Are you in a rut or digging your grave?

How we feel about our own finances has an effect on the market as a whole. Well now you may be saying that you feel less optimistic because the markets have been going in the toilet lately. It’s sort of like the chicken and egg scenario. Didn’t this all start with the demise of the sub prime mortgage market. If you remember that all started when people were unable to keep up with their mortgage payments and started to lose their homes. It sort of has a snow ball effect don’t you think.

The real difference between a rut and a grave is the depth! So stop digging and put down your shovel. There are solutions and there is a better way.

1) Stop looking at your feet and start looking at where you want to go. Begin with the end in mind, and with that I mean that you should have a clear vision of where you want to go.

2)Take action now. Don’t get caught up in analysis of paralysis. Just do something, and learn from what you do until you find out what works.

3) Expect to succeed. Hoping and praying will kill you. Expect to achieve your end result. If your boat overturns in the middle of the lake, you don’t hope to make it to the shore, you find the closest point and swim your butt off and get there. Be persistent and find a way. 

If your current financial crisis finds you buried up to your eyeballs in bills, there is a better way. Contact my office today so we can show you how to systematically eliminate all your debts so you can build true wealth.

Cheers,

Pat

Lower your debt with your mortgage!

“Where does it all go?”You’re looking at your T4 from last year or maybe your most recent pay stub. Sure many people wish that those numbers after the dollar sign were a litter higher but it’s the vanishing act that alarms your the most. Tax time is especially sobering: you can see how much money you made…. but your credit card is still maxed out and you don’t have much to show for a year’s income.

If you are looking for the holes in your wallet start by making a list of your debts. Are your credit cards teetering at the top of their limits? Do you make regular use of your overdraft protection at the bank? Do you have escalating tax liabilities? What about any department store cards? Do you know what interest rate you are paying on them? Have you added it up? Many Canadians are startled to see how much they are actually paying to service their debt.

Industry Canada, which monitors consumer data, reports interest rates for department store credit cards as high as 28%! Even competitive rate credit cares will often run at 18% or more. This is also at at time when mortgage rates are dropping.

Why do banks and department stores charge such high rates? These are unsecured debts, meaning that if you default on the debt the lender has no easy recourse to recover the money. Not surprisingly they charge a higher interest rate, and sometimes a MUCH higher interest rate, to compensate for the higher risk that an unsecured debt represents. A house is considered a reliable security, so mortgages often offer the best rates anywhere.

Consider this then. If you have equity in your home, you can take advantage of attractive mortgage rates to save a bundle on interest charges. Compare current mortgage rates with the rates charged on your other debts. Seek some professional advice on whether it might pay to do some restructuring and roll your other debt, such as your credit card debt and tax liabilities into your mortgage. You can consolidate your debt into fewer payments and save some money on interest and improve your cash flow at the same time.

You have a few options: A secured line of credit could provide you with funds up to 75% of the value of your home, minus any mortgage debt on the home. You can look forward to a substantial reduction in the interest rate and all you need to pay each month is interest, ( this is both good and bad). You can do the math on this comparison yourself, or talk to a mortgage professional like us. If you are carrying credit card debt you will be shocked at what you can save with a secured line of credit.

You could also consider increasing your existing mortgage. If your mortgage is coming up for renewal, this the perfect time to reorganize and consolidate your debts at today’s excellent rates. Even if you are in the last year or two of your mortgage, it may make sense to restructure your finances and roll in your other debt at a much lower rate.

Your best option will be clear to you once you have discussed your situation with a mortgage professional. So feel free to contact my office today to see how we may be able to help you.

Cheers,

Pat 

What is money anyway?

As all the world’s financial markets are losing trillion’s of dollars almost daily, I am having to think “What is money anyway?”

It is more than pieces of paper with pictures of deceased notables on it as Anthony Robbins says. Some say that it is financial currency for the value placed on the exchange of service from one party to another. But it is more than that as well. Below is the definition that I like the best. 

“It is the physical representation of value that rises and falls in ourselves, within us. Not within ‘things’ outside of us, but within us. For without us, what can the value of a thing, such as a car, be to us? Nothing, at least not to us. In other words, it is we, the observers, that place value in things, but this value is really value in us – we give value to the material things. The material things have no ‘money’ value in themselves – we give that to them. So, money is the external physical representation of a particular section of our internal value, within us, within you.That is why a house or a block of shares valued at $1 million today can fall to a valuation of half a million dollars tomorrow when fear is introduced into the hearts of those involved. The fear kills a portion of the internal values of the participants and that is reflected by the paper money, the ‘body’ of value.”*

So how does this all apply to our current financial crisis? Let’s think of the sub prime mess that we are currently still suffering through. Lenders were creative with their borrowing requirements, and as a result lots of people who otherwise would not have been able to afford a home now had one. These same lenders then sold their books of mortgages to investors for the value that they put on them. Everything was working fine until people were not able to make their payments, thus changing the value of the book of mortgages. As a result investment firms and banks who bought these books of mortgages (or still have them on their books) are now unable to find investors to buy them and are now suffering massive losses.  As these banks and investment firms are dropping like flies, it is unraveling our confidence in the financial system as a whole.  Of course, panic in the market does not mean that you should panic yourself! In this environment it is vital to be clear about what does, and what does not, need you to respond.  Those who are strongest financially stand to gain enormously, as perfectly sound assets are sold off at fire-sale prices. 

