With all that has been happening in the financial markets these past few weeks, I would not blame you if that is what you have been thinking. However don’t do it, and here is why.
1) Boom always follows the bust. As corny as it sounds, hard times never last, but good people do. My favorite investor Warren Buffet has a saying that rings true ” Be greedy when others are fearful and fearful when other are greedy”. There is no better time than now to prepare for your best financial future.
2) Have a plan. Your life may not be perfect right now, but you should know where you are going. You would not get in your car to go on a vacation with out a destination in mind. However many people go through life with out any clear objective. Begin with your end in mind, so get off your rear end and develop a plan and see your objective.
3) Clean your house. By that I mean your financial house. If you are to get out of this financial crisis smelling like roses, then you need to get your finances in order. Trim the fat and cut out any unnecessary expenses. Systematically eliminate all of your debt and start building true wealth.
I would be honored to help you develop your plan to eliminate your debts. Please feel free to contact me at my office so we can get you on the road to true financial freedom.
Cheers,
Pat
How we feel about our own finances has an effect on the market as a whole. Well now you may be saying that you feel less optimistic because the markets have been going in the toilet lately. It’s sort of like the chicken and egg scenario. Didn’t this all start with the demise of the sub prime mortgage market. If you remember that all started when people were unable to keep up with their mortgage payments and started to lose their homes. It sort of has a snow ball effect don’t you think.
The real difference between a rut and a grave is the depth! So stop digging and put down your shovel. There are solutions and there is a better way.
1) Stop looking at your feet and start looking at where you want to go. Begin with the end in mind, and with that I mean that you should have a clear vision of where you want to go.
2)Take action now. Don’t get caught up in analysis of paralysis. Just do something, and learn from what you do until you find out what works.
3) Expect to succeed. Hoping and praying will kill you. Expect to achieve your end result. If your boat overturns in the middle of the lake, you don’t hope to make it to the shore, you find the closest point and swim your butt off and get there. Be persistent and find a way.
If your current financial crisis finds you buried up to your eyeballs in bills, there is a better way. Contact my office today so we can show you how to systematically eliminate all your debts so you can build true wealth.
Cheers,
Pat
“Where does it all go?”You’re looking at your T4 from last year or maybe your most recent pay stub. Sure many people wish that those numbers after the dollar sign were a litter higher but it’s the vanishing act that alarms your the most. Tax time is especially sobering: you can see how much money you made…. but your credit card is still maxed out and you don’t have much to show for a year’s income.
If you are looking for the holes in your wallet start by making a list of your debts. Are your credit cards teetering at the top of their limits? Do you make regular use of your overdraft protection at the bank? Do you have escalating tax liabilities? What about any department store cards? Do you know what interest rate you are paying on them? Have you added it up? Many Canadians are startled to see how much they are actually paying to service their debt.
Industry Canada, which monitors consumer data, reports interest rates for department store credit cards as high as 28%! Even competitive rate credit cares will often run at 18% or more. This is also at at time when mortgage rates are dropping.
Why do banks and department stores charge such high rates? These are unsecured debts, meaning that if you default on the debt the lender has no easy recourse to recover the money. Not surprisingly they charge a higher interest rate, and sometimes a MUCH higher interest rate, to compensate for the higher risk that an unsecured debt represents. A house is considered a reliable security, so mortgages often offer the best rates anywhere.
Consider this then. If you have equity in your home, you can take advantage of attractive mortgage rates to save a bundle on interest charges. Compare current mortgage rates with the rates charged on your other debts. Seek some professional advice on whether it might pay to do some restructuring and roll your other debt, such as your credit card debt and tax liabilities into your mortgage. You can consolidate your debt into fewer payments and save some money on interest and improve your cash flow at the same time.
You have a few options: A secured line of credit could provide you with funds up to 75% of the value of your home, minus any mortgage debt on the home. You can look forward to a substantial reduction in the interest rate and all you need to pay each month is interest, ( this is both good and bad). You can do the math on this comparison yourself, or talk to a mortgage professional like us. If you are carrying credit card debt you will be shocked at what you can save with a secured line of credit.
You could also consider increasing your existing mortgage. If your mortgage is coming up for renewal, this the perfect time to reorganize and consolidate your debts at today’s excellent rates. Even if you are in the last year or two of your mortgage, it may make sense to restructure your finances and roll in your other debt at a much lower rate.
Your best option will be clear to you once you have discussed your situation with a mortgage professional. So feel free to contact my office today to see how we may be able to help you.
Cheers,
Pat
As all the world’s financial markets are losing trillion’s of dollars almost daily, I am having to think “What is money anyway?”
It is more than pieces of paper with pictures of deceased notables on it as Anthony Robbins says. Some say that it is financial currency for the value placed on the exchange of service from one party to another. But it is more than that as well. Below is the definition that I like the best.
