Donald Trump’s policies are providing a stronger US economy at the moment with low unemployment and tax cuts leading increased personal income. The stock market is also on a wild ride, racing to record highs on a regular basis which Donald Trump loves telling us about.  These factors are increasing pressure on inflation notwithstanding the demographic headwinds explained by Harry Dent demographics.

Wall Street’s banks have forecast the Federal Reserve will raise borrowing costs three times in 2018. The new Federal Reserve chairman, Jerome Powell, sees the dangers of keeping borrowing rates too low. He is not as dovish as Janet Yellen.  Is now the time to get out of housing investments? Housing has had a good run is recent years and if you’re sitting on some decent returns it may be time to sell.

Increased borrowing costs will also adversely affect bond and stock prices. When will the pack start running for the exit? You want to be ahead of the pack when this occurs.

The US Federal Reserve raising borrowing costs also impacts other parts of the world such as Australia, Donald Trump is having an impact worldwide. Australian banks have borrowed from offshore lenders and as the facilities roll-over the lenders will require a better return. This will put pressure on the Australian banks to raise interest rates on their loans to housing investors.

Beware and good luck.

Since the initial post, interest rates have certainly increased in the United States as the Federal Reserve gradually increased the Funds rate by 0.5% to 2.25%. Further increases are to come so you must stash the cash away and be ready for the opportunities that may arise.  Your goal is to be debt free and aspire to be part of the FIRE movement, that is be Financially Independent and Retire Early.

Having a budget is the most important part of saving money. Knowing how much you are spending and what your are spending your money on is a key part of building your wealth and financial freedom.

Budgeting is more than just reducing spending but should be used to manage your money to achieve the goals that are important to you. Saving money to invest in income streams always makes sense to me. Income streams are a key component to your financial freedom.

I recently came across an application called Good Budget which I believe would be of assistance to anyone who wants to use a budget. The Good Budget application can be loaded on to your phone or tablet. The convenience of having your budget at your finger tips should not be under estimated, there is no need to keep a paper record.

There are 2 versions of the Good Budget application, the BASIC which is free and PLUS which $45 a year. The main difference is the number of expenditure categories and history maintained. Which one you go for is up to you, by having a budgeting system you will save far more than $45 per year.

Check out this review of Good Budget from Matthew R Stover.

Flipping houses is an example of where budgeting is essential to making a profit. Not only will you have an overall budget but an individual budgets for each section of the house together with a schedule of works to be completed. Good Budget is only a start which will provide you with discipline and basic tools to tackle far more complex budgets.

Check out what you can save using Amazon to purchase some of items you are thinking of buying.

Remember any savings can be directed towards building income streams which will help you set aside some money to enjoy those Summadays.

The US Federal Reserve has just lifted interest rates by 25 basis points, this is only the third time the Fed has lifted rates since the GFC. Home Loan interest rates will also start to rise as well. Investors and homes owners need to be aware this could have a dramatic impact on their wealth if this is the start of interest rate normalisation.

Interest rates have been declining for decades and few have experience in dealing with a sustained increase in rates and the impact it will have on asset values. If Donald Trump succeeds in making America great again and the American economy grows at something like 4% the Federal Reserve will have no option but to continue to normalise interest rates.

The amount of debt households are taking on around the world is staggering and any interest rate increases will impact on their lifestyle. Those with too much debt will pay a high price if they are unable to service the debt load taken on.

House prices in Sydney are out of this world with first home buyers being locked out of the market, this maybe a blessing as if you would want to take on a million dollar loan.  Every 25 basis point increase would cost an additional $208 per month in interest payments. If rates normalised by 200 basis points (That’s only 2%), the additional monthly interest would be $1,667 per month. Ouch!

Landlords who are highly leveraged would also be at risk because it would be highly unlikely they would be able to pass the additional cost of the interest rate increases to their tenants.

Try getting the same price you paid for the property if you had to sell.

Stock market investors would not be immune as their any many interest rate sensitive stocks listed on the market, many mum and dad investors would not be aware which stocks would be at risk. Find someone who can advise you on the stocks you have in your portfolio. This is especially valid if you have concentrated your investments in a small number of stocks or only one.

Again, Beware of rising interest rates.