Rising interest rates, less mortgages
by: Ryan Blake
BUSINESS LOUNGE
Mrs. Wanica Purkiss of JN outlines ways to help With production coming to a halt in some sectors; such as the ‘temporary’ closure of the bauxite production plants and many companies trimming their staff quota it is becoming increasingly difficult for persons to service their ‘normal’ debt. Due to an increase in the reserve requirement ratio and market interest rates by the Bank of Jamaica, it is even harder for individuals to access and repay loans because financial institutions were forced to increase their lending rates. The harsh reality Houses and cars are being repossessed as persons are just not able to provide the banks and lending institutions the money needed to keep these Wanica Purkiss, Mortgage loans from going and Operations Executive - into default. Not all Jamaica National Building lending institutions are quick to reposSociety sess homes which mortgagers have defaulted on. Jamaica National Building Society is intent on having all of its customers pay their mortgage on time. Mrs. Wanica Purkiss, Mortgage and Operations Executive states that “While job loss or income reduction may be good for stimulating enterprise, the financial consequences can be serious if not managed properly. The worst option in a crisis is panic as rational responses can frequently solve the problem.” She also notes that in the mortgage market, the ultimate disaster is to lose your home by defaulting on a mortgage arrangement. One of the most important actions is to give the mortgage provider early notice, so that measures can be taken to ease the situation. methods implemented by jn to help in the current crisis “Jamaica National has several instruments to assist mortgagers who are experiencing difficulty. It is key for persons to come in as soon as possible, so an advisor can select the product which best suits the situation. These include using your upkeep savings, placing a moratorium on your mortgage payment,
extending your mortgage term, debt consolidation and freezing your interest rate,” said Mrs. Purkiss Mrs. Purkiss also says that they (Jamaica National) are planning to offer rebates to mortgagers who pay their mortgagees in time. The rebate is a refund to those mortgagors whose rates were increased to 14 per cent. She said the payment decision was made after a review of mortgage accounts which targeted particularly deserving groups, and in light of the difficult circumstances many are now experiencing. “We did it in recognition of the discipline required to make payments on time. We want to encourage timely payment of mortgages,” the Executive said. Late payments are discouraged by charges, “So we believe we should balance it with a reward for timeliness,” Mrs. Purkiss explains. ADVERTISEMENT
10 Smart Steps to:
Boost your income Provided by: Financially S.M.A.R.T. Services
Question:
Everything is going up except my salary! I can’t find the money to pay all my bills every month much less save money. What are my options?
Raise Your Financial IQ! -
MONEY $MART...
Answer:
Most people don’t earn as much as they need to in order to live the lives they desire. We have to be determined in finding ways to boost our income to make ends meet and save towards our goals. Here are ten smart ways to make more money:
7. Find a need and fill it. A need is an absence
of a vital commodity or service in the marketplace. Needs can be created – just look at our demand for mobile phones! Look around your community, workplace, school or church to find a business need that you can take advantage of.
8. Find a problem and solve it. Smart people see opportunities where others see problems, so look around for solutions that you can offer. Sometimes if you can find a way to fix your own problem, you
1. Compare your monthly expense needs with
your income. Fill out the personal budget available at www.financiallysmartonline.com
2. Determine
your budget shortfall (expenses greater than income). This will give you a targeted amount of extra money to earn each month.
3. Break down the monthly shortfall into a weekly
or daily amount. For example $15,000 monthly shortfall becomes a $3,750 weekly or a $500 daily shortfall. Create an even smaller target- think of how can you earn $50 profit from ten people per day.
4.
Try to earn more on your current job. Talk to your HR department about how you can increase your salary, whether by doing overtime or improving your skills to get a promotion.
5. Look for a second job or new job. If your cur-
rent job is a dead-end, get help in improving your resume and assess your options in the marketplace. Consider changing your industry by looking for jobs in under-serviced fields.
6. Get creative. Whether the economy is good or
bad, most times you will have to depend on your own efforts to earn additional income. Focus your energies on coming up with ideas for you to earn some extra money.
can make money by offering the solution to others for profit.
9. Find your talent and market it. Is there any way you can use your unique strengths and abilities to earn money? Think of ways of offering your talents so that people will pay for it. Start with a clear picture of what consumers want, then tailor your talents and ideas to meet their needs or solve their problems.
10.
