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Book Review: Rich Enough by Mary Holm

Written by R. A. Stewart

Mary Holm is a New Zealand financial adviser who has written books on the subject of a personal finance nature for years and her book “Rich Enough? Is certainly a very good book with lots of down to earth information written in simple easy to understand terms.

There are several important points which she highlights and the first one is the importance of starting early. In fact the earlier you start the more money you will accumulate in the long term.

Starting early develops good savings habits which will in turn serve you well during your lifetime. 

The second point is to get rid of any debt you have as soon as possible and staying out of debt. If you are paying 10% interest on your debt then paying off that debt is just like being paid 10% interest on your money. It makes no sense to have money invested at 5% interest when you are paying 10% interest on your own debt. That money is better off in your pocket.

Falling into the Christmas trap can be costly as Mary points out. 15% of New Zealanders have more than 11 people on their Christmas shopping list to shop for and about 27% of them are women who plan to spend over $200 per person on presents. About 17% of people expect to spend over $1,000 on Christmas. Some suggestions on how to reduce your Christmas spending are given by Mary.

A section on New Zealand’s retirement scheme Kiwisaver tells of the excuses people provide for not joining and one of those excuses is “I have not got around to it.” 

This is stupidity according to the author, Mary Holm.

Another reason given is, “My grandma lost it all during the Global Financial Crisis.”

As Mary points out, these finance companies which went under during the GFC lent money to people who the banks considered too risky to lend to so they borrowed off the finance companies and paid higher interest rates. As a result, investors who lent money to these companies received high interest rates.

As the saying goes, higher return often means higher risk.

The importance of diversification is discussed as are the value of different types of investments. 

My rating: I rate this book a 10 out of 10 based on the fact that the information presented is applicable to everyone irrespective of their means. 

To find a copy, go online. Trademe, Ebay, and Amazon may have a copy for sale.

www.robertastewart.com

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6 Benefits of Saving Money

The value of saving money

Written by R. A. Stewart

If there is one habit which will make your life easier it is the habit of saving money from each payday. As a responsible adult this is the mature thing to do. People who just spend all of their money leaving them broke before the next pay day arrives are irresponsible. 

Saving money without an end goal may seem pointless to some people and that is why it is important to have goals so that your money has a purpose. This gives you motivation to save otherwise you will become just like most people and just fritter your money away and when that rainy day comes there will be nothing to fall back on.

Here are reasons why you must save:

  1. Saving helps you to avoid borrowing

People who have no savings often borrow for stuff they need, such as some appliance breaking down or a medical emergency. Borrowing adds to the cost of whatever it is a debtor is paying for. This cost is called interest. Another word for interest is dead money because it gives you nothing tangible for your money. If you have debt then getting rid of it must be your first priority.

  1. Saving helps you to avoid future inconvenience

Imagine having no savings and the car, washing machine, or internet modem, or something else needs fixing and you have no savings. These are items which we take for granted but having no money to repair or replace something which needs replacing will cause you a great deal of inconvenience. Having a rainy day account for emergencies is a good idea.

Having

  1. Saving enables you to build your wealth

Saving money will help you to build your wealth portfolio and you do not need to have a fortune to begin investing but you do need to invest in order to create a fortune. Share market platforms such as Sharesies and Hatch enables anyone to invest on a shoestring. Investing with these platforms helps build your financial literacy.

  1. Saving provides more opportunities 

Saving money creates more future opportunities. It provides opportunities to study, to travel, and to move locations for work. Your future you will thank you for what you have saved today. Will anyone reach the age of 65 and regret having made consistent contributions to kiwisaver? I think not.

  1. Saving provides more peace of mind.

Saving provides a certain amount of peace of mind. When you have something up your sleeve to pay for emergencies when you need it life becomes much less stressful. That is something which should be part of your financial plan.

  1. Saving helps prepare for retirement

Having money behind you helps make your retirement years more comfortable. Whichever country you belong to it is important to join your country’s retirement scheme and take advantage of any tax incentives if any.

About this article: The contents are of the opinion of the writer and may not be applicable to your own personal circumstances. You are advised to seek professional budget advice if necessary. Feel free to print this off for easier reading. You may use this as content for your blog, website, or ebook.

