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Saving money

Saving for whatever…

Written by R. A. Stewart

Establish your savings goal. Are you saving for your retirement, a new car, a deposit for a home or whatever. This will be the determining factor when choosing where to invest your money. It is important to note that you can have several different savings/financial goals at the same time with a different type of investment with each goal. 

For example, you may have a short term goal to pay off your TV set, a medium term goal to save for your car, and a long term goal to put away money for your retirement.

Your financial goals should be split up into three categorys; short term, medium term, and long term.

The category will determine where it is best to place your money.

  1. SHORT TERM

Oncall-6 months

This is money on standby and used for general household bills such as power, car running expenses rent, and so forth. 

Where to keep this money; Ordinary savings account or bonus bonds

  1. MEDIUM TERM

6 months-3 years

This is money being saved for a car, appliance, overseas trip.

Where to keep your money; Bonus Bonds is a good option but mutual funds is an option but invest conservatively. 

There are a number of managed funds which are cropping up and you do not have to have much to get started with them. A good one for the beginner is sharesies (in NZ). If you are from another country there will be companies similar to Sharesies you are able to invest with.

  1. LONG TERM

3 years+

Saving for a house deposit and building a nest egg for your retirement are examples of long term goals.

Where to keep your money; kiwisaver is an ideal investment to drive you to your savings destination because the incentives will help your savings grow.

Some tips.

Pay off debt first because if you are able to pay off a debt where your are paying say 10% interest on the debt then the interest saved from the paid off debt is just as if you had been paid the 10%; as the saying goes, “A dollar saved is a dollar made.”

Stuff happens in life where circumstances change therefore you need to be prepared to be flexible.

Take a long term view of your investments. It is time and not timing which is the key to investing. As you gain more experience with investing, your risk profile will improve.

Read all you can about finance and the share market. Knowledge will help you overcome your fears when investing.

PLEASE NOTE; The information in this article is the writer’s opinion based on his experience. If you require financial advice see your bank. You may use this information for your website, blog, or ebook.

www.robertastewart.com

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The averaging system for shares

The averaging system for shares

Averaging is a term which has been used by share market followers over the years. This is when an investor buys several shares in the same company over a period of time and the average price which was paid per share may be higher or lower depending on which direction the share price is going.

Here is an example of one New Zealand company, Fletcher Building beginning with January 4, 2023. The first three days of the year were public holidays so January 4 was used as the starting date and every seven days after that.

Date Share Price

4/1 4.71

11/1 4.90

18/1 5.06

25/1 5.11

1/2 5.25

8/2 5.46

15/2 5.07

22/2 4.81

1/3 4.71

8/3 4.65

15/3 4.50

Now let us assume that you had purchased Fletcher Building shares on each of these dates, investing the same amount of money. You would simply add up the totals of these prices and divide the answer by 11. That is the average price you paid for the share. In this case the average price you would have paid for Fletcher Building shares would have been $4.93 if you had bought them every week. 

We all know that shares go up and down so drip feeding shares into the market in this way will ensure that you have bought shares at a lower price when they are down as well as when they are on an upward trend.

Online trading platforms such as Sharesies and Robinhood make this process easy. If you have more money to spend you may want to choose two or more companies per year to invest in using this system.

As with other investment strategies you need to ask the question  “Where does this fit in with my financial goals?”

About this article

You may use this article as content for your ebook or web page. The information may not be applicable to your personal circumstances so discretion is advised.

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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Investing facts of life you must accept

Investing facts of life you must accept

In every aspect of life there are some cold hard facts that you need to get your head around. Investing your savings is no different. Here are seven facts of life when it comes to investing. Understand these and you will be better equipped to make better choices.

  1. Whenever there is a chance for a capital gain there is also a chance for capital loss

Whether you like it or not, if an opportunity for a capital gain arises then there is also the chance for a capital loss. It is easy to invest when all is going well and the money you have invested has grown but most of your capital gain will come when you are investing while others are selling. It requires patience and self control to stay with your financial plan when the markets are heading south. Your financial plan has to take into account the possibility of a bear market therefore, invest according to your timeline.

  1. It is time not timing which is the key to growing your wealth

The key to prosperity is to start saving early. Once you get into the habit of saving and investing from an early age then things will become easier for you years down the track. Saving a portion of your income means living within your means but that does not mean that you have to be very stingy. It means not frittering away your spare cash on items which are not going to help you financially in the long term. If you are on the verge of retirement or already retired then you have less time to recover from financial setbacks therefore cannot be as aggressive with your investing as the young ones but that does not mean that growth funds are out of bound but rather just balance your strategy depending on how soon you are going to use the money.

  1. Your investments are your responsibility

You may be using a financial adviser to deal with your investments but they are still your responsibility because an adviser cannot think for you; it is up to you to set your own goals which match your personal situation. It is then up to you to tell your adviser where you wish to invest your money. Some investors like to have someone to blame and during a market downturn the first person to blame is their fund manager. In the case of retirement schemes such as the New Zealand Kiwi saver, investors have the choice as to whether to invest their money in growth, balanced or conservative funds. If balanced funds are chosen then there is the choice of what percentage of your savings will be invested in growth funds. Balanced funds are a mixture of growth and conservative funds.

