Making financial planning decisions in tough times

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Published: May 4,2009

Let’s agree on a couple of things before I make any recommendations:

1. We are experiencing the worst recession since the Great Depression and no one saw it coming.

2. Those of us who invest in the stock market have lost about half of what we had when this thing started.

3. Our plans for financing retirement are in shambles and many of us are going to have to delay retirement and work beyond our original goal.

4. We’re angry at somebody but don’t really know who to target.

Now that all of that is out on the table there’s only one thing to do — get over it. Things are the way they are and, as mature adults, we need to strategize how to make the best of what we’ve got to work with.

This recession, as bad as it is, is far from the worst our country has endured. Our economy is the strongest on earth and has proven time and again that it is resilient. We’ll get through this recession and come back strong.

So, what can and should we do about our personal finances? There’s only one thing to do. Re-evaluate our plans and course correct where necessary due to changed circumstances. No whining or gnashing of teeth, just intelligent reaction to a difficult situation. Following are some suggestions for making lemonade out of the financial lemons we have been given.

Do not, I repeat, do not sell your stocks if they still meet your financial objectives. You don’t have a loss until you sell. You still have the same number of shares you had when this recession began. If you sell now, you will accomplish the dubious objective of having bought high and sold low. Don’t set your losses in concrete by getting out of the market now.

Don’t stop contributing to retirement plans even though the market is acting erratically. Any year that you don’t contribute to a 401(k) can’t be made up in later years. The opportunity to accumulate savings tax sheltered for that year is gone forever.

Revisit your life insurance coverage. Perhaps you lowered your life insurance based on your soaring stock portfolio and now the coverage is not adequate to cover your obligations. Life insurance is cheap right now and a term policy might be just what the doctor ordered until portfolio values increase.

Begin planning how you could extend your career beyond the traditional retirement age, not that you will, but it’s helpful to be aware of your options. Every year that you continue working allows another year for your investments to recover. You don’t have to commit to continuing in the workforce, just strategize how you could do it if you decided to. Many Boomers are concerned that they will outlive their retirement income and extending your work years for a little while diminishes that threat with each passing year.

When thinking about extending working years, some people plan to stay in the same line of work. Perhaps working on a part-time basis or in a lower responsibility position could take the sting out of working longer. Other folks are turning the situation into an opportunity by changing jobs into an entirely new field. Again, it’s better to have a plan and not use it than to need one and not have it.

Maintaining contacts with business associates is more important now than before. Should you unexpectedly lose your job, your contacts can help you get something going. It’s better to have maintained contact with someone than ask for help when you haven’t talked with them in years and years.

Stop grumping and start planning. And remember, the most important things in life aren’t defined in dollar terms. Count your nonfinancial blessings and enjoy living as much as you can. These things, too, will pass.

Joe D. Jones is a certified public accountant and is publisher emeritus of the Mississippi Business Journal.

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