Earned (After Tax)	Spending Value (after Inflation)
Term Deposit	$5,000	1 Year	4.3%	21.5%	1%	$168.78	$5117.09

If you would like to calculate the effects of compounding interest in your term deposit, then you may want to use the calculator under the following website:

http://www.moneychimp.com/calculator/compound_interest_calculator.htm (although you will need to calculate your tax to be taken off the annual balance).

or working from a formula use the following website:

http://www.mathsisfun.com/money/compound-interest.html

Pitfalls /Tips:

When choosing the right investment for you, think about:
- What amount of risk you are comfortable in taking when making an investment?
- Will you need the money in the short term, or is this a long term investment?
- Can you earn a better return if you researched other investment options more?
- How does inflation impact on your investment (inflation is in essence a tax on your money's value)?
If the Investment is long term (more than a year) add the interest to the principle so that your investment continues to grow – if you want to see the power of compounding interest then go to the following website https://www.sorted.org.nz/a-z-guides/power-compound-interest

When should I review or change my investments?

If you are actively searching out investment options then you should review your term deposit regularly to ensure the term on the deposit will allow you to take advantage of other opportunity when they become available. For example, if there is a company share issue coming up in a company you are really interested in, then you may choose to use some of your deposit money to purchase shares. You will not want all your savings in a term deposit as it will be tied up already. Instead you may want to reinvest a portion of your term deposit and keep the remainder on call, in readiness for a share purchase. Or, if a term deposit is coming up to maturity (maturity is when the term deposit has reached it due date and the deposit funds will be paid back into your bank account), you may want to see what other interest rates and term deposits are available.

Example One:

John and Mary want to save up a deposit for a house. They think it will take two years to save enough money. They already have $5000 saved and believe they need to save another $20,000 over the next two years. To get to their goal quicker, they want to maximise the interest rate for the money they have saved to date. They put their $5000 onto a term deposit for six months. When the term deposit matures (falls due), they add another $5000 and reinvest for a further six months. They plan to continue to add to the term deposit so the six month term suits them best.

Example Two:

Jack and Beth own their own home and are now looking to start saving for their retirement. They have $10,000 saved and do not know anything about all the different investment options. They decide to invest their $10,000 on a twelve month term deposit. This decision gives Jack and Beth time to research other investment options while maximising the interest rate with low risk to their initial $10,000.

FINANCIAL GOAL SETTING

Description:

A financial target that someone is trying to achieve or reach.

When do I need to set financial goals?

Most big dreams or ideas will cost money to achieve or reach. The money you need may be quite a large sum, so you will need a plan which has smaller financial steps in order to reach your goal.

How do I set financial goals?

Have you ever had a goal that you wanted to achieve in the past? Did you achieve the goal? If yes, how did you set about achieving it? Financial goal setting is much like setting any other goal. The only difference is this goal has a money sum associated to it.

Write down all the things you want to achieve in your life time.
Prioritise which goals are the most important to you, and write them into the Financial Goal Template (the Financial Goal Template can be found on our website, under the Products Tab – some examples of financial goals have been provided)
Give each goal a timeframe in which you would like to achieve it in.
Research how much you think it will cost to achieve each goal.
Calculate how much you need to save each month to achieve the goal in the timeframe you set.
Use your Budget Template to see if you can save the amount needed or not, and what possible alternatives there might be. Such as extending the timeframe, getting a second income, reviewing your investments to see if they can earn you more, selling off items you no longer want or use, paying off your credit card first which will reduce interest costs, etc.
Your goals should be Specific, Measurable, Attainable, Realistic and Timely (SMART goals), see the following website for guidance on setting goals http://topachievement.com/smart.html. Once achieved provide yourself with some form of reward and remember to make it fun.

Pitfalls / Tips:

Dream big as most things are achievable if you plan on how to get there. Break these big goals into achievable bite size goals.
Or set short-term easily achievable steps which you can commit to; this will help you towards achieving the bigger goals.
Never give up – keep chipping away.
Idea: Keep a scrapbook of all the things you want to achieve. You will be impressed at how much you have achieved when you look back after 5-10 years.

