Our brains crave certainty. It gives us clarity and purpose. When we focus on aspects of our lives that we can control, we can thrive. 

By creating new goals today and taking small, steady steps to reach them, we can become more resilient and bring stability to our mental wellbeing, or wairua, even during challenging economic times like a recession.

Having clarity about your finances can contribute to freeing yourself from mental and physical stress. By finding the tools to help you track and grow your money at every life milestone, you’ll discover the positive things you can do along the way to create a better today and a happy tomorrow.

Why financial resilience is better for health

Financial wellbeing is wellbeing, and research shows when we’re satisfied about our standard of living and financial wellbeing, we elevate our entire wellbeing. When the reverse happens — when times are tough — financial worry can take up brain space and cause long term stress that may impact physical wellbeing, relationships, work, social life and self esteem. 

Research by New York State Psychiatric Institute research scientist Oscar Jiménez-Solomon shows that ‘financial wellness is correlated with good health, while financial stress, including a high debt-income ratio, puts physical and mental health at risk’:

‘The research shows that indebtedness creates two experiences that can be fairly lethal. One is a sense of uninterrupted hopelessness, feeling like there's no way out and feeling trapped. The other is shame, which is very isolating. People walk around with secrets and feel not worthy of support. Societies like ours tend to see economic success as a reflection of a person's qualities and economic difficulties as a sign of personal failure.’ — Oscar Jiménez-Solomon, research scientist, New York State Psychiatric Institute, Columbia University Irving Medical Center

The American Psychological Association has reported that stress from worrying about money can negatively affect every system in our body. This can result in chronic issues that may impact our heart, gut health and digestion, and nervous and immune systems.

‘Money is one of the biggest stressors in life. And when you're stressed over anything, that creates physical issues within your body, like those stress hormones that make you not sleep or bring down your sense of well being overall.’ — Carolyn McClanahan, M.D., CFP, founder of Life Planning Partners, Investopedia

The Financial Services Council’s (FSC) 2024 Financial Resilience Index (FRI) reported that this year 70% of Kiwis worry about money either daily, weekly or monthly. It said that nearly 90% of New Zealanders are concerned about inflation (89.6%), with 75.6% worried about interest rates — the highest number since 2020. But there are simple things we can do over time to remove financial stressors. 

Financial wellbeing starts with a plan

Taking care of your finances —  even if it takes longer than you might hope — can be empowering and rewarding. The first step might be defining your hopes and dreams for the future, or anamata, and working out the small steps to help you get there.

Start with asking what fires you up when you think about the next two, five or ten years? Is it starting a side hustle or a new venture? Is it growing a house deposit? Do you want to shoot off on a year volunteering? Or do you want to build a retirement lifestyle that you'll enjoy? Honing in on these mid and long term dreams can help shape your financial goals.

To help you in your planning, or whakamere, try starting with our five simple steps below.

5 Simple steps to improve financial wellbeing

1. Fill the rainy day fund 

If the last couple of years have taught us anything, it’s that being prepared for the proverbial rainy day can help with managing a budget. Having money in a savings account, your pūtea penapena, makes sense. Savings are instant to access and can help buffer against surprise expenses — like car repairs, or a sudden necessary trip to see whānau.

MoneyHub suggests to aim to keep your emergency fund topped up with around $10,000 - 20,000 to cover 2-3 months of living expenses. The team also shares 8 budgeting apps that can help you identify possible savings in weekly spending. Learn more here about the difference between saving and investing and how both can help you reach long term financial goals.

2. Avoid taking on more debt

While Buy Now Pay Later schemes seem attractive to purchase things you need or want today and pay for them over six weeks, it can add to mental load and financial stress when the debt needs to be paid back.

Research released by AUT in 2023 found that a quarter of the 705 Kiwis aged 18 to 34 they surveyed were caught in a cycle of debt when payment deadlines were not met. And in 2022, Consumer NZ reported that one in five BNPL users use a credit card to pay off their BNPL debt.