Www.robertastewart.com

 

Disclaimer: I may receive a small commission if you sign up with sharesies. (see below)

 Investing with Sharesies is an accessible and straightforward way to invest in the stock market. By following these steps, you can get started on your investment journey and start building your wealth. However, before making any investment decisions, it is essential to do your research and seek professional advice if necessary.

 Join Sharesies here

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Have you joined KIwisaver yet?

Now is a good time to join kiwisaver if you have not already

Written by R. A. Stewart

It is a good time to join kiwisaver if you are young and just starting out in the world. If you are over 30 and have not already joined kiwisaver then why not? Kiwisaver is the New Zealand retirement scheme. If you are in work you will get the equivalent of 3% of your gross wages from your employer deposited into your kiwisaver account. 2%, 4%, or 8% (you choose) of your gross wages will be deposited into kiwisaver and deducted from your pay. You can also make voluntary contributions to your kiwisaver account. This is an option used by those who are self employed or not in work.

The government’s contribution to your kiwisaver is what makes this a no-brainer. You will receive $520 of government money into your kiwisaver account but you need to invest at least $1040 to receive the full $520 otherwise the government contribution is 50% of your contribution. This is per annum; in other words you need to invest at least $1040 into your kiwisaver account per annum to receive $520 of government money every year.

The Kiwisaver year begins on July 1 and ends June 30 the following year. If you are on part time work and it looks as though your kiwisaver contributions are going to be less than $1040, you can make voluntary contributions to ensure your own contributions reach $1040.

In order to take advantage of the falling share prices you need to be in a growth fund or have some portion of your portfolio in a growth fund, otherwise called a balanced fund. If you are in a conservative fund then you are going to miss out on the market rebound. Financial experts will tell you that if you are in a growth fund then you need to leave it invested for at least five years. That way, if the market falls during this time there will be time for it to recover and recoup any losses which it has to be said are only paper losses.

Money which is needed for the short term such as a holiday abroad next year is considered short to medium term money. If you had this money invested in a growth fund you may find that your spending money for your trip has been depleted therefore, to reduce this from happening investing in something less risky is an option taken by a lot of holiday makers even though the return on this money is less than the inflation rate.

If you are prepared to take the risk then you might consider investing your short term money in growth funds in the hope of increasing your capital but it is important to understand that whenever there is an opportunity for capital gain then there is a chance for capital loss.

It cannot be stressed enough that it takes a cool head to live through the ups and downs of the share market and be relaxed about it. One thing you can always bank on is that the share market will go up and down. It is important to have a strategy in place to take this into account.

Diversification minimizes your risk. Diversification is when you spread your investment among several companies. One company might fall over but not the whole lot.

Some may argue that if you plunge all your money in one stock then you will make a killing; that is true, but you never hear of those who tried that and lost. If you are going to do that then it should be done independently of your main investments rather than risk your retirement savings going down the drain.

ABOUT THIS ARTICLE

The information in this article is of the writer’s own opinion and may not necessarily apply to your personal circumstances. You are advised to seek professional financial advice if you require assistance. You may use this article as content for your ebook or website. Check out my other articles on www.robertastewart.com

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3 Mistakes Investors Make

Avoid these three Financial Mistakes

Written by R. A. Stewart

Building an investment portfolio is similar to building a relationship. It takes time and patience but over caution can be just as costly. A lot of tolerance is required because in finance and in life in general you do not always get your own way. Life has its own ups and it is during the downs that we show our true character. It is when our true colours come to the surface.

Human nature or emotion as it is can interfere with one’s better judgment. This applies to relationships and finance.

Here are the biggest mistakes made by investors.

Mistake number one-Greed

“If something is too good to be true then it almost certainly is,” but many people have fallen into this trap by investing in something which was offering above average returns. In doing so they completely ignored another rule in finance and that is to diversify. During the 2008 Global Financial Crisis many investors lost their entire life savings when various finance companies went under. Several people have their entire life savings invested in one company. Whatever has been reported about these companies it is up to investors to do their own due diligence and invest sensibly. Placing all of your eggs in one basket is certainly not investing sensibly. The key word for sensible investors is “diversify.” This minimizes risk. Two things to bear in mind is that when there is an opportunity for a capital gain as there is with shares, there is also the chance for a capital loss. The other thing to remember is that when you hear stories of someone who made a killing on the share market by placing all of their eggs in one basket, you seldom hear of individuals who tried the same thing and lost their money. Greed will eventually get the better of investors who thought they were smart enough to beat the market.

