Big changes fade quickly in the new year. The key is to make small, sustainable changes to help get on top of your finances.

Resolution one

This can be set up in such a way that you don’t need will power to remember it.

I’m guessing that at least one of the following financial situations applies to you:

• You have credit card debt or a car loan or other debt on which you pay interest above 5% - probably way above 5%.
• You have a mortgage.
• You have no debt, but you would like to save more – either for retirement or for a house deposit, car, holiday, furniture or other big expense.

So let’s get that debt down or those savings up. There are two keys to success here.

The first is to start low. I’m not going to say skip a cup of coffee a week so you can spare $5. Coffee might be one of your little joys in life. But one way or another most people can come up with $5 a week.

For you it might be $20 or even $50 or $100 a week. And that’s great. But don’t stretch yourself.

Make a note in your diary, calendar or other reminder to gradually increase the amount every month or every three months. If times are tough, ignore this. If you’ve had a pay rise, make the increase bigger than usual. If you forget to make the increases, at least you are still making progress.

The second key is to set up an automatic transfer of the amount from your bank account. If you can send the money directly to pay down the debt or add to savings, that’s great. For example, you can automatically pay extra into your KiwiSaver account. If you are an employee, you don’t have to organise this through work. Just ask your KiwiSaver provider how to set it up.

If you can’t make a direct payment, transfer the money into a separate bank account set up for that purpose. Then move the money from there when it builds up.

Paying down high-interest debt is particularly effective. Most credit cards charge around 20% interest, and on some it’s about 30%. If you get rid of that debt, you are improving your wealth in the same way as earning 20% or 30% in an investment. That’s extraordinary. And it’s risk-free. You’re mad not to do it!

Resolution two

This is a one-off. It will take you maybe 15 minutes, and could mean you retire with many thousands – in some cases hundreds of thousands – more dollars.

The action: check you are in the best KiwiSaver fund for you.

Not in KiwiSaver? Join. If you are under 65, it’s hard to beat KiwiSaver as an investment because of the annual government contributions. And if you are an employee, contributions from the boss make it even better.

If you are over 65, you can still join nowadays. And having your money in two or three KiwiSaver funds at different risk levels – low-risk for money you will spend soon and higher-risk for longer-term money – can be a great way to run your retirement savings.

Finding out which fund is best for you is simple. Go to the KiwiSaver Fund Finder on sorted.org.nz. Click “Find the right type of fund for you” on the left side, and then answer the three questions. That will tell you whether you should be in a low-risk defensive or conservative fund, a medium-risk balanced fund, or a higher-risk growth or aggressive fund.

The tool then suggests you compare the different funds of your type. Click on that and you get a list of all the KiwiSaver funds in that category, ranked from the lowest fees to the highest fees.

I strongly recommend you move your KiwiSaver account to one of the cheapest half dozen or so funds. You can get more info on each fund by clicking on its name.

The Fund Finder also lets you rank funds of your type by services and returns. By all means take services to members into account. But take little notice of returns – other than to perhaps exclude funds that have a really bad long-term record.

Why take note of fees and not returns?

As Morningstar, which reports on KiwiSaver returns every quarter, puts it, “Past performance is not a guide to future performance. This year’s best performers can easily be next year’s worst… fees are the one constant that will always eat away at your returns. Take a close look at the cost of your KiwiSaver Scheme.”

Once you’ve found a fund you would like to move to, all you have to is ask that provider to move you. They do the work for you.

Footnote

So far I’ve assumed you either have debt or you need to save more - or both. But for some people the problem is the opposite. They have no debt and plenty of savings and aren’t spending enough.

Quite often these people are women, and they may have been through tough financial times and have vowed never to go there again. But there’s such a thing as over-saving and missing out on fun times.

For you, the resolution might be shouting yourself a treat at least once a week, and a big treat at least once a year.