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Breaking into your Retirement Savings Early can be costly

Breaking into your Retirement Savings Early can be costly

Written by R. A. Stewart

New Zealand’s retirement scheme is called Kiwisaver. There is one thing which makes this scheme unique to retirement schemes of other countries and it is this:

There are circumstances when people can access their money prior to reaching their retirement age, 65 in New Zealand. People can access their money early for any of the following reasons:

  1. Terminal illness
  2. Going overseas permanently
  3. Purchasing their first home.
  4. Hardship.

Numbers 1 and 2 are quite understandable. Number 3 is that if you are purchasing your first home you may be able to use part of your kiwisaver for a house deposit.

Reason number 4 is the most common reason for premature kiwisaver withdrawals. In 2025 58,000 people withdrew money from their kiwisaver for hardship reasons. 

Breaking into your Kiwisaver early is not easy. You have to prove undue hardship, something which 58,000 people have managed to do. 

It is the fund manager’s supervisor who makes the decision to release your funds. They still have to follow a set of strict guidelines and a lot of people will have their application to withdraw early declined as a result.

Some people will see their Kiwisaver balance and think, “You can’t take it all with you, I can do a lot with that money,”

Kiwisaver is earmarked for your retirement or for your first home purchase and should not be touched otherwise you will be paying for it later on down the track.

The whole point of kiwisaver and any other retirement scheme is that you are saving money for your retirement and do not withdraw and keep contributing. 

Consistent long-term savings work well thanks to the magic of compound interest. 

Any break in savings will interfere with this process. 

With compound interest you earn interest on the interest and this helps your savings to grow faster. 

At retirement there can be a big pot of money waiting for you thanks to compound interest which is a friend of the long-term saver.

Making right choices

It is important to make the right choices when making important financial decisions, whether that is entering into a new relationship, purchasing a car, taking out a loan, or making major home improvements. The pros and cons need to be explored thoroughly and not to be rushed into.

All of these major decisions will have consequences, which will eventually lead to an outcome. 

One big mistake is to make major decisions based on today’s circumstances as if today’s circumstances will remain the same forever. Investing some if not all of your discretionary spending money in a share market fund other than kiwisaver will improve your financial know-how. There are several online share-market investing platforms available to begin your investing portfolio if you have not already started one. It is just a matter of being consistent with your investing and letting compounding interest do its work. 

About this article

The contents of 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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Invest and Forget

Invest and Forget

Written by R. A. Stewart

I know a couple of people who have money invested in the share market and keep track of how their investments are going by checking up on their shares online just about everyday. I told them that I just invest in such and such and then just forget about them. 

For me, there is no point in worrying about how your share portfolio is going because what the markets are doing is out of my control.

If you have chosen where to invest your money and it is in line with your values, your goals, and your risk profile then what the markets are doing should not be a concern for you.

Financial experts will tell you that if you are investing for the long-term, 10 years plus, you should be a little more aggressive with your investing.

Some investors get panicky when the markets are down and shift funds. Then what happens next is that they miss out on the gains which would regained their previous losses, if you can call it that, because these are just paper losses. They are temporary, but if you decide to sell when your shares are down or switch to conservative funds then these losses are locked in.

Some investors change fund managers because their funds are not doing well. It is worth noting that past record is no guarantee of future performance, so even if a particular fund manager out performed all others this year it does not necessarily mean that they will continue this trend.

If you have chosen which fund type to invest in then how the markets are performing should not be an issue.

Your savings goals can be categorised in one of three goals; they are:

Long-term goals

Medium term goals

Short term goals

Long-term goals are money which is not needed for 5 years+. Retirement savings and house deposit savings are examples of long-term goals.

Medium-term goals are money not needed for 1-5 years. Saving for a car or the trip of a life-time fall into this category.

Short-term goals are money needed within 12 months. This could be your emergency fund set up for unexpected expenses such as an appliance or car breaking down. School expenses, etc.

