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The financial environment can be confusing, even in the best of times. It seems even more so today in light of the financial crisis of 2008, the recession, the housing market, low interest rates, volatile markets and uncertainty over potential future government actions.
Even with all the uncertainty, there are some actions that are always appropriate to consider. In fact, the uncertain future could be the ideal time to review your financial situation, clarify your goals and take actions to help you reach those goals.
Review your financial liquidity
It is often recommended that you should have an emergency fund equal to at least three months of living expenses. If you do not have that much, start saving. If you already have three months' worth, consider increasing it to six or nine months. According to the Bureau of Labor Statistics, the average length of unemployment has increased from 17 weeks to almost 40 weeks over the past four years. Having more is better than not having enough.
Be prepared to find a new job
No one likes to think they may lose their job, but it does happen. Being prepared can reduce the stress if it does happen and make it easier to find another job. Here are some ideas to consider taking now.
Identify large expenditures that could be eliminated if needed
Reducing your expenses is never easy. While eliminating a morning coffee or dining out less often will save some money, they will not reduce your living costs dramatically. To be prepared, you should identify some major expenses that could be trimmed or eliminated if warranted. Things to consider could include major vacations, private schools instead of public schools and major purchases that could be delayed. Even if you never have to cut your expenses dramatically, knowing that you could will provide some peace of mind.
Review your retirement plans
Most people have not taken the time to determine how much they need to have saved before retirement to enjoy the lifestyle they want after retirement. If you have not done this or it has been a while since you have, spend a few hours and you may identify some actions to take now. If you have a 401(k) plan at work, make sure you are taking full advantage of it by contributing enough to get the full employer match and be sure you are using an appropriate strategy for how your 401(k) funds are invested.
Review your estate plans
Estate planning is more than trying to minimize any estate tax that might be due.
Handle your finances more effectively
Many people have difficulty just handling the "paperwork" associated with their finances. Be sure to keep the important papers and don't let unimportant papers take up too much room.
Improve your financial literacy
It is never too early or too late to improve your financial literacy. Learning more about how to handle your personal financial situation as well as what is happening in the overall financial environment is a worthy goal and there are lots of resources available. Most news websites have a finance or money section with many useful articles. Financial columns in newspapers and magazines often offer suggestions for someone's issue that may be similar to yours.