Mortgage Risk – What You Should Be Aware Of

Mortgage Risk Management

When taking out a mortgage it is important to be aware of the way that it will affect your future right from the start, in order to avoid messy situations later on. A mortgage is one of the most binding commitments you can make financially, as it ties you to a debt that will be with you for the foreseeable future, and maintaining payments to it is a non-negotiable part of your daily life for the period of the loan. Getting a mortgage that will suit your personal situation is essential because if you fail to make payments you risk losing your home and putting yourself in a situation where it will be impossible to get credit for the next several years.

It is genuinely of the utmost importance that you are aware from day one that these risks are real and serious. Although there are drawbacks to poor credit conduct on any kind of borrowing, the drawbacks on unsecured lending are considerably less. If you fail to meet the payments on a credit card then the card will be blocked and you will not be able to use it. This is not an ideal situation, but as long as you can make reduced payments for a specified period you will at least be able to maintain your way of life to a certain extent. The risks that come with a mortgage are proportionately increased by the fact that you have secured the loan against a property where you are living, and failure to meet those payments will see you evicted from your home if you cannot come to some kind of negotiated settlement.

In order to manage this risk, it is important to consider right from the start that a situation may arise where your income from work will be reduced. Do you have other sources of income that will allow you to at least maintain your mortgage payments? Will a claim on the insurance enable you to keep the account ticking over until your situation improves? Are you going to be eligible to claim on the insurance at all – this is dependent on what your current health and work situations are – or will you be turned down and need to rely on another source of income?

There are many questions that you need to ask yourself, and getting satisfactory answers in your mind for each of them is an absolute essential if you are going to successfully manage a mortgage account. If you are confident of living up to whatever is required of you, then you can be happy in the knowledge that one day, the house that currently belongs partly to the bank will be yours 100%. A mortgage is something that requires a lot of maturity and financial common sense to give you the best possible chance of owning your property and maybe one day realizing a profit on it. You don’t want to be paying off debt after you retire, so keep all of your most important questions in mind when looking for the right mortgage for you.

Productivity and Feeling Happy

Feeling Good Increases Productivity

 Feeling good has lot to do with how productive we are. When you feel good and happy, your energy level gets a boost and increases productivity. Difficult tasks seem less difficult and endless problems resolve faster than you thought it would take initially. Our body releases several hormones when we feel good, such as Oxytocin and Serotonin, and we feel calm, cheerful, and in control – helping us to concentrate better with an increased level of productivity.

However, due to stress, day-to-day distractions, and various other factors, it may not always be possible to feel good and happy. I will go over some simple things you can do to overcome the negatives that prohibit you from feeling good and being happy.

Empty Your Mind - It’s hard to feel good with a clogged mind. A tangled and overloaded mind can’t make you happy. Here is more on How to empty your mind. 

Confidence - Confidence is one of the most important things you will need to be happy. When you are confident, you can face and tackle any challenges – and that’s when you become happy. Accept your weakness and learn how to become confident.

Better Yourself - Your learning journey and efforts to make yourself better should never stop. Changing yourself to a better person is not easy. But once you start the journey, you will be self contained and filled with joy and happiness.

Embrace Simplicity - Find happiness in simple things, live with less, and help others. You don’t need money to live a rich life. A rich life is living with minimal possessions and helping those who are in need. The good feeling you will get from doing so is something that money will not be able to buy.

Feeling good depends on various factors and most of these factors can be learned and practised. As you learn and start practising these factors, you will notice your positivity and good feeling will go up, along with your productivity.

China and India In The Next 20 Years

China or India – Or China AND India?

There is an economic miracle of sorts taking place in today’s global economy, and it is coming as no shock to the people who have been watching the global picture develop these last ten years. However unsurprising it is in general, there will be people who, although they knew it was coming, may not have expected to see it happen in their lifetime. The economic miracle is taking place in Asia. That may not be terribly specific, given the size of the continent itself (the world’s largest continent), so to specify: Where the miracle is really happening is in two particular countries: China and India.

