25 July 2018 FT — Articles to Read

25 July 2018


Question: According to US News & World Report, what are 9 habits that can get you out of a deep debt hole?


Venezuela heading for 1,000,000% inflation warns IMF – Pg. 4

          The figure would compare with levels seen in the Weimar Republic in Germany in the 1920s and Zimbabwe a decade ago, and was the likely outcome if Venezuela continued to pring bank notes in response to its economic crisis,…

          …expected the economy to contract 18% this year – the third consecutive year of double-digit contractions – and that the worsening social crisis “will lead to intensifying spillover effects on neighbouring countries”, which have already taken in thousands of poor Venezulean immigrants

          Prices have consistently risen at more than 50% per month – usually considered the threshold for hyperinflation

          If the IMF’s prediction proves correct, it will put Venezuela on par with the Weimar Republic, where people carried virtually worthless bank notes around in wheelbarrows.  Thankfully for Venezuelans, they can generally use debt cards to make purchases, even for small items

          Most cases of hyperinflation do not last long, although in Greece during the second world war and in Nicaragua during the late 1980s, prices rose by more than 50% per month for several years

          At the heart of Venezuela’s economic collapse lies a dramatic fall in oil production, which accounts for virtually all the country’s export revenue

          Output has more than halved since the start of the century and is at its lowest level for decades


Its time for millennials to fight for our rights – Pg. 9

          …people born between 1981 and 1996 make up the generation that shrugs “yolo” as they hop in an Uber instead of the bus, sip their artisanal gin and plan their next mini-break

          On the other, they are the generation that came of age in the middle of the global financial crisis: they drink less, smoke less and study harder.  They cling to job security and worry that they will never own homes

          Millennials say: we are paying a price for a global crash we did not cause

          Boomers say: it’s hard to take you seriously when you’re frittering away your salary on smashed avocado on toast (Prof Note: I was in a Silver Diner this week and they had Avocado on toast on the menu)

          …young people are on average more austere, not less

          In 2001, 25- to 34-year-olds spent roughly the same amount of money as 55- to 64-year-olds on goods and services other than housing.  Now, the younger group spends 15% less

          …the vital building blocks of a life – housing and education – have become vastly more expensive

          …millennials in the UK are half as likely to own a home at age 30 as baby boomers were

          Home ownership rates for young people have been declining for decades as house prices have detached from incomes

          …in an effort to make the financial system safer, regulators limited how much banks could lend to housebuyers.  Suddenly, many young people needed far bigger deposits to buy their first home, effectively locking them out of the market

          It would be better to build more houses in areas of high demand, including more social housing; take measures to boost productivity so incomes rise; and rebalance the rights of tenants versus landlords to make the UK more like Germany.  There, the alternative to home ownership is not poor quality housing with no security


Answer: (1) Learn how to shift your spending habits (Prof Note: Rarely do I get a drink anymore at restaurants.  $3 for a coke when a 1 litre is 99 cents…no thank you!); (2) Set up an automatic savings account (Prof Note: Forget the auto “anything”…do it manually.  Pay yourself first!); (3) Have an emergency fund (Prof Note: ONLY for familial health issues.  You should have a standard side hustle!); (4) Don’t automatically use an unexpected windfall to pay off your debt (Prof Note: Absolutely true BUT if you have no discipline you may want to reconsider); (5) Pay off smaller debts first (Prof Note: NOOOOO!!!  Pay off the high-interest debts first!); (6) Pay your debts on time (Prof Note: Absolutely!!!); (7) Use cash as much as possible (Prof Note: NOOOOO…then you loose points on credit cards!  Learn credit card discipline and be responsible!  ORRRRRR…as soon as you make a credit card purchase go to the smart phone and transfer from checking to the credit card); (8) Measure your debt (Prof Note: One cannot eliminate what one cannot quantify!); (9) Dine in (Prof Note: There is always room at my table for anyone on the list-serve.  On Nevis, the main is served at 1:00pm promptly!  Olive always makes too much as she never wants me to go hungry! J); (10) Continually monitor your budget (Prof Note: Yes, this is 10 but the question had “9”…I noticed this as well and double checked.  As for budget, stay true to your budget.)