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Investing for seniors

Your age is a crucial factor in establishing your savings and investing strategy. Your 20s, 30s, 40s, and 50s are your savings years. It is these years when you build up your assets. 

Your 60s and 70s can be considered your spending years. It is when you tick off items on your bucket list while you are able to.

That does not mean that you do not have to work to make life more affordable and a lot of older people are taking this option, not because they cannot make ends meet on their pension, but because they enjoy what they are doing.

In New Zealand, retirees will have access to their kiwisaver account once they reach the age of 65. Money invested in kiwisaver will be in growth, balanced, or conservative funds. Most people during their working life opt for growth or balanced funds.

It is time to decide whether to stay with the status quo or invest in more conservative funds. 

Your age and your health are the two most important factors in deciding which fund to invest your money in. 

Older people do not have time on their side to overcome financial setbacks such share market falls and so forth, therefore if you are 60+ it is a good idea to lean toward more conservative investments but still retain some exposure to risk.

It is worth mentioning at this point that New Zealand financial advisor and writer Frances Cook has a formula for calculating how much exposure you should have based on your age, and it is this…

Subtract your age from 100.

If for example you are aged 60 then only 40% of your portfolio should be invested in the share market.

I do not necessarily agree with this formula and my exposure to the share market is more than her formula suggests I have.

However, that is a personal choice; one that I do not necessarily recommend to you because your circumstances will be different as they are for different people.

If you are connected to the internet and you have a lot of spare cash in your account then I suggest that you place most of your money into an account that is not connected to internet banking. This is to reduce your chances of becoming a victim of internet scammers. 

With internet banking being the norm, this could be difficult in the future though.

What I am saying here is to not park all of your money in the same place just in case the unthinkable happens.

It is important to take individual financial advice if you are offered a so-called opportunity to invest your money for a high return. Investments which offer high returns also offer a higher risk and that is something you should avoid in your later years.

Don’t be too proud to ask your family for advice if something you are offered sounds a bit dodgy. It is a good idea to only ask advice from family members who have a good level of financial literacy.

www.robertastewart.com

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RETIREMENT SAVINGS SCHEMES

Kiwisaver Retirement Savings Scheme

“A good man leaves an inheritance to his children’s children.” Proverbs 13:22

Saving for one’s retirement is the responsible thing to do and it is up to each individual to get their own finances sorted for their latter years. New Zealand has their own retirement scheme as most other countries do to help make life easier for their citizens when they retire. 

The New Zealand retirement scheme is called “kiwisaver.” It is open to New Zealand residents. Kiwisaver is voluntary and anyone aged up to 65 can join. You do not have to be in work to join kiwisaver, you are able to make voluntary contributions at any time.

You are about to make contributions through your wages and salaries of between 2%, 4%, or 8% (you choose). Your employer will also make contributions to your kiwisaver account. If you are not employed then you can choose to make voluntary contributions.

The key component of kiwisaver is the government’s contribution which is a maximum of $10 per week or $520 per year but you have to contribute at least $1040 per annum to get the full $520 otherwise you the government will put in 50% of whatever is your contribution.

You will receive the government money sometime in July. The kiwisaver year starts 1st July and ends 30th June and any money deposited into your kiwisaver account during this period will be eligible for the government contribution the following July. You could say leave it until June before you put any money in kiwisaver and still be eligible for the tax credits as the government money is sometimes called.

When joining KiwiSaver you will be given the choice of fund managers. If you do not choose one, the I.R.D (Inland Revenue Department) will choose one for you and when this happens, it tends to lean on the more conservative side. 

You have the option of different funds, Growth, Balanced, or Conservative with growth funds being aggressive. They have the potential to grow your savings but the downside is that they are the most risky. Conservative funds are low risk but can inhibit the growth of your savings while balanced funds are a combination of growth and conservative funds. 

