Buckle Up; It’s Going To Be a Rough Ride

This summer, groceries skyrocketed, gas skyrocketed, and we all felt the pinch.  The “financial crisis” created a global freakout, Congress pledged an historic bailout (bigger than the auto bailout of the 70s), and multi-billionaire Warren Buffet came to the rescue of at least one financial institution in a public way.  More importantly, the also-historic national election front brought winds of economic change, from a market-based capitalism to wealth-redistribution state. 

And  immediately after the elections, the market plummets.  And continues to plummet.  If you have more than $150,000 of income, including investment income, you’ve been promised that your taxes will increase drastically.  Is it any wonder investors are pulling out of the market!?  Sell, and do it now, before the 2009 TY sacks you. 

If your city, like mine, is trying to sell bonds to finance construction that it is under obligation to complete in the next few years (like a new stadium to host the College World Series), those bonds may not sell now.  And that means promises not to use tax money for the project may “have to” be broken, too.  Up go the taxes, again.  You need to brace yourselves.

All the financial experts I hear and read these days say the same thing: get rid of your consumer debt as fast as you can!  If economic history tells us anything, it’s that high consumer debt, with high inflation, with reduction in available credit, equals higher and higher interest rates.  And if you’re concerned for your job, that’s more reason to get rid of the albatross of credit card balances, outstanding loans, and installment payments.

Make a plan to pay off debt, and stick with it.  Pay more than the minimum required payments on all debts, but focus on the lowest balance debt (or highest interest rate if they’re close).  Pay as much as you can to eliminate it as fast as you can.  With one debt down, tackle the next, adding what you’ve been paying on the first debt to what you’ve been paying on the second.  After you pay that off, move to the next.

Try to build up a liquid savings for living expenses you need for one year.  Lots of folks say six months is enough, but we don’t know what’s coming, so I say a year.  Ideally, of course.  Keep a few months’ worth in an interest bearing checking account locally.  Put the rest in a higher interest savings or money market account (not a stock investment account right now), which you can access easily and quickly if needed.

If you’re just trying to protect your investment funds from future redistribution (we should all be so challenged), you’ve got to find a way to distribute your own assets to your best advantage.  I’m sure we’ll see more folks putting money into home improvements for that shelter.  It might not be the best move to get a new mortgage on a new house right now.  Yet that investment profit has to go somewhere where it will grow value but not increase a tax burden.  Pouring it into your home, with decreased values right now, could fit the bill.  Increased equity when the housing market improves, improved living conditions for the short term.  Hey, if you can find a reliable contractor, that might be the way to go.

If you’ve been out of the job market a while, consider a seasonal job.  Even though retail Christmas season sales are projeted to be lower this year, many stores and online customer services companies are still hiring.  After the holidays, tax season hits.  You might find work in that industry.  Then springtime brings lawns, home improvement sales, and summertime child care.  Seasonal, fleeting, and fickle.  But if you need work…

I hope and pray that you fare well through the current changes and unknown upcoming ones.  If this is the change you hoped for, I hope you get yours.  If it isn’t, I pray you weather the turbulence well.  I hope we can all focus our priorities appropriately, and “do the best with what we have, where we are.”

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