2. Build cash reserves
Err on the side of too much cash.
Aim for six months of after-tax expenses.
Sell things you no longer need to build cash.
3. Secure your cash
Make sure your deposits are FDIC insured:
http://www2.fdic.gov/idasp/main_bankfind.asp
Do not exceed coverage limits:
https://www2.fdic.gov/EDIE/
FDIC insurance maximum is now $250,000 .
Coverage is per depositor and account type.
IRA deposit accounts permanently covered to $250,000.
4. Control your spending
Decrease discretionary spending.
Freeze (literally) your credit cards.
Don’t be an ostrich! Create a system for tracking your
spending and following a budget.
www.wasabe.com, www.mint.com, www.mvelopes.com
Use Quicken or Microsoft Money
Find an accountability partner.
5. Pay down debt
Build cash reserves first.
Consider alternatives to better guaranteed
return.
Focus on highest rate debt, then combine
payments.
6. Simplify your finances
Merge your accounts (e.g. multiple Traditional
IRAs.)
Use mutual funds and ETFs instead of individual
securities.
Use target date funds.
Automate savings.
7. Stick to your investment plan
Stay invested.
Take a methodical approach to rebalancing.
Reassess risk tolerance if you can’t stomach
volatility.
Avoid infotainment.
8. Use Roth IRAs
Contribute to a Roth IRA
Balance tax deferred growth benefits and possible need for
money.
Tax-free and penalty-free withdraws of contributions.
Convert to a Roth IRA while account balance is low.
Limited by income.
http://www.fairmark.com/rothira/eligible.htm
9. Harvest tax losses
Offset long-term investment gains and losses.
http://www.fairmark.com/capgain/capgain.htm
Avoid a wash sale.
http://www.fairmark.com/capgain/wash/
10. Get to know your credit
Instances of identity theft are on the rise.
Check your reports and scores.
www.annualcreditreport.com
www.myfico.com - Equifax and TransUnion
www.experian.com
11. Rethink your college savings plans
Check the actual allocation of your 529 Plan.
www.savingforcollege.com
Consider cutting back on contributions.
Cash reserves
Retirement savings
12. Refinance your mortgage
Take advantage of low rates.
Must have equity and good credit.
Consider a family loan:
http://www.nationalfamilymortgage.com/
13. Go (back) to work
Network.
Get training or education.
Polish your resume.
14. Take advantage of deals
Home renovations
Cars
www.thegrocerygame.com
15. Cover your assets
Yourself – disability and life insurance.
Review homeowners/renters and auto once per
year.
Get an umbrella liability policy.
16. Get Help
Choose Fee-Only.
www.NAPFA.org
www.garrettplanning.com
www.CFP.net
Learn about credentials:
http://www.cfp.net/learn/knowledgebase.asp?id=15
If you need guidance or to be held accountable.
17. Contact
Steve Ellisor, CFP®
www.StarFinancialPlanning.com
steve@StarFinancialPlanning.com
Phone: 703-749-7984
Take advantage of my free, “get acquainted”
meeting.
Editor's Notes
Used to say three to six months; now coach clients to have six months.Can always invest excess cash when economy becomes more stable.Have a sense of how long it will take to get a new job. Talk to others in your field.
Make sure your bank is FDIC insured.Single accounts aggregated to $250,000.Joint accounts count separately
Example: gifts.Open communication with family – spouse, kids, parents.
Better to pay off 5% loan than get 0.5% in your savings account.Pay off highest rate debt, then take that payment and combine with minimumpayment on next highest rate. Continue until payments becoming savings.
Explain that this is for better control, which is needed during bad economy.Define ETFs.Must know actual allocation of target date funds and your target allocation.
Assumes that you have one. If you don’t – start learning or get some help.Talk about Portfolio Solutions rebalancing a maximum of once per quarter. Usually uses percentage based bans.The important thing is to be methodical (not emotional) about your approach.Reassess – times, people, laws, goals change. Don’t accept volatility for the sake of growth that you don’t need.Research missed opportunity from being out of the market at the beginning of the recovery.
Balance tax deferred benefits with need for money.Principal can be removed any time penalty and tax free. Can save and have cash available if you need it. *Do not invest in stocks if you may need the money.Conversion:Lower account balance = lower taxes. Can now convert employer plan directly to a Roth IRA.
Only applies to taxable investments.Wash sale prevents you from claiming a loss on the sale of a security if you buy the same security 30 days before or after the sale.
Identity theft up 22% in 2008 according to Javelin Strategy and Research; average lost decreased due to better early detection.Lost or stolen wallets, credit cards, debit cards and checkbooks were responsible for 43 percent of all incidents. 11% online.Not one good source for getting all reports and scores. Make sure it is a FICO score. Scale is 300-850.Protect and nurture your good credit if you have it.
Lesson learned from economic downturn.Change to principal-protected allocation 1-2 years before you need the money.Link to plan at savingforcollege.com
To provide second family income or to supplement retirement income.Could put all earnings into retirement savings.
Get them while you can. Builders and car dealers will squeeze you again when they can. Benefit from supply and demand!Don’t spave! (buy stuff you wouldn’t normally just because it is on sale)
More vulnerable during economic turmoil.
Understand how your advisor gets paid and think about where their motivations and incentives lie. Is s/he a fiduciary?CFP does not guarantee Fee-Only. Neither does FPA.CFP marks ensure a certain level of education, training, and competency.