While compounding interest can be great when it grows your savings and investments, when it applies to debt, it can stretch how much you have to pay back, and take much longer to pay off than you may have expected.  

‘There can be a temptation to take on more debt, such as ‘buy now pay later’ schemes, on credit cards or personal loans, which can cause greater problems down the track. Always ask yourself when buying something, is it a need (an essential) or a want (a nice to have).’ — David Verry, Financial Mentor, North Harbour Budgeting Services

Read more about the multi-billion dollar BNPL industry and the stats around mounting debt.

3. Tap into your community and investing resources

Learn about investing with a friend and become financially literate together. At Hatch, we’ve created a LearnHub and Glossary for every stage of investing, whether you’re just starting out, or you’re already a confident investor. You can also Google popular investing books, podcasts and webinars, and seek out online communities of like-minded investors. 

Find a mix of relatable Kiwis who inspire you and who share achievable goals, along with international investing all-stars who’ve learned by doing and are generous in sharing their insights on the share markets — like Warren Buffett’s lessons learned from his biggest investment mistakes. Then share what you’ve found with your investing buddy. Discover our top Kiwis talking about money to follow here.

4. Keen to invest? Learn by doing

Hands-on experience builds know-how and strengthens confidence. Following record 2020 low interest rates, across the world, people learned that investing could grow bigger returns than savings or term deposits. Historically, the US share markets have averaged annual returns of 10 percent, with an index fund like the S&P 500 returning an average of 13.6 percent for the last 10 years. While there’s no crystal ball, history shows us that having a long-term view when it comes to investing is a common approach.

If you’re ready to start investing, give our Getting Started course a go - at just 10 minutes a day for 10 days, you’ll definitely know more in the time it takes to sip one coffee a day. Then just $100 NZD is enough to experience the psychology of investing, so you get to understand how share prices move and how you respond to any share market fluctuations. You may even see the parallels in world news be reflected in any shares you buy, sparking curiosity. 

You could start by choosing one of the brands you already use if you believe in their potential to grow over time. If you’re active, you may already be wearing Lululemon (LULU), Under Armour (UAA), Nike (NKE), or On (ONON) —  you can own a slice of their business too. If you like gadgets, games, social media or entertainment, you may also want to invest in the companies that provide them. Like Apple (AAPL), Roblox (RBLX), Spotify (RBLX), Snap (SNAP ), Netflix (NFLX), Disney (DIS), and Paramount (PARAA, PARA). And the list goes on to many companies you use everyday. Always do your research and seek to understand how companies remain competitive, and innovate and grow their business for the long term. Find out here how to research shares.

Not ready to choose a single company? Learn about ETFs (exchange traded funds), which are baskets of companies. Some are grouped by themes, such as green energy, tech, or gender diversity. Others are broad ETFs, such as the Vanguard S&P 500 and the S&P 500 Index, which own a slice of the top 500 companies listed on the US share markets. Discover more here about ETFs here and how they can help you diversify your investments.

5. A common budgeting strategy: Pay yourself first 

When it comes to investing slowly, set-and-forget automatic payments every payday take the admin out of having to choose shares every time you receive money. Small and frequent investing in ETFs and companies means you create lifelong habits, are more likely to choose buying shares over shoes, and you’ll grow knowledge and potentially your nest egg, or pūtea penapena, over time. Learn more here about the benefits of paying yourself first.

Building financial resilience in small, incremental steps can help you with a financial buffer and a pathway forward to long-term financial and overall health and happiness.

Keen for more resources?

For free budgeting and financial support services go to:

• Moneytalks.co.nz — a free helpline run by FinCap for debt and budgeting support. Call 0800 345 123 or visit fincap.org.nz to arrange a meeting with a financial mentor
• Sorted.org.nz — independent financial information, guides and tools to help you create a financial plan to get sorted
• Moneyhub.co.nz — financial information and tips ‘n’ tricks to make your money work harder‍
• Mentalhealth.org.nz — wellbeing tips for managing financial stress