Undoubtedly 2009 has proven to be a difficult year for women as investors. With the first day of summer around the corner, it may be tempting to take a mental break from a trying year. As we slip on our flips flops, pick up our summer read, rejuvenate and retool for the second half of the year, now is also a perfect time to reassess our financial roadmap to success.
Each month in “Money Matters with Helen Wathen,” we will explore financial topics that pertain to us as women and provide great tips to approach the financial challenges which hinder both building and maintaining our hard earned money. This month we explore the beginnings of developing a sound financial road map that can help poise you for success for the remainder of 2009.As women we tend to wear many hats in our lives and continue to hone our skills as multi-taskers. Balancing career, family and household can often prove to be overwhelming and gives us great reasons to place the management of our finances at the bottom of our list. In my nearly 30 years as a financial advisor to countless women of all walks of life, I’ve seen women struggle to prioritize their financial responsibilities with their other obligations.
The steps below are a starting point to navigating your financial roadmap and gaining control of your financial future.
1. Pull Your Credit Report
When assessing your financial position, your credit score is the first place to start. Whether you are considering refinancing a mortgage or negotiating credit card rates, creditors look at your credit score to determine which interest rate you will be offered.
Usually consumers with credit scores of 750 or above experience the most success with creditors. We are all eligible to receive one free credit report annually which includes scores and monitoring from the three major credit bureaus Experian, Equifax and TransUnion. While there are several online sources for obtaining your credit reports, the Federal Trade Commission (FTC) endorses www.AnnualCreditReport.com. Your annual report is truly free with no strings when ordered from that site. Watch for hidden costs and obligations at the other sites.
2. Refinance and Consolidate Consumer Debt
Rates are at historical lows with mortgage companies. Cash flow is tight. It’s a great time to look at all your debt to see how it can be consolidated and interest costs reduced. Start with your mortgage. If your interest rate is about 6 percent, check to see if refinancing makes sense. A factor that would affect your decision would be how long you expect to be in your home. If the time frame is less than five years, you may not benefit after factoring in the costs of refinancing. Everyone should at least check their rates and evaluate the benefit of refinancing at this point while interest rates are low.
For credit card debt, make a list of all credit cards, balances, interest rates, and amount of credit available. Call each company and ask for lower rates. Again, interest rates are at their lowest levels. If you have a decent credit score and history with these companies, they should be willing to work with you. Also look for offers for balance transfers with low interest rates. Read all the terms as often there is an upfront charge for transferring the balances. Implement a plan which reduces your interest rates as much as possible for the longest time. Stay aggressive about keeping your interest rates as low as possible.
3. Maximize retirement account contributions
Many might say that stocks are on sale right now. Generally when we can buy something on sale, we leave the store with our bags full. Why wouldn’t take that approach with our investments as well? This could be the best time to be loading up our retirement accounts with contributions. One dollar today buys nearly two times of the amount of securities compared with two years ago when the markets were at their highest levels. Contributions made now will help the portfolio recoup its losses much more quickly once the market begins to recover. Now is the time to get your money to work for you by also taking advantage of employer matching options in 401(k)’s and other like accounts.
4. Redirect Your Cash Flow
By following the points listed above, chances are that you may have identified some areas to redistribute cash flow. You might consider Using the savings from refinancing your mortgage to pay down credit card debt AND increase 401k contributions. In times like these when the economy is turbulent, the instinct for consumers is to spend less money and pull back as much as possible. Instead of retracting from investment and growth opportunities, now could be the time to take advantage of the investment opportunities which always rise out of periods of uncertainty.
Helen Wathen is a Vice President and Financial Advisor at Merrill Lynch in Dallas and can be reached at 972.386.1332 or at Helen_Wathen@ml.com, http://fa.ml.com/Helen_Wathen.
Opinions expressed are those of the author and subject to change.
The investments or strategies presented do not take into account the investment objectives or financial needs of particular investors. It is important that you consider this information in the context of your personal risk tolerance and investment goals.
