New Year’s resolutions don’t all have to be about giving up chocolate and alcohol

It’s only the second day of the New Year and you’re probably fed up with reading about resolutions. However, they don’t all have to be about giving up chocolate or alcohol, or rising before the sun to exercise.

These tips for 2018 don’t have to be done with any great urgency; rather, think about the following advice as something you can check in on over the year as your appetite for financial management ebbs and flows.

1: Decide on your goals

An obvious one, but how many of us have ever taken out life insurance, or embarked on a renovation without thinking of the wider impact of such a move?

Writing down your financial goals may not mean you’ll actually achieve them (sorry fans of The Secret) but it will probably increase your chances of doing so.

2: Get your mortgage into shape

If you already have a mortgage, there are three things you should be thinking about this year. The first is checking you’re on the right rate; after all, one thing we’ve learned from the tracker scandal is we can’t rely on the banks to get it right for us.

The second is to consider a switch to another product or competitor. With house prices continuing to rise, your loan-to-value (LTV) ratio will have fallen which should make you liable for a cheaper mortgage.

Thirdly, pay more than the minimum. While you could be doing something else with your money, for most of us, the peace of mind that comes with inching away at your mortgage is hard to beat. A little effort can, over time, produce substantial returns.

By overpaying each month you’ll reduce what you owe the bank and cut the term of your mortgage. It also means you’ll cut your interest bill. As you’ll be enhancing your LTV ratio, the bank may offer you a keener interest rate which will have another cost-reducing impact.

Consider someone on a €250,000 mortgage with 17 years left to go paying interest at a rate of 3.7 per cent. They are currently making repayments of €1,653 a month. If they increased their repayments by €100 each month it would knock 16 months off the mortgage term, saving them €7,302 (based on interest rates staying where they are).

If they bumped up payments to €200 a month, they would cut the term by 30 months and save themselves €13,454 in interest.

Bank of Ireland has a calculator which can help you work out your savings.

3: Review your pension

You may not do it this week or next week, but at some point this year take the time to read your annual pension benefit statement and figure out how your retirement is shaping up. You owe it to yourself.

And if you don’t have a pension, is it time to think about getting one?

If you have spare cash you can simply bump up your contributions. But if your pension is going nowhere, why reward your non-performing fund manager even more?

So how do you go about that?

You’ll need to figure out a couple of things. How much will you need in retirement? Will you have a mortgage? Will you get a full state pension of €12,300 or so a year? What if you don’t?

Armed with this information, you can see where you’re headed by examining the “statement of reasonable projections” in the pension documents that should be sent to you annually. This will show what income your current pot, plus future contributions, will generate.

If you’re falling short of your goal outlined in the first step, you may have time to rectify this. Typically, to get a pension worth half your salary, you’ll need to be saving at least 15 per cent (ideally 20 per cent) of your salary. Any employer contributions will count towards this, and making additional voluntary contributions (AVCs) will boost it.

Don’t ignore your pension fund’s performance. Is your manager returning as much as you’d expect given market conditions? If not, think about switching. If you’re in a group scheme and can’t, bring your concerns to the funds’ trustees.

Fees and charges are also a factor. Are they too high? If you’re losing too big a chunk on fees, it may be time to switch or renegotiate. After all, as figures from the Pensions Authority show, an annual management charge of 1 per cent depletes a fund worth €136,700 by 10 per cent, or €14,500, over 20 years.

4: Bump up your savings

Deposit rates may be on the floor (the best 1-year fixed rate is currently just 0.75 per cent from KBC Bank), but so too is inflation. This means it may make as much sense to save today as it did when these indicators were much higher.

You won’t regret upping the amount that goes into your savings each month, even if it’s a small bit such as the amount you’ll save this year thanks to Budget 2018 changes.

You could also consider investing in a stock market fund. Doing so on a monthly basis lowers the risks and could offer better returns; saving €200 in an account paying 2 per cent will give you €4,893 in a regular savings account, while a stock market fund returning 8 per cent a year will give you €5,186 after two years (assuming markets continue to rise).

Of course while headline inflation is stagnant, rental and house price inflation is rampant. This undoubtedly makes it more challenging to try and save. But, if you’re seriously considering trying to buy your first home, look at other factors which might help you seal the deal. Help to buy (5 per cent tax rebate on purchase price up to €20,000) can help you get your deposit on a new home purchase.

