Contracts and agreements e.g. rental agreement, mortgage agreement, loan from family member or friend, credit card agreement, hire purchase agreement etc. affect most of us at some stage in our lives. and what you should be looking for to protect yourself and your assets.
Whether we are making these contracts and agreements with people we love and trust or whether we are making them with strangers. There are some simple rules of thumb that we should all be looking at as they apply to most of us.
Historically, 100-200 years ago, most countries did not recognise women’s rights to own property. They could not get a mortgage or credit without their husband’s permission. They themselves were treated as chattels.
If they wanted to know about money, they were told not to worry their pretty little heads – so it became the man’s job to worry about money and the woman’s job to take care of his personal needs and to be the heart of the house. He worked, he provided for their needs, she took care of the children, the household chores and her husband’s needs. Consequently when a husband died or divorced her or just disappeared, she was left not knowing how to balance a chequebook, not knowing what her mortgage rates were, or how responsible she was for paying that mortgage down. She had no knowledge of insurance and was often left without insurance coverage for herself and her family. As far as her car was concerned, she knew how to put the key in the ignition and get to the nearest service station.
Nowadays, women are in top positions in corporations but many of them still have their husband’s making the major decisions on things like insurance, mortgage rates, investments, medical coverage and pension plans.
Historically, when a woman gets into a relationship, she’s always given her husband dominion over her assets. She could come into a marriage with a house completely in her name and once she gets married and he wants to be put on the title to it, she doesn’t question it.
Also, historically, a woman takes the softer view. I love him, everything we have is ours. We share and share alike. I should be putting the house in both of our names. WRONG, wrong, wrong.
If he wants to be put on the title, or you want him to be put on the title, get 3 evaluations of the house and let him give you his share of the money for that house. After all if you are going into a business partnership and someone wants to buy into your business, you would have your business valued at current prices, and that partner would have to buy in cash at the current value. A house is no different.
Once he is on that title, he can do anything with that house, he can take out loans against it, and he can walk out on you, or he can mortgage it to the hilt and die leaving you with debt.
The same can be true of a man who owns property, but men usually cover themselves with pre-nuptial agreements. Women, historically have not been that smart. They have got smarter in recent years, but because their emotions are engaged so quickly and so deeply, they often have to be reminded to protect their assets.
The same thing holds true if you own your own house and your spouse wants you to sell it so that you can move into a larger place – once again, that partner should be compensating you with the value of his or her share of the house before you sell it. Because if the marriage falls apart, either way you would lose out because when it comes to a division of assets – you only own half of the new house and none of the house that you had in your own name before the partnership.
For example, I knew someone who had her own home that she had bought with her own money and had been living there for a number of years and that house was almost paid off. Then she got married. The new husband moved in. A few months later, he decided he didn’t want to live in that house. He wanted them to sell it and live in another house. After their divorce 15 years later, all she was able to get was half of the new house and nothing of the house that she had originally.
When you are dealing with monies, even if you are in a deep relationship, with a family member, a friendship, your spouse and you trust the other person deeply. You have had a lot of experience over the years and you think to yourself that you don’t need a written agreement – think again. You can never tell if or when the other person is going to back off and leave you with the debts and responsibilities or if the other person is going to sell off their half of the partnership leaving you unprotected.
On a professional level, I have a client who is having a house built, and she has known her builder for many years and he’s done work on other houses of hers. He has given her a quote for the work and said that it will not be above $120,000 for his labour costs – but she has decided that she doesn’t need a written agreement. I advised her that no matter how well she knows her builder, she does need a written agreement stating that his costs will not be above $120K. What happens if he is injured and he hasn’t been paying his public liability insurance? What if he goes into bankruptcy and just leaves the job halfway done and leaves the country?
If you have a quote from a builder with materials included, their suppliers could go out of business, the builders costs could go up and your costs could go up accordingly. If you want to protect yourself on materials, open up an account at a builder’s merchant so that you can buy the materials yourself and you can get the most competitive prices. That way, when your builder is quoting you prices for labour, you know you are just paying for labour and you can negotiate his labour costs, especially now when construction work is in such short supply.
So as you can see, on a personal and a professional level, you always need a written agreement.
You can be in a romantic relationship or a marriage and all of a sudden your partner goes to the bank and draws all your money and you are left with all the debts. And no matter how much you love someone, where there is money involved, make sure everything is spelled out really well. Make sure your lawyer has covered everything and you are not leaving any loopholes.
For example, I knew someone who had been married for 25 years and their only daughter was getting married. The wedding was very expensive and as soon as they got home from their daughter’s wedding, she started preparing for bed. She sees her husband has a suitcase and he is emptying his drawers out into the suitcase. What are you doing? I am packing, I’m leaving you. I just wanted to wait until our daughter got married and was out of the house so I could leave you. I have found someone else. After 25 years of marriage, he just walked out and left her with a pile of debts.
