Money Talk Daily

Archive for the ‘The Economy’ Category

Everyone is dealing with tough economic times right now. In fact, people are even more on edge with news that a double dip recession is still a possibility. While this may seem like the time to use credit if you have to, you actually should be laying off credit card spending if you want to weather the recession.

When money is tight, those credit cards look real tempting. However, you cannot afford to get trapped in a vicious circle of debt because it will only make it more difficult for you to deal with emergency situations. Instead of spending on credit cards, work to save money and only use credit cards in emergencies. You’ll avoid more debt, which will help in the long run.

Here are the latest headlines from John Williams’ Shadow Government Statistics. If you’re not a subscriber, you might want to consider it as a great source of competent economic reporting. (Disclosure: I am a subscriber only. I get no compensation if you do subscribe.)

- The Great Downturn Deepens as Household Incomes Collapse
- September Retail Sales Gain Exaggerated by Poor-Quality Seasonal Adjustments
- Trade Deficit Still Suggests A Positive Contribution to Third-Quarter GDP

I’m really afraid that too many people are putting their hope of a secure retirement in their 401K plans and, possibly, social security. Let me suggest that you consider another component – residual income from a business you own yourself.

Now I’m not talking about opening a retail outlet or starting a lawn-care business. What I’m suggesting here is a source of extra income that you can develop at a reasonable pace now while you’re still employed, and that is a source of income that you would be happy to take with you into retirement. It well worth your consideration.

I don’t want to get trapped into the “gloom and doom” sort of thinking that is so prevalent in many of the current discussions of our economic situation. That said, we do face a whole array of unresolved problems – and this coupled with a government that clearly has no coherent plan for evaluating, let alone solving them, does not breed optimism. If your strategy for financial security relies on the government getting us through this “rough patch” so your 401K grows nicely and your government pension is secure, you might want to re-think that. Or plan on a much reduced standard of living in retirement. Hence my suggestion you look at the concept of residual income from your own business you run from your home.

Assuming this is of interest to you, let me suggest some characteristics that I believe should be part of a such an enterprise:

• Can do it from anywhere
• Does not require daily activity
• Free of licensing or permit requirements
• Has relatively low exposure to liability issues
• Minimal start up costs
• Plenty of resources available on the business so you can shorten the learning curve

Writing comes to mind. And there are tons of different styles of writing and prospective customers for your work. There are all sorts of business models that work for the internet, although this area is not without plenty of scams you need to avoid.

My purpose here, though, is not to suggest business models for you. I want to get you thinking about diversifying your sources of income by adding a stream of residual income. You might even find it helpful before retirement rolls around.

Even those who only casually watch the financial markets had to notice – today was ugly. All market gains for 2011 have now been wiped out. In other words, if you have money invested in a broad market index fund that mirrors, say, the S&P 500, your returns are now negative for 2011. Maybe you’re still up for the year depending on what’s in that investment fund. Or maybe you’ve gotten really clobbered. Regardless, 2011 has not been kind to investors so far. Markets are in turmoil, and I for one expect increased volatility to be the norm for quite some time.

Of course, one day – or even a few months – do not determine a proper investment strategy. So I am not suggesting you panic and make any changes in your strategy based on today’s market action. But if you are out of the loop and just letting someone manage your money, I suggest you get into the loop. No one cares as much about your assets as you do. Regardless of whether you are a self-directed investor making your own investment decisions or whether you have your funds with a broker who has discretion in how those funds are invested, you need to have your head in the game. You need to watch the markets. Learn about the markets. Understand the markets. Challenge assumptions. And don’t throw up your hands saying, “I don’t have time.” Or, “I can’t understand all this financial stuff.” Yes, you can understand the financial markets, and yes, you do need to make the time to do so.

After all, your financial future is important to you, right?

Did anyone really expect Washington to make any meaningful progress in even addressing the nation’s profound economic problems during a couple weeks of politically-charged nonsense? Is anyone surprised that the resulting legislation pleases no one? Do you really expect this bunch to take the action necessary to provide an environment where the economy can grow and we can succeed?

If not, what are you doing to come to terms with this situation and make your own plans for your future regardless of what our supposed “leaders” do?

For small businesses and even individuals, getting a loan during these economic times is tough. Even three years after the beginning of the recession, today the economy is still in a challenging state. Lending froze up when the recession first hit and many banks still are having a hard time lending, since they are not as financially healthy as before.

If you’re an individual or small business trying to get a loan, there are a few tips that can help. First, finding the right bank can definitely be helpful. Look for banks that specialize in these loans and look for banks that have the financial stability to offer loans. Creating a relationship with the bank or lender before asking for the loan also may help.

Applying to multiple lends is a great idea as well. The more applications you put out, the more likely you are to find a loan that works for you financially. Keep in mind that you probably will have to offer some form of collateral and when you take on much of the risk, you’ll find that you are more likely to get a loan during these difficult economic times.

Many people continue to bear the powerful memory of the Great Depression in their minds, so when the current economic downfall was officially declared in the mass media, they became extremely nervous about the way things will turn out in the end. Since there are so many similarities and dissimilarities between the two periods, we think it is to our best to determine which measures people should use to get out of the economic recession without being too affected by it.

Saving money and covering debts were the two main aspects that people cared about in the 1930s and thanks to these preoccupations, they were able to regain their financial stability. The numerous credits that have been approved in the past few years are the main reasons why people are now confronting with a new crisis; therefore, we think it is to our best if we follow the previous example and save money. In addition, you need to make sure that the objects you want to purchase are truly worth borrowing for; if not, you may wait until you raise the necessary money to purchase it.

The second aspect you may improve in your life is to replace ready-made products with objects that you may create yourself. Since they didn’t have the financial means to purchase all the clothing items and furnish pieces they wanted, most people would dedicate themselves to do-it -yourself activities in the 30s that helped them overcome the crisis. In addition to the fact that you will create resistant products with less money, you will achieve a highly rewarding feeling once your projects will be finished.

You can reduce the money you spend on food and other commodities by being a wary consumer, that is, by reusing old objects in the creation of the new ones. This was the third measure that we learned from the Great Depression of the 1930 and we truly think that reusing the old, yet functioning parts of your electrical devices or clothes, will increase your annual income and reduce the negative consequences of the recession.

Thanks to your wary attitude you will be able to save some bucks that you may either deposit or invest in a profitable business. Judging by the example set by the Great Depression, we think it is a good idea to invest your money in tangible commodities, such as, the gold or the oil market as these are the most reliable investments in times of recession. As a matter of fact, these markets are expected to grow up to 30% this year, so it is advisable that you purchase gold bars or coins before the prices go up.

Small coins and bars represent the best method to Buy Gold and improve your income.

With the federal interest rates at such a low point, many retirees are being hurt. Those with money put away in CDs are now getting less than 1% on those CDs, which is not enough for them to live on in most cases. This is hurting retirees so badly that many don’t think that their retirement money is going to last them very long as they have to dig into their savings for retirement.

Although the low interest rates have been helping those taking out mortgages and the banks, those counting on their retirement money are having a tough time. Surveys have shown that retirees are having to dip deeply into savings because of the economic downturn and it doesn’t look like it will be getting better soon.

Currently the U.S. economy is seeing some big problems with oil prices rising. Even before the current turmoil in the Middle East, prices were beginning to creep up, going over $100 per barrel.

Unfortunately, part of the problem is that the supply is not increasing, which is leading to an increase in prices when Americans are already having a tough time financially. With the economy so tied to the price of oil, it causes a problem and increases the likelihood of oil wars occurring as well. Keep an eye on the crude oil as a measure of pain the U. S. economy is experiencing.