With the current economic crisis you might be wondering how you’re going to handle 2009 and the promise that we’re hearing from all the economists (and even the President Elect) that things are going to get worse before they get better. Well, strap yourself in and let’s take a look at some of the things you can do that can help you survive financially in 2009

1. DON’T: Play prognosticator!

Let’s face it - if we knew what the stock market was going to do we’d already have enough money to retire! Don’t second guess yourself! If you’re already invested in something and prior to the debacle of the last several months it was doing ok - it’s probably a good idea to stay in the game. Don’t start trading every day just because you think you know what the stock market is going to do tomorrow!

2. DON’T: Put all your eggs in one basket!

Now we’ve all heard the story (and perhaps the tale of Madoff is our most recent example) of someone who put every single dime they had into one investment vehicle. Don’t do that! Keep a variety in your portfolio - yes, some things are liable to take a hit, but factually, just as many are liable to stay stable and now and then you get lucky and some will rise like yeast. Diversity is the key to a sound investment strategy! We aren’t the only ones who feel this way, check out this Motley Fool article.

Not sure how to diversify? Here are some tips:

• Suggestions from MoneyWeek on alternative investments
• Six tips to a well balanced portfolio
• LA Times tells investors to look to mutual funds
• General lessons learned and ideas for the future

3. DON’T: Spend every dime you make!

Before you start spending this week’s pay check ask yourself if you really need that newest gadget, blouse, pair of pants, tool or whatever. If in fact you really don’t need it, you can certainly save that money - remember - living at our means is fine, living below our means is even better because it means greater savings and the possibility of more to live on during retirement! Think before you spend!

There are a lot of ways to save money, here are a few ideas:

• US News basic money saving strategies
• Be prepared for the next gas price hike and follow these tips from GasBuddy
• CBS News reports on how Americans can cut everyday costs
• Money saving tax tips from the IRS

4. DON’T: Bounce around!

If you’ve got a fairly stable portfolio, do not consider changing it! If you have faith in the stability of the companies you’ve invested in, stick with them! Remember that investment fees add up quickly (commissions and transfer fees) and you’ll diminish your investment amounts if you keep moving in and out of positions! Take a few tips from AP on understanding investment fees and how they can add up quickly.

5. DON’T: Increase your debt!

There is nothing like a financial crisis - sometimes it brings out the worst in us. Of course no one would recommend that you start hiding money in a mattress and stop buying things altogether but watch out!Don’t start running up credit card debt needlessly. If you find something you really want, set up a plan and start saving for it!

Tips for Reducing Credit Card Debt:

• Federal Trade Commission (FTC) gives consumers helpful advice to get out of debt. Everything from budgeting to counseling to damage control is covered. It is a must read for anyone knee deep in debt
• The Washington Post has some great lessons for everyone with credit card debt and pointers for getting it under control
• MSNBC says split your normal monthly payment into biweekly installments to reduce finance charges
• ABC News gives consumers pointers for negotiating away debt

6. DON’T: Be a nervous Nellie!

Sometimes unfortunately our gut instinct tells us when a stock starts losing value it’s time to bail out and sell it. Think about the opposite side of that - invest a little more in it. This helps bring down your overall cost leveraging your investment! Remember to keep your focus on long term gains, not short term pains.

7. DON’T: Pay a Money Manager!

Let’s be realistic - most of us don’t have a million dollars sitting in our savings or our investment accounts! Therefore, all you are going to do is pay someone ridiculous fees to manage your money on your behalf - and the reality of that is you’re still going to be the one making the decisions! Take control over your own money and stop paying management fees!
Here are some basic tips for managing your own portfolio:

• The Securities and Exchange Commission (SEC) puts out a great beginners guide to investing
• Morningstar has a helpful tool that analyzes your portfolio and investment strategy
• Schwab has a great article on how to build a portfolio that will last and can be tailored based on risk tolerance
• If you do want to go with a broker, visit the Yahoo Finance education center. It is filled with helpful articles on how to choose the right broker
  

8. DON’T: Be one of the many!

If you follow any financial news you’re liable to see any single stock go into the hopper any given day. The reasoning behind this is that some traders (and I’ll pick on them since it’s easy) see that a stock is trading downwards in large blocks and all of a sudden they follow the leader.

STOP and think!! If everyone is selling - and the fundamentals of the stock are good - think about buying! This could work to your advantage!

9. DON’T: Invest ‘over your head’!

Sure we have our stock broker call us and tell us about this new investment vehicle called a CMO and they try to explain it but we’re still a little confused about what it is - the broker is making it sound like the best thing since sliced bread. Don’t do it!

If you don’t understand it, don’t invest in it - plain and simple. Some people will always invest in only stocks or only mutual funds and that’s just fine. Puts, Calls, Options, etc., are way over most of our heads - if they’re over yours, avoid them!

