With the cost of borrowing likely to be low for some time, a good case can be made for renovating your home to make it larger or more comfortable rather than selling to upgrade. Negotiate a good price with tradesmen and suppliers to keep the total costs down and potentially you can add significant value to your house without having to outlay a large amount of money.

Now is also the time to take advantage of the subsidies available for insulating your home. Insulation has the advantages of making your home more comfortable and easier to sell with the added benefit of reducing your power bills. More information on home insulation subsidies is available at www.eeca.govt.nz.

There are some words of caution, however, if you are thinking of embarking on a renovation project. Strictly speaking, your home is not an investment; it is what financial planners refer to as a ‘lifestyle asset’. If you have spare funds, you can usually get a better return on your money by investing in assets which give you income as well as capital gain. If you need to borrow to do your renovations, don’t borrow so much that you are living from payday to payday to keep up with the mortgage payments. Finally, do your sums and check local property values to see if your resale value will improve by more than the cost of your project.

The SWG has recommended policies to increase the quality, quantity and rewards of saving. These include reducing serious tax distortions, and improving the disclosure for financial products, especially for fees and performance as well as improving their efficiency and returns.

In the area of retirement saving, the SWG has recommended that all employees over the age of 18 be automatically enrolled in KiwiSaver with the ability to opt out. At present, automatic enrolment applies only for new employees.

Also recommended is that the enrolment age be lowered to 16 and that the default employee contribution be set at 4% with the option to drop it to 2%. Of course, one of the most obvious solutions to our savings problem is to increase the retirement age. Despite this being a good economic solution it is still politically unacceptable, at least until after the next election.

The proposal for the Government to help make annuities available to retirees is an excellent one. Many retirees prefer to have a regular monthly payment to supplement income rather than a lump sum to invest. It has been suggested that payouts from KiwiSaver could be part lump sum and part annuity.

While much progress has been made to introduce financial literacy into the school curriculum, the SWG has gone one step further and suggested that financial education be compulsory in schools. This is to be applauded. Increasing the level of knowledge of financial matters is critical for changing attitudes towards saving and thereby securing the financial future of our nation.

• Set your credit limit at a level you can afford to repay within the interest free period.
• Know the due date of your payment and pay on time.
• Always pay more than the minimum due on your credit card to help reduce your balance and your interest charges.
• Avoid interest charges altogether by paying your credit card balance in full each month, preferably by direct debit from your bank account.
• Use online services to keep track of your card spending so you can keep within your limit.
• Avoid taking cash advances or paying utility bills with your card as they usually incur additional fees.
• Regularly review your monthly statements to ensure that there are no errors or unauthorised charges on your account.
• Use your card only for essential purchases and not for luxuries.

Consider having two cards – one with a low limit for everyday purchases which you pay off in full each month and another for emergency or large purchases.

It pays to shop around for the right type of card for you with a fee structure that suits your needs. For example, some low interest rate cards have higher monthly fees and are more suitable for those with high credit balances. If you need a card only to make online or telephone purchases, consider using a debit card. Your bank account will be debited straight away and you will therefore pay no interest.

When asked about the importance of specific attributes of advice, there were clear differences between men and women. Women place a much higher importance on having an adviser who takes time to educate them, with 63% rating this attribute as extremely or very important compared with 52% of men. They also seek an adviser who provides a knowledgeable point of view (69% for women vs 52% for men) and who coaches them on what they need to do to achieve their retirement goals (58% vs 43%).

During their pre-retirement years, more women than men put high importance on planning to be able to volunteer (31% vs 22%) and spend time with family (77% vs 68%) in retirement. These differences continue through to how they spend their time in retirement. Men, on the other hand, place more importance while in their pre-retirement years on planning how to spend more time resting and relaxing (38% vs 32%) and deciding on hobbies to pursue (33%vs 21%), yet in retirement they are much more likely to continue to work (17% vs 6%).

One of the most surprising findings of the survey is that both women and men give almost equal importance to an adviser’s ability to understand what is important to them as to the adviser’s ability to produce competitive returns on their money.

In summary, while women tend to have more concerns about their financial future, they are also more likely to use a financial adviser and to make plans for an active lifestyle in retirement.

Firstly, make sure you are being paid enough for the work you are doing now. If you are in business, can you increase your prices? If you are an employee, research other jobs in your field to see if you are being paid the market rate.

Now look at your skill set. People with expertise in areas where there is a big demand get paid more. Is there a special skill you have that you could develop further through training and experience so you become an expert? Alternatively, could you broaden your expertise by developing new skills?

Developing your network of contacts is a good way to find opportunities for career advancement. It is easy to do this on line, for example through networks such as Linked In, Plaxo and Facebook. Let people know what it is you are good at.

One of the easiest ways to make more money is to set up a business you can run from home in your spare time. The internet is full of opportunities to make money and even better, it is a huge global marketplace.

