Finance Roll

If you've been watching the news lately, you might have heard the media celebrating the fact that American job loss was lowest in April than it's been since October of last year.  I caution all of you not to break open the champagne just yet, unfortunately.   The stabilizing unemployment rate was a bit skewed by the 72,000 jobs added to Uncle Sam's payroll. Keep in mind that roughly 60,000 of these new employees were hired on a temporary basis to work the 2010 census, but they'll be back in the unemployment line as soon as the gig is up.

And besides, since government salaries are paid by taxpayers and the U.S. is already battling an enormous tax deficit and declining tax revenues, the new jobs will have to be funded by inflation.  The bottom line is that more government jobs isn't a sign of an economic recovery -- it's a sign that we're digging ourselves even deeper into a bottomless pit that will ultimately end with the collapse of the dollar bill.

It's not all doom and gloom out there, fortunately.  There are steps you can take to protect yourself and your family in this uncertain economy.  Americans are losing their jobs in record numbers, and while you're powerless to some extent, read on to learn how you can help safeguard yourself and your financial future.

1 Pay off bad debt

Ideally, you have whittled your debt and monthly payments down to size, using any extra money you can spare each month to reduce them even further.  Or better yet, you're debt-free and can sock a significant portion of your dispensable money away for the rainy days ahead.

By the way, you may be wondering what I mean by bad debt.  Basically, I'm talking anything that is unsecured and has a high interest rate.  Yes, that vacation you charged last year and are now paying back plus interest counts as bad debt.  No, your mortgage or car loans don't count.  They are what I consider to be necessary debt as you need a roof over your head and transportation to and from work (unless you have access to public transportation, but that's another topic altogether).

2. Reduce your expenses.

While you're eliminating bad debt, which is a monthly expense for your family, start cutting other unnecessary expenses as well.  One way is to stop buying in bulk.  What good are 500 rolls of toilet paper going to do you if you lose your job and, as a result, your home?

You'd be better off scouring the sales and finding a good deal on a 24-pack of t.p. and saving your money.  Cash is king, and it's better to have your reserves in cash than depreciating material goods.

The bottom line is that you shouldn't stockpile on items for the future.  Now more than ever, you should be living in the present.  Buy what you need right now and save that extra $10 you would've spent on bulk items for whatever you might need next month.  Most of all, from a biblical perspective, be content with what you have and stop trying to keep up with the Joneses.

Now isn't the time to be making frivolous purchases.  Sure, a new plasma TV screen would make a great addition to your living room, but that money could be saved as a cushion against hard times that can unexpectedly hit anybody at any time.  How many groceries could you buy with the money it costs to buy a plasma TV?  Quite a few!  So until the economy makes it turnaround, hold off on those big purchases and build your nest egg instead.

3. Secure your income.

Easier said than done, I know, but do whatever you can to make sure that your job is secure. Hopefully, you have done your homework and learned that your employer is in good enough shape to keep funding your paycheck in the coming months.  You're doing your job to the best of your ability and offering to help in other areas as needed.  Basically, make yourself as indispensable as possible.  You should also consider avoiding unnecessary job changes that can lead to instability and job loss.  After all, it's much easier for employers to can a worker who's been on the payroll for two months than one who's been contributing to the business for twenty years!

Unfortunately, nothing will guarantee that you'll keep your job.  This is one reason that many savvy investors build their own companies instead of seeking out high-paying jobs working for others.  Many hard-working Americans have experienced the misfortune of unemployment through no fault of their own.  The key is to do whatever is in your power to secure your income and keep putting money aside in case the unthinkable happens.

4. Keep a roof over your head.

By now, you have likely made sure your family will continue to have a roof over its head by either 1) Deciding to stay in your home and using my action plan for saving it come hell or high water -- or, 2) Deciding to sell your home and rent an equal or better home for less.  If you are getting behind on your mortgage payments, you may want to consider moving to a small apartment until you can get on your feet again.  Part of the problem is that you must weight your options with your lender.  Generally speaking, I believe you should stand your ground and try to work out a payment system with your lender to keep your current home.

If you are being evicted due to non-payment, you will still need some money on hand to put down a deposit and first month's rent, so be prepared with cash.  In today's market, most lenders will work with you as long as you are making some type of payment each month.  The banks don't need any more bad debts on their books right now and are more willing to work with you than ever before, so take advantage of the situation before it's too late.

5. Protect your money in the bank.

Make sure your money is in the safest bank available to you.  Contrary to common belief, I recommend keeping some cash on hand at home and using smaller local banks for the rest of your money.  Many of the local banks have managed risk well and are in better positions to hold your cash, so do your homework and ask to see the debt ratio at the bank you use or are considering using.  Obviously, the lower the ratio the better.  Fannie Mae was leveraged 100 to 1, which is a prime example of what not to do.

Reduce or eliminate your exposure to plunging stocks and bonds, saving your portfolio and your retirement from further disaster, and ...

Hedge against further losses in the value of your home and in investments you can't sell. Which leads us to number 6...

6. Make wise investments.

Because the stock market is experiencing a government-inspired rally, now is the time to sell!  Sell every soft stock you have and check out some of the alternative investments below that have stood the test of time.  

Physical gold and rare gems are good investments for economic hard times.  But they aren't the only investments you might consider.  Cash is king, at least in the short run until inflation kicks in and the dollar starts diminishing in value.  Not sure about the best way to buy these items?  Contact me to learn everything you want to know about alternative investments.

Since the beginning of time, metals and gems have increased in value, making them the best safe haven and hedge against dropping currency in troubled times. 

Other investments, like Managed Future accounts, have been growing in popularity.

Managed Future accounts are secure investments that allow professional traders use your money during business hours returned to you at the end of the day.  The volatility in the current market offers day traders opportunities they have not seen in years.  Right now, the stock market is not a buy-and-hold scenario for the savvy investor.   If you are getting that advice, I respectfully warn that you may need to reconsider your financial advisor.

More about Managed Futures: Integrated investment platforms improve profitability and better manage risk.  You keep custody of your own funds, but let professional traders do the trading.   Traders (which are highly regulated) have Limited Power of Attorney to trade the managed account only.  Only you have deposit or withdrawal authorization.  Returns typically average in the 20-30% range, even during shaky economic times like those endured in 2008!   If your portfolio was down last year, you need to get into a managed account today. Don't quit your day job to become a trader; let the professionals do it for you.  Your time is better used doing what you are good at and have a passion for, not pursuing a new carrier in this market.

You can see that while the economy is dismal, there is still hope for a strong economic future.  You just need to take a few precautionary steps to protect yourself and your finances, and then hunker down and weather the storm.  This too shall pass!