Mistake number two-Timidity

Playing it safe is risky. Being overcautious will mean that you miss out on opportunities which risk takers take advantage of. There is no suggestion that you should be reckless and ignore common sense precautions but in relationships you need to risk getting hurt in order to discover what you are looking for. As far as financial matters are concerned, you have to accept some level of risk but this is manageable by diversifying your portfolio. Managed Funds or Mutual Funds as they are also called is an excellent way for ordinary investors to get involved in the share market. In New Zealand, Kiwisaver, Sharesies, Kernel Wealth, Hatch, and Investnow are excellent platforms for ordinary investors to get involved in shares. If you are from the US you may want to look at Robinhood which operates in much the same way as Sharesies.

Mistake number three-Impatience

“It is time and not timing which is important in the share market,” is a cliche which is worth keeping in mind. Patience is a virtue and this is applicable to relationships and finances. Some people lack patience that they invest their money in abc shares then when their portfolio is stagnant they sell those and invest in something else and sod’s law, the shares they sold at a lower price suddenly rises meaning they have missed out on any gains which would have recovered their losses. The share market is a long term gain. If you require the money in the short term then investing in shares may not be the right option. Bank deposit probably is but you have got to do your homework. 

It is all about understanding the risks and whether you have the mindset to handle the ups and downs of the money markets.

It really is up to your own risk profile.

About this article

You may use this article as content for your blog/website and as content for your ebook. Feel free to share this article with others.

The information here is of the opinion of the writer and may not be applicable to your personal circumstances.

Invest in sharesies here:

Sharesies makes it possible for anyone to get into buying and selling shares. It is an online share market platform where you have the option of purchasing shares in individual companies or in various funds (managed/mutual funds). You can even start with $5. This is a no brainer because it gives investors young and not so young the chance to improve their financial literacy. There is certainly no substitute for experience when it comes to learning and this is applicable to everything else, not just investing.

Join sharesies here: https://sharesies.nz/r/377DFM

Disclaimer: I may receive a small sign up bonus if you join sharesies.

www.robertastewart.com

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People you should not take Money advice from

Written by R A Stewart

Have you heard of the donkey story where an old man and his grandson were walking the donkey along the street?

If not here is the story:

An old man and his grandson were leading a donkey as they were walking along the road. A bystander said to them, “Why don’t you both get on the donkey and ride it?”

So they both rode the donkey but further down the road the second bystander said, “Hey look at that poor donkey having to carry two people; that is cruelty.”

So the boy got off the donkey and led it along the road while the old man rode it but further down the road, a third bystander said, “look at that poor boy having to walk while that old man is riding the donkey.”

So the old man got off the donkey and his grandson got on, however further down the road, a fourth bystander said, “Look at that poor old man, walking along the road while the lad is riding the donkey.”

So the boy got off the donkey and they both continued their journey as they both led the donkey on foot.

What is the moral of this story?

The short answer is that people can take away your power to think for yourself if you allow them to.

If you have a bit of money to spare there will always be people who think they know what you should do with it and a lot of these people have little or no savings of their own.

Here is an example:

I know someone who years ago made a fortune on sports betting. He turned a few hundred dollars into over thirty grand. In the early stages when he had about six grand his colleagues at work were giving him advice and one was to use the six grand for a deposit on a car. I told him that not only would he be back to square one but he would also have a debt to pay. 

He was sensible enough to ignore stupid advice like that. I did however, tell him that he should at least invest enough into his Kiwisaver account to get the government incentives.

Financial illiteracy is common which means it is vitally important to read books on personal finance and pick the brains of the authors rather than allowing random individuals to infect your mindset.

A bad attitude towards money can be a hindrance of wealth. I once said to a lady that her daughter should attend financial seminars when she is older in order to meet successful men. (She was 9 or 10 at the time). She said, “Men like that are selfish and stingy.”

