Money Matters

It’s crazy!!! It’s insane!!!  People are spending as if there is no tomorrow. As if there is no responsibility for their actions. As if someone from somewhere will come in and bail them out. Right here in Northboro, Fitchburg, and the Newton area. All over our area of Central and Metro West Massachusetts.

The handwriting is on the wall. Very soon the piper will have to be paid. The crash is coming! Soon. What other warnings would you like to get YOUR serious attention?!?!!

Over the last several years, my articles have strongly suggested to get your financial house in order. Prepare for the bad times as well as the good times. First things first by building a strong financial foundation. The same old no-glamour, conservative, live-within-your-means basics. Be debt-free. Maintain a 6-months cash reserve. Have your insurances in order. Complete your estate planning and/or update it. Those are the age-old basics. THEN the fun-things like investments. NOT the other way around.

It is very rare when I take on a new referral or client from poverty status to multi-millionaire that they have practiced this common professional advice. They are not alone. It seems no matter where you live, people have debts up to and beyond the limits. They have no cash reserve or use their credit cards as their cash reserve. Their insurances are not in order and their hard-earned money is gambled away in the stock market. Or, as we’ve seen this past year in too many instances, thrown away. This tells me they do not know what they are doing financially!!! Unfortunately, they have been sucked in, unknowingly, by the greed on Wall Street and/or the ads telling them to buy this product or that service. Well, guess what? If you won’t listen one way, the time is just about here to get your attention a different way.

Six months. Nine months. Maybe sooner or maybe a little later. But personally, I doubt we’ll have to wait that long. This is speculation as to when. However, what I see are major signs for a super duper attention-getting "downturn", or a major recession, if not a crash similar to 1929 to 1932. Others are now finally joining me in this observation.

Look around you. Everywhere. You are not blind or are you? Blind to sound finances, perhaps. In California, as the lights have been going out, the utilities are basically bankrupt with huge loans and bonds outstanding. Who holds those debts? Who holds the massive debts of the numerous insolvent dot.coms? Large and small banks and credit establishments do, as well as many investment funds which are also owned by many other companies. And who owns those investment funds and the stocks and bonds of those companies who own those bankrupt utilities, the dot.coms and those banks with the un-receivable loans? That’s right - YOU probably do. Eighty percent of Americans now own investments and they are all inter-twined so that when one sector falters, others feel it. The US is also affected by the financially-troubled, and in some cases deep in crisis-mode Japanese, Indonesian and other foreign economies.

There is more credit available now than is possible to be paid on. And the government is no better with their "creative accounting". Recently in a newsletter I sent out, I indicated at least one professional publication alerted us financial advisors to the fact the huge credit bubble has started to pop. Many large, medium and small companies, as well as lots of the start-up dot.coms are not able to pay their debts. All over the country. We’ve started hearing it more out on the west coast, but it is local as well. The ripple effect has started. My guess is that we in Central and Metro West Massachusetts should feel it "big-time" probably by this summer or fall, if not sooner. When it hits, events will happen quickly. Look at the consumer confidence level dive in the last two weeks of December and since.

Also, the stock market is grossly over valued with many CEOs and insiders selling their shares quickly knowing the cart-before-the-horse insanity can’t continue. This is easily verified as the "insiders" have to document their actions to the SEC. Everyday people and a good possibility - you, have been chasing "greed" in a ponzi-scheme with industry advising to "keep investing, you can’t lose". Well this past year, many have started to realize they can. Look at your own portfolio. Look at the conservative bell-weathers like AT&T, IBM, Chrysler, Home Depot, Xerox, Dupont, JC Penny, and many other newer players.

And now, many have changed their approach to "hang in there." There are those that inappropriately take advantage of the greed for profits NOW mentality vs. promote the more "old-fashioned" conservative approach with the appropriately delayed gratification. They are now shifting to find ways to make it seem palatable to continue sucking even more money out of you. Month after month. If your financial house were in order, that would be different. You could afford the fluctuations and losses. However, if your house isn’t set, then investing in the stock market is not yet appropriate. Real simple.

Based on what I have experienced with referrals, clients, people on our local streets, the internet, as well as professional publications, I believe most people are inappropriately tossing their money into the trash can with nothing to fall back on when the market takes another major "correction" in the very near future. That is my opinion. And I’m no longer alone.

Look at other signs as well. Look at all of the shockingly sudden layoffs, down-sizing, right-sizing, and/or closed doors. The economy has turned and has been slowing down for about a year now. It is ready for a nose-dive like the consumer confidence. If you look, you can see several visible signs of this.

There’s more. Lot’s more. But the space is not available in this article of warning.

Bottom line - I strongly urge you to seriously consider YOUR financial situation and, if necessary, change it NOW! I realize I won’t be liked by investment professionals (and I am one of those myself), but are YOU living beyond your means? Is your house in order for the possible crash? Are you completely debt-free? Do you have a 6-months cash reserve of liquid-cash? Are your insurances in order? Is your estate plan done? If not, you should seriously consider stopping ALL of your investments including your 401k plan. At least temporarily until your foundation is in order. Later you can return to them. You don’t have much time. Will you heed this urgent warning?

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Gary F. Restall of AGS FINANCIAL SERVICES is an independent Registered Financial Planner, Registered Investment Advisor, Insurance Broker, and Long-Term Care Consultant. His company is centrally located in Northboro and can be reached for additional questions. You may also visit his educational website www.agsfinancialservices.com.

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