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YOUR FINANCIAL RISK PROFILE

Your risk profile-what is it?

Your risk profile is the level of risk you are willing to take when you make an investment! The higher the potential return on your investment, the higher the risk but the catch 22 situation is that just parking your money in low risk low return investments will inhibit your potential returns and could end up costing you in the long run. Taxation and inflation will eat away your profits so investing needs to be a balance between risk and reward. 

Your risk profile is a big factor when deciding how you are going to invest and that has several parts to it so lets examine them.

1. YOUR AGE

When you are young, you are able to take more risks because you have more time to recover from financial setbacks but that is not to say you cannot be on the conswervative side if your circumstances warrant it. 

It also does not mean that you cannot take risks when you are approaching retirement because chances are that you could live long after you retire. 

2. YOUR GOALS

It would be madness to invest in high risk (growth investments) if you require the money in the short term, say within the next 6 months to pay for a wedding, new car, or whatever because the markets may be losing ground and you may end up with less money than you intended. Therefore for money you require in the short tern, invest conservatively. 

3. PERSONAL MAKE UP

If the prospect of losing your money is going to cause you to lose sleep then lean towards more balanced investments. These are a combination of growth and conservative investments. 

Your potential return will not be as much as it could be but at least you will sleep easy, albeit, at a cost.

4. YOUR FINANCIAL SITUATION

If you are up to your eyeballs in debt then clearing that debt has to be your number one priority and staying out of debt is priority number two then you can think about saving for whatever reason. Investing in the kiwisaver scheme is a very good investment for the reason that there are tax credits of up to $520 per annum and you are entitled this providing you invest a minimum of $1040. That equates rto 50% return on your investment, tax free. Where else will you get a return like that?

At the end of the day, it is your money you are investing and it is you who will bear the consequences for any financial decision make.

If you would like email updates from me then you can sign up here;

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www.robertastewart.com

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KEEPING UP WITH THE JONES

The cost of keeping up with the Joneses.

Keeping up with the Joneses cost cost you dearly and determine how you spend your retirement years. Life seems to be a competition to at least have a car or house which not only serves the person for which it was made for but makes a statement which says, I am at least the equal of the Jones’s.

So who are the Jones’s?

They are other people who have that fancy car, that nice house, that nice swimming pool, or that nice whatever that is the envy of others. 

The bible says “Do not covet another man’s wife or belongings,” which is saying we should not envy another person’s lifestyle and I will tell you why.

Firstly, you do not know how hard they have worked for whatever they have or what kind of sacrifices they have made.

Secondly, for all you know, they may be up to their eyeballs in debt trying to compete with everyone else in the material rat race.

Thirdly, their income may be twice as much as yours. There is an old cliche which says, “Living a champagne lifestyle on a lemonade budget.”

Your spending and savings plan must be a reflection of your income level and that means to forget what others are spending their money on and focus on your own situation.

There are certain spending habits which will cost you thousands in the long run and they are;

1. BUYING ON HP

The interest payments on consumables bought on HP (Hire Purchase) will add up to a fortune during your lifetime. Interest is dead money; in other words, it is money you pay but do not receive anything for it.

2. CREDIT CARD USE

Interest rates on credit cards can be horrendous if you get behind on your payments. As with HP, interest is what you pay for the use of other people’s money. Greed and selfishness manifests itself in widespread credit card use.

3. BUYING STUFF BRAND NEW

A lot of consumer goods are bought brand new when you can purchase the same item second hand at a fraction of the price at a charity/second hand shop. The eco centre at your local tip also has low cost goods for sale at a very low price. 

Many people are too proud to even set foot in these places because it is not in keeping with the image which they are trying to portray.

Trying to maintain an image during your lifetime will cost you dearly in the long term. 

www.robertastewart.com

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GETTING THE RIGHT ADVICE

Listening to the right people…

Taking advice from the right people and ignoring comments from the uninformed will help you to become better off financially in the long run. An example I am going to use is my nephew Kyle who had made a bit of money from sports betting. He withdrew all of the money from his betting account and invested the money in a fixed interest account. His goal is to save money for a house deposit but he is almost got the money now. It is some of the advice or rather comments that he has been given that really gets me, with some of it bordering on stupidity.

