Where do we go from here?

Posted 5/4/09

It took the Treasury Department one year to announce that we were in recession. I wonder how long it will take to announce when we are in recovery. …

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Where do we go from here?


It took the Treasury Department one year to announce that we were in recession. I wonder how long it will take to announce when we are in recovery. Assuming it will be in long-awaited hindsight, it may be prudent to start planning now.

First it might be good to review all the things we can take advantage of during a recession. This way if you haven’t accomplished some of these yet you may still have some time to do so.

Recessions and bear markets may create opportunity for the following:

Tighten the budget and get your financial house in order. This is a good excuse to postpone luxury items and improve spending habits.

Pay down debt while interest rates are low. If your home equity line of credit dropped from six percent to four percent and you keep making the same payment, you are reducing principal at a 150 percent. This is a good time to eliminate consumer debt.

Consider refinancing your house if you have an adjustable rate or if your fixed rate is greater than six percent. Recessions and low-interest rate cycles are a good time to reduce your liabilities.

Keep funding your 401k plan. If you keep your contribution the same, you could be purchasing up to twice as many shares as you were 18 months ago.

Go the extra mile at work and do everything you can to impress your boss and keep your job. Take some classes, improve your computer skills. Next month’s college graduating class is the largest and most qualified in history and they can undercut your salary.

Review your portfolio and eliminate anything you would not buy again today. You may be able to realize some tax losses and you will want to get positioned with the best strategy for a potential recovery on your longest term assets.

Carefully research investments. I believe there are many low-priced stocks with good multiples that may help your nest egg recover if you can see past the next few months of volatility.

Keep your house and car in good repair. Labor and materials are abundant and this will keep you prepared for the unexpected.

Review your tax planning for next year before you file away your recent tax return. If tax rates remain low for 2009, and you don’t get that bonus or raise, you could benefit from substantial tax planning if you get started early in the year. You may be able to reduce your withholding on the advice of your tax professional. This can allow you to rebuild emergency savings or fund more into your 401k.

Now you are ready to plan for the recovery that has historically always happened. Stay focused on your goals and don’t let naysayers keep you from taking advantage of the opportunities that we believe abound. Meet with your financial advisor and prepare a strategy for the next decade. Many analysts predict the next ten years will be better than the last ten years.

Add higher taxes and inflation to the pot and you will need a powerful growth strategy to stay ahead. There may be no better time in history than now to get positioned for that future.

Patricia Kummer has been an independent certified financial planner for 22 years and is president of Kummer Financial Strategies Inc. at 8871 Ridgeline Blvd. in Highlands Ranch. She is a financial consultant offering securities through SagePoint Financial, Inc., member FINRA, SIPC, and Investment Advisory services through KFS, Inc. a Registered Investment Advisor, not affiliated with SagePoint Financial,Inc. She welcomes your questions at www.kummerfinancial.com. These views are not the opinion of SagePoint Financial, Inc, and should not be construed as an offer to buy or sell any securities. Investing is subject to risks including loss of principal invested. Past performance is not a guarantee of future results.


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