While New Zealanders in general have an excellent grasp of basic financial concepts, a recent survey has found that they are not so good at putting into practice what they know. The survey, undertaken by the Commission for Financial Literacy and Retirement Income with the support of ANZ, ranked New Zealanders well ahead of other OECD countries on financial knowledge. However it also shows we have a long way to go to get people engaging in financial behaviour that will help them achieve their financial goals. For example, while 85% of those surveyed know what a budget is, only 61% have one.
Banks, family and friends and the Sorted website are popular sources of financial information but a possible reason for the lack of action is that many people struggle with how to translate general information into something that suits their own specific needs and circumstances. Putting together a budget, let alone a financial plan, can be a complex process involving setting goals, analysing spending, calculating income and the amount of saving required to achieve specific goals.
Building your financial future is no different than building a house in that you are much more likely to succeed if you have a plan drawn up, with the assistance of an expert, to show how everything is supposed to fit together. Every plan is unique as it depends on individual goals and circumstances. There are a number of reasons why people don’t have financial plans:
- Lack of familiarity with using a financial planner
- Lack of understanding of the value of a financial plan in comparison with the cost.
- A shortage of qualified financial planners who are authorized to give advice
These are all obstacles that need to be dealt with so that financial knowledge can be turned into action.