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3 Reasons why people do not get ahead

3 Reasons why people do not get ahead

Written by R. A., Stewart

We have heard the term “Cost of living crisis” a lot in the past few years with people struggling to make ends meet. The government is often made the scapegoat for all of this; whether it is the government’s fault or not,  taking responsibility for your own money management and the choices you  have made is the only way you will get ahead in life. There are three main reasons why people do not get ahead. Each one is explained further. I have written this with the intention of not mincing my words.

  1. Lack of vision

Life is for living but it is not cheap. Whether you are buying a car, enrolling for further information, getting married, having kids, taking out a mortgage, or retiring, being prepared financially for all of life’s stages requires saving. Having the vision to prepare for all of this will enable you to cope with the expense. A person without vision will spend their money as if there is no tomorrow. Living from one payday till the next without any thought for the future. This kind of attitude will lead you to the poorhouse.

  1. Lack of planning

“If you fail to plan you plan to fail,” as the saying goes. Making a plan for your money and putting it to work for you requires vision and discipline. It will help you to get the most out of your money. You need to decide what you are saving for and deposit that money in the appropriate account. A person without a plan is like a person on a life raft; they will go wherever the waves take them. They will spend everything they have then when some unexpected bill crops up they will borrow the money and put it on the credit card. There is a cost to this and it is called interest. 

  1. Lack of financial literacy

This has to be the number one reason why people have poor financial outcomes. A person with no financial literacy will make poor financial choices which eventually lead to poverty. Getting paid more is not a solution to poor money management skills. Getting financial education is easy and you don’t have to spend a fortune on books; your local library will have books on budgeting and investing. You will be able to find such books at your local charity store for a couple of dollars.

About this article

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

www.robertastewart.com

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Book Review: The Barefoot Investor

Book Review: The Barefoot Investor

Written by R. A. Stewart

A personal finance book which is worth a read is “The Barefoot Investor” by Scott Pape. This book is practical and down to earth. It is written in a way that is easily understood.

Some of the things covered are strategies for using your money  to grow your long-term wealth, having a safety net, and having some splurge money, or as it is often called, “discretionary spending money.”

These three types of money are what he describes as buckets.

Another section of the book explains the mistakes made by home buyers; they are:

1.They are waiting for a crash

  1. They rent but forget to save
  2. They buy a house they cannot afford
  3. They buy an investment property first.
  4. They don’t consider other options.

You cannot plan your life around something which you have no control over, the author says in reference to number one. Various websites publish articles about the crash which is about to hit the housing market. Pape claims this to be clickbait to attract visitors to their websites.

Mistake number two is renting but forgetting to save. Such people live from one payday till the next and have nothing to show for their labours.

Many people who did have the self-discipline to save make the mistake of buying a house they can’t afford, and then to compound their financial struggles, kids come along. Such people are sometimes referred to as “The Squeezed Middle.”

Buying an investment property first with the intention of moving in later on. The advice given in the book is, if you want a family home, to save up and purchase one.

People who have given up the notion of purchasing their own home sometimes lose heart and instead of saving money will instead fritter it away so that they have nothing to show for their labours.

Scott Pape writes in a down to early style which makes the book easy to understand, making finance less intimidating for beginners. 

A feature of the book is that Pape encourages everyone to have a healthy relationship with money which does not mean living in deprivation. 

The book focuses on Australian financial systems and this has to be adapted to your own country’s local context.

If you want to improve your financial literacy you will enjoy reading Barefoot Investor; this book will steer on to the right path toward a more successful future.

Read my other articles on www.robertastewart.com

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What does your Financial Future look like?

Written by R. A. Stewart

Your future is fully dependent on today’s actions. As far as finance is concerned, it is important to know where you are going and decide on a strategy to get ahead in life. You may be working at a minimum wage job doing menial tasks but you can still develop a plan for your financial future. It is not how much you make but what you do with what you receive in your paypacket that counts.

