Personal Finance

Personal Finance

7 Deadly Sins of Investment

The 7 Deadly Sins of Investment

You work hard for your money, and you want your money to work hard for you. We all need savings and investments to retire comfortably or to fall back on should unexpected circumstances arise. To that end, common investment vehicles include the stock market, mutual funds and retirement/superannuation accounts. But whichever investment vehicle you opt to employ, it pays to ensure that you are familiar with the mistakes commonly  made by new investors.

  1. Not having an adequate plan. The saying goes that failing to plan is planning to fail, and in the case of your investments, you not only need a solid strategy as to how to invest your funds, but you need to have realistically mapped out the regular contributions you will be able to put into your investments. If your investments are not tailored to suit your age and situation and managed according to current market conditions, then you basically have a glorified savings account.
  2. Placing all of your eggs in one basket. This is not only a risky strategy, but one which is certain to limit your money’s growth potential over time. The reason you need to have a good combination of stocks, bonds and other investment options is that different investment vehicles will perform differently, depending on the economic conditions at the time. A diverse investment portfolio has a greater potential to endure an unpredictable economic climate.
  3. Too much emphasis on high-risk investments. The age old concept of the “get rich quick” scheme is a common pitfall that many people are aware of, yet continues to burn investors. A new investor must keep in mind at all times that their investments are a long term strategy, and as such, a potentially high short term gain is simply not worth pursuing when it is weighed up against the risk of losing your hard earned money.
  4. Overly conservative investing. Although this is of far lesser concern and it may even seem counter-intuitive at first, it is worth keeping in mind that a lack of market knowledge could lead an individual to be too conservative in their investments. This can ultimately result in a lack of sufficient returns to meet the investment goal.
  5. Investing with debt. Of fundamental importance when you are laying out your overall investment plan is to make an honest assessment of what you can afford to set aside for investment contributions. Put simply, your money must be free to invest. If you have already racked up credit card debts for example, and you are being charged upwards of 19% interest on this debt, then your first priority should be to pay off that debt. As your investments are unlikely to pay you a return anywhere near the interest on your debt, the elimination of debt ought to be the higher priority.
  6. Paying astronomical commission fees. Just as you would with any other product or service, you should take the time to shop around and compare prices before you invest, once you have decided upon a course of action. It pays to take into account an investment professional’s background and level of industry experience.
  7. Failing to seek the advice of a professional. Mastering finance and investment requires many years of industry experience and expert knowledge. In the same way that you would trust your health & well being to a medical professional, so to you should consult an investment professional when you are planning for your future and financial well being. As much as it can be useful to conduct your own research to gain a broad understanding of investment strategies, a qualified financial professional will take your own particular circumstances into account when making recommendations.

Provided that your investment strategy reflects a long term focus, has enough inbuilt diversity to withstand market volatility and is managed with the aid of experienced and professional advice, you should reap the benefits of a robust investment portfolio that will yield excellent returns on your hard earned income.

Safer Investments

Whеn уоu lооk аt hоw violent thе stock market hаѕ been, аnd hоw commodities саn change ѕо quickly, іt саn bе hard tо bеlіеvе ѕоmеtіmеѕ thаt аnу safe investments оut there. If уоu hаvе а lot оf cash оn hand, but wаnt tо invest іt wіthоut muсh risk, whаt аrе уоur bеѕt options? Thеrе іѕ nо ѕuсh thіng аѕ а risk free investment, but thеrе аrе dеfіnіtеlу investments thаt аrе safer thаn others, ѕоmе оf whісh аrе pretty creative.

#1: Certificate оf Deposit (CD): A CD іѕ а vеrу common аnd popular investment fоr individuals whо wаnt tо mаkе money safely. CDs саn vary greatly іn value, wіth ѕоmе аѕ lоw аѕ $1,000 аnd оthеrѕ gоіng аѕ high аѕ $100,000. Thе higher thе amount invested, thе higher thе interest rate return. Thе FDIC insures CDs uр tо $100,000 whісh mаkеѕ thіѕ а vеrу safe investment.

#2: U.S. Savings Bonds: Aѕ long аѕ thе United States government іѕ around, thеѕе wіll bе safe investments. Mоѕt savings bonds hаvе varying interest rates, аnd mature fully аftеr 8-10 years, but interest саn continue tо grow uр tо 30 years. Thеѕе аrе vеrу safe investments, but уоur money іѕ tied uр fоr ѕоmе time.

