Territory Loans

Have You Heard The Recent Reports From Various Economists?

30th January 2012

Have you heard the recent reports from various economists? They're predicting a global economic downturn, worse than those events of 2008. Should we listen carefully to these predictions? Of course, it is wise to be cautious, but is it wise to be overly cautious? In times of economic downturn, opportunities abound for the astute investor. The real estate market can be likened to the stock market. Buy low, sell high, but in real estate, those lows and highs eventuate over a longer period of time and are also influenced by local, national and global economic forecasts. If you have stable income, whether that is wages or salary, rental income, interest or other diversified income, you should be in a comfortable position.

Having said that though, it is wise to be prepared for unexpected situations and with and economic downturn, some businesses may need to reassess their expenditure. Often this may mean a reduction in staff. Many people live from pay to pay and will be in financial difficulty within two weeks of being out of work. So think about your personal financial situation. Could you cope with being out of work for a period of time? As a general 'rule', it's recommended to have approximately three months worth of your cost of living, in savings, as a buffer for those unexpected situations. So, to get an approximate figure, refer to the previous article "Do You Know Where You Stand Financially?" also located under the NEWS tab and you can also use the Budget Planner link, located on the HANDY LINKS tab. Once you've calculated your monthly expenditure figure, multiply it by three and this is what you need to aim for in your savings account.

There is also speculation that interest rates will drop for the third consecutive month, when the Resrve Bank meet again for the first time in 2012, on Tuesday February 7th. The reasoning behind lowering interest rates is to keep the Nation's population spending and therefore stimulating the economy, avoiding slow down or stagnation. In some ways, a reduction of interest rates has a psycological reaction amongst the population. Lower interest rates may make people worry less about their cost of living, particularly their loan repayments and in turn, this slight shift in attitude helps stimulate spending. People feel they may be able to purchase items they wouldn't usually spend money on.

Lower interest rates means real estate may become more affordable and people who are eligible for the First Home Owners Grant may decide to take advantage of this. And as mentioned above, property investors may also decide to take advantage of the lower interest rate to add to their investment portfolio.

It is recommended that you seek professional advice before making such a large financial commitment. It will help to put you in complete perspective of your situation and allow you to feel at ease with your decision. A tip to remember when seeking financial advise is, a financial advisor or mortgage broker is, in some ways, a financial doctor, not too much different to a medical doctor. If the advise you've received doesn't seem quite right for you, seek a second opinion, and keep seeking until you find an advisor that you're comfortable with and has your best interests at heart. You should feel comfortable with the advise you've received. If you have any doubts in the back of your mind, ask more questions or seek another advisor.

So there's no need to panic, worry or be anxious. Just think about your situation and work towards being financially stable.

Do you have any comments about this article? Or wish to ask questions? Please contact us on 08 8950 6333 or email richard@territoryloans.com.au