- Assess your job situation. In a recession, no one is immune from layoffs. Today, anyone in housing, real estate or finance is especially vulnerable. And your job doesn't directly have to be "real estate agent" or "hedge fund manager" to feel the burn. Anyone in home furnishings, retail, construction and interior decorating, among other related fields, is subject to being laid off.
- Pay off credit cards. It's sad to say, but many people "use their credit cards as a rainy day fund," Golden Gate University professor Kit Yarrow tells the SF Chronicle. If you pay off your balance now, when you can, you will be able to borrow more if times get tough (assuming your credit score doesn't deteriorate). Paying down debt will help improve your credit score.
- Don't dismiss retirement. Continue contributing enough to your retirement plan to get the full employer match, but consider putting any extra savings in your emergency fund until it is sufficient.
- Consider a home equity line of credit. If you have enough equity in your home, think about opening a line of credit while you still have a job. As long as you don't borrow against it, you won't incur interest charges and there's usually no fee. If you do lose your job, you can use it for emergency funds. You generally can't open a line of credit when you don't have a job. These lines can be dangerous, however. "The problem is, every six months my bank sends me checks and reminds me I can write a check up to X, Y or Z," money manager Jeff Lancaster tells the SF Chronicle. "You need to be very disciplined" and resist the temptation to use it for nonessentials.
- If you are laid off, file immediately for unemployment benefits. In California, you must file by phone or online and you can't begin collecting benefits until one week after you apply. To be eligible, you must have lost your job through no fault of your own, be able to work and be looking for employment. Weekly unemployment benefits range from $40 to $450 depending on your earnings.
- Investigate health care options. If you lose your job, you usually can remain in your former employer's group health care plan for 18 to 36 months, but you generally pay the full cost plus an administrative fee. There may be cheaper options, such as adding yourself to a spouse or domestic partner's plan.
- If you must raid your retirement plan, know the rules. You can withdraw money from an individual retirement account for any reason. If it's a traditional IRA, you will owe income tax on the withdrawal plus (if you are younger than 59 1/2) a 10% penalty. (Different rules apply to Roth IRAs and nondeductible IRAs.) Many 401(k) plans allow withdrawals if you can prove a financial hardship, but you will still owe income tax on the withdrawal plus (if you are younger than 59 1/2) a 10% penalty.
If you leave your job and roll your 401(k) plan in to an IRA, you will have to wait until you turn 59 1/2 to take a penalty-free withdrawal. [SFGate.com]
- Just Say No to Credit Cards. Credit cards, my friend, are a drug to some of us. The thrill of charging a new plasma television may indeed exceed the thrill that some experience when taking illegal drugs. Because of that, we have to learn to say no.
Even if your credit card habits aren't that bad, you could probably use a bit of "reigning in" and learn to avoid making unnecessary purchases. Even if you pay cash for your "splurges" save the cash and put it toward paying down your debt. With the economy hit so hard, you want to have as little debt as possible weighing your finances down.
- Fall In Love with Coupons. If you haven't yet discovered the wonder of coupons, it's time you get acquainted with the little bits of paper that can save you hundreds (or even thousands) of dollars each year. For the little bit of time you spend clipping coupons and planing to shop the best sales, you'll have a much fatter bank account to show for it.
- For those of you who are homeowners, now may be the time to refinance. If you have an ARM (if you don't know what that is, read my breakdown of mortgages here), now may be the time to refinance into a fixed-rate mortgage. Mortgage rates are lower than they've been in a long time. Adjustable rates can go up and you may find yourself in a bind if you can't make your rising mortgage payments. With a fixed rate, you won't face that dilemma.
- Save for an emergency fund, as you're paying down debt, of course. [Consumertipreport.org]
This week in books 4/30/17
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