There is no one shoe which fits everyone, therefore it is up to each individual or couple to set up their own financial plan according to their goals and personal circumstances.

Which funds are best for you?

There are three types of funds to choose from when you invest in a managed fund, also called mutual funds. They are:

Growth funds

Balanced funds

Conservative funds.

Growth funds have the most potential to grow your wealth but are the riskiest. They are for long-term investing. It is suitable for young people because they have more time to recover from a market meltdown.

Balanced funds are a combination of growth and conservative funds. They have the potential to grow your funds but are not as risky as growth funds. 

Conservative funds are safer than growth and balanced funds but are not as profitable. They are more suitable for short and medium-term investing depending on how much risk you are prepared to take on.

Once you have chosen where to invest your money, you should just get on with your life and turn your attention to other things. In other words, “Invest and Forget,” because what happens in the money markets is out of your control.

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. You may use this article as content for your website/blog or ebook.

Read my other articles on www.robertastewart.com

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Tailoring Personal Finance to Your Risk Profile and Goals

Financial planning for your personal circumstances

Written by R. A. Stewart

“No one shoe fits all sizes” is a saying which is applicable to financial planning. No two people are the same. Personal finance needs to be tailored to one’s personal circumstances.

There are several factors which need to be taken into account when deciding what to do with your money. The one factor which covers all of your circumstances can be summed up in two words, “Risk Profile.’

Your risk profile is the amount of risk which you can comfortably cope with. “If there is a financial meltdown, would it affect your lifestyle?” is a question which needs to be asked, before you commit to investing in such and such.

Your timeline is one of the factors which make up your risk profile. The longer your timeline, the more time you have to recover from a market meltdown. When you are young you are able to invest more aggressively into growth funds, but that does not mean that you should invest every single dollar you own into growth funds because it all depends on what the purpose of the fund is.

You may be young and have some money invested in growth funds, some in balanced funds, and some in conservative funds.

Everyone has different goals and different living arrangements, which mean that your financial plan must be set according to your personal circumstances.

Setting goals is important. It gives you a destination to travel to. Without goals life will take you where it takes you.

There are three categories for goal setting:

Long-term goals (over 5 years)

Medium-term goals (1-5 years)

Short-term goals (up to 12 months)

A long-term goal can be savings for your retirement or a house deposit.

A medium-term goal can be saving for an overseas holiday or a car

A short-term goal can be saving for an emergency fund.

Growth funds are ideal for long-term savings goals.

Balanced funds are ideal for medium-term savings goals

Conservative funds are ideal for short-term savings goals.

Your tolerance to risk is a factor. There is no point investing in something if the possibility of loss is going to give you sleepiness nights. Having said that, successful investors learn to take a financial hit without losing heart. They learn the lesson and apply it to future investments.

During covid, the markets went through a bad spell. Many Novice investors switched from growth to conservative funds. The markets recovered and these investors turned a temporary loss into a permanent one.

The moral of this is to plan and stick with your plan because if you have invested according to your risk-profile then what the markets are doing should not be an issue to you.

People make different choices, some make right choices and others make wrong choices. It all leads to different outcomes. If you want a different outcome to what you have been getting then make different choices. It is as simple as that!

All the best.

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. 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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Build your Wealth with Diversification

The Art of Diversification

Written by R. A. Stewart

“Invest your money in many places because you never know what kind of bad luck you are going to have in this world.”-Ecclesiastes 11:1-2

Diversification means that you invest your money in several companies in order to manage your risk. We all know that from time to time a company will collapse, leaving those who invested in them out of pocket. We sometimes hear of cases where one or two investors had their entire life savings invested in such companies and got severely hurt by their loss.

The big mistake these people made was that they placed all of their eggs in one basket. They have only themselves to blame and no one else.

It is important to ask the question of “How will the loss of this money affect my lifestyle? And invest accordingly.

If you are investing for the long term, ten years+ for example then the share market drops should not worry you. These dips are only temporary and you should not view it as a loss but rather treat share market volatility as a fact of life and just get used to it.

Life has its own concerns without being overly concerned with how your portfolio is doing. If you have invested according to your risk profile then there is nothing to be concerned about.

No investment is entirely risk free but in order to increase your wealth then it is necessary to take risks but that does not mean gambling with your money which is speculating on a certain outcome. Investing means taking calculated and sensible risks. 

What is a sensible risk?

Investing in cryptocurrency for your retirement fund is not a sensible risk, it is a reckless one. However, investing in cryptocurrency as a side interest and with only discretionary spending money is fine as long as you understand the risks involved and the loss of your capital in this way is not going to affect your lifestyle.

The same can be said to investing in individual shares as an interest. I have a sharesies account where I drip feed money into individual shares in the share market. I choose one company to invest in per year and drip feed money into this company throughout the year. The share price will go up and down throughout the year and I will get shares at the lower price when they are down.

Investing your retirement fund in this way is considered to be “Placing all of your eggs in the one basket,” and is not recommended, but investing speculatively with your discretionary spending money can provide an added interest and an extra string to your financial bow.

About this article

The contents of this article are 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 blog/website, or ebook. 

Read my other articles on www.robertastewart.com

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Mistakes People make with their Money

Mistakes with Money 

Written by R. A. Stewart

Poverty does not just happen, it is the result of poor choices. That is barring unforeseen life events which can happen. I understand that others are forced into poverty for one reason or another. This article is aimed at those who have the means to make the most of the money they earn but choose to squander it. Here are their main mistakes.

1 They make poor life choices

The difference between the rich and the poor is because their choices in life are different. There is a stark difference between what a rich person and a poor person does with their discretionary spending money. All of those satellite dishes on council estates tell a tale. A rich person will find ways to invest their discretionary dollar so that it multiplies while a poor person will spend all that they have and more when you consider the consumer debt that they take on. It is also a fact that the poor tend to have more children and having kids does not come cheap, so this further compounds their vulnerable financial position.

2 They do not save 

People in a poor financial state do not save money. They fritter away their money with no thought for the future. Their financial situation is made worse because of their poor lifestyle choices. They borrow for stuff which is not essential to everyday living and spend money on things of no lasting value and this leaves them with nothing to show for their labors.

3 They do not invest

Wealth does not increase when money is not invested. Instead it loses its value due to the effects of inflation. Investing gives you a financial education and this leads to better decision making when it comes to money matters. This in turn leads to better financial outcomes for the future.

4 They do not take risks with their money

Investing involves taking some risks with your money but this does not mean speculating which is really just  gambling on some favourable outcome going in your favour. It is having a strategy of investing which enables you to make the most of what you have

5 They do not get financially literate

Lack of financial literacy is the number one reason why so many people are broke. Lack of ambition to rise above mediocrity is the main reason and there is little hope for the individual who lacks the will to improve their financial situation. I know that you are not one of those people otherwise you would not be reading this.

6 They hang out with the wrong people

People who are financially illiterate tend to spend too much time with like-minded people; those who have the same money mindset. “You are the average of the five people you spend most of your time with”. If you intend to be financially successful then spend more time with financially successful people. Read their books and pick their brains. Ask yourself, “What have I got to lose?”

7 They have a poor attitude

An attitude is something which every one has control over. No one can force you to adopt a certain way of thinking, you choose it and your circumstances have nothing to do with it. Having a good attitude will take you further than a bad one so you had better take responsibility for your own thinking and adopt a good attitude to financial affairs. I have heard all kinds of excuses why people have not joined a retirement scheme or have saved money. The real reason why they come up with excuses is that these people are unwilling to give up whatever it is which they are frittering their money away on. 

If your financial affairs are in a poor state then it is likely that you will have to make some changes. A budget advisor may be needed, but not necessary for if you just paid a visit to your local library then you will find some good books on personal finance which will help you.

About this article

The contents of this article are 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 blog/website or ebook.

Read my other articles on www.robertastewart.com

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The Prodigal Son and its Money lessons

The Prodigal Son and its Money lessons

Written by R. A. Stewart

The parable of the prodigal son may have been first told over two thousand years ago but its lessons are timeless and are worth noting. In this parable a young man asks his father for his inheritance while his father was still alive. The Father then divides his estate between his two sons, and then the younger son,the one who asked for his inheritance gathers all of his things and goes to a faraway land where he fritters away his inheritance on loose living.

During this time the younger son had more money than he ever had in his life but was not responsible or mature enough to handle all of that money. In fact he was just a baby with too much money.

As so happens when young people get a lot of money, he became arrogant and displayed his wealth with his generosity. 

He had lots of friends when he had all of this money but they were not true friends as we will discover later on in this story.

We sometimes hear stories of people who won the lottery, then were broke a few years down the track. It is important for people to learn how to handle their money from a young age. This is called, “Financial literacy.”

Learning to be an investor is part of being financially literate. Some people are good at saving but they save to spend, not to invest.

Back to the prodigal son.

When one is living beyond their means the result is debt and with interest repayments on top of that financial disaster looms. The prodigal son, the younger of his father’s two sons, spent all that he was given and had nothing coming in so that it was only a matter of time before he was left with nothing.

The parable puts it this way, “There was a famine in the land”

This means that he was living in poverty. The money was all gone so what did he do?

He got himself a job working among the pigs. He wished he could eat what the pigs ate but no one gave him anything.

Strange; he had lots of friends when he had lots of money but as soon as he needed help, no one would help him. 

You will only find out who your real friends are once you hit rock bottom.

Next thing, something happened inside the mind of this lad because he came to his senses. In other words, The Penny Dropped.

He figured out in his own mind that if he returned home then he would be better off than his current circumstances. 

The main lesson from this story is that despite all of the stuff offered by the world system, it only leads to emptiness. There are things which he will never get back and that is time that he never spent with his family. His behaviour was a stain on his reputation. There are some things which money cannot buy; a good reputation and time with his family. It is all very well, going out and exploring new opportunities and working hard to make a life, but these things need to be kept in its proper perspective.

www.robertastewart.com

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How to set Money Priorities (And stick to them

Written by R. A. Stewart

Being strategic with your money will enable you to make the most of what you have and that means managing your money well; it also means prioritizing what you are going to do with your money.

Having clearly defined goals will enable you to do this but it takes a fair bit of discipline to stick to your plan.

If you are saving for a car then it means giving up stuff which does not add any value to your life. There are worse ways in which you can spend your discretionary dollar than on a vehicle. If you spend it on clubbing every weekend, then you will not have anything to show for the money you have frittered away. At least buying a car will add to your lifestyle.

Keeping pets can be very expensive and can cramp your lifestyle. The cost is not the only issue you have to deal with; if you are away on holiday then there is the issue of who is going to look after your cat or dog.

Then there are vet bills. Some folks are so attached to their cat or dog that they are prepared to spend $1,000 or more on vet bills. This is utter madness and can undermine a person’s financial well-being.

The questions which need to be asked are:

Is this purchase really necessary?

Will this purchase help me to achieve my financial goals?

Is this the best use of my money?

It is worth pointing out that there are some factors which affect your priorities. Some of them are your age, family responsibilities, your health, and your goals.

If you are aged in your sixties, then you are not going to have goals with a thirty-year timeline.

Another thing which should be mentioned is that whatever you are saving for should not be at the expense of your retirement fund. If you get into the habit of putting off retirement contributions after you have saved for whatever it is you are saving for then it will cost you when that time comes and it will surely do. 

Investing helps build your financial literacy. If you are not getting involved in the share market, then you are not gaining investing experience which will help you make better decisions in the future. It is better to make mistakes when you are young and with no commitments because your lifestyle will not be impacted. Not so when you are older when you may have your own family or other commitments.

We all have a choice of how to use our discretionary spending money and by setting goals on where your money is going you will have something to show for your money. It is all matter of prioritising you’re spending.

About this article

The opinions expressed in this article are 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 blog, website, or ebook. 

Read my other articles at www.robertastewart.com

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Don’t just hoard your money-put it to work

Written by R. A. Stewart

Saving money is a good habit to get into; it will put you in a better position to thwart some of the unforeseen setbacks which life has in store for us. It will also mean that you are able to pay for those major items in life which will crop up such as, a car, wedding, kids,or  retirement. This all requires vision. Planning for those things which are unseen but will likely occur in the future.

A person with no vision will spend their money without any thought for the future; they live for today as though tomorrow does not exist.

Saving money is one thing but investing is another thing altogether. Investing your money can multiply your wealth and help you to achieve your goals faster.

Investing needs to be strategic. Most importantly you need to know whether what you are saving for is short-term, medium-term, or long-term.

Your rainy day fund is considered short-term because you could need the money anytime, whether that be for car repairs, insurance, dental or medical bills.

Saving for a car can be considered short or medium term depending on how long you have given yourself before you are buying a car. 

Your retirement fund and saving for a house deposit are considered to be long-term savings goals.

Here is a breakdown of Short-term, medium-term, and long-term goals.

Short term is under one year

Medium-term is one-five years

Long-term is more than five years.

This determines your risk profile but you can fall into more than one category depending on what your savings goals are.

Your rainy day account is money which should be invested conservatively such in an ordinary savings account or a conservative fund in say sharesies or robinhood.

You’re saving for an overseas trip or car within five years in the medium term so you could consider having that money in a conservative or balanced fund.

Your retirement fund is considered long-term so that money could be in a growth fund if you can stomach the volatility of the markets.

As an investor you can fall into all three categories.

There is another category which I will include here and that is discretionary money, but if you are planning to save for something special then you can simply redirect your discretionary spending money into whatever you are saving for.

What you spend your money on is what takes priority in your life. It should not be at the expense of your future plans. If you are spending all of your discretionary money on your hobbies but have nothing to show for all of the money you have received from whatever source your income comes from then there is a problem. 

It all boils down to choice and how you manage your money. It is not how much money you make which determines your financial outcome but what you do with what you make.

With the right financial strategy in place you can weather some financial storms which may come along. As for investing, if you choose the correct investments for your risk profile then what the markets are doing will not be an issue. Don’t let the possibility of loss scare you off investing. You need to be an investor if you want to grow your wealth.

About this article

The opinions expressed in this article are 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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Don’t follow the crowd

 

Written by R. A. Stewart

Prior to the 1987 sharemarket crash, which was named “Black Monday,” investors were rushing to buy shares and as the price rose and the value of their portfolio increased, people borrowed money to purchase shares using the value of their holdings as capital. When Black Monday arrived, the value of their portfolio dived, the result being that investors who borrowed money found themselves in the position of owing more money than their shares are worth.

The problem with using borrowed money is that the crunch comes when you have to pay it all back plus interest.

Jumping on a bandwagon can be very costly. In the case of the 1987 sharemarket crash, the price of shares did not reflect their true value but rather the amount of money which went into the market.

It reminds me of the old saying, “Something is only worth what others are prepared to pay for it.”

We have seen similar examples of companies on the share market which have seen their price rise then come crashing down quickly. Many who jumped on the bandwagon got their fingers burnt.

If you are going to try your luck at making a killing, then this needs to be done with your discretionary spending money and not with your retirement funds or your deposit for a house fund.

The reason being that investing for a killing is a short term speculative investment.

Once in a while you will hear stories of someone who made a killing by investing in such and such but you never hear about those who tried the same thing and lost. It is likely that such people ended up losing their profits.

