The initial reaction of many people who still have some disposable income and perhaps some savings to the April 7th Emergency Budget, will be to batten down the hatches and safeguard every penny they have until the next onslaught in December.
It’s a natural enough reaction, especially if you happen to see colleagues or other friends and family members losing their jobs.
But it might not be the most sensible long-term course to take if you are also nursing some losses – from property or pension funds or other investments.
By being more pro-active now, without taking crazy risks with your money, you may not only prevent further losses, but see your balance sheet return to profit sooner than those people who take no action and hope instead that this bad news will just go away.
Between now and December, you still have time to get your financial house in order as well as you can to prepare yourself for the next round of taxes and state service cuts that will have an impact on you and your family.
The experts I speak to regularly believe there are steps you can take, some small, practical ones, and some bigger, more substantial ones that you should seriously consider:
Insurance: Dermot Goode, a former private health insurance manager who is now an accredited fee-based financial advisor (01-685 4318) recommends that “everyone with health insurance review their policy and compare prices with the other providers”.
He also highly recommends that the self-employed take out income protection insurance (against illness, not unemployment).
“A recent survey I undertook for the Irish Broker’s Association showed that half of all health insurance members are either in the wrong plan for their needs or are paying too much for their policy,” he said.
“Most people don’t switch insurers either because of inertia or because they don’t think they can. There are some coverage restrictions if you have a pre-existing medical condition. But you might still be in too expensive a plan.”
Goode believes savings of €400 or €500 a year is achievable for most families and individuals on higher plans who undertake a review, with or without switching providers.
With house and motor premiums on the rise, and the extra one per cent insurance levy a non-life insurance a similar review should be a priority. Use the services of a good, non-life broker.
Savings: Everyone should aim to have three to six months worth of savings immediately to hand and to secure the safest longer depository for the rest of their cash.
The return is important too, especially now that DIRT has gone up to 25 per cent, but chasing yield is a risky business if you leave all your funds in higher paying accounts in highly indebted banks.
The risk of higher inflation going forward is increasing with every extra bout of “quantitative easing” that takes place. Your deposit return will eventually go up too, but so will prices.
Avoid falling into this potential savings trap by shifting a portion of your cash into tangible assets with intrinsic value like gold, say the Dublin gold bullion providers Gold and Silver Investments (see www.gold.ie).
Precious metals, like other commodities (oil, foodstuffs like grain, water), arable land, etc., are assets that may go up and down in price but will not disappear overnight. Gold and land being the only two assets that cannot totally disappear.
The price of gold has recently come off its latest $1,000 a dollar an ounce high and at time of writing was $880 an ounce as stock markets react to the “glimmers of hope” speech by President Obama.
Mark O’Bryne at Gold Investments is having none of it. “The fundamentals of the US economy remain very weak, despite the recent strength of the dollar and increasing risk appetite,” he said.
In the short term, gold prices may fall to about $850 an ounce – but according to Mr O’Byrne, gold remains “the best insurance” against the devaluation of paper currencies when the inflating of the global money supply eventually spills into the consumer price market.
Pensions and investments: Eddie Hobbs (www.eddiehobbs.com) is Ireland’s best-known financial commentator and advisor.
He sends regular financial updates and investment recommendations to his clients and in recent years this has included a strong recommendation to invest in oil and renewable energy shares and funds.
He warns that the next business cycle, once the deflationary one is finished, “is almost certainly going to be double inflationary, first from the increase in the money supply and secondly from a return to the commodity bull market.
“When the cash dam cracks, the uplift, as ever, will catch sideline investors sitting on cash piles as prices quickly move forward. If you haven’t already done so you should consider new investments in energy and gold.”
His three favourite energy fund picks are Eagle Star’s Global Commodities Fund, the New Ireland Innovator Fund and JP Morgan’s Global Natural Resources Fund.
Similar funds to these can also be accessed through RaboDirect’s investments where the buy and sell charges are relatively low compared to the life assurers and fund details are very transparent.
* Jill Kerby welcomes reader’s letters. Please write to her via Jill Kerby, The Munster Express, 37, The Quay, Waterford or via email at firstname.lastname@example.org