“It is the physical representation of value that rises and falls in ourselves, within us. Not within ‘things’ outside of us, but within us. For without us, what can the value of a thing, such as a car, be to us? Nothing, at least not to us. In other words, it is we, the observers, that place value in things, but this value is really value in us – we give value to the material things. The material things have no ‘money’ value in themselves – we give that to them. So, money is the external physical representation of a particular section of our internal value, within us, within you.That is why a house or a block of shares valued at $1 million today can fall to a valuation of half a million dollars tomorrow when fear is introduced into the hearts of those involved. The fear kills a portion of the internal values of the participants and that is reflected by the paper money, the ‘body’ of value.”*
So how does this all apply to our current financial crisis? Let’s think of the sub prime mess that we are currently still suffering through. Lenders were creative with their borrowing requirements, and as a result lots of people who otherwise would not have been able to afford a home now had one. These same lenders then sold their books of mortgages to investors for the value that they put on them. Everything was working fine until people were not able to make their payments, thus changing the value of the book of mortgages. As a result investment firms and banks who bought these books of mortgages (or still have them on their books) are now unable to find investors to buy them and are now suffering massive losses. As these banks and investment firms are dropping like flies, it is unraveling our confidence in the financial system as a whole. Of course, panic in the market does not mean that you should panic yourself! In this environment it is vital to be clear about what does, and what does not, need you to respond. Those who are strongest financially stand to gain enormously, as perfectly sound assets are sold off at fire-sale prices.
To minimize the effects of this financial meltdown personally, then you must make sure that you are in the best financial shape possible. That means paying off your debt as quickly as possible and having cash available in your portfolio to invest in the market as the buying opportunities present themselves. Contact my office now and leave a message, if you are interested in checking out a new way to pay off your debt quickly so you can then have more cash available to take advantage of the buying opportunities.
Cheers,
Pat
* Taken from David Cameron Gikandi’s “Happy pocket full of Money“.
Unless you were living under a rock or had your head in the sand, you probably know that most of the central banks lowered their key lending rates yesterday by 50 basis points. This was in response to the ongoing financial crisis that seems to be gripping the world.
The strange part for us Canadian’s is that usually when the Bank Of Canada lowers it’s key lending rate, the major banks usually follow with the same immediate cuts to their prime rate. However this did not happen yesterday, the Bank of Canada drops the rate by 50 basis points and the major banks only cut their prime rate by 25! Their reason for the rebellion, they say according to a Globe & Mail article is that they are already feeling too much pain because of an increase to their lending costs.
How many billions of dollars were injected into our financial system in the past few weeks? How many more do they need? Our banking system is vastly different and more stable than our friends in the US. Where they have hundreds of banks, we have 5 large players.
These banks can not possibly be suffering as much as the small business owners and countless home owners across the country who really need the to reduce their borrowing costs. It just looks like they are putting their profits ahead of what is good for their clients. I am hoping that this is only temporary, if they do this again, then what would we really need a central bank for if our banks are just going to march to the beat of their own drum.
Cheers,
Pat
From today’s issue of the Globe & Mail.
Major central banks slash rates in extraordinary move to ease crisis
Globe and Mail Update
Wednesday, October 08, 2008
OTTAWA — Major central banks took the extraordinary step of deeply cutting interest rates in a coordinated move on Wednesday, a development that serves to underline the deterioration of the world’s banking system and the threatened global recession.
Central banks in Canada, the United States, Britain, the European Union, Switzerland and Norway cut their key lending rates by half a percentage point. Only Japan, among the major central banks, opted out given that its rates are already at rock bottom.
The move came after a sharp overnight drop in Asian markets and U.S. stock futures that threatened to spark another North American selloff on Wednesday. The Dow Jones Industrial Average lost 508 points Tuesday, bringing down markets globally. Britain also was rattled by a deepening banking crisis yesterday, forcing the government to announce a $80-billion bailout package.
The move gave some comfort to worried economists, but they warned the extraordinary action is not enough to end the deepening financial crisis.
“Today’s co-ordinated half-point cuts from all the major central banks … will provide at least a temporary boost to confidence, but we fear there is still a lot more work to do,” said economists at London-based Capital Economics. “For a start, the fact that the central banks have had to take such extreme measures underlines how bad market conditions have become.”
The Bank of Canada lowered its key rate to 2.5 per cent, from 3 per cent, but tried to assure the public that Canada’s banks were still solid.
“The intensification of the global financial crisis is having a marked impact on all countries. In recent weeks conditions in global financial markets have deteriorated sharply, the U.S. economy has weakened further, and commodity prices have fallen abruptly,” the Bank of Canada said in a statement it issued alongside the joint statement with other countries.
“As a result of these developments, credit conditions in Canada have tightened significantly, despite the relative health of our financial institutions.”
The central bank warned that a U.S. recession and weakness in key trading partners is hurting Canada’s exports. Plus, the domestic side of the economy is no longer on fire as commodity prices drop and the Canadian dollar slides, the bank noted.
More to come
© The Globe and Mail
