- Have an emergency fund. Nothing beats having cash on hand to get you through a tough patch (and to help you sleep at night). Even a few weeks’ worth of expenses in the bank can help you ride out trouble.
- Have access to credit. This might seem strange considering how I’ve warned you away from toxic debt. But having plenty of open space on your credit cards, or an unused home equity line of credit, can provide you with money if you’ve exhausted your emergency fund. You don’t want to make credit a first resort, but it’s good to have when you need it.
Want to learn more? Get your own copy of Easy Money and Investing 101.
Liz Pulliam weston is author of Easy Money: How to Simplify Your Finances and Get What You Want Out of Life, Deal with Your Debt: The Right Way to Manage Your Bills and Pay Off What You Owe and Your Credit Score: How to Fix, Improve and Protect the 3-Digit Number that Shapes Your Financial Future. She writes regularly for MSN Money and her Q&A column "Money Talk" appears in newspapers throughout the country. Pulliam weston appears frequently as a money expert on radio and TV programs, including NPR’s “Talk of the Nation” and NBC's “Today Show.” Learn more and get advice at http://asklizweston.com.
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Q: I want to buy a home. Is now a good time? How do I know if I can afford it?
A: I’m a big fan of buying a house if you’re ready to stay put for at least five years and your finances are in order. These days you’d be smart to have a minimum of a 5% down payment (10% is even better), plus a month or two of mortgage payments before you buy. Get a loan with a fixed interest rate for as long as you plan to stay in the home; consider a 30-year fixed rate for even more safety. Your housing costs − mortgage payment, property taxes homeowners insurance − should be less than 30% of your gross income; 25% or less is even better.
Q: I don’t have health insurance, can’t afford COBRA and need medical care. How can I pay for it? Are medical providers willing to negotiate for services?
A: If you’re healthy, your best bet is to get a high-deductible policy that protects you against catastrophic expenses. Many medical providers will negotiate, or at least give you the same discounted rate they give insurance companies, if you ask. Also, there are free or low-cost clinics that provide services.
Q: What are three steps I can take to recession-proof my life?
A: You can’t insulate yourself completely from the economy but here’s how to increase your chances of surviving a financial setback:
- Don’t carry toxic debt. Credit card debt, payday loans and other high-cost debt sap your cash and leave you vulnerable to lenders. Pay off this debt… and only use credit cards if you’re committed to paying off the balance every month.
Q: Some experts are saying it’s a good time to buy stock. Is this true? What type should I invest in – and why?
A: Warren Buffett, our GREatest living investor, certainly thinks it’s the time to buy. He’s investing billions right now. When there’s economic panic, good companies get sold at big discounts. A patient investor who’s willing to take some risk can prosper.
That said, it can be a scary time for novice investors. It’s smarter to invest regularly rather than trying to time the market. Take full advantage of your 401(k) at work and invest in broadly diversified mutual funds or exchange traded funds (ETFs). For a good primer, read Kathy Kristof’s Investing 101(Bloomberg Press, 2008).
Q: In this economy, are 529 college plans still worth it?
A: For most families, they make sense. Tax benefits can be substantial and 529 college savings plans receive favorable treatment in financial aid formulas. Typical plans offer age-weighted options that reduce a portfolio’s risk as the child nears college age. That’s the best investment choice for most families.
Of course, you need to make sure you’re on track for your own retirement before funneling money toward your kids’ educations. But you can always start small. Even $25 a month will help reduce their future education debt.
A CFP can look at your entire financial situation, judge your tolerance for risk and gauge how much you need for the future. You can get referrals to fee-only CFPs who charge by the hour at the Garrett Planning Network (GarrettPlanningNetwork.com). The National Assn. of Personal Financial Advisors (NAPFA.org) is another GREat source for fee-only planners, although they tend to represent planners who deal with people who have a high net worth.
Q: How safe is my money market fund? How do I know if it’s in danger?