To minimize the effects of this financial meltdown personally, then you must make sure that you are in the best financial shape possible. That means paying off your debt as quickly as possible and having cash available in your portfolio to invest in the market as the buying opportunities present themselves. Contact my office now and leave a message, if you are interested in checking out a new way to pay off your debt quickly so you can then have more cash available to take advantage of the buying opportunities.

Cheers,

Pat

* Taken from David Cameron Gikandi’s “Happy pocket full of Money“.

Who is calling the shots?

Unless you were living under a rock or had your head in the sand, you probably know that most of the central banks lowered their key lending rates yesterday by 50 basis points. This was in response to the ongoing financial crisis that seems to be gripping the world.

The strange part for us Canadian’s is that usually when the Bank Of Canada lowers it’s key lending rate, the major banks usually follow with the same immediate cuts to their prime rate. However this did not happen yesterday, the Bank of Canada drops the rate by 50 basis points and the major banks only cut their prime rate by 25! Their reason for the rebellion, they say according to a Globe & Mail article is that they are already feeling too much pain because of an increase to their lending costs.

How many billions of dollars were injected into our financial system in the past few weeks? How many more do they need? Our banking system is vastly different and more stable than  our friends in the US. Where they have hundreds of banks, we have 5 large players. 

These banks can not possibly be suffering as much as the small business owners and countless home owners across the country who really need the to reduce their borrowing costs. It just looks like they are putting their profits ahead of what is good for their clients.  I am hoping that this is only temporary, if they do this again, then what would we really need a central bank for if our banks are just going to march to the beat of their own drum.

Cheers,

Pat

  

Rate cuts everywhere!

From today’s issue of the Globe & Mail.

Major central banks slash rates in extraordinary move to ease crisis

Globe and Mail Update

 

Wednesday, October 08, 2008

OTTAWA — Major central banks took the extraordinary step of deeply cutting interest rates in a coordinated move on Wednesday, a development that serves to underline the deterioration of the world’s banking system and the threatened global recession.

Central banks in Canada, the United States, Britain, the European Union, Switzerland and Norway cut their key lending rates by half a percentage point. Only Japan, among the major central banks, opted out given that its rates are already at rock bottom.

The move came after a sharp overnight drop in Asian markets and U.S. stock futures that threatened to spark another North American selloff on Wednesday. The Dow Jones Industrial Average lost 508 points Tuesday, bringing down markets globally. Britain also was rattled by a deepening banking crisis yesterday, forcing the government to announce a $80-billion bailout package.

The move gave some comfort to worried economists, but they warned the extraordinary action is not enough to end the deepening financial crisis.

“Today’s co-ordinated half-point cuts from all the major central banks … will provide at least a temporary boost to confidence, but we fear there is still a lot more work to do,” said economists at London-based Capital Economics. “For a start, the fact that the central banks have had to take such extreme measures underlines how bad market conditions have become.”

The Bank of Canada lowered its key rate to 2.5 per cent, from 3 per cent, but tried to assure the public that Canada’s banks were still solid.

“The intensification of the global financial crisis is having a marked impact on all countries. In recent weeks conditions in global financial markets have deteriorated sharply, the U.S. economy has weakened further, and commodity prices have fallen abruptly,” the Bank of Canada said in a statement it issued alongside the joint statement with other countries.

“As a result of these developments, credit conditions in Canada have tightened significantly, despite the relative health of our financial institutions.”

The central bank warned that a U.S. recession and weakness in key trading partners is hurting Canada’s exports. Plus, the domestic side of the economy is no longer on fire as commodity prices drop and the Canadian dollar slides, the bank noted.

More to come

© The Globe and Mail

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.

As always, contact me if you have any questions.
Cheers,
Pat

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?

If you want a first hand account, then click here, here or here.  As horrific as a run on a bank is, this is real: my friend in Hong Kong can see the crowds from his office.  If enough people withdraw their money, it doesn’t matter how well-run or profitable a bank is, it has to close and everyone can lose most of their savings.  So this is a wake-up posting to those of us who watched Bear Stearns and Lehman go under with a hint of a “I’m so glad it didn’t happen to me” expression on our faces.  

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? 

As I have mentioned in a previous post, make sure that your bank has CDIC (FDIC if you are American) insurance and that your deposits are covered. It is one thing if the bank that holds your mortgage goes under, it is entirely an other if the bank where you deposit your paycheck goes under. For one thing the bank that holds your mortgage can always find someone to buy the paper as it is an asset that produces income and can be easily sold. 
This is what the average person should do: Make sure that your savings are protected while still maximizing your investment power, your capital is need in the system now more than ever, and by this I mean not under your mattress! Get ready for buying opportunities as the crisis unfolds and the opportunities present themselves news article and the best way to do this is by making sure that your personal balance sheet is lean and your debt are in the process of being eliminated. 
I am told that the Chinese word for “crisis” is the same as “opportunity”. If you think about it, one can not exist with out the other. 
Cheers,
Pat

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