By Amanda Morrall
A piece of housekeeping first folks.
Starting next week I'll be reintroducing this column on a trice weekly regular basis; Mondays, Wednesdays and Fridays.
I'm also pleased to announce I'll be returning (kinda) in the form of more video content and interviews with interesting personalities and finance experts speaking to a range of personal finance issues. We wouldn't want you to get bored now.
I am hoping to introduce those items next week and run them on a Friday although the exact day remains to be determined. I will be looking for a range of people to profile and interview including "regular" folks who have made some impressive gains with their own personal financial situation as well. If you fit the bill and you'd like to share your story please contact me via email at firstname.lastname@example.org.
1) Buying high
With all this exuberance returning to the market I have been wondering when the other shoe is going to fall. Don't get me wrong, I'm optimistic these days but I'm still not convinced we've been through the worst of this massive mess of cheap credit, money printing, Government debt and freak natural disasters.
I have a friend who thinks himself clairvoyant and wise in this matters about when and what would trigger it. He must been watching too many Hollywood movies because he thinks the next big market meltdown will be triggered by an explosive satchel bomb with catastrophic consequences.
Whether it's another major natural disaster, the Eurozone imploding, terrorists or a meteor the size of Brazil raining down on planet Earth you can be sure something major event is going to rock and shock us. Markets imitate life; they go up and down and through periods of moodiness and plateaus of contentment.
Here's Carl Richards, author of The Behaviour Gap, blogging for the New York Times on how to avoid the easy trap of buying at the top of the market and how to carve a steady investment path that doesn't follow the herd.
2) This is why you're broke
Staying on the subject of investing, the following post from financiallypoor.com contains a list of the six most common mistakes people make when it comes to investing. One of them relates to 401ks in the US and not paying into it to the full extent you can receive matching funds from your employer. Substitute KiwiSaver here.
Now as most of you know the minimum contribution amount has risen to 3% of gross pay, also to be matched by your employer. Guess what? Some employers actually pay more. They're not obliged to but a few are in a position to and recognise the importance of retirement savings for their employees.
Make sure you are not missing on such an opportunity (i.e. to pay 4% when you can get that matched by the company). If you are self employed or a low wage earner, to the get the added member tax credit from Government (which maxes out at $521 a year) you need to pay a little over $20 a week.
3) Financial advisor rage
If you use a financial advisor, make sure you get one who is well and truly equipped to advise you and also be sure you understand how they are paid. Whilst other nations are moving toward a fee for service system, New Zealand still allows advisors to receive commission from products they sell to their clients. That said under the new Financial Advisors Act professionals selling advice and products are required to spell this out for you loud and clear. Whether you understand what they are saying, is another matter.
Here's a blog to reinforce why you should be asking hard questions of your advisor: 7 Financial Advisors I Would Like to Punch in the Face.
4) The triple crown
I'm not much of a princess but I do like crowns, metaphorical ones. Forbes Money in this post outlines how to win the Triple Crown of Personal Finance.
Can you guess what they are? Being mortgage free, saving for your kid's tertiary education to minimise their debt burden so they can get on the housing ladder before they're 60 and padding the retirement savings fund.
5) Net worth
Here's a little reality check exercise on net worth from Squirrelers.com. Calculate your net worth (sum total of assets less liabilities) then divide that figure by your monthly expenses. All of a sudden (depending on how much you spend each month) you can feel a shrinkage effect.
Income and the shelf life of that income will also impact the equation and of course the matter of how long you will live. Can you afford that lifestyle you are living? If so for how long?
Like what you've read? You'll enjoy the book better. Here's how to order a copy of Amanda's book Money Matters: Get your Life and $ Sorted. The book is also available in ebook format as well via Amazon and is replete with hyper links to help you get your finances in order. Find your flow and the money will follow.