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Market Update & Personal Finance Suggestions

MARKET UPDATE

For many months, there have been warnings of a market meltdown, or an impending crisis.   Unless you live in a cave, you know by now that there are problems both in the US and globally.   Financial markets like the TSX went down over 800 points this week, house prices all over Canada are falling, the US situation is a disaster, with people loosing their homes left, right and centre, and debt load consumers are bracing for job losses in all major Canadian industries.   And although, we're not facing the same horrific situation here in Canada, we are definitely feeling the pinch on the credit lending side.   There will be less lending, more prudent decision making, and tighter controls.   As of October 15th, Canadian lending institutions will administer the change in law on lending practises, to buffer the Canadian economy and avoid the credit crisis facing the Americans.   (In parts of Southern California, for example, half of all house sales are reposessions!   HALF of all house sales!   And listen to this:  a majority of all houses are full of stuff the owners leave behind, including TVs, flat screen TVs, and other high-ticket items.   What's the reason?   They can't afford movers, so they just pack their car with whatever fits and leave the rest behind.)  Surely these are all signs of omminous times. 
What does that mean for us?    Well, I think it means time to plan ahead.   We're likely a few months behind whatever economic horror is occuring across America.   According to Warren Buffett, the "Americans are heading for an economic Pearl Harbour."  If Pearl Harbour or something like it is in the near future, then we should clean house to make sure we are padding ourselves with cloaks of safety.  
Here are some personal financial suggestions:
  1. Clean house:  review all of your monthly expenses and reduce them in any way you can.
  2. Get rid of excess stuff you don't need by selling on e-Bay.   You'll generate income AND clean house.
  3. Start an internet business and spend a few hours per week working on it... it may provide you with a few extra thousand in a year or two.
  4. Do not pay off all your bills with any windfalls:  buy some property instead. 
  5. If you have any savings accounts, switch them to banks paying high interest on savings accounts (without the bother and chains of locking in).   This means you leave TD or BMO and head over to www.hsbc.cawww.icici.com, or www.ingdirect.ca.   All of these banks offer regular savings accounts that pay out 3% interest.   It's better than nothing and it's NOT locked in.
  6. Review all your credit outstanding and make a plan to get rid of them.
  7. Consider buying stocks now or in the next while... as things are sliding.    When stocks go down, we forget that it's actually the best time to buy!

Here are some real estate suggestions:

  1. Refinance today!    Get a credit line quickly.   If your house goes down in price and you lose your job, at least you'd be able to use the credit (from today's value of your home) to purchase something which will generate income. 
  2. Buy cash flow property now!   
  3. Sell off large scale equity property that have no possibility of becoming cash flow property.  

Take heart, things will get better.   In the meantime, make sure you clean house and review your holdings.  Slight adjustments now will guarantee your financial future will be that much brighter!

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