WGN’S MONEY SAVING EXPERT ILYCE GLINK IS HERE WITH A LOOK AT HOW TO PROTECT YOUR FINANCES …
ILYCE: LATELY, THE ECONOMIC NEWS HASN’T BEEN ALL THAT GREAT. FORECLOSURES HAVE REACHED THEIR HIGHEST LEVEL EVER. AIRLINES ARE A FEW MILLION PASSENGERS SHORT OF A RETURN TO BUSINESS AS USUAL. AND BUSINESSES STILL AREN’T INVESTING ENOUGH TO GET OUR ECONOMY ROLLING AGAIN. EVEN FED CHAIRMAN ALAN GREENSPAN IS SAID TO BE THINKING ABOUT CUTTING INTEREST RATES FURTHER – WHICH WOULD HELP HOMEOWNERS, BUT COULD REALLY HURT RETIREES LIVING ON A FIXED INCOME.
WITH THIS AS A BACKDROP, I’VE COME UP WITH A FEW EASY THINGS YOU CAN DO TO PROTECT YOUR WALLET – AND YOUR RETIREMENT ACCOUNT.
FIRST, SPEND LESS – WAY LESS. I KNOW PRESIDENT BUSH KEEPS TELLING US TO BUY STUFF, BUT WE CAN’T SPEND OUR WAY OUT OF THIS SLOWDOWN. BUSINESSES HAVE TO SPEND, TOO. WHAT I THINK YOU SHOULD DO IS CUT THE EXTRAS, LIKE TAKE OUT FOOD AND EXPENSIVE NIGHTS OUT AND DELAY BIG PURCHASES, LIKE CARS, VACATIONS, AND REHAB PROJECTS AT HOME. AND IF YOU HAVEN’T REFINANCED IN THE LAST 6 MONTHS, CONSIDER REFINANCING YOUR LOAN WITH THE LOWEST RATES IN NEARLY 40 YEARS.
NEXT, TAKE THE CASH YOU’RE NOT SPENDING AND SAVE IT. WHILE NOTHING IS PAYING VERY WELL FOR CASH RIGHT NOW, AT LEAST YOU’RE BUILDING UP YOUR EMERGENCY RESERVE. CHECK OUT MONEY MARKET ACCOUNTS, SHORT-TERM CDS, A CASH ACCOUNT AT A BROKERAGE FIRM, OR A SHORT-TERM BOND FUND.
OR IF YOU HAVE DEBT, PAY IT OFF.
PAY YOUR HIGHEST, NON-DEDUCTIBLE DEBT FIRST – LIKE CREDIT CARDS OR CAR LOANS – AND THEN YOU CAN PREPAY YOUR HOME LOAN A BIT, IF YOU LIKE. IF YOU HAVE A SPENDING PROBLEM, PUT YOUR CREDIT CARDS IN WATER, AND STICK THEM IN THE FREEZER.
ALTHOUGH THE STOCK MARKETS ARE STILL DOWN – AND COULD GO DOWN FURTHER – YOUR RETIREMENT FUNDS WILL STILL DO MUCH BETTER IN STOCKS OVER THE LONG RUN THAN BONDS. BUT THE KEY THING IS TO CONTINUE TO INVEST REGULARLY IN YOUR RETIREMENT. A FEW WEEKS AGO I TALKED ABOUT DOLLAR COST AVERAGING, AND YOU CAN CHECK OUT THAT STORY ON OUR WEBSITE AS WELL. FINALLY, INDEX FUNDS MAY BE YOUR BEST BET.
AN INDEX FUND IS A MUTUAL FUND THAT HOLDS STOCK IN ALL OF THE COMPANIES THAT MAKE UP AN INDEX. SO AN INDEX FUND THAT TRACKS THE LARGEST 500 COMPANIES WOULD BUY AND HOLD STOCK IN ALL THOSE COMPANIES. THEY’RE EASY AND CHEAP TO OWN AND THEY AIM TO MATCH THE RETURN OF THE INDEX. VANGUARD BASICALLY INVENTED INDEX FUNDS AND HAS THE CHEAPEST ONES TO OWN, BUT YOU CAN CHECK THEM ALL OUT AT MORNINGSTAR.COM.
AT SOME POINT IN TIME, THE ECONOMY WILL KICK INTO GEAR, AND YOU CAN THROW CAUTION TO THE WIND AND START SPENDING AGAIN . . . BUT UNTIL THAT HAPPENS, DO WHAT YOU CAN TO KEEP YOUR FAMILY’S FINANCES SAFE.
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