Tried and true ways to get ahead; risk and reward; lifestages funds; using your kids as a tax shield; five day trader mistakes to avoid

Tried and true ways to get ahead; risk and reward; lifestages funds; using your kids as a tax shield; Anatomy of an entrepreneur

By Amanda Morrall

1) No big secret to saving

The secret to getting ahead is really no big mystery. Spend less than you earn and do something financially productive with the rest. Given today's economic uncertainty, the latter is no small feat and yet many fail to reach this stage altogether because they remain stuck in a debt trap.

Here Getrichslowly blogger laments the never ending quest for "unique savings tips" and exhorts the need to focus on the basics in personal finance.

2) Risk/reward

I love to blame other people when things go wrong but usually it's my own damn fault. And as much as I'd like to blame someone for losing 12% on a managed fund over the past two years, I was amply warned about its volatility and also the need to hold the course. I invested in a growth fund loaded to the hilt with equities that over-time was expected to reward me for the risk.

I've learned a few tough lessons. One that my real appetite for risk is probably a lot lower than purported by me to my financial adviser. Two, that my ability to take on higher risk is a lot lower than I can properly afford. Three, that while your goals and priorities may change, investments earmarked for a specific time frame aren't as bendy as one's will.

Yourguidetoinvesting.com discusses how to balance risk with financial goals.

3) Lifestages

At a dinner party last week, the topic of KiwiSaver came up. I'm the life of a party as you can imagine talking about retirement savings. Like many readers on this site, one of my good friends believes that money managers are only looking after themselves, that money locked away till 65 is doomed to disappear and the economy is set to undergo a revolution the likes of which we have never experienced. Can I say with absolute certainty that none of these are true? No.  Can I say that my friends will be well provisioned in retirement regardless. No. 

When I mentioned the possibility that they could use the money as a deposit on a first time home, the tone of the conversation changed. Their biggest goal is to buy some land to build on or else a home. Their biggest challenge in KiwiSaver, should they have a change of heart about it, will be finding the most appropriate fund given their short-term goals for KiwiSaver.

Another couple, also non-KiwiSavers, inquired about fund selection. I briefly explained the basics.

For many, at least those who will never seek professional advice or do the research, lifestages funds are a good choice. Asset allocation is built around age and retirement targets.

To see what providers offer lifestages funds in KiwiSaver see our KiwiSaver section here.

4) Kids as tax pawns

Money writer Mary Holm in her latest NZ Herald column cites some famous quotes on taxes, all of them extolling the virtues of good citizenship through tax. To be honest, the quotes all made me cringe. I believe in paying my fair share, I just think those of moderate means pay more than their fair share. A reader suggests it's because I am a libertarian "at heart.'' I dunno. I just know I'm not a socialist.

Anyway, the column itself is a good one and worth a read as Ms. Holm looks at the scenario of a couple using their children to avoid paying a higher resident withholding tax rate on some term deposits. It's not something I would condone even as a bitter taxpayer and no it's not allowed.

5) Entrepreneurialism

Entrepreneurs come in all forms but are said to share a common trait: passion. It's the passion, above all, that is said to the driver of success.

Here Monevator.com looks at the different types of entrepreneurs and their distinguishing attributes.