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New Zealand Financial Adviser says…

“3 Money Mistakes made by people”…

according to New Zealand financial advisor Frances Cook.

Frances Cook was on the AM show and explained the three mistakes made by people which are costing them hundreds of dollars every year.

Mistake number one

Not negotiating over price!

Frances says “Don’t just stay loyal to your power company but look elsewhere to see if you can get a better deal”

She advises people to shop around, for everything; that could be your power company, your internet supplier, or your phone company,” and not just stay loyal to them without questioning whether you may be better off with a competitor. “Start with one company and do your research to see what kind of deals they are offering, if you can ring them and bring it to their attention. They may give you a deal in order to retain you as their customer.

Mistake number two

Leaving your kiwisaver in a default fund.

Those who join kiwisaver and do not specify which fund they want their money in will automatically have their money in a default fund which is invested in conservative funds. The money is safe but the returns are very low meaning by the time those in conservative funds reach 65 their retirement nest egg will be smaller than it would have been if it was invested in balanced or growth funds.

This is applicable to those in New Zealand but it may apply to some abroad depending on how your retirement scheme works.

Mistake number three

Having a bad attitude

I couldn’t quite catch what Frances said was the third mistake but she did say that it was like not learning to swim because you don’t know how to. If you say, “I am not good or not interested with all this financial stuff,” then that kind of attitude will cost you a fortune over a lifetime. There is no excuse for staying ignorant about personal financial matters.

Gaining financial literacy is easy with so much information available online.

Check out Frances Cook’s website www.francescook.co.nz 

www.robertastewart.com

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Retirement Spending

INTRODUCTION

Spending your retirement years is not all about how you will spend your time but your money also. Ticking off those items on your bucket list becomes your priority. This all takes money. A financial advisor thinks older people should spend their money while they can and travel while they are able to.

Spending your money during your latter years

Written by R. A. Stewart

“Spend your money while you can.”

That is the message of New Zealand Financial Advisor Mary Holm who has recently published another book. 

This message was aimed at retirees. Ms Holm says you should not just leave your money to your children.

She says that she has received letters from people in their eighties and nineties who have said they wished they had done more traveling when they were able to. They were of course referring to when they were in their sixties and seventies.

Holm does have a point but it all depends on how responsible your children are with their money. If they have a house and a retirement plan then you can stipulate that the money can go toward these things. 

Doing stuff while you are able to is probably the best way to live for those who have reached the retirement age and that all takes money.

What Mary says makes sense; helping your children get their foot on the property ladder or through university is one thing but if they are irresponsible with their money then that is another thing altogether. 

This all highlights the importance of teaching your children financial literacy. 

Teaching your children how to invest is just as important as teaching them how to save. Most people are able to save money but most are saving to spend rather than saving to invest.

It is investing which will make life easier in the long-term.

Your priorities will determine how you are going to spend your latter years and there is no law to say that you have to retire at a certain age; a lady in her eighties was still working at our local supermarket. Everyone is on their own I suppose but I don’t see the point of that since our country (New Zealand) is very generous to its retirees. It was only ill health which caused her to stop working and then she succumbed to her illness not long after.

Deciding what is important to you is all about setting goals; Anthony Robbins book, “Awaken the Giant within,” is certainly worth reading. 

In the chapter on “Goal Setting,” he talks about taking the rocking chair test. If you were to sit in your rocking chair at the age of ninety what would you regret about your life?”

“Don’t die wondering,” is a saying worth remembering. It is important to enjoy the stage of life you are at because there may come a day when you regret not having made the most of that particular stage of life.

Planning for the future is just as important; its getting that balance right which is the key. There is no point in blowing your retirement fund during your first year of retirement if it is going to leave you in poverty for your remaining years.

SUMMARY

A work colleague said to us once, “I can’t understand these old people who live frugal lives only to leave their money to someone else.” Making sacrifices in order to save money is understandable when you are younger but not when you are past the retirement age. (unless you are living from paycheck to paycheck). Live your best life now while you can and not just hoard your money for the younger generation to fritter away.

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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Avoiding Dumb Debt at all costs

The quickest way to a financial mess is to borrow for stuff that loses it’s value. You not only pay more for such items but the item is worth less than when you acquired it because it is no longer new once you take possession of it and therefore you will receive less than what you paid for it. This is called “Dumb Debt.”

Avoiding Dumb Debt at all costs

Written by R. A. Stewart

Everyone has seen the television commercials with slogans such as “Buy now pay later,” and the like.

you do not need to save your money to buy that new car, a wide screen TV, that latest smartphone, or a holiday in a tropical island when you can have all these things now. 

Instant gratification is a very expensive habit; one that will lead you to a life of financial challenges.

There have been misleading statements in some of the advertising; one I saw read, “Helping you to get ahead.”

