I'm the eternal optimist. It annoys some readers. But I really do believe there are silver linings in financial downturns.
Last year was a rude reminder to many people not to put all their eggs in one basket, and that living it up personally on your business profits or even capital can end in tears. Many will have learned from those lessons and go on to be better investors or business people. Ask those who were in business through the 1987 to the mid 1990s.
Even redundancy can lead to better things – if you've got the right attitude. One middle-aged man I chatted to at a barbecue over Christmas had been made redundant after 17 years in the same job and has now launched a very promising business indeed. He loves the freedom of working from home and the business has real potential. And for those of you that have jobs. Celebrate the money they bring.
That's not to say that 2010 might not be dicey. Residential real estate prices still aren't in kilter with wages and salaries and they're back to almost historic highs. Inflation and interest rates may be set to rise, and the government retail deposit guarantee scheme that has led some people to invest in less than stable finance companies runs out this year. Public debt is much higher than it was a year or two back and many commentators fear that China could be in for an economic crisis. Oh. And there's the spectre of rising oil prices again.
January is always a great time psychologically to take stock of your current financial (and life) position and make changes. I'm not a great believer in "resolutions", because they're made to be broken. Setting some achievable goals is better and a simple "To Do" list with dates for completion can go a long way.
Here are five things that you could put on that to do list:
- Plan how you will take steps this year to increase your net worth and to invest your savings. That could be by drip feeding money into investments such as managed funds or shares.
- Rebalance your portfolio and ensure that you are not too exposed to financial bubbles, which could include gold, residential property, and even the Chinese economy.
- Minimise your taxes. Do consider seeing an accountant. They often claim (and in my case it's true) that you will save more than you pay.
- Cut down your household expenditure. Someone earning $120,000 isn't necessarily better off than another on $80,000 if their spending is out of control and they're paying too much tax.
- Invest in yourself. Whatever you do, you can do it better. We Kiwis aren't good at admitting that. If you're employed, educate and brand yourself. If you're self employed do what it takes to make you a more successful business person, and if you're a full time investor, identify your weaknesses and work on them.
Finally, I really enjoyed reading all the comments from the Saver of the Year/Investor of the year competitions from the last couple of years. I wonder which of the managed funds readers recommend for 2010 and why?