hello

I’m feeling more like myself again.  Ready to move on.  I’m taking one more day to read and sit around looking at my bellybutton.  Come tomorrow, I shall stick my big toe back into the writing.  We’ll see. 

I was catching up on my some of the financial things I like to read this morning.  It’s interesting to me how the tone of things has changed.  Even the analysts that are usually quite optimistic and even keel, are banging the recession, bear market drum.  Apparently, what we’ve experienced so far, many of these experts are saying, is only the tip of the iceberg.  They expect things to get much, much worse.  Scary.

So, what can we do?  Cut back on spending.  Pay off as much of your debt as you possibly can each pay check, starting with the highest interest rate first.  If possible consolidate all of your debt into one large one that charges lower rates.  It is also very important to have an emergency fund of at least 6 months.  If all the gloom and doom that the financial experts are predicting comes true there is going to be downsizing and cut backs.  If you are one of the unfortunate ones and you lose your job, you want to make sure that you have a cushion that will sustain your family until you find other work.

If you are having financial troubles now and have missed a few mortgage payments, call the financial institution where you got the loan now! Sooner is WAY better than later.  I know it’s is scary, but you need to know that they would much rather work out an adjusted payment schedule with you than foreclose on your house.  I know it’s tempting when the shit is hitting the fan to want to crawl into bed and pull the covers over your head, but it is very important that you don’t.

Oh, and one more thing.  If you have stocks and/or bonds AND you are carrying a large credit card or mortgage...don’t be crazy.  Sell the stocks and bonds and pay off the debt. 

I know this is a hard thing for people to get their head around.  We are so indoctrinated into thinking we need to have stocks and bonds to feel like a success.  BUT you have to think about it financially.  How much interests are you earning on your bonds?  Maybe 4%.  But that’s 4% gross income, taxed at your highest rate.  For me here in Canada if I earn $100, I have to pay $47.30 to the government in taxes, that only leaves me with $52.70 in my pocket to pay for things like credit card debt and mortgage payments. 

Now take a look at your stocks.  What is their dividend yield?  What is their price earnings?  Even calculating the possible growth, which many of the leading financial brains around the world are saying, are not in the cards as they see them.  Are you earning more on your investments after you pay taxes than the interest payments you are paying?  What are interest rates are you paying on your credit cards?  18%?  21%?  So you see, in the big picture, you might not be earning money on your bonds and/or stocks, but taking your debt into account, having these “investments” might actually be losing you money.

Do the math.  What percentage of interest are you paying on your credit card debt, your car loan, your mortgage?  Can you earn more than that with your investments? 

You see what I mean?

Posted by Meg Tilly on Sunday, January 27, 2008 in Chewing the Fat

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