Seven Ways to Get on Track

 for Your Own Economic Recovery

It is up to you. You are the only one who can get your own financial house in order. Here are some concrete steps you can take now to be in a better position for the Economic Recovery.

1. Review your current cash position. Everyone needs an emergency fund equal to 3-6 months of after tax income. This is the starting point. The emergency fund should be invested in secured accounts like CDs or FDIC insured accounts.
2. Build a cash flow program. This is also called a budget, but no one likes that term. Determine how much money is coming in, and more importantly, how much is going out. Look for ways to cut back on expenses. Eat in more often, put off buying more expensive items. But, do not be too strict with yourself. The number one reason people quit their cash flow program is that they start out too strict and then give up.
3. Review personal debt. Debt comes in two types… good and bad debt. Good debt is tax deductible (mortgage or home equity line of credit). These loans are usually at lower interest rates. Bad debt is non tax-deductible, usually with a very high interest rate (credit cards). These rates can be 18% to 21% per year. Your goal should be to reduce or eliminate the bad debt. This can save you tens of thousands of dollars over time. The second thing you can consider is refinancing your mortgage or home equity loan if the difference in interest rates warrants the change. Talk to your financial advisor about this possibility.
4. Check your credit score. Annualcreditreport.com provides consumers with the means to request a free credit report once every 12 months from each credit reporting company. The three companies are Equifax, Experian, and Trans Union. Clean up any credit problem areas. Remember, the higher the credit score, the lower the interest rate you will pay on any loan.
5. Check your insurance coverage. Having the right amount of homeowners, auto, health, life and long-term care insurance is extremely important. So is not paying too much for it. Review your needs carefully with your financial advisor. Compare and contrast different companies. Get a real evaluation of what is available to you.
6. Be tax smart. If you are a participant in a 401k or other qualified plan, continue making contributions. Now is not the time to stop. Markets are low so each $1 of contribution buys more shares. If at all possible, increase your contributions. If you are concerned about your 401k investments, talk to your financial advisor. They are happy to help. Remember, these plans are tax deductible.
7. Rebalance your investment portfolio. After all the difficulty in the market, it makes sense to review your portfolio. Visit with your financial advisor. Go over your goals, both long-term and short-term, and make changes as necessary. A word of caution: the market tends to recover before the economy does. Do not let go of your long-term investments at this stage. In fact, now is a good time to acquire more equities. Current prices are at near historic lows.