When should I review or change my financial goals?

Whenever you achieve a goal or your circumstances change, you may need to reset your timeframes and what you can achieve by when.

Financial Goals Template:

On our website under the Products Tab, is a template for financial goal setting. There is an example provided to help you define your financial goals and shows how to fully complete the template to ensure you following the SMART goal setting principle.

TAX RETURNS

Everyone is obligated to pay the correct amount of tax.

When you need it:

If you are PAYE (Pay as you Earn) tax payer and receive no other income and your employer is taxing you at the correct tax rate (exception: if you have a student loan) then you are unlikely to need to complete a tax return. Note: If you start part way through a tax year then it would be advisable to complete a return to double check that your employer hasn't overpaid your tax as your employer may not have taken the part year into account. However, if you are self-employed or PAYE with other income, have a student loan, then you will probably need to complete a return.

Do I need to complete a tax return?

To check whether or not you need to complete a return, go to http://www.ird.govt.nz/income-tax-individual/ to see your tax thresholds. If you are in another country then look up your tax department's website to find the tax rules and thresholds and/or you are classified as a non-resident for New Zealand.

How do I fill out a tax return?

Collect all income statements, annual returns, PAYE, donations, expenses (if you are self-employed) and any other information relating to your income.
Group all receipts, income, expenses, etc into their own individual piles.
It would be easiest if you list each receipt (pieces of paper), in a spreadsheet – listing by month may be easier if you have a lot of records to process.
Follow the tax return form, step by step (a booklet describing each question is provided). If in doubt call the IRD or refer to their website http://www.ird.govt.nz/income-tax-individual/.

Tips on completing your tax return:

Get someone who has experience in completing tax returns to check your return form if you have any concerns.
If you are unsure about anything Ring the IRD.
If you find that you do not have any idea on how to complete the IRD tax returns, then call an Accountant with a good understanding of tax laws within your country, as they will be able to help.
Before you send your return in, make a copy for yourself, so if the IRD does call to question anything, you have it in front of you.
Make note of any corrections that the IRD advises you of, so you do not make the same mistake again. Be aware, if your return is incorrect and you owe the IRD more than what is stated on your return, then they may charge a penalty for late payment.
If you have GST (Goods and Services Tax) returns to submit, check the following http://www.ird.govt.nz/gst/

When should I review my taxes?

Tax returns are annual (although this will depend on size of the tax liability) and how your income is received. If you are Self-employed, and tax could be high then review it before each provisional tax payment is due (check on http://www.ird.govt.nz/calendars-dates/reminders/, otherwise if you are PAYE with other income or have a student loan, then it is most likely that you need to fill out a tax return once a year. If you keep a copy of your return, it will make completing your future returns a lot easier as you have previous returns as examples.

Tax Return Template:

On our website under the Products Tab is a Tax Return Template which helps to capture all the information you should need to complete the IRD tax return.

FINANCIAL EDUCATION WITH BENEFITS

It is the opportunity to further your financial education by learning about different types of investments, and giving some investments a trial.

When you need it:

Now is the perfect time to get involved in investing. Most investors benefit with the power of compounding returns over time. So the sooner you start learning about investments and start investing, the better off you will be over the long term. Start by educating yourself, this can be done by learning through books, courses, seminars and by observing or the experience of doing.

How do I go about learning?

Read books and resources to educate yourself and gather as much information to help you to make decisions on investing. By doing so will hopefully show you the reasons why you should learn about investing as early as possible.