I suppose if you are a gold digger you would think like that. I mean “who needs financial advice when you can just get a man”

It is worth remembering that some of the best financial writers are women, such as Frances Cook and Mary Holm. They strongly encourage women to take responsibility for their finances rather than just have a man as their financial plan.

The young people may not be your best source of financial advice either because they do not have the experience of investing like the older generation. 

One of the things which the financially illiterate say to reinforce their opinions is “You can’t take it all with you.”

That may be true, however, during one’s lifetime, there are life changing events which require savings. Here is a list:

Flatting 

Buying a car

Going on your Big OE

Further education

Saving for a house

Marriage

Children

Retirement 

Responsible people will get into the habit of saving from a very young age in order to be able to finance whatever crops up during their lifetime when they have the ability to do so. Stupid people will fritter away their discretionary spending money so that when a rainy day comes they have money squirrelled away for something to fall back on.

About this article

You may use this article as content for your ebook, website, or blog. The opinions in the article are of the writer’s own opinion and may not be applicable to your own personal circumstances therefore discretion is advised,

www.robertastewart.com

https://www.robertastewart.com

Your friends can be hindering your financial dreams

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Share Market Averaging explained

Dollar cost averaging explained

Written by R. A. Stewart

If you do not know what dollar cost averaging is and how you can use it as part of your investment strategy then you may have come to the right place. 

I may not be a financial whizz but can at least explain things in simple to understand terms.

Dollar cost average is when you invest in a particular company regularly. If you invest in PGG Wrightson, a farming retailer every month for a set period of time; that is Dollar Cost Averaging and the reason why this is so is because the average price you paid per share will be somewhere between the highest price and the lowest price.

It is not considered dollar cost averaging if you purchased shares in different companies every month because the idea behind the dollar cost averaging system is that you purchase shares regularly in a particular company; they could be up and down on the date of purchase and the average price paid per share is between the highest and the lowest price.

Here is an example.

You decide to purchase shares in xyz company every month for six months.

It’s share price is as follows:

January $3.00

February $2.90

March $2.80

April $2.70

May $2.60

June $2.50 

Here is the formula for working out the average:

Step 1-Add up the totals paid per share:

$ 3.00 

+ $ 2.90

+ $ 2.80

+ $ 2.70

+ $ 2.60

+ $ 2.50

= $16.50

Step 2-Divide the figure in step 1 by the total number of transactions. (6)

$16.50 divided by 6.

The answer is $2.75

Notice the difference in price paid per share in January and the average price paid per share. That is averaging at work.

If you bought a different share every month, that would not be called averaging because you could have bought the share at a high or a low, it would be down to chance.

You could however, just purchase unit trusts in a managed fund using the averaging strategy. That is called averaging using the steps given above.

Using the averaging strategy helps to take the emotion out of your decision making. It is investing mechanically because you already know how much you are investing and where you are investing every month.

Hopefully I have explained everything clearly enough.

About this article

The information here is of the writer’s own opinion and may not be applicable to your circumstances. You are welcome to use the article as content for your blog/website or ebook.

Www.robertastewart,.com

 

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Making the right financial choices

Making the right financial choices

Written by R. A. Stewart

Think of your life as a jigsaw puzzle and your choices as parts of the jigsaw. You need to make the right choices which fit into your life. A choice which is right for one person may not necessarily be right for another. It is just a matter of discovering your “why” and setting goals.

It is no secret that people make choices which lead to poverty. Smoking, alcohol, drugs, hanging out with the wrong crowd, and frittering away their money are some of the main reasons why many people are poor. 

Lack of financial literacy is at the heart of all of this because someone who has set themselves money goals will become more motivated to give up their vices.

What are the right choices?

That all depends on your passions, skills and talents. 

What gets you up in the morning? What do you look forward to?

The things you have a passion for tend to be the same things you have a talent for. Skills can be developed but if you don’t have any aptitude for a particular then you are better off looking elsewhere for fulfilment.

