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Top 10 Ways To Improve Your Household Economics

In order to invest in gold and silver, you obviously need some money to set aside. Here is a list of Top 10 ways we believe may help you reducing risk and advancing in your household economics:

1# Analyze your own personal finances

List your sources of income and ask yourself how secure these are. Is there any possibility to increase them, or to increase the number of revenue sources? Next, list your main types of expenses and ask yourself if you could reduce or even eliminate some of these, and identify other potential expenses you might incur in the future that you do not have today (i.e. medical expenses, etc.). A simple rule: make sure to remain on the net positive side (of your income minus expenses). Today it is too easy to borrow money on your house, spend money with your credit card or to get a “Buy-now-pay-later” deal; many people systematically spend more money than they earn over a long period without realizing it. We believe the cheap and easy access to credit will soon be over. Make sure to straighten out your personal finances and set aside for savings and investments. Most people are good at paying their invoices, but have you ever tried to send yourself an invoice? If you get used to “paying yourself first”, and then buying assets*, not liabilities, you will have learned one of the biggest secrets of wealthy people.

2# Mortgage loan – Fixed vs. variable interest rate

This is an important subject for anyone about to enter the housing market or already owning a house (together with your bank!). The world economy is living an artificial situation; you might want to prepare for higher interest rates and reduced access to credit. It is difficult to time the exact moment (or event) at which the seemingly-perpetually low interest rates are going to start moving upwards, but it makes a lot of sense to consider a fixed rate for 10 – 30 years on your mortgage now. Note. Beware that the conditions for fixed interest mortgages can vary a lot from one country to another. Make contact with your bank or an independent financial adviser to learn more about what options you have.

3# Buying a house/apartment

We all need a roof over our heads, but if you are new to the housing market the feeling of entering at “peak prices” is always there. Whether the house price on your home goes up or down should not make too much difference when you finally have bought it. At the moment you enter into that deal, you just need to know whether you will be able to pay it off. Said differently, you should not enter into the deal gambling for (or depending on) the prices to continue to rise. The most important is that you understand the financial tool you decide to use when buying your house/apartment. What happens if you lose your job? What happens if the interest rates increase dramatically?

4# Credit cards

If you have more than two, cut them in half. If you have spent some of the credit on the two cards left, pay it off. Credit cards can be useful to pay, for example, for trips to include insurance, or to be used for short-term liquidity issues, but should in general be avoided.

5# Consumer loans

Same as for credit cards; get rid of them. Learn to save.

6# Savings account

It is good household economics to save money. Getting used to always put aside some of your earnings into a “high-interest” savings account is a good habit. Even if you don’t save for something specific, you will always find use for this money at a later stage. It allows you to more easily stay away from credit cards and consumer loans, and you might then be able to put some for investments; preparing for your future financial well-being and freedom. Note. We would not recommend that you keep all savings in one currency (i.e. U.S. dollar, Euro, etc.). Opening a foreign account can prove to be a useful step.

7# Stock market – individual companies vs. funds

This is a difficult subject in which to give general advice, because it really depends on which risk level you are seeking and to which extent you would like to control your investments yourself or leave it to others. In any case, we do not recommend putting all your chips into the stock market, at any time. Diversification into other assets is important.

8# Real estate

To own real estate is historically seen to be a good investment over the long term. Just be careful in regards to how you finance the deal. It is clearly an asset, but depending on how much you borrow to buy it, the asset might as well not be yours, but your bank’s!!

9# Bonds

To individually buy a bond is not for everyone. It normally requires a minimum amount which often is quite high and it also has shown to be a bit too complex for just any individual investor to enter alone. A bond (corporate or treasury) is traditionally looked upon as a good way to diversify your investment portfolio, giving a steady interest payment and a “secure” investment you will be paid back. However, beware that even on the bonds that guarantee your principal paid back (typically a governmental treasury bond), you do not know how much the currency will be worth when you are finally paid back. If you want to sell a bond before final due date, the bond value might be substantially lower (or higher) depending on which way the interest rate has gone. Gold Reference Team believes we are witness to a global bond bubble bigger than ever seen and would rather place this money into something physical. In any case, as for all other investments, do not put all your eggs into this one basket. Note. You might think that you yourself do not hold any bonds in your portfolio today. Check out your pension fund, and you might get an interesting surprise. In many cases we can choose for ourselves which types of investments and the portion of your pension fund you want in which type of investment, but few people seem to be aware of this.

10# Physical precious metals

Many professional investors recommend to always have part of your portfolio held in physical gold and silver. It is like an insurance and hedge on your other investments, and is an excellent way of preserving purchasing power over long periods of time. Gold Reference Team is very pro-physical gold and silver as a holding these days and believes it is an absolute necessity for those that want to protect themselves and prosper from current and upcoming financial crisis.

Read also our How To Buy Gold & Silver Online page.

Important last message…

How much you should invest, or what exact changes you should make to your own financial affairs, all depend upon your individual situation and should be discussed with an authorized financial adviser. However, as we further explain in our FAQ page; a financial advisor, authorized or not, will always ask you to “read” and sign disclaimers and extensive Terms & Conditions… so choose your advisor carefully. Make sure to educate yourself to a basic level of understanding before entering into any form of investment.

* Asset vs. Liability: Make sure to fully understand the difference between an asset and a liability. An asset brings money into your pocket, whereas a liability takes money out of your pocket. It is that simple. Think about it; the house in which you are living in is not an asset. Even by the time you have paid off your mortgage, you still have maintenance costs, etc. Try not paying housing taxes to your government one year, and you’ll see whose asset it really is, and who holds the liability.

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