If you being asked to sign anything e.g. a husband of 30 years – make sure a lawyer checks the paperwork. Ensure that someone can explain it to you and don’t be led like a lamb to the slaughter. In the end that partner may leave you, divorce you or die and may leave you with a lot of debt. You need to know what you are going to be responsible for.
Another important point to remember is that if anyone wants you to sign papers quickly, your answer has to be NO. Don’t ever allow yourself to be rushed into a financial agreement. No matter how good the deal might sound, you need time to assess whether it is right for you.
Sunday, August 16, 2009
Friday, August 7, 2009
Written Agreements
When you are dealing with monies, even if you are in a deep relationship, with a family member, a friendship, your spouse and you think to yourself that you don’t need a written agreement – think again. If you are going to have any agreement drawn up always go through a lawyer. You can never tell if or when the other person is going to back off and leave you with the debts and responsibilities or if the other person is going to sell of their half of the partnership leaving you unprotected.
You may trust this person wholeheartedly and may never had cause to doubt them – but circumstances can and often do change. For example, I had a client who had all his monies tied up with his wife and their business. On Christmas Eve, she threw him out of the house and would not allow him to come back. Luckily, he had done as I had advised previously which was to put some money aside in a separate bank account. Had he not done this, he would not have had the money for a month’s deposit on a lease and he would have been out in the street.
You can be in a romantic relationship or a marriage and all of a sudden your partner goes to the bank and draws all your money and you are left with all the debts. And no matter how much you love someone, where there is money involved, make sure everything is spelled out really well. Make sure your lawyer has covered everything and you are not leaving any loopholes.
If you being asked to sign anything e.g. a husband of 30 years – make sure it a lawyer checks the paperwork. Ensure that someone can explain it to you and don’t be led like a lamb to the slaughter. In the end that partner may leave you, divorce you or die and may leave you with a lot of debt. You need to know what you are going to be responsible for.
Another important point to remember is that if anyone wants you to sign papers quickly, your answer has to be NO. Don’t ever allow yourself to be rushed into a financial agreement. No matter how good the deal might sound, you need time to assess whether it is right for you.
If you are ever asked to sign a lease, or a mortgage with your partner or spouse, make sure you understand it thoroughly. Take it to a lawyer. Make sure you can afford it, even if the incomes between you are reduced to one income. People have a tendency when they sign a lease or a mortgage, that they figure out how much they can afford to spend each month. What they DON’T calculate into these costs is a failing economy, or one of the partners being laid off or fired and out of work, or other expenses that go through the roof.
So if you are contemplating signing a lease or a mortgage with a partner, make sure you calculate it for just one income, because if you are basing it on two incomes in this economy you may find that you do not have enough money to cover the rent or the mortgage. You must ensure that your property is not foreclosed on you risk being evicted.
Don’t be embarrassed to tell your spouse or business partner that you want to speak to a lawyer to have him go over the fine print with you. When signing a legal document, many people don’t bother to read the fine print – or if they do bother to read the fine print, they don’t understand all the details. Wherever your money is being spent, that’s where you need to be very vigilant about your role in protecting it.
You may trust this person wholeheartedly and may never had cause to doubt them – but circumstances can and often do change. For example, I had a client who had all his monies tied up with his wife and their business. On Christmas Eve, she threw him out of the house and would not allow him to come back. Luckily, he had done as I had advised previously which was to put some money aside in a separate bank account. Had he not done this, he would not have had the money for a month’s deposit on a lease and he would have been out in the street.
You can be in a romantic relationship or a marriage and all of a sudden your partner goes to the bank and draws all your money and you are left with all the debts. And no matter how much you love someone, where there is money involved, make sure everything is spelled out really well. Make sure your lawyer has covered everything and you are not leaving any loopholes.
If you being asked to sign anything e.g. a husband of 30 years – make sure it a lawyer checks the paperwork. Ensure that someone can explain it to you and don’t be led like a lamb to the slaughter. In the end that partner may leave you, divorce you or die and may leave you with a lot of debt. You need to know what you are going to be responsible for.
Another important point to remember is that if anyone wants you to sign papers quickly, your answer has to be NO. Don’t ever allow yourself to be rushed into a financial agreement. No matter how good the deal might sound, you need time to assess whether it is right for you.
If you are ever asked to sign a lease, or a mortgage with your partner or spouse, make sure you understand it thoroughly. Take it to a lawyer. Make sure you can afford it, even if the incomes between you are reduced to one income. People have a tendency when they sign a lease or a mortgage, that they figure out how much they can afford to spend each month. What they DON’T calculate into these costs is a failing economy, or one of the partners being laid off or fired and out of work, or other expenses that go through the roof.
