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In Time Of Economic Crisis…. |
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By Jay De Leon - AFF
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Tuesday, 01 July 2008 |
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Millions of Americans are currently complaining and hurting about a lot of things. Prices of gasoline and other crude oil related source of energy are at all time high and still soaring. Food prices are relatively high due to the increasing cost of transporting goods and commodities while income remained the same. In the past months, we have noticed that there was a short supply of rice throughout the world. Unbearable negative impact is being felt by people in third world countries complicated by the pain attributed by natural calamities such as, flooding, typhoon, earthquake and other disasters. It is also true in this country most especially in Midwestern States where flooding ruined the lives of numerous Americans. It is a lot better, however, in this country when crisis arise since the U. S. government has the immediate resources to deploy in the affected areas. In third world countries, like the Philippines, help is always late and not enough if there is.
The present economic situation in this country is unique in nature. This is more of self inflicted injury committed by the people. In this country, where the economy is driven by law of supply and demand and being fueled by careless speculators, most likely the economic growth is artificial in nature. Let’s take for example the stock crisis in late 90’s up to early 2000s, that was the years of technology stocks that drove Wall Street into a tremendous trouble. Stock investors and traders speculated so much on DotCom companies and ignored the basic fundamentals of stock investing thus created a huge bubble. That balloon price popped and hurt millions of both short and long term investors. The 911 incident gave that stock market crash a final nail to the coffin. Now America has created again another bubble in real estate. Real estate industry is the biggest industry in this country and considered as one of the low risk investment. Price of homes has gone up uncontrollably due to supply and demand. The demand however, was very artificial created by the speculators and unscrupulous people in the industry. There are cases when an individual is qualified only to buy a house but with the connivance of real estate agents, appraisers, developers and mortgage brokers, they were able to close 4 homes in a month. They live in one house and rented the rests. Others flipped the properties quickly for some equity. Some people became greedy and bought 10 or 15 houses and kept it for a year after getting all the equity. The bubble popped when the interest rate (ARM) has gone up. These investors just ran away from those houses and have them foreclosed. Those individuals who bought expensive houses for their own use ended up in foreclosure too since their income can not support the adjustment in mortgage payment. Bottom line was real estate and mortgage industries were abused by these sharks. Legislations should be passed to further regulate these industries most especially when the agents and mortgage brokers are on commission basis. Mortgage brokers and bankers who wrongfully guided consumers in obtaining fraudulent loans must be held liable and penalized. This could be considered as a crime related to economic sabotage. There are millions Americans who foreclosed their homes already. There are millions more in the pipeline. The impact of this meltdown may continue in the next couple of years or so while the value of real estate is still on a down trend. However, this is the best time to buy for those people who don’t have a house yet but they should stick with what their income can afford. This disaster has affected a lot of industries in this country. It gave a domino effect in the country’s total economic picture. U.S. economic recession has affected the world in general. Consumers’ Fico scores are low and credit records are fully decorated with late payments, foreclosures, charge offs, and other derogatory remarks that will remain with Credit Bureaus for several years. What effective steps do you need to take in time of economic crisis? First, you have to step back and have a birds-eye-view of your finances. Sit down and analyze where you are and where do you need to be. Set a realistic short term and long term goals. Second, secure and tighten your financial priorities and spend within the budgeted amount. Third, go back to the basic needs. Drop all the non-important expenditures and identify the real “Need” not the “Want”. Need is what’s necessary for you to survive not copying what your NEIGHBORS HAVE. Fourth, improve your income potential on a monthly basis. Work harder and smarter and bring home additional dollars that will improve your savings. Fifth, dispose of your dollar-eating assets. For instance, if you have an 8 cylinder van or truck, try to exchange it for a more fuel efficient vehicle. Sell the extra cars in your possession. Review your home, life, car insurance coverage and look for a cheaper plan. Switch to Term Life Insurance to save more money on a monthly basis. Remember you need protection only not an investment on life insurance. A 10 or even 20 level premium term insurance can save you a fortune. Review the number and usage of your cell phones, cable, and all household expense items. Sixth, do your research yourself. Do not make decisions based on what your agents will tell you. They have vested interests on all the deals. Second or even third opinion will benefit you in the long run. Seventh, stay away from using your credit lines and credit cards most especially those charging you exorbitant interest rate. Use them only on extreme cases of emergency like between “life and death” situations. Eight, and the most important, put more emphasis on your family’s health and well-being. If you will follow the above recommendations, you will survive this crisis like a breeze….Good Luck! |
