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Making the right financial choices

Making the right financial choices

Written by R. A. Stewart

Think of your life as a jigsaw puzzle and your choices as parts of the jigsaw. You need to make the right choices which fit into your life. A choice which is right for one person may not necessarily be right for another. It is just a matter of discovering your “why” and setting goals.

It is no secret that people make choices which lead to poverty. Smoking, alcohol, drugs, hanging out with the wrong crowd, and frittering away their money are some of the main reasons why many people are poor. 

Lack of financial literacy is at the heart of all of this because someone who has set themselves money goals will become more motivated to give up their vices.

What are the right choices?

That all depends on your passions, skills and talents. 

What gets you up in the morning? What do you look forward to?

The things you have a passion for tend to be the same things you have a talent for. Skills can be developed but if you don’t have any aptitude for a particular then you are better off looking elsewhere for fulfilment.

When I was at school, the boys did woodwork class and the girls did cooking and sewing. I did not have any kind of aptitude for woodwork and was always at the bottom of the class. I think if I had been at the cookery class, I would have found my niche. Some of the girls may have thrived working with tools. As one teacher at high school told us a couple of years later when trying to persuade some guys to take up cooking lessons, “All of the best cooks in the world are men.”

The point being, that when setting money goals, one size does not necessarily fit all. 

What are the differences then?

People have different financial circumstances. Some are married, some are single, some are mature, some are young. It all depends on what your personal goals and your needs are.

Once you have worked out your goals it is just a matter of figuring out how to achieve them.

When deciding on where to invest your money, ask yourself, “What is the purpose of this investment?” Once you know the answer to that you will have a fairer idea of which type of investment suits your aims.

About this article

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

Www.robertastewart.com

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Liabilities: what they are

Liabilities: what they are

Written by R. A. Stewart

A liability is when you have a debt to pay. You are responsible for that debt until it is paid. The opposite of a liability is an asset. It is something which provides some kind of value to you.

An example of a liability is when you have borrowed money from a finance company to purchase a car. You pay a certain amount to the finance company each week or fortnightly. It is a liability because it takes money out of your pocket and reduces your wealth.

An example of an asset is an investment with a finance company which lends out money to car buyers. This is an asset because it puts money into your pocket and increases your wealth.

Borrowing money is not the only type of liability which can reduce your wealth.

Others can be, keeping pets, smoking, drug taking, drinking, hobbies, and so forth.

Have you ever heard of dog owners spending thousands of dollars on vet bills when for just $50 they could have had their pet pooch put down. I know of some people who have spent $1,000 on a vet bill for their cat. If that is not financial stupidity I don’t know what is.

Emotional spending is very costly in the long term.

Borrowing for something which does not give you anything in return is a drain on your future financial welfare. Paying for a holiday is a perfect example. This is something you can do without. If you don’t have the money you don’t go on holiday. It’s as simple as that.

Hobbies can be expensive; have you ever seen those news items on television where some collectors have spent thousands of dollars on their items. Whether it is a doll collector, model train collector, or whatever, these people spare no expense in getting their hands on the next item to add to their list.

Becoming an investor rather than a consumer will help you to be better off financially in the long run. By minimizing your consumer purchases and investing that money instead you will build up an investment portfolio, whether that be in the share market, property, and the like. Stuff doesn’t last long and it loses its value over time.

Investing in yourself will pay dividends in the long run if you apply what you have learned. It is just a matter of applying whatever is applicable to your own life. There is a lot of investment advice on the internet and in books but not everything you read will be applicable to your personal circumstances. Having the ability to discern which advice to follow takes experience.

What you spend your money on today will have an effect on your future lifestyle. It is all about making the right choices in life. Politicians talk a lot about achieving different outcomes for certain groups of people. Personally, I think that it is choices which people need to take responsibility for because the only reason why there are so many different outcomes is because people make different choices.

About this article

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

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

All the best.

www.robertastewart.com

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Banking Scams are costly

Steps to take to avoid becoming a banking scam victim

It is no secret that millions of dollars are being lost to scammers worldwide, therefore it is important to have the proper systems in place to avoid being the next victim. Internet scams come in many forms; the most common being phishing scams where the object is to obtain your email address or banking details. Here are some simple steps to take:

1 Don’t log in by clicking on a link

You just don’t know whether the link is from your bank or a scammer these days. It is advisable to type in the URL in your browser.

2 Use a two-factor id

A two factor login is where you log in with an username and password and a text message or an email message where you are given a code to type into the bank’s website.

Here is An example of how two-factor verification works: I sign in to do internet bank with a username and password. I then receive a text message with a code which I then enter to complete the signing process. This code may be sent to your email address if you have chosen to receive this code by email.

3 Use a different email address for your banking

The email address you use for your banking should never be used for other sites such as dating. Scammers will use these sites to try and hack into your email address.

4 Do not connect your debit card to your personal account on any website

I know someone who did this and the website concerned was hacked which exposed the banking details to the hacker. He lost $3,000 as a result.

