COVID-19 has been a disaster for many people globally, one reason being the effect of the pandemic on the cost of living.
As the cost of living is rising while wages remain stagnant, it’s becoming apparent that many people are struggling to pay off their existing commitments. As a result of such obligations, more and more people seek refinancing options to lower their mortgage rates and reduce monthly expenses.
This post will cover how COVID-19 has affected home loan rates and the part it plays in the rising cost of living.
How Has COVID-19 Stressed Out The World Economies?
While it’s inevitable that no country can escape the effects of a global pandemic, some countries have weathered the storm better than others. For example, as you can see in the image above by Compare The Market Refinance Quotes, the US, Australia, and Denmark seem to be the least financially stressed of world economies, with manageable home loan rates being a significant factor. This has allowed these countries to cope with the negative effects that COVID-19 has had on the cost of living.
Other countries may be able to copy the decisions made by these governments to help restore their economies. Nevertheless, many individuals of these countries and others still find it challenging to pay their bank loans and mortgages.
How Are Home Loans Affecting The Cost Of Living Post-COVID-19?
In March 2020, many countries worldwide implemented a debt moratorium to alleviate household debt burdens due to the coronavirus pandemic. These moratoriums have already expired in many places, which raises some tough questions regarding what additional policies should be adopted to address the pandemic’s lingering effects.
With people facing the challenge of prioritizing their payments, especially when considering the rapid increase in inflation that many countries are experiencing, many have turned to various financial tools such as refinancing to get them through these difficult times.
What Is Loan Refinancing?
Loan refinancing is when you take out a new loan to replace the old one. There are many reasons why you might want to refinance your loans; you may not be happy with how much money you are spending each month on your monthly payments, or maybe you have another loan with a higher interest rate that will save you money in the long run. In these uncertain times, refinancing is becoming more popular.
However, it’s important to note that refinancing only works if you have good credit and still owe some of the original balance of your original loan. Not all types of loans can be refinanced, but here are five loan types can:
- Student loans
- Credit card balances
- Auto loans
- Various bank loans
In conclusion, the effects of home loans on the cost of living are pretty significant for many people, not just in the US but also worldwide. This has caused many to use refinancing as the cost of inflation rises.
Islamic Estate Planning: Protect Your Family and Leave a Legacy
Islamic estate planning involves the distribution of your assets that serve to preserve, manage, and distribute them after death according to the principles of the Shari’ah.
According to the Islamic ordinance, those principles are significant in planning for dependents and represent an investment in the afterlife.
Islamic inheritance laws organise your wealth ownership and assets to ensure fairness and justice after your passing. Instead of leaving the tough decisions to grieving family members, you can arrange the gifting of your assets in advance. This creates a streamlined process for the distribution of the inheritance to all family members.
Islamic estate planning is essential in the life of Muslim faithful. Indeed, if you pass away as a Muslim without a proper plan for your assets, you may be breaching the bequest guidance stated in the Holy Book, which serves as an instruction manual for a Muslim’s life.
However, many are not concerned with making an inheritance plan, even though a failure to make one could trigger intense family debate and hinder the transfer of some assets to specific beneficiaries.
According to the guiding principles of Islamic estate planning, after covering the funeral expenses and debts owed by the deceased, a person may designate up to one-third of their wealth.
This discretionary giving is known as the Wasiyyah. However, there are limitations to this discretionary giving.
For example, Wasiyyah cannot be given to someone already receiving a share under the Islamic inheritance laws. The Wasiyyah is most commonly given to charity or to care for distant relatives who cannot provide for themselves.
The residual two-thirds is the Mirath and is reserved for the Islamic heirs as ordained in the Holy Book. Primary beneficiaries are those who will inherit some of your wealth, provided that they are alive and Muslim. These are your spouse, children, and parents, and they receive a fixed share of the wealth.
Secondary beneficiaries are those whose share of the inheritance is contingent on whether other primary beneficiaries are still alive. These may include siblings, grandparents, grandchildren, aunts, uncles, and other relatives. It is vital to appreciate the rights and obligations relating to an estate.
In preparing to bequeath an inheritance, it is crucial to organise your wealth in a manner that will make assets acceptable for consideration in an Islamic estate plan.
In this regard, investments should be screened for compliance with Islamic estate ethics, and investments in interest-bearing assets are disqualified.
