Mattress + money = bad idea.
With the economy in turmoil, stashing your cash under the bed or burying it in the backyard may feel like the safest bet. But experts say there are still investments that make sense.
The most important tip is Investing 101: Think long term. Markets fluctuate every minute and they go through cyclical swings that can last many months. But over time, stock market investing always beats inflation. You have to be able to ride out the volatility.
"Don't panic," said David Campbell, a principal at San Francisco's Bingham, Osborne and Scarborough, which has $1.7 billion under management for high-net-worth individuals. "The smart money never panics; it always looks for opportunity."
He and other financial advisers said withdrawing investment funds in a downturn is often the worst strategy.
"The problem with taking your money out of the market is, we know at some point in time, based on historical data, this market will rally," said Barry Taylor, portfolio manager at the same firm. "If you pull out of the market, you're not going to be there when those losses are recouped. Our recommendation is not to pull out but to stay in and ride it out, wait for the eventual return we know will happen. Markets go through cycles."
Creating a diversified portfolio is one way to be ready to ride out financial storms.
"It's important to stay diversified - well balanced between stocks and bonds within different sectors, maybe different asset classes if you can tolerate the volatility," said Gary Schlossberg, senior economist with Wells Capital Management, the investment-management arm of Wells Fargo.
Hank Herrmann, CEO of Waddell & Reed, a mutual fund company in Kansas with $70 billion under management, said that now can be a time for some people to go bargain hunting in the stock market.
"We've had about a 22 to 23 percent decline," he said. "The average decline for a bear market is 28 percent. If you use that as a rule of thumb, you've got 5 percent more downside. It suggests that most of the damage is done."
Here are suggestions from investment professionals:
Commodities: There's nothing as basic as energy, precious metals, food, etc. "Historically, commodities are a good diversification tool," Schlossberg said. "They're not so much to goose returns, but to stabilize returns."
In fact, a lot of money now looking for a home seems to be being channeled into commodities, as shown by an increase in their prices, he said.
"Gold is always a good barometer for fear and anxiety, and we have plenty of that now," Schlossberg said.
Basic consumer products: "Health care and consumer staples (have) resilience to the business cycles. They are essential items that don't bounce around as much as the economy moves up and down," Schlossberg said. "Health care earnings tend to be stable. Essential consumer items like food, certain types of beverages, personal care products are not terribly exotic but tend to be more resilient to a slowing economy."
Telecommunications is another area that tends to outperform the market during an economic slowdown, he said.
Blue-chip stocks: "For truly long-term investors, it's a great opportunity to buy equities," Herrmann said. "Stocks are on sale now. Stocks are the only thing you can think of that people sell when they go down. Usually when you put something on sale, people rush in to buy, but not with stocks."
Fortune 500 companies are large enough to withstand an economic slowdown, and they derive a large portion of their sales from overseas. That's a double plus: They benefit from stronger growth internationally, as well as from bringing in revenue in currencies that are stronger than the dollar. "It's a nice protection for U.S. investors," Campbell said, naming companies like General Electric, IBM and Hewlett-Packard.
Financial services: With banks, brokerage houses and mortgage lenders imploding on a daily basis, it sounds like heresy to suggest investing in the financial services industry. But the country will still need banks two years from now - and the ones that survive will be stronger than ever.
"If you have confidence some of these will be survivors - Citigroup, Bank of America, Wells Fargo - they're having to float new bonds and securities to raise more capital, and because of the current environment are having to float long-term rates with a very nice yield," said Richard Welty of Welty/Solari Capital Advisers in Lafayette. "I wouldn't put all my money in any one of them, but it's an area that's worth looking at. It's all in the timing."
Timing: You can't time the market just right. But again, experts emphasize, you should use a long horizon when deciding where to invest.
"The question you should ask yourself today is not 'When will the stock market bottom, next year or next month?' " said Jim Paulson, chief investment strategist at Wells Capital Management. "Draw a big circle around where we are today. Ask yourself, 'If I step in and buy something, will I be happy two or three years from now, even if it goes lower in the next six to nine months?' If you ask that question today about stocks in general, the answer is 'Yes.'
Investment tips for a shaky market
Poor financial advice, habits hurt many Hispanics
By TAL ABBADY | South Florida Sun-Sentinel
She's had to take a second job as a maid. To save on gas, she rarely drives her car. And she stands to lose her home.
