of 10 when people do that, they lock in losses and sell into a down market and they miss the upswing later when the market recovers,” she says.
Still, if the risk level is so great that it causes personal uneasiness, it is OK to reevaluate your 401(k)’s asset allocation. “You don’t want to be in a situation where you can’t sleep at night,” Henson says. “At a certain point and time, people cannot stomach anymore losses. If it starts getting to that point, ratchet out exposure to the market.” For those who are five years pre-retirement, instead of completely liquidating assets, Cox recommends possibly investing more in bonds and cash.
“The problem I have is when people pull their money out and have nothing to do with it because inflation erodes the dollars purchasing value,” Cox says.
TIPS FOR SAVING, PROTECTING YOUR FUTURE
By Janell P. Hazelwood
With an economic outlook that gets gloomier by the day for the average consumer, there are still ways to safeguard your money and ultimately gain better financial habits for the future. Lynnette Khalfani-Cox, CEO and founder of The Money Coach L.L.C., a financial education and consumer advocacy company, offers tips to help you safeguard your finances and shore up savings:
Don’t panic. Diversify. The recent fallout of the $700 billion bailout negotiations heightened fears of frenzied investors, whose first instinct was to quickly sell, and led to a historic plunge of the Dow Jones Industrial Average to 777.68 points. However, Khalfani-Cox warns that investors should “err on side of caution.” Be sure you have the proper asset allocation strategy in place, she says. Diversification is key, in terms of the types of accounts, such as stocks, bonds, and cash accounts; location, such as including both national and international investments; and market capitalization, such as investing in small cap, large cap and midsize companies.
If you’re young, just get in the game. With advantages such as the employer matches and tax breaks, investing in a 401k is a good idea for saving for the future. “And you’ll have the full advantage of time and compounded interest,” she adds. Contribute what you can, even if it’s a small amount per paycheck or per month.
Seek guidance. Khalfani-Cox recommends resources such as the Financial Planning Association to find financial planners in your area.
Credit Card Debt
Avoid extra temptation. You can discontinue receiving credit card offers by calling 888-5OPT-OUT, toll free.
Be a pristine account holder and negotiator. Avoid missed payments, even on utility or cell phone bills. If you have a good history with companies, get on the phone and start negotiating. You can get interest rates adjusted or request that fees be waived. “Let them know that you are a valued customer. Many consumers who ask for lower interest rate, get it on the spot,” she says. Also, set up automatic payments and alerts for bill notification when due dates are near.
If in deep debt, determine the root of your problem, and seek help. Communicate with creditors and try to make arrangements.