A: Unlike bank accounts, money market mutual funds aren’t insured by the FDIC. Money market funds are usually safe investments because they invest in corporate and government debt.
But when institutions like Lehman Brothers went bankrupt, some money market funds suffered big losses and “broke the buck.” That means investors would get less than $1 for every dollar invested – the first time in 14 years that has happened.
It’s not easy to predict whether a money market fund will break the buck. The federal government is taking steps to try to stabilize money market funds by offering a limited guarantee of the money in them.
Although your risk is small, a money market fund is not as safe as an FDIC-insured account. If safety is your primary concern, you might consider moving your money to an insured bank account.
Q: I have a steady job, no debt and money to invest. Where should I put my money? What’s the highest yield, safest investment these days?
A: Safety is an illusion. The kinds of investments that promise to protect your principal don’t pay a very good return. If an investment promises safety and high yield, it’s a scam.
If you’re only getting 3% interest, you’re not even keeping up with inflation. That’s an appropriate return if you’re talking about emergency fund money you might need to tap in a hurry. Consider using one of the online high-yield, FDIC-insured savings accounts offered by ING Direct or one of its competitors.
But if you’re investing for retirement or another goal more than 10 years off, you’ll need the kind of inflation-beating returns that stocks have historically offered over the long haul.
Q: How much of my money should be in stocks, bonds and cash in this economy?
A: That’s a GREat question to ask a fee-only Certified Financial Planner. You need individualized advice, not canned responses that aren’t appropriate for your situation. For example, if you’re middle-aged, you’ll have different plans than someone nearing retirement.
Q: I have credit card bills, car bills and a mortgage. What’s the best way to reduce debt?
A: If you have credit card debt, the real solution is to stop using the cards, create a plan for paying off the debt, cut expenses to fund that plan and then set up online automatic payments so your balances get paid down over time.
Don’t worry about paying off a low-rate, tax-deductible debt such as a mortgage. Car debt is usually low rate as well (although not tax deductible), so it needn’t be tackled until these other financial ducks are in a row. That means you’re saving for retirement, you’ve paid off toxic debt such as credit cards, you have at least one month’s worth of expenses in your savings account and you’re adequately insured.
Q: My bank is threatening to foreclose on my home. How much negotiating room do I have? What steps can I take to prevent this?
A: Contacting a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD) is your best bet. They can review your situation and advise options. You can find a list of counseling agencies at HUD.gov.
Q: I have $275,000 to park, $25,000 over the FDIC-insured limit. What do I do with the excess? Should I take a chance on banking the whole sum?
A: If you have more than $250,000 at any bank, you risk losing money if the bank fails. You don’t have to expend much effort to ensure your cash is protected. The FDIC has rules that provide higher coverage for certain accounts, depending on the types of accounts and other variables. Find out if you qualify for the higher coverage. (Click here for more information.) Or you can simply divide your cash into multiple pots and stash them at different banks.
Your 401(k) is shrinking, your bank is sinking, and you’re losing sleep over the Dow’s daily dive. Is your nest egg safe? Can you really recession-proof your life? LifeScript sat down with financial expert Liz Pulliam weston, author of Easy Money(Financial Times, 2007) for answers. Her advice? Read on to find out. Plus, take our quiz to see if you’re investment savvy…
Q: Many experts are advising people to pull out of the stock market and/or stockpile cash. Is this good advice? If so, where should I put my money?
A: Here’s the problem: There’s a world of difference between television personalities, whose primary job is entertainment, and true financial planning professionals, whose job is to understand their clients’ individual situations and provide advice on growing their wealth.
And you won’t find many qualified financial planners urging people to bail out. Recent polls of Certified Financial Planners (CFPs) show the majority are not only urging clients to stay invested, but are also staying invested themselves.
That’s because CFPs understand the market has cycles and the best way to protect yourself is to be diversified, take a level of risk appropriate to your situation and continue investing throughout the cycle so that you takeWorried About Money? Your Top 12 Questions - Answered!文章來源頭牌英語[美文欣賞]