  1. Value is determined by what others are prepared to pay for

Have you ever stopped to ask yourself the question, “What will this be worth in x years time?” The answer is quite simple!

What gives something value is what others are prepared to pay for that item whether it is a painting, someone’s stamp collection, shares in a particular company, cryptocurrency, property, gold, or whatever. 

None of us can know for certain what the market will do, therefore we take calculated risks based on our knowledge and expectation. 

As with anything in life there is no guarantee but if you do your homework and put a bit of thought into your strategy then you can have a nice nest egg to call upon when you need the money.

  1. Life is one big pyramid

One fact of life you need to accept is that life is like a pyramid. Using sport as an example; few ever make it to the elite level, comparatively few that is compared to the numbers taking part. It is the elites who make the most money, then as you go down to each level there are more and more participants. At the grass roots level you will find the highest number of participants, these are the sports men, women, and children who take part in sport for no other reason other than the enjoyment they derive from their chosen sport. 

If you have the ability to make money from your sport then it certainly will pay to have a backup plan by adding another string to your bow.

As for investing, well, there can only be one Warren Buffet, Robert Kiyosaki, or Anthony Robbins. It is important that you be the best at being you and not try to be a second rate version of someone else. Your personal financial choices must be what is applicable to your own circumstances.

 

  1. Life is all about percentages

Most people have played the lottery and most of us whether we have played it or not have heard about the absurd amounts of money which some lucky lottery winners have won; sometimes running in the millions. There is something which you must understand and it is this; For every person who won the lottery there are countless thousands who have lost their money trying the same thing. This is also true of many aspects of investing. You may have heard about someone who made a killing on the share market, on bitcoin, or some other investment but you seldom hear of those who lost everything while trying the same thing. My advice to those who are thinking about taking on high risk investments is to only do so with discretionary spending money and not with your retirement savings or money set aside for a house deposit or a car.

  1. Life is a numbers game

In life you cannot expect to win every single time. That is unrealistic. But making mistakes is just part of the learning process. The fact is that the more mistakes one makes the more likely one is going to win. Some people avoided risk after the 1987 sharemarket crash having got their fingers burned during Black Monday. 

If you do not take risks then nothing may happen to you but then you will also miss out on some of life’s experiences. When it comes to investing you need to take some kinds, albeit calculated ones in order to get ahead of inflation and the cost of living, otherwise the value of your money.

www.robertastewart.com

ABOUT THIS ARTICLE

This article is of the opinion of the writer and is not necessarily applicable to your personal circumstances. Feel free to share this article. Users may also use the article as content for your blog/website/ebook.

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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

Looking to add another string to your financial bow? Sharesies is an online platform enabling everyone to have access to the sharemarket for a minimum investment. It is a terrific way to build up your financial literacy, not to mention your wealth. Check it out here:

https://sharesies.com/r/377DFM

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FINANCIAL SUCCESS

ABOUT THIS ARTICLE

Financial success can be as easy as making a few adjustments to your spending habits and your attitude. If you have self-control and a strategy in place you can avoid many of the traps which cause financial heartbreak to so many people.

8 Causes of financial failure

Struggling financially? A lot of people are even though they give everyone the impression that they have it all made. They are working, live in a nice house and drive a nice car, but are living from payday to payday. Here are 8 major causes of poverty in the first world. 

Living beyond your means

There is no getting away from it. If you spend more money than you earn then you must be getting your extra money from somewhere and that almost always means borrowed money, also called buying on credit. There is a cost to all of this and it is called interest. If you are in the habit of buying stuff on credit then the interest you are paying during your lifetime will add up to a fortune. The interest is sometimes called dead money because you have nothing to show for all of the interest you are paying.

Think of what you could have spent with all of that interest. It is almost too painful to even think about but if you are to avoid poverty then you need to pull yur head out of the sand and face the facts; your financial future depends on it.

Keeping up with the Joneses

Some people try to keep up with their peers with whatever they are spending their money on. It’s a compulsion that will cost you plenty. Living up to some kind of self image will severely dent your finances and will prove costly by the time you stop working. You may think your peers are doing well financially to afford this stuff or even think they have done well for themselves but what you don’t know may surprise you. That they may be up to their eyeballs in debt. Even if they are living within their means to finance their lifestyle it does not mean you have to keep up with them. 

Don’t be a people pleaser and live up to other people’s expectations, live according to what is the right course of action for your own circumstances and you will be far happier.

Consumer Debt

Consumer debt or dumb debt as it is often called is purchasing stuff with borrowed money. It is spending tomorrow’s income today. Debtors are usually oblivious to what is happening to the so-called stuff they bought on credit; that their newly acquired possessions are worth less the minute they have bought it. A crucial factor which needs to be observed is this; The money owing on the item is always more than what the item is worth. No one so many people are caught up in the debt-poverty cycle and it is not just those on lower incomes; in fact people on a middle income are prone to this trap. 

