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Prioritizing your spending

Prioritizing your spending

Written by R. A. Stewart

Life is all about making priorities and it is not all about money and how you prioritize 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 all depends on what your priorities are.

What factors should you consider when setting priorities?

Here are several to consider:

Your commitments

Your debt levels

Your age

Your family circumstances

Your health

Your career

Your pets

It is important that you base your priorities on what is important to you and that you do not try to copy someone else’s figures. There is no one size that fits everyone; it is your own needs and wants which determine how you are going to prioritise your spending.

Everyone has different levels of commitments; these have to be managed as best as you can. Commitments can be financial such as a mortgage or other debt or something more personal such as a relationship. 

Your age is another factor; you are not going to take out a 30 year mortgage when you are 60. If you are in your twenties you will have different priorities. As a young investor you can take more risks with your investing strategy because you have more time to recover from a financial meltdown.

That does not mean being reckless with your investing but rather; taking calculated risks.

Your family circumstances are another factor to weigh up. If you have kids then you will have less disposable cash to play around with than if you are single. The flip side is that if you are in a relationship then you have the advantage of having two incomes which will make it easier to save for major life events such as having kids. It is a good idea to put aside money for this purpose.

Then there is your health to think about. If you are fit and healthy then that is great but as we all know, Father Time catches up on us sooner or later. If you have health issues which lessens your chances of reaching the retirement age then your priorities need to be different from those who are healthy.

Then your career or job is a priority. It has to be your top priority because it pays the bills. It is where you spend so much of your time so a carefully chosen career will help make your life more meaningful. Adding different strings to your bow will give you more options. Learning does not end once you leave school is a lifelong project.

Your pets can bring enjoyment to your life but they can also become a burden to your finances as a lot of people have found during the cost of living crisis. The SPCA were swamped with cats and dogs because people could not afford to keep them. When deciding whether to get a dog or a cat it is important to work out how much this is going to cost you. It is also important to consider the fact that keeping pets fits the discretionary spending category and that money spent on them will be better off going towards the mortgage if you have one or towards your retirement fund. 

As far as pets are concerned, many people let their hearts rule their heads; I mean honestly, why else would one spend a grand on a vet bill for a cat or even more than that on a dog when it would be cheaper just to have the animal put down?

 

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

 

www.robertastewart.com

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Risk and Reward

Investing risk and Reward

Written by R. A. Stewart

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

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

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

High interest accounts with Finance companies

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

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

Investing in Gold through an online investing platform

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

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

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

Investing in Bitcoin

Is investing in Bitcoin a safe investment?

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

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

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

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

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

About this article

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

Read my other articles on www.robertastewart.com

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What is discretionary income?

What is discretionary income?

This is a question which is important to those who want to balance their household budget. As most people know there are two categories of spending; your needs and wants.

Here is a list of expenditure which can be classed as needs.

Power/heating

Rent/rates

Food

Car expenses

Clothing

Loan repayments

Savings/investments

Some of these items you have some control over. For example you have the ability to choose how much you spend on food. The same is with clothing. You have the option of shopping around for something affordable. You also have control over how much power you use.

Wants are items which are not essential but are optional. Here is a short list of items which are wants:

Holidays

Hobbies

Entertainment

Gambling

Alcohol

Cigarettes

It is what you do with your discretionary spending money which will make a difference to your financial outcome. If you use your money as a seed for your investments then money worries can be a thing of the past. Dental and Medical bills are not cheap and the wise person who sets aside funds for a rainy day can pay for these emergencies in full.

Your personal financial situation will determine what you do with your discretionary spending money. If you have your life ahead of you then you may have more disposable income after your bills have been paid. If you are older you may not have as much disposable income but have more savings behind you.

If you have consumer debt then you do not have any discretionary spending money. Your number one priority as far as your finances are concerned is to pay off that debt. 

It is not how much you make which determines your financial outcome but what you do with how much you make. Some people spend all of their discretionary spending money and are left with nothing until the next pay day.

Here are some stories:

When I was a teenager we were helping a neighbour build a cattle yard on his farm. My father said to the neighbour, “There is no profit in having the best looking cattle yard.”

What he means is that having the nicest looking cattle yard is not going to make any difference to the bottom line profit of the farm.

Years ago, a colleague bought a car for twenty grand. When one of his friends told me, I replied, “If that was me I would have just bought the cheapest car and invested the rest of the money”.

An expensive lifestyle proves costly in the long term. Those who have developed the habit of living modestly are better equipped to deal with the cost of living crisis.

At the end of the day you make your choices and your choices make you.

About this article

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

Disclaimer: Please be aware that if you sign up for sharesies or coinbase through my site then I may receive a small commission.

www.robertastewart.com