Saving Money - The Magic 20 PercentWritten by Emmanuel Mendonca
Saving money is not easy and is made more difficult if you have a short-term outlook regarding your personal finances. If, like many people, you are living from one pay cheque to next, it is difficult to put some money aside for a rainy day or for a summer holiday. But what if you were to change your financial outlook into a medium to long-term one? You might believe that you cannot afford to think ahead and make plans, but in most cases you would be wrong. Most people should be able to save some money and with some effort, maybe even as much as 20 percent of their salary each month. Income Analysis First of all it is important to have a handle on where your income is going. Unless, we are on an extremely tight budget or are very money conscious for other reasons, many of us have never really sat down and considered what our money is being spent on – we just know that by end of month, it has all gone! You will know if you are consistently spending your money on unnecessary purchases, for example. Having this knowledge equips you with control to change things a little or a lot. Saving Money Mentality Many people have never been taught to save and as children, immediately spent money they received without any forethought. You often hear people say, “Life is short, if you want something buy it now”, but thankfully for most of us life is not really so short and along way we will have to deal with both opportunities and challenges. Having some money saved will help you make most of opportunities and ride challenges.
| | Five Myths About InflationWritten by William Cate
Five Myths About Inflation By William CateA classic definition of inflation is any increase in money supply. Understanding inflation is vital to anyone seeking investment profits or attempting to build a successful company. As with most basic issues of global economy, inflation is surrounded by myths and misinformation. Myth #1 Inflation is bad for everyone. Inflation is bad for lenders. It's good for borrowers. To break even on a loan, a lender must charge sufficient interest to offset inflation and taxes on resulting interest income. For past decade, inflation has hovered around 6%/year in USA. If you assume that State and Federal taxes on interest income are 40%, lender needs a 10% interest rate to breakeven. There haven't been any relatively safe U.S. Investments paying anything near 10%/year, for over two decades. If you have a 30-year fixed mortgage at less than 6%, you are benefiting from inflation. Assuming inflation rate remains at 6%, (which is very optimistic) you are making more money on borrowed mortgage money than you would earn having deposited same amount of money into a bank savings account. America's biggest borrower is U.S. Government. The Government's plan has always been to ensure that inflation rate offsets Government's interest payments. Follow Washington's lead and be a borrower in United States. However, borrow to create income and assets, not to live good life. When people no longer accept their currency, lenders usually go bankrupt and borrowers will pay their debts with worthless paper. There are two examples in American history of loss of confidence in U.S. Dollar. After Revolutionary War, Continental Dollar was no longer accepted as currency. After Civil War, Greenback Dollar was no longer accepted as currency. Both were printed by Government to pay for a war. In both cases, dollars where bought by speculators and Government eventually redeemed them at face value. The reason that U.S. Constitution has a provision limiting currency to gold and silver is directly related to failure of Continental Dollar. The strategy that benefits from this inflation paradox is to be an American borrower of dollars to buy hard assets and a foreign investor (lender) of your investment funds. Myth #2 A gold standard would end inflation and result in a better life for all. You can't eat gold. You can't wear gold. It takes too much gold to build a house. As Art Hoppe suggested twenty years ago, chicken eggs would make a better hard currency than gold. At least you could eat your nestegg when Government scrambled economy. Western Europe had eight centuries of gold standard. From roughly 4th Century to 12th Century, everyone was on gold standard. Usury was outlawed everywhere, It was against teachings of Catholic Church. It's still against teachings of Islam. Money was limited to gold, silver and land. This period in Western History is called "the Dark Ages" for good reason. After WWI, Winston Churchill tried to move Great Britain back onto a modified gold standard. Not only did his effort fail; it was among secondary causes of Great Depression in England. Fiat money is intrinsically worthless. Gold is intrinsically worthless. The advantage to paper currency and credit is that it can be expanded at any rate and thus create perceived wealth. This perceived wealth could be used to create products that create more jobs and more perceived wealth. The goal is to ensure that those hurt by expanding money supply aren't aware of their lending mistakes. As long as everyone agrees that paper money has value, system works better than people agreeing that gold has value.
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