There was always the potential for this to happen, given the raw data that is available to anyone. China and India are two of the world’s largest countries by size, and easily the two largest by population with almost 40% of the world’s people living between them. This mix of landmass and population combined with the resultant ability to call on raw materials gives both China and India the opportunity to maximize any opportunity and become global powerhouses. But this dimensional magnitude has in both cases been both a blessing and a curse. The spread of both countries, allied to China’s historic insularity and India’s numerous dividing factors, has held both back from becoming quite as successful as they might have hoped.

As the 21st century really gets going, with its first decade almost inked into the history books, both China and India look ready to make their big impact on the world’s economy. Both countries are expected to have a big century, and by the middle of this one will, on any reading of the situation, have economies which outstrip the current largest in the world, that of America. China will get there first – by 2030 on a conservative estimate, followed by India within the next 20 years. Will America and others be able to catch up in the mean time and overturn the predictions? It’s hard to say, but the economy does sometimes throw up unexpected situations.

Another question which might arise is that of whether competition between India and China will be a stalling factor in either country’s growth. This is not expected to be the case, as the economic strengths of both countries complement each other quite well, and may in fact enable mutual growth in countries which are showing greater expansion in their economies than any other major nation.

China is endlessly improving on a mass-manufacturing front, and expanding its range of industrial plants in order to cement its role as a world leader in that respect. India is marking its territory as a master of precision manufacturing and software innovation. The two working together will be able to supply the world with much of what it wants without stepping on each other’s toes. It is impressive to see how quickly both have developed, and interesting to wait and see what is next from these two future superpowers.

How to Make Decisions

Steps to Make Decisions

We make decisions from the moment we wake up till we go to bed on a daily basis. Some of the decisions we make intuitively and some of the decisions we make by giving it a lot of thinking and consideration. Decisions have a huge impact on our lives. Some of the decisions we take can make the difference between being alive and dead within seconds (such as while driving) and some of the decisions can impact our life immensely after 10-20 years (such as investing in the right type of assets or getting married to the right person). Who we are today is based on the result of the decisions we made in the past. Who we will become tomorrow or in the future will be the result of the decisions we make now and in the future. It is important throughout our lives to make the correct decisions to increase our success rate of living a better life.

Decisions can be roughly categorized in two classes, regardless what sorts of decisions they are: Calculated decisions and non-calculated decisions. Let’s take talk about these two a little bit.

Non-Calculated Decisions – Emotional decisions, intuitive decisions, decisions based on past experience, and so on are all examples of non-calculated decisions. Most of the decisions we take daily are non-calculated decisions and we don’t think or spend much time on these types of decisions. Although non-calculated decisions seem to be not that important and we are in habit to decide on it fast, making the wrong non-calculated decision can ruin our life, just like calculated decisions.

Calculated Decisions – These are the decisions that are systematic, analytical, logical, and calculative. We take a long approach and do a lot of research and follow a step-by-step procedure to come to a conclusion. Most of the life’s big decisions fall into this class. Some examples are: Who should I marry? Should I quit my current job to accept another offer? Where should I retire? Should I be an entrepreneur or a 9-5 employee for life?

Now, is there any way to make a better decision? While there may not be a single, foolproof approach to make better decisions, here are some steps to consider in making good decisions.

1. Identify your decision or the purpose of the decision

2. Identify your objectives or what you are expecting from the outcome of this decision.

3. List all the possible outcomes that can happen due to this decision.

4. See yourself to the extent of each of these outcomes. Look at all the pros and cons that will come due to this decision.  Imagine yourself living with one or several of the outcomes that will happen due to your decision. You can add your past experience, knowledge, intuition, calculation, analysis, etc. to seeing yourself how things will be, how comfortable and happy you will be, and how better it will be for your future because of this decision.

5. Make the decision that you like best in number 4.

Sometimes decision making can be really tough regardless of how much thinking you put into it. Research has shown that it is incorrect to think that calculated decisions are always better than instant, snap decisions. There will be times in your life when you will need to make decisions beyond logic and calculation – based on your instincts or emotion. This is just fine. We humans are emotionally driven quite often and following logic or calculation will not simply make sense during those times. If you need to make a decision, whether it’s a calculated or an emotional one, make a solid decision, regardless of whether it makes sense to others or not. Stick to your concrete decision to the end – and if it happens to be a wrong decision, have no regrets. Just learn from it and move towards the future.

