Don't get caught with your finances down!
On days like we have been having lately it is tempting to just turn off the TV, avoid reading the paper or surfing the finances pages of the internet. However sticking your head in the sand – as reassuring as it can be at the time – is a great way to guarantee that you go down with the ship! The worst thing you can do is assume the strategy that got you where you are today, which has worked great over the past 20 years, will continue to work for you over the next 5 years: it won’t work. The system is broken.
So you may be asking what can you do? Well here are a few simple idea’s:
1) Manage your emotions. Breathe. Look out of the window and appreciate the autumn views. Notice all the looming disasters you’re afraid of, and notice also that you do have options and can improve your situation even in the worst of times.
2) Think long term, this market downturn is a buying opportunity if you have the cash to do it, other wise sit tight and focus on your long term financial goals. Solid companies, strong balance sheets and good dividends.
3) Shore up your own personal balance sheet by paying off your debt. Limiting your liabilities is the best thing that you can do in these volatile times. The financial analists are predicting that credit may be harding to get in the very near future. You will greatly improve your credit score by paying off your debts and leaving your credit lines open and only using them when needed and paying them off immediately.
Whose Fertilizer are you buying?
I have to admit that I bought into it as well over the last 2 weeks, I watched countless hours of CNBC, CNN and read the latest horror story on the many financial websites that I visit. However thanks to an e-mail subscription that I received from Matt Furey, I realized that there is more to it than meets the eye.
You see we can not play the blame game about our own personal finances. No one else is responsible for where we are at financially but ourselves. Regardless of outside economic conditions people have always found ways to survive and even thrive.
If you want some examples then I would highly suggest that you pick up a copy of Napoleon Hill’s “Think and Grow Rich“. Even though it was first published in 1937, there are still valuable lessons that can still be applied today, and that is probably why it is still in print and has been a best seller for many years. While you are at it, another gem that I would recommend to help get your mind on the right track is James Allen’s “As a man thinketh” first published in 1918, a short book but not one that you should read quickly.
The whole point that I am trying to make here is this “Invest in your own economy”. Do not believe everyone who says that the sky is falling. You make the choices that determine your current reality, make better choices, pay off your debts ( ask me how if you need to), look for ways to grow you income (start your own business, sell on line, there are countless ways), and last but not least train your brain and focus on where you want to go.
Make this a great week.
Cheers,
Pat
How to recession proof your life!
If you have been watching the news lately you have probably heard that times are tough and it may possibly get tougher. Well that does not have to apply to you personally. Below are a few suggestions to help you ride through the turbulent times with a smile on your face.
1) Trim the fat. As obvious as this seems, some people do not see it. There is no better time than now to pay off your debt and cut the ties to your creditors. Doing it may be easier than you think and you can do it with the money that you are currently making. Contact my office today and we can show you how to put you on the fast track to eliminating all your debts.
2) Make cash king. Now that you are well on your way to paying off all your debts you do not want to run them up again. Put the credit cards on ice, (literally and figuratively). Everywhere you had used your credit cards before also take cash, debit or certified cheques and if you have to use your credit card pay it off as soon as you use it as interest is charged from the date you use it rather than when you get your bill. You should also know that by paying off your credit cards and not using them greatly improves your credit.
3) Plan your purchases. I am not saying that you should not take a vacation, buy the new iphone or a new flat screen television, save up and then pay cash for them. Don’t get sold on no money down, interest free or no payments, promotions at the big box stores, as they are linked to taking their in store credit cards.
4) Start your own business. The idea here is to develop another income stream, and multiple if possible. Don’t quit your day job if you have one. Many times you can do this while still working a full time gig. Click here or here for some idea’s for home based businesses. I also recommend Ed Dale’s “Thirty Day Challenge” to show you how to start an internet business. There are tax advantages to doing this as well, consult your account for full details.
5) Focus on income producing activities. As exciting as having your own business is, it is still required that you work in it if you want it to produce an income. Concentrate on activities that will generate revenue for you and your business.
6) Share the wealth. Last but certainly not least, as you are riding out this possible recession remember others may not be as fortunate. Sow the seeds of your success, and share with others what is working for you and also what lessons that you have learned along the way. Also do not forgot about local charities that also need your financial help, as their services will be needed more now than ever before.