Your savings in kiwisaver are locked in until you reach the retirement age of 65 (applicable in NZ) but you may be able to access your funds under exceptional circumstances. These are if you are suffering from financial hardship, have a terminal illness, or die (money goes to your estate). It is important that you have a will because if you don’t, any money still in your kiwisaver will likely be swallowed by lawyer’s fees.

You may use some of your kiwisaver funds for a deposit on your first home but only after you have been in kiwisaver for at least five years. If you are at that stage where you will be looking at purchasing your first home in the not too distant future then it would be a good idea to go for a combination of balanced and conservative funds when choosing which type of kiwisaver fund to invest in because if you went for growth funds, the markets may have gone down when it comes time to withdraw some of your kiwisaver funds for a home deposit. That would be a double whammy because when the market recovers and is on the up, you have missed out on the gains because you withdraw your money when the market was down.

It is a good idea though to have other investments which can take advantage of the swings and roundabouts of the markets even if you only have a small amount to invest. 

Always try to keep up to date with what is going on in the financial world as this will increase your financial literacy and help you make better decisions on your finances.

Check out my site www.robertastewart.com for useful information on how to increase your wealth.

The information in this article is the writer’s opinion and experience. It is advisable to seek independent financial advice to ascertain the best financial plan for your situation.

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Taking Responsibility for your Finances

Taking Responsibility for your Finances

Life is full of choices and what you do with your choices determines the outcome or what happens in the long term. Taking no action is a choice in itself. As far as finances go, what you do with your resources can make a difference to your life.

In New Zealand and in most countries some form of retirement scheme is in operation.That is where a small percentage of your pay goes directly into your retirement scheme. There are various incentives available to encourage people to contribute toward their retirement savings. 

New Zealand’s retirement scheme is called “Kiwisaver” and it is voluntary which means that no one is compelled to join or to contribute to their retirement fund if they do not wish to.

Considering the advantages of belonging to Kiwisaver it is truly baffling why anyone would not want to join. 

I have heard all kinds of excuses such as, “I’m not earning enough,” “You can’t take it all with you”, “Other people are not in Kiwisaver.”

These are all excuses and not reasons.

The truth is and the real reason why some people are not involved in KIwisaver or are contributing toward it is because they are irresponsible.

Of course you will not hear any of them admit that.

The bottom line is that it is not up to the Prime MInister to spoon feed people. At some point one has to take responsibility for your own finances.

Irresponsible behavior is a habit and a pattern of behavior. Responsibility is a dirty word to some people and a person who is not responsible enough to join a retirement plan of some kind is likely to be irresponsible in other areas of their life. The number of one parent families is a prime example of this. “Where are the fathers of these kids” is a question I sometimes ask myself when I see a story on TV about single mothers.

Responsibility also means that you must make the decisions on which funds to invest in; those who may be intellectually limited and those who do not have the time to do their research can make the use of a fund manager by investing in managed funds. All money invested into kiwisaver are in managed funds. 

Fund managers are skilled and have the kind of financial knowledge that the ordinary man in the street does not but you still have to choose which fund to invest in whether it is growth, balanced, or conservative. 

Markets will go up and down which are beyond the control of the fund manager, therefore, do not take your anxieties out of them when the markets are down.

It is certainly a fact of life that some people will let others make their decisions for them so that they have someone to blame when things turn to custard.

You may have a financial advisor but they still need to know what your intentions are as far as your goals in order to make the right choices for you. An investment made for someone who has thirty years left till retirement is not going to be the same as one for someone who has five years to go. It is your responsibility to keep your advisor informed.

That is, if you have an advisor. If you do not then it is up to you to do your own homework. That way, if things turn to custard then the person who is to blame is the one you see in the mirror every morning.

Watch this video

This is not for everyone; we prepared a presentation for you outlining the income opportunity, please watch through it in its entirety. Here is the training link, http://bit.ly/3uQXf7I

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How to prioritize your spending

INTRODUCTION

It is important to prioritize your spending in order to get the best outcome for your finances. This will often mean delaying those items that you want in preference for something which is really needed. For example, car repair expenses should have priority over that new smartphone you saw advertised on TV. There is a system you can use to decide on how to prioritize your discretionary spending and this is explained.