The rent a room scheme, which allows you earn €14,000 a year tax free by renting out rooms in your home, may convince a lender to take a chance on you. It could make you a more attractive candidate for a mortgage and will also make repaying it much cheaper.

Consider a three-bed home with a mortgage of €350,000. Monthly repayments at 3 per cent will be €1,500, or €18,000 a year. If you earn the maximum €14,000 allowable under the scheme, you will be left with a shortfall of just €333 (plus bills) each month. Certainly cheaper than renting in the current market.

5: Take control of your debt

As a nation, our outstanding consumer debt may be falling but figures from the Central Bank show we are the fourth most indebted in Europe. Average debt per household is €83,941.

While mortgages may account for most of this, expensive, short-term debt is also a factor. In August 2017, for example, more than one-third (36 per cent) of credit cards had balances of between 75 and 100 per cent of their limits.

If you have too much debt weighing on your credit card, try and make some inroads this year.

For example, if you have €2,000 sitting on your credit card at a rate of 20 per cent and you are repaying just 2 per cent a month (€40), it will take you nine years to clear your debt. And it will cost you an extra €2,336 in interest!

If you repay an extra €5 a month, you’ll cut the time to 6.6 years and your interest bill to €1,635. If you bring the monthly repayment up to €60, your cost of funds will drop to less than €1,000 and you’ll repay it in about four years.

Here are few tips to make a comprehensive and successful investment plan that can lead you towards a profitable investment future in share market. Get more stock trading tips from India Infoline.

Many investors think the stock market is like a treasure box. Once you open it, it would overflow with wealth and goodness. However, that’s not the case. The stock market does have the potential to make you rich but only if you invest smartly. You need to plan your investments in such a way that your losses are lesser than the profits in the long run.

For this, you need to have an investment strategy in place. If you are a new investor investing in the stock market for the first time, you need to consider some points. These would help you make a comprehensive and successful investment plan. Implementing and following these tips can lead you towards a profitable investment future. So here are 5 tips for your consideration:

1. Spend time in preparation before you start

Investing in thestock market isn’t something you start immediately once you hear about it. Take time to understand and prepare yourself for the stock market. Know the various risks associated and your reasons for investing. Having clarity about your reasons helps you get focused results faster.

1. Know your investment options

As a new investor, you have an option to invest in different shares individually or invest in mutual funds and let the fund manager do the work for you. Ensure that you know the various options that stock market has to offer. Consider each along with its pros and cons. Weigh it with the goal and reason of investing and see if it is the most profitable option for you. Investment in stocks, gold, real estate and other avenues are some of the many options that you must consider. Once you choose, ensure you stick to it till you achieve your goals.

1. Have a roadmap and diversify investments

In the stock market, just investment is not enough. You need to have a solid financial plan or roadmap to back your investments. Consider your financial situation, your cash flow and risk tolerance before investing and locking away your funds. This would ensure that you are able to manage comfortably without having to be dependent on anyone even in the event of a loss. Planning also helps you make a budget and promote financial discipline in your life.

1. Have a contingency plan in place

Since investment in thestock market may not be completely safe, it is always advised to have a contingency plan in place. This is often referred to as an emergency fund. It is something that you keep contributing to, along with your investment. The role of this fund is to take care of you in case an emergency arises. You don’t have to withdraw from your investment in that case but instead can meet your urgent need with these funds. Ideally, having a sum that could last you for six months without any other income is considered as a basic level of an emergency fund.

1. Avail professional help, if necessary

You are a first-time investor and therefore, it is quite possible that you would not be well aware of the nuances of the market. At such times, you can take help from a professional investment advisor. An investment advisor or financial planner would help you identify and analyze your goals and work towards it. They would also provide you with a roadmap for your investments and also factor in your emergency fund for your financial security. You can ride on their market knowledge and expertise till you are confident of taking care of your investments on your own. They might charge a nominal fee for this service but the upside or learnings you get, besides the profits, are priceless.

As a new investor, you don’t need to get afraid when investing in the stock market. Spend time in knowing why you want to invest and what is it that you want to accomplish out of it. This would help make half of your task easier. Then check out the various options, choose the ones that suit you and plan your investment strategy for a happy future. If you still have doubts, don’t shy away from taking professional help. It would only do well for you and your investments. So, stop delaying and start investing today.

Investors have two major ways to find new investments that are the top-down approach and the bottom-up approach.

