Back in 2018 Stuff published an article by Janine Stark on 30 things that destroy your Wealth. 5 years on, here’s how we see them.

  1. Stashing Cash: There is nothing more financially devastating than holding deposits long term. Still true, but harder to see now that term deposit rates are hovering around 6%. Inflation will still eat away at your cash over time.

 

  1. Keeping inherited assets: Here’s the test. If you woke up one morning and found your inheritance in $20 notes on the doorstep, would you rush out and buy the asset you just inherited? Sentimental value will only get you so far.

 

  1. Spending an inheritance: It’s a chance in life to shore up your retirement. Keep it in your own name and don’t mingle it with other assets. It will remain yours in the case of a divorce. Absolutely, although a little splurge never hurts.

 

  1. Divorce: One US study shows wealth falls four years before divorce and average wealth drops 77 per cent – marriage is more efficient. Still true but maintaining wealth may not be enough reason to stay in a relationship.

 

  1. Not enough house: Lack of home ownership is the quickest route to poverty in retirement. Still true and a very big issue in NZ.

 

  1. Too much house: It’s not an investment. It’s a lifestyle asset. Buy big at the expense of long-term investment funds. Eventually the kids will leave home and when you hit retirement, you can’t eat your house.

 

  1. Failure to ask for a pay rise and promotion every year: Ever heard of someone labelled “annoying” for doing this? Nor me. Difficulty finding staff in NZ over the last year should have seen employees bumped up the pay scale. If this was not you it might be time to ask why.

 

  1. Failing to invest 10% of your salary in a retirement fund: Current KiwiSaver rates are vastly insufficient.

 

  1. Waiting to invest: Today is good and tiny amounts are fine.

 

  1. Conservatism: Failing to invest in growth funds over the long term. It’s been a bumpy ride since 2018 but shares still outperform bonds over the long term.

 

  1. Timing the market: If you have fear, break a lump-sum into parts and invest monthly. It’s not proven to make much difference, but it’ll help your head. Not even the professionals can time the market. “Time in” the market is what gives you a return.

 

  1. DIY investing: How do you know a DIY investor? Oh, they’ll tell you. Generally a know-it-all with rental property, a bunch of Kiwi shares and a technical background in something far cleverer than money. They’re over exposed to risk – both concentration and themselves. With the arrival of platforms like Sharesies and InvestNow the options for DIY have grown. It’s not all bad – it can be a great place to learn and find out that you need guidance from a professional!

 

  1. Investing heavily in NZ: The value of shares on the main board of the NZ exchange is $129 billion. We’re about 20% of Facebook’s value after a bad week. We recognise this risk and always allocate a large part of your investments offshore.

 

  1. High fees: Too much money in active management or paying performance fees over the long term. Performance after fees should be your long term focus.

 

  1. Concentration of risk in one asset class: Own a few rental properties in the same city? Hmmmm. Still happening. Diversify, diversify, diversify!

 

  1. Retirees giving money to adult children: Do your grandchildren own an iPad? If they’re not suffering technology-poverty they can all wait until you’re dead. Easy to say, harder to do – we all like to give to family. Do so only if you have more than enough to spare.

 

  1. Not spending it: Retirees who don’t have regular monthly capital payment from their savings destroy the whole joy of using their wealth. It can be a big mental barrier to switch from saver to spender, but why else have you worked so hard your whole life?

 

  1. Viewing tax as a burden rather than a reward for investing: It will narrow your scope of opportunity and cause badly timed decisions. Investment property capital gains tax anyone?

 

  1. Stuck with a widow: The partner of a dead shareholder-employee isn’t ideal in a business. It’s not gallant to keep them invested and it’s not fair for them to remain. Buy life insurance policies on your key people to assist with a buy-out. Very important and too often overlooked.

 

  1. Starting a part-time business: Commercial reality will bite. Any successful business is twice a full-time commitment. Yes, but you need to start somewhere.

 

  1. Starting a business without a double income: If your partner isn’t in a position to have their own career and fully support a period of zero income, you’re not cut out for it as a couple. Could also be applied to starting a family…..

 

  1. Starting a business in a field you didn’t train in: The best businesses are started by people who are already experts. Can’t argue with that.

 

  1. Starting a business when your mortgage isn’t paid off: A fatal error to have the stress of home loan payments. Assume you won’t make money for several years. Even harder with new higher mortgage rates.

 

  1. Businesses owned by friends or family: If you can’t decipher a balance sheet, filter a business plan, and compare it to a range of other opportunities, don’t do it. If it doesn’t make financial sense, the fact they are your friend only complicates things.

 

  1. Not having a goal to sell a business: Find out what multiple of earnings similar businesses have sold for. Keep close to competitors; they’re your natural buyer. Things change with time and the economy. Your business might not be worth what you think so keep your hand on the pulse.

 

  1. Employer shares: Only valuable if there’s a plan to build and sell the business in a set timeframe. Don’t bank your retirement on it. See also #15.

 

  1. Using borrowed money to invest: The Aussies are rather fond of this and it’s more prevalent across the Tasman. Steer Clear. It’s even less appealing with interest rates where they are now.

 

  1. Peer-to-peer platforms: Loans to strangers. There’s a reason they got turned down by a bank or didn’t approach one. Know the risks of what you’re getting into.

 

  1. Crowd-funding: It’s a play-thing and a very long-term play-thing. Don’t expect to see any action for 10 years. See #28.

 

  1. Kids in Parent’s Pockets Eroding Retirement Savings: You’re over 50 and these are your turbo years of saving. Don’t under-estimate the damage you do by funding kids lifestyles. Still happening, particularly with the boomerang generation. Not only can you damage your retirement savings, but your kids take a longer time to learn financial independence.