What To Do In These Uncertain Financial Times

The housing crisis. The stock market plunge. The banking industry in shambles. What’s a person to do in the midst of all this financial turmoil? We thought we’d offer our suggestions for making it through the rough waters many of us are facing:

1. Don’t panic/worry. It’s not going to do you any good at best and at worst it can lead you to make some very poor financial moves.

2. Learn from what’s going on. How would you have liked to have had all your retirement savings in Lehman Brothers stock? Key learning: diversify. If you have a large percentage of your portfolio in any single company, especially your employer’s stock, you’re taking on a big risk. Spread your money out and you’ll be much better protected.

3. Focus on your career. Your career is your single biggest financial asset. As long as it’s going strong, you have a very reliable safety net in your earning potential. Take some opportunities to improve your earning power/marketability/job security by attending a seminar or two, volunteering for a new project that adds to your experience base and delivers needed results for your employer, and networking with others just in case a change is needed. Making yourself a better, more marketable employee is never a bad decision — and these days it’s one solid investment you can bank on.

4. Increase your emergency fund. Having a bit more financial cushion is a good idea these days. To save more, consider cutting spending where you can. Funny how a simple, innocent purchase in good times seems very frivolous these days. It’s a cliché, but that twice-daily latte that runs you $8 total adds up to almost $3,000 a year. Is coffee really that important to you or would you rather be a bit more financially secure? Maybe it’s not coffee for you and there’s certainly no reason to eliminate all of life’s pleasures, but there are areas of spending we all have that can be cut back a bit and not really cramp our styles much.

5. Keep investing. Yes, the stock market has been brutal of late. That’s the bad news. The good news is that stocks are as low as they have been in some time. It’s a great buying opportunity if you have ten or more years before you need the money. Prices may go down further in weeks and months to come (no one knows for sure), but if history is any indication, you’ll do very well if you can hold out for a decade or two. 401(k)s are especially good investments. Look at it this way: even with the big losses in the stock market, you’re still ahead of the game if you get free money from your employers’ 401(k) match.

Those are a few of our tips. What would you add to the list?


(Photo: Kevin Dean)

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