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Things that Prevent You from Getting Rich and How to Avoid Them

Paul Martin • Feb 20, 2017

Things that prevent you from getting richMost of us want to be rich - to buy the things that we want, to travel to different places, to perhaps build our own business and more. But for most getting rich is not that easy. Even though you work hard every day, the money you earn is still not enough to buy and do all the things that you want.

One of the reasons for this is due to our poor money habits.

As a trusted personal financial and business advisor in Auckland , we are sharing some of the common things that we notice people do that prevent them from building a strong financial position. So, what money traps can you fall into?

1. You don't have emergency funds

You may have money to cover your bills. But you don't have any emergency funds that would cover any unexpected expenses, such as repairs to your damaged vehicle, maintenance around your home, or emergency medical bills among others.

No matter how good you are at budgeting your money, if you don't have an emergency funds that would cover sudden big expenses, you are financially fragile. You might even end up with increased debt because you don't have extra money to pay for these sudden expenses.

Expert advice:

Save at least 20% of your income. Set up a direct debit from your wages to make the saving automatic. If you think you can increase your savings, increase it by 5 or 10% quarterly or yearly. This way you will be able to prevent spending all your money on non-emergencies and build a nest egg for the future.

2. Not paying your debts on time

Some people pay only the minimum amount due on their credit card, thinking that having a credit balance will give them a solid credit history. But in reality you are not building a good credit rating if you cannot pay off your debts. Also, you are extending the suffering from paying your debt for a long period of time and you will be paying more interest because of this. It makes more sense to always pay credit cards off when they fall due.

Expert advice:

If you cannot pay off your debts right away, it is advisable to create a plan for settling your debts. Prioritise those that are urgent and with the highest interest rates. Make a flexible payment plan or schedule that you know you can follow.

Paying your debt off will mean sacrifices in other areas. But the rewards are great if you have a clean credit record and are not bogged down with debt.

3. Not knowing where your money goes

You may have many bills to pay and other things that you buy for your everyday needs. But not paying close attention to your finances has repercussions. If you continue mindless spending, you won't be able to save for emergency situations, or have funds to pay off your debt. Mindless spending also prevents you from getting rich.

Expert advice:

If you don't have a budget, it's time you created one. If you are not good at budgeting, it's time to learn. Budgeting your money and knowing how to track your spending habits will help you to manage your finances properly. If you know where your money is going it is easier to make necessary adjustments.

Example, if you are spending $5.00 a day for a coffee, you may want to buy a whole pack and make your own coffee instead. A whole pack of coffee is more affordable and can last for a long period as compared to buying an expensive single coffee every day.

4. Hanging out with toxic people

Your spending habits will also depend on the type of people you socialise with. If you spend time with people who love gambling, drinking and partying, it is likely that you may fall into their spending habits, which will affect your own finances.

Expert advice:

There's nothing wrong with socialising with other people. You just need to understand if you can keep up with the kind of lifestyle they have. More likely, in the attempt to blend in, you will be influenced by their spending habits.

Spend time with people who you think will help you be more responsible with your finances. Or seek financial advice from mentors or experts. Find someone that you can trust to help you manage your finances properly.

These are just some of the very common things we see that prevent clients from getting ahead financially. As chartered accountants in Auckland, we help professionals and business owners manage their finances. We also assist them with annual accounts, tax returns, GST and other professional accounting services. We offer business consulting and help clients prepare business strategies for their dream business.

So if you want to know more about how you can improve your personal finance, or if you need help in starting a business, talk to us on (09) 576 4166 or request an online appointment.

How the new Government and coalition agreements might affect owners of residential rental properties

By Paul Martin • 04 Dec, 2023
There were some key takeouts of interest to many of our clients from the recently signed coalition agreements between National, ACT and New Zealand First and the formation of the new Government. In particular there are a number of policies which will likely benefit landlord clients who own residential rentals. I have summarised some of these below. 1. Return of Interest deductibility for residential rental properties Interest deductibility for residential rental property owners will return. It will be phased back in over three tax years: • 2023/24 tax year: 60% of interest cost will be deductible. • 2024/25 tax year: 80% of interest cost will be deductible. • 2025/26 tax year: 100% of interest cost will be deductible. 2. Reduction in bright-line period National signalled in their pre-election campaign that the bright-line period for residential rental property sales would reduce from 10-years to 2-years. While the exact implementation of this policy is not yet known, it is good news on the horizon for residential property investors. 3. Reinstatement of 90-day no-cause termination notices The new government will reinstate 90-day no-cause tenancy termination notices. This will avoid many unnecessary disputes in the Tenancy Tribunal and gives landlords more confidence in letting to possibly “marginal tenants". Many landlords have avoided what they considered to be risky tenants because eviction for anti-social behaviour was so difficult. With this reinstatement, landlords might be more inclined to give a marginal tenant a chance because they know that if the tenant misbehaves, they won’t be stuck with them. If you would like more information on how these changes might affect your personal circumstances, please feel free to contact us to discuss further.

How does provisional tax work, especially in an economic downturn?

By Paul Martin • 18 Jul, 2023
If you had to pay tax of more than $5,000 in your last income tax return, you may have to pay provisional tax for the following year. Provisional tax is like making progress payments on next year's income tax.

How to handle inflation as a sole trader

By Paul Martin • 18 Jul, 2023
Sole traders have had an especially difficult few years as inflation surges. We have got three tips to help lighten the load for your sole trader business. 
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