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Prioritising your spending

Prioritising your spending

Written by R. A. Stewart

Life is all about making prioritise and it is not all about money and how you prioritise your spending but about what you do with your time. We have different financial commitments and different levels of income but when it comes to time, we all have an allotted 24 hours in the day, no more and no less but our income and how we earn our income will have an effect on how much time we have to devote to the important things in our life.

Many people sacrifice their time for money by spending all of their time working leaving little time for anything else. They are out of balance.

If you have a specific goal in mind such as saving for a house deposit then the sacrifices may be worth it in the long term. Maybe because only you will know whether the long days were truly worth it. It al depends on what your priorities are.

What factors should you consider when setting priorities?

Here are several to consider:

Your commitments

Your commitments will have an effect on what you are able to spend your money on. Most people have commitments of some kind and these will having a bearing on your financial spending. 

Your debt levels

Any debts you may have will have a bearing on your spending. If you have a mortgage or other debt then saving up for an overseas holiday will not be on the radar nor will spending money on things which are considered to be wants rather than needs.

Your age

Your birthday will make a difference to how you spend your money. If you are in your 60s then you are not going to plan 30 years ahead. The young ones have tat luxury. Retired people are at the spending phase of their life. That does not mean to go out and blow your retirement fund all at once but rather enjoy life to the max by ticking off those items on your bucket list.

Your family circumstances

Your family situation will determine your priorities. A single person without any kids will have different priorities than someone who is married with kids. A married person is not going to make decisions based on themselves but has to consider their spouse and plan their journey together.

Your health

Your health is another factor to consider. If you have issues concerning your health then that will be a factor in how you prioritise your spending because you may not be able to work the hours you previously did which means that less money is coming in.

Your career

Another factor. Every career has its own unique set of challenges which have to be dealt with. 

Your pets

If you own pets then you have a responsibility to take care of their needs. However, it is important to think things through before deciding to get a pet because they can be a drain on your time, not to mention finances.

What now?

Who am I to tell you what you should do with your money but if your priorities in life always involves spending money and not investing it then somewhere down the road it will all catch up with you with that medical or dentistry bill and you do not have the funds to pay for it.

Hopefully this will at least serve as some kind of guide to setting goals for managing your money.

ABOUT THIS ARTICLE

The information contained in this article is of the personal opinion of the writer and may not necessarily be applicable to your personal circumstances. Please feel free to share this article. You may use this article as content for your blog/website/ or ebook.

www.robertastewart.com

 

Start investing on a shoestring

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

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Investing in share trading platforms

Investing in share trading platforms

Online share market platforms are gaining in popularity; they provide a terrific opportunity for ordinary folk to get involved in the share market on a shoestring budget. Just deposit $5, $10, $20, or more per week and given the benefit of time and patience this can all grow into a tidy sum.

The beauty of this is that your financial literacy increases as you get more and more involved in choosing which shares to buy.

In New Zealand Sharesies is the number one share market platform. It enables anyone of small means to invest directly into the share market and even in individual companies. 80% of sharesies investors are under 40 so it is appealing to the young folk. That is a good thing as it shows that the young are interested in matters of finance. It is also a good thing that the young are improving their financial literacy.

I cannot speak for other sharesies investors but here is my strategy. It may not necessarily be right for your personal circumstances but I will share it with you. 

I choose one company per year to invest in with sharesies and drip feed money into it every two weeks which means that whether its share price is up or down I have bought shares in it. If I had just made one purchase of the share then chances are that I have bought it at the higher price and its value has dropped a few weeks later but spreading my investment out means that I have bought some at the lower price.

You can use different strategies to suit your budget, goals and personal circumstances.

Here is the link to join Sharesies if you are keen to give investing a go. This is only for those living in New Zealand or Australia.

 

https://sharesies.com/r/377DFM

www.robertastewart.com

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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

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How to spend your money

This article was obtained from a PLR website. I have decided to share it with you. As usual the advice may not be applicable to your personal circumstances.

Improving how to spend your money

It is important to be aware of where your money goes in order to correct any bad habits

Money may not be with you all throughout the year. There are downs and ups when we talk about the financial resources and income of an individual or family. In dealing with financial difficulties, there is a need to have budgeting techniques as early as possible. There is a need for us on how to master the art of stretching the capacity of our available money. 