Cheers,
Pat
“If you can’t convince them, confuse them.”- Harry S. Truman
What would happen if the bank where your savings are goes bust, and the bank where your mortgage is doesn't?
There is nothing like a big panic for irrational reasons. What makes this one more important than Lehman going under is that Bank of East Asia are the 3rd biggest bank in Hong Kong (that makes them global size), they have a great balance sheet, have nearly 3x the capital they’re required to have, and have no exposure to sub prime mortgages. I.e. none of the very real issues that our banks here in Nova Scotia are currently facing. And they still got hit by a run.
If it can happen there, with those fundamentals, don’t think it can’t happen here. The people queuing in the street are not wealthy investors, they are hardworking professionals like you and me. Hardworking professionals who have suddenly decided to take a day off from work, just because they’re afraid of losing everything they worked the past ten years for. Irrationally yes, but the whole point is that it is not rational for it to happen to a large and sound bank. What is the news going to bring next?
How to get a risk free double digit return on your money!
You’re about to learn some closely guarded information you’ll never hear from bankers, brokers, insurance agents, or credit card companies. Many love to keep you in the dark about debt, credit, and investing so they can keep getting richer at your expense.
If you don’t do something about it, more than half your lifetime earnings will eventually end up in the bulging pockets of others. Think I’m kidding? Read on.
Banks and lenders are robbing you blind, as the real interest rate of your home mortgage may be as high as 200%! Let’s use this example. Average home costs 225K, assuming you have good credit and you get an interest rate of 5.7%. Now this is where it gets interesting, you have options to spread out your loan to 25, 30 or 35 years.
At 25 years, you will be paying 194,906.41 in interest alone before it is paid off. At the end of the 25 years you have paid 419,906.41 for that 225K house. At 30 years, you will be paying 241,714.81 in interest alone before it is paid off. At the end of the 30 years you have paid 466,714.84 for that 225K house, now almost double. At 35 years, you pay 290,772.51 in interest or that 225K house has cost you now 515,772.51! In case you have not got it so far, the bank always pays them selves first! In fact it will take you almost 15 years of payments ( on a 25 year mortgage) to break even on a principal and interest payment balance. There is also no guarantee that your real estate will appreciate at the same interest rate the bank is charging you!
Credit card companies lure you with the “prestige” of their credit cards. Meanwhile, you’ll end up paying them two, three, even five times what you actually spend on products and services! Would you pay $17,500 for something worth $3,500? Well, that’s exactly what you’re doing when you charge $3,500 on a credit card!
There are over 50 Million credit cards in circulation in Canada, or over 2 per adult. Over 22 million of those cards carry a monthly balance. Canadians owe over 50 BILLION in credit card debt! Our national mortgage debt tops 500 Billion. Here is a scary fact, for every dollar of disposable income that we have, we owe $1.25 to debt. We are not making any real progress.
Who’s winning this game, give you one guess and it ain’t us!
Most people believe that the stock market is a better investment than paying off their debt. However the truth is, when you pay off your debt you can get a Guaranteed Return of up to 20% a year. Try getting that in the stock market! Especially with the recent volitity that we have seen in the past week or so, investing in stocks can be a risky proposition.
Let Craigburn Capital show you how to steer clear of the traps and put you on the path to financial freedom. You’ll learn how to get rid of all your debts in as little as 5-7 years and possibly retire a debt-free millionaire. It’s easier than you think. Contact us today so we can show you how.
Cheers,
Pat
Final Mortgage Insurance Guarantee Parameters.
On Friday, September 19, 2008 the Department of Finance issued its final mortgage insurance guarantee parameters and accompanying explanatory notes. The final guidelines follow the initial announcement on the financial guarantee for mortgage insurance providers issued July 9, 2008 by the Department of Finance.
There are two noteworthy changes from the draft parameters:
1. Elimination of reference to a Total Debt Servicing (TDS) number, replaced by a principles based approach;
2. Reduction in minimum credit score to 600 from 620. Three percent “basket” for flexibility remains;
These modifications follow discussions with stakeholders, including CAAMP. CAAMP through its submission focused its comments on the minimum credit score and welcomes the decision by the Department of Finance to adjust the credit score.
Court turns down ABCP appeal!
