Safegaurd Your Savings
http://www.parade.com/news/2008/11/safeguard-your-savings.html
By Gerri Willis
Publication Date: 11/09/2008
Managing your money intelligently isn't easy right now. But stay calm. Making careful decisions today could save you and your family from bigger problems down the road. Here are some good ways to protect yourself and your earnings.
STASH EMERGENCY CASH The roof springs a leak. Your son breaks his arm on the practice field. You need money--fast. Everyone should have an emergency fund to pay bills that come up on short notice, but where do you stash that cash in uncertain times? The pros go to Treasury bills for safety, but the interest they pay is puny. The good news is that for the next two months (and likely up to a year), the federal government has offered guarantees on many money-market funds--investments provided by large mutual-fund companies that offer a return typically higher than passbook savings accounts. Investors usually receive a checkbook so they can begin withdrawing funds immediately. Bank certificates of deposit are another option. These are insured by the government as long as they don't exceed $250,000 per depositor. You can't access your money right away without paying a penalty, but CDs generally earn more than a passbook savings or checking account.
STAY IN THE MARKET The stock market's gyrations may have you clutching your stomach, but unless you are five or fewer years from retirement, you still should invest in your 401(k). Buying when prices are low reduces your average cost of investment. If you are close to retirement and fear that you're losing the little you've socked away, consider working longer. According to InvesTech Research, the average bear market lasts about 15 months. This particular sell-off already is a year old. Selling now guarantees only that the cost of getting back into the market will be higher. Financial adviser Ric Edelman tells small investors to watch the smart money for cues. "When the Dow hit 14,000, institutional investors started selling," he says. "When the Dow fell below 10,000, it was consumers who sold." So, what's the difference between a top-performing 401(k) and one that performs poorly? Diversifying. The October sell-off creamed onetime safe havens like financial stocks. By putting your money in lots of different investments, you reduce the risk that one sector will ruin your returns.
GUARANTEE YOUR INCOME According to the Insurance Information Institute, 43% of 40-year-olds will have a disability lasting 90 days or more by the time they retire. In many states, all it takes is three months of missed payments to lose your home, so workers must protect their ability to earn income. The easiest way to do this is to opt into disability insurance during your company's benefits-enrollment period. Typical policies cover short-term sick leave, which can range from a few days to six months. If you work for yourself or have a poor benefits package, you may buy coverage on your own from a life, health, or auto agent.
KEEP YOUR HOME All the power of the federal government now is aimed at making the mortgage market work better. This will allow people to buy houses and potentially lift the value of your home in the coming years. Meanwhile, however, you have to weather the storm. That means keeping up with your payments. The longer you hang in there, the more likely it is that the banking industry will come to your aid. Mortgage lender Countrywide, for one, will be making available more than $8 billion to
modify risky mortgages. If you've already missed a payment or two, you may be eligible for Hope for Homeowners, a new government program that aims to prevent foreclosures by letting you swap your mortgage for a more affordable, fixed-rate loan.
PAY DOWN YOUR DEBT Want an investment that can pay a guaranteed rate of return in the double digits? The average American household carries $9900 of debt on cards with a typical rate of 14%. Paying it off is like giving yourself a 14% return. What's more, credit-card companies are cutting their credit limits, which can hurt your credit score if you don't reduce your spending. Charge only 30% of your limit to keep from hurting your credit.
By Gerri Willis
Publication Date: 11/09/2008
Managing your money intelligently isn't easy right now. But stay calm. Making careful decisions today could save you and your family from bigger problems down the road. Here are some good ways to protect yourself and your earnings.
STASH EMERGENCY CASH The roof springs a leak. Your son breaks his arm on the practice field. You need money--fast. Everyone should have an emergency fund to pay bills that come up on short notice, but where do you stash that cash in uncertain times? The pros go to Treasury bills for safety, but the interest they pay is puny. The good news is that for the next two months (and likely up to a year), the federal government has offered guarantees on many money-market funds--investments provided by large mutual-fund companies that offer a return typically higher than passbook savings accounts. Investors usually receive a checkbook so they can begin withdrawing funds immediately. Bank certificates of deposit are another option. These are insured by the government as long as they don't exceed $250,000 per depositor. You can't access your money right away without paying a penalty, but CDs generally earn more than a passbook savings or checking account.
STAY IN THE MARKET The stock market's gyrations may have you clutching your stomach, but unless you are five or fewer years from retirement, you still should invest in your 401(k). Buying when prices are low reduces your average cost of investment. If you are close to retirement and fear that you're losing the little you've socked away, consider working longer. According to InvesTech Research, the average bear market lasts about 15 months. This particular sell-off already is a year old. Selling now guarantees only that the cost of getting back into the market will be higher. Financial adviser Ric Edelman tells small investors to watch the smart money for cues. "When the Dow hit 14,000, institutional investors started selling," he says. "When the Dow fell below 10,000, it was consumers who sold." So, what's the difference between a top-performing 401(k) and one that performs poorly? Diversifying. The October sell-off creamed onetime safe havens like financial stocks. By putting your money in lots of different investments, you reduce the risk that one sector will ruin your returns.
GUARANTEE YOUR INCOME According to the Insurance Information Institute, 43% of 40-year-olds will have a disability lasting 90 days or more by the time they retire. In many states, all it takes is three months of missed payments to lose your home, so workers must protect their ability to earn income. The easiest way to do this is to opt into disability insurance during your company's benefits-enrollment period. Typical policies cover short-term sick leave, which can range from a few days to six months. If you work for yourself or have a poor benefits package, you may buy coverage on your own from a life, health, or auto agent.
KEEP YOUR HOME All the power of the federal government now is aimed at making the mortgage market work better. This will allow people to buy houses and potentially lift the value of your home in the coming years. Meanwhile, however, you have to weather the storm. That means keeping up with your payments. The longer you hang in there, the more likely it is that the banking industry will come to your aid. Mortgage lender Countrywide, for one, will be making available more than $8 billion to
modify risky mortgages. If you've already missed a payment or two, you may be eligible for Hope for Homeowners, a new government program that aims to prevent foreclosures by letting you swap your mortgage for a more affordable, fixed-rate loan.
PAY DOWN YOUR DEBT Want an investment that can pay a guaranteed rate of return in the double digits? The average American household carries $9900 of debt on cards with a typical rate of 14%. Paying it off is like giving yourself a 14% return. What's more, credit-card companies are cutting their credit limits, which can hurt your credit score if you don't reduce your spending. Charge only 30% of your limit to keep from hurting your credit.