7 Best Strategies During the Financial Crisis

It’s easy to lose focus and panic during a financial crisis. There are brighter times ahead so get your head out of the sand and start right away. Here are 7 strategies for you to review and keep in your back pocket so that you can stay on track to protect and build your assets back up:

1. Make a budget. Budget is a dirty word to almost everyone. So let me put it this way- watch your cash flow. Track what goes on and what goes out. Get on a money diet. There are many free and lost cost tools to help your track your finances like Mint, Wesabe, and Quicken. Find one you like and use it. You’ll be surprise too at how easy it is to pay bills online, too.

2. Get out of debt. Easier said than done, right? Start with consolidating all of your cards to a low or no interest one and then start paying off that one. You will be paying down more of the principal than the interest which helps it go down faster. Meanwhile tear up the ones you own until you get the debt under control.

3. Make cash work for you. Get your cash out of the coffee can, or from under the mattress and invest it. That’s right, invest it. If you are nervous that we are headed for a depression, then invest in something that will guarantee your principal back like a bank account or certificate of deposit. If you don’t, those dollars under the mattress are a guaranteed loss. They are guaranteed to buy less and less goods and services by the amount of inflation we have each year. And you don’t want that.

4. Pay off higher interest debt with low interest funds. Cash is king right now. If your savings is 3% and your mortgage is 8%, then it’s obvious to start using your savings to pay down the mortgage. Don’t do this until you have enough cash in the bank for emergencies like fixing the roof, car repairs, etc. Be on the extra safe side and have enough cash to support you for 6 months in case you lose your job.

5. Keep contributing to tax deferred plans. Don’t stop believing, and don’t stop saving for retirement. Believe me that one day you will want to stop working and when that day comes you are going to need the funds to support yourself. Tax-deferred funds in a pension, 401K, 403b, etc. are the fastest way to accumulate money. Be brave and keep contributing the maximum. You will be glad you did years from now.

6. Have an investment strategy and stick to it. Many of you who did not have a strategy to look at in this crisis are the ones that panicked and sold everything and now wonder if they did the right thing. The federal government is spending like crazy and that means inflation is on the horizon. That means you need to be invested in equities to keep up with taxes and inflation. Buy and hold is my favorite all time strategy. It is easy, boring, and was thought up by Pulitzer Prize winners in economics and favored by some of the (still) wealthiest people in the world.

7. Don’t abandon diversification. Just because one sector is doing so well that you want to bet the whole farm on it is chasing performance. Stay disciplined with a diversified strategy. Cash for emergencies, equity investments, fixed income investments, and real estate should help you stay ahead of the game. Avoid the temptation to chase after high yield high risk investments to make up for losses in the past.

By following the 7 strategies above you can rebuild your portfolio and protect it from taxes and inflation. In tight times like this, many scams will be floating around. If you focus on your personal financial strategy to build wealth, you will be set for brighter times ahead.

Source by Fern Alix LaRocca

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