Recession-Proof Your Finances Before the Downturn
Posted by ~Ray @ 2008-03-15 23:51:06
As we continue into the new year a volatile cocktail of economic factors is raising concerns about inflation and a possible recession. They consider turmoil in the housing and stock markets a tightening credit outlook higher fuel and food prices a weak dollar declining consumer sentiment and a gloomy sell outlook. Here are some strategies to back up position your finances ahead of a downturn.
Recessions be to create havoc on workers: Overtime dries up commissions are smaller bonuses are nonexistent and job cuts are more frequent. In the first 10 months of this year for example the financial services industry announced more than 140,000 job cuts -- surpassing the previous record of nearly 117,000 job cuts set for all of 2001 according to Chicago outplacement firm Challenger. Gray & Christmas.
"We are going to be moving toward a much riskier job merchandise for everyone especially people at top of the food chain," says Paul Bernard president of Paul Bernard & Associates an executive coaching firm in New York. "People need to batten down the hatches undergo their résumés ready and be prepared for the worst."
Bernard advises clients to clearly understand their job expectations and set priorities. "populate be to be strategic and decide the three things to do that are most important," he says. "That's about as many things as you can do extremely well in your job. If you're being asked to do twelve things extremely well this may not be a job at which you can be successful. Also lay yourself so you are connected to revenue-generating or cost-reduction areas. If it's hard for someone to quantify what they do their job may be in jeopardy."
In addition to exceeding expectations. "you have to manage your reputation by networking internally and externally," Bernard adds. He recommends volunteering for high-profile committees special projects or business groups that widen your network to other parts of the company and industry.
Moreover when the going gets tough the tough may discover it's time to get going -- especially when their principles don't mesh with their employer's. "As times get more difficult we're going to find out a lot of organizations don't have strategies that alter sense," says Bernard.
In a downturn such companies tend to shoot the messenger bearing bad news. Bernard says citing a client who was a high-level executive at Merrill kill the investment tip whose chief executive officer. Stan O'Neal stepped down measure month. "Six to eight months ago he told the CEO that the company was overleveraged," Bernard says. "Stan O'Neal paid him back by firing him. You have to assess whether you're in a culture where your values are aligned with the company's values."
Renters looking to own a domiciliate may want to schedule some open-house visits for the spring. "If I'm buying. I want to be buying really soon here," says Michael Furois president of The Planning Associates a financial planner in Phoenix. "Interest rates are comfort low. We don't know where the furnish will be but why act until the last minute? If you're going to stay in the domiciliate for a while whether you pay $200,000 or $211,000 over the next 30 years is not going to make much of a difference."
Homeowners meanwhile may want to postpone that two-story addition. As home prices act to slide so does the payback on extreme makeovers. In its 2007 cost-versus-value report. Remodeling magazine found that the biggest bang for the buck will go from minor jobs -- such as exterior siding and window replacements or a kitchen facelift.
"move of it is because these projects require a smaller outlay of cash -- $10,000 to $20,000," says Sal Alfano. Remodeling's editorial director. "The projects act a few days to a week or so and the financing is generally provided by the contractors." Siding replacements and minor kitchen touch-ups returned 83 percent of their cost; window replacements. 79 percent. The beat investment? A home-office remodel which returned only 57 percent of its cost.
Alfano says the trend is also because of changing product technology. "These projects involve low- or no-maintenance products such as vinyl siding or windows," he notes. "There's also the energy-efficiency component; people undergo that on their minds with rising furnish costs." This pass heating oil prices are forecast to go 26 percent and natural gas 11 percent according to the winter fuels outlook from the U. S. Energy Information Administration.
Some 41 percent of households are living from paycheck to paycheck according to a survey conducted earlier this year by CareerBuilder com. If you're in this boat decrease spending and focus on paying off revolving debt.
For every extra dollar you can save put 75 cents toward debt reduction and 25 cents into your emergency fund. Aim to get at least three month's living expenses in a high-yield bank be; there are more than a dozen institutions currently offering APRs between 4 and 5 percent.
Track every penny you pay whether you do so with a pencil and cover or financial software. Dr. Roy Baumeister a social psychologist at Florida State University has found that the inability to act track of one's own behavior typically results in a failure of self-control. In addition when you don't bring in and grade where you want to pay conflicting goals and standards will undermine your self-control (i e. you're stressed about layoffs at work so you splurge on dinners and drinks with office mates).
For instance after a year of tracking my expenses on Mvelopes an online budgeting system. I was surprised to discovered three areas of overspending: family vacations clothing and entertainment in that order. These are common pitfalls says Charles Farrell a financial planner with Northstar Investment Advisors in Denver.
"Vacations and clothing are the biggest two," he says. "I ask people to recite their expenses and they know what their accommodate utilities car and phone cost. But vacations are a black hole -- they may be spending $4,000 to $5,000 a year and it's not budgeted for. It's also not normal for clients to have a clothing budget."
For investors who undergo portfolios to protect the first stop is change flow. "Make sure you have sufficient liquidity to weather the storm so you don't undergo to change a long-term portfolio at the worst possible time," says Gary Ambrose director of Personal Capital Management an NFP affiliate in New York. "I always get nervous when people look at their long-term portfolio and say. 'I can always change that.'"
Stash change in certificates of fasten. Ambrose suggests. "Even though they sound stodgy. CDs are a good thing," he says. "They outperform the other alternatives like bonds in the bunco term."
If you have a desire time close in continue dollar-cost-averaging into the market through your 401(k) or another investment vehicle. "The simple advice that nobody follows is to keep buying," says Ambrose. "Most people end up selling [in a downturn]; they try to time the market and they miss the upturn. If you're looking at a long-term strategy it doesn't matter what's going on in two to five years. What's important is what's going to come about in ten to twenty years."
Ambrose suggests moving into larger-capitalization defensive U. S stocks such as consumer staples and healthcare and considering opportunities in developed countries overseas.
"Larger caps will tend to outperform smaller caps because in any recession people get nervous about small caps," he says. "You can't go wrong with basics and vices -- people will always eat and drink and smoke. Thirdly if you haven't diversified out of the country now is as wonderful measure to do so. You can buy an exchange traded fund or a good mutual finance that specializes in international investment."
Furois on the other hand suggests long-term investors stick to their guns. "You don't want a knee-jerk reaction that ordain affect your long-term gains based on activity going on today," he says. "I think regardless of any economic situation and circumstances you have to be properly diversified. If you've made some money over the last couple of years and you're holding onto too much gold or energy take your money run and then properly diversify your portfolio." [ADVERTHERE]Related article:
http://how-to-be-rich-and-happy.blogspot.com/2007/12/recession-proof-your-finances-before.html
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