Your Financial Future: Adjusting to the new economy
The new economy is here whether we like it or not. The news has been full of stories of people who have lost their jobs and are struggling to pay their mortgage or rent.
For some people, that is not much different than before COVID-19 hit. Others were keeping their heads above water or doing very well before the pandemic. We are responsible for our family蘑菇视频 financial security.
There is an old saying often credited to Albert Einstein that 鈥淥nly a fool would think you can keep doing the same thing and get different results.鈥� This means if we want to improve our financial health, we might need some changes.
Cash flow is the starting point. How much money do we need each month and what is the source of this income? Younger people in their accumulation years have several choices if they need more income. They can look for a new higher paying job or they can improve their skill set to qualify for new position. Sometimes a second job might help.
While the unemployment rate is much higher than at the beginning of the year, there are help wanted signs at many locations. Use some of the new job search apps to find openings. Probably the best way is to let all of your connections know you are looking. You will often hear about an opening that has not been posted.
The second half of the equation is to find out where your outflow of money is going. Surprisingly, many people do not realize where all of their money goes. There are two types of spending: needs and wants. It is the wants part that offers opportunities to improve cash flow. You may want a new cellphone, but is your current one still working? You may want a lot of channels on cable and that gym membership, but are you using them? The cars we drive and the clothes we wear can have big difference in cost. What expenditures work in your budget?
If you are buying wants on a credit card and not paying the balance in full every month, it is even more expensive than you think. Interest rates on credit cards are one of the highest you will pay. Create a plan to pay them in full every month. It might take a little time to do so, but you will feel a sense of accomplishment when you do.
You need to start thinking about long-term planning, too. Hundreds of millions of dollars of free matching dollars go unclaimed every year in 401(k) plans. If your company offers one, contribute at least as much as necessary to get all of the matching money. It is hard to beat free.
If you are doing better financially, this may be a good time to consider a Roth conversion. This is where you take money that is in an IRA or 401(k) and pay the taxes now. This money grows tax free if you follow two simple rules: you are 59 陆 and have had a Roth for at least five years. Taxes rates will probably have to go up in the future. Saving for retirement in a Roth might be a great way to do so.
While things are tough today, they will get better. We will overcome today蘑菇视频 economic problems. You must decide if your family is going to come out in better shape than before the crisis or not. It is all depends on your actions. The good news is you can do it.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, 鈥淵our Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.鈥� If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.