Last week's volatile stock market suggests that economic woes are far from over. After Monday's record gain was followed by triple-digit ups and downs, it's clear no one is out of the woods yet.
And with no certainty that efforts to rescue the global financial system will work, with unemployment on the rise and with the stock market still 38% off its 2007 high, it's time to protect your finances.
Here are four smart money moves to make now:
Create a Budget
"Watch every dime coming into your house, because tomorrow it could be a nickel," warns Catherine Williams, vice president of financial literacy for Money Management International, which oversees nonprofit credit-counseling agencies. The best way to do that? Stick to a budget.
The basic premise of a budget is, of course, simple: Make sure expenses don't exceed income. But you also need to find a way to squeeze out some savings, says Donald Ray Haas, a financial planner in Birmingham, Mich.
Check your budget breakdown against these rough guidelines from Money Management International's Consumer Credit Counseling Services: savings (10% minimum); housing (20-35%); food (15-30%); transportation (6-20%); medical (2-8%); insurance (4-6%); utilities (4-7%); clothing (3-10%); personal care (2-4%); miscellaneous items (1-4%); personal debt (20% maximum).
Eliminate Debt
If the stock market has you spooked, you can get a nearly unbeatable return by focusing on paying off debts instead.
Credit cards: Attack high-interest-rate credit cards by seeking out the cheapest rates you can find, says Scott Bilker, founder of DebtSmart.com. Look to credit unions, which tend to offer more favorable rates than big-name banks.
Mortgages: Prepaying your mortgage may not be a bad idea. Generally speaking, mortgage debt is cheap debt, but prepaying can give you an after-tax return that is a lot better than what most folks have earned in the stock market this year.
source : http://online.wsj.com
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