After the continued downward slide in yet another very tough market week, last Saturday's interview in the Mid-Ocean News with Sir John Swan sounding the same warnings as he has in prior interviews that `our country takes its high standard of living for granted' was timely.

`Bermudians Need a Reality Check' stated Mr. Dale Butler, in a series of articles, written about the lack of interest in employment in the hospitality industry.

Financial planners, credit managers and lenders, while perhaps not having the same degree of exposure to the political and economic level that both of these eminent gentlemen, work with clients every day regarding the primary issues of financial security.

And while not speaking for anyone else, both of these gentlemen show great courage and concern in urging Bermudians to stop and plan for their financial future. Here is why.

THE `ON PAPER' POVERTY EFFECT Whether the Federal Reserve in the United States actually chooses to drop the fed funds rate again next month may be almost irrelevant in the minds and pocketbooks of the average American investor and the corporate cost-efficient Chief Financial Officers of global companies.

Over the last year, $4.5 trillion dollars ($4,500,000,000) in stock market capitalisation has evaporated. That's a lot of zeros! US Gross Domestic Product has slowed way down, redundancies are picking up with new companies -- including very large brokerage firms -- announcing lay-offs every day. The most recent Disney announcement of 4,000 redundancies sends another ominous message; Americans are tightening their belts and staying closed to home for vacations.

The Northeast had a boom winter season as people chose to drive to New Hampshire, Vermont and Maine for a break, rather than a more costly experience in Vail, Colorado or Chamonix, France or the islands. The wealth effect, that of looking at your investments and seeing them appreciate has vanished; people feel poorer, people will spend less money; corporations will retrench by cutting budgets and personnel.

PREPARING FOR A RAINY DAY Bermuda has seen an economic slowdown before; 1989 through 1994 was perhaps not the easiest of times for many Bermudian citizens; somehow, everyone survived. Will it happen again? Who knows, the multiplier effect on negative wealth perception could take as long a year. Do you remember knowing anyone who really struggled during those years? Have you insulated yourself and your family against temporary changes in your economic circumstances this time? If you have been careful and put away for a rainy day (savings backup), good for you.

Experienced Financial Planners are like Moms and Dads, we have seen it all before, we know what to do to help you out and we hope that you will take the advice (medicine) that is given, in the true spirit of caring. We are concerned many families do not have a contingency.

Listed below are some situations that are all too common, right here in Bermuda (and in other countries). These are not isolated cases, nor has any client confidentiality been compromised. They are `made up composites' to reflect various economic straits that people get themselves into, and are not intended to resemble, however remotely, any one you know.

Scenario One -- Lump sum settlement issues A lump-sum settlement ($70,000) is offered to an employee who has opted to take an early retirement at the age of 50. The employee indicates that he/she may just take some time off (a year), fix up the house, and then, maybe, look for some other job. Just relax, and take it easy. Oh, and by the way, the soon-to-be ex-employee has only about another $20,000 saved! Reality check: Have you truly researched who will hire you at the age of 51 at the same salary (or better) than you had? Many companies may already have an informal hiring freeze in place, and good jobs are becoming harder to find.

Whether you want to admit it or not, (and no company will ever admit it), your age may work against you. When was the last time you upgraded your job skills? Do you realise that if you stay out of the work force for just one year, you may lose five years of job skill experience? How long do you think your money is going to last? Are you aware that you may actually have the best chance in these last 10-15 years of your working life to shelter financial security in your pension? If you need a minimum of $2,000 per month to have a carefree life, take a look at this withdrawal calendar.

Just using simple maths, a rate of return of six percent (you can't lock up your money for long) and factoring in Bermuda inflation of at least four percent, you will be out of cash at the age of 53. What then? You can't collect on Government Pension until 65. What happens if you get sick? Oh, and you owe your elderly mother money as well. How old is she, 87? Does your family have longevity genes? Oh, you think you will be around until you are 95. Living on what, might I politely ask after the money runs out at the age of 53? Let's see, I make that to be another 42 years. Did you realise that you might be in retirement longer than the years you worked? You changed your mind, you are not going to stay home? You intend to start your own business? What are you going to use for collateral? Have you researched this business thoroughly? Are you going to use all of your savings? Are you aware that 75 percent of new businesses fail in the first year? Do you really know your customer and your market? What about health insurance? Did you know that you have to pay it all yourself, now that you are self-employed.

What will you do if the business fails and you have mortgaged your home (with your mom in it) to subsidise the business? What is wrong with this scenario and many others that you may have seen? These people are not planning for anything; they are just motoring along, oblivious to anything except their immediate needs.

Stay tuned - for next week when we discuss two more 'mock composite cases' and provide some real-life solutions for all three cases.

While my job as a Certified Financial Planner is to counsel clients who want and need comprehensive financial planning, not everyone can afford to hire a planner. Many individuals may not feel confident enough and independent enough to try setting up a contingency plan set up on their own.

There is no time like the present to change the way you handle money! Whatever your inclination, I beg you to think about your financial security, delay buying everything that you want, refuse to make money decisions on pure emotion, and start now to secure your future against worst case scenarios.

It's called ` no gain without pain '. You will be glad you did. And if nothing happens, perhaps for the first time in your life, you will be in control of your finances, making a great start toward true prosperity.

Martha Harris Myron CPA CFP(, is a Bermudian, a Certified Financial Planner, holds an NASD Series 7 license and has a US tax background. She is Programme Director for the Financial Planning Association of Bermuda. Questions regarding this article may be sent to Email: marthamyron y northrock.bm Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or any other investments. Readers needing specific assistance should seek advice from an experienced professional financial advisor.

Rate of Return How soon it goes: The above chart illustrates just how quickly a lump sum saving of $90,000 will disapper.