The first rule of personal financial management is to spend less than you earn! It sounds really easy and makes sense, but did you know around 30 per cent of Kiwis are living in financial stress?

So, if it is that simple, how are so many of us struggling financially? Well, technology has allowed us to remove the pain of buying from the pleasure of receiving.

To begin to understand why this happens, have a chat with your grandparents or someone else from that generation who love to talk about the “good old days” before computers and the internet. I think you’ll learn something quite fundamental about financial management.

I am blessed to have a grandmother who was born in the late 1920s and who is still with us. She has seen a lot of change during her lifetime and so she was the perfect person to ask how her family managed their money.

This is what she told me.

“On pay day my father would come home from work and sit down with my mother and us kids at the wooden kitchen table. He would pull out the brown envelope from his jacket pocket, take what he wanted and then hand the rest to my mother. It was then up to my mother to pay all the bills from what she had left.

“She would carefully divide the cash up and put each amount into the various jars labeled rent, food, power and other bills. My sister and I would wait anxiously to see if there was a coin or two left for us. Sometimes we were lucky, but most times there wasn’t.

“It wasn’t an easy life. We didn’t have much, but my mother always managed to put food on the table and shoes on our feet.

"When I got married and had a family and came to New Zealand, your grandad and I followed the same system but this time instead of putting cash in jars, we used bank accounts. Then we drew money from one of our savings accounts when we needed to.”

So, what can we learn from this little history lesson? The system was simple, cash came into the household and cash went out. The family had a “banker” who was in charge of the finances. Grandmother (and her mother) knew exactly how much money they had at any one time and where it was being spent. In other words, they had a money plan and they stuck to it.

How can we apply this in our age of electronic banking and credit cards?

First of all, you need to understand why it is so easy to spend more than we earn. Yes, credit cards and interest-free deals do get most of the blame. In fact, New Zealanders owe $6.2 billion on their credit cards as of March 2023.

Our primitive brain isn’t much help either. Your brain loves pleasure and let’s face it, buying nice things like food, gadgets, clothes and cars is very exciting and enjoyable (well for most of us anyway). Our brain can't help itself, “yes, yes, yes, buy it!” Instant gratification is his best friend. And credit lets us do this even though we don’t have the money right now to pay for it.

So, the pain of paying is separated from the pleasure of buying.

Secondly, in our wonderful world of technology, we generally don’t see our hard-earned cash. It goes straight into a bank account and we use various cards and electronic means to pay for what we want.

We no longer have the same awareness of money (spending or earning) that they did in your grandmother’s day (this is called abstraction of money, where we are so removed from the actual money we don’t know what is going on).

In fact, according to a recent survey by the Commission for Financial Capability, 45 per cent of Kiwis do not have a budget, and only 27 per cent regularly track their spending. It's no wonder so many of us find ourselves in debt.

But fear not! By following the simple principles of our grandparents, we can take control of our finances and start building a strong financial future.

Start by creating a money plan, and tracking your spending regularly, like virtual jars. There are plenty of great apps available that make this easy and convenient, even for those who are not particularly tech-savvy.

You can also try using cash for your day-to-day expenses, to bring back that awareness of money that has been lost with electronic payments. Set aside a certain amount each week or month for discretionary spending, and when it’s gone, it’s gone.

And remember, it’s never too late to start. Even small changes can make a big difference in the long run. So take control of your finances today and start building a brighter financial future for yourself!