Let’s say that you have decided that you really NEED a new fridge. The next question is, can you afford it? Or are you thinking to yourself, well, it’s only another $10 a month. You really need to look at your income. That is your starting point. How much money do you make? i.e. What do you take home after taxes and deductions? That is your spending money. You can choose to spend all or it or some of it. But you should not be spending more than you have.
Every time you put something on a credit card – you had better look at the interest rate you will be paying. Add that to what is coming out of your income. Not only that, you may find that you pay up to three times the original price of the fridge by using a credit card instead of cash.
Let’s take it back to basics:
How much is your income?
How much are your fixed expenses?
How much money do you have left over after your fixed expenses? It’s that figure that should prompt you on how much you have to spend on that fridge. If you cannot afford it from what you have left over – you don’t buy it unless it is an absolute emergency. But remember, very few things are an absolute emergency.
So now we come back to wants and needs. Do you want that fridge or do you really need it? Can you make do with the fridge you already have, or is it beyond repair and your food for the family is rotting because it is not in the fridge?
Is there a way that you can exchange services with someone who has a fridge? Does someone have a fridge tucked away in their garage that they are not using?
If that’s not possible, there is always Trade Me in NZ or EBay around the world.
The best way to pay for anything is with hard cash. Then you are able to negotiate a much better deal. There is a lot of competition out there right now for your business, so make sure you negotiate assertively. Check around all the retail outlets, do your homework and then you will be in a stronger position to get a better price. It’s amazing what is negotiable. For example, I went to upgrade my memory for my laptop. I managed to negotiate the store down from an original quote of $280 to $200!
I’ll talk about negotiation in more detail next week. The first step it to have some cash jingling in your pocket to get the best bargains. Have a great week and only buy what you need!
This blog is about economic trends, market updates, news and forecasts. Up to date information about finance and business.
Saturday, July 25, 2009
Saturday, July 18, 2009
Do you really need it?
You may want a very big house, but do you really need it in this economy? Can you stay in the house you are in, or if your mortgage is too onerous for you to handle, perhaps you could consider downgrading and moving to a smaller house?
I had to grapple with this situation a couple of years ago. I found the house of my dreams – it had everything in it that I had ever wanted. However, I had a feeling that the economy was turning and I decided not to go ahead. I realised that it was something I wanted and not something I needed.
Do you want or need a luxury car? Could you make do with something that gets you from A to B?
Do you want or need more clothing or an extra piece of jewellery? What is it that you do need? You may say that you need things for business, for example, better clothing. But do you really need more clothing or could you buy clothing more cheaply?
Ladies, how many pairs of shoes do you actually need?
While some books are wonderful to own, must you own all the books you read, or can you get some at the library?
How often do you go out to eat? What kinds of restaurants do you go to? Can you cut back on the number of time you entertain or go out to dinner? Can you cut back on the types of entertainment you go to?
Everyone nowadays seems to love everything electronic. Do you really need all those electronic toys? How fancy does your computer have to be? How much of a sound system do you need to enjoy your music? Can you do these things more cheaply or relinquish them altogether when necessary?
It’s better to know what your options are to conserve your assets rather than wait around and some day maybe have to give them up altogether.
Right now, while you still have a choice, if the economy is affecting you adversely and you are being forced to reorganise your priorities, you would be best served by taking a look at what you have, what you are willing to give upa dn what you are willing to economise on. So if you are ever in a position where you have to give up something or everything, it will be less painful. Any by economising now, when you are not being forced to do it, you will end up with a plus in your savings account.
Many people just want to get away from it all and they go on holidays that they can ill-afford. When they come back nothing has changed in their lives, except now when they come back from holiday they have less money than when they started. If you are going on holiday, make sure you can afford it and there is still going to be money for you when you come back.
Everyone needs a break in their routine. It doesn’t mean you have to spend money to take that break. Take advantage of the free things that are available to you – walking, cycling, fishing, free concerts, art galleries, museums.
In an economic recession, people get more depressed more easily so they need a little lift from time to time. However, there is no reason to think total depression at the thought of having no money, no entertainment and nothing to break up the doom and gloom when there are plenty of free activities to do. It requires friends and family to pull together to do things that are enjoyable to lift one another’s spirits.
I had to grapple with this situation a couple of years ago. I found the house of my dreams – it had everything in it that I had ever wanted. However, I had a feeling that the economy was turning and I decided not to go ahead. I realised that it was something I wanted and not something I needed.
Do you want or need a luxury car? Could you make do with something that gets you from A to B?
Do you want or need more clothing or an extra piece of jewellery? What is it that you do need? You may say that you need things for business, for example, better clothing. But do you really need more clothing or could you buy clothing more cheaply?
Ladies, how many pairs of shoes do you actually need?