So if you are contemplating signing a lease or a mortgage with a partner, make sure you calculate it for just one income, because if you are basing it on two incomes in this economy you may find that you do not have enough money to cover the rent or the mortgage. You must ensure that your property is not foreclosed on you risk being evicted.
Don’t be embarrassed to tell your spouse or business partner that you want to speak to a lawyer to have him go over the fine print with you. When signing a legal document, many people don’t bother to read the fine print – or if they do bother to read the fine print, they don’t understand all the details. Wherever your money is being spent, that’s where you need to be very vigilant about your role in protecting it.
Saturday, August 1, 2009
There are always options
We are living in increasingly uncertain times. Whilst the stock markets seem to be rallying unerringly and governments keep reiterating that we are over the worst, more and more people are losing their jobs, their homes, their pensions and their future security.
In the USA, Michigan has one of the highest unemployment rates right now. I was talking to a client whose house was originally $1M a year ago and now at $250K she still cannot find a buyer. California and many other states are going through terrible times, yet the banks, having taken taxpayers money, continue to pay out huge salaries and bonuses to their employees.
What can we do about it?
First of all, be ready to speak out, to write to your representatives in Congress if you live in the US, or if you live elsewhere, to those in power. Don’t accept their excuses and get together with like-minded people and make your views known. For too long we have trusted our governments and the powers that be and now they are proving themselves untrustworthy and incompetent. It’s time to stand up and be counted.
If you are one of the unfortunate ones who have reached the stage that you are filing for bankruptcy, remember that JC Penny said that anyone who hasn’t gone bankrupt three times is a failure. If you find you have to sell everything for 10 cents on the dollar, at least it still gives you something. The tighter you hold onto what you have, the more desperate it becomes. For those of you who are struggling but who are not yet bankrupt, only buy goods that are on sale that you must have.
If you are locked into any contract, try to renegotiate your contract or your mortgage. There are always different options at your disposal. It may look very bleak one day, but you always have options. You may not like all your options, but there will always be some if you look hard enough.
Try to economise wherever you can. Here are a few ideas:
- don’t buy ready-made meals, start from scratch. It may take a little longer, but you will save money and it will be much healthier without all the additives and preservatives.
- avoid the fizzy drinks aisle in the supermarket – do you really need all those sugary, unhealthy liquids? If not, you will save yourself a lot of money.
- you don’t need a different cleaner for each part of the house e.g. bathroom, kitchen etc. For about $3 you can buy one cleaner that will do the entire house in different dilutions.
- when something is on offer that you like, buy it in bulk and stock up.
- buy toilet paper instead of tissues.
- start building up a storage cupboard of dried, tinned and dehydrated foods. You will then have some supplies should supermarkets be unable to stock their shelves, or if you experience a lean financial spell.
In the USA, Michigan has one of the highest unemployment rates right now. I was talking to a client whose house was originally $1M a year ago and now at $250K she still cannot find a buyer. California and many other states are going through terrible times, yet the banks, having taken taxpayers money, continue to pay out huge salaries and bonuses to their employees.
What can we do about it?
First of all, be ready to speak out, to write to your representatives in Congress if you live in the US, or if you live elsewhere, to those in power. Don’t accept their excuses and get together with like-minded people and make your views known. For too long we have trusted our governments and the powers that be and now they are proving themselves untrustworthy and incompetent. It’s time to stand up and be counted.
If you are one of the unfortunate ones who have reached the stage that you are filing for bankruptcy, remember that JC Penny said that anyone who hasn’t gone bankrupt three times is a failure. If you find you have to sell everything for 10 cents on the dollar, at least it still gives you something. The tighter you hold onto what you have, the more desperate it becomes. For those of you who are struggling but who are not yet bankrupt, only buy goods that are on sale that you must have.
If you are locked into any contract, try to renegotiate your contract or your mortgage. There are always different options at your disposal. It may look very bleak one day, but you always have options. You may not like all your options, but there will always be some if you look hard enough.
Try to economise wherever you can. Here are a few ideas:
- don’t buy ready-made meals, start from scratch. It may take a little longer, but you will save money and it will be much healthier without all the additives and preservatives.
- avoid the fizzy drinks aisle in the supermarket – do you really need all those sugary, unhealthy liquids? If not, you will save yourself a lot of money.
- you don’t need a different cleaner for each part of the house e.g. bathroom, kitchen etc. For about $3 you can buy one cleaner that will do the entire house in different dilutions.
- when something is on offer that you like, buy it in bulk and stock up.
- buy toilet paper instead of tissues.
- start building up a storage cupboard of dried, tinned and dehydrated foods. You will then have some supplies should supermarkets be unable to stock their shelves, or if you experience a lean financial spell.
Saturday, July 25, 2009
Wants and Needs - Next Steps
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!
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!
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.
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