How to harness the power of your greatest asset

As at June 2012, the average weekly wage for a person in employment was $806 a week, or $41,912 per annum (source:

If you are aged 25 and you had just been successful in getting a job at the average weekly wage,  you stayed on the average weekly wage all of your life, and your wages were increased by an average of 3% per annum as an inflation adjustment over the term of your working life, at the age of 65, you would have earned over THREE MILLION DOLLARS in your lifetime.     It is $3,160,218 to be exact.

Where would that three million dollars have gone?

I could not find any reliable statistics on the spending of New Zealanders, but a survey in the United Kingdom taken in 2008 showed that 40% of British households were spending 110% of their annual income each year.  (     There is no reason to think that the spending habits of New Zealanders are any different.

A lot of people that I meet live to the extent of their incomes, and set little aside for savings, or for long term goals.  Often, new cars and family overseas trips are funded by taking on more debt.

It is a known fact that money, if it is not closely watched, evaporates!

The way to harness the power of money is to CONTROL how it is spent, and the way to do this is to run a BUDGET.     There are many budgeting tools available on the internet, and I also recommend the free budgeting tool on   However, it is worth noting that I, a qualified financial planner, run my family’s fortnightly budget out of a 3B1 notebook! You have to do it in a way that works for you.

Firstly, you need to work out what you have been spending your money on to date, and this is easily done by accessing your bank statements for  the past 6 – 12 months.    This will give you a flavour for how much things are likely to cost for you or your household going forward.

Secondly, you need to work out what your base fixed day to day living costs are going to be.  You need to work out what the costs are for your rent/mortgage, power, phone/internet, childcare etc and put these in your budget.

Thirdly, you need to have a strategy of setting aside money for “large ticket payments”, such as rates, insurances, school fees and uniforms etc.   A good strategy is to work out what the annual cost is going to be, dividing that amount by the number of paydays that you have in a year, and automatically transferring that amount into a separate account every pay day.  It is worth noting that most insurances of all types are cheaper if they are paid annually, instead of on a monthly basis and having money set aside allows you to pay annually.

Now you will have an idea of what your surplus income looks like.  From this, you can make up a budget for your grocery shopping, and also for things like clothing, club memberships, regular donations, satellite TV etc.   If you find that you have a surplus, you can choose to save it, or use it to reduce debt.   Start with high interest debt first.

Budgeting is the most powerful action that you can take to increase your wealth, and I would really encourage you to give it a go.


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