Monday, October 13, 2008
Last week, we went through one of the scariest downfalls in stock market history. Financial institutions who previously thought they were invincible have been brought to their knees and in some cases are going bust. Trillions of dollars have been wiped off the value of global stock markets and a quick turn around is no where in sight.
Savers in the US, Canada and worldwide, who are terrified their bank will be next to fall, are sticking savings under mattresses. What is the most ironic part about this? The US, who has taken the world into this downspin, has had its currency rise!
Others are buying gold in large quantities. It interesting to think that if this continues to get worse, we may see gold being used as the common currency just like in ancient times when you would go to the local farm to buy a loaf of bread with a gold coin.
So, what can you do to protect yourself? Here are some tips I have researched to survive the meltdown.
· Paying off high-interest debt such as credit cards, store cards and personal loans is an absolute priority.
· It's never sensible to be paying interest rates of nearly 20 per cent. But in a slowing economy, when unemployment is forecast to rise and getting a decent pay raise out of your employer will be tougher and tougher, ditching fixed debt is more important than ever.
· There are plenty of credit cards around offering zero per cent on balance transfers for six months or more, which means that every penny you repay during that period goes towards repaying the capital and not towards servicing these high rates of interest.
· Try and dump as much debt as you can on these zero per cent cards. Apply for multiple cards from different banks if necessary because one card's limit may not be high enough.
· But always make sure you only use these cards as a way of saving interest and do NOT spend on them. Put a very low cap on the credit limit if necessary to prevent you getting deeper in debt.
· Here's one area where the crunch has already arrived and virtually all homeowners have felt its fury.
· For all you first time homebuyers, it is harder to get a mortgage right now and banks are not willing to take the risk they might have 6 months ago.
· Bank funding costs have also risen and they have been quick to pass on the cost to borrowers.
· Remember, the bank’s intention is to put more money in more pockets to help encourage us to spend and boost the economy.
· Even so, it might be a good idea to have a broker look at your current deal and see if you can't save a few more dollars by getting a more competitive rate.
· Interest rates are on the way down and they'll continue falling to stave off a recession, but there are still good deposit rates on offer.
· Given these rates are only likely to get lower, it probably makes sense to lock into a high rate by investing in a term deposit account. You can fix your interest rate for up to five years, although you can't touch your savings for the whole term otherwise you will lose some or all of the interest. The best one-year term deposit accounts are paying around 8.6 per cent.
· If you want to retain access to your cash then you'd need an online saver account, which would give you a lesser rate but still give you the flexibility you may need.
· But if you're really nervous and want to prepare for the worst, advisors are all talking about buying gold. If you look at any financial information these days, the only currency on the rise is gold.
· As the global slowdown intensifies, more people are laid off and more people worry about how safe their jobs are, fewer people are prepared to stretch and buy a new property. Demand and prices fall.
· As for renters, the lack of supply of new properties because of lack of affordability will mean a continued shortage of apartments and a continued rental squeeze.
Now is the time to be sitting back with your cash in hand and watching to see what happens next. It is a time where all those visionaries who saw this market crash and got their money out early, will be in a great position to make some serious money by buying low, sitting on it and watching the market rise when it does eventually turn…
During these turbulent days financial advisers really earn their money. A suggestion is to call, set up an appointment and get advice immediately.