Money mentor Tony Hailwood says interest rate rises are a wake-up call for people to look at what they are doing with their money.

Kiwis often just spend what they earn, thinking they don’t need to save because they can borrow, he says.

They can get into trouble this way, especially with interest rate hikes, but they need to go back to basics and look at their budget and expenses.

Banks, he points out, have already assessed mortgage holders as being able to cope with the fluctuations of rising and falling interest rates.

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“Yes, there will be people that are going to feel the pain and that’s what I guess these cycles do.

“They shake the loose fruit off the tree, so to speak, like those who have just really over-committed themselves.

“It is hard and there’s not really an easy way through this for them but for the majority of people they will find the way to meet that cost.”

People need to get a good understanding of what their true costs are, not their inflated perception of their costs.

“If they’re given a mortgage, they should be able to manage that because the banks always build that buffer in there.

“If they are struggling it's because they haven't recognised that and figured out how to make that work - how do I take what the bank prepared for me in advance and use that so when interest rates go up or down I don't feel the stress or pain from that?”

Hailwood’s top tips include not to create a budget of past expenses.

“Create a plan based on what do you consider your expenses look like going forward - that's number one.”

He also says everyone has a minimum savings capacity, so even if people consider they can't save money or find room for saving money in their plan - actually, they can.

“Regardless of your income you do have a minimum savings capacity. Work out what that is and make saving a fundamental part of your money.”

• Money coach Tony Hailwood manages a business entity for NZME. He also has the website www.moneytrainer.co.nz