Look at everything you spend and take a long term view of it. I know some people who take lottery tickets every week. If you are just taking the basic ticket for a power ball, it costs $12. That is around $600 per annum.Think of what can be done with that.

Take a moment to think, “What can I do today that my future self will thank me for?

I can tell you now, that there will be no one who will reach the retirement age and regret that they contributed to a retirement scheme all their lives.

It is the same with financial education. It will enable you to make the best choices for your money. Financially illiterate people tend to fritter their money away on things and then when the car breaks down there is nothing in the kitty to fix it. No one is going to regret that they gained a financial education.

You don’t have to be rich to invest, but you have to invest to become rich. Most people think, “I will do this or that when my ship comes in,” but that day never arrives. 

Building a solid financial base requires planning. Joining a retirement scheme is a must. Developing the saving habit is important. The sooner the better. It will then make life easier further on down the track.

Young people have the advantage of time on their side. This means that there is more time for them to recover from a financial hiccup such as a share market meltdown. Financial experts advise the older generation, particularly, the retired ones to be more conservative with their investments. This means taking on less risk. New Zealand financial advisor Frances Cook has a formula for working out how much investors should have in the share market. She says, “Subtract your age from 100”, so a 65 year old, according to her formula should only have 35% of their savings in the share market.

I do know of older people who have a much higher percentage of money in the markets than they should do according to Ms Cook’s formula. I am one of them.

As long as one knows the risks that they are taking on and will take responsibility for any losses that may occur instead of pointing the finger at others when something goes wrong, then why not go for it?

The main thing to remember is that if the loss of your money is not going to cause you any hardship, then by all means take some calculated risks.

Everyone has their own personal circumstances as far as finances go; there is no one size fits all. It is a matter of deciding what your priorities are and what you are going to sacrifice. 

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

Read my other articles on www.robertastewart.com

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Your Financial Risk Profile

Your risk profile is your tolerance to risk when you are investing your money. Your personal circumstances are what determines your risk profile.

To boil it all down to one factor, your timeline is the big factor to consider. If you are young, in your twenties or thirties then you have more time to recover from a market meltdown than someone in their sixties.

This does not necessarily mean that the young ones should invest all of their money in high-risk high return stocks because you could be in your twenties and have a short to medium timeframe with your investments.

It all depends on what you are going to use the money for.

Split it up in three categories:

Short term money is when you need the money for emergencies and everyday living expenses.

Medium term money is when you need the money within 5 years

Long term money is when you do not need the money for more than 5 years

Short term money

Rainy day account

Every day expenses

School fees

Medium term money

Saving for a car

Saving for an overseas holiday

Long term money

Saving for a mortgage

Contributions to your retirement fund

There has never been so many opportunities for the ordinary man and woman

 in the street to get involved in the markets with so many investing apps available.

You can invest in direct companies or in managed funds.

The latter is recommended.

Managed funds come in three categories:

Growth Funds (long term)

Balanced Funds (medium term)

Conservative Funds (short term)

Growth Funds have the most potential to increase your wealth but you have to be patient because investing in the share market is a long-term game.

Balanced funds are a combination of Growth and Conservative Funds.

Conservative funds are less volatile than growth or balanced funds but they have less potential to increase your wealth apart from just keeping ahead of inflation.

Once you have established your timeline for when you need the money then you can choose the appropriate investment.

One thing to add here is that if you have a rainy day or emergency account then this money is best left in an ordinary savings account at your local bank rather than invested in a conservative managed fund and the reason for this is that fees are higher with managed funds than at your local high street bank.

As already mentioned, your age is a factor in your risk profile but does that mean retired people should not invest in growth funds? Not at all, as long as you’re prepared to stomach any market meltdowns which could see your nest egg dwindle. People are living longer these days so a person retiring at 65 may have another 20 years of life ahead of them.

That being said; it is important to enjoy all of the things which money can buy such as life experiences and not just hoard your money for the sake of it.