As a lifetime of hard work crumbles under one bad financial decision after another, Alicia Suarez wishes she and her husband had sought better advice.
"By the time we realized we had no money saved in the bank, we were at rock-bottom," said Suarez, 52, of West Palm Beach, Fla.
Suarez's plight is shared by millions of Hispanics and blacks who have suffered critical setbacks in a shrinking economy, according to recent data from the National Foundation for Credit Counseling.
Debt-counseling services are scarce in low-income neighborhoods, and many financially strapped black families often don't know where to turn for help, according to Emanuel Ridgeway, chief financial officer of the Urban League of Palm Beach County.
"You have a lot of single mothers who live paycheck to paycheck," said Ridgeway, whose agency offers debt management counseling, particularly for first-time homeowners. "Many of them just don't know how to save and put away for a rainy day. There's a lack of resources and education out there."
Among Hispanics, a widespread mistrust of financial institutions in some immigrant communities and the tendency to rely on an informal network of friends and advisors for financial guidance has led many to the brink of ruin.
"They are one flat-tire or emergency-room visit away from disaster," said Gail Cunningham of the National Foundation for Credit Counseling.
Suarez, a Colombian native, said she and her husband quickly built a solid, middle-class existence when they moved to the U.S. five years ago. She got a job in the marketing department of a company that sells health products and he found work as an electrician. They had all the measuring sticks of success: a comfortable, two-bedroom home, two cars and two children assimilating well in school.
But after refinancing their mortgage, spending more money than they had and maxing out their credit cards, the family will likely lose their greatest asset, their home, to a short sale. Suarez said her husband's hours were reduced while gas and food prices rose, worsening their predicament. But she emphasized that irresponsible spending, acquiring four credit cards they didn't need and listening to the advice of friends put her family in a bind.
"We didn't educate ourselves. We simply went to friends who said, 'Refinance your home. It'll give you the power to buy things.' That's true of many people in my community. We're not getting organized and going to a professional for help," she said.
Javier Roca, director of ProColombia Unida, a group that guides immigrants in South Florida through the citizenship application process, said his agency is struggling to meet the growing demands of Hispanics there who need financial advice.
"A lot of people are considering bankruptcy. They simply don't know what to do," he said
In recent years, Freddie Mac and other institutions have partnered with Hispanic organizations around the country to launch bilingual credit education programs. But information about personal finance is not always readily available to new waves of immigrants, for whom the first point of contact in the U.S. are often small, grass-roots groups like ProColombia Unida.
Fabio Andrade, head of the Americas Community Center in Weston, Fla., said his organization, which provides services to immigrants in Broward County, will likely make financial counseling a regular part of its services. The agency caters to many white-collar Venezuelan and Colombian professionals.
"You have a lot of people in our community who wanted to keep up a certain social status," he said. "That meant getting the new car, the bigger house they couldn't afford. Now they're living day to day."
Financial advisers offer tips for tough times
By JOE CREWS
Business Writer
With bad financial news flooding the media, consumers can't help but get jittery.
Deciding what to do with your money is always tricky, but especially difficult in poor economic times. There are no one-size-fits-all plans you should blindly follow, other than to focus on your long-term goals rather than the day-to-day vagaries of the financial markets, experts say.
We asked two investment advisers to offer typical strategies at different age levels and marital status. Here are the suggestions of Greg Wynn of Greg Wynn Financial Services in Ormond Beach, an investment adviser with Raymond James Financial Services, and Jeff Ritchey, a financial adviser with an Edward Jones office in Deltona.
SINGLE PERSON: Wynn recommended broadly diversified, international mutual funds that invest in a mix of stocks, bonds and commodities. Ritchey suggested putting the same amount of money each month in mutual funds to take advantage of market volatility over the long term.
YOUNG MARRIED COUPLE: Ritchey recommended sticking with dollar-cost averaging in mutual funds. Wynn said these folks would need to keep some of their personal money in reserve if they plan to have children or buy a house, or take care of their children and home. Their long-term goal should be to continue investing in broadly diversified international mutual funds, Wynn said
MIDDLE-AGE COUPLE: By this stage of life, Wynn said, couples usually will have two distinct "pots of money." Retirement accounts should remain in those international mutual funds, but other money should go into safe investments such as short-term certificates of deposit or money market accounts. Ritchey advised continuing to build up mutual fund investments, contributing the same amount of money each month.
