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It seems when its time to tighten our belts, the charities get hit first. I figure if I have enough left over in a month to still see Pineapple Express and buy Force Unleashed, then I should donate to a worthwhile cause.
It helps me to realize my situation is not as bad as it could be.
Besides, what goes around comes around.
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I also like to remind myself of this philosophy: One can only cut down on expenses a finite amount, but one's earning potential is infinite. So if need be, get a second job or find another way to honestly/ethically/legally earn more money.
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there's always free cheddar in a mousetrap. The best thing to take away from all this is that if it sounds too good to be true, it is.
I'm waiting another few months to jump into some stocks. I want to see more of the other vultures start eating before I start picking at the bones.
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Keep your resume up to date and polished. NO amount of seminars or projects will protect you from a top-down bloodbath restructuring.
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Turn a hobby into a source of income. Write a book on the subject you know best. Create something useful or artistic and sell it.
These are just the sort of times that catalyze the innovative among us.
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Stocks are only a great buying opportunity if they go up in value eventually. If the company goes bankrupt, you're never going to recover that money. Given that some market stalwarts just bit the big one, I'd find that to be a significant factor in any investment decision.
Well said, Nixi.
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From the article:
She asks [clients] to calculate their monthly expenses - from Botox shots to country club fees - and their monthly income from work and investments. Then she has them cut 10 or 20 percent off the income figure
This is a great idea! Let's see how much it saves me:
Botox shots, now: $0
minus 20%: $0
Country Club Fees, now: $0
minus 20%: $0
Total savings: $0
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even with the big losses in the stock market, you're still ahead of the game if you get free money from your employers' 401(k) match.
Really? My 5% match doesn't come near my 15% loss in 401k this year.
I think investing is a decision each individual needs to make, there is no cut and dry rule. I'm putting everything I can into the market but I'm fairly risk averse and don't need the money for years to come.
If the financial \"crisis\" is actually making you think about daily decisions, suggesting that you keep investing is probably the last thing I would advise.
@enm4r: You should not post while hosting conference calls. You'll end up sounding like an idiot for making simple math errors and corrected by numerous other people. PS, don't tell any of them you work in finance.
@enm4r: Well, actually it does, because the \"5%\" refers to the portion of your entire pay that is matched. Essentially, depending on what your match is (ie, 50% or 100%) is what should be compared to your 15% loss.
Do the math and rethink your answer.
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@enm4r: Depending on how you have allocated your investments and when you plan on retiring, the drop in the stock market could actually help you in the long run.
If you are like me and have 20+ years to retirement, you could invest in an index fund and buy stocks now while they are cheap (and growing cheaper by the day.) You would essentially be buying these stocks when they are on sale.
Eventually the market will recover, and you will have a greater profit. You can then can gradually move your funds into less volatile investments as you get closer to retirement.
The only potential flaw I see with this plan is if the entire U.S. economy collapses, in which case you will probably have bigger issues to worry about than retirement.
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@enm4r:
You're right -- if that's your match. But most 401ks are well above a 5% match (at least at some level.)
@FMF: Are you sure most have more than 5% matching on a 401k? My husband and I have never worked for an employer that even matched 5%, generally they were between 3 and 4%, and that much only if the employee was contributing double.
Again with the 'cut out the latte' bit as advice on cutting expenses. I don't know anyone that ever drank 1 latte a day, let alone 2. Most I know bought a starbucks maybe once a week. but I suppose this advice is to be expected when there's not much else one could cut.
On the medium income equals middle class bit, so much depends on where you live. $50,000 might well be middle class in many parts of the US, but not in most large cities. The median income can also be deceptive when that same article points out that the top 6% earned 1/3 of all income. Middle class is also generally referred to as a range of income, such as from $35,000 to $100,000.
@Jevia:
If you contribute 8% of you salary into a 401k and your employer puts in 4%, then you have a 50% match. If you put in 5% and your employer puts in 5%, then you have a 100% match up to 5% of your salary.
@enm4r:
I'm assuming you misspoke and meant that your employer puts in 5% of your salary and not matches 5% of your contributions. I'll also assume that you put in 10% and your employer puts in 5% (which is a 50% match, not a 5% one).
With no match, if your contributions are $10k and you lost 15%, you now have $8500. With your match, the company puts in $5k with your $10k, giving you $15k contributions. A 15% loss gives you $12,750.
Note that you would have needed a 27.5% gain on your own contributions to get to where the company match and a 15% loss got you. This is why it's always a good idea to get the full match.
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@enm4r:
Agreed. I get a 6% match in company stock, which really doesn't help that our stock has tanked lately and my 401k as of this morning is down 20% ytd.
Though i have a very long way to retirement so I'm going to ride it out and hope for the best.
The dollar is in real danger, it's not backed by real money (gold, silver, etc.). When you diversify, make sure some of your investments are in physical commodities that won't just disappear. From 2003 to today you would have realized an almost 100% return on an investment in Gold or Oil.
Historically, paper money not backed by real commodities fail. Research it. This includes the original US Currency created by the Continental Congress. That failing is in fact what lead to a Gold backed Dollar when the US was formed. Point being diversify, make sure some of your investment portfolio is in real assets. Gold, silver, real estate, etc.
Pay off your debts.
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I might have picked the wrong time to buy a house!