Myself, I advised him that investing in the New Zealand retirement savings scheme Kiwisaver would be a good bet because he would be able to use part of his kiwisaver for a house deposit providing that he has been in kiwisaver for at least 3 years and that it is for his first home. He would qualify on the latter as he has never owned a home but he has been in kiwisaver for just 6 months and is unwilling to wait another 3 years.

That may be so, but everyone in kiwisaver should at least contribute $1040 into the scheme per annum to take advantage of the full tax credits of $520. This is effectively a return of 50% per annum on your investment, all tax free.

The advice I gave is exactly the same as every other financial expert have been saying, and no, I am not qualified to give financial advice to anyone but then neither are many of those who have been adding their two cents worth. Some of them have little money or assets and have nothing to show for their life’s work.

If you hang around losers, you will be one yourself. What they will do is drag you down to their level because then that it will make them feel better about themselves. Some people have such a low opinion of themselves that they will tear others down because the success of others is giving them an inferiority complex.

To use Kyle as an example, he has prospered since he moved out of his auntie’s flat.

Kyle has more financial sense than any of his siblings; one of whom told their mother that he has a gambling addiction. He withdrew 10k from his betting account and invested the money and when he told his brother that he had nothing left in his account that he had nothing left, he thought he had lost the money.

The pathetic thing about this is that this sibling cannot live a day without alcohol and smokes like a chimney that who knows how much of his income is disappearing every week on booze and smokes. Multiply the weekly amount spent on this and the amount spent annually on his vices is quite substantial, certainly in the 1000s.

It pays to not let others know what you are doing and keep your activities to yourself apart from those who are on the same page.

As for investing money into his retirement fund to save for a house, well that may not be the right option for someone looking to use the money in the short to medium term. A retirement fund is exactly that-a fund for retirement and one has to understand that you have to wait until you are 65 or whatever the retirement age when you reach it. Money for other purposes should be put in appropriate account.

A stupid comment I did hear from someone regarding kiwisaver was, “You may not get it back.”

Kiwisaver will get the money at 65 but what gets my goat is that the person who masde this comment has very little in the way of assets so that whatever she spent the money on she never got it back. It is the same with people who spend x money on a nicotine or alcohol addiction; that is money gone forever, not to mention a shortened life span because of the health consequences of these addictions.

I wrote a post a few weeks ago about using your money as a seed to grow your wealth. Money if it is sown in the right places can reap a nice future harvest.

Happy investing!

www.robertastewart.com

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ATTENTION INTERNET MARKETERS

Internet marketers should take note

Those of us seeking a way to make money on the internet have seen all of those ads making some pretty rash claims of the amount of money it is possible to make online and have opted in to their mailing list then follows a series of emails trying to convince us of the benefits of what they have to offer but there are times when their emails are really just get on your nerves.

1-JOINING TOO MANY LISTS

Taking advantage of too many freebies on offer on the internet will get you on to a number of mailing lists which is really just frustrating when you are trying to clear out your email inbox. It all takes up too much time and the best thing to do is to unsubscribe or mark as trash. What I cannot understand is that many of these internet marketers appear to be offering free ebooks on behalf of other marketers and therefore creating competition for themselves. Talk about shooting themselves in the foot.

2-BEING SOLD TO

One thing I do not like is being sold to in a manner which comes across as being pushy. There are some who try to upsell on a product even while the sale process is going on. Would like to be upsold while you are at the checkout at the supermarket? What this tells you is that the marketer is only interest in your money.

3-ASKING FOR TOO MUCH INFORMATION

There are some people who are unwilling to give out their phone number online and if a buyer in unable to complete a transaction because they never filled out their phone number then they buy from someone else.

4-MAKING THE DOWNLOAD PROCESS COMPLICATED

I ordered something online, well I thought it was an ebook but it appeared to be a video which I had to join Warrior Plus, I think it was to access it then go through a complicated process which would challenge the mentality of Einstein. I found it overwhelming and so within 10 minutes of ordering the product, unsubscribed from this internet marketers list.

5-RUNNING A LONG SCRIPT

When I read the sales letter, if you could call it that, I want to know what it is your are selling, How much it’s going to cost me, and how it will benefit me. Reading through a long, long script trying to find out this information is a turnoff. I don’t want to listen to/read about your whole life story, just get straight to the point.