It is but normal to commit errors especially when you are not yet used to doing things your job calls for you to. But, do not make those mistakes that you would surely regret in the long run. As soon as you could, you have to develop a great way of managing to budget your money. There are some tips you could remind yourself of. These would be points you could use in making or establishing good means to improve the way you budget your money.

  • Make a list of your unwanted budgeting habits. This includes all those you think of being not useful or helpful for you and your financial needs and financial security.
  • You plan on what to do in order to take the first steps in changing your old habits or acts in which they made your budget method a failure.
  • Manage your income and the amount of money you spend by preparing a sort of tally sheet of such information.
  • Prepare your spend plan. This must include your foreseen expenditures.
  • Collect receipts and note bigger amount spent 
  • Limit spending by looking for some alternatives to it
  • As much as possible do not use many credit card or checks.

Those above-mentioned points are really a great reminder for you. If followed, you would clearly see the improvement in your budget techniques. It would surely result to better financial management capacities for you. 

When this is achieved, you would definitely live a more satisfactory life. The right way of how you budget what you need as a winning one in the field of financing one’s self.

It is important that you set personal goals that are your own and not be influenced by how others are living. People who have no goals or ambitions just fritter their money away and are left at the mercy of life’s misfortunes for stuff happens such as a car breakdown, dental emergency, house repairs, or some appliance such as the toaster, electric jug, dryer, or washing machine breaking down. An individual who manages their money well will be able to pay for these emergencies without using credit of some kind.

www.robertastewart.com

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MISTAKES MADE BY INVESTORS

Mistakes made by ordinary investors

MISTAKES MADE BY INVESTORS

Written by R. A. Stewart

We all make mistakes; none more so than when we are making investments but it is important to learn from your mistakes in order not to repeat them. It is also important for investors to note that a financial mistake should not be a deterrent to making further investments. Just keep saving and investing and that will make life easier later on.

Mistakes made by ordinary investors

If you have money invested in your country’s retirement plan then you are an investor whether you know anything about the markets or not. Chances are you have your money investyed in some kind of mutual fund which is managed by a fund manager who invests on your behalf. It is up to you to decide on which fund to invest in and for how long.

1-Too Conservative

You have got to learn how to be an investor and take calculated risks; there are no two ways about it. You can manage these risks to take into consideration you age, goals, and your timeline. If you have your money in conservative funds and you are in your twenties then your retirement fund will fall far short of where it is likely to be when you retire. Investing in growth funds is all about achieving capital gains.

2-Too inconsistent

Lack of consistency as far as contributing to your retirement fund will cost you in the long run. It is easy to be consistent in your contributions when the share market is going strong but it is when the markets are bearish that you need to motivate yourself to keep investing because during the low points is when there are bargains in the share market. If you are working in some type of job then a percentage of your gross wages will be deducted and deposited into your kiwisaver account.

3-Too Emotional

Fear and greed is what drives the share market is an old cliche which rings true. Many investors react to the market’s swings and roundabouts and sell when they should hang on to their stocks. Investing in the share market is a long term game; it is not a sprint, it is a marathon. If you have some kind of retirement fund then your fund manager invests on your behalf, however if you are in New Zealand you are able to switch funds which some investors do in reaction to what the market is doing. If you have some kind of financial goals then this should take into consideration a possible share market crash.

4-Too Greedy

Many investors are simply too greedy; they invest in something offering high returns without paying any attention to the risk they are taking on, or worse still, they place all of their eggs in one basket hoping to make a killing. This all or nothing approach has destroyed several retirement plans. This was certainly the case when several investors saw their life savings disappear with the collapse of several finance companies. Diversification minimizes your risk.

5-Too Impatient

Patience is the name of the game in investing. It is time and not timing which will build your retirement riches. There will be ups and downs in the markets but a bit of patience will pay off in the long run. Something some people do not have so the invest in risky stuff offering quick returns and end up ,losing more often than not.

