It’s time to take stock of your financial situation

The best advice is worth repeating until people take it to heart and follow it.

For your waistline, it’s something like, “eat less, exercise more.”

The best advice for your wallet might well be “spend less, save more.”

Nancy Lottridge Anderson, a chartered financial analyst, offers advice to clients at New Perspectives Inc., her investing service and financial planning firm in Ridgeland.

She also helps readers of Mississippi Business Journal and The Clarion Ledger, listeners to Mississippi Public Broadcasting’s weekly “Money Talks” and students in her finance class at Mississippi College.

“People really need to hear it over and over before it starts to sink in and they take action,” she said of financial advice.

Money in handThese days, with the stock market roaring to record levels, Anderson said people are asking her if it’s a good time to come back into the market. “Now is actually the time to turn back a little bit and take some money off the table,” she said.

The big winners, she said, were those who invested before the markets took off.

This is the time to take stock of your financial situation, according to Anderson.

“Once we get past tax season, when people are so concerned about getting their taxes done, it is a good time to look at where you stand because you already have gathered up all your financial information.”

Anderson recommends looking over your first quarter 401(k) statement and other accounts as well as looking at your emergency cash fund. If any adjustments need to be made, now is the time to do it, she said.

Another ongoing issue consumers are having to deal with is low interest rates at banks. Anderson doesn’t expect that to change in the next few years but she cautions people not to be tempted by offers to put your money into something that might not be appropriate for them.

“You need a good savings account to keep cash where you can get your hands on it,” she said.

While the economy is improving, consumers can expect some bumps in the road to recovery, Anderson warns. “Now is the time just to be cautious and not run the other way,” she said. “Sit down as a family once a year and assess where you are. How much have you saved? What are your goals? What does your debt situation look like?”

Interest rates may be low but credit card rates are still high, Anderson said, and consumers shouldn’t take on more debt than they can handle.

Another important lesson to learn is how much you need to save for emergencies and retirement.

“There are financial calculators online or you can schedule an appointment with someone to give you direction,” Anderson said. “If you need some help with your 401(k), it’s worth it to pay somebody to help you with a plan.”

Anderson offers these financial tips for the different stages of life:

For younger people: “First and foremost you need a good emergency cash fund,” she said. Since many young consumers are comfortable with online banks, they can usually find a little higher rate online. The second piece of advice is to sign up for your 401(k) “the first day you possibly can sign up,” and start out saving at least 10 percent. “You won’t even notice it but it’s going in every month,” she said.

Some researchers say you should save 16.6 percent of your salary for 30 years for retirement. “Most people don’t come close to that,” she said.

For middle-aged people:

“At this stage you’re often in the midst of dealing with children in college,” Anderson said. “Just relax. It’s the most expensive time of your life but you will survive it and get past it. Hopefully you saved enough in the early years that you can use and when the kids get off the payroll, you can go back into high gear, contribute more to your retirement account and deal with other issues. You’re pretty close to retirement at that point.”

For retirees:

“If you are already retired, you want to be careful about your exposure to the stock market,” she said. “You don’t have long to make up for big dips in the market, and at the same time retirement money is still lifetime money. You can draw the income you need. But you still need some kind of growth on your account so don’t give up on stocks.”

Also, Anderson said, with lower interest rates, “a lot of people are tempted to sign up for annuities that offer a so-called guaranteed rate that locks you in.” Trying to get the money out before a certain time can be costly. “Don’t be tempted by that,” she said.

Anderson said people at any age can make the biggest financial misstep very easily. “The one that can really hurt you more than any other is taking on too much credit card debt,” she said. “It is so easy to get your hands on. Every store is issuing a card. Those bits and pieces can fool you into thinking you don’t have that much debt.”

Credit card debt is around 15 percent and Anderson calls that “money just going down the drain for stuff that is perishable. And you’re not able to save as much.”

 

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