PRE-RETIREMENT BABY BOOMER: Because many people will live 25 to 30 years past their retirement, their money has to be managed with a higher percentage in safe investments, such as CDs or money markets, Wynn said. But some still should be invested in broadly diversified international mutual funds. This is not the time to put your money into narrowly defined niche funds, he said. Ritchey said now is the time for developing a strategy that takes into account your needs, goals, risk-tolerance and time frame for retirement, and making investments in a diversified portfolio with high-quality stocks or mutual funds, bonds or long-term CDs. But you also should have a six- to 12-month supply of cash or CDs readily available, he said.
RETIREE: A guaranteed income stream -- Social Security, a retirement plan or insurance annuity -- is needed to cover the fixed expenses of a retiree, Wynn said. Whatever is left over can be used for the "fun things," and should be kept in short-term CDs or money market accounts. Ritchey recommended sticking with the diversified portfolio and easily accessible cash or CDs.
joe.crews@news-jrnl.com
Spread Your Money Among Several Banks To Stay Fully Protected
BOSTON -- On Monday morning, customers of the failed IndyMac Bancorp Inc. lined up at the thrift's retail branches to withdraw their hard-earned savings, rather than leave it in an institution that was being taken over by the Federal Deposit Insurance Corp.
It was too little too late, closing the barn door after the horses were gone. And their reaction was completely unnecessary.
The biggest irony of IndyMac's failure -- and it was the nation's second-largest independent mortgage lender and the seventh-largest savings and loan -- was that the branches had big signs telling customers "You can count on us," when in fact the only thing those consumers could rely on ultimately was the promise of FDIC insurance.
While it's understandable that consumers would want to get their money out of a failing bank, experts suggest that there is no real reason to make such a move, provided you fall under FDIC protection guidelines -- specifically holding no more than $100,000 per individually registered account.
(If you have two certificates of deposit in your name at the same institution and each is worth $75,000, you have exceeded the protection limit; if one was registered in an individual name and the other was registered jointly, however, the total amount would be protected because neither registration has exceeded the coverage limit.) See related story.
Show and tellers
When regulators stepped in last Friday, IndyMac customers experienced a brief disruption in the ability to get their money. While automated teller machines were working, they also capped the amount that a shareholder could withdraw electronically, limiting it to a few hundred bucks.
That's why customers had to wait around for Monday morning's opening to rush the bank and ask for their cash back.
By then, of course, they had full access to their money, up to the protection limits. If they had balances above the insured level, they could only access up to $100,000, with the rest being frozen until regulators sell IndyMac and see what's left. While the best-case scenario is full restitution and the worst case is a total loss, the truth is likely somewhere in the middle. That means months of foregone interest and lost opportunity, but not necessarily a big loss in principal.
"People rush to the banks out of an irrational fear," says Greg McBride, senior financial analyst at BankRate.com. "Only depositors who had an exposure more than the $100,000 limit really have to worry, because they are going to be standing in line waiting for a payout."
That's important to remember, in light of reports suggesting that the Federal Reserve has almost 100 banks on a "watch list" of potential candidates for the next bank failure/takeover. The list hasn't been released -- because it would spur a run on those institutions -- but analysts are quick to say they do not believe IndyMac was an isolated failure. Things will get worse before they are cleared up.
Safe deposits
As a result, McBride noted that anyone with accounts that top the deposit insurance limits need to remedy that situation now, either re-titling accounts or moving money to stay safe. At a time when some of the biggest financial institutions are in trouble, it may be better to diversify your safe havens -- spreading money into several banks or thrifts -- rather than letting it build in one place, even if it's earning a higher rate of return.
"It's like driving without a seat belt," McBride says. "You have this tool to protect you -- FDIC coverage -- but you drive around without using that protection, figuring it will be all right. And it is, right up to the point where there's an accident. ... Right now, there are a lot of accidents waiting to happen. It's easy to buckle up, and people ought to be doing it."
For consumers who are caught up in the anticipated wave of regulatory takeovers, bailing out after the news surfaces won't make much difference good or bad. There are new checks to buy and any new account fees to be paid if you move your money to a new bank, but that's a small price to pay for the peace of mind from knowing there won't be even a moment when the bank that is supposed to be safeguarding your nest egg is meeting with regulators.
In reality, the only reason to run to your bank is to protect yourself in case the institution fails -- not to get your cash back once failure has happened.
