Rose coloured glasses when looking at a financial opportunity
Don’t get carried away, be rational, and sleep on it.
Then look hard at only doing half.
When things look really bad, it does take some courage to buy – easier if you do half.
Even if you hate paying premiums, insure at least half of your assets and don’t forget life insurance as well.
Trying to avoid taxes
You can waste a lot of time, energy, and incur a lot of costs , and in the end outwit yourself. The penalties are horrific too. If in doubt do half.
Trying too hard to get your children a student allowance
Same again, and don’t set your children a poor example.
Consuming capital in retirement
Good savers find it hard to to turn around and consume some of their capital in retirement.
If you spend say $3,000 a year on a cruise and really want a $6,000 cruise. but are too scared to spend the money, then increase by half and spend $4,500.
Trying to time your way into or out of markets
There is plenty of proof that no one can consistently pick the top or bottom of a market.
Do half now and half later - “averaging”.
Is property better than shares?
Anyone holding good property over the long term will usually do well.
The same applies to shares – holding a widely diversified portfolio of shares long-term usually pays.
There is no proof that either is better – so half and half looks good.
Retiring too soon
If you are worried about income in retirement, don’t stop work abruptly. If you can , do half – drop down to working 20 hours per week for a while to see how your cashflow looks.
Spending too much
If you are constantly getting into debt, cut your luxury spending by half. Eventually you will need to get “cured” or your life will be hell.
Failing to plan
Those who fail to plan are planning to fail. Spend half your surplus today and have a life, but save the other half of it for tomorrow.
Helping children too much
Sometimes our children genuinely do need help, but they also have 20 to 40 years working life in front of them - lots of time. You may not, or may already be retired. If in doubt, do half.
Waiting for exchange rates to move back to “where they used to be”
“I won’t bring my money out from England until £1 is back up to NZ$3.” Who says it will ever get back there? Why should it go back up? Who can forecast accurately ?
Better to do half now and half in 12 months’ time.
Being too risk averse
Most of us need to work our money harder. If you are fearful, invest half in the bank and half in a diversified portfolio.
A business venture that couldn’t lose
A retired father went guarantor for his son who had a brilliant idea for a business venture. The father put his house up for security for a bank loan, and would get 50% of the profits.
The global financial credit crunch arrived, the venture failed, and dad lost his house.
Dad should have at the very most done only half, and since he cannot go back to work, taken security over all the assets.
The guy at the bar, my uncle, my boss told me…
A young man said “the guys at the bar” are making really good money on these tech stocks. He had saved up $50,000, and invested all his money in a tech stock fund. He lost most of it ……….
If only he had done half. ……….
Other things where you might do half
Paying for your daughters wedding.
Paying off your children’s student loans.
Home renovations – what will half of the cost estimates buy ?
Buying a camper van – consider cost vs. use vs. depreciation – maybe go smaller and spend only half.
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media & on line – see www.acfs.co.nz
His second book is due out in June 2014 & is entitled “The Great NZ Work, Money & Retirement Puzzle”.
Alan is an independent authorised financial adviser (AFA) FSP26532 & his disclosure statement is available on request and free of charge.