If you watch the news daily, you’d think that our economy was in un-recoverable shambles, that our financial worlds are ending and all investors should stay away from windows in tall buildings. Even to the point that we all should be buying only food, fuel, ammo and toilet paper preparing for the hostility at the end times.
I do not think it is that bad quite yet… As Seasoned Human that has seen times like this before, I think that saving all of your money is a BIG mistake right now.
First, this is just my opinion and these are actions I am currently doing, as the deals right now are better then they have been in years! I have been watching and paying close attention for the last number of years, always looking for my other kinds of answers. Not all the answers are of only the Knowledge and wisdom kind that I am looking for. Financial other kinds of answers are worth looking for also.
I now believe our situation, as a whole, seems dire enough now and First, Yes, an emergency fund is a requirement for any sound financial planning effort and I do have mine in place. But saving every last penny is the last thing you should be doing right now! It is the time to buy the things that you’ve been putting off because every signal out there is telling you to save everything.
The laws of supply and demand are in our favor because very few folks are buying, which means the people who are, will be getting incredible deals, if they are willing to negotiate and put in the time for research, exploring and planning. This goes for minor cost items like simple tools and supplies of life or business, all the way to major capitol Items, such as second homes, rentals and whole businesses.
With no one spending their money, because they’re saving or holding… this means banks won’t be giving you great interest rates because they don’t have to, and they have too much money, or even too much bad debt! That’s only the beginning of this very large financial story…
Apparition of Inflation
The government seems pretty savvy; they know you’ll get upset if they raise the taxes without giving you a very very good reason. Fortunately they have another weapon, printing presses. When the government pumps more money into the money supply, the value of your dollars can decrease. The government has made trillions of dollars in promises to financial institutions, automakers, and many other smaller profile parties through its actions the last few months and it will have to fund them somehow.
Part of it will be funded by borrowing, but some of it will come through increasing the supply of money. Inflation won’t be an issue while we’re in a recession, but it’ll be a beast of a problem whenever we’re no longer scared of the recession. Be warned now and be thinking ahead for Other Kinds of Answers…
Negotiate Deals
The time to buy is when others are panicking. When you have the benefit of timing, you control all the power in periods of economic uncertainty. I’m not talking about just the stock markets, I’m talking about everything! If you wanted a house, now is the time to buy because interest rates are low and home prices are even lower. Heck, even the Government, Federal and State maybe willing to give tax breaks and grants, if you will move now.
If you wanted to make improvements to your house, start talking to contractors because their business is slow and they will be willing to cut deals just to stay in business. If you wanted a car, dealerships will offer great incentives because they need to boost their sales numbers. Even if it’s something as simple as an appliance, you can negotiate the price down and get an energy savings tax credit to boot!
And don’t buy things you don’t need just because they’re a deal, that’s reckless, buy only things you need and negotiate it down to the bare bone pricing. Watch out for hooks in the deal also, things that you have to do to get the GREAT Deal, or are added at the sale’s close…Required Install labor, shipping charges or more fees can eat up any great deal in a hurry
Bank like Banks Do
Ever received one of those offers in the mail that seems like the solution to all your problems? It may have said, "Your home is an untapped resource. Refinance your loan with us and you'll get quick cash to buy something, fund college, add to savings or pay off your debt." You may have been tempted by the idea, but hopefully you didn't bite. There are much better ways to solve problems with debt. Refinance your loan; in the long run could actually cost you much more money. Keep reading…
There is a newer option in the
Lower Interest Rate Doesn’t Always Equal Saving
First, make sure that you are really saving money if you do refinance. It’s not enough to compare 6% to 4.5%. What you need to do is determine how much interest you’ll be paying if you keep the original loan versus the total cost of the refinanced loan (i.e., interest plus closing cost). To do this correctly, you’ll need a good mortgage calculator. There are many worthy FREE ones on the web. For example, let’s assume your original $300,000 loan is a 30-year fixed rate loan at 6% and you’re refinancing to a 15-year fixed rate loan at 4.5%
| Age of the original loan (years) | Interest remaining on old loan | Principal balance to refinance | Interest cost of new loan | Savings before closing costs and other fees |
| 10 | $180,620.08 | $251,057.36 | $94,645.79 | $85,974 |
| 15 | $110,611.51 | $213,146.93 | $80,353.74 | $30,258 |
| 20 | $53,828.02 | $162,011.42 | $61,076.08 | ($7,248) |
As you can see from the scenarios above, you could lose money by refinancing to a lower interest rate. In general, it’s more advantageous to refinance newer loans than older ones, because most of your money goes toward paying interest at the beginning of most loans.
Interest Rates Are Low NOW
The federal funds target rate “range” is 0.00% to 0.25%, which means the government doesn’t want you to save, they want you to spend! The federal funds target rate is the target rate the Fed wants banks to lend to other banks on an overnight basis (to meet capital requirements). They achieve this rate by expanding or restricting the amount of money available. If a bank can borrow money from another bank for 0% - 0.25%, what incentive do they have to pay you anything for your savings? Almost none. The end result is that you get almost no interest from your savings, or bank investing, as another way to look at it.
Another quick point, you may even be able to get 18 to 36 month 0.0% financing right now on many items, so you do not have to spend your cash savings right now. Yes, in some cases, you do have to spend at least a certain minimum amount to get those deals, but in many cases, you can reach the minimum by buying two, three, or four items together. Just be sure that you understand all the details of the deal and all the fine print.
In other words, the government doesn’t want you to save your money; they want you to spend it and help boost the economy! And let’s be honest, unless you start spending, the government will only get worse in how it pumps more money into the system, or even has to manage everything by taking over everything.
Reward the Entrepreneurs
The
I firmly believe that the way out of this whole big mess is through business growth spurred on by something, whether its consumer confidence and increased spending or whatever that improves our infrastructure, it will be led by small businesses and entrepreneurs, with other kinds of answers.
Think carefully before you borrow money to do anything. When you borrow, you are guaranteed to lose the amount you pay toward interest. However, you are not always guaranteed a better return on investment on borrowed money. I know this article is heavy on mathematics, but I hope you will enjoy learning about the process and it is pretty clearly about Other Kinds Of Answers...
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