To manage money is easy when there is no money. Subject to availability of funds there is a desire to keep and increase it. Or to spend on something “big and bright” that will please you for many years. But to realize this wish every year is becoming increasingly difficult. Imports more expensive, while the ruble depreciates, rates on deposits is low everywhere (except for any “leftist” banks, which at any moment can cease to exist along with your money), indexation has not kept pace with inflation, “bubbles” investment burst one after another — yesterday was profitable in something to invest the money, and today that “something” is not worth a penny. Against this background, in Russia on the example of the West (where after the “great recession” of 2008-2009 is also in all growth there is a problem in what to invest money) multiply a variety of consulting firms, some of whom are legitimate financial experts, and lots of crooks of all stripes. Many Russians, knowing that they are misled all: the government, banks, employers and financial wise men consultants — prefer nothing to delay and will not invest, and spend all the remainder that the money was at least some, albeit short-lived, but the benefits.
Debts become “civil valor”
Today it is not so much that someone — for example, the Bank used your money in their pockets, giving you a percentage, but about the opposite pattern: you use other people’s money (also at interest, of course) to create for themselves the desired quality of life. In the modern world a huge number of people have no money, but at the same time as if they are there — other people’s borrowed.
Today the outstanding loans are about 60% of Russians. Overdue over 90 days debts totaling more than 1 trillion rubles “hang” around 7.5 million people. Banks are attracted to extortion debt collection firms. Collectors are often aggressive, crossing the limits of law. But our people are not timid — life with unpaid debts is gradually becoming the norm. By the way, are not only physical persons but also legal entities. As he wrote recently, “MK”, the total wage arrears in Russia is 3.8 billion rubles. General corporate debt of Russian companies — a much more substantial amount: about 630 billion U.S. dollars.
In the debt sphere, Russia seems to be trying to “catch up and overtake America”, where debt has long been not considered as something reprehensible — on the contrary, it is a kind of “civic virtue”. If you’re in debt as in silks, but the monthly pay debts little by little, you dear man, you have a great credit rating, may take…
The “great recession” that broke out in late 2007, a direct result of the fact that millions of people lived beyond their means, seeking for a beautiful life. Demand creates offer, and financiers vtyuhivali all who can and can not, loans with rewards. Enough to see the stats of a single decade — the 1990s: the income of the US population has grown by about 20%, and the debt nearly three times. If in 1990 the average family debt on credit cards was about $3000 dollars by the year 2000 it exceeded $8000. While personal savings over the same period fell from 11% in real income to minus 0.1%.
Who depends on whom?
In America there is a saying: if you owe the Bank a thousand dollars, you depend on the Bank, and if a million — the Bank depends on you. Many savvy individuals have applied this rule, even on a more modest scale. Ran into memory picture that I watched ten years ago: Haitian students of new York College boast to each other “card” debt: “I Have on credit cards more than 15 thousand debt!” — “I have 20 thousand!”
I have repeatedly witnessed how some of my American acquaintances who live by the principle “let the lender worry”, answered phone calls loan companies and collectors, trying to knock them off. They methodically and patiently sent… you know where, referring to his inability to jump higher… you know what. And the “legitimacy” of the actions of such debtors in America every hour confirms commercial is muddy firms: “Your right is not to return all your debt, though credit card companies inspire you to do otherwise. Give us a call and we’ll help you”. And it will help — for a price.
Half a million people in the United States each year use the procedure of personal bankruptcy, which is debited more or less than their debts — sometimes even all. Credit card companies, banks realize that less is better than nothing, and allow malicious debtors to pay cents for each full dollar spent trying to “be the Joneses”. The elderly often gain a bunch of debt and go into another world, leaving creditors with only one option — to write off losses as non-returnable. And their children and grandchildren? The son of the father is not responsible.
What to do with the money?
But let’s say that you are a normal person who wants something to invest your money so at least they are not depreciated. What?
Financial guru, sharing with the laity of his wisdom, first of all talk about diversification — not necessary, they say, to put all your eggs in one basket. Action — not one, but several companies; bonds (bonds) — also different issuers; individual retirement accounts that in America you can’t touch until 59 ½ years or a fine; life insurance policies; gold, silver, precious stones; if the currency is too different countries… Wealthy people invest in works of art, collectible cars and, of course, real estate.
