Sydney McLennon, AVP Private clients and portfolio management at Capital and Credit Securities Limited.

Today’s money question is from a reader who is struggling to keep her loan commitments. She wrote: “I’m a young woman who literally lives hand to mouth on credit cards. Much of my salary, roughly $60,000-$70,000, goes to bills and paying off a loan to a family member. Should I try to get a small credit union loan to cover that debt or continue living hand to mouth on credit cards? ”

debt cycle

Sydney McLennon, assistant vice-president for private clients and portfolio management at Capital & Credit Securities Limited (CCSL), says living hand to mouth on credit cards is not the way to go.

“This sounds like a scenario that many people can relate to. It’s your typical debt cycle that’s based on consumerism and we need to get out of it,” says McLennon, in urging the reader and others in this position to take a holistic approach to financial recovery. “The reader asked if she should try to get a loan to cover the debt and she’s definitely on the right track,” he asserts.

McLennon believes that debt consolidation is a good place to start. “In simple terms, if you have three creditors, A, B and C; you try to get another party to take over all those loans so you are able to pay off A, B and C and end up with one loan to service. Based on the terms and the amount, what that could do is give you one lower payment, which means more cash flow. And cash flow is key,” he explains.

But according to the CCSL executive, debt consolidation would only be the first step on the road to financial recovery. “Now that you have got a more manageable loan situation and a little more cash flow, it is not the time to go spending because you are still in the recovery cycle. This is where you need to re-examine your expenditure. Ask yourself, ‘How did I get myself in this position?’ It’s important to manage your expenses, starting with the little things – the number of cellphones you have, the amount of call credit you buy, the number of social events you attend,” he suggests. McLennon adds that setting a specific time frame for the recovery period is also essential.

creating a surplus

The next step in McLennon’s recovery plan is building a reserve. “Ideally you should save at least 10 per cent of your gross income. Once you have achieved that, you can begin to work towards building a financial base of six times your gross income. You may then use some of this reserve to clear off your debts, and this will take you into a surplus position,” he notes.

McLennon points to the next phase, which is wealth creation.

“This is the area where we at Capital & Credit have a lot of experience. We help people move from no money to some money to more money. There is no magic wand and it doesn’t happen overnight,” he explains. “It takes a lot of drive, sacrifice and discipline. When you come into Capital & Credit we start by having a conversation with you to find out what makes you tick and what you want to achieve.” he added.

He further noted: “We look at you to develop a financial plan using our Life Goals product. Through our various instruments, we help you accumulate wealth, achieve life goals and plan for retirement. All this put together creates a financial solution.”

By Stacy-Ann Smith

]]> http://gleanerblogs.com/moneymatters/?feed=rss2&p=107 0 http://gleanerblogs.com/moneymatters/?p=98 http://gleanerblogs.com/moneymatters/?p=98#comments Tue, 01 Sep 2009 14:25:32 +0000 admin http://gleanerblogs.com/moneymatters/?p=98 SO YOUR position has been made redundant. Whether you got a pink slip or a letter on a plain old sheet of white paper, you are still out of a job.

The good news is you have a bit of redundancy money. It is the position thousands of Jamaicans have found themselves in this year. Many persons have received separation packages and are now looking for advice on what to do with the money, as well as how they can generate income.

Anthea Domville

One reader, who we will call John, wrote: “My position was recently made redundant and I was given a payment of $550,000. I must try to start a business as I do not see myself working for anyone. I have a mortgage of $22,000 per month and a wife and two children to take care of. I really have no skills – like carpentry or masonry – but I think I could be good a salesman, so I have been thinking of buying and selling something. Please advise me about what I can do.”

save for future

According to Anthea Domville, the senior manager for portfolio planning and private clients in the Capital and Credit Financial Group, the first thing John should do is set aside some money for the future.

“It’s important to consider long-term goals and things like retirement. Sometimes when we get a lump sum, we think we have a lot of money and we go spending,” she says.

Domville suggests that the reader puts at least $150,000 aside.

invest

“To maximise his earning potential, John could put $100,000 in a Government of Jamaica Treasury bill. That can be done through Capital and Credit Securities Limited. The remaining $50,000 can be put in a life-goals product such as the Capital and Credit Individual Retirement Account or IRA,” Domville advises.

“This is very important since John will be self-employed. After the initial deposit, he can contribute a minimum monthly amount of $1,000. As his business progresses, he can deposit more – up to a maximum of 20 per cent of his annual income tax-free,” she adds.

