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Debt-a dirty word for the financially literate

“The borrower is a slave to the lender.” Proverbs 22:7

If you don’t have the money you don’t buy it is a quote I once heard from a church leader and he is right. Debt is a cancer on the financial health of people and just like physical cancer, the cure is often painful and requires a change in behaviour. It is all very well to keep your debt under control but you must learn to live within your means if you are able to. If the books make terrible reading then you still must do something about it such as seeking financial advice and going to a budget advisor.

Credit card spending is one of the main causes of debt because it makes credit easily available. Once you have convinced your bank of your credit worthiness you are virtually guaranteed a credit card. All the bank is concerned about is making a profit. They are not concerned that you are getting in debt and if you get behind in your credit card repayments, the interest rates really bite hard.

It is not just those on modest incomes who are in possession of a credit cards. Those on medium and high incomes use them as well.

So what does this tell you?

It tells me that what motivates people to use credit cards is greed and selfishness. It is the “keeping up with the Joneses” mindset. Some people spend their whole lifes trying to keep up a persona, that is keeping up a self-image just to impress others. That nice car or expensive house house may impress others but at the end of the day if it is bought with borrowed money then it will result in the borrower’s life being ruled by the lender.

Many people are pennywise but pound foolish! They take note of all of the bargains and will purchase one item over a competititor because it is 10p cheaper yet would think nothing of purchasing other stuff on credit and paying interest on it which means they are paying a higher price for everything bought on credit.

It is important to live by your own financial objectives and circumstances. In short: Stop being a people pleaser and be yourself!

The information here is the opinion of the writer. If you need financial advice then ask your budget or financial advisor. Feel free to pass on, share, and print this post.

www.robertastewart.com

Working out your risk profile

Investing money has its risks if you are prepared to go for growth but even though you may not have the stomach to take on risky investments

The main one is to diversify. That is to spread your portfolio over a wide range of industries. This is possible for the ordinary man and woman in the street who are able to invest in managed funds where your investment is combined with those of others. It is then up to the fund manager to handle all of the investments. This is exactly how kiwisaver operates.

Each fund will give you an option of investing in Conservative, Balanced, or GRowth funds and your decision of which fund to leave your money in will be determined on whether you can stomach heavy losses should the sharemarket go bellyup. If the though of losing your money will cause you sleepless nights then you should go for balanced funds. Conservative funds will not grow your money if at all once the fund manager withdraws their fees that you may have better options though in the case of kiwisaver, the government will contribute 50% of what you put in to a maximum of $520 per annum so at least this would make it worthwhile.

Your risk profile is not the only determining factor in deciding which fund to choose. If you are saving for a deposit on a home then you are not going to want to risk losing your money in the sharemarket which will happen if you had all of youer money in Growth funds only for the markets to tumble.

Your age is another factor to consider. When you are young, it is advisable to go for growth funds because you have more time to recover should the markets go down whereas someone nearing retirement would have their retirement plans affected should this occur.

It is your money however and your own responsibility to decide where you are going to invest so learn all you can about the various types of investments and in time you increase your financial literacy.

The information given here is my own opinion and not given as financial advice.It is best to seek professional financial advice if you are unsure.

www.robertastewart.com

Amazon Tax introduced to NZ

A new tax has been introduced to New Zealand where purchasers are required to pay goods and services tax on goods bought from sites such as Amazon. Previously any goods valued at under $400 NZ were exempt from tax.

Goods and Services tax or G.S.T as it is called is 15% of the value of the goods but apparently the postage paid on the item will be taxable as well. I don’t know about others but whenever I have bought stuff on Amazon I had to pay $25 NZ postage which means an extra $3.75 is payable in G.S.T on the postage alone never mind the value of the book.

The overseas websites are required to register for G.S.T but those that sell less than $60,000 NZ worth of goods to NZ per annum are exempt.

I’m not sure how this tax applies to books bought overseas and brought back home with your luggage. In due course we will see how all this unfolds.

