Are We Still in a Recession?

On my way to work this morning, I was thinking how can I make more money? A lot of ideas popped into my head while I was waiting in traffic. Then just randomly I saw a luxury sedan that I wished I could own and wondered how I could afford that. I then started to take more notice of the cars on the road today.

I love cars and if I was rich enough that would be my indulgence. I stopped thinking of my ways to make money so I could concentrate on other people’s wheels. In the short distance from my wife’s office to mine, approximately 20 minutes drive. I counted 3 German saloons that I know are quite new on the market and their price is similar to that of a townhouse. I lost count of the SUVs that drove by, one particular model even the basic baseline model is probably worth 3-4 times my annual salary. I noticed 2 Porsches and various other sports cars that are not that old on the car market.

This made me think, either there are a lot more “Rich” people in our area or they have purchased these vehicles on a credit plan that involves them to almost sell a kidney (maybe they did). The vehicle dealers are now able to market the un-reachable cars to the general public. They use the buy now pay later methods or attach a residual value to the finance agreement, or finance the vehicle over a ridiculously long period.

I never really took notice of the car ads on the radio or TV, but I now know why they promote the new models as if we cannot live without them. And I also know now that at the end of the ad when they disclose the finance terms, they say them so fast you cannot really understand them. So the unsuspecting or excited consumer goes to that dealership to enquire about the deal. The salesman doing their job, would tell the consumer about all the benefits and paint a pretty picture convincing the buyer this is all he or she needs to be current with all the cool kids.

When the finance part of the deal is to be dealt with, that is done so quickly because the prospective buyer is so hyped they will sign almost anything at that stage. They will probably finance the deal so that the vehicle becomes affordable each month, and then worry about the balloon or residual payment at the end of the term at a later time. For example most residuals are 30% of the vehicles value (NEW). At the end of the term X years the consumer must pay that back, as a single lump sum payment or re-finance the owing 30% for another X years. Some people have said I will save up the 30% over the term in the bank and pay it when the time comes. Honestly how many people actually stick to that? Or sell the vehicle when the final payment is due and then do the same deal for the next car. That could work for business use and a tax write off, but for the individual they will always be in debt.

If I were to buy another vehicle I would save the biggest deposit I could, negotiate for the best deal I can on a sensible car and then make all efforts to pay it down as soon as possible. Or keep my current vehicle if it is paid off and start saving each month for the next car that I could purchase cash in a few years time.

Remember the vehicles you buy do not appreciate in value, unless you own the original Gull wing Mercedes or a particular car a movie star owned.

Tomorrow morning when I drive to work, I will notice those vehicles again and the people driving them. I will be grateful that I am not paying a third of my salary on a car that uses so much fuel and costs so much to maintain. People will argue with me saying but if they can afford the car why try cause a fight about it. My response will be: If you had to manipulate the finance terms so it became affordable to you then you cannot afford it.

Granted some people may well have bought those cars cash, some of them may have no debt whatsoever or they may actually be rich enough to buy whatever they want. I did say some people because the majority of the population are not rich and cannot afford those vehicles / houses / clothes etc.

I hope you enjoyed this article, please feel free to comment or submit your own experiences.

Retirement Planning is boring I know...

Like all things in life, good things come to those who wait. Financial readiness for retirement is no different. It may seem pointless contributing funds each month to a finance house and not see any real gain for years. But the earlier you start the better the return in 20 or 30 years time.

In my opinion, it’s foolish to rely on government pension schemes or the group scheme you may have at work for your financial security when you do retire. Chances are most of these are controlled by investment firms that may turn a profit each year if the markets are good to them. Returns are normally estimated and not guaranteed. But on top of this there are fees to be paid for their services and related taxes on payouts. Did the fund beat the inflation mark consistently? I am not knocking Retirement Annuities at all; I contribute to 1 each month at work and privately. And am sure the funds that have accumulated may be of use in the future.

My idea of a secure retirement does not only rely on my work scheme benefits or my annuity fund alone. Having all your eggs in 1 basket may set you up for disappointment when it’s too late. The tax benefits on an annuity are great and that’s my main reason for having one, but having income generated for life is by far the best security you could obtain.

Most people talk about passive income e.g. affiliate programs etc, but I still maintain the ultimate passive income comes in the form of dividends or rental income from fixed property. I do agree that investing in property is out of reach for most people (it still is for me apart from our primary residence) but with perseverance and drive, you can get your hands on an investment property to help boost your net worth and income. Consider investing in listed property if fixed property isn’t to your liking. As time goes on your property’s capital value will escalate and so does your rental income each year depending on your agreement with your tenant. If you find that after a while the property game is not one you interested in, you can sell it for a profit a few years down the line. Everyone needs a place to live, and there isn’t a factory creating more land. The profits can be invested whichever way you deem fit.

The closer you get towards retirement the less risk most people are willing to take. If you are younger and have a longer investment horizon, you can take advantage of more aggressive and risky investment vehicles. As time goes on these choices then change to more moderate, then conservative investment choices. There is a large debate as to whether your primary residence is an asset or liability. Most see it as an asset because it increases in value over time; some see it as a liability because it doesn’t make you money each month but costs you money. Is it better to rent or buy? That’s up to you and your budget and financial plan.

This is how I have currently broken up my retirement contributions:

·         I have unit trusts that are starting to perform consistently

·         I recently setup an automated payment to buy low risk stocks with good dividend ratios

·         I contribute monthly to a private retirement scheme

·         I contribute towards an Emergency salary fund that I set up

·         Also we paying down debt as fast as possible to start saving for a cash deposit on a small flat we will rent out.

These are the steps I have taken; I have researched a lot of options and got advice from many. This is what made sense to me. I try to actively make the best financial choices possible, but I seek advice before I do. Read the fine print on everything, find out about hidden costs if any, look past the pictures of people jet skiing on glossy pages. Always make informed and educated investment choices. Anything that says we can double your investment overnight should be investigated with a fine tooth comb.

I hope this article was interesting for you to read and helpful.