First of all, how did 2025 creep up so fast?! It’s kind of crazy how quickly 2024 zoomed by, despite the challenges so many of us faced. Although you may still be daydreaming about summer (cue sand between the toes and salty hair), for most of us the big break is over, for another year. Sigh…

As tempting as it is to throw your goals out the window and jump back into the daily grind, it’s important to check in every now and again with your long-term finances. Now is the perfect time to review how your goals and budget have worked for you over the past year. A helpful approach could be to break it down into your debt and savings goals (if you have them), and how you can align these with your budget. If this sounds like a potential winner for you, read on…

Getting on top of debt 

Let’s start with debt. The classic financial dilemma: Should I pay off my debt first or should I save for the future? The general rule of thumb is to pay off “bad debt” before you start saving. But as always, there are nuances and nothing is absolute, or black and white. As a reminder or rule of thumb, debt is considered “bad debt” when it has high-interest rates and can accumulate extra charges, making it harder to pay off quickly. Think credit cards, car loans, and personal loans - often used to buy things that depreciate in value over time or don’t earn you any income. On the flip side, good debt typically offers a return on your initial investment. This could be a student loan or a mortgage to buy your own home.

Anyway, back to new year, new you! Did you have a goal to reduce any of your debt last year? If not, or if you did but are still working through any of those debts, let’s walk through a method we quite like: the avalanche budgeting method.

How to use the avalanche budgeting method

1. Note down all your debts: Write down all your outstanding balances, interest rates, and fees.

2. Prioritise: Identify which debts are negatively impacting your finances the most (i.e. high interest rates and high fees!) and arrange them in order.

3. Tackle the highest interest rate first: Focus all your extra cash on one debt until it’s paid off. Then rinse and repeat, moving to the next highest.

The avalanche method makes sense mathematically as you tend to pay off your total debt faster, and save money over the long run. But it can be quite daunting for those who like to sweep their big debts under the rug, aka head in the sand (ostrich) method. If that’s you, you’re in luck because we have another approach:

The snowball method

This method flips it around and focuses on paying off your smallest debts first, working your way up. By knocking out those little wins, you can build your confidence and momentum. By the time you’ve reached those big and scary debts you may be more ready to tackle them head on, no sand. Everyone’s financial situation is different so the key is to pick a method that works for you. The hardest part is the first step, and that’s simply getting started.

Nailing your savings

Once you’ve thought about how to tackle any debt, savings are a great next thing to consider. Your savings goals are very personal to you, and everyone is different. Common goals include building your retirement savings, planning on a big holiday, or saving for a major purchase like a car or home deposit. But setting pragmatic savings goals is the key to making progress.

If you dig deep into your memory, you’ll probably recall an acronym that teachers made you use every year to set goals - the ones you wrote down and promptly forgot about. Well, we’re here to tell you that SMART goals are, ironically, a super smart way of setting goals! 

• Specific: Your goal is clear and concrete. 

• Measurable: It has an objective measure of success.

• Attainable: It’s challenging, but with the resources available it’s achievable.

• Relevant: It meaningfully contributes to your greater objectives. You want to achieve it.

• Timely: It has a deadline or a timeline of milestones to be reached.

Using the SMART goals framework turns, “I want to put money aside for an emergency fund,” to a more focused and clear “I will cut $20 from my splurge account each week until I’ve saved $1000 for an emergency fund.” The start of the fresh new year is the perfect time to review your current goals and check if you’re meeting your milestones. If you’re not quite on track, SMART-ify them!

Your quick and easy 2025 KiwiSaver check-in

Alongside setting your financial goals for the new year, it can be super handy (and quick!) to review your KiwiSaver and whether it’s working as hard as you are. Check that your fund type continues to align with your current financial goals and risk tolerance (we have a handy fund selector on our website if you want to check it out, or go to sorted.org for a range of resources). It's also a good time to check if your contribution rate is in line with your saving goals and whether you're taking full advantage of any available employer contribution matches. And of course, don’t forget about the Government Contribution if you’re eligible - that will come up quicker than you think at the end of June!. A quick annual check can make a significant difference in growing your retirement savings efficiently.

Don’t forget about your budget

You’ve established a plan to tackle debt and set yourself some savings goals; it’s time to bring it all together with a budget! Budgeting is a great way to rein in your spending, reach savings milestones, and stay on track with future goals. One of our favourite approaches to budgeting that we’ve talked about on our Money Made Simple podcast is the 50/30/20 rule. This approach simplifies budgeting into three broad categories in terms of what we tend to spend on. It’s a great way of balancing your essential costs with the things you enjoy.

1. 50% for needs

This covers your essential living expenses, so things like your mortgage or your rent, your groceries, insurance, petrol, utilities, all that stuff that’s boring but definitely has to come out of your income.

2. 30% for wants

Allocating part of your income for ‘wants’ means you still get to enjoy the things you want to spend money on whilst covering the essentials. This could include dining out, entertainment, hobbies, new clothes, and other treats that enrich your lifestyle.

3. 20% for savings & investments

The final 20 percent is put towards reaching your long term financial goals, whether that’s your retirement savings, building an emergency fund or investments in shares and/or managed funds.

Bonus tip: Regularly reviewing your budget is just as important as setting it up!

The 50/30/20 split is just one of many budgeting strategies out there, so if it doesn’t quite fit your life or goals, there are plenty of other options (go check out the podcast episode we did on budgeting, if you want to consider the alternatives). The fundamental idea is having a structure in place that maintains a healthy balance between needs, enjoyment and future growth.

With 2025 in motion, doing a quick financial check-in can be super beneficial for your future self. Making progress is all about consistency, whether that’s big or small. So, continue to enjoy your summer road trips, pohutukawa-lined coasts and warm ocean breezes (minus the sea lice) and enjoy your new year with a fresh new financial perspective down pat.

The information provided and opinions expressed in this post are intended for general guidance only and not personalised to you. These materials do not take into account your particular financial situation or goals and are not financial advice or a recommendation. Information is current at the time of posting, and subject to change without notice. Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme and Investment Funds. For Product Disclosure Statements please visit our website simplicity.kiwi.