For a long period up until last year it had been relatively easy to borrow to buy the things that we wanted or needed. House prices were increasing, credit was easy to obtain and Banks were very comfortable to lend more to people, if they wanted to alter their house, buy a new car or finance a holiday, etc.  So, if we needed a new appliance or wanted to take a holiday, rather than save for these, many of us have simply taken advantage of the interest-free offers available, put it on the credit card, or increased the mortgage.

That has now all changed dramatically over the last 12 to 18 months. Suddenly, credit sources dried up, property and investment markets fell and mortgage top-ups became more difficult to come by. In fact, we are now facing a very different reality to the situation only 18 months ago. This requires a different approach to managing and structuring your personal financial affairs.

We are already starting to see changes in people’s financial priorities and ‘battening down the hatches’ is, perhaps, the best way to describe much of this response. We are now seeing a return to more conservative financial management; people are looking to save more to cover the unforeseen, accelerating the repayment of the mortgage and retirement of other debt is becoming more of a priority for many people, as is the need to reassess their insurance provisions to ensure that they adequately address the needs of the family.

Whilst these changes are, in general, to be commended, they are often undertaken as single steps without necessarily taking full account of the individual’s broader financial position. For example, many people increase the repayments on their  fixed rate mortgage or decide to fix the whole of their borrowings yet have no ready access to funds for unforeseen cash needs, or, they go on a KiwiSaver contribution holiday and do not make any payments at all to KiwiSaver and ultimately lose $20/week that the government was contributing.

If you are thinking about making changes to your financial situation, you should consider those changes in the context of your short, medium and long term goals and aspirations.   Alternatively, if in doubt you should seek professional advice through your financial adviser. If you do not have an adviser, contact Advice Financial, a Nationwide independent financial advisory group to assist you by calling them on 0800 10 22 64 or emailing them at action@advicefinancial.co.nz  to meet with one of their qualified advisers.