How to prioritize your spending

We all spend money. That is the purpose of getting a job or being in business. All of the expenses involved in living need to be paid for somehow. Once the necessities are taken care of, what is left over is called discretionary spending money. It is up to us to make a choice with whatever discretionary spending money we have. We can save it or we can spend it, it is up to our individual choices.

Some folk fritter away their spending money because they have no plan to make the most of what they have. 

Two people can have the same level of income and the same outgoings but one has a financial plan and the other does not. I can tell you that the difference in financial positions between the two in the long term will be massive.

The truth is that both have a plan, one a plan for a favourable financial outcome and the other a plan for financial failure; the core difference between the person with a financial plan and the one who does not is priorities. They each have different priorities on how to use their money.

How do you establish priorities?

Here is a simple system.

Make a list of your top five goals on what you are saving for.

This could be to save for a smartphone, savings, new car, holiday, pay off debt, buy a new tv, or whatever.

Once you have written out your five items for your list, place a number besides them, one to five in no particular order of preference.

Now put them in groups of two. 

One and two, one and three, one and four, one and five, two and three, two and four, two and five, three and four, three and five, and four and five.

You will have ten groups of two.

Next place a circle around your preferred option in each group of two.

Here is an example.

Sam lists his top five goals (not in order)

  1. Paying off Debt
  2. Buying a cellphone
  3. Buying a motor vehicle
  4. Saving
  5. Going for an overseas holiday

The first group is Paying off debt V Buying a cellphone which if I was Sam I would circle paying off debt.

The next group is Paying off debt V Buying a motor vehicle. Once again I would circle the paying off debt option if I was Sam.

The third group is paying off debt V Saving and once again I would circle paying off debt because by paying off debt you do not have to pay interest on the money which has been borrowed.

Go through all of the other combinations and the option which has been circled the most is your priority.

This all clarifies your thinking.

ABOUT THIS ARTICLE

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The advantages of saving money

INTRODUCTION

If ever there was a habit which needs to be acquired from a young age it is the habit of saving money. It is a habit that will help one achieve financial goals. There are so many advantages of saving money as compared to just spending everything you make and if you are able to save something each week then you will be better off financially in the long-term.

The advantages of saving money

The ability to save for all the things you need will put you in a much better financial situation in the long-term. It will mean you pay less for whatever you are buying and places you in a less stressful situation. Mind you some borrowers just don’t care that they are in debt as long as they are able to pay it back. 

The crunch comes when there is a job loss or some health issue arises and there is no money in the kitty to pay the bills. 

A person who has set up their finances properly will factor in these types of emergencies in making their financial plan. 

Saving money is a no-brainer; here are the five main reasons for not borrowing.

1 NO DEBT

Borrowing money for the things you need or want puts you in debt. It means that you are indebted to someone else. Sooner or later it all has to be paid back along with the interest. The debt is not going away until it is paid off so there is no point in burying your head in the sand if you are indebted to your creditors. Creditors have every right to expect repayment of their money whether they are the bank or other lending institution or a family member.

2 COST OF BORROWING

There is a cost attached to borrowing money and that cost is interest which is sometimes referred to as “Dead Money.” Paying interest on the stuff you buy on credit adds to the cost of the item. The habit of purchasing goods on credit adds up to a massive amount over the course of your lifetime. That interest money could have been used to build a nest egg. Commercial debt is the worst type of credit spending because the item which has been bought on credit loses its value as time goes by. Another name for commercial debt is dumb debt. 

3 READY MONEY FOR EMERGENCIES

Emergencies crop up from time to time. The car breaks down, the washing machine needs repairing, you suffer a tooth ache and need to go to the dentist, you need a new pair of spectacles. There could be anyone for a number of reasons for financial emergency. If you have money set aside for these then you can tend to these emergencies without worrying about whether you have the money to pay for them. Every responsible person has an emergency fund on hand to cushion them against financial shocks which can occur from time to time.

