People are feeling extremely confident with the continuing strong economy. The debt level per household is increasing, and the level of household savings is still one of the lowest among industrialized countries. People are feeling like the good times will never stop rolling along. Now is the perfect time to prepare for the next economic downturn. Have you paid off your credit card debt? Have you built a cash reserve to be used for emergencies, not to buy stock on a market dip? Have you increased your contribution percentage into your retirement plan? Have you reapportioned your asset allocation to keep it in line with your original intentions? All of these actions are steps you should be taking to ensure your financial health and keep you on track with your financial goals.
|Too many folks are jumping on
the stock market bandwagon without having taken care of the less exciting
details necessary for a secure financial future. If you were to look at
the total return on your assets, that 25% return of a mutual fund could
easily be just 4% after subtracting your credit card interest rate of 21%.
Your stock allocation may be too high for your risk tolerance, making the
next market downturn all the more painful. If the day trading bug bites,
limit your exposure to less than 10% of your investment money, consider
it play money you could afford to lose, and never use margin.
Take the time now to get your finances in order so that you can weather the next economic downturn with a relaxed look, not a grimace. After all, the time to fix a leaky roof is when the weather is fine.
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