Instead, it would help if you endeavoured to invest in increasingly popular Sukuk bonds. You should consider Mudarabah Investment accounts as substitutes to fixed deposit accounts and subscribe to a family takaful policy instead of a life insurance policy in your saving plans.
As for pension assets, you should opt for a multi-fund structure with an option to invest in Shari’ah-compliant instruments.
Zakat, the third pillar of Islam, is a compulsory giving required from every financially stable Muslim. Those who have acquired wealth are obligated to respond to people in need and give back to the community. This response could include sponsoring widows or the education students and organising in a charitable Trust as part of an Islamic estate plan.
Therefore, you must consult a professional estate planner to assist with setting up a Trust arrangement where 2.5% of your assets/wealth is set aside annually for Zakat.
Several other tools can be used to organise the transfer of assets to a specific beneficiary. They include Hiba (making gifts), Waqf (setting up an endowment or trust), Wasiyya (transfers by donation), and it is appointing a Wasi or guardian for living dependents. Getting it right requires a thorough understanding of the principles of Islamic estate planning and the various assets available to achieve compliance.
Governor Okowa’s 2023 Presidency; an Objective Analysis
By Jerome-Mario Utomi
This piece stemmed from three recent developments in the country. First is the latest argument by development minded Nigerians that the nation’s perennial leadership haemorrhage/crisis is aggregated by a successive deficiency in leadership vision and in some cases made worse by public officials’ understanding and interpretation of problems with clarity but lacking in political will to see through or implement solutions. A development that has made the nation in dire need of a system that works, a government that caters for its citizens, especially the youths, secures lives and property while bolstering the economy.
The second and very germane is the Southern Governors Forum insistence that the presidency must shift to the southern part of the country come 2023, coupled with the recent decision by the main opposition party in Nigeria, the Peoples Democratic Party (PDP), to zone the position of the national chairman of the party to the north.
As we know, it is a political principle embraced by major political parties in Nigeria that each time the national chairman of a political party emerges from the north, the presidential candidate of the same party, usually, emerges from the south where the likes of Governor Ifeanyi Okowa of Delta State hails from.
Thirdly and most essential has to do with the fresh call by the Minority Leader of the House of Representatives, Mr Ndudi Elumelu, on Mr Okowa to contest for the presidency of the country in 2023.
The Minority Leader, who spoke at the installation of Rotary Club’s 2nd President for 2021/2022 Rotary Club Year (Club of Asaba Downtown District 9141), pointed out that Governor Okowa should serve as the President of the nation so that he can replicate his achievements in massive infrastructural and human capital development in Delta State at the national level.
He stressed that Governor Okowa was endowed with the capacity and proficiency to rescue the nation from the misrule of the All Progressives Congress (APC) and reposition her to the path of peace, unity and economic prosperity.
“I must commend Governor Okowa for his selfless service and sacrifices that have led to unprecedented massive infrastructural development in our dear state as well as a better living standard for our people.
“Governor Okowa is a rare gift not only to Delta State but also to our nation Nigeria, at large. I firmly hold that he is endowed with the capacity and proficiency to serve our nation at the topmost level so that he can replicate the successes recorded in our state at the national level.
“I sincerely call on him to make him available to serve the nation again. He deserves to be the president of this country, come 2023,” Elumelu stated.
However, despite the popularity of this opinion, it will be antithetical to support a movement based on sentiment or allow sentiment to determine our actions. Therefore, in line with the Christian Holy Book, the Bible, admonished in 1 John 4; 1 that we do not believe every spirit, but test the spirits to see whether they are from God because many false prophets have gone out into the world.
It will, for reasons, be of considerable significance to place this call under objective analysis to fundamentally help electorates make informed decisions ‘as the ignorance of one voter in a democracy impairs the security of all’.
To perform this function well, it will necessitate the following posers; Is Governor Okowa capped with vital leadership capacity needed to tame the nation’s perennial ‘leadership haemorrhage/crisis aggregated by a successive deficiency in leadership vision and made worse by public official’s understanding and interpretation of problems with clarity but lacking in political will to see through or implement solutions? Has Governor Okowa truly achieved massive infrastructural and human capital development in Delta State? Has he indeed and in truth demonstrated selfless service and sacrifices as claimed by Mr Elumelu?
Again, going by Elumelu’s claim, another question would be at the federal level, are there signs of misrules on the part of the APC led federal government that calls for Okowa’s attention to reposition the nation to the path of peace, unity and economic prosperity?
