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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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Bank scam warning

Bank customer scammed out of 40k 

A BNZ bank customer was scammed out of $40,000. His experience is a timely reminder to all not to share passwords. 

The man who had received a sum of money from the sale of a house received what he thought was an email from his bank and gave away his log in details.

$40,000 went missing from his account as a result but it wasn’t all in one lump sum. Instead it was $5,000 here, $2,000 there to different names and email accounts.

$15,000 of the money did bounce back but about $18,000 of the money is still missing.

The bank customer complained that the bank did not contact him in more than a month.

The BNZ said that because the customer gave away the code to the scammers which gave him access to his bank account they were unable to return most of the missing money to his account.

The bank also said, “They would never ask their customers to click on link in an email or ask for their password.”

Sending a hyperlink was something scammers tend to do.

There are steps which people can take to protect themselves against cyber crooks: Making use of strong passwords, not sharing passwords with anyone and setting up a two-factor authentication system.

As for this particular customer. It was too late for him and he is still trying to get the bank to take responsibility for his loss.

MY PERSONAL ADVICE

Don’t leave all of your money in just one account but invest some in an account which cannot be assessed online.

www.robertastewart.com

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The averaging strategy in the markets

INTRODUCTION

Investors must realize that investing in the markets has its ups and downs (literally) that it is important to keep it all into the right perspective if investments do not go your way. There is a method of playing the markets in a way that you can take advantage of the market drops. 

The Art of Averaging 

Averaging is a term one may come across in the markets now and again; what this refers to is the average price paid for a particular share if you had bought shares in that particular company.

To calculate the average price paid for a particular share you add up the total amount you have paid for the shares and divide that by the number of shares you have bought in that company. 

The answer is the average amount that you have paid per share.

Try this mathematical question:

There are five numbers 10, 20, 30, 40, 50

What is the average number?

The calculation: 

Add up the five numbers:  10 + 20 + 30 + 40 + 50 = 150

Divide the total of the five numbers (150) by 5

150 divided by 5 = 30 (answer)

You can do this easily with a calculator.

There are so many share trading platforms available these days that investing directly into the sharemarket has never been easier for the ordinary man and women.

So how does averaging work?

If you purchase stock at regular intervals you will pay different prices for each stock because share prices go up and down. Imagine if you bought something at the supermarket last week at the full price then bought the same item this week on special. The average price you paid for the item will be somewhere between the higher price and the lower price.

The sharemarket works like that. By purchasing a particular stock at regular intervals you will manage to pick up some shares in it when the price is lower. This is the advantage of saving regularly. 

In fact I think there is a case for purchasing more shares when the price is low. The average price paid per share is determined by calculations as explained earlier. 

The averaging strategy can also be used in cryptocurrency investing. 

Bitcoin is more volatile than the sharemarket so an astute investor who has an eye for a bargain can invest when the price has dropped.

There are so many share trading platforms available that playing the markets is accessible to everyone. I have joined two of them in New Zealand. Most countries have share trading platforms available. Signing up for them is easy; you require some form of identification. Just follow the directions and you are all set up.

TO SUMMARISE

Playing the markets requires a positive mindset and a cool head. If you have these you can profit from falling markets. Averaging is a method that takes advantage of falling markets. 

ABOUT THIS ARTICLE

Robert Stewart has a blog with other articles of a finance nature. Visit www.robertastewart.com Feel free to post this article on to your site, use it as part of your ebook, share it, print it, even sell it.

 

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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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5 things you should never borrow money for

5 things you should never borrow money for

Written by R. A. Stewart

Holiday Travel

This is a complete no no because once your holiday is over you have nothing to show for the money which has been spent on it. Before overseas travel is considered it is important to think where in the scheme of this could that money be better spent as far as your goals are concerned. Other debts such as a mortgage, car repayments, and hire purchase repayments must all take priority and this is where any surplus cash should go. To go on holiday while having these debts hanging over your head is completely irresponsible. If this is you then you are heading for financial hardship.

