Discretionary Income Choices

Making the most of your discretionary income

Discretionary income is what you have left over after paying your fixed costs. It is yours to spend on whatever you choose.

But…
How you spend this money can make a difference to your financial situation, but before this we have to ascertain what is discretionary income.

Rent/rates

Car running expenses

Power

Debt

Groceries etc.

People who have an addiction of some kind will prioritize their spending so that the addiction is included among their fixed expenses.

Everyone as an adult has freedom of choice unless they have debts which means their freedom is being eroded away in relation to their level of debt.

The old Proverb, “The borrower is a slave to the lender,” sums it up.

We all have some control over most of our fixed expenses such as groceries and power;we can cut down on these but with items such as rates/rent are fixed but even then we can choose to live in a more modest apartment or downsize.

The excess to your expenses is called discretionary income.

Another way of increasing your disposable (discretionary) income is to increase your income by getting a part-time job, getting a higher paying job, or selling stuff online.

Saving your discretionary spending for some greater purpose instead of frittering it away gives your life some meaning. Instead of just letting things happen you are making things happen. Many people in 10-20 years time wondered what happened.

There is a major difference between saving your money and investing it. Astute investors use their discretion to increase their wealth by investing in higher risk stocks and shares, gold, and cryptocurrency. There are enough online platforms where you are able to drip feed money into these things if you are still climbing up the investment ladder.

But then you may prefer to save for a holiday and tick off one or two items on your bucket list. The border closures will restrict your choice of places but here in New Zealand there are so many fantastic places to visit it is an opportunity to discover your own backyard.

Among the more popular activities in New Zealand are landing on the Franz and Fox Glaciers, going for a dip in the Hanmer Springs hot pools, visiting the wine region of Marlborough, or attending one of the sports meetings around the country. One thing I have to mention here is the Tranz Alpine Express train journey between Christchurch and Greymouth. It is rated one of the finest train journeys in the world and having experienced it I do not disagree. It has to be on everyone’s bucket list.

Learning to Trade Commodities

Many new traders ask how long it takes to learn to trade in commodities. It can take a couple of months for a diligent individual to learn to trade commodities. However, for those, who question about mastering trade commodities, they should know that it also may take a lifetime to trade commodities.

If you wish to make consistent profits from commodities trading, you will have to trade consistently. Never trade with the intention of making large sums of money right away. This is why usually 80% to 90% of the traders lose their money through trading commodities. When you are learning to trade commodities, a time will come when you achieve the breakeven point. This is the point where trading becomes profitable.

Commodity trading is held in commodity markets. It can be the derivatives market or even the spot market. In the derivatives market, commodities are traded via different financial instruments whereas in spot market, commodities are bought and sold hand to hand. Usually,Futures is a financial instrument that is used for trade exchanges in the commodity market.

Futures exchange is a standardized contract. It is set on the basis of particular futures exchanges. These include the size, the type, and quantity of the commodity along with the transaction price and the place where the commodity is to be delivered.

Some regulated Futures Exchanges negotiate the future contract. It is a place where the buying and selling orders are brought to a single place on the exchange.

A trading floor or trading computer is required for carrying out transaction in the commodity future market. This exchange takes place among the brokers, who are the members of the exchange of a particular commodity, which is to be traded. Both buyers and sellers are going to have a broker. They will transmit the purchase and sale order.

While you are learning to trade commodities, you see that the buyers and sellers of commodity futures contracts have certain obligations. The buyer has to take delivery and pay for the cash commodity. The time frame for the commodity contract is set. The seller has to deliver the commodity for which he has paid the price that was set for the exchange. The price can change on the quality of the material supplied. The obligations of the buyers and sellers can be eliminated by offsetting the trade exchange before the due date of the contract. This is usually how spectators trade in the commodity markets.

Just like every other type of trading, for commodity trading, you have to open a trading account with the commodity broker. Just choose the broker carefully when you are planning to take recommendations from the trader. Make sure that the trader provides a good trading commission along. The broker is going to be responsible for connecting buyers and sellers. Through the trading accounts, the trader can continue on the exchange himself too by using the computer. This method of trading has become quite preferable among the traders, as it is convenient and quick. Just contact a licensed broker for trading.

Setting Your Money Goals

3 Factors which determine your investment strategy

You may be wondering what is the right investment strategy for you, but without knowing anything about you, any advice on which investments are right for you may in fact be the wrong ones. There are basically three factors that determine which are the right investments for you, they are:

1. Your age

2. Purpose for the money

3. Your risk profile

Starting with your age. It would be rather silly of you to invest all your money in growth funds if you are aged 65 because if the market takes a dive such as was the case during the 1987 sharemarket crash and to a lesser extent, the Global Financial Crisis during the early 2000s you have less time to recover from these setbacks whereas the young ones have time on their side.

The purpose for the money is the second factor.

Decide whether you require the money in the short-term, medium-term, or long-term.

Short-term would be up to a year.

Medium-term is 1-5 years

Long-term is longer than five years

Short term expenses would be, a bank account for emergencies, a holiday within a year, dental expenses, or t pay for the kids schooling for a year.

Medium-term would be savings for a car.

Long term would be your retirement fund, saving for a house deposit, or saving for the trip of a lifetime.

Your risk profile is a determining factor in where you invest your money. If the thought of the sharemarket taking a dive will give you sleepless nights then investing growth stocks in the sharemarket is not for you. A better option would be managed funds where you will be given a choice between growth, balanced, and conservative funds.

It is important not to get into debt for there is a cost to debt and that is interest. Interest adds to the cost of goods bought with borrowed money, and this adds up to a fortune during a lifetime of borrowing for consumables. This is called bad debt because the value of the item declines over time.

There is such a thing as good debt though and this is your first home because the value of the property increases during the lifetime of the loan but even this is not always a good option for some people if you live a kind of transient lifestyle.

“Everyone is to their own,” so only you know what makes you tick so your personal circumstances are the determining factors which govern where best to invest your savings.

You must do your homework before you invest in anything, whether that is the sharemarket, managed funds, or gold. There is so much information available on just about everything, and that includes finance. It is just a matter of learning the ropes and having a financial strategy which suits your personal circumstances.