Guest Post

Are you paying too much for your utilities? Perhaps the cost has been steadily climbing for some time, at first only slightly noticeable, but now making up quite a chunk of your monthly payments. There are some simple modifications you can make to reduce these costs and help the planet at the same time; it just takes a bit of careful planning.

Change your supplier: Search online to compare electricity prices and take note of companies from which may be able to get a better deal. In light of recent increases in gas and electricity prices, it’s important not to be complacent about your supplier and to check that you’re getting the best deal available – even if you’ve been with the same company for a long time.

Supply accurate gas and electricity readings: Suppliers may take a monthly estimate of metre readings, rounding up costs rather than the actual amounts. Learn how to read the metres in your home and ensure you give your suppliers accurate readings so that you pay only for what you use.

Programme your heating: This is important if you live alone or work during the day. Turn the heating on for the times you’re in the house and dial it back for midday when you’re not there. If you go away for the winter, turn the thermostat to a low setting to prevent the pipes from freezing and save money while you’re away. Similarly, if your tap water is scalding, turn it down; it generally doesn’t need to be hotter than 60°C to be comfortable.

Be energy savvy in the kitchen: Simply by making small modifications you can save money on your energy bill. For example, try not to open the fridge door for longer than is necessary and defrost the freezer on a regular basis. Use saucepan lids when cooking and turn down the heat. Only boil as much water as you think you’ll need rather than boiling a full kettle for every cup of tea.

A really easy, cost-saving tip is to use energy saving light bulbs rather than incandescent ones. They take a little while to warm up, but there are some excellent bulbs available from department stores, and they last a lot longer and reduce your energy costs.

Cutting your utility costs doesn’t mean living in discomfort. Making small tweaks and living conscientiously are just two ways to reduce those bills that are becoming more and more expensive. Compare your energy expenses online to find suppliers that can serve your energy needs at affordable rates.

This article is brought to you by the Money Supermarket.

By Kevin M

The investment universe seems to be as confusing now as it’s been at any time in recent memory. While it seems that opportunities exist—they always do—the risks have never been greater. So what are the choices, and how do we play them?

The Stock Market

The stock market is hovering around Dow 11,000—is it a good place to be? Many of the experts are saying that the economic recovery is just getting started, and now is an excellent time to be in the market. Profits are growing and the market is following a textbook post recession path to higher levels, maybe higher than we’ve ever seen in the past.

But voices in the woods—including regular OOYR contributor Rob Bennett—are advocating caution. Valuations remain high by historic standards and the economic backdrop is much more convoluted than it has been in past recoveries.

I’m not an investment expert by any means, but I lean toward the cautious camp here. The problem I have with the experts predicting a higher market is that most of the same people are always predicting a higher market. In fact, it’s hard to find a time when they’ll tell us to sell and get out. I’m always wary of that kind of advice—are they really experts, or are they salesmen for Wall Street? Perhaps they’re a little of both.

The other issue I see is that the market has risen from the 6000s in the Spring of 2009, up to nearly 12,000 a few weeks ago. That’s a near doubling and represents a substantial climb already, even if the market is headed higher. Advances of that magnitude scream out for a conservative approach. Markets tend to go down much faster than they go up, leaving little reaction time when the dominos start to fall.

What are your thoughts on the stock market?

Real Estate

Investing in real estate looks certifiably high risk right now; prices have fallen somewhere between 20% and 50% in most markets—considerably more in some, and there’s no way to tell when or even if that direction will change in the foreseeable future. Meanwhile the foreclosure mess continues with no end in sight and financing is harder to get than it has been in a human lifetime. The situation looks quite hopeless, doesn’t it?

I’m not entirely sure. Again, I’m not an investment expert, and I’m not sounding the call for everyone who can buy up investment type real estate, but there are a few positives that can’t be overlooked either. Bear markets are the best time to buy any investment. Prices are going at a discount and mom-and-pop money has been scared out of the game. There are more deals than ever and in many markets rents are more expensive than house payments, quite possibly setting the stage for an eventual turn around.

I’m not suggesting that real estate will do a “V” shaped recovery in which prices suddenly spike higher; but I am pointing out that the dynamics of the market are taking a definite turn. It will take a big bankroll and a lot of patience, but real estate may be a better buy now than it seemed to be at the peak of the market when people were pouring money in with little thought.

What do you make of real estate as an investment in this market?

Bonds, Certificates of Deposit, Money Markets

In the current ultra low rate environment, traditional fixed income/fixed value/cash type investments seem to be almost a suckers bet. A long term portfolio, such as a retirement account, would be a guaranteed loser if that’s where you have most of your money invested.

The choice now is between short term instruments at rates that don’t even cover inflation, or taking a chance and tying up money long term at historically low rates. At this point, unless you expect rates to head into negative territory—which is not a common event—committing funds at these rates long term doesn’t seem as if it will bring a happy ending.

But it’s equally true that cash investments have become more about safety than return. In the past they’ve offered safety AND return, but not now. Their primary purpose in a portfolio mix right now is avoiding loss, and I don’t know if you can rightfully call that an investment at all. It might best be considered as money out of circulation—even so, it’s a must-have in an investment environment as muddy as the one we find ourselves in right now.

