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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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5 Ways to Diversify your investments

5 Ways to Diversify your investments

To have a diverse portfolio means to have your money in several places so that if one company or industry is in trouble then income from your other investments should at least minimise the shock.

There are 5 ways to diversify your portfolio. 

Number 1: Invest in several industries

Investing in different kinds of industries protects you from a downturn in one. With the online share market platforms I am with I have investments in a building company, an energy company, a farming retailer, phone company, and a New Zealand milk supplier. This diversification technique minimizes risks and gives me plenty of interest too.

Number 2: Invest in several funds

If you invest in managed funds and that includes everyone who is in Kiwisaver then you will be in various types of funds; growth, balanced, or conservative. The best strategy is to invest in the fund which is right for you and that depends on how soon you need the money. Long term, medium term, and short term money should be in growth, balanced, and conservative funds respectively but it all depends on your risk profile.

Number 3: Invest in different platforms

Most of us have heard of the online investing platforms such as Sharesies, Hatch, Investnow, Kernel Wealth, and Robinhood. Investing in several different platforms will help cushion you against the shock of having one of them fail, and certainly, there is no guarantee that this will not happen. I advise not investing all of your life savings into one online platform.

Number 4: Invest in different asset classes

Investing in different types of asset classes will enable you to withstand a downturn in one class of asset. Investing in fixed term interest, the share market, gold, and property are all different types of assets. It all depends on what the right kind of assets are right for your kind of personal circumstances. 

Number 5:Invest in different companies

This is very important. It is unlikely that all of the companies will fail even though the industry is going through a bad patch. This rule is just as applicable to investing in finance companies for a fixed term return as it is for shares. 

Benefits of Diversification

The number one benefit of diversification is it reduces your portfolio risk. If you placed all of your eggs in the one basket then you could lose it all if that one company went under and it did happen to some investors during the 2008 Global Financial Crisis (GFC) and 1987 Sharemarket crash (Black Monday).

It can be enjoyable for investors to own a little bit of a number of countries. Micro investment platforms such as Sharesies, Hatch, and Robinhood make this affordable for Mum and Dad investors.

Downsides of Diversification

Diversification can be time consuming but then everything worth doing is worth doing well. Investing in managed funds or mutual funds as they are called in the US is an option for busy people. More transaction fees and commissions is another downside to diversification and that could reduce your short term gain.

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.

 

Sharesies is an accessible and straightforward way to invest in the stock market. You can get started on your investment journey and start building your wealth. However, before making any investment decisions, it is essential to do your research and seek professional advice if necessary.

 Join Sharesies here

Disclaimer: I may receive a small commission if you sign up with Sharesies.

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Budgets for personal finance

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

Budgets can expose some cold hard home truths

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

There are two parts to a budget.

Your income and your spending.

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

Your spending covers everything which is costing you money. 

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

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

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

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

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

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

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

1 Reduce spending

2 Increase your income

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

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

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

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

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

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

ABOUT THIS ARTICLE

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

www.robertastewart.com

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Financial Windfalls

Financial Windfalls

What it is

Written by R. A. Stewart

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

Types of Windfalls

There are various types of windfalls, they could be:

An Inland Revenue refund

An inheritance of money or property

Lottery winnings

Gift from a rich relative

Life insurance payout

Employee bonus

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

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

How to take advantage of a windfalls

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

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

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

Is a Financial Windfall Discretionary Spending Money?

That all depends on your personal financial situation.

The answer is “No” if…

You have consumer debt.

You have credit card debt.

You have a student loan to pay back.

You have some other debt.

Even a mortgage.

The answer is “Yes” if…

You have absolutely no debt.

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

About this article

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

www.robertastewart.com