KEY POINTS:
Given the sad state of investment markets, should I cash up now?
That depends on your personal circumstances. If you have a sound and robust financial plan, now is not the time to abandon it. Over the past 12-18 months, many have lost capital as a result of poor investments. Others have seen their savings decline in value, leaving many retired New Zealanders worried they will run out of money before they run out of life.
But unless you absolutely need to use the money now, think carefully before selling quality shares or property in the middle of what is a very depressed market. It may be tempting to favour bank deposits, but they are likely to yield less than 4 per cent soon. Quality investments will ultimately survive and flourish.
What are the best things most people can do in the current economic environment?
Depending on your time of life, financial circumstances and employment situation, get back to financial basics. Take stock of what you own, owe, earn and spend to get a sense of the big picture. Look at all the ways you spend money and think about how to lock in or reduce your biggest costs.
Make reducing debt a priority. Develop a sound budget and stick to it. Depending on your circumstances, try to distinguish between what is essential spending as opposed to discretionary spending, like that work-day morning latte: you may want it but your wallet can live without it.
Should I still carry on saving when investment markets have been hit so hard?
Yes, try to stick with your grand plan. If you are contributing to a retirement savings plan - KiwiSaver or a private plan - keep up the payments if you can. Don't stop because investment markets are in the doldrums. Remember that with every dollar you invest now, you are buying investments at prices that are likely to be less than you would have paid 12 months ago.
Should I put my aims and ambitions on hold?
Don't be too quick to abandon your long-held and cherished dreams and ambitions. Remember that a plan is a dream with deadlines. With prudent and sound financial planning, your dreams could be achievable.
