Tuesday, February 26, 2013

Protect Your Finances

With the economy in flux, now is the time to shore up your funds. Here are three areas to focus on.
By Ryan Mack

From the controversy over the debt ceiling to the Dow Jones index fluctuations in recent months, the economic ups and downs of the past few years have left many of us wondering when the turbulence will finally subside. Navigating these financial highs and lows has been a rocky road. Still, now is not the time to panic. Follow these smart moves to help protect your financial future.



Those who will benefit most from falling interest rates are people who have high liquidity and good credit scores. Go to
 annualcreditreport.com to start repairing or building your credit. And stash some cash. Your goal should be to save up to 12 months of living expenses.

Pay bills on time. It may sound simple, but making timely bill payments can decrease the chance of a rate spike. If you have good credit, check in with creditors every six months to negotiate a better rate.

Watch interest rates. Federal Reserve Chairman Ben S. Bernanke’s decision to keep rates close to zero through 2013 means that the variable rate on your credit card will stay low. To compare rates, go to bankrate.com.


The worst thing to do is to make a knee-jerk decision that locks in losses. Think of falling stock prices as you might a shoe sale. Cheap can be good! Consider picking up more shares now, and regularly discuss asset allocation and risk tolerance with your financial adviser. Other stopgaps:

Consider safe havens. Talk to your adviser about other avenues that can provide a decent yield in your portfolio, like municipal bonds, which can help protect your initial investment while earning you tax-free interest.

Bond investing is subject to risks, such as interest rate, credit and inflation risk. As interest rates rise, bond prices fall. Long-term bonds have more exposure to interest rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Lower-rated bonds may offer higher yields in return for more risk.

Manage your 401(k). Review the plan to familiarize yourself with your portfolio of investments. Then talk to your adviser to be sure you have the appropriate asset allocation. Check your plan at least twice a year to monitor performance.


Mortgage rates should stay low for at least the next several months. Rates are tied to the U.S. Treasury, so consider refinancing to lock in a better interest rate. If you are at risk of foreclosure, contact
 hud.gov to find a credit counselor who can help you save your home. Additional actions:

Invest for less. You can’t stop your home from depreciating, but you can maybe take advantage of opportunities that a volatile market presents. Consider pooling funds with family and close friends to buy investment property. That way, you’ll mitigate the risk of full ownership.

From the October 2011 issue of Essence.© 2012 Time Inc. All rights reserved.

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