Auctions mirror problems faced by individuals, companies

25 Jan, 2015 - 00:01 0 Views
Auctions mirror problems faced by individuals, companies

The Sunday News

Bus3Economic Focus Gabriel Masvora
IN the past, people used to take goods for auction not because they were in a financial hole but as a safe way of disposing property they no longer want to use.
It was a safe way of selling goods at the same time avoiding the pitfalls of falling into the hands of dubious buyers who prey on unsuspecting people.There are always a number of problems associated with doing transactions at individual levels.

Those who run auctions are seen as experts who do all the due diligence to ensure that transactions are done above board, at a commission of course.

However, these days, auctions have become the mirror of problems many people and companies are facing.

Instead of the goods sold being from willing sellers, most of them are those that are confiscated from struggling individuals and companies who would have failed to honour their debts.

Almost everyday, auction companies are putting adverts of goods being sold from companies and individuals after a payment dispute.

From the adverts and from some of the auction floors, you can sense that people are failing to settle very small amounts as in some cases some of the goods on sale will be small household property.

This might be good to the person who is trying to recover his/her money but is a nightmare to thousands of people who are losing their goods and possessions.

Maybe what needs to be looked at is not the issue of simple auctions to settle debts but why a number of people and companies end up losing their goods.

A general look at some of these adverts show that financial institutions and to some extent local authorities are among the most aggrieved, dragging their customers to courts to recover their monies.

It is such a big societal problem which must be looked at not simply as a way of solving debt disputes.

The main question which economists and to some extend the Government must explain is why many people and companies in general have resorted to borrowing when in some cases it is very clear that they do not have the capacity to settle the debts.

While borrowing is a common feature worldwide, maybe research must also look at how people are using the money they are borrowing.

The fact that most end up failing to honour their debts is a sign that maybe the money is not being channelled into production.

It seems people and companies might be borrowing to either buy unproductive luxuries or to settle immediate needs which do not generate any profit.

There are challenges the economy is facing of course but maybe we need to look at whether borrowing is the immediate solution to the problems we are facing at family level.

This is a huge topic which experts need to tackle in order for the people and companies to come out of this vicious cycle which has in some cases left some poorer.

What, however, I know is that when borrowing people must know one thing. One day you will need to repay the money and in most cases with interest so be very careful on what you want to use the money for.

Borrowing without coming up with a sober plan on how to repay has led to many people and companies losing their property.

One thing which has failed to sink in many people and companies is the culture of investing.

Only a sound investment gives you the security that you will be able to repay your debts and realise some extra income.

We have been running a number of articles on how people can invest their money and below is another instalment from the Zimbabwe Shareholders Association which deals with ways on how people can improve awareness on how to carefully use the little they have for the benefit of tomorrow and also avoid falling prey to sharks who will grab their goods when they fail to pay.

Human and Emotional Life Cycle

Your fiscal life cycle tracks your lifetime financial activities in tandem with components of your human life cycle. Despite all impending changes, some elements of your social lives remain constant.

There will always be hope for gain and fear of loss coupled with the need for love, affection and respect. The first two phases, the formation and orientation phases, as well as the early part of the survival phase are dominated by the human motivation of hope for gain.

During these times you are looking forward to “more”; more income and accumulation of more assets. In the later part of the survival phase and throughout the accumulation phase and preservation phase, fear of loss begins to be an increasingly motivational factor in your fiscal fitness life cycle.

Hope for gain remains an influential part of your motivation. You will probably continue to want more. However, you most certainly do not want to lose what you have accumulated, so at some point your most basic motivation changes from “Hope for gain” to “Fear of loss” as you progress through your fiscal life cycle.

Unfortunately, this metamorphosis, can cause a new series of insecure feelings. That is, if you are not extremely careful you can be overly fearful of not having enough or losing what you have, that you feel just as insecure and confused as you did in the earlier stages of your life.

To accommodate these emotions and to preserve your income stream throughout your fiscal life cycle, you must be knowledgeable about your passive — to — vocation income ratio.

Passive Income and Vocational (Job) Income

Your passive income makes money without your active involvement in generating it, while your vocational income is derived and earned from your job activities.
Passive Income earnings are derived from investments such as:

Rental Property Income
Interest Income
Dividends Income
Capital Gains Income
Retirement Plan Income

Vocational Income Earnings are derived from:
Your Job wages or Active business participation
As you pass through your fiscal life cycle your passive income ratio should be increasing. Your earned income from your job and vocation eventually expires, leaving only passive income for survival. Typically, as passive income rises, your vocational (Job) income decreases.

As you progress through life your passive income will become your primary income.

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