Get expert advice. Seek assistance from small business support agencies for business planning, product development and financing, to help convert your brilliant ideas into big money! ........................................................................... Financially S.M.A.R.T. Services is Jamaica’s number one source for practical, down-to-earth and independent answers for all questions relating to personal finance. Get more money smart advice at www. financiallysmartonline.com. Email advice@financiallysmartonline.com with comments or questions.
The World’s Billionaires List or what’s left of it!
By: Andre’ Biurnett
YM INSIGHTS
The 2009 Forbes Billionaire List published in March of said year shows that a staggering $2 trillion simply disappeared and 355 individuals are now former billionaires. The average net worth is now $3 billion down 23% from 2008; this is the lowest average since 2003.
other billionaires increased their fortune including Guy Laliberte, John Paulson and Tadashi Yanai.
How it stacks up Perennial champ, William Gates, saw his fortune slide by $18 billion but managed to regain the top spot. This occurred at the expense of his bridge partner, last year’s front man Warren Buffett. The “Sage of Omaha” lost a quarter of his wealth due mainly to a staggering 50% slide in his Berkshire Hathaway stock over the course of one year. Buffet was still able to hold off Mexican telecoms giant, Carlos Helu who also lost 25% of his wealth from the previous year. Lawrence Ellison of database giant Oracle and Swedish retailer Ingvar Kamprad of furniture brand Ikea round out the top five. Both of them managed to move up on the list despite losses over the year.
Ironically, this year’s biggest loser was last year’s biggest gainer. Indian mogul Anil Ambani who slid from number six to number 34 losing an approximated $32 billion. This was due to massive depreciation in the value of his three largest companies along with the fact that the rupee devalued 18% versus the US dollar. Richest Cities In terms of regional status, declining fortunes saw the United States reasserting its dominance over the rest of world. New York has regained the status as being the city with the most billionaires with former number one, Moscow, falling to number three behind London who sits at number 2. A year ago there were 74 billionaires living in Moscow and 71 in New York, this year Moscow registered a mere 27 while there were 55 in New York. Who is getting richer amidst the crisis? Despite the fact that 656 of the 793 billionaires on the list lost money this year, a steadfast group of 44 individuals showed that it was actually possible to make money amidst the carnage. New York Mayor Michael Bloomberg rode the positive re-evaluation of his firm, Bloomberg LP, to increase his fortune by some $4.5 billion as the only member of the top 20 who actually increased his wealth. Forty three
William H. (Bill) Gates III The 2009 Billionaire recipe Is it impossible to make a fortune in these tough times? The 38 newcomers would beg to differ, even though their recipes for success vary somewhat. Wang Chuanfu who owns BYD Co in China made a killing after his company started selling electric cars in December of last year.
One thing is evident from the additions to the list; one has to be innovative and fearless in making a fortune these days. Relying on convention may see you a step behind the competion.
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Inflation Management and its Consequences on Nation, Citizens and Businesses “Now abideth these three rates: interest, forex , and inflation; but the greatest of these is inflation.”
I
Apostle Common Sense, Acts of the Economy, Knowledge Testament, New International Wisdom Version, Burnsil Doctrine
In true Jamaican style, we have been generating much heat, reactions and focus on the consequences of poor inflation management (interest and forex rates) but with an equally deafening silence on the causes. The focus of the business community, the policymakers, the technocrats, the workers, the citizens and the media should be on INFLATION. All things being equal; bring inflation down to single digits and the other two rates will receded. (And note that recede implies gradualism). Maintain a double digit inflation environment and we will perpetuate a high interest regime and a galloping forex rate. Let us not blame the commercial banks. Lay full blame with the institutions, systems and processes responsible for managing and driving down inflation. They are clearly doing a dismally poor job. Forget the circular argument about which came first (inflation or forex or interest); inflation drives the other rates. Further, forget about the “small, open economy” argument; Jamaica has the worst inflation record of all the “small open economies” in the entire Caribbean. In the small OECS countries, inflation runs between 1 – 3% typically; in Cuba 3 – 6%.; Barbados 0 – 5%; Trinidad 4 – 8%. In Jamaica’s case the out-turn has been, 8.5% in 2006; 9.3% in 2007 and 20.2% in 2008 (data source – IMF 2008 World Economic Outlook). We should ask ourselves why is this so ? What are we doing in Jamaica to make our inflation rate so terribly high ? Even with the same common exogenous variables, Jamaica’s outcome is much worse. Think about it if, as a lender, we know that inflation is hovering at 20.2%, would any of us lend out money at less than 20.2% ? No we would not. An interest rate of 20.2% is just maintaining the nominal value of your funds. Add operation costs and profit and one is already at 25%; at least. However, consider this, with an inflation environment at 4%, would strident calls for interest rates to be in the 9% range be an issue. Clearly not. Interest rates in double digits would be
clear and obvious anomalies in that context. By a perverse logic, the BoJ is correct on this one; their rates are in the correct range, given the actual prevailing inflation rates.. You cannot have a low interest rate regime in a high inflation environment. On the matter of forex rates, think about this, if the US annual inflation is 3% and Jamaica’s is 20.2%, what is the minimum that the forex rate will slip in a year… .17.2% at least. It is as simple as gravity. If the dollar started out at 71:1 at the start of 2008 and the USAJA inflation differential is 17.2% what is the expected value at end of 2008 ……83:1. Its not rocket science. That model is generally defined as the purchasing power parity of the currency. Lower adjustments than that serves to overvalue the dollar by dynamically, and artificially, revaluing it upwards. No amount of NIR, or moral suasion, or ministerial imploring can prevent the subsequent, inevitable, corrective devaluation. As an adult country of 47 years, we should all have learned this lesson by now. What can we, therefore, justifiably blame the BoJ for ? We can blame them for trying hard, as mandated by their own Act, to maintain artificially overvalued exchange rates. The Christmas 08 debacle is proof-positive of this. We can also blame them, and the authorities, for the present long list of mis-placed priorities in the BoJ Act’s five stated objectives; none of which includes price stability.
K C I CL E TO D R OA E H NL AD N W RE T I O N D ND E A LEM PP ITS TY U E eS R I T EN
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Maximising Your Marketing AN ENTREPRENEUR’S LIFE
Get the ultimate strategy by: Cherryl Hanson Simpson
O
focus on building your database to carry out strategic relationship marketing. You must develop a consistent method of capturing vital contact information about your customers. According to Eker, the customer database is the single most unused source of potential income in most businesses.
The most crucial area for entrepreneurs to focus on is the marketing of their products or services. As T. Harv Eker, business trainer and author of Secrets of the Millionaire Mind explains, marketing = money, and without a sustainable marketing system, you will not get wealthy from your business.
Building the back-end The back-end helps you to maximize the revenue made from each customer, and should be implemented as soon as the first product is bought. Your system should offer a complementary product, upsell a more expensive item, or even down-sell a cheaper offer if your customer didn’t buy the original item.
ver the past four columns we have examined ways to systemize your business to achieve sustained growth and eventually create the freedom which most entrepreneurs desire. As discussed, you have to design repeatable processes in the areas of production, operations and marketing to consistently generate profits.
The ‘ultimate marketing strategy’ as outlined by Eker, consists of four equal parts: the market, the message, the medium and the back end. Previously, we looked at how to define the target market which is most likely to buy from you; how to create the right selling message to entice them to buy; and how to select the right mediums to effectively take your message to your market. Focus on FEBE The first three elements of the marketing strategy comprise the ‘front-end’ activities of identifying the market, getting them to know about you and enticing them to spend money with you. The goal in the front-end is to gain people’s trust, Eker reveals. “Do not initially ask too much of your market in terms of their time and money.”
the fer in,” sell
Once you have successfully converted a prospect into a customer, this is where the back-end system comes into play. The back-end is products and services that you ofto your clients after their original purchases. “Once the client is Eker points out, “it’s easier to them new products.” Developing an efficient backend system requires you to
Eker gives some options for back-end offerings: Packages/bundles containing a variety of products and services that makes the offer practically irresistible to the customer; Continuity program that ties in the customer to a monthly or periodic offer; Frequent buyer program that gives rewards for purchasing a certain amount of your products or services. Developing a database marketing system which continually promotes your back-end products and services is the secret to success in producing persistent profits. .......................................................................... Cherryl is a financial consultant and coach, and founder of Financially S.M.A.R.T. Services. See more of her work at www.financiallysmartonline.com. Email Cherryl at advice@financiallysmartonline. com. Please add this address to your email address book in order to ensure you receive a response.
Credits Publisher eZines Limited Managing Director Tyrone Wilson Your Money Reporters Shari Lyew Kenarthur Alexander Mitchell Kimberly Taffe Columnist Cherryl Hanson Simpson Design and Layout Omar Phinn
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