Financial Stability and the Next Recession

The recession (read: meltdown) of 2008 was a huge wake-up call for everyone. Fortunately, the collective anxiety that we experienced being on the brink of global financial disaster has passed, and the world’s economy has, for the most part, recovered.

In 2017, the world was enjoying an economic acceleration. Growth rose in every advanced economy except Britain, and in most emerging ones. Global trade was surging, and America booming, even the Eurozone was thriving. 

But there are warning signs ahead. Even though Trump’s tax cuts have helped lift annualized quarterly growth above 4%, and unemployment is at its lowest since 1969, the International Monetary Fund thinks growth will slow this year in every other big advanced economy. And emerging markets are in trouble. 

So, what can be done to weather another potential downturn?  Here are some things that may help in a financial storm:

Savings

Have an emergency fund at your fingertips. An emergency fund is money you’ve saved up for the sole purpose of helping you maintain your financial obligations through emergencies that life deals out.

The first step to building your emergency fund is to set a reachable savings goal. Start with $500. That’s something that can be done in a few months, or even less if you are frugal. The trick is to not have to earn extra money, but rather find the savings in the money you’re already pulling in.

For example, take a look at your credit card payments. Is there a way to reduce your rates? Turn over your credit card and call the number on the back. A simple request to get a rate reduction might result in a surprisingly positive outcome.

Shopping around for better insurance policies can save you money. So can installing a programmable thermostat, planning your grocery shopping instead of just wandering around the aisles picking up random, unnecessary items.

Try reducing your number of dinners out per month. You’d be surprised at how much you spend on restaurants and other items like that.

Debt

Getting out of debt is a good idea, whether there is a financial crisis on the way or not. Many financial planning experts recommend paying down and eventually eliminating credit card debt as a core personal financial planning strategy. American Credit Card Debt Statistics show that the average American Household Debt is over $5,500. The average for balance-carrying households is over $16,000, with a total outstanding U.S. Consumer Debt of $3.4 trillion.

Conservative investments

 Don’t be tricked by the “call of the wild” which promises unreasonable returns. Now is not the time to gamble your finances away. A sensible middle ground of investing is the way to go, using investments that are based on real value and pay dividends and interest.

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

                                David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC