He is said to be the happiest man in the world. His name is Matthieu Ricard and he is a molecular geneticist turned Buddhist monk who resides at the Shechen Tennyi Dargyeling Monastery in Nepal. Ricard has spent a lifetime exploring the concept of happiness. As Ricard says; “whatever we do, whatever we hope, whatever we dream – somehow is related to a deep, profound desire for well-being or happiness”. If happiness is something that is going to determine the quality of every instant of our life, then it is important that we know what it is. Not knowing what happiness is makes it much harder to find.

Happiness is often defined as pleasure, but pleasure, says Ricard, is contingent on a time, a place and an object. For example, if you eat one piece of chocolate cake you will feel pleasure; eat three and you will feel sick. Rather than a mere pleasure sensation, happiness is well-being. It is a deep sense of serenity and fulfillment that pervades and underlies all emotional states, and all the joys and sorrows that come one’s way.

Very often, people pursue happiness by looking at the outer world and acquiring objects to bring happiness. However, our control of the outer world is limited, temporary and often an illusion. You might have a luxurious apartment on the top floor of a magnificent building, but if you are deeply unhappy within, you may well be looking for a window from which to jump. At the other end of the spectrum, there are people in very difficult circumstances who manage to keep serenity, inner strength and inner freedom. It is wonderful to have external trappings such as a nice place to live, a new car and travel, but these things are not enough. Happiness comes from within.

It has been many years since we’ve seen mortgage interest rates so low. That’s great news for first home buyers and investors in particular. Banks appear to be in a bidding war to attract borrowers. Meanwhile the Reserve Bank is in the process of implementing measures to restrain mortgage lending so as to reduce the risk of house price inflation.

Borrowing money at a low interest rate is both an opportunity and a threat. Interest rates move in cycles. Borrow at the low point of a cycle and it goes without saying that over time, interest rates will increase, thus increasing your mortgage payments.

There are steps you can take to protect yourself when borrowing at low interest rates.

While it is tempting to take advantage of lower rates to borrow as much as possible, your repayments may become unaffordable when interest rates increase. It is sensible to leave yourself some wriggle room by borrowing an amount that you know will be affordable when interest rates rise by a couple of percent.

Fixing the interest rate for the whole of your mortgage for a period of time can create uncertainty about what the interest rate will be at the end of the period. To reduce this uncertainty, consider chunking your mortgage up into two three amounts which are fixed for different periods of time. That way, if rates go up, only part of your mortgage will be affected at any one time, thus spreading the impact of higher mortgage repayments.

While it may seem a good idea to lock in a low interest rate for long period of time, be aware that if your circumstances change and you need to sell your property or repay your mortgage for some other reason, you may be charged a penalty for early repayment.

It is not uncommon for New Zealanders to have overseas investments. Migration to New Zealand, working holidays overseas and inheritances can all lead to investment assets being held outside the country. Examples might be shares in foreign companies, foreign unit trust investments, foreign superannuation schemes and foreign life insurance policies. There are some pitfalls in leaving these investments overseas.

If your overseas investments have a value greater than $50,000, they could well be liable for tax in New Zealand. This is called a Foreign Investment Fund (FIF) tax. There are a number of options you can choose from as to how this tax is calculated and you will need help from an accountant or financial adviser. Certain overseas investments, particularly Australian investments are exempt from FIF tax.

Under current New Zealand legislation, an overseas adviser who provides investment advice to a New Zealand resident must be an Authorised Financial Adviser (AFA) as determined in the Financial Advisers Act. Australian advisers may in some circumstances be exempt from this requirement. Exemptions also apply to wholesale investors, for example those whose investment assets are $1million or more. If, for example, you have a share portfolio of around £200,000 in the UK on which personalized investment advice is provided by a broker, the broker will be in breach of the Financial Advisers Act if he or she is not registered as an AFA in New Zealand. Not only that, but you will not have the protection of the disclosure requirements, dispute resolution schemes and Code of Conduct which are mandatory for Authorised Financial Advisers.

Finally, having assets in currencies other than the New Zealand dollar will exposure you to exchange rate risk.

Obtaining advice from a New Zealand accountant or financial adviser on the implications of leaving investment assets overseas is highly recommended.

Over the next year, a major change will occur for most people in how their homes are insured. As a result of the Christchurch earthquake and other disasters around the world, reinsurers are now seeking to quantify and limit the risks they face by insisting that home insurance policies are based on a maximum specified amount, called a sum insured, rather than an unspecified replacement cost. If you specify a sum insured for your home that is less than the replacement cost, you may find you either have to pay for the shortfall yourself in the event of a disaster, or rebuild a smaller or lower quality home. On the other hand, setting the sum insured too high means you will be paying too much in premiums, because the insurer will pay no more than the replacement cost if the house needs to be rebuilt.

Determining a sum insured for your home that accurately reflects the replacement cost is therefore vital to avoid the potential of financial loss. Special features such as decks, swimming pools, fences and retaining walls will also need to be valued. This exercise has the potential to be very complicated or confusing, especially for elderly home owners or owners of high value homes.

Some insurance companies are providing free on-line calculators to help you estimate the replacement cost by answering a small questionnaire about the size and features of your home. While this may give a reasonably close estimate, in some cases it may be best to obtain an estimate from a builder or a registered valuer. All this will take time and is not something that should be left until the last minute. Contact your insurance company before your policy renewal to find out what support they can give you with determining your sum insured.

Achieving financial security is an aim that most people aspire to. Worrying about money causes stress, loss of enjoyment of life, and is often linked to relationship problems. It goes without saying then, that being financially secure can make you happier. The definition of financial security is a very personal thing and depends to some degree on what you consider to be a minimum standard of living. At the very least, everyone needs a place to live, the basic necessities of life such as food, clothing and heating, and sufficient resources to be able to enjoy life. The basic elements of financial security are:

• Being debt free. This includes owning a home without debt as well as having no credit card or store card debt.
• Having enough money in reserve to cover unexpected expenses or unexpected loss of income. A basic rule of thumb is to have the equivalent of at least three months living expenses in reserve
• Having a secure income that is sufficient to maintain your desired standard of living. Securing your income requires keeping your skills up to date, maintaining good health and a good relationship with your partner or finding ways to generate passive income
• Having sufficient assets and investments to provide for your future needs. This includes your long term goals as well as your retirement needs.
• Being protected from financial risk through having adequate insurance cover, a diversified investment portfolio, and a means of protecting your assets in the event of business or relationship failure

Achieving financial security is difficult for those on low incomes. However, there are many instances where those on good incomes fail to put in place the basic elements of financial security and suffer badly when they have a sudden in change in their circumstances.

One of the greatest myths of wealth creation is that being as frugal as possible is the key to riches and a happy life. There are countless articles written about how to save money and become wealthy by recycling materials, making your own household cleaners, growing your own vegetables, upcycling furniture and so on. While all these activities are very meritorious and may indeed save you money, they are not the path to riches, and definitely not the way to have a happy life.

Being frugal often leads to a poverty mindset. Filling your mind with thoughts of going without and not having enough can lead to missed opportunities, not only to create wealth, but to enjoy life. If you want to get ahead, it may be more beneficial to set up a business or take on an extra job than to spend your time doing home maintenance, household cleaning or gardening. Unless you have plenty of spare time, it is often better to pay someone else to do these things to free up your time to be doing things that give you a greater return.

The right mindset for creating wealth and being happy is one of shifting your money and time resources away from those things which are not really that important to you towards the things that bring you the highest return or the most pleasure. That can, and should, include being generous towards others. This kind of mindset is one of abundance and opportunity. I once heard of a man who used to carry one thousand dollars in cash in his wallet, not to spend, but because he found it gave him an abundant mindset that made him happier, more positive, and more likely to see opportunities. Perhaps we should all give it a try!

As every seasoned investor knows, the four major classes of investment assets are cash, fixed interest, property and shares. In a fully diversified investment portfolio, cash and property usually count for a much lesser proportion than fixed interest and shares. Fixed interest investments, such as term deposits, directly held bonds or bond funds, provide stability and income to a portfolio, while shares provide growth, albeit with volatility. Fixed interest investments generally offer a lower rate of return as well as less risk and are not great at keeping ahead of tax and inflation, especially over the long term. Shares have the potential for much greater return, much of which is without tax as the return is mostly by way of capital gain rather than income. While share prices can be volatile, the impact of volatility diminishes over time. The key to designing a good investment portfolio is getting the right balance between fixed interest investments and shares and therefore between risk and return. Asset classes go through cycles. There will be periods when economic conditions favour fixed interest, and periods where they will favour shares. Rather than trying to second guess which asset class will perform the best, the standard approach is to have exposure to both, but to change the emphasis slightly when economic conditions change in favour of one or the other. Hence we are now seeing a flight of investment money away from bonds (fixed interest) and into shares. This has been prompted by a combination of low interest rates, progress in Europe, the effects of US monetary policy and an improving global economic outlook. As a result the share market has shown strong, sustained growth over the last six months and the high returns will no doubt lead to a further flight from bonds into shares.