Once John has taken care of retirement, the experts at Capital and Credit advise him to concentrate on his mortgage.

“The next thing he should do is contact his mortgage provider,” says Dawn-Marie Brown, corporate credit manager at Capital and Credit Merchant Bank (CCMB). Brown says the mortgage company might be able to help.

“He could seek a moratorium. That holiday from making payments could give him three months or so to sort himself out,” she adds.

family budget

The next impor-tant step, she suggests, is for John, along with his wife and children, to create a family budget for the next three to six months. The budget should include essentials only, Brown stresses.

The CCMB executive recommends that John consider how to make the most of the money he has left.

“He can place the remaining $400,000 in savings instruments that allow him to earn excellent rates, and at the same time, provide him with the working capital he’ll need for his business,” Brown explains.

She offers Capital and Credit facilities that could suit him. She advises him to split the money in half, putting $200,000 in a Capital Super Saver account, and the other half in a Capital Investor Plus Account, or CIP. The money in the Super Saver would earn 14.25 per cent per annum and interest is calculated daily and credited monthly, she explains. According to Brown, the other half of the money in the CIP would allow John to borrow against his own funds.

“He gets the money he needs to start his business, while earning 12.75 per cent interest per annum,” she states.

Brown adds, “CCMB also offers its clients the option of paying back only interest for up to 12 months. As his business starts to grow, he can begin to pay down the principal from income earned from the business,” she says.

Dawn Marie Brown

Brown also has advice for how John should proceed with any business venture.

“I recommend that before he attempts to start a business, he does a proper business plan. Speak with an entity such as the Jamaica Business Development Corporation, which is geared towards providing technical assistance for new entrepreneurs,” she suggests.

Stacy-Ann Smith, Gleaner Writer

_{Dawn-Marie Brown, corporate credit manager in the Capital and Credit Financial Group, and colleague Anthea Domville, senior manager for portfolio planning and private clients, respond to a reader’s question on how to invest his redundancy lump-sum payment of $550,000.}

LIVE AND DIRECT!

Tune in to Real Business on Power 106FM

at 9:35 a.m. on Tuesday.

Read it in The Gleaner the following Tuesday.

Log on to The Gleaner‘s website: www.go-jamaica.com.

Anthea Domville

Today on Power 106 The Gleaner Company is equipping you to fix the problems affecting your financial health.

You ask the questions … and a Capital and Credit Financial Group team member will respond.

Your financial expert this Tuesday is Moya Leiba-Barnes, general manager of Capital & Credit Merchant Bank Limited.

A seasoned banker with over 20 years’ experience in the financial industry. Leiba-Barnes is responsible for the overall management of retail banking, treasury and investments and branch operations.

Live and Direct!
Listen Real Business on Power 106, Tuesday, July 28, at 9:35 am.

Read in your Tuesday Gleaner
Browse www.jamaica-gleaner.com

If you’re among the thousands of Jamaicans who joined the ranks of the unemployed in the last several months, you know how difficult it is to get by, let alone plan for your future. In addition to the loss of steady income, you may be faced with some important decisions, like what to do with redundancy money or funds you have saved over time.

Karlene Mullings - Contributed

A reader has found himself in that very position and emailed a question for our panel of experts at Capital and Credit Merchant Bank.

“I am currently unemployed and in a desperate financial situation. I have $1.2 million in an account and need to earn a reasonable income from it. Please advise me how best to invest or manage this money.”

We call on the manager of the Ocho Rios branch, Karlene Mullings, to point him in the right direction.

“This has become a typical question since the economic crisis. People want to know what their options are,” she said.

She cautions, however, that in order to give someone the best advice, she would need more information, such as his/her age, and a detailed list of their expenses. “Without knowing the reader’s age, we can’t accurately gauge things, like his timeline for investment,” Mullings explained.

Still, there are some assumptions that can be made.

Avoid risky investments

“We do know,” Mullings asserted, “that this person cannot take on any significantly risky investments, as he’s indicated that he’s in a desperate financial situation.”

Assuming he will need to keep the funds fairly liquid to meet short-term eventualities, here are the options Mullings suggests:

Fixed-income investments

Examples of these include Treasury bills with three- or six-month tenors, sale or repurchase agreements, and investment bonds. Low risk means low returns, and if he were to invest in one or a combination of these instruments, his monthly earnings may not be enough to meet his expenses.

