2008 - Getting Over It and Moving On

2008 has been a tough year financially. Although I thought 2008 would be a poor year for investing, I didn't think it would be this bad. My plan to stay invested and ride out the downturn proved to be the wrong plan. Next week, when I do my quarterly financial update, I expect the results to be pretty dismal.

However, it won't do any good to relive 2008...it's done and will be over in a few days. Could have, would have and should haves won't change anything. The best thing to do is look forward to 2009 and try to recover from 2008.

In spite of beginning with the economy in recession, 2009 has a few good things going for it.

1. Oil prices are much lower. After peaking at $ a barrel in July, 2008, oil has fallen to a 5 year low of less than $34 a barrel. In my area, I've seen gasoline as low as $1.41 per gallon. For someone that drives 10,000 miles per year at 20 miles per gallon, that's a savings of $1300 per year versus $4.00 per gallon gas from this summer.
   
   It has been great paying $25 to fill a tank instead of the $80 I paid at the peak this summer.



2. Mortgage rates are falling. Thanks to the Fed rate cuts, mortgage rates are falling below 5% on 30 year fixed rates. Some have even predicted mortgage rates below 4%. For those that qualify, refinancing may be able to lower monthly payments significantly.
   
   In our case, we have about 59% equity in our home with a 5.375% fixed rate mortgage. If we refinance our remaining principal for 20 years at a 1% lower rate, we can lower our monthly payment by 18%.



3. Stocks have higher dividend yields. Dividend yields for the S&P 500 are at 2.90%. While low relative to historical values, it is higher than the 10 year treasury yield of 2.13%. Also, there are about 75 stocks with yields of 5 to 9%.
   
   While the first two are a "give-me,"this one is not quite as certain. In some cases, companies have been reducing or eliminating a dividend to conserve cash. Also, there is the risk that the recession will continue to reduce company earnings in 2009, leading stock prices to drop further.

Based on the above, I will enjoy the lower gas prices and look forward to mortgage rates dropping further. I also expect the stock market to start recovering, and may consider purchasing some high dividend stocks with 6-9% yields that I believe are sustainable.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial, investment, or re-financing advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC