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Stop Overspending: Why Separate Accounts Are Your Best Savings Hack

Written by R. A. Stewart

These days people have bank accounts for different kinds of purposes depending on what the money is being used for. Having your money in separate accounts helps avoid the temptation to spend. Here are some of the most common types of bank accounts people have.

  1. Personal Savings Account

This is the account most people get their pay credited to. It is a spending account for everyday living such as groceries, car running costs, etc. Most people have their fixed bills such as newspaper subscriptions, power bills, and rent directly debited from this account.

  1. Rainy Day Account

This is for unexpected expenses such as car break downs, appliance repairs, school expenses, etc.

  1. Retirement Account

It is essential to have some kind of retirement account. New Zealand’s retirement scheme is called Kiwisaver. It takes vision to make provision for your later years. It is also the responsible and mature thing to do. If there is one thing which your future you will thank you for it is that in your present you have made consistent contributions to your retirement account.

  1. Rent or Rates account

This needs to be kept separate from an account you use for your everyday transactions because what you do not need is to be short of money when it comes to paying your rates or rent.

  1. Insurance bill account

Paying insurance is not cheap, whether it is house or contents insurance, or vehicle insurance and keeping a separate account for this will give you a peace of mind when it comes to paying it.

  1. Travel Spending Money account

This account is for your holiday spending money; this is discretionary spending money. You should not have a credit card for any reason, especially for travel expenses. If you cannot even save your holiday spending money then stay home.

  1. Travel Airfares account

The same rules as your travel spending money account.

  1. Investment accounts

Investing your money grows your wealth. In order to grow your wealth for your future you must invest in several places. Investing not only grows your wealth, it also grows your financial literacy.

  1. Debit card for online transactions

Having a debit card for purchasing stuff online is convenient. A debit card is not for saving whether short-term or long-term. It can be easy to fall victim to a bank scam with a debit card. All it takes is for you to lose your card so only have what you need in this account.

Power Saving Hack: If you have a freezer and there is a lot of empty space in it then get some empty soft drink bottles and fill them with water and put them in the freezer. A part empty freezer uses more power than a full one.

About this Article

This article is of the opinion of the writer and is not financial advice. It 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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How to respond to financial setbacks

 

Written by R.A.Stewart

In 2008 during the Global Financial Crisis, a company I had money invested in went bust. I had close to 7 grand invested in it but my initial investment was 5k. The interest rate the company offered investors was higher than what you would receive if investing for a fixed term with the banks. 

I had smaller amounts invested in other companies which went bust.

The company had assets in property and I thought that at least they had assets which could cover the loan if they ever went bust. Problem was, their assets were worth less than their liabilities.

It reminds me of the 1987 sharemarket crash, also known as “Black Monday” when investors borrowed money using the value of their shares as collateral and as the value of shares increased investors were able to borrow even more. 

That is until the crash when the value of their portfolio was worth less than the money owing on them.

A guy I worked with told me that he had mortgaged his house to purchase shares and was left with a debt which at that time will take years to pay off.

There are several ways in which people respond to financial setbacks such as those that have been described. Here are three:

  1. Stop investing in the markets

Some people who got their fingers burnt during Black Monday, stopped investing at all and just left their money in an ordinary savings account. These people may have avoided future share market shocks but they have also missed out on the market rises. Savings which are just left in a personal bank account will lose money if it is left there for any length of time when you consider the effect of inflation and taxation.

  1. Blame Others

During the Global Financial Crisis (GFC), a lot of investors lost money that they had invested in finance companies. A few had their entire life savings invested in some of these companies. Many blamed those in charge of the company for it going under. Not one of those who were interviewed by the TV reporter who covered their meetings took responsibility for their situation or even admitted that they made an error in placing all of their eggs in the one basket. Why did they not diversify their portfolio in order to minimize the risk of losing everything in one hit. Placing all of your eggs in the one basket is just like going to the races and putting all of your money on the one horse. It is easy to be upbeat when things are going well, but try getting along with someone who has taken a heavy loss.

When choosing where to invest, the question one has to ask is, “How will the loss of this money affect my lifestyle?”

Greed gets the better of some people, so much so, that they ignore all of the telltale warning signs. 

Financial experts warned investors about the risks of investing in financial companies which offer high interest rates, saying, “The high interest rates do not reflect the risk investors are taking with their money.”

  1. Learn from the experience

Then you can take it on the chin and accept that you made an error of judgement. Experience is an expensive teacher but you have to invest in order to gain experience and become financially literate. It is important to get over the fear of loss when investing for the long term. If you are investing for the short term such as for next summer’s vacation or for a car then you may want to invest conservatively.

The question that needs to be asked is, “How will the loss of this money affect my lifestyle?”

When I say loss, I mean if the share market drops by 5% or more. You lose only if you sell your shares. A 5% drop in the market is not a problem for those investing for the long or medium term. 

The only way to get experience is to invest. Experience is your best teacher; this applies to any job or activity which you undertake. You will make mistakes; don’t beat yourself up or blame others; learn the lesson and take that into your future decisions.

About this article

This article 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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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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Cost of living crisis affecting retirement savings

Cost of living crisis affecting retirement savings

Written by R. A. Stewart

Thousands of New Zealanders have suspended contributions to their retirement fund due to the cost of living crisis and this will affect them when their retirement comes around.

New Zealand financial adviser Carissa Fairbrother advised people to keep sowing into your kiwisaver whatever your financial circumstances. Look at where else you can make cutbacks because not investing into your Kiwisaver will affect you when you retire.

Kiwisaver is New Zealand’s retirement scheme; it is voluntary, unlike the retirement schemes of other countries which are mandatory.

There is a $520 tax credit per annum for contributions to Kiwisaver but to obtain this investors will need to deposit a minimum of $1040 every year. This is just like getting 50% interest on your money for the first year the money is deposited.

Anyone who is a New Zealand resident can join kiwisaver. There is no upper or lower age limit. People under the age of eighteen or sixty five and over are not eligible for the $520 per year tax credits. It is still a good idea to join kiwisaver despite this for several reasons.

The $520 tax credits or government incentives as they are sometimes called is paid out in July into your Kiwisaver. If you contributed less than $1,040 during the previous year then you will receive 50% of your contributions.

The Kiwisaver year begins on July 1 and ends on June 30. It makes sense to check your contributions during the year and to make sure that you deposited at least $1040 by June 30.

One is it will give the young ones a good start to life as far as savings are concerned and it will also give them a good education in finances. 

For those aged 65 and over, it is still a good idea to keep contributing to your kiwisaver if you are not going to be using it in the short term.

Buying your first home

If you are purchasing your first home you may be able to use some of your kiwisaver for a deposit. It is all the more reason to start saving as early as possible as it will enable you to reach your goals quicker.

There are other circumstances where you may be able to access your Kiwisaver early. These are if you have a terminal illness, you are moving overseas permanently, or due to financial hardship. There are lots of hoops to jump through before you can access your money.

It is all the more important to have a rainy day fund when everything is going well for you and not just fritter away your discretionary spending money because things do go wrong in life.

It is never too late to join Kiwisaver, you can still join even if you are 65, though you are not eligible for the government incentives. It is still worth your while joining. It is a good way to play the share market.

You are never too young to join kiwisaver. You may not be eligible for the government incentives until you are 18 but joining early then having family members make contributions while you are still at school will give you a good financial platform for the future. Who knows, a rich uncle may leave you a sum of money in his will to be deposited into your kiwisaver.

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 part or all of this article as content for your ebook, website, or blog.

www.robertastewart.com

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The Benefits of Saving

The advantages of saving

Written by R. A. Stewart

Having savings will make life easier later on down the road. Just think about these benefits of saving money that people who are shopaholics cannot take advantage of.

  1. You are able to invest the money and grow your wealth. There are ample opportunities to invest your money and make it grow and if you are able to save your money, you can take advantage of these.
  2. When you save up for something instead of using your credit card then you save on interest repayments. People who buy stuff on credit are paying more than if they have paid in cash. During a person’s lifetime, this interest adds up to a fortune.
  3. Having savings behind you gives you more options. If you spend everything you make then when the time comes that you may lose your job, you are inhibited by your lack of resources. People with savings behind them are able to move to another city in order to find work.
  4. When an emergency arises such as dental repairs, car break down, family occasion such as a wedding or funeral, you are in a better position to deal with it if finance is not a problem.

Saving money requires self-discipline and responsibility for your own finances and with a bit of planning and organization you can make life easier for yourself to cope with the financial hits that will occur from time to time.

Having a plan for your money instead of just saving for the sake of it will give you motivation to keep saving. There are several things you could save for; here are some ideas.

* An emergency fund

*To build a share portfolio

*Save for a car

*Save for a wedding

*Save for a house deposit

*Save for an education fund for your kids

*Dentist and medical bills

Money which is used for saving is disposable income; it is money left over after paying your fixed costs. Think about what you spend your money on that is a want rather than a need. That is money which can be saved and used elsewhere. Money which is spent on wants is considered as consumer spending; it is money which is consumed. Disposable income or discretionary spending money as it is also referred to can be used to protect yourself against future financial shocks. It is the responsible thing to do to make choices which benefit you and your family. 

Irresponsible people just fritter away their disposable income without any thought to the future. What you spend your money on will make a difference to future financial outcomes. It all boils down to planning which will in turn help you to make better choices. No one ever reached the retirement age and regretted that they joined a retirement scheme. 

Always strive to save when you are in a position to do so because life does not always follow a straight path; there will be setbacks along the way as those people affected by natural disasters will tell you.

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. 

www.robertastewart.com

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The savings habit should be developed from a young age.

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Investing for seniors

 

Written by R. A. Stewart

 

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, 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.

In any case I still believe that it will pay to arrange your finances so that if you fall victim to a scammer then not all of your money will be lost. 

Don’t leave all of your money in the one account for goodness sake as some victims of scammers have.

If you are traveling then make sure you don’t have access to your life savings because if you do then so will be a scammer if they manage to get hold of your login details.

Scammers have all kinds of ways to trick people into handing over their login details.

Anyone can be a victim so don’t be proud by saying “I am not that stupid.”

As you get older you will have to invest more conservatively; that does not necessarily mean transferring from growth to conservative funds but investing some of your current savings into low risk accounts. The deciding factor is your timeline. How soon you need the money and funds which are going to be used within 12 months are best invested conservatively.

 

www.robertastewart.com

 

ABOUT THIS ARTICLE

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