1. Feature Article

WHAT TO DO WITH YOUR MONEY IN UNCERTAIN TIMES

I’ve received a number of queries about the current financial turmoil raging in the US and basically throughout the world.
“What do you think of the subprime crisis in the US?”

“Do you think the same problem will hit our shores?”

“What do we do when the banks start failing?”

Everyone wants to know what they should do with their money. Everyone wants to know where they can place their monies where it is safe, guaranteed and sheltered from the effects of all these troubles.

I hate to disappoint them but the truth is that I don’t know what will happen next. Another truth is that no one, and I mean no one, knows. I’ve a fair idea, based on my knowledge on finance and history, but it is just an idea all the same. I cannot guarantee the thoughts in my head will be reflected in the news tomorrow. (Ask the next person who claims to know about the future to place all his money where his mouth is, and he will shut up very quickly.)

So in other words, we don’t know what the stock market will do tomorrow. We don’t know where the interest rates will head in next week, where the oil price will go to and whether the property prices will rise or fall.

In other words again, this is an uncertain time (as if I have to tell you that). While I personally welcome such times as it means that I can make money (I invest when others are running), I also understand the fear that is gripping the hearts of the average investor. They are scared and want some pointers on what they should do next. They want some assurance. Unfortunately, assurances are work of fiction in these times. How can anyone assure anything when they don’t even know what will happen tomorrow?

So there is no one safe place to invest your money. Not the stock market, not the property market and not even the banks. While you can actually make money from any of the three, you can also lose if the tide should turn south.

Having stated that there are no assurances when it comes to making money, there is one thing you can do that will increase your net worth. There is one thing you can do that will give a sure return on your money and improve your financial situation – instantly. What’s more, you do not even have to think, run or work hard to do it.

And what is it? The answer is paying back your debts, particularly your housing loan.

See, every time you pay off your debt, you are improving your financial situation. As you know, net worth is measured by deducting your liabilities from your asset. So while you should always look for ways to increase your assets, you can also become better off financially by using the money to reduce your debts.

And like I said earlier, paying off your debt requires no work on your part. You don’t have to think hard or spend much effort in the process. Just write the cheque or click the online link and pay off your debts. If the interest rate for the loan is 10% per annum, it means that you are making the same return every time you pay off the loan. And getting 10% return in these trying times is indeed a fabulous move.

By the way, it is almost impossible for you to go broke or get into trouble financially if you do not have any debt. The folks who came through unscathed during the 1930s Great Depression in the US were those who had little or no debt. Which is something we can all learn from.

So to recap, any time you are not sure what to do with your money, any time the world is in financial uncertainty, pay off your debts. It is a sure return.

Copyright © Azizi Ali 2008

2. Quote of the Month

There are plenty of ways to get ahead. The first is so basic I’m almost embarrassed to say it: spend less than you earn.
*Paul Clitheroe*

3. Your Question Answered

QUESTION:

Hi Azizi,

I have contacted Bank Rakyat regarding the the 15% return that you wrote about in a previous issue. They said there is no such a thing. I need your help to verify this. If it
is true, I need to know the details. Many thanks.

ANSWER:

Bank Rakyat is cooperative. They have been paying 15% or so dividend to their cooperative members (not depositors) for the last few years. However, the membership has been closed for the past few years which in English means that you have missed out. Don’t get too upset: I’m also not a member.

Perhaps the staff that told you that there is no such thing is new or perhaps he thought you meant interest payment to depositors.

* HOT TIP *

Read “Masa Cipta Kejayaan” by Quincy Kandoh