Commercial Greed

Commercialism during the 20th century has brought a lot of prosperity; it has provided jobs and created countless businesses but there is another side to it. The first world poverty which is caused by an insatiable appetite for things. People are not content with just stuff they need but keep wanting more. This all has to be paid for, it is money that could have been used to build a financial base for their future.

Addictions

Addictions are very expensive; just ask any smokers. One does not need to be a mathematician to calculate how much cigarette smokers are paying for their addictions. It is estimated at over $100 NZ per week. That equates to five grand per year and fifty grand per decade. No wonder many smokers are broke. It is the same with those who are addicted to alcohol and the pokies. 

Financial illiteracy 

Financial illiteracy is the major cause of financial poverty and it is not only those with low incomes who are financially illiterate; people on a high income can also be guilty of this. You hear stories of successful sports people who earned millions during their heyday but are broke years after their retirement. It is important to save and invest your money during your best earning years to set you up for when you are no longer earning as much.

Irresponsibility

Not taking responsibility for your own finances is irresponsibility. They will come up with all kinds of excuses why they have not joined kiwisaver or are not contributing. Excuses such as, “You can’t take it all with you,” “I might die before retirement,” or “I’m only young.” People who are irresponsible with their finances tend to be irresponsible in other areas of their lives as well. Making commitments whether it is in a relationship, owning a house or car, or saving for your retirement takes responsibility and that is what separates the men from the boys.

Bad Company

There is no doubt that bad company is a major reason why so many people are living in poverty. It has been said, “You are the average of the five people you spend most of your time with,” so it pays to examine who you are hanging out with and ask whether their attitudes and opinions on finance are influencing your money habits. In order to grow you need people to help and encourage you. This sometimes means separating from bad company. Some find that hard but in the long run it is all worth it.

ABOUT THIS ARTICLE

You have permission to publish this article, post it on your blog, use it as material for your ebook or do anything you wish with it as I do not copyright my stuff. My blog www.robertastewart.com has lots of financial types of articles.

If investing in gold is for you check out the link below:

https://affiliates.goldco.com/l/1VRW1MU2Q/

Good financial habits can be developed from a young age.

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GETTING THE RIGHT ADVICE

Listening to the right people…

Taking advice from the right people and ignoring comments from the uninformed will help you to become better off financially in the long run. An example I am going to use is my nephew Kyle who had made a bit of money from sports betting. He withdrew all of the money from his betting account and invested the money in a fixed interest account. His goal is to save money for a house deposit but he is almost got the money now. It is some of the advice or rather comments that he has been given that really gets me, with some of it bordering on stupidity.

Myself, I advised him that investing in the New Zealand retirement savings scheme Kiwisaver would be a good bet because he would be able to use part of his kiwisaver for a house deposit providing that he has been in kiwisaver for at least 3 years and that it is for his first home. He would qualify on the latter as he has never owned a home but he has been in kiwisaver for just 6 months and is unwilling to wait another 3 years.

That may be so, but everyone in kiwisaver should at least contribute $1040 into the scheme per annum to take advantage of the full tax credits of $520. This is effectively a return of 50% per annum on your investment, all tax free.

The advice I gave is exactly the same as every other financial expert have been saying, and no, I am not qualified to give financial advice to anyone but then neither are many of those who have been adding their two cents worth. Some of them have little money or assets and have nothing to show for their life’s work.

If you hang around losers, you will be one yourself. What they will do is drag you down to their level because then that it will make them feel better about themselves. Some people have such a low opinion of themselves that they will tear others down because the success of others is giving them an inferiority complex.

To use Kyle as an example, he has prospered since he moved out of his auntie’s flat.

Kyle has more financial sense than any of his siblings; one of whom told their mother that he has a gambling addiction. He withdrew 10k from his betting account and invested the money and when he told his brother that he had nothing left in his account that he had nothing left, he thought he had lost the money.

The pathetic thing about this is that this sibling cannot live a day without alcohol and smokes like a chimney that who knows how much of his income is disappearing every week on booze and smokes. Multiply the weekly amount spent on this and the amount spent annually on his vices is quite substantial, certainly in the 1000s.

It pays to not let others know what you are doing and keep your activities to yourself apart from those who are on the same page.

As for investing money into his retirement fund to save for a house, well that may not be the right option for someone looking to use the money in the short to medium term. A retirement fund is exactly that-a fund for retirement and one has to understand that you have to wait until you are 65 or whatever the retirement age when you reach it. Money for other purposes should be put in appropriate account.

A stupid comment I did hear from someone regarding kiwisaver was, “You may not get it back.”

Kiwisaver will get the money at 65 but what gets my goat is that the person who masde this comment has very little in the way of assets so that whatever she spent the money on she never got it back. It is the same with people who spend x money on a nicotine or alcohol addiction; that is money gone forever, not to mention a shortened life span because of the health consequences of these addictions.

I wrote a post a few weeks ago about using your money as a seed to grow your wealth. Money if it is sown in the right places can reap a nice future harvest.

Happy investing!

www.robertastewart.com