10. DON’T: Play Russian roulette!

We all understand that with risk comes reward. But the other side of that is that great risk often means greater risk. If you’re twenty years old you can probably afford to take a few more risks than your fifty year old mom but don’t overdo it. Remember, every investment already has the potential to wind up at $0 value!

Here are a few risk management resources:

• Simple explanation of money management when trading
• Risk management for beginners by RGE
• Bank Info Security gives readers ideas of how to manager both professional and financial risk

11. DON’T: Pay Higher Interest Rates!

As a practical matter if you can lower the rates on your existing credit cards then transferring the balances on old cards for a new card could be very sensible. Just make sure you close the old account first. Cut the card in half, throw it in the barrel and send a letter to your credit card company and tell them to close your account.

In fact you might even want to look into the possibility of getting rid of all but one credit card and consider a home equity loan to pay them off since the interest on home equity loans is tax deductible.

Help navigating the credit card interest rate jungle:

• Barron’s is a great resource to help guide you through the treacherous world of credit cards
• You can negotiate with your lender for a lower rate. Here are a few ideas to get you started
• A local Baltimore news station shows viewers how to convince their credit card companies to cut them a break
• PBS tells you what you need to know about your credit cards

12. DON’T: Overlook deductions!

When tax time approaches make sure you’re taking full advantage of any deductions that are available to you! If you’re not sure on which ones you may qualify for then you should consider hiring a tax professional. There’s no point in ‘leaving it on the table’….if you’re entitled to a deduction, by all means take it!

Resources to help you find more deductions:

• Turbotax provides some great information on maximizing your tax deductions, so check it out before you file.
• IRS list of what can be used as a deduction, because knowing is half the battle
• Kiplinger list of most overlooked tax deductions
• Yahoo Finance list of a few more overlooked deductions

13. DO: Remember Cash is still gold!

Most of us have some modest savings - just because credit is harder to get and you’re itching for that new huge screen TV to watch the Super Bowl - keep saving! Don’t deplete your rainy day fund on furniture (unless you’re sitting on the floor), other big ‘toys’ or the stock market.

Make sure you have a ‘slush’ fund just in case your company decides to downsize! Motley Fool goes as far as saying having that extra slush fund can help save your marriage. It’s something to think about.

14. DO: Consider over the Ocean!

Many of our overseas allies have robust stock markets (and outlooks that while they’re similar to ours have more stability in some cases). Take a look at some of the emerging markets and think about investing in them if the long term fundamentals make sense. Ask your local friendly broker about potential good overseas investment options or check out this recent Fool article.

If you have gotten rid of your broker, start with these international investing tools:

• Check out Morning Star’s international investing center
• Yahoo Finance has a great international news section
• Motley Fool’s international area has good articles from time to time. They just need to get rid of that annoying pop up
• Financial Times world area is a must read for international financial news

15. DO: Conserve resources!

Look, let’s call a spade a spade - we waste water, electricity and yes, even heat. Consider some of the options you have for low cost investments just around your home: Water efficient showers, water heaters, etc. In fact, for less than $10 you can purchase a timer that will turn your lights off and on (and you won’t have to worry about it).

Make conservation a family affair and add those savings to your current savings! Don’t forget about available tax breaks for energy efficient vehicles and home improvements! A small investment (or even a large one) in energy efficient appliances, cars or insulation can add dollars to your savings!

Here are some simple and easy ways you conserve both money and the environment:

• The Daily Green has seven simple money saving tips for readers, like unplugging unused electronics to save a potential 8% a year on energy bills
• MSNBC has also caught on to energy conservation helping to save money
• Consumer reports has a massive resource center for saving money

16. DO: Look for lower cost options

Now this can cover a whole variety of things - like for instance: do you really need that $3 cup of Starbucks coffee every morning? How about carrying your lunch instead of heading out every day? There are hundreds of little ways to save money (by the way - it’s time to think about selling that Hummer and getting a small car that’s more fuel efficient!).

Look around - there are plenty of simple ways you can add to your savings by making small sacrifices and lifestyle changes! Find them and use them! Even Cosmopolitan magazine has some great money saving tips.

Here are some other fun and inventive ways to save money:

• From cutting your own hair to using baking soda as toothpaste Frugal law student has some simple ideas to cut back
• Stay at home parents have some suggestions for cutting grocery bill costs, like freezing milk
• Kiplinger has an entire section to spending wisely on their website

17. DO: Pay Attention!

If you’re not keeping good track of your everyday expenses you’re probably overlooking some really easy ways to save money for you future. For instance: Do you know how much you spent this week on lunch, coffee or that mid-afternoon break? Learning where you’re spending your money can help you save more money.

You don’t need an expensive software program to do this - you can use something as simple as Excel or even a pen and ledger! Just keep track! If you have an iPhone, there are some great inexpensive apps like “My Expenses” “Pocket Lint” or “BudgetBuster” that let you track expenses.

