Managing income returns in a low yield, high inflation, depreciating securities market. Is this is an impossible statement? Can you accomplish this when global market conditions are so difficult? This is a challenging time for many, but particularly if you are living on a fixed income. Monitoring your cash inflow helps your feel more secure even though outside your world of influence market forces are subject to continuous fluctuations. It is well to remember that you are always in control of your personal decisions.

Here are a few suggestions that you may be able to use in working your way through a recessionary environment. While they cannot be specific to your individual situations, hopefully you may take away a few tips that will work for you.

Reviewing income producing financial elements:

• Bank deposits - both Bermudian and US dollars are paying rates at the very low end of the totem pole. Reassess the structure of what you do have to see if you can restructure these to earn a bit more. Planning for a slightly better yield may involve placing amounts in laddered steps up the yield curve. In English, that means the following: enough liquidity in a savings account (or money market) for a couple of months living expenses; then start your yield curve ladder by placing sums in three-month call or term deposits, six months, one year, two years, and so on. This will generate a bit more interest than keeping it all in one longer-term lock up. The key here is that you need to have interest generation available more than every two -five years that remains locked up. With a revolving deposit ladder, you have planned maturities when you need the along with the interest earned.

• Trap: be careful in playing the foreign currency term deposit game by keeping in mind that the values of the currency can change quickly - just like a see-saw - adversely affecting your principal amount on deposit. Diversifying among other currencies seems a good idea, and may work if time is on your side - and you don't have to cash the deposit in during a US dollar strong point. Foreign currency funds come with a cost to convert in/out as well, which also affects the final value of the rate of return - another point that is often overlooked.

• Money market funds are available in at least four hard currencies here in Bermuda, US dollars, Canadian dollars, Pounds sterling, Euro, and Japanese Yen. These investment instruments are not considered fixed deposits, and are held in segregated accounts. They are very liquid, generally available daily, and offer higher yields in other currencies, depending upon country. Remember that you are subject to currency fluctuations here, too.

• Dividends - declared and paid on common stock are subject to the decisions each and every year, as well as in the interim, of the Board of Directors and executive management of a company. We are learning that dividends are not a God-given right and they will be reduced or not paid depending upon economic forward planning strategies of a company. If you receive dividends either in stock or cash, but need more cash, stop the reinvestment program for the time being and take the cash.

• Preferred share ownership has been the linchpin of many portfolios. Often praised as fairly safe and producing very good rates of return, investors are now realising that this type of security tends to be concentrated in the banking and insurance industry. Thus, instead of representing diversification of risk, regretfully, it has become more concentrated. The decision to keep or try to sell these shares is a tough one. You will need to consult frequently with your financial advisor to be sure that, a) there is still a market to sell them, b) whether they will be redeemed by the company on the call date, and c) whether the underlying company credit rating has been upgraded or downgraded since that will affect the share value in the open market.

• Corporate - some market commentary has indicated that high-grade corporate bonds are returning to favor. Corporate bonds from well-rated credit quality companies tend to pay better interest rates than government bonds. The best way for the small investor to obtain a component of this group is to consider a high-grade (not high yield) total return bond fund, such as PIMCO Total Return where you can have the interest component paid to you. PIMCO is the largest fixed income manager in the world.

• Government bonds, also known as sovereign debt, in the big OECD countries, Canada, US, UK, Germany, Norway are still considered very safe, but returns are low, and you will need a security custody account (and the cost associated with this) to hold these in your account.

• Rental income here in Bermuda appears to have flattened in some income thresholds. If you are fortunate enough to have a rental unit, you may have to accept a lower amount than in the past. The old adage, a bird in the hand is worth two in the bush - holds very true here. The longer your unit sits empty, the tougher it may be to lease it.

• Loans to family - which brings me to one of the easiest (and the hardest) ways to raise income. Consider helping younger family members by loaning them some of your principal.

Stick to a certain percentage only, and be very sure to have a legal document drawn up that gives you the right to ask for collateral. You don't want this to turn into a casual gift down the road that no one is grateful for, and will never be repaid.

• Cutting into principal. On a temporary basis, you may need to use some of your principal to fill in for the lower income amounts you are receiving. Use careful thought to figure out how long you can afford to do this, and how you might be able to replace that principal. Part-time employment - finally, if after making a list of these alternatives and counting the amount of revenue you can expect, you may have to consider any type of a job to augment your fixed income, so that you can keep your principal intact.

Use determination, perseverance, and all your family and friend's contacts to your best advantage. There are always ways to plan, for people who really want to plan their finances to best advantage.

These are not ordinary times that we are managing through this year - the usual rules will not apply. We will survive this, taking away some valuable lessons in money management that some of us have never had to do. That is a good thing.

Martha Myron, CPA CFP(US) TEP, is a Partner and an independent fee-only Financial Planner at Patterson Partners Ltd. Specialising in comprehensive financial solutions for Bermuda residents with US connections, internationally mobile people and US citizens living abroad. Questions and confidential inquiries can be sent to Martha at email mmyron@patterson-partners.com or call 296-3528