Every one’s personal situation is unique, and a strategy needs to take all of this into account. Setting goals which are your own is important and not just trying to follow what others are doing. They have their own life to live, and you have yours. 

I am not saying that you should ignore sound wise advice, but rather listen and use your own sound judgment.

Taking responsibility for your own choices in life applies to your finances as well. Obtaining advice on where to invest is not a license to use your advisor as a scapegoat if your investments are not doing as well as you had hoped. Investing requires patience and time.

About this article: You may use this article as content for your blog, website or eBook. This article is of the writer’s opinion and may not be applicable to your personal circumstances therefore discretion is advised.

Read my other articles on www.robertastewart.com

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Factors which determine your Financial Priorities

Written by R. A. Stewart

Everyone has their own life to live and what this means is that everyone has their own unique set of circumstances which determines how they spend their money.

It is called setting priorities and there is no one size fits all when it comes to designing a life. As far as money is concerned, setting priorities is what we all do even if we are not consciously aware of it.

There are several factors which determine how you are going to spend your money:

The main ones being:

Your income level

The cost of living

Your health

Your age

Your marital status

Whether you have children

Your debt level

Your money goals

Your risk profile

The choices you make will have a major influence on your financial priorities. It is no secret that many people are simply broke because they have made wrong choices in life, not only how they spend their money but made some major mistakes such as getting involved with the wrong person or having kids out of wedlock. Having to pay child maintenance if your ex-partner or ex-wife is the one taking care of the children is going to kill off any chances you have of getting ahead financially.

If you are young, single, and smart, you will afford this kind of a life and live a prosperous life.

Age is a major factor in determining your priorities. Someone aged in their 60s will have different priorities than a person in their 20s.The young ones will be able to take more risks with their money because they have more time to recover from  a financial setback such as a share market tumble. A 65 year old is not going to set goals with a 30 year deadline but the twenty and thirty somethings do this all the time when they take out a mortgage.

There are several factors which will hinder your chances of any kind of financial success. Smoking, drugs, alcohol, and debt are the main ones. It is sad that some folk will prioritize their spending on cigarettes rather than buying good wholesome food for their children.

As far as these things are concerned it is important for the young ones in particular to make decisions which their future self will thank them for. I mean, honestly, I can thank my younger self for not taking up this disgusting habit. Another decision which I can thank my younger self for was my decision to join and contribute to a retirement savings scheme. In New Zealand it is called Kiwisaver.

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

Read my other articles at www.robertastewart.com

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Leaving a financial legacy

Written by R. A. Stewart

“Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much.”-Luke 10:16

Should you leave your money to your kids or grandkids?

I think the answer to that question can be a “Yes” or a “No”.

New Zealand financial advisor Mary Holm wrote, “Don’t leave all of your money to your grandkids for them to spend, spend it yourself.”

I disagree with Mary but not entirely, because it all depends on how responsible the recipients of your generosity are with money.

If they are just going to fritter the money away on booze, cigarettes, drugs, and whatever then I would not leave them a cent or if you are in the UK, a penny.

But, if they are responsible with their own money then it is a good idea to help them out.

That does not necessarily mean just leaving them a sum of money and allowing them to decide what to do with it.

In New Zealand, the retirement savings scheme is called “Kiwisaver”, which cannot be accessed until you reach the retirement age of 65, but there are circumstances when one can access this money and one of these is to use some of the money to go for a deposit for your first home.

If someone is responsible and mature enough to be able to save for a mortgage then they deserve all of the help which they can get, but you just have to let go of those who have no interest in gaining financial literacy because if you do not spend your money then someone else will.

The alternative is to leave it to charity, but if you are going to do that then it may be a good idea to donate to a charitable cause while you are still alive; well if you are living in New Zealand because you will receive one third of your donations back from the tax man, provided of course that the recipient of your generosity is registered as a charity..

Young people do not give much thought about what happens to their property after they go and as a result do not bother to make a will. This can leave problems for their loved ones if the unexpected arises.

