Interest rates go up and down, the economy spins around, but you don't need to freak out and change your financial tack with every new headline. Frances Cook on how to keep cool and ignore (most of) the drama.
If you base your money plans on the news cycle, I have a prediction for you; you’re about to be broke, burnt out, and probably a bit mad.
That doesn’t mean we ignore the news. It can be very useful.
It does mean that we make sure we’re not jumping at shadows, and probably losing money in the process.
We can build our money strategy to expect the unexpected, and be ready to flex through the weird and wonderful world we find ourselves in.
So the next time house prices are soaring, interest rates are falling, there’s a stock market wobble, or a politician announcing an unwelcome change to your KiwiSaver, you’re able to ride through it with as little stress as possible.
A plan that works no matter what
The goal is to create a money plan that can survive whatever’s on the front page, whether that’s an inflation spike, interest rate cut, or the latest political policy grenade.
The backbone is surprisingly simple: Protect the essentials – so you’re never forced into a bad decision. Automate the good stuff – so you keep building wealth without needing constant willpower. And lastly stay flexible – so you can tweak without totally scrapping and starting over.
If you get those three right, the daily noise can become a source of interest, rather than a cause of panic. Let’s break it down.
1. Protect your base
First, lock in the parts of your life you can’t live without.
This probably includes housing, food, transport, utilities. You need to do what you can to be able to pay for those, even if the economy takes a turn.
How we do this will be different for all of us, depending on what our life requires. But there are some common tactics that many will find useful.
If you own a home, it might mean fixing a large part of your mortgage so you’re shielded from rate spikes, but leaving a portion floating to allow you to take advantage of cuts.
If you rent, it might mean having at least three months of expenses in a separate account, so a sudden job loss or rent hike doesn’t derail you.
In fact, three months of savings to cover core expenses is a good idea for just about everyone. For the self-employed, who have more ups and downs in their income, it could even stretch to six months of expenses put aside.
If you have kids, you might want to look at insurance that protects your income, or has a payout in the event of your (sorry) death. That way you make sure your dependents are still looked after, even if you’re not around to pay the bills.
The goal here isn’t perfection, it’s breathing space. With your essentials secure, you can ignore a lot of the panic in the headlines.
The morning's headlines in 90 seconds, including the trial for a man who set fire to Loafers Lodge begins, Erin Patterson’s back in court, and how dirty is your drink bottle? (Source: 1News)
2. Automate the good stuff
Automation is the secret weapon of people who seem effortlessly good with money.
Because it’s not about being disciplined. Willpower is unfortunately unreliable, for pretty much everyone.
Those people who seem to have effortless willpower actually just have good systems in place. It’s about setting things up so they happen without you thinking about them.
That means:
- Your savings transfer going out the day after payday.
- Your KiwiSaver or investment account topping up automatically.
- Your debt repayments set at a level that gets you ahead, without needing a monthly decision.
This is the part that stops “life happening” from wrecking your plans. You can get busy, distracted, or even lazy, and your wealth still builds in the background.
And yes, it still works when inflation is high or interest rates are falling. In fact, it works especially well then, because you’re not being swayed into emotional knee-jerk reactions.
3. Stay flexible
A plan that ignores headlines isn’t a plan that ignores reality.
The trick is to check in at sensible intervals, such as say, twice a year. You look at the big picture, and make sure your money’s still doing what you want it to.
If interest rates have dropped, that might be the moment to restructure your mortgage so you pay less interest overall. If food prices have risen, it might be time to tweak your budget, add a few more pantry staples to the list each week, or shop around each week for bargains.
Flexibility doesn’t mean chasing every twitch in the market. Instead, it can mean making strategic updates when the numbers really change, not just when they’re noisy.
Emotions and money: oil and water
All of this is important, because otherwise you leave yourself at risk of having an emotional reaction to every new headline.
Emotions and money are like oil and water. They shouldn’t mix.
It doesn’t matter if it’s a happy emotion, a scared one, or something else. It will almost always lead you to make a bad call.
Humans are wired to pay attention to threats. So when you see words like “crash,” “spike,” or “free-fall” in 48-point font, your brain lights up like it’s spotted a tiger in the grass.
That’s great for survival in the wild, less useful when the “threat” is a short-term dip in the sharemarket.
So you need to build emotional distance into your money systems: Don’t check your investment balance every week. Don’t try to respond to every push alert from the business pages. Do focus on progress you can control, like how much you’ve saved this year, or the percentage of your mortgage you’ve paid off.
When you measure what you can actually influence, you feel calmer and more in control. That’s the energy that keeps you on track.
But what about big changes?
Some headlines do matter, which is why I’m not trotting out the tired idea of “turn off the news and stick to your plan”. The trick is knowing what will make the difference.
A one-off inflation number? Probably not worth changing course.
A change to tax law that affects your investments? That’s worth paying attention to.
The way I think about it is: will this headline change the rules of the game I’m playing, or just the scoreboard right now?
If the rules change, such as a new KiwiSaver withdrawal policy, or a different way capital gains are taxed, then yes, it’s probably time to review your plan.
But many headlines are just score updates you can read with interest, without actually changing your money tactics.
What this looks like in real life
Let’s say you’re a first-home buyer.
You’ve set up an automated transfer into a high-interest savings account for your deposit, you’re contributing enough to KiwiSaver to get the full government match, and you’ve built an emergency fund to protect you here and now.
Then the latest headline tells you that house prices have dropped. Tempted to panic, or to try to liquidate everything to take advantage? Maybe.
But in all likelihood, your plan doesn’t actually change. Instead, you keep saving, keep investing, and keep watching for when the market lines up with your budget.
Or maybe you’re already a homeowner. Interest rates are high, but you’ve split your mortgage so you’re not locked into one rate for the whole thing.
Cuts are coming? Great, now when your floating portion drops, you can throw the difference at the principal instead of spending it.
In both cases, the plan is the anchor. The headlines are just background noise.
You can’t control a lot of what hits the headlines. But you can control how much of your financial life is at the mercy of those things.
Protect your essentials. Automate the good stuff. Stay flexible enough to adapt when it matters, but not so reactive that you’re yanked around by every headline.
Because the best money plan isn’t the one that wins the most in good times. It’s the one that quietly survives the bad times, so you’re still in the game when the good times come back around.
The information in this article is general in nature and should not be read as personal financial advice.
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