More and more people in PNG are realising the vital importance of growing their wealth for their long-term future. Whatever your stage of life, you will have hopes and plans for your future. Your goals may be short term or long term and include financial wellbeing for you and your family.
The end of one year and the start of another is the ideal time to plan for your future.
This year, it is more important than ever as inflation increases. Inflation, by definition, reduces the value of your money unless you are earning a higher return than the rate of inflation.
A very basic definition of inflation is the increase in general prices of goods and services over time. You can feel how expensive things are every time you do your grocery shopping or pay your bills. This is why is it important that you invest money in something that ensures that you are able to make a return that is higher than inflation.
In this year’s “PNG 2023 Budget Strategy Paper” the Government is predicting that inflation will be 6.2 per cent in 2022 and 5.6 per cent in 2023.
To not go backwards your money needs to earn you at least those amounts.
Money deposited in bank accounts will earn you less than 0.5% in a savings account and up to 2.0% in a long term deposit. So even then your money is going backwards.
Cash management accounts are about the same.
Government bonds will earn around 4.5% at the moment, which is still below inflation.
By contrast, shares are earning between 6% and 11.5%, well above inflation. They are higher risk than term deposits and government bonds, but shares such as BSP, Kina Bank and Credit Corp are quality stocks in the PNG market.
The festive holiday season over Christmas and New Year is an ideal time to sit and think about these issues and plan your finances for the following year. After all, “If you fail to plan, you are planning to fail!”
Take the time to think about your budget – how much you earn, how much you need to spend next year, how much you want to spend next year, and how much you can save. Even if you only save a few kina each week, over time it will build up.
If you need to borrow money, take the time to find out how you can borrow money at the lowest possible rate. This may mean opening a bank account and regularly saving some money. The banks, which are the cheapest source of borrowings, will want to know who you are and that you are a responsible borrower.
Then think about how you can invest any spare money you have to earn as close to, or more than, the rate of inflation. Reinvesting your earnings (called compounding) rather than spending it will grow your wealth even faster.
In the meantime, enjoy the festive season, reflect on the past, enjoy the present, and plan for the future.
From everyone at PNGX and the stockmarket professionals at Kina Securities and JMP Securities, we wish you a merry Christmas and a blessed new year. We look forward to helping you grow your wealth in 2023.
The information in this article is general in nature and you should take care to inform yourself about the specific characteristics of a particular investment before making a decision to invest in it. PNGX recommends discussing your investment objectives and needs with a stockbroker or qualified financial adviser. In PNG, you can either contact JMP Securities Limited (enquiries@jmpmarkets.com) or Kina Securities Limited (wealth@kinabank.com.pg).
By following these articles and reading the information available on the PNGX website (www.pngx.com.pg) or following PNGX on LinkedIn or Facebook you can learn more and build your wealth by investing in PNG.
