Oran Hall|The Issues of 2020
The issues of 2020, based on the questions raised by my readers, do not differ significantly from those raised in 2019. Perhaps it will be some time before a significant dent will be made as people become more financially literate and more focused on realising their goals.
Home ownership continues to be a major goal of many people and the National Housing Trust (NHT) seems to be where they pin their hopes to secure funding to realise that meaningful dream. No surprise.
The NHT provides relatively cheap funding to build on own land, to buy on the open market, to make home improvement and to own homes it develops. It facilitates joint mortgages with participating mortgage-lending institutions and allows for contributors to come together to access more funds. These are just some of the facilities it offers to its contributors who are in good standing.
On the other hand, although it has facilities to help contributors who are in the lower income levels, many still see owning a home beyond their reach. It is clear to me that Jamaicans love to own their own place.
While home ownership contributes to the increase of net worth, many have come to learn the hard way that that net worth can decline sharply. A primary reason for this is debt. Debt wisely used can cause net worth to increase, but poorly used may reduce or even eliminate net worth.
Credit card is one of the main means by which many have come upon hard times. Young adults among my readers are the people who seem to be most affected, gladly accepting the offers of cards from the financial institutions and spending with reckless abandon without considering from whence the bills are to be paid.
It is not unusual for readers to acknowledge that they did not fully understand what they were doing when they were buying courtesy of the credit card. Here is one area where there has to be discipline in spending and where spenders must recognise early that trouble is brewing rather than wait to the point where action is taken by the financial institution which issues the credit card before seeking help.
It is encouraging that more people, particularly young adults, are taking more interest in investments. The fall in interest rates, the performance of the stock market (notwithstanding the cooling down of recent months) and the floating of new issues as the financial market develops are largely responsible for this.
The growing recognition of the need to protect purchasing power in the face of inflation is also responsible for the attention being paid to the stock market. What is required is patience. Many investors, the new and young more so, to a great degree, expect great returns in a short time.
Some investors also need to take time to learn about the market, including the instruments, and how prices are determined.
Readers are showing that they are interested in having a good life in retirement. They want a life of independence, being able to fund their lifestyle from their own resources, such as their savings and investments and their pension, but there are still few people who have formal pension arrangements in place.
Even in the absence of employer-sponsored pension arrangements, there is a facility for the employed to contribute to a formal pension arrangement, the approved retirement scheme. Contributors, like those who contribute to the employer-sponsored plans, receive favourable tax treatment on their contributions and the income earned on them when they are invested.
Although contributors incur management fees on such funds, a well-managed fund should help the contributor derive such good returns, and the fees should pale in comparison over the long term.
Some people have sought help upon realising that retirement is just around the corner and they are not ready financially, a situation which brings its own stress and misery. The earlier the preparation for retirement starts the better, but it is also better to be late in starting than not starting to prepare at all.
There is also a need for serious estate planning. I cannot promise it will solve the ‘dead lef’ issues, but it should help to reduce the controversies which arise after, and sometimes before, the death of family members. Dying intestate causes too many problems for those left behind. Families need to keep more in touch and legal guidance should be sought before problems arise.
As we approach the end of another year, I urge you all to reflect on what you want to achieve and where you are. Refocus if that is necessary, but never give up. Keep safe in this season when many drop their guards, and may 2021 bring you the success and satisfaction you deserve.
- Oran A. Hall, the principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel. Email email@example.com