From where I stand, both methods have their merit. In fact, the goal of each approach should be the same thing, that is, to find good investments in the vast world of stocks. But, at the same time, these two approaches are quite different.

With that in mind, let’s take a look at the key differences between these two strategies.

The top-down approach

Investors who use the top-down approach tend to take a broad view before focusing on a particular sector to find suitable investments. For instance, recent reports suggest that interest rates might increase soon. With that framework, top-down investors may look at industries that can benefit from interest rate hikes, as such the financial industry.

The focus then shifts towards companies that operate within the financial industry. This method allows investors to concentrate on growing industries, or companies that are primed to benefit from any macroeconomic changes.

In my opinion, the key advantage of the top-down approach is that investors can focus their energy and time on specific industries. That would be mean less time is wasted casting their net too widely.

On the flipside, investors who use this approach limit may themselves to certain industries, and may miss out on other investment opportunities. As a result, there may be investment gems that are missed out.

The bottom-up approach

In contrast, the bottom-up approach involves making investment decisions based on the individual attributes of a company. Here, investors will tend to overlook the broader economy and focus on companies that they think have strong fundamental characteristics.

To sieve out good companies, they avoid industry-specific screening but will be open to any company that meets their investment criteria.

The key advantage of this method is that investors can find good investments, regardless of the industry that it operates in.

However, as you might have guessed, the bottom-up approach can sometimes be taxing and time-consuming as investors might have sieve through a large number of companies to find the few that are worth investing in.

A Foolish takeaway

Whether it is top-down or bottom-up, both methods have its pros and cons. As investors, we might want to consider employing the stock screening approach that suits our investment style. After all, the investor’s goal is to find the investments that can earn good returns in the stock market.

Making the money last when it's time to shift from saving to spending

You’ve earned and saved money and now you’re headed into retirement. What could go wrong? Along with a new schedule and opportunities come new questions and challenges, particularly around finances. The most pressing ones are often: “Do I have enough savings to last my lifetime?” and “How do I turn my nest egg into a paycheck that I can count on throughout retirement?”

One of the biggest changes in retirement is going from receiving a consistent paycheck to needing to generate your own cash flow to cover expenses. This shift requires a new investment strategy and mindset.

The 3 Phases of Retirement

To start, you’ll want to think of retirement as a series of three unique stages:

The “Go Go” Years In the first years of retirement, you’ll likely be focused on the fun things in life, such as travel or enjoying activities with friends and family. The result can be a spike in lifestyle expenses. During this period, your investment strategy should account for a faster withdrawal rate from your portfolio and more money going out the door.

The “Slow Go” Years Throughout these years, it’s likely you’ll settle into a routine. Your desire to be as active may taper off, and with it, life expenses can tend to go down.

The “No Go” Years More Americans are living into their 90s or beyond. While this is a testament to our medical advancements, increased longevity is often accompanied by physical limitations. At this point in life, you may scale back your activity even more and find that your remaining expenses are focused on daily living and possibly health care-related.

5 Ways to Restructure Your Portfolio for Retirement

Throughout the different phases of retirement, you’ll need to develop strategies around covering your day-to-day expenses as well as the best ways to tap into your assets. Both strategies should meet your goals and reflect your views on risk. Regardless of your circumstances, be sure to address five key areas when mapping out your retirement income plan:

1. Protect against sequence risk If the stock market takes a tumble and you’re not appropriately diversified, you could be forced to pull money out of investments that have declined precipitously. The returns during the first few years of retirement can have an especially significant impact on your long-term wealth picture — this is known as “sequence risk.”

So consider keeping some of your money in liquid investments such as cash or other relatively safe, short-term vehicles to cover expenses for the first two or three years of retirement.

1. Match your assets to your expenses Identify which of your expenses are required to meet your basic needs of living, (such as food, shelter, utilities and health care) and which are discretionary (like travel and hobbies). Then, target sources of guaranteed or stable income to meet your essential expenses. This can include Social Security, a pension if you’ll get one and perhaps an annuity with guaranteed payments.

You can use investments that may vary in value to meet your discretionary expenses.

1. Remember that taxes are an ongoing expense As you create your own paycheck in retirement from your savings; remember that you may still have a tax liability. Unlike your working years, taxes may not be automatically withheld from your sources of cash flow. Even the majority of Social Security recipients are subject to tax on the benefits they receive.

Depending on how effectively you manage your income level, you may qualify for a zero percent long-term capital gains tax rate when liquidating certain investments in a taxable account.