'Rich Dad Poor Dad' team splits in chapter of 'He said, she said'
by Craig Harris - Jun. 2, 2008 12:00 AM
The Arizona Republic
Their advice in Rich Dad Poor Dad has appealed to millions of readers and even drew the interest of Oprah, but the Valley co-authors of the wildly popular financial book have broken up.
And, like many divorces, it isn't pretty.
Sharon Lechter, who co-authored Rich Dad and other similarly branded books with Robert Kiyosaki, alleges in a lawsuit that her ex-business partner and his wife are enriching themselves, diverting assets and wasting money in a business that she claims to have helped build from scratch. Click Here
The Kiyosakis deny the allegations and contend in court records that if Lechter has been "damaged," it was caused by her own actions.
Success from the original book catapulted their joint venture, commonly known as the Rich Dad Co., into a multimillion-dollar operation with offices in Scottsdale. The company now offers more than 20 financial books, CDs and games with a key objective: to achieve wealth.
Lechter said in a lawsuit that while Robert Kiyosaki has been the face of the company and appeared on TV programs, she was the one who "refined and created" the original book. She also claims in the suit that Kiyosaki once told staff members she was the only "indispensable" person on the team.
Lechter, a certified public accountant who lives in Paradise Valley, now wants a judge to dissolve the joint venture, appoint a receiver and have Robert Kiyosaki and his wife, Kim, pay her compensatory and punitive damages. Lechter also alleges that Robert Kiyosaki's "volatile temper, spurious accusations, foul language and inappropriate behavior" created a hostile work environment for her. The Kiyosakis denied the allegation.
"It is evident that Robert and Kim have executed a plan to willfully destroy the joint venture, while simultaneously and purposely diverting opportunities belonging to the joint venture to one or more entities owned exclusively by them," Lechter alleges in the suit.
Robert Kiyosaki, who co-wrote a financial book with billionaire Donald Trump and has appeared on The Oprah Winfrey Show, declined to be interviewed. He and his wife live in Phoenix, and the suit claims the couple has accumulated more than $9 million through various Rich Dad entities.
The Kiyosakis have sought to dismiss the case, but the two sides also have set June 11 as a deadline to reach a settlement. They began fighting last year in Clark County District Court in Nevada.
In court records, Lechter said she filed there because the Rich Dad entities are part of a joint venture based in Nevada called CASHFLOW Technologies Inc. If a deal can't be reached, a trial is set to start Dec. 29.
Kim Kiyosaki said the full story has not been told.
"I guarantee you, what you have is one side of the story. We have not presented our case," said Kim Kiyosaki, who, court records show, owns an equal third of CASHFLOW with her husband and Lechter.
Kim Kiyosaki also responded in writing to a series of questions from The Arizona Republic.
She wrote that the lawsuit was a first for CASHFLOW. And she added that Rich Dad Poor Dad is her husband's story; he wrote the book and Lechter edited it. She also wrote that there is no reason to consider having a receiver appointed based on "our profitability and growth."
"The bottom line is that Robert and I are going through a divorce with our former business associate. Sharon Lechter resigned from the company in July 2007," she wrote. "As in many divorces, Sharon's perception of her contribution and value to the company is a surprise to us and at odds with what we perceive it to be."
Lechter also declined to be interviewed, and her attorney did not return calls. An attorney for the Kiyosakis declined to comment.
Lechter, however, issued a statement May 22, after being told that The Republic was doing a story on the lawsuit.
In her one-page statement, Lechter was complimentary of the Rich Dad organization, saying its mission always has been to "elevate the financial well-being of humanity."
She also wrote, "We remain hopeful that an amicable resolution can be reached and that the business partnership can be closed on pleasant terms."
In the lawsuit, which includes hundreds of pages and some sections that are sealed, Lechter's tone is harsher. The case also could become fodder for those who have challenged the non-traditional advice in Rich Dad Poor Dad. The book advises readers to avoid mutual funds and 401(k) plans and to leverage themselves up to invest in small businesses and real estate.
Allegations
Lechter, in the lawsuit, claims she "often rewrote large sections" of other books she and Robert Kiyosaki co-authored. And she alleges that Success Stories, Rich Dad Poor Dad for Teens and Escape From the Rat Race were written with ghost writers. Robert Kiyosaki's "involvement was limited" even though he is listed as the lead author on the cover of those books, the suit alleges.