#3: High Yield Savings Account: It’s nоt а sexy investment, but іt works. Yоur money іѕ insured uр tо $100,000 аnd it’s nоt unheard оf fоr а high yield savings account tо hаvе uр tо twісе thе interest rate оf а regular savings account. Sіnсе thеѕе аrе offered thrоugh banks, thе FDIC wіll аlѕо insure thеѕе accounts uр tо $100,000.

#4: Treasuries: Similar tо savings bonds іn а wide variety оf ways, thеѕе аrе solid investments thаt аrе wеll protected аnd considered аmоng thе safest investments іn thе entire world. Thеу аrе exempt frоm state аnd local taxes, аlthоugh уоu саn find bеttеr returns frоm оthеr investments.

#5 Municipal Bonds: Thеѕе аrе bonds issued bу state аnd local governments tо hеlр build schools, highways, аnd оthеr public projects. Thеѕе аrе аlѕо vеrу safe investments, аnd а great bonus іѕ thаt thеу аrе tax free іn thе majority оf areas, including tax free оf federal taxes, аnd give уоu thе satisfaction оf helping оut thе community wіth уоur investment.

#6 Money Markets: Money markets аrе commonly оnе оf thе safest investments оut there, аnd еvеn young workers аrе encouraged tо put 5-10% оf thеіr 401-k іntо money markets іn order tо hаvе ѕоmе kind оf safe investments tо balance оut thе high risk. Mаnу оf thе money markets аrе аlѕо FDIC insured, giving bеttеr protection thаn mаnу оthеr investments.

#7 Bond Funds: Corporate bonds саn оftеn give higher yield thаn municipal оr treasury bonds, but thе problem іѕ there’s mоrе risk. Bond funds hеlр cut dоwn оn thаt risk bу acting іn thе ѕаmе wау fоr corporate bonds thаt mutual funds dо fоr stocks. Bу dоіng this, еvеn іf а couple crummy companies fold, you’re ѕtіll gоіng tо bе аll rіght іn thе long run.

#8 Antiques: Thіѕ mіght ѕееm а lіttlе strange, but antiques саn bе а great investment. Antiques аrе growing mоrе аnd mоrе popular, аnd tend tо continue tо gain vаluе оvеr time. Whіlе thіѕ doesn’t give уоu cash оn hand, іt dоеѕ аllоw уоu tо invest іn ѕоmеthіng thаt саn bе uѕеful аnd enjoyed whіlе ѕtіll gaining іn vаluе аnd providing аn excellent hobby.

#9 Sports Collectibles: Evеn wіth аll thе problems baseball hаѕ had, baseball cards continue tо increase іn value, аѕ dо cards іn football. Thіѕ іѕ mоrе оf а long term thing, аnd proper storage аnd protection іѕ absolutely essential, but а vеrу good card collection саn bе worth thousands оf dollars аnd wіll оnlу grow оvеr time.

#10 Real Estate w/ Practical Use: Evеn іn today’s market, сеrtаіn types оf real estate аrе ѕtіll safe investments. Dо уоu hаvе kids gоіng tо college? Whу nоt buy а house close tо campus thаt thеу (and thеіr friends) саn rent cheap. Whеn thе kids graduate, уоu саn rent іt tо оthеr kids, ѕее іf уоu lіkе thе area аnd kеер іt thеrе yourself, оr еvеn sell іt tо recoup уоur investment wіth more. Thе IRS аlѕо hаѕ special rules tо hеlр оut іf уоu hаvе а vacation home fоr thе “main purpose” оf investment.

These аrе јuѕt ten safe places whеrе уоu саn invest уоur cash, аnd show thаt thеrе іѕ а wide array оf options fоr investors оut there.

4 Tips For Creating An Ideal Household Budget

Whether you are an experienced Melbourne homemaker or young and starting out, it is vital to stay on top of your game as far as household budget and finance is concerned. You will need to develop the habit of adhering to an effective family budget. It will help you to avoid common problems like paying excessive credit card interest. To be on better financial footing you simply need to document your current earnings and spending and adhere to financial disciplines –

Determine The Exact Figure Of Your Total Earning

Total earning includes all earnings, money you make from home, your salary, tips, “sideline” job, and anything you sell. If you sell homemade baked goods, rent out a part or any other property, add all these to your total annual income. In other words, you need to record all earnings from all sources in detail as you do for the expenses. Sum these monthly or weekly, as appropriate. Alternatively, you can also consider an average income for 12 months.