This new law is designed to level the playing field because local retailer’s are suffering with the volume of online shopping. I think if Amazon set up their F.B.A service in New Zealand then physical retailer’s will really have something to worry about. FBA stands for fulfillment by Amazon.

ABOUT AMAZON FBA

Here is how it works. You source items to sell at Amazon. This may be from ebay or in our case trademe and put your markup on it to sell at Amazon FBA. Amazon will collect your goods for you for delivery to their warehouse. I do know of one or two people in the UK who source products for Amazon FBA by going through the websites of high street stores and sourcing products that way.

If you are in a country where you can do this then it is worth a try. I will just have to wait and hope that Amazon do set up a warehouse in NZ as well so that I can  jump on the bandwagon as well.

robertastewart.com.

Ditch those excuses

People come up with all kinds of excuses why they are not part of a retirement savings plan even though they can afford it. You can understand someone who is struggling to feed a tribe of kids on a modest income not being able to afford to join a retirement scheme but you do hear of people from time to time saying that they are not enrolled in one. New Zealand’s scheme is called “Kiwisaver” and I have heard a lot of different kinds of excuses as to why people are not enrolled. Here is sample.

“I am not earning enough money.”

The person who made this excuse has money to spend on a lot of other things such as Sky TV subscriptions and all of the other consumer able items that are not essential to survive.

“I have bills to pay.”

This one is similar to the previous excuse. People are quite prepared to purchase stuff with borrowed money but apparently think “Financial advice” is a dirty word.

“I might die before I retire.”

The person who made this statement does have a kiwisaver account but is an irregular contributor and is not making the most of it. He is missing out on the government tax credits. Yet is spending money on collectable items which he has stored up in the attic. That could be his retirement fund. He may not take his retirement fund with him but will not take his collectables with him either.

The “You can’t take it with you” excuse is one of the most common excuse given for not saving for one’s retirement. It is basically a selfish attitude to have since you are going to lumber your family with a big bill when you die.

“The Government might sell kiwisaver.”

This is the most stupidest reason for not going into kiwisaver because kiwisaver is the name given for New Zealand’s retirement scheme. It is not owned by the government. Each person who has kiwisaver is the owner of their own account.  I tried to explain this but the person who made this comment instead of listening then confided in his colleagues who were just as financially illiterate and  they came out with more stupid comments. That just goes to show that people tend to hang out with those who are like minded. If you want to get ahead then associate with those whose lives are heading in the same direction as you want to go.

 

Funeral Insurance. Do you really need it?

The opinions expressed in this post are my own and may not be applicable to your circumstances therefore it is suggested that you talk things over with your own family if you are unable to make your own decisions.

You must have seen the TV adverts selling funeral insurance so that you are covered if something unexpectedly happened to you. I do not have this kind of insurance but I do know others who do. Yet these people are not with kiwisaver, New Zealand’s retirement scheme. Now, I do not know how much they are paying to these insurance companies every week but I suggest that if they cut out the insurance and instead invested that same amount of money into their kiwisaver account then they would in the long run be better off financially providing of course that they do not die in the forseeable future.

Now let us suppose for the sake of explaining things that they are paying $10 per week or $520 per annum in funeral insurance. If this money was invested in kiwisaver instead and along with the government’s contribution of 50% of their contribution would mean that there would be $780 in this person’s kiwisaver account. If this was repeated every year then there would soon be sufficient money in the kitty to pay for insurance.

Do you see where I am coming from?

It is something to think about but as I stated at the beginning of this post, this is my own opinion and may not be applicable to your circumstances.

www.robertastewart.com

Saver or Investor which one are you?

Most people are able to save money. It is just a matter of spending less than you earn but few people are investors. If you have say a grand or two in an ordinary on call savings account then you are not making the most of your savings. An ordinary savings account will only pay around 1-2% interest which is not much more than the inflation rate. On top of that, you have taxation to pay on the interest. In the end, it is no way to grow your savings. The bank is really using you and your money to get rich. They charge their borrowers a much higher interest rate than they are paying for the use of your money and to rub salt in the wounds, the bank’s best customers, those who borrow money for their businesses recoup the money they paid for the use of your money by charging you a higher price for the goods and services they provide.