Kim Kiyosaki, in responding to the paper's written questions, said a writer/editor was brought in for Success Stories to organize stories readers sent in after reading Rich Dad Poor Dad. She added that Rich Dad Poor Dad for Teens is based on the original book, and the company hired a cartoonist to work on Escape from the Rat Race.
Lechter also alleges:
• Robert and Kim Kiyosaki manipulated their salaries with Robert's increasing and Kim's decreasing for personal tax-planning reasons, and they gave themselves a discretionary bonus of $250,000 each in August, shortly after Lechter left the company.
Kim Kiyosaki wrote that it was not appropriate to discuss company finances or personal taxes, but she added that their pay and bonuses have not varied from what they were historically paid.
• Robert in 2005 demanded that his wife get a 25 percent royalty on all new books even if she didn't have a role in writing them.
Kim Kiyosaki wrote that she and her husband did not want to get into that issue, but she wrote that the allegation was "petty and hurtful."
• In February 2007, Robert attended the NBA All-Star game in Las Vegas with a Rich Dad adviser and had the company pay for a private jet and other travel expenses that weekend. Lechter, in an affidavit, cited this as an example of "exorbitant" spending and mismanagement of company funds.
Kim Kiyosaki wrote that the company has an ongoing business relationship with the NBA, which wants to bring financial education to its players.
An NBA spokesman acknowledged that league officials had met with Robert Kiyosaki "but he has not done work for us."
• The couple has commenced a systematic campaign of mismanagement to suppress the value of the company and one primary goal is to ensure product "housed in Nevada does not sell."
Kim Kiyosaki wrote that the allegation is "ridiculous" and the company is "more profitable and productive than ever."
The Rich Dad story
Lechter currently has her own Web site and for free writes a personal finance column for Arizona Woman, an Arizona Republic magazine.
She and Robert Kiyosaki developed their partnership around 1996. At the time, he was looking for someone to help write a book to promote an educational board game he had co-created, the suit says.
Lechter, in the suit, says Kiyosaki gave her hundreds of pages of material and she "reorganized and coordinated the content" and determined which portions to "include and exclude" in Rich Dad Poor Dad.
At the time, no major publisher wanted it. So it was self-published and released April 8, 1997.
Within a few years, the book had taken off, and an appearance by Robert Kiyosaki on Oprah Winfrey's show in 2000 enhanced his celebrity status. Today, the book has sold more than 27 million copies in 109 countries and has been translated into 51 languages.
Robert Kiyosaki advocates taking control of your finances and buying investments that create cash flow, and the book is based on how Kiyosaki's two "dads" approached money.
He has said his biological father was highly educated but struggled financially and left a legacy of unpaid bills. However, he said his other father, a mentor, never finished eighth grade but became one of the richest men in Hawaii, leaving millions of dollars to family members and charities.
Sara Fleury, a Phoenix-based public-relations consultant who offers crisis management guidance, said how much the suit damages the Rich Dad Co. and the Kiyosakis depends on how the couple and their employees react.
"They need to lay low and hope it doesn't elevate," said Fleury, president of B.J. Communications. "If they pay a lot of attention to it and convey their concern frequently, it will cause more alarm."
John Reed, a California-based real-estate writer and frequent critic of Robert Kiyosaki's advice, said he doesn't believe the lawsuit will hurt Kiyosaki. Reed added that he had heard it was filed months ago, but didn't know the details.
"I don't think it will dent him, and I don't think it will hurt her," Reed said.
Want to Retire Rich?
By John Rosevear
I don't know anyone, except an old friend who became a Zen monk, who doesn't dream of being wealthy someday.
Even those who have been financially successful sometimes dream of hitting it really big -- of hundredfold stock returns, of lottery wins, of finding out that their long-lost uncle has the initials W.B. and runs a successful company in Omaha.
For most of us, the odds of such windfalls are pretty low. If we want to be rich someday, we'll have to make our own windfall.
Use what they give you
The U.S. government has made it awfully easy for to us to become rich. You only need two things: a job and some common sense. With those, you can become rich using only what the government gives you.
What have they given you? IRAs. Workplace savings plans like 401(k)s. Tools, in other words, that let you park money in investments and watch it grow -- completely out of reach of the tax man.
These tools can help you fund incredible retirement dreams -- if you use them the right way.