Tips on investing:

If you have heard other people's investment choices have not gone according to plan, take this as a learning curve, but do not let it stop you from investing. Consider what happened, what can you learn from their experience or need to investigate more, and what would you do next? Whatever you do decide, do not give up on investing – experience or others mistakes will help you do better. It can be the best way to learn - from mistakes, so start small so if there are errors made you will not lose much money and recover from any mistakes quickly (Note: you may make money so learn from those experiences too). The key messages are:

Learn to invest now
Investments grow over time
Learn from any mistakes or successes
Do not give up
Do not let fear stop you; get educated

A good place to start your investigation, is to take a look into KiwiSaver - http://www.kiwisaver.govt.nz/. This retirement scheme has a list of providers and a summary of the types of investments http://www.kiwisaver.govt.nz/providers/about/funds/, you can invest your retirement savings in. Be aware there are restrictions for withdrawing your funds and some rules around changing providers. This fund gives you a good starting point of what type of investments are in the market place, although there are more asset classes such as property, bonds, and owning your own business, which you may also want to investigate.

When should I review or change it:

If a mistake is made with an investment, always review it as your approach may need to be changed. Mistakes can be good if you learn invaluable investment knowledge, so do not let the fear of losing stop you from taking action if you believe in what you are doing. Otherwise review your investment strategy when the investment plateaus (means you believe it has reached its' top earning potential) or when a new opportunity becomes available.

A Good Investment Example:

Jess knew nothing about investing but decided she would like to try investing in shares as her first investment choice. Before she selected any shares, she went to the library to find share investing books and looked online to find some websites that may help her explain shares and the share market. Jess set about putting a plan together, her plan went something like this:

Read some books about Share Investing, such as Monkeying Around with Shares by Geoff Wiggins and Shares: Make Money & Beat the Market by Martin Hawes and made notes on helpful tips
Found a couple of websites like the New Zealand Share Market Trading Site https://www.nzx.com/, a brokerage site such as http://www.directbroking.co.nz/directtrade/static/home.aspx, and a share information site such as http://www.fatprophets.com.au/ or www.headliner.co.nz
Jess was mainly interested in New Zealand companies but also wanted to review some of the Australian companies so she subscribed to the New Zealand Company Register through Mercantile Gazette Marketing Limited (subscriptions@mgpublications.co.nz pH: 0800 649 696).
From gathering all this information, Jess decided to make up a mock portfolio of shares which she decided to follow for the next twelve months to check that her understanding of the shares and the share market were sound. While she was watching her mock portfolio, Jess decided to register with a brokerage site, filled in the application form and started saving for her investing.
After the twelve months were up, Jess made some adjustments to her portfolio and felt ready to invest in the shares for real.

Within twelve months Jess invested in her financial education, her approach was much like what she would do if she was taking a university course. The difference is that she would immediately benefit from her learning and start her financial journey.

SUMMARY - REVIEW

The Budgteting Basics Course covered the first three of the Seven Principles. The first two principles 1) start increasing your savings and 2) control your expenses, have been covered here in detail, while 3) make your money multiply is just briefly covered but will be covered more thoroughly in "Make Money" and "Retirement Planning" courses.

If you follow these Basic Principles of money, then you will achieve great control over your money and assets, and should soon see them grow comfortably. The hardest part is to start, but once you start you will find getting control of your finances will get easier as you go along, and you will have more and more success. An inspirational wealthy businessman Richard Branson has written many books but a title that encapsulates what this course is trying to say, is the book titled "Screw It, Just Do It" (Branson has many other inspirational quotes http://sourcesofinsight.com/richard-branson-quotes/) and who is a man of action. The challenge to you now that you have the financial information is to take action.

BUDGETING BASICS CHECKLIST	YES	NO
Are you practicing the Basic Principles of Money
Have you checked your Bank accounts, do they meet all your needs
Have you set up a Bill Paying System
Have you completed your budget
Have you put a direct debit to pay off your Credit Cards each month
Lending - Can you put off buying until you have the cash
Lending – Is your Loan secured and you are paying it off asap
Deposits – Are you researching better investment options
Have you Completed your Income Statement
Have you outlined all your Financial Goals
Can you Complete your own Tax Return
Do you know all the different types of investment options
Have you tried out a couple of different investment options