There was a case several years ago when a 20-year-old lady died unexpectedly and had money in her kiwisaver account, but her family did not receive any of it, the lawyers did because she did not have a will.

Problems will arise when one dies without a will and making a will is one less worry for the family to deal with.

About this article

The contents in this article are of the opinion and experience of the writer, therefore discretion is advised. You may use this article as content for your blog or website.

Read my other articles on www.robertastewart.com

 

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Risk and Reward

Investing risk and Reward

Written by R. A. Stewart

Weighing up the risks and rewards of various investments is doing your due diligence which is the responsibility of every investor.

There is no shortage of choice for investors to get involved with but it is a matter of choosing the ones which are right for your personal circumstances and goals.

Here are my personal views of some of the types of investments available:

High interest accounts with Finance companies

If a company is offering you an investment offering you a high interest; it can only mean that they are also charging high interest to their borrowers and the reason why some people are prepared to pay a higher rate of interest is because they have been turned down by a bank. This could only mean one thing. “These are people who are at a higher risk of defaulting on their loans.”

During the Global Financial Crisis of 2007-2008. Several finance companies in New Zealand went into liquidation. Prior to this some financial commentators warned people that the high interest rates being offered by these companies does not reflect the risk they are taking.

Investing in Gold through an online investing platform

Investors are able to invest in gold through the internet via apps similar to Sharesies, Hatch, and Robinhood but is this a safe way to invest?

I am not so sure because the problem with gold is that it provides no income, therefore investors are relying on capital gains to make money. 

It is the transaction fees which could kill off any likelihood of profit, however, having said that, this is a good way to get involved in gold as an interest for a modest outlay. Just make sure you only use money which you would class as discretionary spending money.

Investing in Bitcoin

Is investing in Bitcoin a safe investment?

My answer to this is that nothing is 100% guaranteed, Bitcoin is a volatile investment. If you are prepared to ride out the lows then you can make capital gains for you. 

It is not a substitute for your retirement fund and under no circumstances should you invest your entire life savings in bitcoin. The same is applicable to the share market and gold.

If you have discretionary spending money then using it to invest in Bitcoin is the way to go and who knows, you may become the next Bitcoin millionaire.

There are risks with Bitcoin but if you use your common sense and learn as much about the risks as you can then you can reduce your chances of making choices which can be costly.

Investors have so many options to invest these days but there comes the risk of losing due to an economic downfall therefore, it pays to be on the conservative side. That is to diversify and spread your money around. 

About this article

This article is of the experience and opinion of the writer 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.

Read my other articles on www.robertastewart.com

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Make Saving a Habit

Make Saving a Habit

If there is one financial habit which will get you ahead it is this one…

Saving!

Why you must develop the savings habit

It is not how big your pay packet is, what counts is what you do with the money. Irrespective of your financial situation, it makes economic sense to save a portion of your income regularly. the mains reasons for saving are;

1-For unexpected emergencies such as car expenses, the washing machine breaking down, or dental bills.

2-To put aside money for your retirement.

3-Holidays or wedding expenses.

4-study expenses

5-Home repairs.

6-To save for a deposit for a home.

7-Saving for a car

8-Saving for a business

Consequences of not having any savings

If you do not have any savings of your own then if an unexpected emergency crops up such as the car breaking down then you may have to borrow the money to pay for repairs and every time you borrow money, the interest you pay means that you are always paying a higher price for goods and services bought with borrowed money than someone who always pays in cash.

Saving money requires you to live within your means and to live modestly. Good savers will not purchase items brand new when they can find the same item in a charity shop at a fraction of the price. 

Your choices will make or break you

Every time you make a choice there will be consequences, good or bad. The key is to make enough good choices to succeed and to minimize your bad choices. It is important to keep your eyes and ears open to what is happening around you and listen to wise people who have succeeded in their chosen field. Having said that, you must row your own boat and discover your own calling in life.

