Wealth management on a tight budget

It’s a given that the wealthy have more options to consider when it comes to growing and protecting their wealth. But that is not an excuse for those of us with limited resources to do nothing.

1. Get out of debt. Paying off your debts is a form of savings, and in a deflationary scenario, debt is a killer.

2. 6 to 12 months of expenses in cash. Calculate how much you will need on a monthly basis to pay all bills and living expenses. Have a kitty for that in cash. Do not dip into this kitty for any reason that is not an emergency, and if you do, top it back again as soon as you can.

3. Even if all you have left after doing the above is just RM 1000 in excess cash, convert it into either gold or silver. The foundation of your wealth must always be built upon a 7 – 15% base of noble metals. There is a premium when you purchase investment quality Gold and Silver (coins, bullion, bars), so it will be cheaper and in some ways more prudent to substitute jewellery for coins. The easiest ways to do this will be through Ebay for silver, which you can sometimes get at no premium to spot market prices, and buying used jewellery from pawn shops, as you will be paying only for the gold content and not for the workmanship. I have also seen silver jewellery being sold at a discount in shopping malls , so always be on the lookout for a bargain. Store in a secure location, don’t walk around with them.

4. If you want a more active portfolio, and have an understanding of the underlying market, you can also opt to hold undervalued currencies which can give returns in excess of 10% p.a. with little effort. Right now the Sterling looks the best bet in the short-term. If you want to hold a currency for the long-term, the Swiss franc is the best bet as it is the only ‘major’ currency where the notes in circulation are balanced by gold reserves to nearly 100%. It is also the darling of the wealthy in times of crisis, and has a proactive citizenry who do not let the Swiss Central Bank get away with any hanky panky.

5. Do not, in any way, shape or form, follow the herd. By this I mean do not jump into whatever asset class the general public is flying to at any point in time. In Malaysia right now, real estate is the current darling. This is driven by credit (mortgages) and while valuations can still go up, a double dip which looks more and more likely in the global economy will squeeze credit, and many property ‘flippers’ who have not taken anything off the table will find themselves in the same boat as millions all over the world. The time to get into properties, just like any other asset class, is when the general public won’t touch it with a ten foot pole.

6. Read. There are tremendous changes happening right now. And knowledge will help you find ways to protect your wealth from external factors. The best website at the moment is http://www.marketoracle.co.uk/, try to read at least one article a day. Malaysians in general suffer the same mentality as others, in that they think,”it won’t happen to me”. Trust me it will.

7. Don’t panic. This ties up with being well-informed. Expect that change will happen, but do not panic when it does. Every right action you take today will show its true results at some point in the future.

8. I am truly sorry that the best options out there are beyond the reach of us normal folk, but that is the way things are. The world is not fair, but that is not a reason to just roll over and play dead.

Good luck and God Bless.

Jeevindra Kumar