Year-end Recession Survival Tips

01 Dec, 2008

Posted by: earlhines In: Investing| Retirement| Tax Planning

Earl Hines

Don’t Ignore Your Accounts

The October stock market crash has probably wreaked havoc in your 401K and erased significant value on many of your other investments. It’s perfectly human to feel a little sea-sick right now. These are trying times not only for investors, but everyone in the country, especially now that home foreclosures and unemployment is rising. It may provide only minor comfort to hear that, yes, we’ve survived these cycles before, and that we believe that even though this recession will be more painful than others in recent history, the economy will indeed recover.

Even though you can not control the economy, there are some things you can do to take charge of your finances now and prepare for the possibility that things might get a little worse before they get better.

Here are few things you can do now to weather this recession:

1) Cash is King. The first thing I recommend you do is evaluate your cash position. Maintaining 3 to 6 months of fixed-spending for emergencies is always prudent, but if you’re worried about the possibility of one or more breadwinners being out of work, try to increase this position, to 9 months or even 1 year. Having cash on-hand can provide peace of mind. This cash should be in highly-liquid and safe instruments, like your savings account, FDIC-insured CDs, money-markets, etc. Do not invest this cash in the market.

2) Delay Big Purchases. Put off any new large cash commitments until 2009. Try to pay-down any recurring credit card debt to reduce non-deductible interest expenses; and leave sufficient open credit for emergencies. Of course, only do this after you have your cash position in place from #1 above.

3) Budget. Commit to making and tracking a family budget for 2009. Most of us rarely think about budgeting, because we don’t have to. But budgeting can give you a very comforting sense of control. By reviewing and categorizing the family’s expenses you can more easily interrogate fixed versus discretionary expenses, and make informed decisions on what can be reduced or even eliminated. If you can’t measure it, you can’t manage it.

4) Review and as Re-balance your portfolio. For your retirement accounts, it’s time to analyze your holdings and see if you are taking too much risk given your time horizon. Are you too heavily concentrated in Growth? Do you have enough dividend paying Value? Are you appropriately diversified between stocks, bonds, sectors and geographies? Bottom-line: Your portfolio is almost certainly not appropriately balanced after this year’s market sell-off, and there are attractive “buy-low” opportunities that you can take advantage of now.

5) Stop Ignoring your Concentration. It’s time to have a hard talk with yourself about being too concentrated, or refusing to cut losses. If you have losses in the portfolio, now is a good time to “book” some of these before year-end. For tax planning, these can help you diversify your holdings, dump losers, and off-set capital gains in the future. This can also help you raise some cash in your emergency fund if you’re concerned about your job.

Talk to your Financial Advisor who can make suggestions based on your specific situation.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Tags: Investing, Retirement, Tax Planning

Fearless Finance™

Year-end Recession Survival Tips

Don’t Ignore Your Accounts

Related Posts

No Responses to "Year-end Recession Survival Tips"

Comment Form

Biblioth ques sp cialis es long term use of cialis 258.

cialis why two bathtubs

Approval Emea Tadalafil Cialis Pah

Cialis Cialis Generico Tadalafil Compra Cialis

Categories

Our New Book

Archives

User Login

Search

About Us

Proudly Sponsored By

Recent Market News