Joining your country’s retirement scheme.

Many countries around the world have their own retirement savings scheme where a portion of your gross income is invested in that country’s retirement fund and your money cannot be withdrawn until you reach retirement age which varies between different countries. (In New Zealand it is currently 65)

Accumulate investments.

It is a good idea to not only have a retirement fund but invest in various areas to increase your financial knowledge. The share market, managed trusts, and fixed term investments are all well worth getting into.

Don’t place all your eggs in one basket

Don’t under any circumstances place all of your eggs in one basket. There is no guarantee that a particular company will not go under irrespective of how solid it appears. After all, if a company is in trouble, its directors are hardly going to shout it out from the rooftops are they? During the economic downturn around 2008, many people lost a lot of money in failed finance companies and the tragedy was that many of these folk invested their entire life savings into the one company. In other words they placed all of their eggs into one basket. The number one rule is to spread your risk. Divide your money among several different companies. That way you stand a far better chance of protecting your financial assets.

Www.robertastewart.com

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6 Recession Proof Industries

6 Recession Proof Industries

Written by R.A.Stewart

When a recession occurs self confidence is reduced and spending is reduced. Some industries do well during recessions because whatever happens during the economy we all still have basic physical needs to meet.

Those industries rely on discretionary spending money are those that are most likely to be affected during a recession. In a period of belt tightening people will cut back on non necessities such as travel and the like.

A recession means job losses and while no industry is 100% recession proof there are some that will get through the recession better than others. 

Here are some industries which are expected to do better than average during a recession.

  1. Dairy Farming

Dairy products are basic grocery items and if you have the skills and the aptitude then you will be rewarded for your diligence. Retail outlets whose customers are farmers will buck the recession. 

It is only the price of dairy products which will affect retailers. If farmers have the money to spend they will spend it. 

Company to note: PGG Wrightsons 

  1. Healthcare

Health care will always be in demand, more so with an ageing population. If you are involved in this industry then you will always have opportunities for employment. The number of retirement villages is increasing in line with the increasing ageing population and this provides opportunities for investors with many of them being listed on the New Zealand stock exchange.

Company to note: Somerset

  1. Consumer Basics

There are basic items which are always in demand irrespective of what the economy is doing. Basic food items, toothpaste, toilet paper, shampoo, shaving foam, laundry detergent, and the like are recession proof.

Company to note: Any company which deals in these products.

  1. Pet Food & supplies

People will still spend money on anything related to pets during a recession because pets still need feeding. There is an increase in the number of cats and dogs handed to the SPCA during the cost of living crisis but there is still a lot of demand for pet supplies irrespective of what shape the economy is doing.

  1. Utilities

There will always be a demand for utilities because it is a fixed expense in every household. 

Companies to note: Genesis Energy, Mercury, Mighty River Power, and Contact Energy + others.

  1. Alcoholic Beverages

There will always be a demand for alcoholic drinks and has been for the past 2000 years and beyond. 

This list is by no means complete. There are dozens of industries which are recession proof; it is just a matter of choosing one which best suits your skill set if you are in the process of choosing your vocation or changing the one you already have. It is a good idea to add a few strings to your bow by working in different types of jobs or careers. 

As far as the share market is concerned, it provides some insight into which companies are likely to survive the cost of living crisis better than others.

This article is of the writer’s experience and opinion and may not be applicable to your personal circumstances.

Disclaimer: I may receive a small commission if you sign up for sharesies or coinbase.

Www.robertastewart.com

#recessionproof #personalfinance #retirementsavings

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6 Ways to Make Capital Gains

6 Ways to Make Capital Gains

Written by R. A. Stewart

There are basically two types of investment income. Capital Gains and Investment Income.

Investment income is income you receive from an asset, examples of investment income are interest on savings, rent from property, and dividends from shares.

Capital gains is the increased value of an asset; examples of capital gains is the increased value of property, shares, and other assets.

