Will Arduino " Five Things to Resist Doing in a Turbulent Economy
May 7, 2009
After watching the markets tumble about for the last year or more, many of us are frustrated or angry or confused about how to manage our personal finances and how to stay afloat on this wild whitewater raft trip our economy has taken us on. This week’s focus is on what NOT to do in these rapidly changing times, according to the National Endowment for Financial Education.
Thanks to the recent stock and bond market roller coaster ride, you might be thinking about borrowing against your home or withdrawing money from your 401(k) while you “ride out the storm.” While it is never a bad idea to re-examine and rebalance your budget and portfolio, now is not the time for hasty decisions. In fact, now is the time to be even more cautious.
NEFE says there are five main things to resist doing in an erratic economy.
– Don’t borrow money to continue your lifestyle. If your income has dropped or you think it is about to, now is the time to rewrite your budget. Income doesn’t match expenditures? Then it’s time to make some cuts and try again.
– Avoid pulling out funds or taking a loan from your 401(k), and continue making contributions into it. If you have to cut back, at least continue to save the amount (or percentage) matched by your employer. Remember, that’s “free” money. If you’re nervous about the ups and downs of the stock market, consider changing your diversification.
– Even if you’re tempted by low interest rates, avoid borrowing against your home equity to fund current expenses. All you are doing is digging yourself deeper into debt. Not to mention your home could potentially devalue as a result of the soft housing market.
– When the going gets tough, the tough turn to retail therapy and that is not a good philosophy in uncertain economic times. This would be a good time to re-evaluate your spending habits and avoid activities that cost money to make you feel better.
– Avoid turning to credit for unexpected expenses while you have savings in the bank. Credit card rates are in the double digits, while interest on savings is in the low single digits. Why would you want to “give away” 10 percent or more of your spendable income to credit card interest? If you have not already done so, now is the ideal time to start to build an emergency savings. You never know when you’ll need it.
” Content for this article was provided by and used with the permission of the National Endowment for Financial Education. NEFE is a nonprofit foundation dedicated to helping all Americans acquire the knowledge and skills necessary to take control of their financial destiny. To learn more, visit http://www.nefe.org