A business venture

This option is more likely to yield higher returns, but will definitely involve more risk. It is imperative that he not invest the entire $1.2 million as start-up capital for any business. He should ensure the business venture is one where turnover is high, and returns reasonably high and fairly guaranteed. Combining options one and two: He may invest $1 million in fixed-income instruments and get start-up or additional capital from a cash-secured loan, that is, using the sum invested as security for the loan. Interest rates on cash-secured loans are always lower than those applied to business loans. The key to this option is to ensure that the business is generating a higher rate of return than what the loan is costing.

Invest and create wealth for later

Mullings also cautions this potential investor to avoid the trap of thinking only about the immediate future.

“We have to assume that since he’s unemployed, he’s not part of a pension plan, so he must consider his future,” she said. “With an individual retirement account, or IRA, offered by Capital and Credit Securities Limited, you have the freedom of being your own boss. Investors aged 18-59 can easily invest and create wealth for later. You get the benefits of tax-deductible contributions, and you grow your retirement fund tax-free.

“There are also flexible payment schedules for contributions, and free financial and retirement-planning consultations,” Mullings explained.

“If you start with a lump sum of $50,000 and invest $5,000 per month for approximately 26 years, you can earn $8.6 million; or you can invest as little as $5,000 per month without any lump-sum investment, and over 22 years, you’ll earn over $4.5 million.”

Stacy-Ann Smith, Gleaner Writer

In today’s instalment of Making Something Out of Nothing, Lance Duhaney, assistant vice-president and regional branch manager for Capital and Credit Merchant Bank in Montego Bay, responds to a reader’s cry for help.

I have been living from pay cheque to pay cheque. As a matter of fact, I have three credit cards
that I use to ensure that I get through each month. Altogether, my credit card
debt is $120,000. I earn just about this amount per month. I feel as if I am in a bind with no way out. Please help me.

Six-step plan

Here is Duhaney’s six-step plan to recovery:

1. The first thing to look at is budgeting. Do a comprehensive budget carefully and stick to it no matter what. You have to decide on needs and wants, and spend on needs only.

2. Stop using those credit cards. If you continue to use the cards, you will only go deeper into a bind. You don’t need three credit cards. Get rid of two and keep one for emergencies only – let me stress, emergencies only. You can get rid of the credit cards by consolidating the credit-card debt into a loan. By doing this you will get a much lower interest rate
(up to half the interest charged on the credit cards) and a more manageable monthly payment which would ultimately result in more disposable income.

3. Reduce your expenses like telephone bills. Talk is not cheap and Jamaicans love to talk. You also need to reduce your entertainment bill if you have one. You, don’t need to go out or drink so much. Again, Jamaicans have a tendency to party too much. Then look at the cable bill. Do you really need to watch cable? Conserve on electricity and water. Too often we take these for granted – we allow the water to run or walk past the room with the light on. You can also do simple things like planning your route before you leave home to conserve on gas and time.

Less is best

4. Buy what you need on a daily or weekly basis to give you more cash flow for savings. Smaller quantities result in less wastage. Do you really need to buy a case? How many times have you had to throw out that can or two left sitting on the shelf?

5. Stop shopping at supermarkets for ground provisions. You need to go to the produce market. The prices there are often much less than in the supermarket.

6. Keep saving no matter how small. Ideally, you should set aside one-five per cent of your monthly income. You need to keep your funds in interest-bearing accounts like the Money Management Account at Capital and Credit Securities Limited. The interest is calculated daily and credited at the end of each month.

From now until the end of the year, Lance Duhaney and the rest of the Capital and Credit team of experts will be at your service. Every month, they will answer your money questions and tell you how you can Make Something Out of Nothing.

Send your money questions to editors@gleanerjm.com and look out for the answers online, in print and on air.

Log on to The Gleaner’s website: www.go-jamaica.com.

Tune in to ‘Real Business’ on Power 106 FM every fourth Tuesday at 9:35 a.m., then read the money advice column in the Tuesday Gleaner the following week.

Real money business, in real time for real people!

Stacy-Ann Smith, Gleaner Writer

“I feel as if I am in a bind with no way out.  Please help me,” pleaded the reader.

Help is on the way.

Read Lance Duhaney’s advise in The Gleaner next Tuesday.

In this second instalment of Something Out of Nothing, Chris Walker, general manager at Capital and Credit Securities Limited, sets the record straight on some banking terms, so people can understand what their options are and make the best decisions about their next financial move. The questions were submitted by Gleaner readers.

What are repos?