Some investments provide capital gains but no income; examples of these are precious metals such as gold, bitcoin, antiques and other collectable items.

Here are investments which provide Capital Gains:

The Sharemarket

The sharemarket offers excellent opportunities for capital gain. For most people, investing directly into the markets is not an option because the transaction fees once taken out for buying and selling shares make it not worth their while, however, there are plenty of managed funds investors with limited means can participate in. Sharesies in New Zealand  is one.  Investors can drip feed money into the markets with Sharesies and there is the option of investing in various funds or individual companies. Other similar types of platforms in New Zealand  are Investnow, Kernelwealth, and Hatch. These are not the only ones though. 

Your retirement scheme invests in managed (Mutual Funds) and they are also a form of Capital Gains. In New Zealand joining kiwisaver is a no brainer. KIwisaver is New Zealand’s retirement scheme.

Property

The property market has been a popular Captain Gains tool for a lot of investors using not only their money but other people’s money in the form of a loan. Income is gained from rents which pays for the mortgage. All related costs are the most popular form of capital gains and the easiest one for the novice investor to get their toe wet in the markets and learn as you go because there are several mutual funds which are available and the start up costs are minimal. In New Zealand Sharesies only costs $1 to get into which gives you the chance to invest in managed funds or individual companies. It is a great way for tax deductible. This type of investment can turn to custard such as wayward tenants. If you are prepared to take the risk then this investment may suit.

Your own home is a good source of Capital Gains if you intend to sell at some point.

Another way to get in on the property ladder is to purchase shares in property investment companies in the sharemarket. This can be done by investing in individual companies or managed funds which invest in property.

Compound Interest

You must have heard of compound interest; that is when you invest in fixed term accounts for x% interest. Instead of receiving your interest payments into your bank account you let them be added on to your principal and you earn interest on your principal and previous interest payments. This is called compounded interest. 

The increase to your capital is called “Capital Gains.”

Interest rates are very low at present (2020); in some instances lower than the inflation rate which makes this kind of investing less attractive. It is important therefore to do your due diligence and not be enticed by some finance company offering higher interest rates than normal, because with higher interest rates comes higher risk. These finance companies offering higher interest rates lend to higher risk types of borrowers. 

I am not saying that you should not invest your money in these companies but rather do your due diligence and at least diversify your portfolio rather than plonking all of your life savings into the ione company.

Gold

This one is purely speculative but can be a good hedge against a downturn in the markets. The one drawback with gold is finding a place to store it. Another way to invest in gold is buying gold stocks in the sharemarket. Purchasing gold coins from auction sites such as Ebay and Trademe is another option. As with other investments it pays to do your homework and read all you can about gold and other precious metals. 

Crypto Currency

Crypto currency such as Bitcoin and the like should be treated as speculative investments, therefore, only invest money in this if you can afford to lose it. What I am saying is use your discretionary income to purchase crypto currency. This type of investing can be a rollercoaster but one piece of advice which may be useful is to not just purchase all your crypto currency in one transaction but to do on a weekly, fortnightly, or monthly basis so that there is a chance that you have made a purchase when the currency is low. It is called averaging.

Collectables/Antiques

Investing in collectibles can give you a sense of satisfaction and profit when you intend to sell. You really have to know your stuff when dealing in antiques. Always remember, something is only worth what others are prepared to pay for. If someone is prepared to pay $1,000 for a painting at auction then that is what it is worth, however, if another painting is sold at auction for just $10, then that is it’s worth. The value of something is only a matter of opinion.

Recently (2020), some Banksy paintings sold for over $100,000 in New Zealand. The seller of the paintings paid a total of $500 for them in London (UK) some years earlier. It just shows how one’s eye for a bargain can be profitable.

For smaller items such as postage stamps, bank notes, beer labels, and so forth collectors can list their duplicates on auction websites to help fund their hobby.

This article is of the writer’s opinion and experience and may not be applicable to your personal circumstances therefore discretion is advised.

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