@Mr_Human: You picked the right time to get a loan. Ever see what serious deflation does to the lending market? I haven't - pretty much none of us have. We weren't alive during any depressions. But I've heard it's pretty nasty.
@Mr_Human:You gotta live somewhere. Better to pay a mortage then rent anyday. Plus housing prices are down now
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\"Look at it this way: even with the big losses in the stock market, you're still ahead of the game if you get free money from your employers' 401(k) match.\"
???? What kind of logic is this?
Matching funds are part of your compensation, as much as your paycheck or health insurance. Don't worry, just keep putting money in?
\"The few who understand the system (interest-bearing notes) will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting the system is inimical to their interests.\"
federal reserve non government bank . that taxes us for fake printed money , backed by nothing but trees
Here is what I have never understood about tip 5 (the stock market is a good place to invest if you don't need the money for ten years). Lets say I invest money I don't need for 10 years, and then 10 years later, when I need the money, the market just happens to be starting in a prolonged bad patch and I have to sell my stocks at a loss (Not so hypothetical for people who bought stocks in 1999 and need the money today). There have been a few flat or down periods for the stock market that have lasted for quite a few years (1968-1980 for one plus the one we are working on now). So maybe you should not invest money in the stock market if you will ever need to pull that money out in any particular timeframe? And who knows when they may suddenly need to draw on their assets (disability of wage earner or family member, someone charged with a serious crime, uninsured illness, etc) and be forced to sell stocks at a loss during a down period?
I have a problem with number 5. Somehow, we ALWAYS get the advice to \"keep buying\".
That was good advice in the 90s. It's not now. Take a look at a very long-term chart of the stock market - one that goes back to the great depression. You'll see that after the really major downturns, like the one we're in now, getting your money back from the market can take DECADES. My horizon is not that long, and unless you're a teenager right now, yours probably isn't either.
Some better ideas: buy tangible things, like art, collectibles, or small businesses. You might even look at the loads of bargains out there in real estate, which will recover a lot sooner than the stock market will. Real-world objects have the advantage of being intrinsically valuable - they will still have worth even if the whole economy, or the dollar collapses.
If you want to play the market, use a trading system (one that has a track record) to choose entry and exit points. The last time I had a stock timing system discussion on this site, three free trading systems were discussed: tradewhen.com, sniper.at, and a simple 20-50 week moving average system that is easy to calculate even without a computer. All three of these systems correctly called a market exit before this week's crash.
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6. Don't get laid off.
My wife and I are doing fine at the moment because we still have her job and I have always believed in building up savings, but I was laid off months ago and jobs are disappearing left and right.
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7. Correspondence Courses
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Take all your money to a casino, put it on red or black. That way you have a 50/50 shot at being rich or being broke. Where else can you get those odds?
I forgot about the zeros, still good odds.
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I think smart investing is ultimately the way to go...and not just when you're on a tight budget... \"for it is it in times like these that we come to realize there have always been times like these.\"
But seriously. Currency trading will always be a smart move if you learn how to do it. If one market is taking... then there's money to be made... if its rising... there's money to be made. There's so many options out there, people just have to find their nitch and go for it.
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Number five... This is an area where I disagree significantly. I am not a fan of the stock market. They tout long term returns (10 years or more) in the stock market as some sort of a sure thing. If you believe that, look at the performance over the last 10 years. Add in inflation, taxes, management fees, etc. and your portfolio will be about 40% lower.
Consider this as an alternative. A minimum of 25% of your portfolio, assets, net worth should be in some form of guaranteed investment. I am less concerned about the return on investment here and want principal protection that guarantees the return \"of investment.\"
Up to 25% of your portfolio, assets, net worth should be invested in real estate. Evaluate this as the actual cash you have in the investment - not the asset value. Add to this an intelligent ongoing refinance strategy and your net worth will zoom. This is the fuel of your overall rate of return.
Up to 10% of your net worth should be in alternative investments like antiques, art, gold, stamp collections, coin collections, etc.
The remaining should be invested in the stock market to the extent that you have to. I believe that is the matching component of your 401(k) or 403(b). Beyond that, I tend to favor the use of indexed universal life insurance products that are maximally overfunded. I tend to believe in the suggestions of Douglas Andrew in his New York Times best seller \"Missed Fortune 101.\"
This approach will consistently produce much better long term results. Investing in single family rentals that you have managed by a professional property manager is a real secret.
$35,000 is not that much for a car anymore. Inflation is crazy these days.
The median automobile price in the U.S. is $25,632.
It wasn't too long ago that $25k was a luxury car. Now it's a modestly equipped midsize sedan.
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Here's another one: stop living above your means. You don't need a $35,000 car, or the 3rd flat-panel TV.
@Norcross: Every person with a $35,000 car is not necessarily living above their means.
@Norcross: Obvious but so true. Think in terms of need rather than want. The cool thing is that when times like these come around, America comes out stronger and smarter on the other side. Let's hope this is no exception.
I find it kind of interesting that the stock market goes down a lot the very week my 401K is starting. Good luck for me I guess. :P
@Norcross: Sometimes the wisest advice is the most simple. I wonder why this is so hard to do.
As far as the career thing goes my friend told me last night that maybe I should look into being a financial counselor (as in teach people to budget.) Somehow I think it would be less rewarding than being in the soulless IT world.