Repo is really short for repurchase agreement. A repo essentially exists where you have a borrower who will agree to sell a security to a lender at a predetermined price, agreeing at the same time to buy back the security at a future date.

What transpires is this: You have funds that you place with a financial institution; that financial institution will technically sell you the security, which is actually the guarantee for your investment; and at maturity, they will agree to buy back that security, paying you interest on maturity as your earnings on the arrangement.

What is a CD and what happens when it is rolled over?

A CD is a fixed-deposit arrangement with a commercial bank whereby an individual will agree with the bank to invest for, maybe, a 30-, 60- or 90-day period at an agreed rate. It is guaranteed by the bank. Upon rollover, you get some options. You can actually combine the interest and principal and reinvest for a new period; or you could take your interest and reinvest the principal only; or you could ask to be paid out, thus closing the CD.

What about savings and investments – is there a difference?

Yes, there is a difference. Savings is when you put away money for the short term; so you should not be saying you are saving to buy a car or a house. That is actually the wrong way to think of savings. Savings are monies that will be affected by inflation and generally when you save, you are doing so in low-yielding accounts. Investing, on the other hand, is for profit. Saving represents the short term, while investing is a long-term commitment.

Can you explain what the banks mean when they talk about risk appetite?

Risk appetite represents a person’s tolerance to take on a challenge or face risk. A person whose risk appetite is low should not be looking at investing in volatile stocks; he or she should probably be looking at a repo or a CD. This is in contrast to someone with an aggressive appetite.

There is the risk-reward relationship – the higher the risk, typically you would expect a greater reward. But if you flip that over, the higher the reward is the greater the risk you will have to face.

Stacy-Ann Smith, Gleaner Writer

For real people

From now until the end of the year, Chris Walker and the rest of the Capital & Credit team of experts will be at your service. Every month, they will answer your money questions and tell you how you can Make Something Out of Nothing.

Send your money questions to editors@gleanerjm.com and look out for the answers online, in print and on air.

Tune in to Real Business on Power 106FM every fourth Tuesday at 9:35 a.m.

Listen to the latest broadcast here …

Real money, in real time, for real people!

Capital & Credit boss Ryland Campbell advises: “When I was young, I was the chairman of the School Savings Programme that used to be operated in Jamaica, both in St Elizabeth and when I came to Kingston. In order to encourage and establish the basic background by which young people can understand the value and importance of money, you must teach your young child to save.

“Whatever you give them for school or any other purpose, you should teach that child to recognise that it is from that savings that they’re going to be able to build their own future. In my view, the best thing a parent can do for a child is to teach that child the value and importance of money and help that child to start a little savings programme somehow so that by the time that child becomes an adolescent, that child would have a sum of money put away for a specific purpose.”

Fifteen years ago, the financial sector was on the brink of collapse. A mere two years later, banks would begin to close, people would start losing their jobs and confidence in the banking system would plummet to an all-time low. But although conditions were ripe for a meltdown, a group of businessmen pooled their funds and put Ryland T. Campbell in charge of running a bank.

Today, Capital & Credit Merchant Bank is a remarkable story of an indigenous Jamaican merchant bank that has accomplished a long résumé of success. The success and development of the group has mirrored that of the life of its chairman, Ryland Campbell, a modest beginning followed by tireless work and dedication, a commitment to delivering excellence, and a depth of character that is recognised not only in the industry, but the wider society and the Caribbean region.

Not possible?

Campbell has done what others thought was not possible. He started a merchant bank in one of the most unpredictable periods in the nation’s history and succeeded beyond most people’s expectation.

So, how did Campbell and the Capital & Credit team turn $30 million into a financial conglomerate worth billions inside of 15 years?

The Gleaner sat down with the farm boy from Westmoreland turned-banking mogul and asked him to take us back to the beginning.

“There was a group of us that felt that we local boys and girls needed to be engaged in the financial sector. I had many years of experience in it working in the commercial banking system and there was a bank that was available that was put in receivership by the Bank of Jamaica. That was the spark that lit the furnace of possibilities.”

Today, Capital & Credit Merchant Bank is part of the Capital & Credit Financial Group of companies, which has an asset base of US$80 million-$100 million (J$7 billion-J$8.8 billion).

“Interestingly, when we started out there were really two companies and now there are about seven companies, including a company operating in Florida as a broker dealer which is called, in Jamaica, an investment bank. So we have gone many places since the lonely, lowly days of 1994.”

Article by Stacy-Ann Smith, Gleaner Writer