Shore up finances ahead of potential downturn
The economy is growing, the stock market is soaring and unemployment remains low. It’s the perfect time to prepare for the worst.
Any economist or financial planner will tell you that no party goes on forever. And it’s much easier to make smart decisions when things are going well than when times are tough.
So, The Associated Press talked to a few experts about what steps to take now while things are hot to better position yourself for when they, inevitably, are not.
Stocks just set the record for the longest bull market of all time at 3,453 days – about nine and a half years.
It’s good news if you’ve been invested that whole time. But the boom period for stocks might have thrown off your ratio of investments, making it time to rebalance. Take a look at your portfolio and make sure you aren’t over-invested in stocks and adjust accordingly.
While you’re at it, make sure you are content with the overall investment plan.
“I would suggest everyone take a look at their accounts and make sure they are comfortable, just in case,” said Jeanne Thompson, senior vice president at Fidelity Investments. “Would you be comfortable with your plan if it were to drop 10 percent?”
What investors should be doing now is what they should always be doing, said Mark Stoeckle, CEO of the Adams Funds: Be honest about how much risk they can take on to meet their goals and tune out the noise.
In short, make a plan and stick to it. Trying to time when you should be in or out of the market is a fool’s game, he said.
DEBT AND SAVINGS
It’s a good time to rededicate yourself to the basics of financial health – paying off debt and saving adequately.
Interest rates are going up – that’s bad news if you’re carrying any variable debt, but good news if you have savings.
Savings have been earning little to no interest as the Federal Reserve kept benchmark rates at historic lows, but online savings accounts are now approaching as high as 2 percent and CD rates are as high as 3 percent, according to Bankrate.
“You can put yourself on the right side of the interest rate equation by paying off debt and increasing savings,” said Greg McBride, chief financial analyst for Bankrate.
Your job, in some sense, is one of your biggest financial assets as it’s the source of your livelihood.
Unfortunately, most people pay attention to managing their career only when their job is threatened, and that is often after a period of denial, said career coach Sheryl Spanier. But taking care of your professional life proactively can pay off – financially and emotionally.
Spanier said that the people she sees who are most successful think about their career strategically – being savvy about both where they and their industry are going. They also are always marketing themselves and building their portfolio of experiences and expertise to better position themselves within that framework.
Following that script can make you indispensable when times are tougher, should layoffs or other unwelcome job changes come
“Don’t approach this whole thing with a fear perspective,” she said. “It’s about growing, it’s about what you care about and what you are curious about. That tends to get submerged when people are under duress and trying to protect themselves against a career crash.”
Networking is also important, even in good times. This means staying connected to people you like, those who have helped you and that you can help.
Housing should, first and foremost, be treated as a place to live and not an investment, said Mark Fleming, chief economist for First American Financial Corp.
All the same, it’s good to consider the financial implications of any decisions you might be making.
Homeowners should make sure, as always, that they aren’t playing too fast and loose with their cash.
If you own a home, make sure you have savings on hand to protect yourself if you hit a financial pothole in the future. If you are feeling confident and want to remodel, don’t overextend yourself financially or invest too much in an update that won’t pay off if you have to sell.