Save early, save often; Self managed funds; A simple plan; Minimise your mistakes; Growth Investing

By Amanda Morrall

1) Save early, save often

I interviewed a financial advisor recently who said despite all the doom and gloom facing younger generations (priced out of the housing market, saddled with student debts and facing the possibility of having a slimed down version of New Zealand Superannuation when they retire or maybe even none) that she was optimistic on their behalf. Why?

In one word, KiwiSaver. This advisor reckoned the forced savings habit will secure them a far more comfortable retirement that folks twice their age who left savings too late to make a meaningful difference in old age.

I'm not so sure it'll be easy street for today's high school and university grads but she has a point about the advantage they will be afforded by saving early and saving often whether that's in the form of KiwiSaver or another locked in investment earmarked for retirement.

Jack Bogle, founder of the famed low fee index tracking firm Vanguard, preaches the same advice outlined in this piece by Forbes.

Like it or loath it, KiwiSaver does create a forced savings habit because the money goes straight into an investment before you have a chance to spend it. As for the low fee part well, that's up to KiwiSavers to do their homework so, in Bogle's words, they can benefit from “the magic of compounding returns” without having them “destroyed or severely eroded by the tyranny of compounding costs.”

To compare what you are paying in fees on KiwiSaver for similar funds (and compare their performance as well) check out interest.co.nz's extensive KiwiSaver section here.

2) Budgeting

I have lots of conversations about money with people given my job. Today as I was chatting, a friend mentioned how they can't bare to do budgets and questioned their effectiveness if you controlled spending mentally.

It's true budgets can easily be broken by unanticipated expenses and one offs here and there. What's more important I argued is making sure you set aside adequate savings.

Your spending will adjust around that creating a budget of sorts where you live within your means. A similar point is made here in this piece from mymoneydesign.com which offers some numbers to target on the savings front.

3) Lost supers

In the course of my conversation with said friend, we also discussed superannuations funds held across the pond.

Regular readers will know that you can repatriate your savings back to New Zealand now under the terms of the Trans Tasman Portability Agreement. If you have lost track of where your super is invested and with whom this is a good starting point.

If you are not planning on bringing your funds back home but want to keep fees down, switching to a self managed fund may be worth pursuing, if you know what you are doing. The following outlines the risk and returns for those who opt to go the DIY route.

4) No mistakes

What's the best financial advice you can give someone in their twenties, apart from saving early and saving often. According to LearnVest's Alexa von Tobel, it's avoiding making costly mistakes. Easier said than done however being forewarned is being forearmed in personal finance, I would agree. 

5) Growth investing

Monevator continues with its investment 101 series, the latest explaining why and how growth investing differs from a value investing approach and why the grand poo bah of value investing, Warren Buffett, dismisses these classifications.

Here's how to order a copy of Amanda's book Money Matters: Get your Life and $ Sorted. The book is also available in ebook format as well via Amazon and is replete with hyper links to help you get your finances in order. You can also follow Amanda on Twitter @amandamorrall; check out her previous Take Fives here.