I have heard more than a few people over the last year refer to their 401(k) retirement plan as their “201(k)” because of the shrinkage that has occurred in the financial market. In addition, many have lost their jobs or are concerned that it could happen soon.
Valerie RumboughHow do you cope? There are actually several bright spots in this gloomy picture. These stem from basic financial planning principles that each one of us should adhere to, whether times are good or bad.
One principle is to develop and stick to a fiscally sound budget, one that requires us to spend less than we make, and save the rest. In order to do this, one may need to look at needs versus wants. Our society has become very spoiled, and is now feeling the pain of not getting its way. A good budget has always been the basis for successful financial planning. Once we get a grip on this, we will be in better shape the next time this happens in our economy.
Another bright spot is that this is a great time to buy stocks, because they are “on sale” right now! Economists tell us that it may be some time in 2010 before our economy begins to improve. In the meantime, for those who invest for the long term (at least 10 years), there may be some great bargains out there.
Since it is virtually impossible to know exactly when is a good time to buy and sell stocks, the best thing to do is to “dollar cost” your way in. This means that you invest a certain dollar amount each month. When the market is up, your dollars only buy a few stocks. When it is down, you buy a lot. That way, the average price you pay for stocks is, well, average. You don’t have to worry about jumping in or out at the wrong time. Several financial experts have been discussing this technique lately, although it has been around for many years.
Want to know other ways to get on the right path to financial success? There are several tools out there. Crown Financial offers courses on financial matters. One tool you may not be aware of, however, is offered through the American Institute of Certified Public Accountants. Their “360 Degrees of Financial Literacy” program offers a lot of information on many different financial subjects. You can visit their Web site at www.360financialliteracy.org for more information.
The third bright spot is that God is in control. Maybe you need to start by turning your life over to him and let him guide you through this time. Remember, it states several times in the Bible, “and it came to pass.” We will get through this with his help.
Rumbough, CPA, CFP, is chief operations officer with the Baptist Foundation of South Carolina. Contact her at (800) 723-7242. In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purposes. Please consult your own tax advisor.