That kind of slogan suggests that the finance company is doing borrowers a favour which is far from the truth.

Loan sharks and finance companies thrive on financial ignorance; a person with even a basic grounding in personal finance will avoid loan sharks as if they had tested positive for covid.

One should ascertain whether the item is a want or a need before signing on the dotted line. 

Many people go into debt because they want to live a champagne lifestyle on a lemonade budget just to impress their friends. They are not happy with living modestly. 

An expensive lifestyle is costly in the long run. 

The parable of the prodigal son is a perfect example. Here was a young man who blew his inheritance on wasteful living and ended up living in poverty due to his lifestyle.

He not only blew his inheritance but was most likely living on credit.

It is borrowing that really kills off a person’s chances of financial success. That interest rate is dead money; it is the cost of borrowing.

Paying interest on stuff you have bought on credit adds to the cost of it and the value of a lot of stuff bought on credit is worth less as soon as you take possession of it.

“If you don’t have the money you don’t buy it,” is a simple philosophy to adopt.

What you think you cannot live without is something others have learned to live without. 

It all comes down to the choices we make.

There are some circumstances when it may be wise to borrow such as when the value of the item you are purchasing is going to make it financially worth your while such as a student loan. This may or may not mean you will get a good paying job but you must be absolutely clear that it is what you want to do otherwise the course will be a total waste of money.

ABOUT THIS ARTICLE

Feel free to use this article as content for your website, blog, or ebook. Check out my other articles on www.robertastewart.com

Disclaimer: The information in this article may not be applicable to your personal circumstances therefore discretion is advised. I may receive a small commission if you make a purchase from any of the links you clink on.

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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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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

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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Relationships can hinder your wealth plan

Relationships can hinder your wealth plan

Written by R. A. Stewart

“He who walks with wise men shall become wise but a companion of fools will be destroyed.”Proverbs 13:30

The person you form a relationship with can destroy your wealth creation plan and your future financial success if you CHOOSE the wrong person and I emphasise that word CHOICE because so many people during the Cost of Living Crisis blame the government for their financial situation and are completely oblivious to the fact that it is their own choices which put them there in the first place.

I mean let’s face it, only a responsible person will enter into a relationship when they are in a suitable financial position to do so and that is not the only issue.

If your chosen partner has a bad credit rating and you have a good credit rating then guess who is going to be persuaded to sign along the dotted line when your partner wants to borrow money for whatever reason?

Then there will be the difficulty in getting a mortgage if you both want to purchase a house and you have a good credit rating and he doesn’t. It has happened!

Another factor is your prospective partner’s attitude to money. Has he or she made any kind of financial plan for the future? A responsible person would!

At the very least they should belong to a superannuation scheme, in New Zealand it is called Kiwisaver.

Years ago I knew an old lady who was still working at an age when others would have retired. She was a waitress. She believed that men who have a lot of money are selfish and stingy. 

Men are better off avoiding gold diggers such as her.

It all boils down to responsibility for your own finances. A responsible person will make provisions for their later years by joining their country’s retirement scheme. In New Zealand this is called Kiwisaver. It should be pointed out that your kiwisaver could become part of property matrimony in the case of a break-up but you don’t even have to be married for this to occur. In New Zealand, a relationship of three years whether you are married or not will mean that any asset acquired during the relationship is equally owned and that includes savings in kiwisaver but only contributions to kiwisaver during the term of the relationship. 

If someone is irresponsible in the matter of finances then it is likely that they are irresponsible in other areas of their lives.

Having wisdom in the matter of relationships will make a big different to your long-term financial position. Lack of wisdom can send you to the poor house.

I will end this with something our teacher Mr. Hart said when we were at school, I was 13 when I was in his class.

During spelling lessons he used to tell us a story with one or two of the words that we were learning and on this particular occasion one of the words was wisdom. He told us this story:

One rainy day he was driving along McGowan Street which is the main street in the town where I attended primary school. (there was no intermediate school back then). Mr. Hart told us that he saw a man sheltering from the rain under the verandah of the shop and the man was reading the Friday Flash which is a horse racing paper. Mr. Hart then said, “If that man had wisdom he would save up his money to buy a raincoat for himself instead of spending it on the horse races.

Such is the value of wisdom.

About this article

You may share/print this article or even publish it on your blog/website/ebook. 

Www.robertastewart.com

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.

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Using the rule of 72 to get wealthy

Using the rule of 72 to get wealthy

Written by R. A. Stewart

Do you know how long it takes for your money to double using the rule of 72?

Using the 72 formula it works like this:

Simply divide 72 by the interest you are receiving on your money. Of course the calculation does not include the tax paid on your investment.

Another name for the rule of 72 is compounding interest or dividends as is the case when investing in the share markets. You are receiving an income from your original investment plus from the dividends and interest which are left untouched.

This is called compound interest.

