Archive for Personal Loans

Savings – The Forgotten Art

December 16, 2011 admin No comments

For a long time, Americans were encouraged to buy, buy, buy. They were told it would stimulate the economy. Savings were down, spending was up.

With the current economic crisis and credit crunch, Americans have pulled in the reins on spending. They are working on paying down debt and trying to survive in a shrinking economy.

The fact is, people have not saved enough money for the current economic crisis. With adequate savings, people could save their homes from being foreclosed. They could ride out being laid off from work until they find a new job or start their own business.

Statistics tell us that 5.2% of American families have a savings account, with an average of $1,200 in savings. $1,200 will not get anyone very far in today’s economy. For most people, that is less than the living expenses for one month.

Now, there is a problem with the typical savings account. When you save in fiat currency (dollars), what happens is that even though you have done a good thing in putting some money away, the inflation rate grows faster than any interest the bank will give you. Therefore, you effectively lose purchasing power.

What is the alternative?

You can have a gold backed savings plan. In this case, you actually save in gold. You can get on a monthly purchase plan and buy some gold every month and save it, just like you would if you had an automatic monthly withdrawal from your current paycheck into your current bank savings account.

The difference is, this is savings in gold. Gold has had a 22% average return so far in 2011. Therefore, unlike losing value when saving fiat currency, saving in gold allows the value of that gold to reflect the decreasing value of the currency, so you do not experience the loss you would experience in paper money.

Can you save just any kind of gold? No, government issued gold can be confiscated by governments. It is wise to save in only a certain kind of gold.

It is time for consumers to begin to think about saving and start saving on a regular basis. There are options for saving in gold. However, consumers must educate themselves so they do not buy the wrong kind of gold and later have buyer’s regret. It is important to do a thorough study before buying gold so as not to buy the wrong kind of gold.

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Early Retirement Planning Ideas

December 16, 2011 admin No comments

It seems no matter where you go these days some one is talking about early retirement. Most working age individuals seem to want to get out of the rat race as soon as possible but don’t know that in order to do so they will need to do some early retirement planning. For early retirement to become a reality and not just a dream careful planning needs to be done, you need to start saving early and be disciplined to achieve your goals.

First you need to figure out how much your life is going to cost you, if you are retiring early then you will still be quite active and may require more discretionary funds then a person who retires later in life. Most people in retirement need about 70-80% of their re-retirement income, but if you plan on doing say a lot of traveling you may require more. You should also consider your retirement in two stages. First make sure you’ve saved enough in your registered plans such as RRSP’s, LIRA’s, TFSA & pension plans in Canada or 401(k)s, IRA’s & pension plans in the United States.

Once you’ve figured out how much you will need after age 59 in the USA or 60 in Canada including long-term health care costs then you can start to figure out the period of retirement before this. If you have maxed out your contributions to registered pension plans than you can start save money in a non-registered investment account. You should consider investing in assets that reward you to own them for example by way of a dividend.

In Canada if you invest in qualified Canadian corporations that pay you a dividend you will pay a reduced rate of tax than you would on say employment or interest income. In fact with an annual income under $40,970 in 2010 you would pay little to no Federal tax at all on your dividends from qualified Canadian corporations.

Early retirement planning is key if you want to achieve your goal of retirement at a young age. A solid plan for saving money is the only way you will be able to achieve it short of winning the lottery, you must be disciplined in your approach and review your plan yearly to make sure you are on track to meeting your savings requirements. You may need to make periodic adjustments to your plan as your life changes. No one said it was going to be easy but if your goal is to exit the 9 to 5 daily living you’ll need to make sure you stay on track.

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Too “Even Bigger to Fail”

December 16, 2011 admin No comments

The banks were “too big to fail” before the 2008 crash. Do you know those same banks are even bigger today?

According to data compiled by Capital IQ, JP Morgan had assets of $1.3 trillion before the crash, now it has $2.3 Trillion. BofA went from $1.4T to $2.2T, Citi from $1.8T to $1.9T and Wells Fargo from $0.5T to $1.3T.

These four banks have the equivalent of more than half the entire output of the U.S. economy of $14.4 Trillion! That’s just too risky for the fiscal health of the country.

The U.S. government had no choice but to bail out the banks. Had they not done so the economic catastrophe in this country would probably have been at least as bad as that of the Great Depression. Sometimes you can learn from history. Why aren’t we learning from this piece of recent and painful history by allowing these banks to get bigger than they were before the crash of ’08?

JP Morgan consumed Bear Stearns and Washington Mutual. Bank of America gobbled up Merrill Lynch and Countrywide. Wells Fargo picked up Wachovia. Citibank was in such tough shape back in 2008 they were not in a position to acquire any of the troubled financial firms.

So, what will happen when one of these financial mega outfits gets in trouble the next time? Most likely, the same exact thing as the last time, a government bailout. In fairness, these institutions are much better capitalized then they were in the period leading up to the crash. One might argue the oversight is better now, though after what recently happened to MF Global that hope seems overly optimistic.

The fact remains, these banks are at the core of the financial lives of millions of Americans and they are once again “too big to fail” because the repercussions of failure would be devastating.

By all accounts the probability of failure of any of these institutions is extremely low but should we even allow a low probability scenario to remain in play? When the financial engine of the world’s biggest economy is at stake it seems the answer should be a resounding, ‘no’.

While the prospect of a mega bank failure is highly unlikely there is a much more likely outcome. Let’s call it “too big to serve”. That is, too big to serve its customer base effectively. It’s a daunting task to merge big corporations. The different corporate cultures, information technology, politics, compensation systems and so on make these mergers almost doomed from the start.

We’ve already seen one example of how the hubris of a mega bank can impact the customer experience. Just a few months ago Bank of America was about to roll out a monthly fee for customers using their debit cards. The backlash was fast and furious which led to the bank retracting their position.

Customers will decide for themselves if their Merrill Lynch experience is better now that it’s a Bank of America experience, or if their Wachovia relationship is better coming from Wells Fargo, or their Washington Mutual interactions are better now that they are JP Morgan Chase.

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