What do you think about cash type instruments as investments at these rates?

Commodities (OK, energy more specifically) and Precious Metals

I’ve done some reading up on Peak Oil, and while no one knows for certain whether or not we’ve actually hit the point of permanently diminishing production, one factor does seem painfully apparent: the cheap oil–the stuff we’ve been banking on at least since World War II—is thinning out.

How else can we explain why Alberta tar sands, Brazilian heavy oil and suspected-but-not-yet-in-production Artic Sea oil seem to be our best hopes for the future? I don’t know a thing about investing in commodities, but I think the facts support a permanent investment position in traditional energy stocks, and at least a small position in any halfway promising renewable energy companies.

This might be especially true now since energy prices are quiet at the moment. Is an energy price spike in the offing? We can’t know for certain, but it’s not something we should bet against either.

Precious metals rate a discussion all there own. I’m going to take the liberty of lumping silver and platinum in with gold, since gold seems to be the dominant metal—and also because I don’t know enough about each to discuss the subject intelligently.

I’ve read the different arguments for and against gold as an investment, but there are some interesting developments taking place. For one thing, the price of gold has been moving up in a fairly methodical pattern which has to make us think that there’s something more here than another speculative bubble.

And here’s another key point…over at Bucksome Boomer, in Kay’s post about gold as an investment, my buddy Money Reasons made a brilliant point that millions of people in India—a country where people buy a lot of gold—are moving into the middle class where they’ll able to afford more.

I think this point is fundamental to any discussion about gold as an investment. Most of the gold discussions I’ve read or heard center on consumption and investment in the US and in Europe. But India and other countries that favor gold are the economies that are growing the fastest and will have the greater impact on future price swings. For that reason alone, the long term trend favors investment here. Maybe it even explains the almost methodical increase in gold over the past decade.

For more direction on precious metals, check out Global Assets Strategist.

What do you think about commodities as investments—specifically energy and precious metals?

Investing in yourself

What if on analysis you decide there’s nowhere truly promising to invest your money? When all else is in doubt, investing in yourself is unquestionably the most secure way to “invest”. When we think of investing, we think about allocating money between various passive vehicles that will provide an income stream while we’re out doing other things.

While this is important and necessary, the reality is that very few people will invest their way to prosperity. What’s the alternative? Your career or business!

We might have some difficulty wrapping our minds around the concept of our career or business as an investment, but just like any other aspect of life, it can always be improved by putting some money into it. And when we invest in our careers or businesses, we’re really investing in ourselves.

If you’re in a job situation, think of ways to invest in improving your skills, either for your present job, or in preparation for a future direction. This could mean taking courses, formal or otherwise, to learn new skills, such as computer software programs common in your field, a foreign language to become bi-lingual, or a given avenue of your employers business that isn’t very well understood. With globalization and advancing technology, it shouldn’t be too hard to identify some niches.

There are many competent people in every field, but precious few experts—think in terms of investing to become one. It’ll give you a leg up on your coworkers by default.

If you work for yourself, you’re probably already familiar with investing in your own business. There are always new products, new market niches and parallel opportunities and more often than not, entering them requires capital. Think of it as investing in your business, or more specifically, in yourself.

Where are you investing your money right now? Do you see areas of opportunity? Do you think some investments are looking too pricey at the moment? Are you avoiding investing altogether? If so, are you investing in yourself?

Related Posts:

Am I Crazy For Being Out of the Stock Market for 14 Years?
Stock Investing for the Long Run – But How Long is the Long Run?
Where Do You Think the Stock Market is Headed?
Cash Is a Strategic Asset
How to Get a Real Deal on Your Next Home
China is the No. 1 energy user – what does that mean for your car?

By Kevin M

What does energy use in China have to do with your personal financial situation here in the Western World?

Many of us prefer to believe this is an issue best left to politicians or economists, but hardly worthy of serious analysis or concern by the rest of us. After all, things will play out the way they will right?

Maybe not. We spend time and money planning for any number of future outcomes—our retirement, our health, our careers, paying off our mortgages, our children’s futures—why not map out and plan a viable energy future? World leadership hasn’t done such a good job of this so far, and if energy follows the pattern of the last few years with steadily rising prices over the long term, it won’t be politicians and economists who will suffer the brunt of the problem—it’ll be us.

Energy is an issue that’s gaining greater attention on my radar screen, but since my first attempt to tackle its impact on our personal financial well-being this past spring, more news of significance continues to pour in. The BP oil leak in the Gulf of Mexico is one such development, but there’s more.

Last week, the International Energy Agency released a report indicating that China surpassed the United States as the worlds leading energy consumer in 2009 (“China rejects world’s number one energy user title”). The agency reported that:

“According to the IEA, China consumed 2.252 billion tons of oil equivalent of energy in 2009, from sources that included coal, nuclear power, natural gas and hydroelectric power — about four percent more than the United States…The Financial Times quoted IEA chief economist Fatih Birol as saying: “In the year 2000, the US consumed twice as much energy as China; now, China consumes more than the US.”

