Military Officer - December 2008 - (Page 44) financialforum Coping in Crisis Today’s tough economic times might seem daunting. But by following a few tips and being smart with your finances, you can make it through this financial crisis. By Phil Dyer, CFP W Need a Financial Update? I If you think it’s time ith the stock market in turmoil — as of early October, the Dow Jones Industrial Average was 33 percent off its record high of 14,164 from October 2007 — the housing sector taking a nosedive, credit becoming harder to obtain, and interest rates near historical lows, what is the average American to do? Consider the following tips to survive today’s economic crisis. Review your current financial situation: to update your financial plan and would like advice, contact a financial planner with the Garrett Planning Network at www.garrettplanning .com. Fees apply. Don’t listen to all the talking heads telling you how bad times are financially. Instead, take a good look at your personal financial circumstances and evaluate your current cash needs and debt load, the time frame until you need any money you’ve invested, and whether you plan to move or need to downsize your home in the near future. In other words, update your financial plan. Don’t suspend regular investments: If you are putting the same sum of money each month into a 401(k), the Thrift Savings Plan, a Roth IRA, or a college savings account, don’t stop. Instead, buy on sale — currently a 33-percent discount — and maintain your disciplined approach. If you have time, don’t sell out: If you have at least five to seven years until you need to access the money, don’t give up and sell out. Although our natural reaction is to throw in the towel, it only will guarantee a significant loss. To illustrate this, the worst one-day percentage decline in stocks in recent history was “Black Monday,” Oct. 19, 1987, when the market dropped more than 22 percent in one day. DECEMBER 2008 However, the market was still 5.5 times higher in October 2008 than it was in October 1987. If you kept your money in cash over that 21-year period, your investment would only be twice as high today. Pay down debt: One of the best things you can do during market uncertainty is clean up your balance sheet. Pay particular attention to high-interest-rate, non-deductible credit card and consumer debt. Paying off a credit card with a 15-percent interest rate guarantees you a 15-percent return on your money. Improving cash flow by retiring debt also is a great way to live on less. Tread carefully around housing: With foreclosures on the rise, be very careful about purchasing a new home unless you are certain you will be in it for at least five to seven years. For servicemembers making permanent change of station moves, consider looking at installation housing or offbase rentals instead of purchasing a home. A two- to three-year deployment is too risky in many housing markets right now. There is no quick fix for the current crisis, but the American and world economies have weathered storms of this magnitude before, so batten down the hatches, turn off CNBC, and take the kids (or grandkids) outside to play! MO — Former Army Capt. Phil Dyer, CFP®, is deputy director, Benefits Information and Financial Education. To find a financial planner near you, contact Garrett Planning Network at (866) MOAA-GPN (662-2476) or www.moaa .org/garrett, or visit www.moaa.org/financial center for other resources. PHOTO: SEAN SHANAHAN 44 MILITARY OFFICER http://www.garrettplanning.com http://www.garrettplanning.com http://www.moaa.org/garrett http://www.moaa.org/financialcenter http://www.moaa.org/garrett http://www.moaa.org/financialcenter
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