5 Do not leave all of your money in the one account

If you have a large sum of money for someone’s inheritance or some other purpose then place it into an account which you cannot access through the internet. That way a scammer cannot have access online.

6 When you are using a google account to register with a particular site do not use any gmail account which is used for your banking.

It is worth keeping in mind that sites which hold your personal details may themselves be hacked into which means that your personal details are exposed to cyber criminals. This is what happened to the person who had 3k disappear from his account. It had a happy ending as the bank reimbursed him.

Do not under any circumstances hand over your username, password, or other details if anyone asks for it online. A bank will never ask you for this information.

Www.robertastewart.com

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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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5 Factors which determine your risk profile

Factors which determine your Risk Profile:

Written by R. A. Stewart

Your risk profile is the amount of risk you are advised to take with your investments. There are many factors which determine your risk profile with the main one being whether the money you are investing is needed in the short term, medium term, or long term. 

Short term is when you need the money within 12 months

Medium Term is when you need the money within 5 years

Long term is when you need the money in more than five years time

Here are the main factors in determining your risk factor:

Factor 1: Your age

Young people have one thing in their favour which the older ones don’t have and that is time. The young ones have more time to recover from financial setbacks such as a share market crash, a job loss, or whatever, therefore are about to invest in growth funds which can be volatile. Older people need to be a little more conservative. New Zealand financial advisor Frances Cook has a formula for working out what percentage of your portfolio should be in shares; it is this: subtract your age from 100. Even if you are in your twenties that does not mean you should be reckless with your money and invest into some kind of risky venture. 

Factor 2:Your health

Your health is a major factor in determining your risk factor. If you have a health condition which requires or may require expensive medical treatment in the future then investing in growth funds may not be your best option because you do not want to lose your money just when you need it. This does not mean that you should not invest anything in growth funds but just not most of it. It may be a good idea to set up a bank account for those medical bills.

Factor 3: Your Personal Circumstances

Your own personal circumstances need to be taken into account. If you are single with no commitments then you will be able to take more risks with your money than someone who is married with children.

Factor 4: Your Debts

Your debts are a big factor in what you should do with your money. There is no point in investing your money at 5% interest when you are paying 15% interest on your loans. People with debts have a responsibility to pay off their own debts and need to prioritise that before turning their attention to investing. 

Factor 5: Your Temperament

Your temperament is a factor. If you are going to lose sleep at the thought of losing your money; something which can happen if you are investing in the share market, then going for more conservative funds is better for you but when it comes to long term investing such as your retirement fund then investing too conservatively will mean that you will likely end up with a lot less money in the kitty when you retire.

About this article

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

You may use this article as content for your blog or ebook. Feel free to share this article with others.

www.robertastewart.com

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Budgets for personal finance

Establishing a budget is an excellent way of tracking your spending and  you do not need to be struggling with money matters in order to benefit from using a budget. 

Budgets can expose some cold hard home truths

Doing a budget can be the simple solution to rectifying a challenging financial situation but few people do a budget because it exposes spending habits which they prefer to keep hidden. Many people do not want to change their habits despite it costing them an arm and a leg.

There are two parts to a budget.

Your income and your spending.

Your income can be wages from a job, profit from a business, or  income from investments.

Your spending covers everything which is costing you money. 

In short if it makes you money it is income and if it costs you money it is spending.

If you can do some simple maths you will soon discover whether you are left with a surplus or a deficit.

If you have a surplus and you are in debt, use the money to pay off your debt.

If you do not have any debts you can use some or all of your surplus for one or more of your goals; this could be saving for a holiday, saving for a house deposit, saving for a car, or investing it in the share market.

There are so many places to invest your money these days that if you did your homework you will find an appropriate investment for your circumstances.

If you have a deficit you need to take some kind of action rather than try and bury your head in the sand because if you do nothing your financial situation will worsen.

There are two things you can do to balance the books;

1 Reduce spending

2 Increase your income

I don’t know how financially literate you are but if you do not understand financial jargon then I advise you to see a financial advisor to discuss your situation. The public library will have information on where to find a budget advisor.

At the Library will will also find good books on how to manage your finances and increase your wealth.

A budget advisor is unable to help you unless you are completely honest about where your money is going. 

It is up to you to make the decision on which sacrifices you are prepared to make. No one else can make that decision for you.

Your spending can be placed in two categories, your needs and your wants. You may be able to reduce some of the money you spend on your needs but it is the money you spend on your wants which you may find easier to eliminate. 

Being able to afford whatever it is you need can be as simple as re prioritizing your spending. It is a matter of transferring your spending from one item to another.

ABOUT THIS ARTICLE

Feel free to share this article with others. You may use this as content for your ebook or web page. Check out my other articles on www.robertastewart.com

www.robertastewart.com

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7 Ways that Emotional Spending can ruin your financial plan

7 Ways that Emotional Spending can ruin your financial plan

Written by R. A. Stewart

The best financial plan can be undermined by emotional spending; unless you have the right mindset all of your self discipline and planning can be undone by a moment of madness. 