Cryptocurrency

I have said it many times previously; “Only purchase cryptocurrency with your discretionary spending money.” In other words, money which you can fully afford to lose. Money which is set aside for household bills such as the rent/rates money or power should not be used for purchasing cryptocurrency. If you bought bitcoin and lost it all, would that cause you undue hardship? is the question which will determine whether you should go ahead with your purchase. It is also worth remembering that cryptocurrency wallets can be hacked and you can also lose money this way. It is also a good idea to point out that investing in cryptocurrency should never be a substitute for investing in your country’s retirement scheme but rather is something treated separately.

Electronics (TV, Laptop, etc)

There are items which are classed as needs and wants. Needs are things such as rent, power, food and grocery items, car expenses, etc. Wants are luxury items which should only be bought with discretionary spending money. Borrowing money for household goods is called consumer debt. You are borrowing money for items which lose their value over time. If you are borrowing money to pay for your needs then there is something seriously wrong with your household balance sheet and making an appointment with a budget advisor is the first step toward getting back into the black.

Furniture

As with other consumables you should never borrow money for household furniture. It is better to pick up cheap stuff from a charity shop than to go into debt for the sake of impressing your peers with nice stuff which is what you are basically doing. Some folk are so focused on accumulating stuff rather than accumulating assets that they never get around to achieving any kind of financial success because there is always something they want to buy. Once something is paid off they look for something else to buy on credit. It becomes a never ending cycle of debt and in the long term all of the interest payments add up to a huge sum of money.

Pets

An absurd amount of money is spent by some pet owners per annum; namely dogs and cats. It is one thing spending your discretionary money on your hobbies and pet ownership is one, but it is another to use borrowed money to pay for it all. I have seen some people spend a lot of money on vet bills for cats and dogs when the sensible thing to do would be to have the animal put down. I was told of someone who spent a grand on vet bills for a cat only for it to die a few weeks later. Now you have to think what would you have done with that kind of money? It could have been used to pay off a mortgage if you have one or some other debt, or have been invested into some mutual funds. 

We all have a choice to spend whatever discretionary income we have and each choice has different outcomes, therefore the trick is to invest your money into something which will give you the best kind of outcome for your personal circumstances.

www.robertastewart.com

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FINANCIAL GLOSSARY

Financial language

Written by R. A. Stewart

It is important to familiarise yourself with financial jargon and their meanings. Do your research on the internet for further information on what these terms mean. This increases your financial literacy.

ASSET RICH-CASH POOR

This refers to people whose wealth are tied up with their property but have little cash in the bank.

BAD DEBT

Usually described as consumer debt or dumb debt, bad debt is when one purchases consumer goods on credit. It is bad debt because the item which has been purchased loses it’s value over time.

CAPITAL GAINS.

This is the increase in value of your asset. It is important to keep in mind that if there is a chance for a capital gain there is also a chance for a capital loss.

CASH ASSET

A cash asset is money in the bank, stocks and shares, and any investment invested with a financial institution.

EQUITY

When someone refers to the equity in their property, they mean how much equity is left after deducting the money owed on the property from its value.

DEPRECIATION

Depreciation is the reduced value of any item purchased. A vehicle is a perfect example of something which reduces it’s value over time.

FINANCIAL PLAN

A plan for your money. To address money issues.

GOOD DEBT

Borrowing money for something which increases in value is considered to be “good debt,” however, it needs to be stressed that if something can increase in value then it is just as likely to decrease in value; shares and cryptocurrency are typical examples.

INFLATION

This is based on the average increase of prices of consumer goods. If your investments are earning less than the inflation rate then you are losing money. 

LIABILITY

This is anything which you have bought on credit and pay interest on. It is said to be a liability. A vehicle is a typical example of a liability. A house could be a liability if it is costing you money but it could be said to be an asset especially if its value is increasing per annum.

NON-CASH ASSET

A property is an example of a non-cash asset. 

RISK PROFILE

This is your temperament to risk and is one factor in determining where to invest your money.

www.robertastewart.com

 

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