Yes – we may be in a recession and the media will certainly let you know it on a daily basis. But your trusted Honeck-O’Toole team is here to calm your fears, help you look at the bright side, and give you some practical tips on how to take charge and be proactive so you can protect your money.
- Don’t panic! While the media would have you running for the hills, be sure to look for signs of economic strength in your daily life. For example, new businesses are opening up every day, and many are thriving in several “recession-proof” industries such as the food industry, pet care, health care, financial products, home improvement, technology, “green” products, and many others. If you own a business, take this as a reassuring sign that people are still willing to spend money on great and/or necessary products and services.
- Convert a variable mortgage loan or home-equity line of credit to a fixed-rate loan. Right now, 30-year mortgage rates aren’t bad at all. This would be a great time to shop for the best fixed rate. Wouldn’t it be a relief to know you have a fixed payment that won’t change with the economic tide?
- Mary Miller, Senior Vice President of Sales for the First Financial Mortgage Corp. in Portland, offer this tip about lending rates:
Know your FICO credit score. Conventional home loans are being rated on FICO score (a credit score developed by Fair Isaac Corporation) and down payment. The less you put down, the lower your FICO score and the higher the rate. There are other programs, such as FHA (Federal Housing Administration) loans, that are not currently raising the rate based on down payment or credit score. Speak with a mortgage professional about your FICO score ahead of time. It could save you ½% on your interest rate. (Call Mary at 207-775-4200 ext. 251 if you have questions.)
- Do your best to pay down credit card debt. While this is always a good idea, it’s especially important to pay down or eliminate credit card debt while rates are fairly low. You never know when rates may climb higher.
- Take a hard look at your spending, and cut back. This may seem obvious, but so many of us buy items on impulse or don’t hunt for the lowest price on purchases. It might be fun to challenge yourself and become a frugal bargain-hunter and make some changes to help build your savings (and even retirement funds). Most financial experts say you should have at least three to six months’ living expenses available in a safe and available savings account such as a money market account. So, by spending less, you can build up this safety account. Small changes can really add up.
- Take charge of your career. Your job may be super-solid, but why not be prepared for the worst by building your network of contacts, updating your resume, or even diversifying your job skills? This can be valuable even if you run your own business. You can never go wrong if you learn a new technology, for example. Online classes and local adult education programs offer a wide range of professional development courses.
- Chad Weber, Financial Advisor, Financial Planning Specialist for The Casco Bay Group at Smith Barney (800-442-6722 firstname.lastname@example.org), refers to this economic climate as a “market correction” and he offers the following two tips for investors.
“Revisit your asset allocation strategy. Employing this type of diversification is meant to reduce your portfolio volatility, but it should also be done keeping in mind your time horizon (when will you need the money), and your risk tolerance…and done in conjunction with a well thought out plan that identifies your future needs. This plan is what justifies the allocation and the ‘required’ rate of return to meet your goals. Discuss these items with your financial advisor if any of them have changed.”
- “Rebalance your portfolio. We all know about asset allocation and diversification, but what few people do is look at how this diversification can be used to your advantage during market corrections. A discipline of proper rebalancing ultimately forces you to add to the underperformers with new cash or by taking some money from assets that have had a great run. This is buying low and selling high.”
- Rusty Pillsbury, of RE/MAX By The Bay offers the following two tips regarding real estate.
“Unless you’re an investor or speculator, you should not buy property just to ‘get a deal’.” People should be looking for a home and a place they want to enjoy, spend time and raise a family. In today’s market, you are probably buying low. There will certainly be people falling through the cracks and letting their house go for cheap over the next year or so, as it takes time to do “work outs” and “short sales” with banks and lenders.
- If you’re selling in this market and you want to maximize your sale, make sure your property is ready to show! This means your property is de-cluttered, thoroughly cleaned, well landscaped (with a picked up yard), and clean windows. Eliminate any reason for buyers to lower their offer.
We hope you’ll find comfort in some of these tips. If you’d like to have us review your current financial picture and help you develop a smart plan for the future, please give us a call right away. Now that our busy tax season is over, we’re available to help you become more “recession-proof.”
If you’d like to review your current picture with a Personal Financial Planner and get ideas to improve your finances, give us a call at 207-774-0882.
Our financial articles are presented by Honeck O’Toole, Maine-based certified public accountants. If you ever have questions about your finances, please email us or call 207-774-0882.