4 Fiscal Steps to Take Right Now

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This week has brought day after day of some of the worst financial news the nation has ever seen -- plummeting stock markets, an unprecedented downgrade of the U.S. credit rating, and the threat of a new recession before many people had even really seen the end of the last one.

In times of trouble, it's always tempting to wait until things calm down. But often, the best opportunity to significantly improve your financial footing comes during the worst of the turmoil. You may not be in the perfect financial condition to take aggressive action on all of these points, but even small steps will help you stabilize your financial future.

1. Get your financial house in order

The one saving grace of the slow economy has been that interest rates have stayed low, which in turn has made it easier for debt-burdened Americans to make ends meet. But with the credit downgrade on U.S. debt, higher interest rates may be coming down the road -- and they may get here sooner than you'd like.

If you have big balances on your credit cards, payday loans, or other "bad" debt, now's the time to get it paid down. With many credit cards now carrying variable interest rates, you'll face a higher bill as soon as interest rates rise. Get those balances paid down now, and you'll not only save yourself a fortune -- you'll also get yourself in a better position to do smarter, more productive things with your money.

2. Start saving for your retirement

If you're having trouble making ends meet, setting aside even a small part of your paycheck toward an uncertain future may seem impossible. But with big changes potentially in store for Social Security, Medicare, and other entitlement programs, you need to be prepared for possible cuts before they happen.

That means taking responsibility for your own retirement through an IRA or 401(k) retirement account. Many employers offer 401(k)s that allow you to contribute part of your paycheck automatically. And with the stock market down, you'll pick up shares much more cheaply than you would have just last month -- boosting your long-term returns.

3. Think about housing

Apart from the stock market, the other scary place for money lately has been in housing. Prices have fallen dramatically over the past several years, and in many places, the bottom still isn't in sight. If you don't already own a home, you may feel like you dodged a bullet -- and figure that there's no point in ever trying to follow the American dream.

But if you start saving up for a down payment now, you'll give yourself two legs up over the competition. First, you'll have time on your side, as continuing drops in prices reward you for your patience. More importantly, when the time comes to buy, you can have enough set aside to satisfy even the stingiest banks in letting you have a mortgage. That's an edge that will get you into the house of your dreams.

4. Start setting money aside for your kids' college education

With all the other demands on your money, saving for your children's college expenses may seem like a low-priority item, especially if your kids are young. But again, with stocks low, it's a great time to start contributing toward their education.

A 529 college savings plan account can be a great way to start. Each state has at least one plan, but you're not locked into your own state -- most plans accept people from around the nation. You'll get the tax break of not having to pay taxes on income and gains on your investments, and if you eventually use the money for college expenses, that income becomes tax-free. Pick a plan that has low costs and good investment choices.

Motley Fool contributor Dan Caplinger loves buying stocks on the cheap. You can follow him on Twitter here.


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Your Royal Greatness

1. Get all those Goldman Sachs people out of Washington.
2. Rather than have the American taxpayer dish out 600-700 Billion dollars to pay for all those financial company debts (due to derivatives, subprime mortgages); have the managers of those companies who made 100+ million dollar buy-outs and retirement packages pay us back. Have them pay our mortgage and credit-card debts also (just for good measure).
3. Fire every financial consultant, advisor, economic expert, and credit-rating auditor who receives income from the same financial companies they were supposedly auditing.
4. Install time-clocks in all "federal" building so that we can really start to monitor government waste (as in not showing up to work even).
5. Bring back the flat tax structure. If you make 20K a year, you pay 2K in taxes. If you make 2000K a year, you pay 200K.
6. Limit the percent exposure banks have on "risk" investments.

ahh crap,..it's all crap,..just sell your stocks, convert your paper money into gold, and stick it up your ass where no one will find it.

September 14 2011 at 1:44 AM Report abuse rate up rate down Reply
captmerit

who writes this garbage?

August 10 2011 at 6:26 AM Report abuse rate up rate down Reply
mrspelosi

I think the first fiscal step was taken in November of 2010 when I was fired as speaker. The next fiscal step will be to hand President Obama his walking papers in 2012, and then send Harry Reid to a retirement home.

August 09 2011 at 6:06 PM Report abuse +3 rate up rate down Reply
mrspelosi

I have been waiting for all my liberal friends to thank the tea party for the market being up over 400 points today. Yesterday all my liberal friends were in hysterics blaming the the tea party for the market dropping over 600 points. My liberal friends think that the tea party has that kind of influence on the market. So with that I say, thank you tea party for the upswing in the market today, from all my liberal friends.

August 09 2011 at 6:03 PM Report abuse +3 rate up rate down Reply
hotbuns82

THIS ALL SOUNDS GOOD-BUT I NEED EVERY DIME OF MY PAY CHECK TO EAT AND HAVE A ROOF OVER MY HEAD. I JUST SOLD MY CAR FOR THE INSURANCE AND CAR NOTES WERE JUST TO MUCH AT A TIME LIKE THIS. I WILL NOW TAKE THE PUBLIC TRANSPORTATION SYSTEM WERE EVER I GO. OH AND THE PRICE OF GAS---WELL THE CAR COST $40.00 TO FILL UP. NOW I CAN USE THAT MONEY TO BUY SOME PERSONAL THINGS , LIKE NEW SHOES AND SOME NEW CLOTHS---MAYBE--------

August 09 2011 at 3:03 PM Report abuse +1 rate up rate down Reply
1 reply to hotbuns82's comment
savemycountry911

At least you have public transportation. Good luck, you are doing the smart thing.

August 09 2011 at 3:36 PM Report abuse +2 rate up rate down Reply
True Grit

YESTERDAY

August 09 2011 at 2:49 PM Report abuse rate up rate down Reply
True Grit

I know what I should do.......Sell all my stock.

August 09 2011 at 2:48 PM Report abuse rate up rate down Reply
mrspelosi

I know what the first fiscal step should be. Give President Obama his walking papers in 2012, send Harry Reid to a retirement home, and slap a muzzle on me.

August 09 2011 at 2:25 PM Report abuse +3 rate up rate down Reply
1 reply to mrspelosi's comment
savemycountry911

As usual, you have very wise advice and Dems hate you for it.

August 09 2011 at 3:35 PM Report abuse +3 rate up rate down Reply