6-Too Gullible

There are offers or as the are called “opportunities,”promoted online mostly and sometimes in the print media as a way of making quick profits. If an investment seems too good to be true then it mostly certainly is. Usually the person or company promoted such offers are the ones making money out of it. You may have read stories about the amount of money such people have made from whatever it is being promoted but tey are in the minority.

It is up to investors to take responsibility for their own decisions and not try to find a scapegoat if things turn to custard.

ABOUT THIS ARTICLE

This article is based on the writer’s own experience and opinion and may not be applicable to your personal circumstances. Please do your own due diligence when investing. You may share this article or use it as content for your ebook or website.

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share market crashes

I posted this article on the site a year ago. Thought I would repost it.

INTRODUCTION

It is not a secret that the stock market can be volatile; history has shown us this. There are many factors which are the cause of a falling market; they could be a change of President in the US, correction in the market, or nervousness by investors resulting in them selling off their stocks. Whether a 1929 or 87 style crash occurs this decade or not, one thing is clear; it is still important to save and invest for the future because one thing is certain; you will cease working one day and need something to fall back on.

History of share market crashes

When one thinks of share market crashes two years spring to mind, 1929 and 1987, hopefully, such crashes on the scale which wiped out life savings are not going to occur in the foreseeable future. It is not guaranteed that it will not happen, but then nothing in this world is guaranteed apart from death and taxes.

There have been other financial meltdowns outside of the two main ones. Asian Financial Crisis of the 90s and the GFC of 2008 wiped billions of dollars off share values. 

The next major financial meltdown in the markets could be caused by the very people who will be most affected by it, Baby Boomers.

Why?

Because as more and more of them retire, they will withdraw their savings out of the stock market causing a major selloff.

This has been predicted in the past but there has not yet been any sign of this happening with the markets at record levels, however, who is bold enough to predict which direction the stock exchange will head in the future?

One thing you can guarantee is that there will be another market crash in the future; investors just need to be prepared for it.

Here are the most notable share market crashes within the last 100 years.

1929-The Wall Street Crash

The Wall Street crash lasted for over four years. Investors borrowed money to buy shares and when shares were sold off to repay the money to their creditors investors were left out of pocket. The 1929 crash led to the 1930s Great depression.

1962-The Kennedy Slide

The stock market had enjoyed a steady rise since the 1929 crash with the ten years prior to 1962 being good ones for the stock exchange. This all changed in January when share prices plummeted. President Kennedy attributed the decline as a correction for the rises of the past ten years.

1973-74-Stock market crash

The Dow Jones fell by 45% during the stock market crash which lasted two years between January 1973 and December 1974. The UK markets feared even worse losing 73% of it’s value during this time. The collapse of the Bretton Woods System was to blame. This is a system devised many decades earlier on an agreed fixed currency rate. 44 countries met in Bretton Wood to discuss the currency issue in 1944 hence the name Bretton Woods System.

1987-Black Monday

19th October 1987 will always be known as “Black Monday,” after the biggest one day fall in the stock market in history took place. Leading up to the crash many traders borrowed money to purchase shares and as share prices rose they borrowed more money using the value of their shares as security, however, when the stock market dropped by 20% in one day many investors owed more money than the value of their shares and found themselves in financial turmoil.

1997-Asian Financial Crisis

Many stock markets in Asia fell dramatically between July and October due to an overheated market. Many who bought shares on credit or with borrowed money were hit hard by the crash.

2007-2008-Global Financial Crisis

The failure of several financial institutions in the United States.

2020-The Covid Market Crash

Stock markets dropped 34% in one day on March 23 2020 as Covid-19 was starting to take hold. This started a worldwide recession caused by the Covid-19 pandemic.

Who knows when the next share market crash will occur; one thing is for certain, it will be out of the control of investors. It is up to each of us to plan our finances in such a way as to minimise the effect of a financial meltdown in the markets. This can be done by diversification; that is by having your money invested in a range of industries. This way you are not placing too many eggs in the one basket.

ABOUT THIS ARTICLE

This article does not represent financial advice, but rather is the opinion of the writer. It is strongly advised that you seek independent advice from a qualified person. Feel free to share this article. You may use this article as content for your ebook or website. Visit my site www.robertastewart.com for other articles.