4 A NEST EGG FOR THE FUTURE

Saving money means you are able to build up a nest egg for the future. If you are a responsible person you will have a retirement scheme of some kind where a portion of your pay goes into the fund. In New Zealand it is called Kiwisaver. I can not stress enough how important it is to be enrolled in Kiwisaver if you are from New Zealand. The government incentives make this scheme a no-brainer. Your country will have its own scheme with it’s own benefits.

5 TAKE ADVANTAGE OF SPECIALS

If you have no money then you will not be able to take advantage of specials. That does not mean you should spend money on something for no other reason than it is special. Your own common sense and self control should be employed here.

6 A DOLLAR SAVED IS A DOLLAR MADE

There is a saying that a dollar saved is a dollar made. The truth is a dollar saved is better than a dollar made because you do not pay tax on a dollar saved which is not the case when you make a dollar. Every dollar which you save can be working hard for you in whatever investment you place it in.

A competent money manager will not have any room in their vocabulary for such words as debt, credit, credit card, loan, lay-by, or hire purchase. In fact these are all dirty words to the person who wants to get financially ahead. 

Having said all of this, there can be times when borrowing money can be worthwhile. 

But…

And it is very big but. 

You have to be absolutely sure that the payoff is worth your while.

Take a student loan for example; You need to be absolutely sure that the type of job which the course qualifications assist you with is something that you really want to do, otherwise the whole course will be a waste of time and money.

ABOUT THIS ARTICLE

Feel free to share this article. You may also use this article as content for your website or ebook or do anything you wish with it. Check out my other articles on www.robertastewart.com

www.robertastewart.com

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INVESTING ON A SHOESTRING

INTRODUCTION

You do not need to be rich to invest but you need to invest in order to be rich and investing in the share market has never been more accessible thanks to the internet. It gives everyone the opportunity to invest irrespective of income levels, therefore there is no excuse for not getting involved.

Investing in the stock market on a shoestring

Investing in the share market has never been as easy as it is today thanks to share market platforms where mum and dad investors can invest as little as $10 at a time. Compare that to investing through a share broker where fees make this uneconomic unless you are able to invest a few thousand dollars at a time. Problem with this is that unless one had tens of thousands of dollars to invest then diversification where money is invested in a variety of companies is out of the question.

The solution to this is mutual funds, often called managed funds where your money is pooled with those of other investors. The fund manager invests on your behalf. The advantage of this for the ordinary man and woman is that the fund manager who has experience in the financial markets is working on your behalf for a minimal fee.

Your money is invested in a variety of companies and industries in order to minimize risk. Wealth, and Invest Now

Sharesies is a popular trading platform in New Zealand but is certainly not the only one; Hatch, Kernel, and Invest Now are others. In the US, Robin Hood is a popular trading platform.

There are so many benefits of getting involved in the share market in this way with the main one being that it improves the financial literacy of participants. It is all very well just reading books of a financial nature but knowledge comes from action otherwise what you may have learned on paper is just information.

There are several strategies you can use to drip feed money into the markets using online platforms. 

I will tell you what I do. I focus on one particular company per year and invest money in this same company regularly, usually every two weeks. That way I will purchase shares at the lower price when the shares are down. If an investor just simply bought shares in one company with just one lump sum then there is the possibility that the share price was high which means it will have to rise further to maintain the value of the investment when inflation and fees are taken into account.

The share I have been buying this year is Spark, a New Zealand phone company. Last year it was Genesis Energy. I have not yet decided which company I will go to next year.

If you are prepared to invest more money you can choose more than one company. So long as you invest regularly you will take advantage of the low points in the market. 

If you so wish you can just invest in managed funds. Sharesies has a range of options for this with varying degrees of risk. The golden rule is the higher the return the higher the risk. An astute investor will take this into account when deciding what to invest in.