Self employed people are burdened with heavy expenses to comply with Government requirements and one of these is the cost of ACC cover. For tradespeople in particular, who have a high risk of injury, the cost can be significant. Many self employed people are unaware they may be eligible for ACC Cover Plus Extra, a product designed to suit the needs of self employed people. With standard ACC CoverPlus and Workplace Cover, your policy will pay out 80% of your previous year’s earnings and you must prove loss of income. If you employ your spouse in your business for income splitting purposes, he or she may have difficulty proving loss of income in the event of a claim. If you return to work part time, your payout is reduced accordingly. By comparison, with ACC Cover Plus Extra, your cover is set at an agreed level, which can be either more or less than your typical earnings. You do not have to prove loss of earnings and you are paid regardless of whether you work part time.

If you choose an agreed level of cover that is lower than your usual earnings, the premium for ACC Cover Plus Extra can be significantly lower than for a standard policy. As an example, a builder earning $64,000 per annum would pay a total premium including all levies of $3,847 on a standard policy. By choosing Cover Plus Extra with agreed cover of $35,000, the total premium reduces to $2,454.

The downside of lowering your cover is that in the event of a claim, you receive less compensation. It is very important to work with your insurance broker to put in place income protection insurance, which can provide top-up cover for accidents as well as cover for illness, based on a percentage of earnings.

Baby boomers should by now be well aware that as they move towards and through retirement, they will place huge pressure on NZ Superannuation. Every three years, the Commission for Financial Literacy is charged with reviewing retirement income policies. Now is your chance to have a say on how things might be for your future.

When pensions were introduced in 1898 they were set at one third the average wage, payable at age 65. At that time only 2.1% of the population was aged over 65. For the first forty years pensions were income tested and asset tested and a good character test applied. The universal pension was introduced in 1938. Now around 14% of people are over 65 and by 2050, this figure will be 25%. Some of the key questions to be answered are:

• Should retirement savings be compulsory? If not, how can we encourage people to save more?
• Should NZ Superannuation be asset or income tested or should it be universal?
• Should the level of payment be benchmarked to the average wage?

People are not only living longer but they are spending more. Pensions were originally introduced to alleviate poverty for a few years between retirement and death, but these days, retirees have an expectation of leading a full and active life for around thirty years after they retire. To what extent should the pension cover these costs? How will the shrinking number of taxpayers be able to cover the increased costs?

Possible solutions could include:

• Increasing the age of retirement as life expectancy increases
• Introducing schemes to allow retirees to draw on the equity in their house
• Allowing people to choose their retirement age and adjusting the level of payment accordingly.

These are all important issues. Have your say by clicking here.

Events in Europe have caused many investors to question the safety of their bank deposits due to fears of a global collapse of banking systems. In fact, the New Zealand banking system has continued to perform strongly despite the challenging international environment. There are 22 registered banks in New Zealand, of which around 16 offer retail banking services. All banks carry a credit rating, and one of the most important steps when investing in a bank is to find out what this is. The larger banks – ANZ, ASB, BNZ, Westpac, BankDirect, HSBC and RaboDirect all have credit ratings of AA-, which places them amongst the most highly rated banks in the world. At the other end of the spectrum, Co-operative Bank, Heartland Bank, Bank of Baroda and Bank of India have credit ratings of BBB-, the lowest investment grade.

Despite the strength of our banking system, failures can occur. Unlike many other countries, New Zealand does not have a deposit insurance scheme, which means that potentially depositors could lose all or part of their funds in the event of a failure. In June, 2013, the Reserve Bank is aiming to implement a policy called Open Bank Resolution (OBR). Under this policy, a statutory manager would be appointed to an insolvent bank. Deposits would be frozen overnight to allow the manager to assess the situation and the following day a portion would be unfrozen. Potentially, some of the frozen funds could be retained by the manager to cover the banks losses. The outcome is likely to be less disruptive than if the bank went into receivership or liquidation. While this new approach has caused some consternation with depositors, the reality is that, providing deposits are held with a bank with a high credit rating, the likelihood of losses is extremely low.