6-OFFERING INFORMATION AVAILABLE ON GOOGLE

Why would someone purchase information which is readily available by doing a simple google search? Yes it does happen, a lot and some of the information is quite expensive. Don’t give me that stuff about PLR rights because prospective customers will also do a google search to see if the same information is available for free.

www.robertastewart.com

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LIVING A BALANCED LIFE

How to live a balanced life

Learning how to manage your money and being smart with your resources will take you a long way in life but it is possible to go to extremes. A lot of people are up to debt to their eyeballs and they need assistance to break free of the borrowing habit which makes them a slave to their lenders. It is those people who are so tight with their money that they have lost all sense of priorities that this article is aimed at but even if you are not one of those people, you as we all are have room for improvement when it comes to how we priorities our spending or rather what we do not spend our money on.

It is what we Sacrifice that really determines what takes priority in our lives. There are moments in life which are just priceless such as spending time with your kids. How much value would you place on having an ice cream with your kid?

What I am saying is that, it is all very well being tight with your money but if it takes away what life should really be about then you need to reassess your priorities.

It is important that you not try to live a champagne lifestyle on a lemonade budget because you will end up working all the time without enjoying what you have.

Your age, marital status, and work situation will all determine your priorities in life as will your financial situation.

If you are young, you have more time to recover from financial mishaps, more so if you are single therefore are able to take more risks.

Someone in retirement may be advised to invested their money in something which can quickly be converted back into cash.

It is really up to each an every individual or family to prioritise what is important to them and decide what is worth making a sacrifice for.

I remember years ago, a man close to retirement age told me that his brother who was living with their elderly parents had 25k saved up in British pounds and told me his brother doesn’t enjoy his money. He was saying that he lived a sheltered life and never went anywhere.

Saving for your retirement is a good goal to have but you need to make the most of your stage of life. It is important to frame your life around your own circumstances, priorities, and your income level but at the same time not to live beyond your means.  You do not want to get to the end of your life thinking, “I wish I had done this or that”. If you love sports and have some talent in anything and have a dream to become an international sports person, musician or whatever then you may be advised to follow your passion before it is too late. You don’t want to get to the end of your life and say, “If only”.

It is a mistake to make money your number one goal at the exclusion of everything else because at the end of the day, life is more than money. What I am saying is that it is important to get your priorities in order but it is up to you to decide what is important to you. It’s your life, ENJOY IT!

www.robertastewart.com

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TURN DEAD MONEY INTO SEED MONEY

Turn dead money into seed money

Financial success is much easier than you think and is often just a matter of prioritizing your spending. The first thing to do is to find out where your money is going and where is disappears into the sunset never to be seen again. Much of this type of spending is dead money because you have nothing to show for it. You need to convince it to stay at home and work for you rather than fill someone Else’s pockets.

There are a number of money leaks which drain your finances so lets take a took at some of the main culprits.

INTEREST

If you have hire purchase loans, credit card loans, or bank or finance company loans then a good deal of your money is being spent servicing the loan. There is a cost to using other people’s money to buy stuff and that is called interest. In order to become debt free and save money, you need to decide on what youer priorities are and MAKE SACRIFICES. As painful as it may sound, you must do an audit in order to work out how much of your money in going in interest payments per annum.

If you are seriously in debt then talking to a budget advisor make sense.

STUFF YOU NO LONGER NEED

Everyone has stuff they no longer need just lying about around the house. This can all be considered “dead money”. Your stuff can be converted into cash and turned into seed money for your future wealth. Selling the stuff on ebay will give you some extra money to invest. You can then put this money to work for you.

HOBBIES AND SPORT

People will spend a fortune on their hobbies and the question of whether the amount you are spending on yours is going to affect your financial plans in the future. We hear of people who spend absurd amounts of money on whatever they are collecting yet when it comes to retirements savings bury their head in the sand. The money spent on this stuff is really dead money because it is not producing any wealth.

Sport is in a separate category altogether because being a participate in sporting activities promotes health and well being but you are able to minimize the amount spent so that what it is costing you does not get out of hand.

MONEY LYING IDLE

Money just lying in a low interest account earning just 2% interest is losing its value because when inflation and tax are both considered, it has lost its value and is worth less than 12 months ago. It all depends on what the purpose of that money is. If it is rainy day money then you may be better off investing it in Bonus Bonds where instead of being paid interest, you go into a draw to win prizes including a million dollar prize. It may be a long shot but at least you have a chance.

