What is really important? I think we are going to find out over the next few years. I don’t think that we have all realized that the new financial “world order” that began with the credit crisis of 2008, is going to impact all of us for a long time. My sense is that most people look at their investment statements and gain some comfort from the fact that their capital is nearing or exceeding pre-2008 levels. They give a huge sigh of relief, and get back to life as they knew it.
The next phase starts when governments withdraw the stimulus spending that has been flooding North American economies for the past three years. Total spending has been in the many hundreds of millions, likely close to a trillion dollars by the end of the day. Although businesses have felt some recovery, they are nowhere near ready to take up the slack as government funding backs out. I’m no economist, but there is no doubt in my mind that this is going to hurt, and people will lose their jobs. (google QE2 for more information on this process. QE is quantitative easing.)
So what should the ordinary person be doing in this new financial world? It’s back to the basics, folks. Live within your means, pay off debt, pay off your mortgage, and save a little regularly for retirement. Although it sounds trite, and more than a little simplistic, it’s a good start for anybody. If you can afford it, spend whatever you want, but if you have to borrow, or divert funds from your debt and mortgage reduction, choose what’s really important. Is the new car, new furniture, bigger (3-D!) TV, really important? Is it necessary to have more plastic things stuffed into cupboards already overflowing with plastic things? Do kids really need more toys, when you can barely find a path through the ones they’ve already got? I think we’ll ask ourselves these questions more and more through the coming years, and with many people already facing working beyond their expected retirement date, the question may be: more plastic stuff, or retirement?
Judy Poole is a financial advisor with Raymond James, and has spent the last 39 years involved in the financial industry. You can reach her at judy.poole@raymondjames.ca. This article is provided as a general source of information and should not be considered personal investment advice. The views expressed are those of the author and not necessarily those of Raymond James Ltd.
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