Here are 7 Emotional Spending Habits can hurt your finances:

  1. Pets

Pets can be very costly and unless you are able to keep your emotions in check they can cost you an arm and a leg. A perfect example of this is when a dog or cat lover will spend a grand or more on a vet bill for their pet moggie when the practical thing to do is to just have the thing put down. Keeping pets can be a drain on one’s finances so it is not surprising that the SPCA are inundated with unwanted pets during the cost of living crisis. The money spent on keeping these pets could have gone toward a rainy day fund which would have enabled the people concerned to weather any financial storm which came along. Personally I think that spending $1,000 on a cat is stupidity.

  1. Expensive Gifts

Buying expensive gifts is another drain on one’s finances. The recipient may appreciate the gift but it is not the same as liking you. What I am saying is that if the only reason why they like you is because you are spending a fortune on them then they like you for the wrong reasons. People who are always buying gifts for others are approval seekers. They seek approval from others and gift giving is their way of achieving this. Giving expensive gifts will drain your finances and is not worth it because it will add up to a fortune in the long run.

  1. Alcohol

Spending too much on alcohol has put paid to many promising careers not to mention being a drain on their finances. Problems with alcohol are usually brought on by emotional needs. Whatever issues you have will be made worse by alcohol therefore it is better to deal with whatever problems you have rather than trying to forget them with alcohol.

  1. Sales (Boxing day, Black Friday, etc.)

You have seen all of the sales advertised on the TV and the internet. Black Friday and Boxing Day sales The sales frenzy on these two days is unreal and it is generated by advertising which appeals to the “Fear of missing out” emotion. 

  1. Lotteries

Gambling is a harmless bit of fun if you are sensible about it but it is when you start placing sizable bets that are affecting your budget that when there is a problem. If that sounds like you then it is time to take stock and find a less expensive hobby.

  1. Cars

Some people are not satisfied with just a vehicle which is adequate for their requirements; they have to go out and spend a lot more on something which is flash in order to impress their peers. Your ego has to be kept in check otherwise it will cost you a fortune over your lifetime. 

  1. Manipulation

Having a strong will and self-discipline will help you become wealthy because there will be people who you have to deal with on a daily basis who have differing views to you as far as finances are concerned. People will try to get you to conform to their values in order to make you just like them. Some will try a tactic known as manipulation by guilt. This is when you are made to feel inadequate or guilty because you won’t do as they say or conform to their value system.

The bottom line is, “They will play on your emotions.”

Don’t try to reason with these people because that type of individual tends to contradict everything you say.

About this article

You may use this article as content for your blog/website or ebook. The article is of the opinion of the writer and may not be applicable to your personal circumstances.

www.robertastewart.com

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Financial Windfalls

Financial Windfalls

What it is

Written by R. A. Stewart

A windfall is a large amount of money you didn’t expect to receive. It could be $200, $1000, and more. It is an amount of money which was not budgeted for because it arrived unexpectedly. Unless you have mastered the art of financial discipline there is a risk that this good fortune will be frittered away with no improvement in your financial situation. It is important therefore that you have a plan for any unexpected cash that comes your way. In this article I will take a look at some of the more common forms of windfall and explain how best to take advantage of them.

Types of Windfalls

There are various types of windfalls, they could be:

An Inland Revenue refund

An inheritance of money or property

Lottery winnings

Gift from a rich relative

Life insurance payout

Employee bonus

These are just some of the kinds of unexpected windfalls one may receive during their lifetime. It is important not to pin all of your hopes of a financial miracle on a windfall if you are in some kind of financial mess. There is no substitute for diligence. Most of the windfalls are the result of living a responsible, diligent life; for example you are not going to receive a tax refund or an employee bonus if you are not working.

As for a lottery win; one must understand that for every one that gains a windfall in this way, there are many thousands who do not. It is a case of thousands contributing money into the pool but only a few taking out. This is luck! The amount of money lost by each individual lottery player is equal or in most cases greater than what one considers a large windfall.

How to take advantage of a windfalls

Gaining a windfall is one thing but taking advantage of it is another. People who come into a sum of money unexpectedly will follow the same pattern of behavior with any windfall as they do when they receive their pay packet…

Those who are spenders will spend it, those who are savers will save it, and those who are investors will invest it.

The end result will be that they will be in the same financial position as they were before  they received their windfall.

Is a Financial Windfall Discretionary Spending Money?

That all depends on your personal financial situation.

The answer is “No” if…

You have consumer debt.

You have credit card debt.

You have a student loan to pay back.

You have some other debt.

Even a mortgage.

The answer is “Yes” if…

You have absolutely no debt.

Money obtained from a financial windfall is discretionary spending money if you have no debt but that does not mean that you should just go and fritter it all away. Windfall money can be used to strengthen an already solid financial situation. One way you can do this is make voluntary deposits into your retirement fund or to put it toward your emergency fund.

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.

www.robertastewart.com