The Supreme Court of Canada has denied an appeal of the plan to rescue $32-billion of stranded asset-backed commercial paper, clearing the way for thousands of individuals and companies to start reclaiming investments that have been frozen for 13 months.
A group of Canadian companies holding about $600-million of notes had challenged the ABCP bailout on the grounds that it was legally flawed. The businesses, which include Domtar Inc., Ivanhoe Mines Ltd. and Jean Coutu Group (PJC) Inc., opposed the plan because it includes a sweeping legal immunity that shields financial players from potential lawsuits relating to their controversial role in the ABCP meltdown.
By refusing to consider the appeal, the Supreme Court has endorsed a precedent that some legal experts say will allow other troubled entities to seek similar shields that deny investors and other parties the right to seek damages for alleged improprieties.
Holders of the ABCP have been unable to cash in or trade the paper since August, 2007, when a global panic about shaky U.S. mortgages shut down a large segment of Canada’s ABCP market. Canadian notes issued by non-banks proved to be more vulnerable than ABCP issued in other countries because they were backed with unreliable emergency lines of credit.
The ABCP collapse has left scores of individual investors stranded without savings that had been earmarked for home purchases, retirement plans and other expenditures. Under a plan approved by the Ontario Superior Court, most of the estimated 2,000 individual investors saddled with ABCP are entitled to receive cash for their notes.
Those investors each holding more than $1-million of notes will be entitled to receive a new class of long-term notes that can either be sold or held until maturities that extend up to nine years.
According to sources, the committee of financial players overseeing the restructuring hopes to start paying cash or other longer term notes in exchange for ABCP by October.
By denying the appeal, the Supreme Court has effectively eliminated the last major hurdle standing in the way of a massive restructuring that many critics said couldn’t be done.
Ever since veteran Toronto lawyer Purdy Crawford agreed a year ago to chair a committee of pension funds, banks and other players seeking to salvage the notes, critics said the bailout would never work.
The restructuring attempt was the largest in Canadian history and it was brought to the brink many times by market and credit panics in the past year.
Canaccord Capital Inc., a Vancouver brokerage that sold ABCP to many of its clients, said the Supreme Court’s ruling paves the way for it to proceed with its plan to reimburse much of its customers’ losses.
“We commend the Supreme Court’s decision,” said Paul Reynolds, president and chief executive officer. “We are eager to complete our relief program and restore funds to our clients, who have been negatively impacted by this market disruption.”
In conference call, Mr. Crawford said he was pleased by the court’s decision, particularly during such a tumultuous week in global markets.
“We think it is a major, significant step forward to getting this deal done. We think Canada is a land of tranquility in a sea of storm.”
Howard Shapray, a Vancouver lawyer who represented Ivanhoe Mines, said he is disappointed that the Supreme Court allowed “a plan that is so flawed from a legal point of view.” Despite his disappointment, he said he is pleased that investors will soon be able to start recovering their savings.
“I have tremendous respect for Purdy Crawford, for his industry and determination. They pulled a rabbit out of a hat,” he said.
James Woods, a Montreal lawyer who represented a group of Quebec-based companies, said that the Supreme Court has left a “very confusing legal landscape” in the insolvency practice because Ontario court rulings that approved the ABCP plan are in conflict with decisions from Quebec courts. He also said he hopes the federal government and market regulators continue with ongoing investigations into the market collapse that left so many Canadians stranded.
“There has to be a very close look at what took place,” he said.
Dear Dad Letter
I saw this on a website today and could not resist putting it here.
A father passing by his son’s bedroom, was astonished to see the bed
was nicely made, and that everything was picked up and tidy.
Then, he saw an envelope, propped up prominently on the pillow. It was addressed,
‘Dad.’
With the worst premonition, he opened the envelope and read the
letter, with trembling hands.
Dear Dad,
It is with great regret and sorrow that I’m writing to you. I had to
elope with my new girlfriend, because I wanted to avoid a scene with
Mum and you.
I’ve been finding real passion with Stacy, and she is so nice, but I
knew you would not approve of her, because of all her piercings’,
tattoos, her tight Motorcycle clothes, and because she is so much
older than I am.
But it’s not only the passion, Dad. She’s pregnant.
Stacy said that we will be very happy. She owns a trailer in the woods, and has a stack of firewood for the whole winter. We share a dream of having many more children.
