Managing your money can be tricky in the best of times. But when the economy is on shaky ground, it’s even tougher. Inflation could keep your money from going as far as it did before. A reduction in income could leave you scrambling to make ends meet. And any unforeseen expenses could leave your finances in a shambles.
Panicking will get you nowhere in uncertain economic times. So it’s a good idea to do a careful analysis of your finances and make adjustments as needed.
Here is some advice that will help you make it through fluctuations in the economy with your money intact.
Build up your emergency fund if you haven’t done so already. Shoot for at least enough money in your emergency fund to pay your expenses for six months months, and more if possible. This buffer will help see you through unexpected expenses or job loss.
Create a budget and stick to it. Factor in all of your monthly expenses, and make sure you allocate as much money as possible toward savings. Having a written budget will help you avoid overspending and make it more likely that you’ll reach your financial goals.
Make sure your investment portfolio is diversified. If it already is, leave it alone. Often times investors get scared when the economy takes a turn for the worse and move toward less risky investments. But with long-term investments, this could significantly lower your rate of return. The exception to this rule is when you’ll be cashing in the investments soon. In that case, taking on less risk might be a good idea.
If you have extra money to invest, consider stocks. Prices are lower when the economy is struggling, so you’re likely to get a good deal. Then you can sell when the market is better, or hang onto them and collect dividends.
If you have high interest debt, pay it down. This may be the best investment you could make when interest rates are low. You’ll save a lot more money than you would make with other investments.
Consider refinancing while interest rates are down. If your credit is in good shape, you could get a much better rate by refinancing your mortgage. This will not only save you a heap of money in the long term, it may also lower your monthly payments, which will immediately improve your finances.
Think twice before you get a home equity loan to pay off your bills. You’ll get a lower interest rate, but you’ll also lose equity and put your home at risk. And by extending the amount of time it will take you to pay everything off, you could still lose money since you’ll have to pay interest for a longer period of time.
Difficult economic times can be very stressful, and when we’re stressed we don’t always make good decisions. Before you do anything drastic, take a deep breath and think about the long-term implications. Things will get better eventually. In the meantime, using good judgment will see you through the bad times and allow you to prosper in the good times.
Tags: Banking Advice, emergency fund, money advice, saving advice
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on Tuesday, June 7th, 2011 at 7:07 am and is filed under Budgeting.
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Managing your money can be tricky in the best of times. But when the economy is on shaky ground, it’s even tougher. Inflation could keep your money from going as far as it did before. A reduction in income could leave you scrambling to make ends meet. And any unforeseen expenses could leave your finances in a shambles.
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