Retirement Savings
Spring is in the air and it is a good time to take a fresh look at your retirement savings plans. There have been many changes in retirement savings in recent times that mean you should review any schemes you signed up for prior to the introduction of KiwiSaver in October, 2007. At that time, a new type of savings and investment product was introduced, called a Portfolio Investment Entity (or PIE). There are significant tax benefits to be gained from switching from an old-style product to a PIE.
Before you pull out of an old-style product, you need to check a couple of things. Check whether there are any penalties for early withdrawal and whether there is any insurance cover attached to your savings plan. You will need to make sure you can replace this cover, if still needed, before you stop your policy. There may also be additional bonuses you might be eligible for by staying with your old plan. With most of these old products, even if your funds are locked in until you reach a certain age, you will have an option of suspending your contributions indefinitely, so that you can keep them going to maintain your insurance cover, get your bonuses or avoid paying huge withdrawal penalties, while putting your new savings into a more modern product.
Your first choice for a new retirement savings product should be KiwiSaver, but only put in the minimum contribution to get the maximum matched tax credit ($1,040 per year) as your funds will be locked in until you reach retirement age. Your next choice is a diversified Portfolio Investment Entity. Over a long period of time, the difference between a good retirement savings plan and a bad one can make a huge difference to your retirement nest egg.
Make Money
If financial freedom is something that you strive for, then no doubt you’ve pondered on how to get there by creating multiple streams of income. Many people dream of being able to sleep soundly at night, knowing that money is rolling effortlessly into their bank accounts, enabling them to retire earlier, work less, or achieve their other goals faster. For some, the dream is a reality; for most it is a wish that is unlikely to be fulfilled.
When you have a job, you are exchanging time and effort for money. There is a physical limit on how much time and effort you have available, and therefore your income is limited. With alternative income streams, you may have unlimited potential to increase your income.
The number of ways in which you might develop multiple income streams is limited only your imagination. The internet has opened up a whole new world of opportunities. Some of the things you can do from home are:
- Start an internet blog or chat room and earn money from advertising on the site
- Write a book or an e-book
- Write articles in magazines or on websites for money
- Turn hobbies into income streams, for example by teaching classes or selling products
- Set up an online business
- Invest in a property or share portfolio
- Rent spare rooms in your house
If you own a business, franchising, licensing and developing new product or service lines are obvious ways to diversify your income.
To make time for a new opportunity, consider reducing the hours you work in employment. If your opportunity requires a significant investment of money or resources, make sure you seek specialist advice before proceeding but also remember ‘nothing ventured, nothing gained’. Don’t be afraid to give it a go!
Rebuild your Wealth
Coming out of a recession is like emerging from winter into spring. There are opportunities for new growth if you get rid of the dead wood and prepare for the new season. If you have lost your job or lost income there are four steps you should take to rebuild your wealth.
Focus on Survival
The first priority is to make sure you are living within your budget. A lower income means your expenses need to be lower as well. Find ways to make ends meet and make your dollars go further. You may have to adjust to a lower standard of living for a while.
Have a Clear Out
Get rid of your financial dead wood. Make paying off your debt a top priority. If your debt has become unmanageable, make arrangements with debtors to pay it off over a period of time
Sell off household ‘stuff’ that you don’t need to free up cash. Get rid of investments that aren’t producing a good return. For some, it might be a case of selling up assets and starting again.
Consolidate and Strengthen your Financial Base
Start saving so you have money to call on if needed. Review your goals and the resources you have available for meeting them. Reflect on the lessons you have learned from the recession and decide what you will do differently for the next one.
Rebuild
Look at ways of increasing your income, for example by up-skilling or retraining to get into a new field. Find businesses which are growing and see what kind of skills they need.
In investment markets, look for early signs of where the new opportunities are – for example investing in emerging markets such as China.
Take the chance to be a leader; it is the early bird who catches the worm.
