family matters n
M O N E Y
es, these are
difficult times. Yes,
it’s natural to feel
discouraged if not
downright
frightened.
If you want a
remedy for this uncertainty and fear,
here it is—act. Do the smart,
measured things you can do to put
life in perspective and your own
money at decreased risk. Consider
these strategies for keeping your
money safe—now and in the future.
T A K E S T O C K You need to take a
look at what you have in order to
figure out how best to protect it. As
life goes on, people often find they
have multiple mattresses under
which money is stashed: You, for
instance, may have a rollover IRA at
a brokerage account and a
401
(k)
plan balance left with a former
employer. Sit down with a financial
adviser and figure out how to best
combine them and maintain access
to the cash you need.
Keep any money you’ll need in the
next several years in such accounts
as money-market funds, CDs, and
savings accounts. This includes
money for emergencies, as well as for
short-term goals such as paying for
holiday expenses or that water
heater you may need to replace in
the next few years. Investing money
in the stock market for these goals
would be foolhardy.
CLEA N T H E S H E E T S While
you’re on this organizing spree, the
next step you should take is to clean
up your balance sheet. Now, more
than ever, you need to slash your
debt and build an emergency cash
cushion. The rule of thumb is to keep
three to six months’ worth of your
living expenses in a savings account
or money market fund. Retirees who
live primarily on savings and
investments should have five years’
worth of living expenses in cash, says
Dee Lee, a financial planner and
author of several books, including
The Complete Idiot’s Guide to
Retiring Early.
That way, when the
market is down, you won’t have to
sell investments to pay for everyday
expenses. Building such a cushion
takes discipline. That doesn’t mean
you can’t do it. “Separate your wants
and your needs now,” says Dawn
Brown, a financial planner with L.J.
Altfest & Co. in New York City. “If
your car is in good condition, ask
yourself if you really need to take on
a new car payment right now.”
TA K E S T O C K (T H E O TH ER
K IN D ) When it comes to saving for
retirement or other long-term needs,
your money is still safest in the stock
market. “If you are retiring next year,
it would be risky to have all your
money in stocks,” says Lee. “But for
a 2-year-old with a college fund,
it’s not risky at all.” So continue
investing for your retirement and
other long-term goals—particularly
now. It takes a significant amount of
fortitude to keep shoveling money
into your
401
(k) during a down
market. But the stock market has the
greatest potential to outpace
inflation over time.
H ELP YO U R SELF There’s
another way to protect your money:
Invest in yourself. This cannot be
overstated, especially in down times.
“People forget that their most
valuable asset is their ability to earn
an income,” says DeDe Jones, a
financial planner in Denver. “This is
far more valuable than your house,
and it’s also the asset you can control
the most.” Attend work seminars.
Take advantage of your company’s
tuition reimbursement plan, if it has
one. Check out community colleges
for part-time classes toward another
career in case the one you’re in
becomes problematic. Make use of
the resources of the U.S. Small
Business Administration,
sba.gov,
to
see what it takes to start a part- or
full-time small business. Although
many economic woes are outside
your power, this is something you
can control.
224 MAY 2009 BETTER HOMES AND GARDENS
PHOTO: VEER.