Again, on May 29, 2015, amidst cheers and jubilation from the marmot crowd that attended his swearing-in ceremony at the Cenotaph in Asaba, Okowa, going by media reports, told his audience that, “As a government, we are committed to the building and consolidation of a state in which there shall be more employment opportunities, a flourishing agriculture and agribusiness sector, effective health and educational systems, renewed urban infrastructure and enhanced security and peace to bolster economic growth and development.”
Now, looking at the past six years of his administration, it will elicit the question as to how well has the Governor brought these promises to fruition? Also, at the national level, how relevant is Governor Okowa when it comes to issues of national urgent importance? As the current Governor of Delta State, what particulars can Okowa led government point at to convince Nigerians that he can effectively administer the federation?
In providing answers to these nagging questions beginning with the last question, it must be fundamentally underlined that separate from the fact that Delta State, to use the words of Governor Okowa, is a microcosm of Nigeria because she is populated by different ethnic nationalities and has had inter-ethnic conflicts/clashes, fatal boundary disputes, especially over oil-bearing land, and political tensions, a case that in my views qualifies a governor of such state to effectively lead the federation, Governor Okowa, as subsequent paragraph will show, since assumption of office on May 29, 2015, demonstrated that for the leader to distinguish himself, he has to be a shining light and as such, he should be in a position to break the retrogressive tendencies that subsist in doing what one does not wish to do.
To capture this claim well, this piece will further x-ray/classify the achievements of Governor Okowa’s administration into two.
First, achievements at the state levels which has to do with policy objectives/programmes implementation aimed at creating jobs and wealth (wealth creation and employment generation), economic diversification, the democratization of the education sector, infrastructural development, re-jigging/provision of the state’s security architecture in the state, engagement of the youths in productive enterprise, nurture of entrepreneurs and leaders, promotion of communal peace and development of a database of employment and unemployed youths for planning purposes. The second focuses on his unrelenting nation-building efforts at the federal level.
Evidence abounds that the Governor in pursuance of these objectives compressed his programmes into a five-point agenda which is encapsulated in the acronym SMART.
The SMART agenda means Strategic wealth creation projects and provision of jobs for all Deltans; Meaningful peacebuilding platforms aimed at political and social harmony; Agricultural reforms and accelerated industrialization; Relevant health and educational policies and; Transformed environment through urban renewal.
Take the wealth creation and employment generation, as an illustration, the Governor himself recently but succulently captured his achievements in this way; “we have a deliberate policy to tackle youth unemployment through skills training and entrepreneurship development programmes. I believe that the way out of the unemployment quagmire is to equip the youth with the technical know-how, vocational skills, values and resources to become self-employed, as distinct from one-off empowerment. This is what my administration has done by instituting various skills training and entrepreneurship development programmes, which include: Skills Training and Entrepreneurship Programme (STEP); Youth Agricultural Entrepreneurs Programme (YAGEP); Graduate Employment Enhancement Programme (GEEP); Rural Youth Skills Acquisition Programme (RYSA); Girls Entrepreneurship Skills Training (GEST); and Women Entrepreneurship Skills Acquisition Programme (WESAP).”
These programmes he said are trainee-centred and service-oriented. The sectors and activities covered include agriculture, agricultural value chain services, vocational skills-based microenterprises and cottage enterprises.
Furthermore, the training and mentoring processes aim beyond raising entrepreneurs to produce leaders and managers that have high levels of personal responsibility and effectiveness. I am pleased to let you know that after six years of faithful implementation of these programmes, we have trained and given business support packages to several thousands of youths.
Following the success of these interventions and other efforts in promoting technical education, Delta State was ranked the Best State in Human Capital Development in the 2017 States Peer Review by the National Competitiveness Council of Nigeria.
Also in 2020, Delta was adjudged to be the Second Least Poor State, coming only after Lagos, Nigeria’s business hub, according to the Nigerian Bureau of Statistics (NBS).
From the above observations, it is obvious that he (Okowa) in my view is a Presidential material the nation needs to exit the unemployment crisis and economic retardation. However, in order not to be accused of indulging in hasty conclusions, this piece will go beyond the Governor’s wealth creation and employment generation prowess, to x-ray his efforts in other sectors.
To Be Continued.
