Is Now the Right Time to Make Financial Changes?

Updated: December 15, 2017

We are about to bid farewell to 2016, and usher in a brand-new year. The year to date has been peppered with challenges and opportunities.

Commodities markets endured a beating in Q1 and Q2 of 2016, with the oil price plunging to a multi-year low at just $26 per barrel in February. Equities markets reeled, and central bank policy took center stage in the financial markets.

The European Central Bank (ECB) adopted massive QE policies to the tune of €80 billion per month. This drove the EUR/USD pair closer towards parity, but dollar weakness gave the European currency the edge for most of the year.

Geopolitical shocks rock global economy

Then the turnaround came: the Brexit referendum on June 23, 2016. The GBP plunged to a 31-year low against the greenback and fearmongers warned of the perils of leaving the single market area.

Nonetheless, the United Kingdom stands firm. The UK economy has performed surprisingly well, despite the pressures from naysayers. Bank of England Governor, Mark Carney, quickly assuaged investors by adopting monetary policy conducive to economic growth in the UK.

The Fed moved in the opposite direction, thereby weakening the GBP/USD pair. A rate hike on Wednesday, 14 December 2016 was penciled in at a 95% probability, with 2 more rate hikes expected in 2017.

Indices are roaring – what to expect in 2017

All of this paints an interesting picture for the global outlook in 2017. Perhaps the biggest surprise of the year was the election of GOP front-runner Donald Trump to the Oval Office.

He brings with him tremendous business acumen and corporate-sector experience. This populist leader has transformed the political landscape in the US, and Wall Street is lapping it up.

The Dow Jones Industrial Average is at record highs, and the NASDAQ composite index and the S&P 500 are not too far behind. Biotech, banking and financial stocks rallied with the election of Donald Trump. We can further expect tremendous upside momentum with higher interest rates driving profits.

But as someone on Main Street, not Wall Street, how can you profit from the tumult in the financial markets?

1. Consolidate and Pay off Your Debt
Easier said than done right? Not really. It’s easy to look around to find attractive solutions to lowering your monthly repayments on high interest credit cards.

Your focus as a financially responsible individual should always be on paying off high interest debt first. Low interest debt is less expensive, and therefore less of a priority.

By consolidating debts into one or two accounts, as opposed to multiple accounts, you will be able to manage it better.

2. Use a Budget
Budgets regularly get bandied about. The funny thing about budgets is that they really work if you stick to them. Make a list of everything that’s coming in, and everything that’s going out.

Your goal with a budget is to allocate a set amount to specific categories like education, entertainment, transportation, accommodation, childcare and the like. Once you know which direction the money is going in, you can manage your finances a whole lot better.

3. Look at your mortgage and make that call
Did you know that you don’t need to be stuck with an expensive mortgage repayment every month. Things happen; sometimes you get a downgrade, sometimes you get a demotion, and sometimes you may find yourself at a crossroads.

It is at times like this that you may wish to look at ways to refinance your mortgage. But this shouldn’t be done in a haphazard way. Take a look at multiple lenders, their APR numbers, rates and your new projected monthly payments.

By using a comparative shopping platform, you can get maximum advantage from your refinancing endeavours. Compare rates with top mortgage providers and make a calculated decision based on your personal financial needs.

4. Rebalance your financial portfolio
With all the spring cleaning you’re about to do ahead of 2017, a shakeup of your financial portfolio is was a good idea. Look at where the markets are right now and determine what mix of financial assets you wish to have.

Your risk appetite determines how you invest your money. Stocks, bonds, cash and commodities form the bulk of your investment options. If you feel that the stock market is overvalued, a correction will be coming.

You could divert money from your stocks to fixed-interest-bearing securities like CDs, treasury bonds, or even cash in hand. With oil price is expected to soar, you may wish to invest in ETFs in the energy sector, or individual energy companies.

Remember, when volatility is swirling around you, your one safe-haven is your humble abode. Take care of your residence and be sure that you can afford to maintain your most important financial asset.

This article was submitted by Elad Mor.

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