Will it enhance or cripple your quality of life? If in doubt, get advice and ensure you have a clear perspective on it.
3. Diversification
About the only free thing in this world, yet all too often misunderstood or ignored.
If we ignore it, it will cost us in the end. Some property investors in Christchurch got hit hard.
Businessmen and farmers often put all their money into the business or farm, and then a downturn comes along and ouch.
4. Invest in quality - the higher the return, higher the risk
In the 2009 GFC many investments failed, but the quality funds are still intact and going strong. There is no free ride with investments, so if something looks hot or is offering more, ask yourself why. It's not always easy to identify quality, but you must.
5. Average in
Buy some now and some later. Monthly payments like KiwiSaver work so well because you are investing monthly. If you are investing a lump sum, buy half now and half in 6 or 12 months.
6. Use the old adage - if in doubt, do half
This is not used nearly enough. It can be applied to your daughter's wedding bill, lending or borrowing money, buying or selling shares, investing, buying and selling livestock, and buying or selling several rental properties.
It can also be applied when transferring money such as pounds or US dollars to New Zealand dollars, or vice versa.
7. Fear and greed
If you flip-flop from one to the other, you will not progress financially. Rather get balanced and disciplined.
And if anything, tend towards investing more when everyone else is fearful, and sell some assets when everyone else is piling in - when everyone is greedy.
And remember no one can consistently forecast markets or pick the right investments.
8. Wearing rose-coloured glasses when looking at a financial opportunity
We all too often convince ourselves that we are making a good decision.
Instead we should write down a list of pros and cons of any financial opportunity or venture, and be brutally honest with ourselves.
"No one wants advice, only collaboration." -- John Steinbeck
9. Women need to know even more about money than men
Since women live longer than men, they need to be financially knowledgeable, so they can make their money last as long as they do, and also ensure that the old boy does not spend it all before he goes.
10. Emergency money and insurances
Most people see insurances as just another bill that you can do without, but they are critical risk management tools, and should be reviewed annually.
Don't rely on your bank for an emergency loan, as they only lend to people who have regular income.
If you have been made redundant, or are sick or have had a bad accident, your income may have stopped, and a bank won't help you.
You need to put away emergency money -- and not in the bank where you have your mortgage.
11. Learn about money - age 17 to 47
People who learn about it early in life, and keep learning, usually win:
• Saving and the magic of compound growth.
• They will actually get started saving.
• They won't make excuses such as "I'm too busy" or "its too hard".
• They won't get badly burned in times like the 2009 GFC.
12. Age 47 to 87 - take money even more seriously
One day you won't be able to work, and then money will matter even more. You may also face other issues as well;
• Hopefully you didn't stop work too soon.
• You may need more income than Government super.
• Where will you get the extra income from?
• Rest home fees - a reason to panic or not a worry?
• Retirement villages - go in too soon and and you could lose your fallback options.
• As you get older you can't afford costly mistakes, as you can't go back to work.
• Planning and good advice will stand you in good stead.
• Alan Clarke is a financial and retirement adviser and author. His second book, The Great NZ Work, Money & Retirement Puzzle, is available at www.acfs.co.nz Alan is an independent authorised financial adviser (AFA) FSP26532; his disclosure statement is available on request and free of charge.
