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Preparing for Financial Storms | The First National Bank Blog

February 16th, 2016

economic stormOne of the country’s worst snow storms coincided with a major financial storm as low oil prices and foreign market worries sent the Dow Jones Index downward in January, 2016. Whether you consider yourself an investor or not, the truth is most of us have money in the stock market in the form of IRAs, Mutual Funds or 401(k) plans. Staying on a secure financial footing during times of market stability is one of the best ways to weather potential storms. Here are three tips to help you survive and possibly thrive:

Have a plan.

Know your financial goals and decide in advance how you are going to achieve them. If you have children who wish to attend college, you may want to open a 529 plan when your kids are relatively young. If owning your own home is a priority, set a budget and put aside enough money to pay 20 percent of your prospective home’s value in a down payment. Wondering how much house you can afford? Plan to spend 2.5 to 3 times your annual gross income on a home.

Contact The First for financial planning that fits your life and your goals.

Pay your savings account first.

It takes discipline, but put money aside in a 401(k) or IRA each month before you spend any money on incidentals. If you have an IRA, invest as much as you can as early in the year as you can to increase earnings on the account. You can wait until April 15, 2017 to fund your IRA for 2016, but doing it early gives your investments several extra months to grow. In a Roth IRA, that growth is tax-free.

Live within your means.

One of the simplest strategies for weathering unpredictable financial times is also one of the most difficult. Nobody intends to over-spend, but unexpected household repairs or auto bills are just two things that can derail your budget. Remember to put money aside in savings to take care of any surprise expenses that you might otherwise have to put on a credit card.

People who save regularly and plan ahead can actually take advantage of market downturns by buying stocks in stable or growing companies while prices are low. You don’t even have to buy individual stocks. Simply investing more of your income in your 401(k) plan is an effective way to make the most of a bear market. Finally, think of investing as a long term strategy and be patient. While nothing is a sure thing, the stock market historically outperforms most other investments over time.

How do you stay on solid financial ground? Let us know in the Comments section.