Wednesday, November 26, 2008

Personal Finance Strategies that have Helped During This Economic Crisis

While the financial crisis of 2008 seems to have negatively impacted everything, some financial strategies seem to be doing better than others. Here are the personal finance approaches that I think have worked well for us during this crisis:
  • An emergency fund. This fund serves as a buffer during tough financial times, e.g. loss of job, bear market decline, or unexpected large expenses. The funds should be held in safe investments like a money market or CD. For this crisis, a bigger emergency was definitely better.

  • Savings allocation in cash or cash equivalents. While just about every investment class has declined significantly, boring cash and CDs have kept their value and even returned some interest.

  • Zero credit card debt. To me, have a large amount credit card debt can make a bad financial situation worse. On the other hand, having no credit card debt eliminates one burden during tough financial times.

  • Guaranteed income stream. Pensions, social security payments, bond interest or annuities provide fixed monthly income no matter what the stock market is doing.

  • During prosperous economic times, these strategies were considered overly conservative. However, use of these strategies has reduced some of the financial anxiety for us during this economic crisis.

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

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