Working with a financial professional before, and throughout, retirement can help you calculate how much you may owe in taxes or which tax breaks you may be eligible to receive.

1. Pay attention to required distribution rules for your retirement accounts If you have money in traditional Individual Retirement Accounts (IRAs) or workplace retirement plans, remember to comply with the government’s required minimum distribution (RMD) rules.

After age 70 1/2, you must take withdrawals from these accounts annually — even if you don’t need the money — based on a schedule provided by the Internal Revenue Service. Failure to comply can result in a significant tax penalty. (Money held in Roth IRAs is not subject to RMD rules).

1. Keep in mind that growth is still a concern When you are younger and accumulating wealth, your primary investment focus is growing your assets. However, in retirement you need to think about the potential impact that inflation could have on your future income needs.

To keep pace with rising living costs, you will still need to grow your assets. That may mean keeping a portion of your portfolio invested in equities that historically have outpaced inflation, but could also be subject to more market volatility.

Start planning early to protect what you’ve accumulated and position your assets for their new purpose — to generate income to last throughout your retirement.

Lots of people dream of becoming a millionaire, but few actually know what it takes to get there. Most millionaires weren’t handed their wealth, and few stumbled upon it by luck. A mere 20 percent of them inherited their money, according to Thomas J. Stanley's book The Millionaire Next Door. The conclusion? The majority of millionaires are self-made.

So, if you want to be a member of that elite group, exactly how do you make a million bucks? The truth is, there’s no secret handbook for millionaires. Most of them follow typical investing best practices. But you do need to be smart with your finances, so do your research and invest strategically.

Stanley, author of the "millionaire" book, also believes that attitude is a contributing factor. “One of the reasons that millionaires are economically successful is that they think differently,” he writes.

Ready to start thinking differently and invest smartly, to make your own million? Here are four tips to help you get there:

1. Be conservative.

When you picture today’s millionaires, do you imagine them recklessly gambling with their money and buying and selling stocks at the drop of a hat? Actually, the opposite is true. Most millionaires are very conservative with their money. They are focused more on avoiding risk than on the potential gain they might make from an investment.

Millionaires know that being cautious with their money will ensure they retain and slowly grow their wealth. Too big of a risk, and everything could be lost all at once. But that doesn’t mean millionaires don’t take any risks. “If you embrace risk at the right time, you can actually reduce it over the long term,” Spencer Jakab, author of Heads I Win, Tails I Win, in an article for TIME.

Don’t be blindsided by the possibility of a large reward when you choose an investment. Avoid investments that are too risky, and be strategic with the investments you do make.

1. Diversify your investments.

One of the biggest investment mistakes you can make is to bet all your money on one horse. Millionaires know that to avoid risk, they need to have a diverse portfolio. That way, they aren’t relying on one company. If one of the companies they’ve invested in takes a hit, they won’t lose everything.

According to a study by Spectrem Group, millionaires invest 44 percent of their assets in stocks. This is typically how most millionaires make their money. They’re strategic in which stocks they buy and how they build their portfolio. They tend to favor low-risk stocks and invest in both foreign and domestic companies.

The younger an investor you are, the riskier investments you can make. As you get older, you’ll want to lower the amount of risk associated with each investment you make, to ensure your finances are stable for the long term.

Millionaires also invest much of their wealth in real estate. With the right property, you can stand to make a lot of cash. Whether you decide to flip houses or look for rental properties, real estate is a potentially lucrative investment opportunity.

1. Minimize fees and costs.

In an interview with Bloomberg, Warren Buffett, CEO of Berkshire Hathaway, said, “Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

Successful investors don’t have to be the smartest financial minds. But they do know what to do to hold on to their wealth. The U.S. Trust survey found that 90 percent of participating millionaires believed that the best investment strategy is the "buy-and-hold" approach.

By holding on to their investments, millionaires maximize their returns. They keep their transaction costs and other fees to a minimum to ensure the highest possible return.

1. Seek out advice.

No man is an island, and neither, it seems, are millionaires. Not all millionaires are investment experts, and many of them choose to seek out help with their portfolios. Spectrum Group finds that two-thirds of millionaires consult with an advisor.

Millionaires know they don’t need to have all the answers or do intense research on each and every investment. They leave that work to their advisor. But they don’t rely on their advisors completely. They are aware of the market, their investments and what’s going on. They are involved in the management of their portfolio but know when to seek guidance.