Posted by Jill Kerby on March 24 2010 @ 10:07
GENUINE RECOVERY… STARTS AT HOME
At the recent Over 50s Show in Galway, I tried to explain to the people who attended the two personal finance seminars that I gave, what effect the massive, catastrophic, debts that we in Ireland and our most important trading partners, the UK and the USA have on their financial security.
Sadly, recovery doesn’t happen when banks are insolvent and there’s a shortage of capital to lend or when unemployment keeps rising, when house prices, incomes and tax receipts keep falling and record numbers of people save, rather than spend their hard earned incomes and pensions.
Under these conditions, you have an obligation to yourself and your loved ones to ensure that your savings are safe, that you aren’t paying more tax than necessary, that you have the wherewithal to get the best discounts and deals when you do spend, and that you generally have no hand yourself in making things worse.
If there are any positive signs, they come from the east, from the economies of China, India, Brazil and other developing countries, where incomes are going up along with demand for the kinds of basic goods and services that once fuelled the great consumer boom that began in the west after the second world war.
These billions of hard working people want cars and fridges, mobile phones and meat-based protein. They don’t have the personal catastrophic debt that we carry in the west and their governments have not yet completely wasted the high levels of savings or fiscal surpluses that they’ve earned.
Some commentators worry that the Chinese in particular are fuelling a huge credit and inflation bubble because of the way the central planners have sanctioned massive bank lending and enormous public works projects since the 2008 crash; these include a road network that is nearly the size of America’s despite only having a fraction of the vehicles and brand new – but empty – cities.
Still, China’s ‘day of reckoning’ is some time off – they hold a few trillions in foreign currency reserves and are on a big international asset and commodity-buying spree with much of this money. (A sensible thing to do as the western paper currencies they hold, relentlessly devalue.)
Our reckoning day is already here. So is Greece’s. And at least three other indebted euro-member states – Spain, Portugal and Italy – are also now in the crosshairs of the foreign currency and hedge fund dealers as they drive up their budget deficits and annual debts even as their tax revenue drains away.
Despite the severe cost cutting in the public sector and other austerity measures, our fundamental problems are not being addressed and our tax take has dwindled to just €30 billion. However, the state’s annual budget, at €61 billion, is higher than it was when the crisis started in 2008. As my 16 year old would say, “go figure”.
The Germans and the euro-bankers seem to have finally woken up to the feeble ‘solutions’ their fellow politicians in the worst overspending countries have presented to them. They’ve marked all our cards…time is running out.
My 10 point plan for the Over-50s audience might be a better place to start in protecting your personal financial position as politicians continue with their futile effort to solve a global financial crisis that was caused by spending more than we produced…by getting us all even further in debt.
1) Be realistic, prepare for the worst …just in case.
2) Protect your savings. Don’t just chase the higher interest rate. Make sure your money is safely deposited in a solvent bank or financial institution. Remember that the 100% government deposit guarantee ends at the end of September.
3) Buy gold and silver to protect the purchasing power of your savings.
4) Pay the correct tax. Claim any tax allowances or refunds where applicable (such as DIRT). With property taxes imminent, should you consider offsetting a potentially high tax by trading down, swopping property with adult children in smaller, less valuable homes, etc? Take advantage of tax breaks – pensions, BES, film investment, Rent-a-Room.
5) Invest in your health and home: buy a good private health insurance policy (check out the cheaper, corporate version of your existing one. Make your home as energy efficient as possible; do minor repairs before they get seriously expensive.
6) Earn more, spend less. Able-bodied seniors may want to start exploring part-time job opportunities, from baby-sitting to business mentoring.
7) Get a lap-top and the internet to take advantage of retail bargains, discounts, vouchers and cost comparison websites.
8) Save more, spend less. All pension income/benefits is likely to be frozen at some stage.
9) Invest…but only once you’ve educated yourself. Take a course, buy top newsletters (check out the Agora Financial stable of publications, including MoneyWeek) and aim for strong ‘value’ companies.
10)Count on your family, friends and community to help you through the economic downturn. The government’s decision to keep rewarding corporate failure and insolvency with the future earnings of our children and grandchildren should be proof enough that real salvation is going to be found closer to home.