While some books are wonderful to own, must you own all the books you read, or can you get some at the library?
How often do you go out to eat? What kinds of restaurants do you go to? Can you cut back on the number of time you entertain or go out to dinner? Can you cut back on the types of entertainment you go to?
Everyone nowadays seems to love everything electronic. Do you really need all those electronic toys? How fancy does your computer have to be? How much of a sound system do you need to enjoy your music? Can you do these things more cheaply or relinquish them altogether when necessary?
It’s better to know what your options are to conserve your assets rather than wait around and some day maybe have to give them up altogether.
Right now, while you still have a choice, if the economy is affecting you adversely and you are being forced to reorganise your priorities, you would be best served by taking a look at what you have, what you are willing to give upa dn what you are willing to economise on. So if you are ever in a position where you have to give up something or everything, it will be less painful. Any by economising now, when you are not being forced to do it, you will end up with a plus in your savings account.
Many people just want to get away from it all and they go on holidays that they can ill-afford. When they come back nothing has changed in their lives, except now when they come back from holiday they have less money than when they started. If you are going on holiday, make sure you can afford it and there is still going to be money for you when you come back.
Everyone needs a break in their routine. It doesn’t mean you have to spend money to take that break. Take advantage of the free things that are available to you – walking, cycling, fishing, free concerts, art galleries, museums.
In an economic recession, people get more depressed more easily so they need a little lift from time to time. However, there is no reason to think total depression at the thought of having no money, no entertainment and nothing to break up the doom and gloom when there are plenty of free activities to do. It requires friends and family to pull together to do things that are enjoyable to lift one another’s spirits.
Saturday, July 11, 2009
Has the World Gone Mad??
Has the world gone mad? Across Illinois, up to 10,000 convicted criminals could soon be released early from prisons. The Governor says that cutting those prisoners loose could save more than $100 million. But at what cost to public safety??
Maybe it’s just a clever ploy to coerce people into paying more income taxes through fear-mongering. You can expect to see much more of this around the world in the countries that are burdened with growing deficits. They are going to cut spending in draconian ways and we are going to be more and more shocked at the tactics they will resort to.
Yet another bank in the US bites the dust. The closure of Wyoming Bank is the 53rd failure of 2009.
California is bankrupt and the government is trading IOU’s with the banks. How much longer can this go on for?
I have a client in Michigan, where there is the highest unemployment in the whole of the US. Only a few months ago, her house was valued at $1M and now it is down to $250K and she is still not able to find a buyer.
Here in New Zealand, the situation in the housing market and banking sector isn’t quite as bad, but I predict that we will follow the US, we are often a year or so behind them.
China has made repeated calls for the world to diversify out of the US dollar. At the G8 meeting this week, Chinese State Councillor Dai Bingguo was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates. France also unexpectedly called for a currency discussion and moving toward a "multimonetary" system, though Britain warned any debate should be reserved for the long term to avoid destabilising markets in the midst of a global recession.
China's ideas for changing the system had previously been mentioned in reports by its central bank, but had never been voiced in a speech by such a high-ranking political leader.
Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency” to the heads of the G8 delegations.
The test coin means that they are getting ready. The question is are you ready? Do you know what the consequences of having a world currency will be? How will it be implemented? What kind of disruption will it cause? Who will be the winners and who will be the losers?
Firstly, there could be a bank holiday. This happened in 1933 when all the banks closed for four days in the US. How would it feel if you couldn’t access your money for days if not weeks? What if they devalue your currency? All your hard-earned money could become worthless. These are very serious times we live in and constantly we are receiving pointers and messages about what the future could hold. Are you listening?
Maybe it’s just a clever ploy to coerce people into paying more income taxes through fear-mongering. You can expect to see much more of this around the world in the countries that are burdened with growing deficits. They are going to cut spending in draconian ways and we are going to be more and more shocked at the tactics they will resort to.
Yet another bank in the US bites the dust. The closure of Wyoming Bank is the 53rd failure of 2009.
California is bankrupt and the government is trading IOU’s with the banks. How much longer can this go on for?
I have a client in Michigan, where there is the highest unemployment in the whole of the US. Only a few months ago, her house was valued at $1M and now it is down to $250K and she is still not able to find a buyer.
Here in New Zealand, the situation in the housing market and banking sector isn’t quite as bad, but I predict that we will follow the US, we are often a year or so behind them.
China has made repeated calls for the world to diversify out of the US dollar. At the G8 meeting this week, Chinese State Councillor Dai Bingguo was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates. France also unexpectedly called for a currency discussion and moving toward a "multimonetary" system, though Britain warned any debate should be reserved for the long term to avoid destabilising markets in the midst of a global recession.
China's ideas for changing the system had previously been mentioned in reports by its central bank, but had never been voiced in a speech by such a high-ranking political leader.
Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency” to the heads of the G8 delegations.
The test coin means that they are getting ready. The question is are you ready? Do you know what the consequences of having a world currency will be? How will it be implemented? What kind of disruption will it cause? Who will be the winners and who will be the losers?
Firstly, there could be a bank holiday. This happened in 1933 when all the banks closed for four days in the US. How would it feel if you couldn’t access your money for days if not weeks? What if they devalue your currency? All your hard-earned money could become worthless. These are very serious times we live in and constantly we are receiving pointers and messages about what the future could hold. Are you listening?
Saturday, July 4, 2009
Volatility - what can you do to protect yourself?
1. Don’t invest in anything you don’t understand. E.g. bonds, investment products, anything stock-market related, even term deposits can be risky. If an investment advisor is pushing you into a product that you only partially understand, turn it down.
2. Interest rates can change in a heartbeat – you may think that a rate of 8% looks great right now and tie yourself in for 5 years – but what happens if interest rates go up to 17% (as they are right now in Iceland??)
3. Don’t tie yourself into anything – times are changing too rapidly e.g. Telecom – one year contract – but with Skype – you no longer have to pay for international calls. Mobile phone contracts – more competitors coming onto the market, rates dropping – best to stay flexible even if it appears to be a bit dearer at the time. This applies to all services including electricity, gas, insurance etc.
4. Learn to discriminate between wants and needs. You may really want to have something, but you don’t need it. In a recession, you need to learn how to be frugal and how to make everything you do have last as long as possible. And if you “need” something e.g. a car or a large item like a fridge or washing machine – remember that the best way to pay for it is with cash – you get the best price, you can negotiate the best terms and you are not heavily laden with debt in a slowing economy.
5. If you can possibly help it, do not take out any debt. Save up and buy it when you have the cash.
6. Green Shoots – do not be misled. Nothing warrants it: government spending deficits (look at California which is now bankrupt), rising unemployment, corporate failures, foreclosures…..economists constantly revising their forecasts, time and again they are wrong. So you will have to trust your intuition and your gut reactions. If it doesn’t feel right, it probably isn’t.
7. Watch out constantly for changes in the markets. Look especially at the US, as they still have the reserve currency of the world. What happens in the USA certainly affects the rest of the world. Be ready to turn on a dime – it is especially hard for people to conserve their wealth during a downturn. Interest rates are low, (Sweden now has a negative interest rate of -0.25%), banks are very unstable. Even those that are backed by the government cannot be trusted. What if the governments cannot afford to cover all the banks’ bad debts? Then what will happen to your hard-earned money? You will probably lose it. So be ready to change and adapt very promptly – people who hesitate will undoubtedly lose great portions of their wealth. And remember, make sure you have some gold and silver on hand in case the world financial systems take a “bank holiday” for a while.
2. Interest rates can change in a heartbeat – you may think that a rate of 8% looks great right now and tie yourself in for 5 years – but what happens if interest rates go up to 17% (as they are right now in Iceland??)
3. Don’t tie yourself into anything – times are changing too rapidly e.g. Telecom – one year contract – but with Skype – you no longer have to pay for international calls. Mobile phone contracts – more competitors coming onto the market, rates dropping – best to stay flexible even if it appears to be a bit dearer at the time. This applies to all services including electricity, gas, insurance etc.
4. Learn to discriminate between wants and needs. You may really want to have something, but you don’t need it. In a recession, you need to learn how to be frugal and how to make everything you do have last as long as possible. And if you “need” something e.g. a car or a large item like a fridge or washing machine – remember that the best way to pay for it is with cash – you get the best price, you can negotiate the best terms and you are not heavily laden with debt in a slowing economy.
5. If you can possibly help it, do not take out any debt. Save up and buy it when you have the cash.
6. Green Shoots – do not be misled. Nothing warrants it: government spending deficits (look at California which is now bankrupt), rising unemployment, corporate failures, foreclosures…..economists constantly revising their forecasts, time and again they are wrong. So you will have to trust your intuition and your gut reactions. If it doesn’t feel right, it probably isn’t.
7. Watch out constantly for changes in the markets. Look especially at the US, as they still have the reserve currency of the world. What happens in the USA certainly affects the rest of the world. Be ready to turn on a dime – it is especially hard for people to conserve their wealth during a downturn. Interest rates are low, (Sweden now has a negative interest rate of -0.25%), banks are very unstable. Even those that are backed by the government cannot be trusted. What if the governments cannot afford to cover all the banks’ bad debts? Then what will happen to your hard-earned money? You will probably lose it. So be ready to change and adapt very promptly – people who hesitate will undoubtedly lose great portions of their wealth. And remember, make sure you have some gold and silver on hand in case the world financial systems take a “bank holiday” for a while.