Family Concerns in The Current Economy
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I have a 401K from my previous job. Right before the bailout hoopla started and the market started plunging with the alarming rate of a roller coaster on descent, I made the decision to switch all my funds to bonds. Before I did that, I saw my retirement fund lose a sizable chunk in just under a year. I’ve seen my neighbors putting up their homes for sale or for rent. I’ve received a letter declining my request for financial aid for school.
According to some experts, we’re heading for a recession so we should see even more decline in economic activity: low Gross Domestic Product, lower income, low sales, higher unemployment. To put it bluntly, I’m scared. Like millions of other Americans, I haven’t placed my family in the best financial footing. What if the declining economy affects my husband’s job, while he’s our family’s only breadwinner?
According to some experts, to prepare for a recession, a family should prepare itself for the possibility of losing their jobs. So what should you and I do?
- Start storing up for the winter so to speak, by way of an emergency fund. Experts say you should have at least 3-6 months expenses saved up. That can really add up for any family. So start being aggressive in cutting back on eating out, Starbucks lattes, maybe forgo that planned vacation and have a staycation instead. Make sure all those money saved goes to your emergency fund.
- Polish your skills. If your job pays for continuing education, or reimburses for it, get a certification that will make you more competitive or even desirable to keep, in a recession’s market.
- Stock up on pantry items. Yes, you read right. In some previous recessions, prices of consumables have gone way up. The ones with the advantage were families who prepared with lots of canned goods (theoretically unlimited shelf life), beans (can be stored safely up to two years), rice, and even meats which can be stored in a deep freezer.
- Put off major purchases such as cars, big screen TVs, or anything else that’s a luxury. You’ll be happy to have the money in your pocket when the lean times come.
- Look at where your 401k is going and redistribute if needed, and change elections if necessary. You may want to stick to bond funds, or you may want to change the percentage of your income going to your 401k. Just remember never to go below your company matched number. If your company matches every dollar up to 3%, stick to at least a 3% election.
I don’t want to alarm anybody, but I did want to give families some ideas on what they can do, and how they can be prepared. Good luck to all of us, and let’s hope the lean times don’t last that long.
Secret Mommy says...
It’s also good to remember that while it is EXTREMELY important to be diversified in retirement accounts, now is also a very good time to make as big of investments as you can in your retirement funds. When prices are low and things are receding, your dollars buy investments that are surely to rise in value, especially if you have many years to wait it out before retirement.
The pantry/stocking up idea is such a good one! I wouldn’t have thought of it, but it makes sense, as I have already seen prices rising at the grocery store!
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