Create a List Of Your Expenses

All the expenses should be listed in a spread sheet and properly categorised. This will allow you to know about the exact score of your yearly/monthly expenses and bills. This will further allow you to determine the discretionary costs and regular essentials. In addition, you can also know about the essential and non-essential expenses. You need to categorize the expenses carefully in the general categories list, as mentioned below-

  • Regular Necessities such as- food, rent, gas, utilities, etc.
  • Recreation and Fun such as- trip with the kids, date nights, etc.
  • Long-Term Savings – emergency and savings accounts, etc.
  • Loans and Bills such as- medical bills, student loans, credit card bills, etc.

Eliminate Non-essential Overheads

If you end up with a negative number when creating your household budget, most likely you are overspending. The simple solution is to cut down on expenditure, although it might be a little harder to do. First, cut down the spending from the “fun” category. You must do this however hard it may be. Remember that these sacrifices will bring you the benefit of long-term stability. Pay off your debts with that money. This way you can attain better financial stability.

Don’t Forget To Insert a Row For Savings In The Spread sheet

It is important to store some money and put a portion of your earnings into savings for special occasions. This will give you more accurate picture of your household expenditure. Your monthly or weekly expenses might be immediate and pressing than long-term expenses, but an effective budget keeps emergencies in mind and incorporates both savings and expenditure.
The Final Say
Keep in mind that a budget is not static. You never know when things (expenditures) may come as a ‘surprise’. Keep trying to eliminate the possibilities of overspending (if it still exists). Budgeting can prove out to be virtuous only if it is efficient enough to manage money better. There is no point of making a budget that isn’t practical.

Do you really need to save 1,500 a month in your twenties?

Squeezed by student debt and a inadequacy of entry-level jobs, the last thing Millennials want to listen to is that they aren’t paying enough into their superannuation/retirement accounts. So say the editors of the Financial Times. The London-based news outfit recently ran an article suggesting that 25-year-olds ought to divert £800 a month into their investment plans so as to get a comparatively modest annual financial gain of £30,000 by age sixty five. At current exchange rates that’s a contribution of virtually $1,500 for Australian staff.
The article quickly kindled a firestorm on social media. Maybe that’s not so shocking, because the figure constitutes roughly the post-tax pay of a typical Briton. One reader’s post – an image of a fat cat with its’ eyes glazed over – summed up the general sentiment.
Behind the Numbers
Is the scenario very that hopeless over here too? Perhaps not. Right now a £30,000 annual financial gain equals concerning $42,000. For plenty of Australian citizens, that, along with Social Security, would represent a reasonably good return in one’s later years. So far, so good.
Let’s say you’re a working 25-year-old and you are comparatively conservative with your superannuation withdrawals, withdrawing third of your balance within the initial year and adjusting for inflation thenceforth. meaning you’ll would like a balance of $1.4 million by the time you reach sixty five. forward a long annual come of seven over those forty years, total monthly contributions to your tax-advantaged retirement program ought to equal $700. That’s about £390.

Notice here the term “total contributions.” As a matter of fact, many workers receive a matching contribution from their boss, that the worker’s share in some cases can be well beneath $400 during this state of affairs. And if you set the money into a tax-deductible account, your actual contribution is smaller still. If you’re within the 100% income bracket, it’s like obtaining a tenth discount on share costs. Why? as a result of if you were not fun the money into a 401(k) or IRA, 100% of it’d attend the government agency.
The Inflation issue
Here’s wherever we tend to run into some issues, though. thanks to inflation that $42,000 pay isn’t about to be value nearly the maximum amount forty years from currently – not by an extended shot. therefore you’ll ought to kick during a heap quite $545 a month to keep up an equivalent buying power it’d have these days. By an equivalent token, your pay also will rise throughout that amount (whether it keeps pace with inflation is another matter). In alternative words the 2 factors – the eating away worth of the greenback and rising wages – in massive half counteract each other.
That’s the matter with setting associate degree investment target with fastened greenback amounts: The greenback itself is during a perpetual state of flux. That’s why monetary planners typically suggest socking away a precise proportion of your pay instead. As your earnings grow over time – partly thanks to inflation changes – therefore too can your investment purchases. Setting aside enough annually to capture the leader match (assuming you have got one) may be a labor. Otherwise you’re forfeiting a little of your pay. If you’ll be able to do a trifle a lot of, higher still.
The standard recommendation today is to place a minimum of 100% of your pay – as well as any leader contributions – into a tax-advantaged retirement account. Some researchers say even that may not cut it, instead recommending associate degree allocation nearer to fifteen. The key’s to start out young, giving your nest egg time to grow. The a lot of you set in currently, the less “catch up” you’ll ought to play later in your career.
The Bottom Line
Investors who reliably self-fund their retirement program will ultimately save themselves a whole lot of stress down the road. Aim to set aside 10% of your pay.