Monthly Archives: May 2020

Does this pandemic teach moderation?

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After more than 60 days in lockdown, we have had a long time to think about many things, including money. We’ve seen how important it is to have enough to get by. Those who lost some or all of their income had to learn how to stretch their provisions to meet their basic needs forgoing the niceties which were so taken for granted.

Peace of mind is the ultimate
When you really think about it we all just want peace of mind at the end of the day. We take comfort in the knowledge that we have enough provisions to maintain our lifestyles no matter what happens along the way. An excessive lifestyle comes at a cost, not only to attain but then maintain.It also has the trappings of taking more of your time. Time which could be spent on other aspects of living. So, contentment is found in maintaining an ordinary lifestyle not having to worry about keeping up with your financial needs. Being in a position to buy a house and a car, educate your children, and go on a holiday once in a while, all without worrying about money.
Aim for something realistic
So, it becomes more important to clearly define what your lifestyle objectives are and then start to save towards them. It takes a hard and realistic conversation with yourself to discover what you really want and then why you want them. The higher you aim the more you will have to provide for overtime. So, the answers will be found in moderation on the size of the house and car even the type of school for the kids. Things you can comfortably afford within your means which leads to enjoying yourself and sleeping well at night.
Enough versus Excess
Catering for a moderate lifestyle is more realistic and easier to cope with as it is probably far less stressful and demanding than providing for an elevated one. It boils down to providing ENOUGH to enjoy your life along the way rather than giving up so much more of yourself to enjoy EXCESS somewhere in the future.

After Lock Down ….rent rather than buy a property?

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The traditional approach to sound financial planning is to buy a property as soon as you can instead of renting. The rationale is that you will be better off paying for your property as soon as you can with the rent you are paying to your landlord.

However, the COVID-19 pandemic has pushed economies into deep recession providing strong reasons to rent a property instead of buying.

Cash fund first
If you are starting a new job, or business, or if you are a contractor or freelancer you need to be confident that you can comfortably generate consistent income. Buying a property binds you to a long-term financial commitment which you will need to cover over the long term. You should aim to settle down first and get a good fix on your income over a period of time.
You need the peace of mind that you can cover your monthly expenses for at least 6 months. So step one in your planning is to save into a cash account until you can comfortably cover your living expenses for 6 months before even considering buying.

Property binds you
If you buy a property you immediately bind yourself to a location. If you find a new contract on the other side of the city or country for that matter, you will then be burdened with the extra cost of commuting further or relocating, Renting will allow you to consider options of moving closer to where your work takes you.
Cash is king
Whilst you are a tenant the risk and costs associated with owning a property belong to the owner. Whilst renting you are freed up to save as much cash as possible for the eventuality of buying your own home one day when you are well settled in your career and have saved a comfortable cash fund.
Currently, the property market is pretty flat and there is no compelling reason in the foreseeable future to rush in and buy. Although interest rates have fallen sharply as a result of THE COVID-19 pandemic being tempted into what appears to be an affordable property at this stage is a risk. Property values after the lockdown will probably reset on the downside. Patiently waiting out the bottom of the property market whilst saving your cash will be a smarter strategy than rushing in too quickly. The economy has been severely damaged which will affect all asset classes for a long while, including property.