October and now, the US dollar slid some four per cent against
the euro and the Japanese yen, its weakest for almost two
years. In the US economy, this pressure almost always fuels
inflation. And back at home, we are shopping for Christmas
The relevance lies in a basic question: How much of what we
buy and sell do we trade in US dollars? Stemming from that
is the fact that our oil and gas exports are priced in US
dollars. In fact, the oil price peaked at US$78, this year,
fell in autumn and is rising again up to US$63 per barrel.
For investors, and for us, the anomaly in the US is in the
interest rates, the repo rates and the experience of the returns
Locally, despite rises in the repo rates, the returns, or
yield paid out by mutual funds for example, and those saving
money, remains savagely lowmuch lower than the inflation
Save for your life!
So when the future seems uncertain, a rule in financial planning
is to check over your bases. Make sure you have the essentials
coveredthe life insurance policy is so important now,
for the simple reason that the stress can kill you! And that
is not just meant to be funny!
For less than a dollar a day, young people can purchase a
contract that can possibly deliver some half a million dollars,
at some time in the future. The only assumptions are that
you are healthy enough to pass a medical examination and that
your lifestyle is not hazardous.
The beauty of such a strategy is that it is virtually risk-free,
cheap, and the price will not go up in the future! Many people
undervalue these three features of life insurance and die
without ever creating a sensible estate. They renege on a
dream to provide well for their families.
The choice they make, is in fact to pursue the most risky,
and most expensive patheventually paying dollar for
dollar for loss of income or disability, since they pay through
their own pockets, never transferring the risk to another.
The second base to cover is the longest term. And that is
your pension. There are thousands of individuals who leave
their excess monies at the end of every year in bank accounts
that pay two to three per cent per annum. That is foolhardy
when they can put away, in a tax-sheltered vehicle, as much
as $12,000 saved each year. The actual benefit is a higher
rate of return in addition to a refund of $3,000 back from
The six-month plan
The third base is the short-term savings accumulations. You
need to have set aside somewhere, an average of five months
salary. Such a vehicle of savings must allow you to access
the money almost immediately.
Many personal disastrous financial events can be corrected
in a five-month period. You can recover from serious illnesses,
accidents, or calamities, even a loss of job, or an economic
downturn, and get back on your feet.
Of course that is providing you have the five months of salary
saved up somewhere to tide you over the period of stress and
loss. It is fundamentally about being and feeling secure.
And having these three bases do just that.
Try it! And see how good you feel psychologically and physically
this Christmas. Keep in your thoughts, the economic reality
that experts persistently hold that the fair price of oil
on the world market is US$50 dollars per barrel.
So whats the best Christmas present you can give your