August 29, 2011
 Redesign Your Life
Have you ever wished you could do something completely different with your life? Many people live their lives in a linear fashion, with one step logically following another, only to realise that the place they have ended up in doesn’t give them happiness or fulfilment. In the extreme, what results is often termed a mid-life crisis that can involve sudden changes in relationships, careers, finances and lifestyles. If you are unhappy with the path that you are on, you have two choices: stay on it and remain unfulfilled, or transform your life by taking a different path.
There are many reasons why people choose to stay on an unfulfilling path. Of these, the two principal reasons are fear of change and a belief that money (or lack of money) is a constraint. To make a fundamental change in your life, there are three extremely important ingredients that you need:
- A clear and compelling vision of how you want your life to be and why
- A plan for the changes you need to make to let go of the things that are holding you back and propel yourself towards the life that you want.
- The courage and motivation to take the necessary action.
The greater your financial resources the easier it may be to change your life, but lack of money should not be a barrier.
Making a fundamental change to your life means taking risks and letting go of things that have previously given you comfort and security, such as your job, your house or other assets and even friendships. The transition can involve sacrifice and discomfort in the short term. It helps to imagine yourself living the life of your dreams because your imagination will produce the energy and creativity you need to bring it into reality.
August 22, 2011
 Being Happy
What makes us happy? Research suggests that it isn’t extra money. In a recent survey in the UK, around half the people surveyed said that relationships are the biggest factor in making them feel happy. Rating second in importance is health. Other factors include friendships, freedom from stress, and being engaged in meaningful work or activities.
The happiest people surround themselves with family and friends, don’t care about keeping up with the Joneses next door, lose themselves in daily activities and, most importantly, forgive easily.
The Happiness Barometer, a recent study conducted in 16 countries, found that around 40 percent of those surveyed said catching up with their loved ones after work was the happiest time of their day, while more than 20 percent said they were happiest when eating with their families. By contrast, only 5 percent said they were happiest when connecting with friends online. Families and partners were, by far, the biggest source of happiness for almost 80 percent of those surveyed, with friends coming up next at 15 percent.
The results also show that, despite the global economic downturn, overall global happiness levels are high, with more than two thirds of people saying they are satisfied with their lives.
When they do need cheering up, around 40 percent have a night out with friends and round 20 percent give or receive a hug.
Commenting on the study, Dr. Richard Stevens, a social psychologist who specializes in happiness and wellbeing, noted: “While it is important to have enough money to live, income is a fairly irrelevant contributor to happiness. Without relationships, love, family or friendship, most people will not be content and no amount of money can fill this void.”
So there you have it. If you want happiness, don’t buy a lotto ticket; go hug somebody!
August 15, 2011
 Focus on the Horizon
When I was young, I used to go fishing with my father in his boat. Not being much of a sailor, I often succumbed to the motion of the waves when there was a big swell. All I wanted to do then was to get my feet back on firm ground. I still remember the advice my father gave me to help me last the distance back to land. He would tell me to focus my eyes on the distant horizon. By looking at a steady point far away, the ups and downs became tolerable and, after plenty of practice, I didn’t even notice the movement. Now, as an investor, I find I can use the same technique when markets become volatile. The horizon on which I must stay focussed is my ultimate investment goal and if there is no good reason to change it, then the short term ups and downs should make no difference to my investment strategy.
Markets move in cycles and as surely as the sun will rise every morning, markets that have dropped will rise again. The value of a diversified investment portfolio will move in waves that fluctuate within a band on either side of a long term trend line; never reaching either infinity or zero.
Share prices are driven by two major forces; market sentiment (fear and greed) and market fundamentals (economic and financial performance). Market fundamentals set the upper and lower limits of value, while market sentiment is the driving force between the upper and lower limits. When the market drops, it is time to look for bargains. There are opportunities to make long term gains by investing in markets and companies that have solid economic and financial prospects, and which will experience a rise in price when the market sentiment changes.
August 8, 2011
Don’t Eat Your Money
The biggest expense for a young family is the cost of housing. Rent and mortgage payments are fixed costs which can only be reduced by moving to a cheaper house, so when it comes to saving money we need to look at the next biggest expense, and that is the weekly shopping bill. There is a wide range of food spending patterns depending on household income, the number and ages of family members, people’s eating habits and expectations about the standard of food they like to eat. Whereas some people expect to dine on roast lamb and salmon, others are quite happy living on mince and sausages. Because there is so much variation, food is a prime area for finding ways to cut back and save. One of the easiest ways to do this is to shop as infrequently as possible with, say, a big fortnightly shop of non-perishables supplemented by more frequent purchases of fresh food. It is important to buy the right kinds of food as well as spending the right amount. Every year, the University of Otago publishes a Food Cost Survey which is available by clicking here. This survey calculates the weekly cost of purchasing a healthy diet for men, women, adolescents and children in major cities and looks at basic, moderate and liberal budgets. It’s no surprise that food costs for a teenage boy are around $107 per week compared to $85 for a grown man! A moderate budget for a couple and two children under the age of five living in Auckland is around $255 per week. For a couple with two teenagers the cost is around $359 per week. Use this guide to set a strict budget for your food, so you don’t eat your money!
August 1, 2011
 Secret Spenders
One of the advantages of being a single person is you can spend your own money on what you want, when you want. Of course, the downside is there isn’t another person to share the cost, so freedom comes at a price. Getting together with another person usually means setting agreed financial goals and this can lead to feelings of guilt when you spend money on anything other than what has been agreed. Just as there are people who eat chocolate bars when no one is watching, there are those who secretly spend. It’s what is referred to as ‘financial infidelity’. Secret spending can range from sneaking shopping bags into the house when no-one is looking to secretly clocking up debts on credit cards or gambling.
A recent survey of couples in Colorado, USA, found that thirty one percent of people surveyed who shared finances with a partner had been deceptive about money and more than half had hidden either cash or purchases from their partner at some point. Even worse, around 34% said they had lied about debt or income to their partner. In the same survey, 16% said their financial infidelity had resulted in divorce.
When two people come together, they should be willing to talk openly about their financial situation; that is, their income, assets and any debts they have. If a prospective partner is reluctant to share financial information, there is a reasonable chance that person will be a secret spender during the relationship.
It is important that each partner in a relationship has access to money that is theirs to spend on whatever they want. By having separate accounts for ‘pocket money’ into which an agreed amount is deposited every payday, partners can have a degree of financial freedom without resorting to spending in secret.
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