In light of the dramatic news of the last few days, I decided to deliver this week’s blog more personally using video.
Check out this week’s video blog on what to do following the S&P downgrade.
Transcript of video blog:
First everyone was focused on the debt debate, and then S&P goes and downgrades the U.S. government’s credit rating. Now the markets are bouncing all over the place and money matters are dominating the news. In my opinion, these events offer a great opportunity to step back and realize that you don’t need to depend on anyone to get where you want to go. Consider it a wake-up call, if you will, because there’s a lot you can do on your own to improve your financial position.
For starters let’s look at investing. I’ve gotten a lot of calls, especially over the last few days, asking for advice on what to do with personal investments given the problems with the U.S economy. So, here is my advice. For starters, the investment advice I posted on June 16th about getting out of the stock market still stands. Sell your stock holdings. Being invested in any stock market is too risky for now, as it’s very likely that the markets will drop a lot more in the months to come. Put your money in short term CD’s (no longer than 6 months) or money market accounts. Once the market drops enough I believe we’ll be looking at a very good investment opportunity. So stay tuned to learn more as the situation develops.
In addition to protecting your savings, there are a number of other steps you can take. For most people, the biggest step of all is learning to spend smarter. It’s easy to believe you’re already spending smart, when the truth is that most people are sitting on a number of terrific untapped opportunities to spend smarter and save money that are right there for the taking. More than half of Money Smart is spent on covering this in detail.
The average two-earner family these days makes about $60,000 a year. Such a family generally can save between $3,000 and $6,000 a year, right now, doing things that they haven’t been taking advantage of, and the potential only grows with higher income. Saving the $3000 each year in your IRA will actually be $3600 or more if invested before taxes. At a 7% return, you’re looking to earn over $380,000 after 30 years of making the same $3000 annual investment. This means retiring a lot sooner than you otherwise would, or being free decades sooner to work less, or work at something you like a lot better.
Also, if you’re one of the 50% of American families in debt, eliminating debt is another terrific opportunity to dramatically improve your finances.
The bottom line is to see this as a moment of opportunity. Don’t wait for the economy or the government to make things right. Do what you can to improve your own finances. Start with the information available on www.MoneySmartOnline.com and my blog, but really consider using the tools in my book, Money Smart to take it to the next level. Take the time to become a smarter spender and a smarter saver and see to it that money is adding to your happiness, not taking away from it.
I’m sure you work hard for your money. You owe it to yourself to see to it that you’re doing all you can to both protect it and use it wisely.