IT ALL MAKES PERFECT CENTS

WORDS: JILL KERBY

Some people say they’ve never been better prepared for the New Year, having cut up their credit cards and eliminated “shopping” as their family’s main past-time after TV watching; reduced their food bills by 25% (mainly by shopping at Lidl and Aldi, eating less meat, cooking more and cutting down on food waste) and hired a good broker to cut the cost of car, home, health and life insurances. Dropping the foreign holiday usually means a three or four thousand euro automatic saving too.

“This ‘thrift and frugal’ double act could catch on,” a friend of mine remarked recently. “Ending up with a 15% pay cut between us isn’t something I particularly enjoy, especially since we’re paying an extra 10% tax [between the levies and more PRSI] but you know, we managed on a lot less in days gone by.”

Mind you, a moment later, she acknowledged that low mortgage rates had insulated the family income in 2009, bluntly noting, “Of course if interest rates go up, we are probably screwed.”

Will rates go up? Undoubtedly. European exports to the US and UK are getting hammered and the question for the euro-bankers is, can the exporting super tanker shift quickly enough from western to eastern markets to offset the jobs losses and business closures that are the main consequence of the Great Recession in the rest of Europe? Higher interest rates are not only stifling export business, say commentators, but attract too much foreign money into the euro, which in turn props up the high value of the currency.

All this macro-economics, “is the latest trigger for my migraines” my sister Ann told me recently. She’s right. There’s little enough that you and I can do to influence finance ministers and their creatures who run their central banks whose policies have run the western global economy into the ground.
So let’s stick with how to position ourselves this year to at least not add to our wider personal finance headaches. .

Read more about It All Makes Perfect Sense in in the Winter '09 issue of WMB.