A View from Wall Street

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Joe Cullen, an editor for a major Wall Street firm, talks about the economic meltdown and the dignity of the worker. [homepage photo: CNS/Reuters]


Surviving Uncertain Economic Times

By John R. Ingrisano, CLU

We have witnessed dramatic financial swings over the past few years — all the way from boom times to last year’s economic roller coaster and bailouts, to the recession and general trepidation in this new year.

Most frustrating of all, there is no foolproof way to predict the economy’s next move.

Yes, we live in uncertain economic times.

That is why now is a good time to review and hone your smart-money skills. Here are some suggestions:

REDUCE YOUR EXPENSES. This is good advice at any time, and it is doubly valuable now. Start by examining your budget. Look for ways to cut back on unnecessary expenses. If luxury items have become commonplace, redefine what is necessary. Revise your attitude toward spending. Remind yourself that frugality is a virtue, helping you to prudently avoid wasting your resources.

At the very least, think twice before buying that big-screen TV or going on a costly family vacation. In other words, be cautious regarding big expenses, at least until the economy decides where it is going. This will help you weather tough times and position you to capitalize on opportunities as they arise.

WHITTLE AWAY AT EXISTING DEBT. Try to reduce your credit card balance a little each month. There is a great deal of truth in the saying, “It’s better to earn interest than pay it.”

Set debt-reduction goals and, if necessary, make short-term sacrifices. In the end, you will find that your standard of living will increase just by reducing your debt.

Don’t ignore your bills if you get caught in a financial bind. You will only accumulate interest and late fees, jeopardize your credit rating and compound your situation. If necessary, contact the companies to which you owe money and explain your situation. Most will accept a revised payment plan, sometimes with no penalties or additional interest charges.

In addition, try not to accumulate any new debt. More and more people are proving that it is possible to live a credit-free existence. They live by a simple philosophy: If I can’t afford to pay cash, I can’t afford to buy it.

SECURE YOUR JOB BY MAKING YOURSELF INDISPENSABLE. Every week seems to bring news of the latest round of layoffs, and unemployment is up. Many businesses are taking a wait-and-see approach to hiring, while some are looking for ways to cut their payroll.

The best approach is to look for ways to emphasize your unique skills and your value in the eyes of your employer. Also, if you are thinking about a career change, keep in mind that this may not be the best time to switch jobs, if only because it puts you at the bottom of the seniority list. In other words, you could be the first to go if your new employer begins to make layoffs.

PRESERVE YOUR FUTURE ASSETS. Avoid making withdrawals from IRAs and other long-term assets unless absolutely necessary. In fact, now is a good time to build retirement assets.

Consider starting or funding an existing Traditional or Roth IRA (RRSP or TFSA in Canada) with a Knights of Columbus Flexible Premium Annuity, if you are a member of the Order.

These annuities grow at a fixed rate, and current competitive interest rates are guaranteed for up to one year.

You can start a Flexible Premium Annuity with a deposit of as little as $300. Rollovers, transfers, or deposits in the amount of at least $25,000 also have the flexibility of also funding a VANTAGE Annuity. VANTAGE Annuities grow at a guaranteed fixed interest rate for five years and offer a fixed minimum guaranteed lifetime interest rate.

In addition, be sure to keep your “risk management” plans in force, including your medical and life insurance coverage. It may be tempting to let a policy lapse when forced to choose between paying insurance premiums and paying the mortgage. However, financial protection is particularly important during difficult economic times.

In the end, the best way to weather an uncertain economy is to protect what you have worked to achieve while reducing your expenses. Keep in mind that downturns are normal and temporary phases of the economic cycle that are usually followed by periods of ever-increasing prosperity.

Just remember that if you maintain financial self-discipline when times are tough, you will be ahead of the curve when the financial climate rebounds.

John R. Ingrisano is a financial writer and business consultant specializing in money management, insurance and retirement planning. He can be reached at john@thefreestyleentrepreneur.com. This article appears in the January issue of Columbia magazine, the official publication of the Knights of Columbus.