The right way
Effective retirement saving -- which is what we're really talking about -- isn't that hard. No matter how old you are, if you have an income -- and some common sense, as I said -- you can make your retirement years more comfortable.
And if you're young, and just getting started, you can build some very serious wealth -- even on an ordinary income.
How? Here's the formula:
* Spend less than you earn. This is the real key to wealth, has been for thousands of years. Whether you earn a little or a lot, you'll have a lot more later if you spend less now.
* Use those retirement tools. If you're spending less than you earn, you have extra to save. Enroll in your employer's workplace savings plan, if you haven't already. Learn about the power of IRAs, and start contributing.
* Take everything they give you. Maybe you're already enrolled in your employer's 401(k) or 403(b). But are you taking full advantage of the match? Nearly all employers match your contributions up to a certain amount. That's free money. Get it all.
* Invest Foolishly. Not foolishly, Foolishly. Use the Fool's investment research and educational resources to find good investments, learn how to take risks sensibly, and build a solid long-term portfolio.
And yes, long-term is the key. Sure, some people have done well with short-term trading strategies, but that kind of success requires luck, intense focus, and a full-time commitment. Is that how you want to approach retirement planning?
Or would you rather buy a few great companies and hold them? Blue-chip superstars like Johnson & Johnson (NYSE: JNJ), Altria (NYSE: MO), Coca-Cola (NYSE: KO), and General Electric (NYSE: GE) have built fortunes -- or just nice nest eggs -- for thousands of savvy investors over the years.
With the recent market turmoil, now could be a great time to buy the next century's blue chips, whether from a list of perennial outperformers your grandfather would recognize, or from the best of newer companies like Apple (Nasdaq: AAPL), NVIDIA (Nasdaq: NVDA), or Garmin (Nasdaq: GRMN).
While spending less than you earn might be the key to wealth, buying great stocks and holding them over the long-term may well be the greatest secret of all.
The Foolish bottom line
But it's not something you can set and forget. You have to stay on top of it. I don't just mean watching your investments, although that's important. You have to continue to monitor your whole financial picture, think about your future, and do the planning necessary to realize your dreams.
Intimidated? We can help. Our Rule Your Retirement service provides how-to articles, interviews with the best minds in investing, and news updates that help you stay on top of things, without having to do hours of research.
Want to check it out? Try it out free for 30 days. The road to wealth begins with the first step.
Fool contributor John Rosevear owns shares of Apple. Johnson & Johnson is a Motley Fool Income Investor choice. Coca-Cola is an Inside Value pick. Apple, Garmin, and NVIDIA are Stock Advisor recommendations. Garmin is a Global Gains selection. The Motley Fool has a disclosure policy. fool.com
Advice For Have Benefit In Recession
Every day, you hear a lot of news from media around the nation about recession. You have found that your colleagues, neighbors, friends and people around you are worried about recession.
Recession is really a word that can make people worry. However, if you are doing well in your personal finance, you won’t worry that much about this. In fact, recession also has its own benefits.
Let me show you the benefits:
1. Recession makes people frugal. One of the reasons people worry about recession is because their personal finance is not strong enough to fight with recession. The good news is worry can make people change. Many people will learn the lesson and be more frugal.
2. Recession helps people think about their finances. I hope that people can learn their lesson from a recession. If you are worried about recession, this is because your personal finance is not recession-proof enough. So you have to sit down and think properly what you should do to manage your money in a better way. At least you can prepare for the recession in future.
3. Low Interest Rate. In order to help the market, Federal Reserve has already cut down the interest rate several times. If you read my article Federal Reserve Interest Rate Cut and Your Personal Finance, you will know its effect on your money. At least, credit card and mortgage interest rates will drop and this is good news for a lot of people.
4. Inexpensive Stocks. For some investors, recession can be good news for them. Stock market drops badly during recession period. So investors will jump into the market and buy those low cost stocks. When the economy goes back to normal, the stock price will raise and they make money from this. This is a cycle of generating wealth.
5. Great Deals on the market. Just like stock market, many things in the market will be affected and drop in price. So if you are well prepared financially and have plenty of cash, you can get a lot of great deals on the market. Currently housing market is dropping. You can pay attention on it and you might find 1 or 2 good deals for your real estate portfolio.
6. Win your business competitors. I don’t really wish to say this but this is the time you can beat your business competitors and stand out the crowd. Many businesses are slow or even closed down during recession. So if you can do something to boost and maintain your business, you will win your competitors and stand out in the market.