This report isn’t merely interesting—it could be downright cataclysmic! The United States is a mature economy and yet it continues to increase energy consumption. Despite its size, China is a developing economy–an economic baby if you will—and it’s growing rapidly. It has more than four times the population of the US and its economy is growing several times faster. All of this means increasing energy consumption. If China’s energy demand doubled in the past decade, what will it be a decade from now? What impact might it have on prices we pay for energy?

Less than two decades ago China was an energy surplus nation, now it’s a big time importer competing with the US and the rest of the industrialized world for new energy sources. In fact the world’s four largest economies—the US, China, Japan and Germany—are all massively dependent on imported energy. And that demand is rising throughout the developing world, including the oil producing nations themselves. Oil demand is rising in virtually every corner of the globe.

What if the world isn’t running out of oil?

Let’s ignore for a moment that fact that major oil producing countries, including the US, Britain, Mexico and others, are experiencing long term oil production declines, and focus instead on promising new sources.

Canada is one of the very few industrialized nations in the world that still exports energy, but about half of it’s oil production comes not from wells of free-flowing oil, but from the Athabasca oil sands in Alberta. The field is extremely large and production is expected to grow considerably in the next few decades, however much of the projected increase in production will depend on continued high oil prices. The field may be the largest reservoir of crude oil in the world, but mining the tar sands and converting it to useable oil is substantially more costly than the favored sweet crude coming out of the Texas, the Middle East and elsewhere.

Brazil is another promising oil source. Just a few years ago it was a net energy importer, but is now rapidly transitioning to the coveted status of exporter, especially with oil. But most of major new oil fields in Brazil are offshore in the Atlantic Ocean, and much of the production is “heavy oil”—a thicker type of oil that doesn’t flow as well or process as easily.

The Arctic Ocean is believed to contain substantial oil reserves and if prices remain high enough some of that oil could be flowing into a gas station near you. Beyond the fact that the region is super cold and hostile to human existence is the related fact that there are no population centers available in the area. All operations will have to be established and serviced from great distances, which will add to the cost of production—once it gets rolling in any volume.

Tar sands, heavy oil, offshore drilling…in the Arctic Ocean…all point to one thing: higher energy prices. No business entity or government authority would even consider investing the capital and labor necessary to bring oil out of the ground under such difficult circumstances or in such hostile environments unless they had a clear vision of higher—perhaps much higher—price levels. Are we willing to bet against the people with the capital?

Until the BP oil leak, we tended to believe that geopolitical disturbances were the primary threat to energy flow and price stability. But as more oil flows out of offshore fields in the worlds oceans—rather than the relatively calm waters of the bodies like the Gulf of Mexico—disruptions related to storms and equipment damage may become more common but less preventable than the political instability of many oil producing regions that we’ve become so familiar with.

The world might not be running out of oil, but it’s clear that demand is powering ahead sufficiently that higher risk sources need to be brought into production. The oil may keep flowing in the future, but it will cost more and come at greater risk as it does.

What can little, ole me do about it?

OK, let’s try connecting the dots and bringing this discussion down to practical application. Is there anything we can do about it, and when should we do it?

As individuals, there’s little any of us can do to change the big picture, but that shouldn’t stop us from working purposefully to develop practical micro strategies to prepare for a future that’s completely predictable. Some steps you can take right now:

• Make fuel efficiency a central issue in the decision of the next car you buy, be it new or used. This doesn’t mean you need to buy an electric car or even a hybrid, but rather a vehicle that gets above average fuel economy.
• Consider the impact of $5/gallon gas on any vehicles you own now. The time to sell a gas guzzler is before the next price spike; once prices rise, the value of the vehicle will plunge by thousands of dollars.
• Consider your daily commute for work; if moving closer to employment isn’t possible, begin to develop a long term plan to work from home. Your job may not be suited to home basing right now, but with some advance planning, you may be able to either work your current job from home two or three days per week at some point in the future, or gear up for a different job or career altogether—one where home basing is part of the package.
• Begin investigating the potential of solar, wind and any other alternative energy sources for your home or business. We always hear that these sources are either expensive, unreliable or technologically flawed, but advances are being made all the time. As energy prices rise over time, those advances will only accelerate–be open to the possibilities. As we continue to drink in the negative news on renewable energy, Denmark produces about 20% of it’s electricity from wind power—most of if from wind mills owned by private individuals and small cooperatives. Somebody somewhere is doing this, and so can we!
• Invest some retirement money in renewable energy enterprises. As growing world energy demand bumps up against production limits on cheap fossil fuels, renewables could be the long term investment play of the century.

Note that every one of these strategies will take time to implement, which is why it’s important that we consider implementing our own energy changes now, while circumstances are relatively calm. Once prices begin to rise, the cost of making changes—be it buying a more energy efficient car, selling a gas guzzler or installing a useable renewable energy system of one sort or another—will likely rise to the point that we can’t afford to do them.

When it comes to energy, should we leave it to the “experts”? Or should we take matters into our own hands and see if we can’t work out our own best solutions?