There are plenty of options for investing your money and no excuse for burying your head in the sand. The banks do have fixed term options at higher rates for those who have a lot of savings. The minimum investment for these is usually around 5k upwards.

Managed Funds are a good option for those who want to grow their savings at a faster rate. It is a good way of investing indirectly into the sharemarket. your investment is combined with all the other investors who have joined the scheme and the fund invests in the markets. You do have the option of which fund to invest your money such as conservative, balanced, or growth.

It pays to do your homework irrespective of where you invest your money. I think the factor which determines the risk level you are prepared to accept is how soon is it that you need your money. If you are saving for a house deposit then you certainly would not be investing your money in high risk investmennts because when it comes to using your money, the markets may have taken a dip, otherwise known as a “Bear Market.”

It is all a matter of increasing your knowledge. I have an ebook “The Golden Rules of Wealth.” which can help change the way you think about wealth. It is only $5. Check it out now.

www.robertastewart.com

How to Gain 50% on Your Investment

Did you know that investor’s in New Zealand’s retirement savings scheme Kiwisaver earn 50% on their investment for the first $1040 they deposit into their Kiwisaver account every year?

Now you may be thinking, “Its too good to be true so it must be a scam.”

Read on.

The government will deposit a maximum of $520 into your Kiwisaver account per annum. To receive this full amount you must deposit $1040. In other words whatever you deposit into your Kiwisaver account the government will invest 50% of it into your account. This is in real terms 50% of on your investment.

The news gets even better. It is all tax free.

If you only worked part of the year or are on a low wage and are unable to contribute the full $1040 on your wages then you are able to make voluntary contributions into your Kiwisaver account.

It is worth noting that the Kiwisaver year begins on July 1st and ends on June 30th. The government money will go into your Kiwisaver account in late July. So the strategy is to always make sure that you have deposited $1040 into your Kiwisaver account by June 30th to get the full amount of government money in July. If you do banking over the internet then it will be just a case of making a transfer to your KIwisaver account in much the same way as you would when transferring money between accounts.

This is all applicable to New Zealand’s retirement scheme only. Your own country will have its own scheme with it’ own incentives.

www.robertastewart.com

 

New Zealand Kiwisaver Scheme is a second to none retirement savings tool.

New Zealand’s own retirement saving’s scheme, “Kiwisaver” is a second to none savings tool for putting money away for your retirement. It has only been available since 2007. Prior to this New Zealand had no government retirement scheme.

There are several features and benefits of kiwisaver and before I discuss this, I want to emphsis the difference between a feature and a benefit. A feature tells you something about the product while a benefit tells you what is in it for you. For example, a feature of kiwisaver is that your money is locked up (with exceptions) until you reach the retirement age of 65. The benefit of this is that you will have a nice nest egg when you retire.

The main feature is the $520 tax credit per annum which you are eligible for but you must deposit twice this amount ($1040) per annum to get the full tax credit. The rule is whatever you put into kiwisaver, the government will deposit half of that amount to a maximum of $520 per annum. This money goes into you kiwisaver account around mid to late July. By the way, the kiwisaver year begins 1 July and ends in June so that even if you waited until June to put $1040 into your kiwisaver account, you will still get the government money in July. You are able to deposit money into your kiwisaver account to ensure you get the full tax credit if you only worked a portion of the year.

Another feature is that your employer will contribute to your kiwisaver account. It all ads up in the end.

You are able to use a portion of your kiwisaver funds to help purchase your first home. There are rules surrounding this. I believe that you have to have been enrolled in kiwisaver for at least 5 years. If both husband and wife are both in kiwisaver, this can be a big help toward getting your first home.

Another advantage of having your retirement funds in kiwisaver compared to other types of investments is that if you need to go on income support then money earned by your kiwisaver account will not affect your benefit whereas any income derived from investments such as dividends from shares and fixed term interests will affect your benefit. It must be stressed that it is not the amount of savings in these investments that is of concern but the income from them.

When one enrols with kiwisaver, they are given the choice between conservative funds, balanced funds, and growth funds. Conservative Funds are low risk but profits are low. Growth funds are high risk but have the potential to grown your savings. Balanced funds are a combination of conservative and growth funds. Most financial advisors believe that when you are young, it is better to put your money in growth fund because you have more time to recover from a sharemarket crash if indeed that does occur. Those nearing retirement are better to scale back and lean on the conservative funds the experts believe. At the end of the day, it is your money and its your responsibility to decide what you are going to do with it.

If you do not choose which fund you are going on, one will be chosen for you and these tend to lean on the conservative side which will limit the earning potential of your savings.

When you start a job you have the choice of choosing whether you want 2%, 4%, or 8% of your gross income will go into kiwisaver. To give you an idea of how much would go into kiwisaver. Someone on $16 an hour working a 40 hour-week would have $12.80 deducted per week on 2%, $25.60 deducted per week on 4%, and $51.20 per week on 8%. It all depends on how much you can afford. I think that 2% or 4% is recommended because you can always make lump sum contributions to kiwisaver if you are in a position to do so.

www.robertastewart.com

 

LIVING THE KIWI RETIREMENT DREAM?

A retired couple in New Zealand are living the dream. They have a mortgage free property and save at least $1000 from their pension (called Super in NZ). This money goes into their cheque account to be used for emergencies and bills such as visits to the dentist, car repairs, and rates. They had 40k in that account.

Now I don’t want to state the obvious or ask stupid questions. But…

Wouldn’t some of that money have been better invested elsewhere earning at least a good interest rate or in some form of managed funds where their savings could have increased in value?

This couple lived frugality and as a result found it easy to save. It appears that travel was not part of their retirement plans. I think most people would want to do stuff in their retirement years which included overseas travel so this couple’s system of living is not for everyone. The point being that it is up to everyone to select their own system of living which financial planning is a big part of. This couple’s lifestyle is not for everyone including yours truly but who is to say that its right or wrong. “Everyone’s to their own” as the saying goes.

This example does show that the habit of saving a portion of your money every pay day can make life easier for you later on in your life.

www.robertastewart.com

 

Setting  Priorities

Setting priorities for your finances is a personal thing. There is no size fits all because everyone’s circumstances, goals, and priorities are quite different and unique. What may work for one person may not necessarily work for another person or family.

So how do I prioritise my spending?

The first question is “Do you have any debt.”?

If you have a bit of discretionary money, that is money which you are able to decide what to spend it on then reducing your debt has to be a priority but then again it all depends on whether it is consumer debt, a student loan, or you have a mortgage. Getting rid of credit card or hire purchase debt has to be your number one goal because that interest quickly adds up. The crunch always comes when you have to pay it back and some people who took on loans without giving enough thought to repayments got a rude awakening when their statements arrived through the post or in the email.

You may not have any debt but will still have other priorities.

Your age has a lot to do with it and in saying that I am not suggesting that your age will determine whether you are going to get married, have kids, go on your big OE (Overseas Experience), learn to drive, or study because people do all these kind of things at any age these days. I am not suggesting for one moment that you take out a 30 year mortgage when you are 80 or train for a marathon when you are 100 though there is no law to say you cannot do these things. Evenone to their own I suppose.

Priorities change throughout your lifetime. What may have been important to you during your teens and twenties may not be of interest to you during your thirties and forties. Then stuff happens which can change your priorities. You may get ill or hurt in an auto mobile accident or at work which can change your priorities.

It really is up to you to decide what is important to you and your family if you have one. As I said at the beginning of this piece, “There is no size fits all” and what your priorities are dependant on your goals and circumstances.

Irrespective of who you are and at what stage of life you are at, it is important that you have a plan in place, that you have goals, and that you decide where you are going otherwise you will be like a life raft that is out on the ocean. It is at the mercy of the waves and will end up where the waves will take it.