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10-Step
Personal Financial Recovery Plan
If you are one of those whose fortunes took
a dive at the end of 2008, you are not
alone.
With the market down over 40% at the end of
2008 and recently up more than 20%, it is no
wonder that the average person's head is
spinning. People are scared, angry and
confused about what they should do next.
Here are some tips:
1.
Assess your damage. Don't be like an
ostrich -- with your head in the ground and
your feet in the air. You've got to take
the time to review all of your financial
assets in order to assess the damage. It
is only through knowledge that you can start
to assess the damage and move ahead to
shore up your losses and plan for the
future.
2. Get on a budget. Belt-tightening should
be your new plan of action. Put pen to paper
and closely examine your monthly expenses.
See what can be eliminated, like too much
dining out, and what can be placed on hold,
like the purchase of that new computer.
There are web sites that can help such as
Wesabe.com, Quicken.com and Finance.Yahoo.
3. Learn to be the monitor of your money.
With the creation of 401K plans 401K plans 401K plans 401K plans 401K plans
many people have been placid participants
who have not learned the
importance of reviewing their portfolio and
making timely adjustments. You should
look at your 401K and stock portfolio as
fluid not fixed --review them for
diversification and rebalance on a quarterly
or annual basis.
4. Reduce your debt. Playing the credit
card game can be a dangerous one. Remember
that "cash is king" and when possible, pay
for what you need by cash not credit. And
better still, eliminate any unnecessary
spending.
5. Plan for the worst. With the
unemployment rates continuing to soar,
the rule of thumb has always been to try to
save an amount equal to at least six months
of living expenses -- just in case. This is
not 401K money, since there are penalties to
withdrawal from 401K funds. This is just a
regular savings fund or money market fund
that is easily accessible without penalties
6. Set short-term financial goals. Be
optimistic. Our country has weathered
recessions before and those who have reset
their financial goals have been ready for
when the economy moves into positive
territory. So, instead of burying your
money in the back yard, decide what
percentage of your money you feel
comfortable keeping in cash and the
remainder diversify in mutual funds.
7. Set a stock market strategy. Despite
the enormous pain most of us have
suffered during the last 18 months, the
stock market, like the economy, will not
remain down forever. Be sure to maintain a
diversified approach that includes mutual
funds, annuities, stocks, bonds and cash. It
may be smart to follow Warren Buffett's
advice: Buy when Investors
are fearful, sell when Investors are greedy.
8. Hire a financial planner. A good
financial planner becomes your trusted
"primary advisor." They provide business,
legal and insurance services as well as
organizing, securing and simplifying the
financial part of your life so that you can
spend the rest of your time doing what you
value most.
9. Consider a reverse mortgage. Tough
times require wise choices. For seniors, a
wise choice may be to covert your home
equity into a reverse mortgage which is
designed to allow seniors to convert part of
their home equity into tax-free income,
10. Take action. Work on the plan that
you've established and never give up.
Remember, Consistency will always outperform
occasional brilliance.
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