Here is another saying worth keeping in mind, “Whenever there is an opportunity for a capital gain there is an opportunity for a capital loss,” that is the nature of the markets.

But with the right investing strategy you can achieve your goals whatever the markets are doing. If you have invested according to your risk profile then the state of Wall Street should not be a concern to you.

A windfall is only as good as how it is being used. It is not much good if it is being frittered away. Use it to your best advantage according to YOUR OWN GOALS and not what others think you should do with your life.

Following the crowd can destroy one’s chances of financial prosperity; Just take a look at how much money smokers are paying for their addiction. And where did it all start?

As a teenager when someone was offered a cigarette by their peers and because they were people-pleasers they accepted.

It is rather mind-boggling the amount of money smokers are burning through per annum. That money could have been put to better use. Not to mention the health aspect of smoking.

Set goals that align with your values and not ones which others have tried to impose on you. If someone has limitations then they will impose their limitations on you. Take heed of wise advice but use your common sense to discern whether the advice is good or bad. If you are unsure then ask a number of adults for their opinion. Don’t be afraid to ask and never be so puffed up with pride that you never take advice from anyone. “Pride always comes before a fall.”

About this article

The content of this article is the writer’;s own opinion 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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Investing with a Vision

Investing with a Vision

Written by R. A. Stewart

“He who lacks vision will perish.”-Proverbs 29:18

Financial planning requires vision. What does vision mean? It is the art of preparing for the unseen. People will go through life stages. They buy a car, get married, have kids, and retire. A person with vision will make provisions for these life stages. A person with no vision will spend all of their discretionary spending money without giving any thought to the future.

This is irresponsible and selfish because there are consequences to spending now and burying your head in the sand mentality and that is often poverty. 

If you enter into a relationship with someone then you will take your financial situation into that relationship. If you have a bad credit rating then you and your partner may have difficulty obtaining a mortgage.

Someone who is a good money manager will make provisions for the future which will help them to withstand financial shocks which may not have been predicted such as a job lay off or health issues.

Financial planning does not end with saving money, but rather it is the beginning. Investing that money so that it is working for you can increase your savings and certainly your financial literacy. Your risk profile is the factor which determines where you should invest your money.

Your risk profile is the amount of risk you can take on in relation to the term of the investment. 

If you are in your twenties or thirties then investing in growth funds may be right for you because you have more time to recover from a market meltdown. Someone in their sixties may need their retirement funds within five years or less and the last thing you need is for the markets to take a dive just when you need the money.

If you are putting money aside for a mortgage deposit, car, your child’s education, then you may want to take a more balanced approach with your investing.

It is worth pointing out that you could fit into more than one risk profile category.

If you are young then financial advisors suggest that investing in growth funds is the way to go for your retirement fund because you may have more than forty years before you retire.

However, you may also be putting away money for a mortgage deposit and need that money within 5-10 years so taking a more conservative approach to your house deposit funds may be best. Again, if the markets took a dive just when you needed the money then your house deposit funds will be short of where you intended it to be.

Having the right kind of attitude to your money will pay dividends in the long term. Some people scoff at those who are prudent with their money, calling them selfish and money hunger yet go out and purchase lottery tickets in the hope of winning a quick million. If that is not a contradiction in their philosophy then I don’t know what is. Gold Diggers are notorious for this. A man is their only financial plan; they have no interest in gaining any kind of financial knowledge. There is an abundance of it out there. You just need to pay a visit to your local library to find such books. Even your local charity stores will have some of these books in stock. 

My favourite authors are Frances Cook, Mary Holm, and Martin Hawes. These financial advisors are from New Zealand. Their advice is just as applicable to other countries, well, most of it. It is just a matter of acting on what they say. That is, if it is applicable to your personal circumstances. 

Having some kind of vision for your life will make it meaningful and fulfilling and that requires a degree of vision. Just Go For It and take no notice of your detractors.

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. You may use this article as content for your ebook, website, or blog.

Read my other articles on www.robertastewart.com