Home' Trinidad and Tobago Guardian : July 27th 2014 Contents JULY 27 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
FINANCIAL ROAD MAP | SBG9
Wesley, a 40 year-old
mer, is married to
Paula a 37 year-old
They have three
young children. Wesley rents a 3-bedroom
house from his 89-year-old ailing uncle Mal-
colm who has no children. Uncle Malcolm
intends to pass the house to his four nephews
when he dies, but has given Wesley the first
right of refusal to purchase the property for
$800,000 and pay off his cousins.
If he doesn t take the deal he knows that
the other three heirs, who all live abroad, will
move to sell the house at market value ($1 mil-
lion) and split the cash.
Wesley has absolutely no money and is in
a lot of debt because of an auto-racing hobby.
To date, he has sunk $150,000 in a custom-
built rally car and needs $50,000 to complete
the job to get it on the road with the hope of
winning a few competitions and collecting the
prize money. He plans to refinance his credit
union loan, which now stands at $350,000
backed by $200,000 in shares. This new debt
will take up 50 per cent of his $15,000 paycheck,
which adds to his $3,500 rent commitment.
Paula s $5,000 salary covers all other living
Wesley is between a rock and a hard place.
He loves racing and loves his wife who has
been hinting that their marriage may be on
shaky ground if he does not take this lifetime
offer from his uncle. With no liquid cash for
a downpayment or closing costs and a huge
Better be ready
Are you ready for a
Source: The T&T Red Cross Society
Contact the Red Cross: Headquarters - 627-8215/8128, Northern branch - 627-8214, Southern branch - 652-2024, Tobago branch - 639-2781
Natural disasters can strike anytime, anywhere.
There are simple steps you can take to help
protect your family from a natural disaster.
Call your Emergency Management Office and the
Red Cross for further details.
Find out which disasters could occur in your area
and how to prepare.
Ask how you would be warned of an emergency.
Learn your communities' evacuation routes.
Ask where your nearest emergency shelters are
Ask about any special assistance for the elderly or
Ask about the plans in place at work, schools or
day care centres as well.
Create an Emergency Plan:
Meet with household members. Discuss with chil-
dren the dangers of fire, severe weather, earth-
quakes and other emergencies.
Discuss how to respond to each disaster that
Draw a floor plan of your home. Mark two escape
routes from each room. Practise an emergency
evacuation drill at least two times a year.
Learn how to turn off your water, gas and electric-
ity at the main switches.
Discuss what to do about power outages and per-
Post emergency numbers near telephones:
ODPM (Trinidad) - 640-1285/8905/8653/
800-ODPM website: odpm.gov.tt
ODPM (Tobago) - 660-7489/7686
Police - 999
Fire Services - 990
Coast Guard - 634-4440/4532/4554
Defence Force - 634-4532
Ambulance Service (EHS) - 624-4343
EMA - 628-8042
T&TEC - 625-1296/1774
TSTT - 6611
National Gas - 800-4427
Nearest health facility
Teach children how and when to call 999, Police and
Fire Services and how to make long distance calls.
Instruct household members to turn to the radio
for emergency information.
Pick one out-of-the-area-relative and one local
friend or relative for family members to call or
meet at if separated by a disaster.
Take a basic First Aid course and CPR class.
Make a list of valuables. Keep family records in a
waterproof and fireproof container.
Prepare a disaster supply list:
- Plastic sheeting and duct tape
- Canned goods, non-perishable foods and a
non-electric can opener
- Drinking water
- Any special dietary food if required
- Identification, cash, valuable papers,
insurance policies and photos
- Battery-operated radio with extra batteries
- Personal hygiene items
- Disposable utensils
- Infant-care items
- Flashlight and extra batteries
- Easy carrying container (bag) for all items.
Prepare a First Aid Kit:
- Prescription medications, betadine solu-
tion, gauze bandages, adhesive tape, sterile
pads, band aids, triangular bandages, safety
scissors, non-prescription medication, sun
screen, insect repellent, non-latex gloves,
absorbent compress 5x9 dressing, adhesive
bandages (assorted sizes), antiseptic wipes,
antibiotic ointment packets, etc.
Prepare an Emergency Car Kit:
Battery powered radio (with extra batteries),
flashlight (with extra batteries), sleeping
bags or blankets, first-aid kit and manual,
bottled water, non-perishable high energy
foods such as granola bars, raisins and
peanut butter, booster cables, a fire extin-
guisher, maps, shovel, tyre repair kit and
pump and flares.
T&T Red Cross Society
debt in excess of his collateral, he knows
that no bank will ever entertain a
request to finance the house.
According to Paula, this is a once in
a lifetime deal. Wesley can purchase
something at a huge discount, which
is the same as his uncle handing him
$200,000 free money.
Further, Wesley is entitled to a quarter
share of the $800,000 if its sold before
Malcolm passes; that s another
Under normal circumstances all he
has to do is borrow $600,000, but then
there is the problem of closing costs,
which could be up to 7.0 per cent of
the loan amount; approximately
$42,000. He could borrow this money
from the credit union but then with
his debt service ratio (DSR) in excess
of Central Bank guidelines of 40 per
cent, he still would not qualify for the
He could put the car up for sale on
an "as is where is basis" but he most
probably will not recover all of the
money he invested and Paula might
not hear the end of his complaints that
he had to sacrifice his only hobby that
made him happy; adding that he had
no other vice and he is a faithful hus-
band and so on! If he borrows the
$50,000 to finish the car to get a better
price, how easy would it be for him to
part with his pride and joy after all he
has been through?
What makes matters dicey is that
uncle Malcolm is on the decline and
no one knows if today could be his last.
Of course, Wesley will collect ¼ of
$1,000,000 but he would have nowhere
to live. If uncle dies after he borrows
the $50,000, his debt load will then be
$400,000 minus $200,000 in shares
leaving a shortfall of $200,000, which
he can clear off with the $250,000
inheritance money balancing $50,000
to face the housing market.
He can improve his home purchase
chances if, again, he considered selling
the car. It seems as though Wesley can-
not have his cake (or car) and eat it!
Or can he?
Wesley is one of the luckiest people
I ve ever met. He might be able to have
both the car and house without having
to put out any cash at all.
The fact that the he is getting
$400,000 off of the current market
value of the house means that he may
be able to leverage the equity (market
value less debt) to get everything he
Table 1 shows the details of this crazy
idea. Assuming that he gets a creative
banker to buy into his plan, he can
request a mortgage loan for $860,000
(86 per cent of market value), which
is less than the traditional 90 per cent,
to acquire the house and pay for the
items listed below.
If the bank uses a 20-year term and
7.0 per cent interest rate, the mortgage
payment could be $6,700, which is 33.5
per cent of their combined monthly
income of $20,000; well within the 40
per cent DSR guideline.
Nicholas Dean (Cer-Fa) is a financial
coach and mentor who is the man-
aging director of the Financial Coach-
ing Centre. He can be contacted at:
Having it all
Wesley is between a rock and a hard
place. He loves racing and loves his wife
who has been hinting that their marriage
may be on shaky ground if he does not
take this lifetime offer from his uncle.
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