HIP POCKET Sink or swim time
I’VE just arrived home from a family holiday. As I opened my front door, I quickly realised I’d brought home a souvenir from Bali: bacteria.
Yes, I’m typing this bent over with a bad case of ‘Bali belly’. Yet nothing bad ever happens to a columnist, so I’m using my tummy troubles as an analogy for how the world financial markets are feeling right now:
Queasy. And worried about what’s coming down the err ... pipes.
Case in point, here are the headlines that greeted my arrival back into the country: “House prices to fall 15 per cent: Morgan Stanley”; “ASX plunges: $50 billion bloodbath.” Pass the bucket! However, I view these headlines as about as reliable as consulting Dr Google about my tummy troubles.
So what is really going on with investment markets, and, more importantly, what should you do about it?
Well, at long last the markets have started paying attention to the fact that global interest rates are on the rise. Yet this shouldn’t come as a surprise to my regular readers … I’ve been banging on about it for years.
In fact, way back in 2015 I wrote an article entitled “2018, The Year First Home Owners Get their Revenge”, in which I urged young people to start aggressively saving up for a 20 per cent deposit so they’ll be prepared to take advantage of lower house prices.
And for people approaching retirement I’ve long advised to save up a buffer of two to three years of living expenses in cash (less any government pension payments) in their super, so they aren’t forced to sell when the real crash comes.
For all the doom and gloom headlines last week, global interest rates are still incredibly low, and they’ve only just begun rising. In my tummy analogy, what we’re experiencing is merely an uncomfortable rumbling.
Yet the truth is that we Aussies, by taking on record household debt at a time when interest rates are at record lows, have already swallowed the bug. As a result, plenty of overstretched people may well find their financial lives will end up in the toilet sometime in the next decade. Are you prepared? Trust your gut. Tread Your Own Path! BAREFOOT REPLIES: If you’re looking for a way to get a huge reward with very little effort, you’ve found it. You are changing your family tree every Sunday night, mate. That’s what it’s all about, right? Well done! I’VE PUT FINANCIAL FIRE OUT MELANIE WRITES: On November 23 last year, I left a violent relationship, then began my “financial fire”. My ex immediately did three things: clear out our bank accounts, redraw on our mortgage, and direct his salary solely to his account. My baby girl was only 10 weeks old. I was on maternity leave at half-pay and I was drowning in unsecured personal debt.
Yesterday, I settled on my new property. I am now a sole homeowner, and my girls (aged three and now one) and I have our very own home. This is all because in December last year, I read The Barefoot Investor. I set up my buckets, returned to work, and got myself a damn good lawyer. Words cannot to express my gratitude! BAREFOOT REPLIES: Each week a handful of people write to me to say “stop promoting your book!”. Luckily, I’ve long given up listening to them. Why? Because I know there are women in domestic violence relationships who are reading this right now, and they need to know there is hope. Melanie, thank you for being a shining light, to all women. You got this! The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins) RRP $29.99. On sale now from Dymock Dymocks and d all ll good book shops.
PROOF IN PUDDING: Children playing a greater role in the kitchen and thousands in the bank. What a great result.
T In F O (H R sa The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.