Real Return Bonds (RRB) and Treasury Inflation-Protected Securities (TIPS)

Real Return Bonds And Their Place In Your Future

First Published Date : October 25, 2009 ADawnJournal.com

With governments around the world insisting that their recessions are over and that the green shoots of economic recovery are now visible, there is an increasing line of opinion holding that there is no better time than now to start investing – or to call a halt to a self-imposed period of no investment – in order to see the benefits of this recovery period for all they are worth. However, caution is also a concern for many given how recent the recession’s lowest points were. At this time, a secure investment with a reasonable return is the absolute ideal for anyone looking to secure a bit of money for the future.

When it comes to secure investment, it is tricky to be absolutely sure of getting what you need for your money. While the economic indicators show that the recession has finished to all intents and purposes, buying shares at the present time is still a little perilous, with companies still having to make cutbacks to deal with the realities of a post-recession age. A secure investment, it must be said, is also an investment which is unlikely to bring a massive pay-off. High returns are still only likely from high-risk investments.

If you are in a position where a comparatively low return for no risk sounds like a good idea, however, then your best choice may well be a real return bond (RRB). Very similar in nature to the American TIPS (Treasury Inflation-Protected Securities), the real return bond is an investment which links your savings to the rate of inflation. As well as this interest is paid on the bond to the rate of interest. Practically speaking, this means that if you buy a $1,000 bond and at the six-month mark the interest rate is 4% and inflation at 2%, the principal of your bond will rise to $1,020 and you will receive a further interest payment of $20.40. As the interest rates climb, payments will continue to accrue based on the principal of your bond.

The important thing for an investor with an RRB is to hang on to it until it matures. If you do that, the realization price is based on the interest rate at maturity while if you sell it prior to maturity you will find that the price is based on the prevailing interest rate – and may be less than you originally invested. This poses problems for some, as the typical life of an RRB is thirty years. If you have the patience to wait this out then the return at the end can be considerable – although it is possible for the RRB to return less than face value if, over the life of the bond, there has been a net deflation.

The above warnings are simply worst-case scenarios however, as the fact of the matter is that should you invest in an RRB you will most likely be in it for the long run, and there have been almost no 30-year periods which have seen a net deflation in the market.

What RRBs should guarantee you is an above face value payout on maturity. This is useful if you are looking to support a future venture. With the 30 year life of most RRBS, many people buy them in their mid-thirties as a potential cushion for their retirement. As no-one is quite far-sighted enough to predict market behavior by the year for the next three decades, there is little benefit in assuming exactly how much you will get for a matured bond after it matures, but it is enormously unlikely to be any less than its face value and, with interest and inflation behaving normally, it can be considerably more.

Buying an RRB is something worth doing if you have a pot of money for investment and are content for it not to be liquid for an extended period of time. As long as you fit these criteria, it is an excellent way to feather your nest for the future. Most usually, the face value of a new RRB is $5,000, but there are many available for a lower price. There is also nothing to stop you from holding several bonds if you have the liquidity to invest in them. If you decide to invest in a real return bond, then your first stop should be the Bank of Canada website to consult the figures there for a bond’s “real yield” and “real price”. This will enable you to calculate the amount that you will have to pay for a bond, and how much you will get on maturity if the market behaves realistically.

Once you have gleaned this information it is time to call your broker and have a conversation, asking for information pertaining to the current and potential future benefits of buying the bond that you have identified. Once you are invested, settle in to see what the market has in store for you and be conscious that this is a long game.

As mentioned at the beginning, RRBs are not dissimilar to the American TIPS. It is possible for Canadians to cut out the middleman and directly purchase a TIPS from an American broker or the US Treasury. However, unlike an RRB, a TIPS bought from the US Treasury cannot be held inside a tax-sheltered account such as an RRSP, so it makes little sense to do things this way. It makes considerably more sense to buy direct from a broker. The major substantive difference between these bonds is that TIPS are guaranteed to pay out at least face value on maturity. Additionally, the US and Canada have different tax rules and regulations, so when deciding which you should buy it is beneficial to check the market rates in both countries.

Naturally, each possibility has its advantages and disadvantages, and the two countries will often see different economic performance over the course of an economic period. Both should, however, see you with a creditable return on your investment for very little risk.