Recession can be good or bad
Like most of the things in this world, recession can be good or bad. In fact, I heard before that recession or bad economy period is a time of wealth exchange. Some people will be poorer but some people are getting richer. This is all about your financial literacy and how well you prepare your finance for this tough time. finandom.com
Get to grips with your money
Whether your finances are a bit under the weather or fighting fit, it's always a good idea to keep track of your money. Do you know what's coming in, and where it all goes to? Would you be able to find money in a hurry if you had to – to pay an unexpected bill, for example?
Our two easy steps below can help you to take stock of your day-to-day finances and, once you know where you stand, follow our tips on how to make more of your money.
Step 1: Take stock
Find out where you stand by reading our tips on how to check what money you have coming in and work out where your money is going. Use our useful tools to help you.
Setting aside a few minutes a week is all it takes to review your finances. A good way to take stock is to make a budget – list everything that’s coming in and where it’s going. You can use our online Budget calculator to help you do this – either complete it online or print it off fill in by hand.
Have your recent bank statements and bills handy to help you fill it in accurately.
Tips to help you take stock of your money
• Don’t forget occasional items, such as birthdays, Christmas or other festive presents and holidays.
• Think about other things that you pay for once a year, such as car tax and insurance. It's helpful to put in a monthly amount for these, perhaps by estimating and dividing up the average that you'd spend during the year.
• Keep a spending diary – try writing down every penny you spend for a month.
• Check to see if there are any State benefits or tax credits you may be entitled to. Contact the Benefit Enquiry Line or look on the government's Directgov website – see Get more help.
• Make sure you review your budget regularly. If your circumstances change – for example, you get a pay rise or your bills increase – look at it again.
• If you haven’t got enough money to cover your expenses, see where you can make savings. Go to Step 2 for some ideas on where you might be able to do this.
• Once you have worked out your budget, think about your financial goals and when you want to reach them. Use our Financial healthcheck to help you.
Step 2: Take action
Once you know where you stand, take control and make your budget work for you.
Not much money left over?
If you find that you're regularly struggling to make ends meet, you will need to reduce your spending. Our tips below may help.
• Try cutting back on non-essential items. What could you do without to help you get back on track?
• Check the APR on your credit card or loans. This shows the overall cost of borrowing including interest and charges. See if you can shop around for a better deal.
• You may save money by switching services such as phones, electricity or gas to new suppliers. Try Energywatch, the gas and electricity watchdog's website – see Get more help. There are also various internet switching services or search engines you can use.
Getting into difficulties?
You may have the beginnings of a debt problem if you find yourself doing any of the following:
• Using credit to take out cash advances, pay bills or pay your mortgage repayments.
• Being tempted to take out a consolidation loan to reduce monthly payments on servicing your debts.
• Paying no more than the minimum payments due on your credit cards.
• Borrowing money without planning how you're going to pay it back.
Think carefully about borrowing more money to pay off existing debts. It could make things worse.
To find out whether you have – or are likely to have – problems with your borrowing, take our Debt test. It will also give you some tips to help you avoid debt problems or help you tackle your debts if you're in trouble.
In trouble?
If you're struggling with debt, try not to panic – you're not alone and expert help is available. Several organisations offer a free service, either face-to-face or by phone. They will help you set up a budget sheet, prioritise your debts and work out how you can live within your means – see Get more help.
Talk to the people you owe money to (for example, your utility suppliers) if you are having problems paying them back – they may be able to help you manage your repayments.
Whatever happens don't ignore the problem – help is available – see Get more help.
Making your budget work for you
Once you've got your budget sorted, it's time to get it working for you. Here are a few ways to get started.
Think about your financial priorities or goals. They could be:
• In the short term
o Paying off or reducing your debts.
o Saving up for furniture, a holiday, or a deposit for a home.
o Taking out insurance to protect your family or home if things go wrong.
• In the longer term
o Saving for your retirement.
If you need help identifying your priorities, our confidential, Financial healthcheck can help.
Do
1.Be straight with yourself about how much money you've got coming in and how much you spend
2.Review your budget if your circumstances change to make sure you’re living within your means
3.Find out if you're eligible for State benefits or tax credits and claim them
Don't
1. Put off dealing with your finances until tomorrow
2. Overstretch yourself by spending more than you can afford
3. Ignore the problem if you are struggling with debt – get specialist help now