If you are running a business at home, you may be able to reduce your tax bill by claiming legitimate expenses such as office, telephone and computer costs. If you are not sure what you can sell yourself, then consider opportunities to make money by becoming an affiliate of someone who is in business and being paid for customer referrals you give them.

Step One – Don’t add to the debts you already have. Debt arises when you spend more than you earn. You can avoid adding to your debts by living within your means.

Step Two – Confront your debts by making a list of them. If you have many small debts you might be surprised at what they add up to. Rank your debts in order of priority for payment. Some people prefer to pay off the debts with the highest interest rate first, and some prefer to start by getting rid of the debts that have the shortest repayment period so they feel like they are making progress.

Step Three – Check on any penalties or fees for early repayment. Contact each lender to determine how quickly you can repay your debt without incurring penalties or fees.

Step Four – Consolidate and/or refinance. Look at options for consolidating your debt and/or refinancing it at a lower interest rate than you are currently paying. If you are struggling to keep up with payments, this may also allow you to repay debts over a slightly longer period of time to make the payments more manageable.

Step Five – Set up an automatic payment to make additional voluntary payments on the first debt on your list. Leave your other debt payments at their minimum level. When the first debt is paid off, start on the next one on the list and keep working through until all debts are repaid.

Spend less than you earn

Spending more than you earn will use up your savings or take you into debt. Spend less than you earn and you will save. It’s a principle that is simple to understand but very hard to do. Get it right, throw in some compound interest on your savings, and you will add to your wealth effortlessly.

Make the most of KiwiSaver

If you haven’t joined KiwiSaver make it one of the first things you do this year. It’s an easy way to double or even triple your money. If you are already a member, get advice on whether your money is being invested in a fund that is appropriate for your needs.

Set up an emergency fund

Life is full of unexpected surprises, some of which can be expensive. Having money on hand will help you stay out of debt, particularly expensive debt such as credit card debt.

Pay off debt

Just as compound interest on savings helps make your wealth grow more quickly, interest on debt will destroy wealth and debt repayments will make it more difficult to spend less than you earn.

Review your life and income protection insurance

Protecting your wealth is just as important as creating it. The death of a life partner or the loss of your or your partner’s income through health problems can see your life savings quickly disappear and your standard of living fall.

• The importance of investment liquidity; that is, the ease and speed with which investments can be converted to cash.
• The importance of diversification; that is, not having all your investments in one asset class or one geographic location
• Return doesn’t necessarily reflect the level of risk
• Markets don’t stay down forever.

Investors have a choice of four asset classes; cash, bonds, property and shares. They can also choose to invest in New Zealand or offshore.

Cash is safe and liquid, but unlikely to produce a good return in the short term. As interest rates rise, bond values will fall and already investors are moving away from this asset class.

There are bargains to be had in property but with low projected growth, this asset class is for those with a long term investment horizon.

For shares, the outlook is much more promising. In particular, emerging markets such as China, India and Brazil are expected to outperform developed markets over the medium term.

There are also opportunities in what are referred to as ‘alternative’ investments, for example investments based on commodities such as mineral resources, precious metals, water and agricultural products.

Investing in 2011 will be no different than investing in any other year. There will be good opportunities for those who use sound investment principles.

You can plug the holes in your leaky bucket by finding out where your money is going. This is a little tedious but necessary. Gather up your bank statements and credit card statements for at least the last three months. Make a list of headings of essential spending, for example rent or mortgage, insurance, rates, groceries, phone, power, medical expenses, petrol, car maintenance, etc and work out how much you have spent on each. Now add up how much you have spent on non-essential and personal items such as entertainment, gifts, haircuts, beauty treatment, clothes.

Compare your total spending to your income over the same period. You’ll probably find that there’s some money you can’t account for! The leaks in your money bucket will be spending that you can’t account for or money you have spent on non-essential items. The best way to plug your leaks is to have a separate bank account into which you put money for spending on your non-essential items. By keeping within the limit of that account your spending will be easy to control and you should always have enough for your essential expenses.

• Do you have a safe place where all your important documents are kept, for example, insurance policies, wills, family trust deed, records of any investments, mortgages or loans, birth and marriage certificates, passports etc?
• If anything happened to you, would someone else know where to find these documents?
• Do you and your partner both have wills? Who else has a copy? Are they up-to-date?
• Do you have adequate insurance cover for your personal possessions?
• Do you understand what exclusions, limitations or conditions you have on your insurance cover and what your excess is?
• Do you know what to do and who to call if you need to make a claim, especially if you are away from home at the time?
• Do you have a list of all your possessions, including serial numbers, photos, or some other evidence of what you own?
• Do you have adequate life insurance?
• How would your partner and family fare if you were to suffer a serious accident or illness and be unable to work again?

Chances are that you won’t need to know the answers to these questions for a long time, but adverse events can often happen without warning. Having your finances in order makes dealing with them much easier.