The basic rules of investing still need to be adhered to such as not placing all of your eggs in the one basket and investing according to your goals. If you require the money in the short-term then investing in growth stocks which are high return but with higher risk is not a suitable investment because chances are that the stock price will be down at the time when you need the money.

Micro investing is an excellent way to get involved in the sharemarket. It helps to build your financial know-how, not to mention your wealth. It can be part of your wealth building strategy so what are you waiting for?

ABOUT THIS ARTICLE

You may use this article as content for your website or ebook. Feel free to share it with anyone. You can find other articles on my site www.robertastewart.com

Watch this video

This is not for everyone; we prepared a presentation for you outlining the income opportunity, please watch through it in its entirety. Here is the training link, http://bit.ly/3uQXf7I

 

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KIWISAVER

INTRODUCTION

Investing for the future is important in order to make things easier for you in your later years and being registered with your country’s retirement savings scheme is a must. There are so many advantages to being involved in such schemes. Every country will have its own rules and it is suggested you do your homework in order to familiarise yourself with your country’s retirement scheme.

The Features and Benefits of joining New Zealand’s Kiwisaver scheme

Written by R A Stewart

This is of particular interest to New Zealanders of those about to become New Zealanders. If you are from another country some of the information may be applicable to your situation since most countries has its own retirement savings scheme with incentives to encourage people to join in the scheme.

WHAT IS KIWISAVER

It is New Zealand’s retirement savings scheme. Kiwisaver began July 1st 2007 as a scheme to encourage New Zealanders to contribute to their retirement savings. It has been acknowledged that New Zealanders are good at spending but not good at saving; the scheme was devised to address this fact.

INCENTIVES

When kiwisaver was first introduced everyone who joined received $1,000 to kickstart their fund. On top of that was the $1040 per annum from the government. To receive this investors had to have invested at least $1,040 to receive the full amount. In other words, the government will match your contribution dollar for dollar to a maximum of $1,040.

However, The National Finance MInister Bill English removed the $1,000 kick start and halved the $1,040 annual contribution to $520 to balance the books during the Global Financial Crisis. (GFC)

Kiwisaver is still a fantastic scheme for investing money for your retirement though.

EMPLOYER CONTRIBUTIONS

Your employer contributions to your kiwisaver are 3% of your gross income so with your contributions + government contributions + employer contributions you will be left with a tidy sum on reaching the retirement age of 65 (New Zealand).

FEATURES AND BENEFITS

There are so many features and benefits of joining kiwisaver and it is important to distinguish between the two.

Feature is your money is locked in until you reach the age of 65

Benefit is you will have a pot of money ready for you when you retire.

50% RETURN ON YOUR MONEY

Depositing $1,040 into your kiwisaver every year in order to receive the full $520 is the same as receiving 50% on your investment for the first year; this is tax-free which makes joining kiwisaver a no-brainer.

OTHER BENEFITS

Another benefit of joining kiwisaver is that if you were to have investments and you end up on a government benefit, the interest earned on your money counts as income for assessing your entitlements. You are allowed to earn up to $160 (gross) before your government benefit is affected. 

This is not applicable to those on Super which is the name for New Zealand’s pension. Those on a pension are allowed to earn as much as they like and their pension is unaffected. (Super is short for Superannuation)

WILLS

It is important to have a will otherwise legal expenses could swallow up your estate’s funds including kiwisaver if the unthinkable happens.

SUMMARY

Kiwisaver is a terrific scheme for putting money aside for your latter years. You are encouraged to read more about the scheme by reading books about kiwisaver from your local library or doing some research online. 

www.robertastewart.com

ABOUT THIS ARTICLE

Robert A. Stewart has his own website www.robertastewart.com with several articles on personal finance. 

You are welcome to print this off for easier reading. You have permission to use this article as content for your blog, website, or ebook.

 

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The savings habit needs to be taught to youngsters