When I was at school, the boys did woodwork class and the girls did cooking and sewing. I did not have any kind of aptitude for woodwork and was always at the bottom of the class. I think if I had been at the cookery class, I would have found my niche. Some of the girls may have thrived working with tools. As one teacher at high school told us a couple of years later when trying to persuade some guys to take up cooking lessons, “All of the best cooks in the world are men.”

The point being, that when setting money goals, one size does not necessarily fit all. 

What are the differences then?

People have different financial circumstances. Some are married, some are single, some are mature, some are young. It all depends on what your personal goals and your needs are.

Once you have worked out your goals it is just a matter of figuring out how to achieve them.

When deciding on where to invest your money, ask yourself, “What is the purpose of this investment?” Once you know the answer to that you will have a fairer idea of which type of investment suits your aims.

About this article

This article is of the writer’s opinion and may not be applicable to your own personal circumstances therefore discretion is advised. You are welcome to use this article as content for your blog/website or ebook.

Www.robertastewart.com

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Liabilities: what they are

Liabilities: what they are

Written by R. A. Stewart

A liability is when you have a debt to pay. You are responsible for that debt until it is paid. The opposite of a liability is an asset. It is something which provides some kind of value to you.

An example of a liability is when you have borrowed money from a finance company to purchase a car. You pay a certain amount to the finance company each week or fortnightly. It is a liability because it takes money out of your pocket and reduces your wealth.

An example of an asset is an investment with a finance company which lends out money to car buyers. This is an asset because it puts money into your pocket and increases your wealth.

Borrowing money is not the only type of liability which can reduce your wealth.

Others can be, keeping pets, smoking, drug taking, drinking, hobbies, and so forth.

Have you ever heard of dog owners spending thousands of dollars on vet bills when for just $50 they could have had their pet pooch put down. I know of some people who have spent $1,000 on a vet bill for their cat. If that is not financial stupidity I don’t know what is.

Emotional spending is very costly in the long term.

Borrowing for something which does not give you anything in return is a drain on your future financial welfare. Paying for a holiday is a perfect example. This is something you can do without. If you don’t have the money you don’t go on holiday. It’s as simple as that.

Hobbies can be expensive; have you ever seen those news items on television where some collectors have spent thousands of dollars on their items. Whether it is a doll collector, model train collector, or whatever, these people spare no expense in getting their hands on the next item to add to their list.

Becoming an investor rather than a consumer will help you to be better off financially in the long run. By minimizing your consumer purchases and investing that money instead you will build up an investment portfolio, whether that be in the share market, property, and the like. Stuff doesn’t last long and it loses its value over time.

Investing in yourself will pay dividends in the long run if you apply what you have learned. It is just a matter of applying whatever is applicable to your own life. There is a lot of investment advice on the internet and in books but not everything you read will be applicable to your personal circumstances. Having the ability to discern which advice to follow takes experience.

What you spend your money on today will have an effect on your future lifestyle. It is all about making the right choices in life. Politicians talk a lot about achieving different outcomes for certain groups of people. Personally, I think that it is choices which people need to take responsibility for because the only reason why there are so many different outcomes is because people make different choices.

About this article

This article is of the opinion of the writer and may not be applicable to your own personal circumstances therefore, discretion is advised. You may use this article for content for your website, blog, or ebook.

Www.robertastewart.com

 

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Dividend Yield and what it means

Dividend Yield and what it means

Written by R.. A. Stewart

A commonly used term in the share market is “dividend yield,” but what does this term actually mean? Some novice investors will be asking themselves but are too afraid to ask others for fear of revealing their ignorance.

The dividend yield is a stock’s annual dividend payments to shareholders as a percentage of the stock’s current price. This figure is often used as a guide to a stock’s future income based on what is paid for the stock.

An example would be, if a stock sells for $10 per share and the company’s annual dividend is 50 cents per share, the dividend yield is 50 cents per share. The dividend yield is 5%. The formula for working this out is annualized dividend divided by share price equals yield. In this case, 0.50 cents divided by $10 equals 5%.

A stock’s dividend can change over a period of time. It may be due to the natural volatility of the markets or changes in the yield by the issuing company. The yield is not fixed and can be changed.

The dividend yield shown on some websites may not be accurate because it has not been updated. One week can be a long time in the markets.

To calculate the annual dividend paid out by a particular company per year you need to multiply the amount of a single payment by the amount of payments.