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LEARNING FROM PAST FINANCIAL MISTAKES

This article is of the writer’s experience and opinion. If you require financial advice then see your bank manager or financial advisor.

Learning from past investing mistakes

By Robert A. Stewart

“He who never made a mistake never made anything,” but there is no need to make a mistake if you can help it. How? By learning from other people’s mistakes.

The most tragic thing of all is to not learn from your own mistakes; here are some tragic examples which have left people with badly burned fingers.

In October 1987 the sharemarket crashed bigtime; there were horrific stories of mum and dad investors losing fortunes. Leading up to the crash investors would borrow money to purchase shares by using the value of their shares as collateral. As the share values increased, they were able to borrow more and more money. One story I was told was of a man who borrowed money using the value of his home as collateral. 

Many companies were basically called paper shufflers; in order words they were not producing anything tangible but trading in shares.

It took several years before the market recovered.

One should never borrow money to purchase shares which is the first basic lesson of investing.

During the Global Financial Crisis several finance companies went belly up in NZ; these included Provincial Finance, Hanover Finance, Dominion Finance, Lombard Finance, and South Canterbury Finance. There were sad stories with one common one being of investors who had their whole life savings invested in the company. The media’s spin on this is to tell the viewer about the investors who lost everything they invested but that is not the case. The truth is investors were drip-fed money from what the receiver’s could recover.

The investors concerned had a lot to say about all of this but one thing was never mentioned was the fact that they placed all of their financial eggs in one basket. This is a fundamental mistake. In one case, an investor had NZ$400,000 invested in Hanover Finance. One would have thought an investor with commonsense would have spread their money around. 

It does make one wonder whether someone provided this investor with misleading advice. 

The second basic lesson is to not place all of your financial eggs in the one basket.

Crypto currency such as Bitcoin and the like have been very popular during the last ten years. Stories of great wealth have been floating around from time to time of investors who have invested x number of $ and turned it into a fortune worth x. My view of Crypto Currency is that it should be treated as a bit of a gamble where you only invest discretionary income in. Only money you can afford to lose should be invested in crypto currency.

A company called “Cryptopia” which was basically a blockchain which held funds invested in Bitcoin was hacked into and all those with bitcoin invested with cryptopia lost their money. There were some sad stories of an x amount of $ lost.

The third lesson here is to NEVER invest money in cryptocurrency which you can not afford to lose. In other words only use your discretionary money for Bitcoin.

It is certainly well worth remembering that if there is a chance of capital gain then there is also a chance of capital loss. That is the nature of investing.

The bottom line is this; “It is up to YOU, the investor to take responsibility for your mistakes.

www.robertastewart.com

Investing in Gold is worth looking at but like other investments an investor needs to do their research, check out the following;

https://affiliates.goldco.com/l/1VRW1MU2Q/

Sign up for future email updates  and receive the free ebook, “Financial Steps,” here; https://forms.aweber.com/form/72/892285272.htm

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WEALTH CREATION DOES NOT JUST HAPPEN

Wealth creation does not just happen….

It is the result of living within your means, saving, and then investing.

Simple isn’t it?

So why are so many people have so little to show for their years of working?

There is no one answer to this question, but…

whatever the reason for their lack of financial success can be summed up in just two words;

Financial illiteracy

People are not broke without a reason and neither are they prosperous without a reason.

If you divided the world’s wealth equally between its citizens, it will not be too long before everyone will return to the same financial position as they were previously because everyone has developed habits of using their money which will either build their wealth or keep them poor.

There is no secret to the financial success of those who build their wealth, and it can be summed up in two words;

Financial literacy

No one is born with financial literacy, just like education of every other kind, it is learned. 

So where do you learn about financial matters?

Start with your local library, there are plenty of books you are able to borrow on financial matters. Your local bookstore, ebay, or Amazon all have books on finance while you may pick up the odd book on the subject from a charity shop.

One good book to keep an eye out for is “Rich Dad Poor Dad,” there are a lot of other books from the same author. 

The author of Rich Dad Poor Dad stresses the importance of developing income producing assets and reducing those or at least eliminating liabilities which cost you money.

I have a free ebook to give away, it is called “Financial Steps.”

All you need to do is join my mailing list on the following link;

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

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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.

Special Note

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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