With 2009 coming to a close, and possibly, the Great Recession, running its course, let's look into our crystal ball and see what's coming in 2010. It has to be better than 2009!
If we look at what 50 of the top economists are saying, 2010 looks like we might be able to breathe a sigh of relief. Let's start with GDP, or the measure of goods and services in the country. Good news here! We are seeing positive numbers, which means further economic recovery. Not a huge recovery, but the numbers are positive. We saw a huge contraction in the fall of 2008 and the first 2 quarters of 2009. In 2010 we should see a slow recovery but at least it's movement in the right direction.
Their predictions, by the way, are also showing some relief this quarter. We are not looking at a rosy Christmas season but one at least as good as last years. Maybe Santa has been checking his list and at least it's not shorter than last years! Our economic forecasters see some hope here!
The housing tax credit will probably be extended and there may even be some credits for household appliances in an effort to jump start a very weak economy. Preliminary results for the $8,000 tax credit show that it is helping home sales. The real estate industry is only beginning to show some life.
That's GDP. Next week we will look at interest rates and even look at this behemoth of a problem, the banking crisis.
"Now what do I do?" is the question many have asked as they try to move forward in our rebounding economy. In last week's segment we touched on creating a budget to help save money and stay out of debt. But what if you are already in too deep?
Some debt is good. Good debt includes anything you need but can't afford to pay for up front, like buying a home, or saving for college or retirement.
Bad debt includes debt you have taken on for things you don't need and can't afford. The worst form of debt is credit-card debt, since it carries such high interest rates.
According to a recent article, the average American household has at least one credit card with nearly $10,700 in credit-card debt, and the average interest rate runs in the mid-to high teens to even in the 20% range. What do you do if you have too much credit-card debt?
Step #1: Be honest with yourself. Add up your balances and see where you stand.
Step #2: Try to consolidate your credit cards to one with the lowest interest rate and best terms.
Step #3: Don't be late with your payments and don't go over your allowed limit.
Step #4: STOP charging! This is the cause of your problem. Correct it at its root.
Credit cards have turned into evil plastic. They are tools to be used and not abused. Use a debit card instead, that way you will only spend money if you have it. Let's become financially responsible.
We have been exploring the question, "Now what do I do?" What steps do I take to ensure I will never be as affected by a financial setback again like the one we have just suffered? One of those steps is to make a spending plan, or budget.
Why create a budget? A budget allows you to see where your money is being spent, how much you are spending and how much you have leftover to save. By creating a budget are you able to determine what you can really afford.
Along with keeping track of your finances, a budget allows you to plan for short- and long-term goals. You can learn how to save for your vacation in one year, a bigger house in five years or your retirement in twenty years; it's all there in black and white so there will be no surprises later on.
Creating a budget is simple: It involves comparing your total income to your total expenditures. There are three steps to creating a budget:
- 1. Identify how your money is currently being spent.
- 2. Evaluate that spending to see if it meets the financial priorities you have established, and
- 3. Track your spending to make sure it stays within those guidelines.
When projecting the amount of money you can live on, don't include dollars that you can't be sure you'll receive, such as year-end bonuses, tax refunds, or investment gains.
If your budget tells you that you are spending more than you earn, you need to make adjustments, fast. Continuing to do so is a surefire way to engross yourself in debt. Eliminate any unnecessary spending on personal items, entertainment, and luxuries you can live without.
Stick to your budget-it is the essential tool for ensuring that your money gets used the way you need it to.
Last week we focused on moving forward as the recession ends and posed the question, "Now what do I do?" If you do not have the experience or knowledge of how to invest your money, the first step to success is to choose a financial advisor.
Qualified advisors are trained help you set financial goals and priorities, and then recommend specific steps to meet them. They will give advice on how you should allocate your investments, and explain how certain moves may affect your taxes or estate.
Choosing a financial advisor is an important step. There are a few things you should consider and be aware of when making your decision:
- 1. Experience matters. Ask about credentials. Check out your advisor!
- 2. Back up. What happens if your advisor dies or leaves?
- 3. Get a solid recommendation from someone in similar financial circumstances to yours. Ask your friends.
- 4. Ask how your advisor is getting paid. It is a conflict of interest when an advisor profits from putting you in or taking you out of an investment.
My advice to you: get close to your money. Educate yourself on investing. This is your money and your future. Make sure you understand what your risks are and be comfortable with them.
Let's face it: making financial decisions is hard. There's a lot you can figure out on your own, but we can all use help when it comes to something as important as how to save, invest and plan for the future.