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Even if the amount is relatively small, there are ways to grow your money. (File photo)
The average New Zealander has about $1400 worth of unwanted and unused stuff just lying around, data shows.
A recent report by Trade Me on the secondhand economy found most people had at least half a dozen clothing items, four books, CDs or DVDs, and three home or living items they could exchange for cold, hard cash.
But once you’ve offloaded the goods, what should you do with the money?
Here’s what experts suggest:
Nadine Higgins, enable.me financial adviser and coach, said many people wanted to jump straight into investment when they came into some cash, but that wasn’t always the best idea.
STUFF
It seems we’re increasingly willing to pay top dollar for vintage interior pieces from the right eras and designers.
“Shoring up your financial security has to come first, or it exposes you to the risk of ending up back where you started, or worse off.
“What you should do with funds you manage to raise is less about the amount in question, and more about your existing financial resilience, your other debts, whether you could afford to lose some or all of that money and when you will need it.”
The first thing people should do after coming into a bit of cash was make sure they had a “buffer” of funds, or a safety net, Higgins said.
”That gets you out of a bind and means you don’t have to go into debt if something unexpected or urgent crops up.”
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Enable Me financial adviser and coach Nadine Higgins says many people want to jump straight into investment when they come into some cash, but that isn’t always the best idea. (File photo)
Emergency funds needed to be easily accessible, not tied up in anything that would be hard to get to in a hurry, she said.
They should also be somewhere without too much risk, otherwise it was possible the money might have dwindled when a crisis arose.
“For example if you bought shares, what happens if you need the money and the share price is lower than what you paid? Such investments need a longer-term horizon – you don’t want to waste the effort you’ve made to generate that cash,” Higgins said.
For those with debt, that was usually the first port of call as a place to use any extra cash.
Loans, overdrafts and other debt that accrued interest cost borrowers money and repaying or reducing them – depending on the size – guaranteed a return that was likely higher than most investments, she said.
SUPPLIED
Tom Hartmann, Sorted personal finance lead, says term investments are a good option for people who don’t need access to their money in the short term. (File photo)
“You could consider a high-interest savings account – although be careful as some have rubbish interest rates unless you contribute to them every month,” she said.
“If they do have that provision, make sure the contribution is something you can afford.”
A term deposit of around six months was an option for people who already had an emergency fund, but Higgins advised against fixing it for beyond the end of any overdraft interest-free period, Higgins said.
Tom Hartmann, Sorted personal finance lead, agreed the timeframe for investment was more important than how much was being invested.
“In this case, we would suggest checking the best term deposit rates on offer. Some term deposits have a minimum investment requirement as low as $500, and they will pay the same rate of interest regardless of the amount invested,” he said.
“The longer you lock the money in, the higher the interest rate will be, so if you don’t need to access the money in the short term, that is a good way to go.”
Hartmann said Sorted could help people understand the fundamentals of term deposits and what the products were best used for.
They would then generally advise people to check the rates available and shop around for the best deal.
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