Marc S. Freedman : Money Tips

Today's economic environment is uncertain, challenging and upsetting.

Consultant Marc S. Freedman says many investors have seen their family's net worth almost split in half in less than one year and promises that it is possible to restore confidence and rebuild control over your financial future. "It is my hope that the following 10 strategies will provide a launching point to help you re-focus and re-prioritize your financial life," he says.

• Maintain an emergency fund. You should always maintain a reserve account equal to three to six months total expenses in an FDIC-insured bank account. Never consider investing money, if your emergency fund isn't fully funded. You should always have easily accessible cash on hand.
• Examine your expenses. We all have succumbed to the temptation of impulsive spending at some time in our life. Now's the time to revisit NEEDS vs. WANTS as well as fixed expenses vs. fun expenses. Your mortgage, utilities, food, insurance, auto expenses, etc are fixed costs. The fun expenses include dining out, vacations, manicures, lawn service, club memberships, lottery tickets, electronics purchases. If money is tight, consider strategies to limit the "fun stuff" for a while.
• Don't rely on your investment account as your EMERGENCY FUND. If you draw money from investments to supplement your spending needs (but have very few dollars in the bank), we recommend partitioning three years of distributions from your investment account into a highly liquid cash investment. For instance, if you draw $2,000 per month from your $500,000 investment account, consider liquidating ($2,000 * 36 months) $72,000 from your investment portfolio and secure your money in a safe highly, liquid product such as laddered certificates of deposit or savings accounts. Your remaining portfolio should continue to participate in a balanced collection of stock and bond investments.
• Rebalance your portfolio. Revisit your existing investment account and insure that its current asset allocation remains in line with your overall risk tolerance and time horizon.
• Harvest tax losses. This is a rare opportunity to accumulate tax losses that can be used to offset realized gains you might earn in future years.
• Avoid speculation. This is not the time to try to recoup losses with quick-fix investment strategies. If you've never used hedging strategies, traded individual stocks or attempted to time investment purchases, now is not the time to start.
• Invest in the stock market. Rather than trying to time the market, if you have excess cash available, begin building positions in well-managed, highly regarded equity portfolios. This may be a rare occasion to invest in great American companies at bargain-basement prices. Although, remember that past performance is no guarantee of future results.
• Don't give up on your 401K. This employer-sponsored, pre-tax investment account remains one of the most sound investment opportunities for working Americans. In fact, contrary to popular belief, you should wish for the stock market to head downward during your "working years" so that you can buy shares at lower and lower prices. If you believe that investments will recover over time, never abandon your systematic investment strategy in down markets.
• Review beneficiary designations. Challenging economic conditions offer rare opportunities to reflect and rethink about our life today, as well as the legacy we hope to leave behind. Be sure that you review both your primary and secondary beneficiary designations on retirement accounts, life insurance policies and annuities.
• Seek professional guidance. Now more than ever, consumers should be seeking the independent, objective advice of a certified financial planning professional. Yes, you will pay for advice, but in the end, I suspect that after meeting with someone who is both ethical and independent, you will only wish that you had sought help sooner. To find a competent, ethical, certified financial planner in your community visit fpaforfinancialplanning.org.