Keep in mind that whatever yield a company pays out, it is not a guarantee that they will continue to pay out at the same rate in the future. The old adage “Past performance is no guarantee of the future” rings true.

It is important to note that a higher yield does not on its own make a great investment. If the company is struggling then there is a risk that they may not pay a dividend to its investors.

The capital gain of a stock is the other main factor in a stock’s performance. Investors who purchase a stock for the long term are often purchasing for capital gains and this has proved successful.

The high dividend yield may be high due to the falling stock price; otherwise known as a “Dividend trap”. There is a good chance that dividends will be cut in such circumstances.

One retired couple I know uses the dividend payouts to pay for their health insurance. If you are in this position then choosing stocks with a high dividend yield may be the way to go. It is important to diversify and choose a wide range of companies to invest in.

If you do not need the income from the dividends then reinvesting is a good option. It will help to increase the value of your portfolio.

About this article

The information in this article is based on the writer’s experience and may not be applicable to your personal circumstances, therefore discretion is advised. You may use this article as content for your blog, website or ebook.

Www.robertastewart.com

 

Investing with Sharesies

Investing with Sharesies is an accessible and straightforward way to invest in the stock market, you can get started on your investment journey and start building your wealth. However, before making any investment decisions, it is essential to do your research and seek professional advice if necessary.

 Join Sharesies here

Disclaimer: I may earn a small commission if you sign up with Sharesies.

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The difference between assets and liabilities

ABOUT THIS ARTICLE

Knowing the difference between real assets and real liabilities and then setting your financial goals accordingly can be the difference between getting yourself financially sorted or the poorhouse. It underlines the value of financial literacy in helping achieve your goals.

The difference between assets and liabilities

Written by R. A. Stewart

An asset is something which pays you money while an asset is something that costs you money.

So let’s look at some examples.

Is property an asset or a liability?

Some people may say it is an asset because it is something you own, however, if you owe money on that property and are not getting a return on it then it is a liability because it is costing you money.

Is it an asset if you are receiving rent from that property?

Only if you are making a profit.

Some people would not agree saying, “The property is increasing in value over time.”

Lets not forget there are rates to pay plus maintenance costs and insurance to pay on that property so it could be costing you money in the long term but you will have to sit down and do your homework. 

Other investment times are less complicated such as the sharemarket so lets look at other investment types which are assets. 

Assets

Your retirement fund

Mutual Funds, also known as managed funds

Other investments

Business or farm

Learn to invest your money in items that can be quickly converted back to cash; some investments do not allow you to quickly turn the asset back into cash without jumping through several hoops.

Liabilities

Any item which has money owed on it and this is your form of transport, however there are circumstances where it may be an asset such as if the vehicle is used as a taxi, which therefore makes it an asset as it is producing an income. Such costs and the money owing on the vehicle can be tax deductible. The same applies to any vehicle used in a business.

Even though a vehicle used for work and business purposes may be classed as an asset, the money owed on that vehicle is a liability and will go into the accounts as such.

The reason why so many people are in such a poor financial state is that they borrow for stuff instead of saving for it and therefore pay more for that item in the form of interest payments.

A pet can be classed as a liability if it is costing you an arm and a leg to keep. Think of a dog for example; I read somewhere that it costs $20,000 to keep a dog during its lifetime. That is not just the food but vet bills and the like. A dog can be classed as a liability.

Do a stock take

Before you know where your money is going you need to do a stock take of all your spending.Your number one priority has to be the elimination of debt and plug up those leaks in your spending that is costing you money. In this way you will know where to make savings and redirect that money elsewhere.

Your task needs to be to reduce liabilities which means reducing debt then once you have savings use it to build your wealth. This involves setting goals which will increase your wealth and not send you to the poorhouse.

There are a number of share market platforms where you are able to drip feed money into the markets. Take advantage of these as they are a great way to build your financial literacy.

ABOUT THIS ARTICLE

Accumulating assets instead of liabilities will lead to a more prosperous future. It is vital for investors to know the difference between the two. In this article Robert Stewart explains this difference. Check out his blog at www.robertastewart.com

All the best.

www.robertastewart.com