Stacy has opened my eyes to the fact that marijuana doesn’t, really
hurt anyone. We’ll be growing it for ourselves, and trading it with
the other people in the commune, for all the cocaine and
ecstasy we want.
In the meantime, we’ll pray that science will find a cure for AIDS, so
Stacy can get better. She sure deserves it!
Don’t worry Dad, I’m 15, and I know how to take care of myself.
Someday, I’m sure we’ll be back to visit, so you can get to know
your many grandchildren.
Love, your son, Joshua.
P.S. Dad, none of the above is true. I’m over at Jason’s house.
I just wanted to remind you that there are worse things in
life than the School report that’s on the kitchen table.
Another one bites the dust!
If you enjoy a good train wreck, then watching the financial markets of the past few days should have given you plenty to watch. For those of you who have not kept a roll call then here is a brief summary, Lehman Brothers the large brokerage house has filed for Bankruptcy protection, Merrill Lynch brokerage house was bought out by Bank of America, and it was just in time or they might have suffered the same fate as Lehman. Now it seems that the straw that will break the camel’s back is what is currently happening to AIG ( American International Group). CNBC announced last night that they need to raise 75 BILLION by the end of Sept 16th to stave off bankruptcy, and now it seems like that may not happen.
Now the question that you may be asking your self is how does all this matter to me, the individual investor. Well you think that because you did not have direct investment in AIG, Lehaman’s or Merrill that it does not effect you. Guess again, it probably does. These companies raised capital for investors and sold it off in the form of debt which many of our local financial institutions bought and packaged and sold back to us in the form of bond and other investments. Normally bonds are one of the safest places to put your hard earned cash and get a return. However, bonds are basically debt instruments, where by we are given an income until the debt is paid. Now what do you think happens to your returns when they can not make their debt payments?
If you are also wondering how this all relates to mortgages, well remember the sub prime crisis? AIG over valued their mortgage backed securities 1.7 to 2 times what Lehman did, and look what happened to them. In plain english, they bought ABCP ( asset backed commercial paper) or pools of mortgages and they issued securities on them ( claims of the principal and interest payments) and valued them higher than what they were actually worth. Now it needs to cover up the shortfall in the valuation and it can not seem to come up with the cash.
This effects us all. If our banks and mortgage lenders can not sell their pools of mortgages to investors then we are left with limited options. Not everyone has squeaky clean credit, can prove their income and has loads of cash to make their purchase. Thankfully we still have lenders who have their finances in order. Call me so we can put them to work for you.
Cheers,
Pat
p.s Maybe the example we should all follow is that of Warren Buffet, click here to get his biography.
Who owns your ass(ets)?
If you are like the average family, you probably have 2.5 kids, a house, a car or two and maybe even a cottage. You are most likely both working and counting down the years till you can kiss your nine to fiver good bye. You may even have a company pension and contribute to the Canada Pension Plan as well. Living the life of Riley right?
However when it all comes down to it, you also have a mortgage, a car loan, credit card bills, probably a line of credit as well. You’re thinking that’s nothing, you have plenty of assets! You have your house, your car, your cottage, and your investments. Hold on there, you may be mistaken on what is an asset and what is not.
Let’s take a quick look, you have a nice house, but it is not your asset if you have a mortgage, it’s the bank’s. Same with your car and your cottage. You’re thinking that this can not be right, and if this is your definition of asset, then you may need to upgrade to the modern version.
Don’t get me wrong, I use to think like that too. It all changed when I heard this version from Robert Kiyosaki’s series “Rich Dad Poor Dad“. He says ” that an asset is something that makes you money”. Think about it, if you have a house with a mortgage, then it is the bank’s asset because you are making regular payments to them. Well you say that it is worth 250K and that you only owe 100K. If that other 150K in equity is not making you money then it is not an asset, unfortunately the same goes for your car(s), your cottage and possibly even your investments.
How can you change all of this? Put your self on the debt elimination fast track. If you owe someone else money then they are in control. Once this is done, see about using the money you once used to service your debts to invest in an area that produces you an income. Cut the chains to the bank and take back the reins to your life.
Please contact my office for a free no obligation debt analysis to see if that is the best solution for you. I was inspired by the actions of the CEO of Royal Bank of Canada Gordon Nixon in regards to his view toward rescuing Lehman Brothers in the States.
Cheers,
Pat
