by Nick Stewart (CEO & Financial Adviser at Stewart Financial Group)

Change is something we’ve all had to become familiar with over the past few years. With once-in-a-lifetime weather events rolling out alarmingly regularly, a global pandemic and war in Europe, change has been the running theme for a while now.

Change is situational. It’s the thing around you; the new job, or location, or set of circumstances. It is the external part of the equation. Transition, however, is psychological. It’s the mindset around the change. How you process that change can determine a lot about your future stress and mindset. Additionally, the events of the last few years have reportedly left us less open to new concepts and ideas, less likely to strive towards our goals, and less willing to be in new situations.[i] So yes, we know quite well by now that change happens -  but we still don’t like it.

In other words, change is what we can’t control. In the world of financial planning and wealth management, things you can’t control include the uncertainty of markets. For example, none of us can control (or accurately predict) what 2023 will bring in terms of market volatility. We can make a guess based on past performance, but that’s not indicative of future returns

An interesting study on climate change perception suggests that people who are aware of climate change, but don’t take action to prevent it, are the most stressed by it.[ii] Similarly to the anxious climate-change observers, not having a financial plan in place can cause a lot of stress because it creates uncertainty. Us humans are unfortunately not programmed to deal with uncertainty well. We’re quite literally creatures of habit. Our brains make decisions based on learned experiences, so as soon as we don’t know what’s up ahead… it can really disrupt that process, and you may end up running through various scenarios trying to figure out what your next step might be.[iii]

If you’ve ever found yourself up at night playing out different possibilities in your mind, you’ll know the feeling. It’s not great, nor is it healthy.

To get around this, you must focus on what you can control: developing a long-term strategy that you can stick with, being patient, and minimising risk where you can.

Some small steps you can take to get started on your financial journey in 2023:

1.)    Know where you’re at right now.

Create an honest overview of your current financial situation. Look at your incomings and outgoings. A very eye-opening exercise would be to go over all your purchases for the past month and categorise them into things like groceries, takeaways, rent or mortgage, clothing, etc. You’d be surprised how many things you don’t remember purchasing as a ‘small’ extra, like getting a pastry with your coffee or getting sucked in by the front counter, impulse buy section when you’re shopping. This will give you insight into your habits – the idea is not to shame yourself, but rather to have a realistic look at what you spend, why, and how you might shift your behaviours if you need to free up a few extra dollars. For example, not going grocery shopping while you’re hungry can help reduce last minute snack grabs on the way to checkout.

2.)    Decide where you want to end up.

How do you want to live when you’re no longer actively generating income? Retirement may feel far away now, but time has a way of slipping by quickly if the amount of “This year has gone so fast” conversations I’ve had are any indication. If you want options and a comfortable retirement, plan for it now so you can start accumulating wealth in a long-term strategy. It’ll be much easier to invest small amounts now than to come up with a lump sum later.

3.)    Check your KiwiSaver fund.

Being in the right fund can make all the difference to your accumulation over time. Generally, the more time you have, the more risk you can afford to take on. If retirement is still 20+ years away and you’re in a conservative fund, you may benefit from talking to a trusted KiwiSaver adviser and reviewing which fund is most suitable for your needs.

4.)    Get your tax right.

Paying too much tax won’t help you to reach your retirement savings goal, so it’s important to get your Prescribed Investor Rate (PIR) right.

This defines the amount of tax you’ll pay on your KiwiSaver investment income – if it’s too high, you’ll be paying tax you won’t be able to claim back; if it’s too low, you’ll need to file a tax return and pay the outstanding amount.

These are changing times, and that’s not necessarily a bad thing. Change, and our reactions to it, prompts growth. It makes us think and reflect. If one of your New Year’s resolutions is to get your financial roadmap in order, a good first step is reaching out to a trusted financial adviser for a chat about your unique situation and goals.

Happy New Year, everyone.

• Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. 

• The information provided, or any opinions expressed in this show, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

[i] https://greatergood.berkeley.edu/article/item/did_the_pandemic_make_us_less_friendly

[ii]https://greatergood.berkeley.edu/article/item/the_top_10_insights_from_the_science_of_a_meaningful_life_in_2022

[iii] https://www.insider.com/guides/health/mental-health/how-to-deal-with-uncertainty