Money Times - Januray 2, 2017
Posted by Jill Kerby on January 02 2017 @ 09:00
WE CAN’T PREDICT THE FUTURE BUT WE CAN IMPACT OUR OWN OUTCOMES
Was 2016 as bad a year as so many people on my Twitter line seem to be suggesting it was?
I suppose if you are mildly obsessed with the passing of celebrities, the pro-Brexit vote and Donald J Trump becoming US president, then 2016 may not be your favourite years.
As a pessimistic optimist, who has finally admitted to herself that I’m only as good a forecaster as my decorative, but not very bright King Charles Spaniel, Jet, I’m only willing to predict that 2017 is - again - going to bring with it all sorts of personal finance surprises.
This might be because of Brexit and its potentially negative impact on prices, and because of Trump’s vague promises to cut the US corporate tax rate in order to lure offshore US companies back home. That might very well impact on existing and future job growth from this key economic sector.
But for every swing there is a roundabout and if I had a young person about to graduate from secondary school I’d be encouraging them to think about working in IT and finance/banking/insurance: there is a already of shortage of workers and graduates to service both these industries based especially in the IFSC in Dublin and that’s only going to escalate if we attract foreign and UK banks and re-insurers from a post-Brexit City of London.
With interest rates finally turning – first in the US after the Fed raised its base rate to 0.25% - and the great bond bull-market coming to an end (yields are jumping as the price of bonds fall), 2017 may very well be a watershed year for American savers.
As anyone living on either side of the Atlantic with life savings or surplus income sitting in a deposit account knows, there has been practically no return on their cash once inflation and the cost of living is taken into account. Throw in the cost of banking and the hidden subsidies that savers unwittingly pay to keep borrowing rates low (especially Irish tracker loans) and 2016 was an even worse year than 2015, 2014, 2013, etc.
Will the ECB eventually follow the Fed and finally end its vast programme of ‘quantitative easing’- the purchase of government and corporate debt from private financial institutions in order to supply them with cheap credit to pass on to the market? QE hasn’t dragged the eurozone out of stagnation but has furred up the ECB’s own balance sheet with what is surely going to become depreciating bond assets.
When bond market bubbles meets their pin, the outcome, say the experts I read, could be uglier than when the sub-prime mortgage derivatives market met theirs back in 2007-8. At the very least, they think some serious direct money printing in the US will be one consequence and that will feed into higher prices, wage demands and higher interest rates.
Expect some ‘trickle down’ effect on this side of the pond, though the ECB cannot, under its rules, just turn on the printing presses to meet any inevitable price/wage demands.
Outside the realm of speculation – I don’t have a crystal ball and neither does anyone else – there are plenty of things you can do to make 2017 a better financial year than 2016 might have been. This week we’ll start with spending/savings actions you can take that will make a difference.
- Work out a family budget – everyone’s income, including pensions, child benefit, teen’s part-time earnings; tax paid, savings, debt, household outgoings and discretionary spending. These are your personal finance building blocks.
- Price compare all your insurance and utilities as they fall due. Check out www.bonkers.ie. You will save c20% on average, claim Bonkers. Gas/ electricity/phone/broadband; motor, home, health insurance bills of say, €5,000 a year means a €1,000 savings.
- Price compare the cost of servicing your loans at bonkers.ie. Then arrange a cheaper, consolidated credit union loan. CU interest is not compound, but charged on the diminishing balance of the debt.
- If you smoke – at €11 a pack – cut back or quit. 20 fags a day is costing you €4,015 a year.
- Cut out €10 a week worth of junk or processed food from your weekly g4ygrocery bill and you save another €520.
- Bring that €3.50 daily café latte (x 240 days) with you to work in a thermos cup and you’ll save c€840 in 2017 minus the cost of the coffee from home.
- Bring a lunch to work and save at least €5 a day or €1,200.
- Cut up the credit card and replace it with an interest-free debit or top up card. Save a FORTUNE.
Next week, an investment and wealth creation plan for 2017.
I wish you a very Happy New Year…and so does Jet!
(The new TAB Guide to Money Pensions & Tax 2017 is now out. The first 10 readers who contact me at email@example.com and includes their home address gets a free signed copy.)