Five Things to Resist Doing in a Turbulant Economy (NEFE)
1. Don't borrow money to continue your current lifestyle
2. Avoid pulling out funds or taking a loan from your 401(k). Even more important, you should continue making contributions into it. If you're nervous about the ups and downs of the stock market, consider changing your allocation strategy, but stay diversified.
3. Even if you're tempted by low interest rates, avoid borrowing against your home equity to fund current expenses. The last thing you need right now is more debt. Another reason to avoid this type of lending is that your home could potentially devalue as a result of the soft housing market.
4. When the going gets tough, the tough turn to retail therapy and that is not a good philosophy in uncertain economic times. This would be an excellent time to re-evaluate your spending habits and avoid activities that cost money to make you feel better. Before shopping, make a list of only items you need and stick to it. Also delay purchase decisions on anything other than routine items in your budget for at least 48 hours to be certain you need them.
5. Avoid turning to credit for unexpected expenses while you have savings in the bank. Credit card rates are in the double digits, while interest on savings in in the low single digits. Why would you want to "give away" 15 percent or more of your spendable income to credit card interest? If you have not already done so, now is an ideal time to start to build an emergency savings.
For more money management tips visit www.smartaboutmoney.org
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