It all adds up during the course of a year. $4 or so for one cup of coffee per day does not sound much but if you buy say three cups of coffees per day that is $12 per day you are spending on coffee. That is $60 per week (5 days per week) and during the course of a year, that is $3,000 worth of coffee you are drinking. That could be your retirement savings or an overseas trip, or whatever you may prefer to spend your money on which you can see with your own eyes what your labours have paid for.

Learn to look at your spending on an annual basis because it does not sound like money money when you are paying for something in small amounts but like a dripping tap, leaks like this can add up to a lake. These little money leaks can then be used as your seed money to build your future wealth.

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WHAT IS YOUR RISK PROFILE?

Your risk profile-what is it?

Your risk profile is the level of risk you are willing to take when you make an investment! The higher the potential return on your investment, the higher the risk but the catch 22 situation is that just parking your money in low risk low return investments will inhibit your potential returns and could end up costing you in the long run. Taxation and inflation will eat away your profits so investing needs to be a balance between risk and reward.

Your risk profile is a big factor when deciding how you are going to invest and that has several parts to it so lets examine them.

1. YOUR AGE

When you are young, you are able to take more risks because you have more time to recover from financial setbacks but that is not to say you cannot be on the conswervative side if your circumstances warrant it.

It also does not mean that you cannot take risks when you are approaching retirement because chances are that you could live long after you retire.

2. YOUR GOALS

It would be madness to invest in high risk (growth investments) if you require the money in the short term, say within the next 6 months to pay for a wedding, new car, or whatever because the markets may be losing ground and you may end up with less money than you intended. Therefore for money you require in the short tern, invest conservatively.

3. PERSONAL MAKE UP

If the prospect of losing your money is going to cause you to lose sleep then lean towards more balanced investments. These are a combination of growth and conservative investments.

Your potential return will not be as much as it could be but at least you will sleep easy, albeit, at a cost.

4. YOUR FINANCIAL SITUATION

If you are up to your eyeballs in debt then clearing that debt has to be your number one priority and staying out of debt is priority number two then you can think about saving for whatever reason. Investing in the kiwisaver scheme is a very good investment for the reason that there are tax credits of up to $520 per annum and you are entitled this providing you invest a minimum of $1040. That equates rto 50% return on your investment, tax free. Where else will you get a return like that?

At the end of the day, it is your money you are investing and it is you who will bear the consequences for any financial decision make.

If you would like email updates from me then you can sign up here;

https://forms.aweber.com/form/72/892285272.htm

www.robertastewart.com

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SAVING FOR A HOUSE DEPOSIT

Saving for a house deposit?

The beauty of the kiwisaver is that part of your funds are able to be used to purchase your first home. There are conditions such as you must not have previously owned a house  and that you must have been in the kiwisaver scheme for 5 years. It is understood that kiwisaver holidays where you did not make any contributions to the scheme are not included in the 5 years.

Making voluntary contributions to your kiwisaver account can really accelerate the savings process because you are investing in an asset which increases in value and there will not be the temptation to withdraw some money for whatever reason. Anotther good reason why using kiwisaver as the main house saving tool is that you will not have to worry about gold digging relatives who accuse you of being stingy and money hungry but purchase lottery tickets because they think that it is the only way of getting financially ahead.

It pays to run the figures in your head in order to know how you are going to arrive at your destination.

For Example, saving $20 per week=$1,000 per annum, $40,00 per week adds up to $2,000 per year, $60 per week adds up to $3,000 per year, $100 per week = $5,000 per annum. Your savings can really multiply quite rapidly once you get into the savings habit.

Saving and investing are two different things. most people can save money but it is being an investor which can mean the difference between staying in a financial rut and prospering.

Parking your money in low interest accounts is not being an investor.

Once tax is paid on any interest you receive and then inflation devalues the value of your money by whatever rate it is, there is nothing in the way of profit left for the account holder.

Few people have the sufficient funds to invest directly into the sharemarket but with your kiwisaver account, you are able to participate in the markets and take advantage of the fantastic capital gains which are available. Kiwisaver is not the only option for investing in the markets. Many banks do have managed funds you can invest with the minimum amount to get started can be $250 on wards. It is an excellent way of breaking into the markets.

