My Money

Anees Sultan, former investment banker, answers queries on personal finance.

I have a car and a home loan. Now that the interest rates have gone up, should I prepay them? If so what should be my priority?
If you need a car, then you need one, and you have to pay for it. If you have some savings that you want to apply for a down payment, then that will reduce your debt burden. Banks also have 1001 ways to make you pay the price of loans. Negotiate longer term financing (more than 12 years), so that the rest of your income is still at your disposal. Resist other bank charges and ensure that you cost the full price of the loan. For example, add all the bank fees and the interest amount and check if the sum is within the interest rate percentage allowed by the central bank. Creating different names for a finance charge should be in check.
Given the uncertain times what are the financial precautions I should take as a mid-level manager of a private sector company that has not laid off a single employee so far?
Companies are likely to lay off people in difficult economic times. The question for them is, whom can I lay off with minimum trouble and cost?" They will typically be first bound by laws, then their corporate standards. So I think it is harder to lay off Omanis. But if an Omani does not pull his weight and his or her performance is below acceptable levels, companies will make their cases and will take action, rightfully so to ensure that the rest of the organisation can weather the troubled or uncertain times.
If you are a good performer and the company is financially stable, then you really don't have much to worry about, but you are encouraged to show some restraint in your spending. You should also accept a pay cut if the company starts that policy. Again, your spending for non-essential or luxury items should drop.
If you are a bad performer at work - and each one of us would know if this were true more than anyone else - then get your act together and get your bosses to see a quick and meaningful change. Otherwise, look for a new job and cut your spending, because you may well be asked to leave, sometimes in a not-so-nice way.
Remember, it is about survival. A company may see that it can cut cost from many things, including (if it is mature) from reducing assets and business lines, and from reducing salaries and employees. In such a case, the company has more resources at its disposal to rescue itself and one will be fighting a losing battle if the company can prove employees' faults.

I'm a 50-year-old professional, planning to send my daughter to a US university for higher studies. My plan was to use my savings to fund her education but considering the current scenario is it wiser to opt for a loan?
If you take a loan with no secure way of repaying it, then you risk bringing your daughter home in the middle of her studies - a traumatic event and an unforgivable action. Send her only if the money is ready and available, or you know without any doubt that it would be ready and available.

Having said that, I am sure you would agree that there is no better investment in life than in educating one's children. If you have to squeeze your budgets and live in some discomfort to see a young educated professional as the result, let me suggest to you that it is one of the noblest sacrifices. This is also a good reminder that students should be encouraged to excel. Excellent students are more likely to be granted scholarships, and they learn to be independent (and proud) early in life.

I have around RO5,000. Should I leave it in my bank or invest somewhere?
Leave it in the bank. RO5000 is a relatively small amount. If it is material to your life, then keep it somewhere safe, and invest when such an amount becomes an excess that you do not need. If it is already extra money that you don't need, wait until you are clear about what you want to invest in. If you are thinking of the stock market, then wait until the first quarter results to check for indications of growth and financial stress. You should also consider starting a small service-oriented business.
I had bought into mutual fund (MF) schemes for the long term. But the markets have fallen a lot. How long should I keep my MFs so that I don't lose money?
Many of the mutual funds sold during the last few years were ambiguous as to what they hold. You may have entered the world of fund of funds or any number of possible leveraged or junk grade products. You may have also purchased a fund that had performed well and was composed of quality assets. In all cases, you are likely to have suffered a considerable drop in value. This would apply to funds from all fund managers and from all countries or investments companies.
The first thing is to check the last published price of your fund. A recent and a frequently published price would indicate that there is a 'way out'. Some funds are listed in newspapers and some have web pages. You should then contact the vendor, typically a bank or a licensed entity. My advice is that the less you know about the components of the fund or its assets, the faster you should sell. If you have the time and the resources to investigate the value of the assets in the fund then you may have the ability to take a view as to whether to stay or exit the investments.

My real estate investment has fallen in value considerably. Should I sell it and reinvest the money elsewhere or wait for the market to pick up? I'm not in urgent need of money.
Like many other investment classes, real estate has seen a flurry of speculative buying in the last few years. If it is a plot of land that you are talking about, check if it can offer someone valuable use. That would depend on its size, but primarily location. If no one wants to buy it now, then no one will in many years, even for a cheap price, because it cannot be put to economic use. So get rid of it and sell it to someone who can extract some value out of it, and respect the market price.
If it is a built-up property, the decision on holding depends on your cost and/or the running cost. Are you repaying a loan related to this pro-perty? If so, make sure the rentals are at least 30-40 per cent higher than the loan service amount. Is it 100 per cent occupied? What if someone vacates? If you are under pressure renegotiate the term with the bank. They will listen.
If you are comfortable with the rent, then consider the type of rental market you are in. Maybe you can upgrade tiles, paint, etc to protect your investment and make it more desirable to existing and future customers.
If you have no loans against the building, you don't need advice.If you do sell, don't rush into the stock market or buy another property without doing your homework. The economic party is over. Cash is likely to be a very dear asset in the next few ears.

I'm a 29-year-old married man with two kids. I want to start planning so that I can have a house of my own by the time I'm 35. My monthly income is RO1,500. What do you suggest?

Talk to a bank and decide how much of a monthly installment can you afford. Keep an eye on land prices, as well as house or apartment prices, they are dropping and are likely to continue doing so in some areas. Start a dialogue with a bank early and get all the documentation ready so that when the time comes you can close the deal with the eager seller.

I'm a 35-year-old mid-level manager with four school-going children and savings of RO15,000. I'm planning to go for an MBA in the UK. How should I go about planning the exercise? My wife is not employed, but we have our own house.

I think that the money should be kept for your kids' education, unless of course you have a very accommodating employer who pays your salary as you rediscover academia while your wife raises your four kids!


My Money
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