Expense tracking tips and tools:

• Track expenses via e-mail, IM, text, iPhone, call or even Twitter with Xpenser
• An assortment of Palm and Blackberry expense trackers for almost every budget
• Kansas City Star tells readers why tracking expenses will keep them out of financial trouble

18. DO: Be a smart consumer

You should be constantly aware of what your credit report says about you. Most states have laws that allow you to get your credit report at least one time annually at no charge (check out the FTC for your credit history rights)  Take advantage of it and make sure it’s accurate. The one thing you definitely do not want to do is need to apply for credit only to find out something negative is on your report erroneously. Make sure you pay close attention to closed out credit cards, etc. and make sure they are reported correctly!

19. DO: Be practical about protecting yourself

Whatever you do don’t consider lowering your insurance at this time! Sure, it’s easy to save a few dollars a month by increasing your deductible, lowering your overall coverage, etc., but don’t overlook the fact that one catastrophe could put you in the poor house!

While the lower coverage could potentially add a few dollars a month to your savings, you could wind up with no savings at all if something happens that you needed that additional coverage. MSNBC has some great and simple tips to add a little more to your savings account each month.

20. DO: Budget, Budget, Budget

Not only that - stick with it! Don’t set yourself up for failure! If you know you’re bringing home $500 per week don’t set a budget for $550 a week! Let’s face it there’s no way you’ll ever make it. If you do in fact find that your actual expenditures are regularly lower than your budget then lower it and stick with the lower amount (that’s a gift in disguise!). Take some advice from About.com and create a simple personal budget.

Budget creation resources:

• Don’t know where to start? CNN Money has a simple and effective budget creation tool
• Yahoo Finance also has household budget tool that lets you incorporate both your income and your spouse’s
• Because it is never too early to start, here are some resources to teach children about budgeting
• Tips from CNBC for sticking to your budget

21. DO: Verify, Verify, Verify!

Whatever you do, don’t go to the first broker dealer who you find in your local friendly phone book! Check them out thoroughly, monitor your statements, make sure you are dealing with someone reputable. Check for complaints through the SEC and through the Better Business Bureau before you trust an investment advisor with your money! (Remember Madoff)

22. DO: Verify your protection

Make sure your familiar with the insurance limits on your bank accounts (and other accounts) and that you’ve adhered to them. There’s no way that any bank or other financial institution can guarantee that they are not going to close tomorrow - so don’t be lulled into any false sense of security. Whatever the insurance limits are make sure you move the balance to another institution!

Great Protection Resources Care Of the Federal Government:

• Call the FDIC to confirm your account is covered - http://www.fdic.gov/deposit/deposits/insuringdeposits/
• Check out the FDIC website to see if your bank is insured - http://www.fdic.gov/deposit/deposits/index.html
• Understand what happens when a bank fails - http://www.fdic.gov/consumers/banking/facts/index.html
• Calculate your coverage - https://www2.fdic.gov/edie/index.html
• Basic credit protection laws - http://www.federalreserve.gov/pubs/consumerhdbk/electronic.htm

23. DO: Consider DRIPS

No, we’re not talking about a dripping faucet. Dividend reinvestment plans can allow you to invest small amounts of money (as little as one share) and continue adding to that by not removing the dividends earned on that stock. Over time, you are buying fractional shares and they do add up!

24. DO: Consider refinancing

If your mortgage rate is one percent higher than the current rate you might want to consider refinancing your mortgage. Don’t make the common mistake though that so many do make - if you have 15 years left to pay in your mortgage don’t take out a new thirty year one, take out a new 15 or a new 20, but definitely avoid the 30!

Here are some tips for refinancing right:

• Marketwatch gives 4 tips to consider before refinancing
• Ginniemae’s checklist of what homeowners need to consider before refinancing
• Understanding what the White house is doing to help homeowners
• Commonwealth of Massachusetts refinancing checklist

25. DO: Consider gifting

If you have the assets you need and you are considering leaving specific assets to your children (or others) don’t wait to ‘will’ it to them. Look into the benefits of early gifting.

Another idea: grandchildren and nieces and nephews will be very happy to receive a savings bond for holiday and birthday gifts (and they count towards your gifting). Take advantage of them.

Gifting Resources:

• Save Wealth discusses the basics of gifting , restrictions, and a living trust
• As of 2009, the IRS has lifted the gift tax to $13,000. That means you can give or receive $13k tax free.
• Local newspaper explains why using gifting to help cover the cost of college and save money is very popular money management strategy
• There was a gifting pyramid scheme. The FTC has some helpful information about how to avoid this and what to do if you were a victim

There are probably a hundred more ways that you can protect your financial future. These are merely a scratch on the surface. These simple tips will help increase your hope for a prosperous 2009!

Tags: 2009, conservation, finances, financial future, gifting, savings

This entry was posted on Monday, January 5th, 2009 at 8:02 pm and is filed under Feature Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.