This is not a column of political opinion. Therefore, we are not going to add more content to the vast material that exists about the ideological rift between macristas and kirchneristas that divides our country.
This is a column of economy and personal finance, and it is in that field where we have detected another type of crack that, far from disappearing, does nothing but widen: we are talking about the differences that exist between those who offer capital and those who they demand, that is, investors and debtors.
While the formation of this financial rift can be explained from the capitalist structure, it is people who embody the different roles, so your reality or mine can always change, for better or for worse.
The American Joseph Stiglitz, Nobel Prize in Economics, once said that “90% of those born poor, die poor for more effort they do”, while “90% of those born rich, die rich regardless of whether or not they merit it”.
Most of the rich are on the side of the capital bidders, while the majority of the poor are in front of the counter requesting borrowed money.
If we accept the figures of Stiglitz, the objective of this column is to help those who dream of moving to the sidewalk of the bidders or staying in it so that every day there are less those who believe that being a constant debtor is to be on the right side.
Tips for capital claimants
If you are a plaintiff, I have news to give you: you will not be able to jump the financial rift until you can not get out of debt. The false illusion that one can grow economically by taking debt at low rates and investing the money in options that grant greater profitability or expecting an increase in income that allows to settle that debt and save even more was buried three years ago when the Central Bank launched its policy of high-interest rates to curb inflation (without much success at the moment, as can be seen).
Consequently, getting out of debt is no longer an option but a sine qua none condition for overcoming the financial crack.
The first step of the road map is to classify debts by ordering them from highest to lowest according to their CFT (Total Financial Cost). If the data is not available, the creditor must be required to report it. Under no circumstances should substitutes such as the TNA (Annual Nominal Rate) be accepted for this calculation, since they can lead to erroneous conclusions.
The second step is perhaps the most complicated, but not impossible. It has to do with generating a monthly surplus thanks to the change in financial habits. This surplus must be used to cancel the debt with a higher CFT. In this note entitled “The savings ladder ” I explain how to do it step by step, step by step.
The discipline in saving allows canceling the debts, starting with the most harmful for our finances. The idea is that, once this path has begun, we will continue to jump effectively to the other side of the crack by investing that capital that we used to use to pay debts.
Tips for capital bidders
Some unsuspecting reader might think: “Why advise someone who generates (or generated at some time) a surplus of capital? You probably already know what to do. ”
Reality marks that in an economy as changing as ours, with biennial inflation of 100%, there are not a few people who at any given time lose the compass and do not know what destination to give their savings.
The first step to achieve this is to learn to discriminate between investing and speculating. For the placement of money to be considered an investment, it must provide a positive flow of funds. This means that the asset in which it is invested must pay a monthly, bimonthly, semiannual or annual income that is independent of the variations that the price of that asset may suffer in the market.
While the investor seeks to generate a flow of money that eventually increases his capital, the speculator bets on a relatively rapid price increase to sell the acquired asset and pocket a profit. It is usually guided by ambition. At least initially, it is advisable to avoid this type of bets.
The second step is not to overweight an investment, that is, not to allocate the majority of our capital to a single asset. To buy peace of mind it is convenient to diversify our capital. In this way, our investment portfolio will not suffer too much due to the loss of value of one or two portfolio assets. You should never place more than 10% of the money in a single risk asset. It doesn’t matter how much the profits you promise attract us. They can always be siren songs that enchant us and end up depositing us in the depths of the sea. An investment portfolio must have between 10 and 20 assets. More not, since exaggerated diversification limits the potential benefits (we will not earn too much when a risk asset rises in price).
Finally, as long as the constant loss of value of the local currency continues, the capital bidders must prioritize the hard currency positions to generate money flows in foreign currency every month. In the column entitled “How to generate income in dollars” at the end of last year I show you how to do it step by step.
Today, one end of the financial rift, the one that has the capital claimants hanging by a thread, which has 52% of Argentines. According to the consultancy Taquion, 20.9% owe money to a bank, 13.1% have debts with family members, 10.5% are committed to financiers and 8% received money from friends.
One has to imagine that on the other side of the counter there are 48% of Argentines, but it is not like that: as in every crack, there are neutrals that owe nothing to anyone, but they are also not in a position to generate surpluses. That is, they live daily. Therefore, in our country, there are more plaintiffs than bidders.
Now, can the financial crack deepen in the coming times? Unfortunately yes. It is what is happening in the world, where inequality grows year by year. Currently, 1% of the population accumulates 82% of the existing wealth.
From this column we will continue making our contributions to avoid this unfair inertia, trying to evangelize and highlight the importance of entering the universe of personal finances and the daily relationship we have with money.
We know that eliminating the financial rift in the capitalist system is impossible, but we believe it is possible to curb its expansion and help those who want to move to the positive side of the counter. Believe me, in times of crisis, is when the best opportunities arise, once and for all, to change sides.