In the latest issue of Money magazine, Stephen Gandel presents a special report on “Survival Strategies“:
“The economy and the markets may be in for a hard fall. Here’s how you and your family can land safely.”
I thought I’d share the 12 points that the article makes as well as my comments on each. All this after the markets have their best one-day gain in 5 years. Oh well, I think these points are applicable regardless of the outcome.
1. Recessions: Learn the Facts
Apparently, the last time we were in this type of economic downturn was in the early nineties. The article states that it took about 3 to 6 months for the economy to turn around once it hit full recession. I have no idea what this current down-turn entails, but if history repeats itself, and we do go into a recession, we’ll be up and out of this thing before too long. I’m not going to panic, but I still think it’s a good idea to brace yourself a bit. That’s what the other 11 points are all about.
Shore Up Your Balance Sheet:
2. Stock Up on Emergency Funds
In the article, it’s suggested that you move from a three months expenses e-fund to the six month variety. I think more emergency cash is always better, so I’m all in favor of this move. If you can move towards more short-term savings then do so. If you don’t have an emergency fund you should start today. Need incentive? Get $50 free for using one of my referral bonuses.
3. Slim Down the Debts
It’s always a good time pay off debt, but apparently even more so in a potential recession. When you’re stocks are flying high you can afford paying a little debt interest, but not now. Check out how I paid off my high-interest credit cards.
Shore Up Your Portfolio:
4. Regain Your Balance
It’s easy to set your retirement savings on auto pilot and just forget about it. Have you checked your 401K lately? What funds are you invested in? Are they properly balanced for someone your age? In my opinion, target date funds are a good way to make this happen.
5. Venture, Carefully, Beyond Our Shores
A quarter to a third of your equity holding should be in foreign stocks says the author. That seems high to me. Again, I let my target date fund do the work for me here.
6. Scared? Then Embrace Bonds
If you think we’re still headed downward then you may consider moving more of your portfolio into Bonds. The author says to do this instead of trying to time the market with stocks.
Work Harder and Smarter:
7. Get to Your Company’s Core
Working on key projects for you company will apparently make you less likely to lose your job if times get tougher. Make sure you are generating revenue for your company. Any position can add value. Be proactive and find the little things that add up to big savings for your boss.
8. Get to the Office and Stay There
Make sure you are getting plenty of “face time” with your boss. If you work from home often, consider stopping that practice for a while. Also, you might want to be the guy or gal who is first in and last out. Can’t hurt.
9. Cozy Up to a Headhunter
Get on Facebook or Linked In now and connect with recruiters in your field. Believe me, they’d love to hear from you. While you don’t necessarily have to begin your job search, make sure you have a few connections. The few unwanted interruptions I do get from these recruiters I don’t mind because of how they’ve helped me out in the past.
10. Get Ready for Next Time
The author mentions laying the groundwork for an industry switch. Health care, is now, and for a long time will be, a very hot field. Consider a career switch and begin investigating the path needed to get there.
Focus on the Home Front:
11. Be a Picky Buyer
The author mentions offering “10% below asking price” if you are in the market for a new home, and offering your home for “slightly less than comparable homes” if you are selling. I don’t know much about real estate so I won’t comment but to say I think there are plenty of deals out there right now. I wish I had a lot more cash in order to take advantage of some of the deals available.
12. …And a Savvy Borrower
If interest rates continue to fall, then you may be able to justify refinancing your mortgage. Apparently, the biggest savings may come on jumbo mortgages above $417,000. That’s a big mortgage. One of the things my Father taught me is that the US Government has long since learned that the housing market is what drives our economy. Therefore, they will do anything to keep it propped up. Look for plenty of bailouts to lenders and borrowers.
Like I said above, while I think it’s great to look at this stuff now, most of these points are things you should consider all the time with your finances, not just in a downturn.
Photo: by soldiersmediacenter