Normal Bank account today “no roll” because of meager cent even on term deposits, Western consumers of banking services in Russian interest rates — 5%, 6%, etc. — seem unusually generous. However, those who are envious of the Russians, do not consider that inflation in the US does not hold up to 2% in Switzerland this year will be generally negative (-0,1%), and in Russia, according to the optimistic forecast of the Central Bank, — 9%. (The Finance Ministry, however, promises even less, 6-7%, but it’s hard to believe.)
Reputable financial Internet resource Bankrate.com aimed to find out: what kind of investment I think the best US residents? In July of this year, he conducted a survey which showed that most of the respondents expressed a preference for the purchase of real estate. In second place was “cash investments”, i.e., Bank term deposits and similar instruments. And only on the third position came the securities associated with risk, but is theoretically able to bring a high return. (Once they had the practical ability, but it seems that those days are gone.)
This alignment of investor preferences, the experts explain the severe consequences of the financial crises in 2000 and 2008, when many trillions of dollars of personal savings invested in securities, literally flew out the window. Real estate is perceived as something stable, not ready to turn into smoke if you experience another financial fire. Another reliable narrow-minded view, the alternative is cash in the pod, under the mattress or in the form of those “cash investment”, which is essentially the same. After the crisis of 2008-2009, the US government raised state Bank Deposit insurance from 100 to 250 thousand dollars. So, money in the Bank will be as a whole, like under the pillow (although the fat from them about the same — almost zero).
Recall that Russian depositors receive when the Bank suddenly will burn a maximum of 1.4 million rubles (just over $21 000) for all accounts at one Bank. Insurance payments on Deposit in one Bank do not affect the amount of compensation in case of default of another Bank where the money keeps the same client.
The real estate investment? Not always
With Bank deposits the egg capsules and mattresses, all more or less clear. But real estate is not. I am surprised at the faith of millions of people in the reliability of Riel-estate. Very quickly everyone has forgotten that the “great recession” began with the real estate market: from there the crisis spread to the entire financial sector and then on the real economy. The United States has forgotten about the forced auctions of seized banks, private homes, whole areas consisting of lifeless high-rise buildings in Florida, California, Nevada and other States. And in Russia, time after time forget about to throw the shareholders and of “double devaluation” of the real estate in ruble terms as a result of poor market conditions and foreign currency due to the weakness of the ruble.
Enthusiasts Riel-estate, you are wrong! The warning comes from the mouth of the chief specialist of real estate — Robert Shiller, the man after whom is named the Index Case Schiller, the main indicator of the market condition Riel-estate. Yale University Professor and Nobel laureate in Economics, indicates that in the century from 1915 to 2015 at home in America grew on average only 1.8 times, i.e. 80%. For comparison, the gross domestic product of the United States since 1929 (that was the first measurements of GDP) to 2015 increased 15.5 times, or 1450%. Schiller explains that the long-term dynamics of housing prices strictly depends on supply and demand: miracles do not happen, the market quickly “ustakanilos” any price excesses: “When prices rise, companies are building more houses on the market there is excess supply, the prices fall”.
Does this mean that you cannot earn on the buying and selling of houses or flats? No. But count on “fat in any case” you can’t. And one more thing. In America courses Riel-estate future agents real estate first told that your housing is your housing, but in no way investment. Another thing — if you already have a house and you bought another for delivery to residents to cut coupons from it: a second home — investment (which again can be recouped or not recouped).
Own housing is that you will always pay, even after full payment of the mortgage loan. The tax on a house with a yard in a nice suburban areas of the United States is up to $20 000 per year or more. In addition, you’ll be buying insurance on the liability of the landlord will insure the property, etc.; you will have to pay for the repair and overhaul of your property, each milled on the property tree, for each repaired water faucet and much more, what you don’t know living in rented apartments.
If you want to make money in real estate, handing in hiring you own the premises, please note: the role of a landlord involves responsibilities, costs and risks. You may find it extremely difficult to evict problem tenants. You have to constantly listen to complaints, requests and wishes of tenants and at least partially satisfy them, spending their time and money. Clip coupons without effort, risk and issues — an impossible dream.
However, this applies to all types of investments. With the exception of those which are not producing fat, and sneaked it past the cashier.