Jerome-Mario Utomi is the Programme Coordinator (Media and Public Policy), Social and Economic Justice Advocacy (SEJA), Lagos. He could be reached via email@example.com/08032725374.
Investing Across Generations
By Manpreet Gill
A client recently asked us an interesting question about long term investing – if one wishes to pass on an inheritance to the next generation, should it be fully invested in equities alone?
At face value, there is a temptation to say yes. Equities, as is often repeated, have historically outperformed other asset classes ‘in the long term’ and, so the argument goes, the inevitable volatility along the way should not matter over such a long time horizon.
However, as we argue below, there are a few things that could go wrong with such an approach. While the appropriate allocation will always differ from one situation to another, in most cases a somewhat more diversified allocation could end up being a more prudent approach.
Preserving wealth for the next generation
There is no shortage of studies that show equities outperformed bonds and cash over long time-horizons in the post-World War II period. One of the most famous studies in this space – Jeremy Siegel’s ‘Stocks for the long run’ – uses considerable US market data to show that, over a sufficiently long period, equities have done a better job of delivering inflation-beating returns than (government) bonds, gold or cash.
While there has been much debate over whether investments made at today’s valuation points will deliver much lower returns than we are used to historically, the relative ranking between asset classes is still likely to hold.
Our long-term (multi-year) expected returns, put together in partnership with Mercer Consulting in late 2020, show that global equities are expected to deliver mid-single-digit annualised returns. While this is lower than what we are used to historically, it is still higher than the less-than-1% annualised returns expected from global bonds and cash, and potentially negative returns from gold.
Such a future would look very much like the past, albeit with somewhat lower annualised returns across the board. Does that mean we should allocate to equities alone for the long run?
Will our nerves be as strong as financial history?
Possibly one of the biggest risks to such a strategy is that an all-equity strategy would make us more susceptible to making a behavioural mistake. To provide just one example, the global equity index fell almost 60% from its October 2007 peak to its March 2009 trough.
Looking back at history, we now know that the correct action for a buy-and-hold investor with a multi-decade horizon would have been to do nothing. However, amid the screaming headlines at the time, would we honestly have been able to avoid making the mistake of selling some, or all, of our holdings in panic?
In today’s bull market, it is easy to say we would not. Nevertheless, there are countless anecdotes of investors who failed to hold their nerves at that time: selling close to the market low and exacerbating the situation by not reinvesting to take advantage of the subsequent equity market rebound.
Most diversified investment allocations would have fallen over that period as well. However, a diversified allocation across equities, bonds, gold and cash would have fallen by much less than 60% and gains in asset classes like bonds and gold would have offered opportunities to take profit and rebalance into equities as they fell. This would not only have reduced the chances of making an investment error but possibly even created a situation where rebalancing would have led one to add to equities at an opportune time.
Beyond making a behavioural mistake, we should also be wary of the three risks of focusing on equities alone.
First, many studies highlighting the historical outperformance of equities over long horizons focus on equity indices. This means that, while the conclusions of the study would apply if implemented through mainstream equity indices, implementation via anything more specific – sectors or specific stocks, for example – would introduce additional layers of complexity that could lead to a very different outcome, including the risk of permanent loss. For example, of the ‘Nifty 50’ stocks popular in the 1970s in the US, many are no longer even publicly traded.
Second, most available researches use US data, sometimes with a disproportionate focus on post-World War II history. It is plausible that the experience outside the US may not be exactly the same. Other studies have also argued that pre-World War II data shows performance between equities and bonds was much more evenly matched. While much of this may seem like ancient history, when considering investment allocations targeted at multi-decade horizons, it is fair to question whether the next fifty years will indeed look like the last fifty.
Third, a broad-sweep characterisation of equities and bonds can hide many opportunities a level or two down from these large categories. For example, our long-term expected returns show that asset classes like Emerging Market local currency bonds or listed infrastructure could offer long-term returns competitive with global equities while offering diversification benefits.
Maximising one’s chances of success
A lot can happen over a long time horizon, and while history is often a useful guide, it is far from guaranteed that future decades in financial markets will look exactly like past ones. For investors, while a large allocation to equities makes sense over such long time horizons, we believe a reasonable amount of diversification can help mitigate the journey’s risks and maximize the investment returns.
Manpreet Gill is Head of FICC Strategy at Standard Chartered’s Wealth Management CIO office
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