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How to Recession Proof Your Life! By Dr. Danielle Babb |
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By Dr. Danielle Babb In today’s turbulent economic times, we can lose 2% of our 401k value in a day; 5% in 6 months in our homes; the instability requires a solid plan of action to recession proof your life!
About 40% of economists surveyed today believe a recession is likely in 2008. So what can you do to be prepared: 1) Secure any income. If you have income streams, document them and be sure they’re safe for the next few years. 2) Start getting your financial house in a database, literally. Use a money tool like Quicken or even Excel to help you keep track of things like mortgage balances and credit card debt. Sometimes seeing how much you are in debt can help curb spending, too. 3) Prioritize your debts. You get an $8000 tax return right? You owe $7500 on your car; so it would be nice to remove that payment! But what if you’re paying 6% on your car and 15% on your credit card? Even if the $8000 won’t make much of a difference in your balance, it will make a difference in how much of your money goes to interest each month. Pay the debt that has the highest interest rate first! 4) Transfer balances. Lots of us get the balance transfer offers from credit card companies and ignore them. This is easy to do. But, simply shifting money from one card to another, even if it buys you 6 months with no interest, can save thousands in a year. 5) Begin saving if you haven’t already. It’s very easy to feel insecure right now with fluctuating markets. 6) Take stock in your stocks. Figure out what is in your 401k. Don’t just put it in and forget about it. Look at the balances, re-balance your portfolio, and make sure you are invested wisely for the future. Most investment planners will have you invest based on when you intend to retire or when you need the money. 7) Look for all the tax incentives you can find! There are lots of ways to save money on taxes; 401ks, IRAs, and some not-so-common savings plans such as college funds and donations. Talk with a tax planner and save your money instead of giving it to Uncle Sam. 8) Have 6 months savings. In otherwords, if your bills cost you $3000 per month, you need a minimum of $18000 in liquid capital. This should be something secure, like a six or twelve month CD. 9) Finally, get spending under control. Throughout the early 2000s, many were using their homes as ATMs, feeling the market would continue to increase. We know how detrimental that can be! Figure out where your money goes by keeping track of it for 2-3 months. You will know what you can cut out, and where to save some extra money. |
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