Important Money Decisions

After historic volatility in 2008 the current investment environment will continue to be strewn with potential challenges. Here are some important things to consider going forward:

1) Review your risk tolerance: Hopefully you have an investment plan, but that doesn’t mean you should let it sit for years without revisiting it. You should review your risk tolerance you’re your financial advisor and be sure your portfolio is allocated properly. Many portfolios have gone out of balance due to the large drop in equity values over the last 18 months.

2) Don’t abandon the investment ship: Market downturns are always filled with panic selling – and buying. While times are tough, it’s wise to examine all your investment choices, but if they make sense, definitely put what you can afford in. You’ll reap rewards when the market returns.

3) Check with your banks: As a result of federal economic bailout legislation, the Federal Deposit Insurance Corporation (FDIC) temporarily raised the per-deposit account, per bank coverage level from $100,000 to $250,000 through Dec. 31, 2009. Certain retirement-related accounts carry $250,000 of FDIC coverage, but again, check in with your bank to make sure you’re covered, and if not, get the right advice for moving funds so you don’t incur an unexpected tax liability or fees.

4) Cash is king: Historically having three to six months of cash on hand in case of emergency was sufficient. These days you may want to consider having twelve months of cash on hand, so that you will not need to tap your investments for expenses in case your job situation changes.

5) Check your credit: No one knows how long it might take to unravel the nation’s current credit situation. That’s why creditworthy individuals might want to delay looking for new lines of credit until things loosen, and it’s definitely a good time to schedule review of each of your latest credit reports at staggered intervals throughout the next year. Why? Because in tough economies and times of tight credit, identity theft might be on the rise, and you’ll need to make sure the information on your credit data is truly your own.

6) Revisit your budget: It’s a good time to make a budget or re-assess the one you have. Though the federal government would love for consumers to start spending again to lift the economy, that doesn’t mean you have to jump in with both feet. Keep your spending smart, your debt low so it’s easier to set savings and investment priorities that will do you the most good when the economy and the market come back.