Sharesies is another option for investing. It basically works like other managed funds but the beauty of this is that you are able to invest the bare minimum. You can start the fund with as little as $20 and invest as little as $5 per week. It is an excellent way of learning about the various funds and watch their movements. Visit; www.sharesies.nz

Developing the savings mindset will go a long way towards reaching your financial goals but if you sit there thinking, Saving for a house deposit for 5 years is a long time, I will be 30, 35, 40 years old or whatever in 5 years time”. Stop and think about this for a moment.

You will be 5 years older in 5 years time whether you decide to plan for your future or not!

Forget about what other people are doing, they cannot live your life for you though they may try to. Just think about your own situation but ask for advice by all means then decide if you are going to take it on board.

Happy investing!

Robert A. Stewart

This article is not intended as financial advice but rather is the opinion of the writer. If you require financial advice, see a qualified financial advisor.

www.robertastewart.com

I have a FREE ebook available “My secrets to Finance Success” by clicking on the link below;

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CAPITAL GAINS TAX

Capital Gains tax and kiwisaver

The talk in New Zealand these past two or three weeks has been the possibility of the introduction of the Capital Gains tax. This is likely to be at 33%. irrespective of which tax rate you are on. So if for example you are on the lower income bracket paying tax of 17.5% then your kiwisaver provider would still pay 33% tax on any capital gains on your kiwisaver. The capital gains tax could be mitigated by new incentives by those in the scheme or at least encourage those who have not joined to do so. All will be revealed in May’s budget but it is likely that the $1000 kickstart will be reinstated and that the annual tax credit will be increased. It was the last National government who scrapped the kickstart in order to balance the books. They also reduced the tax credit from $1040 to $520. Prior to the reduction, you had to deposit at least $1040 to get the full government tax credit so that was in effect the same as making 100% on your investment, tax free. Then National reduced the tax credit to $520 but you still had to deposit $1040 to get this which is like earning 50% on your investment.

As for the $1000 kickstart. If you are a school leaver or have not got around to joining kiwisaver then it may be a good idea to wait until after the budget to see what unfolds. It really depends on timing because Grant Robertson (The finance minister) may decide that they changes will take effect on July 1st which is the start of the kiwisaver year but if the changes take effect immediately after budget night then it would be good sense to join kiwisaver in order to collect the 1k kickstart and deposit at least $1040 into your kiwisaver account by 30th June in order to collect July’s tax credit.

Another change which has been talked about is the scrapping of the tax on employer contributions for those earning less than $48,000. As with the government incentives, the employer contributions will become tax free if your level of income allows it. It was the last National government who placed the tax on employer contributions.

It is interesting to see how any capital gains tax will effect kiwisaver balances in the future because a lot of these funds do have investments in property. It may well affect the supply of housing because would be property developers will think it is just not worth the hassle especially with the new compliance costs which will cost land lords an arm and a leg.

A capital gains tax will not just affect property and shares. It is likely to affect crypto currency as well but it is not clear what the situation is in the event that someone makes a capital loss as can happen when investing for capital gain. Investor’s who lose money in an investment in this way may well be able to claim losses against their wages and salaries but it is best to seek advice from a qualified person in this regard.

www.robertastewart.com

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COMPILING YOUR FAMILY TREE

How to compile your family tree

Starting is easy-you just start with your own family and your parents. Ask them about what they know about their parents and grand parents and anything they know about their ancestry. Don’t just ask them who their ancestors are but ask about their trade, hobbies, and about their life in general.

If you have aunties and Uncles or grand parents then also ask them about ancestors. Two people may have a complete different opinion about a person in the family depending on how well they got along with them or if they didn’t if you get the picture so it pays to keep an open mind. Don’t forget to prepare yourself by compiling a list of questions prior to meeting your relatives.

Now that you have some information available, make a list of things you are trying to find the answers to. If your grand parents are still alive then you should at least have four generations of your family tree and if you get stuck, some members of the family may at least know where to look to get the information you require.

When you are compiling a family tree, note any patterns which may appear in your family. In some families a certain trade may appear several times as sons followed in their father’s footsteps in certain occupations.

Family scrapbooks, family albums, and school report cards will all give you an idea of a person’s interests but this is only possible with living relatives and those who have departed within the last few decades. When it comes to relatives four generations ago and longer you will rely on old public records for information.

Knowing where to look and obtain information is the key. if you want to receive emails updates then click on the link below;

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