There may be a temptation to hasten the doubling up period by searching for high interest investments. My advice is to be careful because if a finance company is paying it’s depositor’s higher than normal interest rates it only means that they are charging their borrowers higher interest rates than the banks. The reason why someone would pay higher interest rates is because they couldn’t get a bank loan because they are considered risky borrowers.

Several finance companies went belly up during the Global Financial Crisis of 2007/2008. These were companies paying higher interest to their investors than market rates.

I did lose money on some of these companies. On reflection, instead of letting the interest compound I should have taken them and invested the interest into my Kiwisaver account.

The rule of 72 is just as applicable to investing in the share market. Your investment can grow using the same principle in managed funds or mutual funds as they are also called but profits can vary. 

You can calculate how much your investment needs to grow per annum in order to double within a specified time. 

72 / your time frame (years)

If you want your money to double in 10 years then you would need an average annual return of 7.2%

The important factor is time. Young people have that in their favour. 

Someone on the verge of retirement is not going to make plans for what they are going to do in thirty years time. Your age is an important consideration to where and what you invest in.

The rule of 72 also works for borrowers. You can work out how long it will take for your debt to grow with this simple formula: 72 / interest rate so if you are paying 15 percent interest rate the amount you owe will double in 4.8 years.

That is of course assuming that you have done nothing to pay off the debt.

It underlines the importance of paying off debt as quickly as possible.

About this article

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

I may receive a small commission if you sign up for Sharesies or Coinbase.

www.robertastewart.com

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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.

Feel free to share this article. You may use it as content for your blog/ebook.

 

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He who never made a mistake…

He who never made a mistake…

never made anything.

You could read all you can about the share market but investors will from time to time go against their better judgement and invest in something because of greed or it is something they are interested in. I have lost money in the past from some of my investments.

Here is a sample:

Air New Zealand (early 2000s)

This company I thought was a reasonably safe investment. Air New Zealand was once owned by the government but it was privatized during the late 1980s or 90s. However, the company almost went under during 2001 I think it was when their shares dropped to 14 cents each from about $1.50. The government bailed them out and still owns about 51% of the company. During covid, the government bailed them out again after the border closures placed them in a financially precarious situation.

Lombard Finance L.T.D

This was one of those finance companies which offered higher interest rates than the banks for fixed term accounts. Lombard as it turned out had too much money tied up in too few projects and when one of their creditors folded it brought Lombard down with them. It lent money to property developers. Lombard Finance collapsed in 2008

Provincial Finance L.T.D

This company lent money for consumable items such as cars etc. It, like Lombard, offered higher interest rates for fixed term than the high street banks. It was also a victim of the Global Financial Crisis.

Dominion Finance L.T.D

Another finance company which fell victim to the Global Financial Crisis. It too offered higher fixed term rates than the banks were offering.

Must be a lesson there somewhere.

These were by no means the only finance companies which went belly up during the G.F.C; South Canterbury Finance and Hanover Finance were high profile collapses. 

Some investors lost their entire life savings in Hanover FInance. 

That is a classic case of putting all your eggs in the one basket; a crucial mistake which affected how some folk will live during their retirement years. 

Greed sometimes over rules better judgement.

We sometimes hear stories of young folk who have bought xxx stock in xxx company which has risen in value by a ridiculous amount. This type of rise is not sustainable and it is only a matter of time before the rising share value slows or in some cases takes a spectacular dive. 

I mentioned young folk because they do not have the past experience of older investors.

It has to be said that those who have made the most investment mistakes are likely to be in a better financial situation than those who played it safe all their lives and just kept their money in low interest accounts. Certainly better than those who are spenders rather than savers.

The bottom line is that it pays to diversify and spread your risk but the level of risk one takes is dependent on a person’s age because younger people have more time to recover from financial mistakes.

A lot of people cannot stomach the thought of losing a few grand on their investments yet would have problem frittering that money on lottery tickets, cigarettes, or booze. In order to achieve more favourable financial outcomes it is important to do a stock take of your outgoings (spending) and transfer money which would otherwise have been wasted into something more profitable. This could be starting an internet-based business, investments, or upskilling.

During the 1987 sharemarket crash thousands of investors lost fortunes. Many of them borrowed money using the value of their shares as collateral and the rising share prices meant that they were able to borrow more money. The collapse of the markets left investors with shares which were worth less than the value of the loans taken out to purchase them. The lesson here is to never borrow money for shares.

Here is a quote from the Auckland City mayor concerning debt levels. “Capacity to borrow is not the issue. It’s the capacity to pay it back.”

The other lesson is that it may be better to invest in upskilling. It never hurts to add another string to your bow.

This article is the result of the writer’s experience and opinion and not considered as financial advice. If you require qualified financial advice see your bank manager or financial advisor.

www.robertastewart.com