Flying high or about to crash?

These are clearly difficult times for many individuals. The numbers being reported from national and area layoffs are staggering. We all have experienced recessions or difficult times. If you are like most of us, once you made it through the difficult period there is usually a promise to make a change in the future. Sometimes those changes are made and a benefit is received. Other times, the changes are merely a fleeting memory before old habits take over.

For those individuals who benefited in recent times from the tremendous growth and business, the current outlook must be bleak. In fact, it may be difficult to remain positive in the face of financial decisions made during the last year or two. The 2007 Lincoln Navigator, the vacation hous or the luxury trip to Europe all now may look like poor decisions in the face of what has occurred. Your personal anchors may be different, but the outcome is the same.

It is all too easy for us to live into sudden increases in income. Many times, decisions made impact income for the next ten, twenty, or thirty years. But, the current increase in income may have only just occurred with little or no certainty it will continue into the future. The really good year of selling 5 or 10 million in real estate can be followed by a year of selling a million. The award for meeting sales targets can be followed by a meeting with the boss about the lack of sales.

It would be nice if there was a benefit for going through these difficult periods. The adage of making lemonade out of lemons comes to mind. I believe recessions will always occur, and we might as well learn to benefit from them. During recessions, there are always opportunities. A piece of real estate goes up for sell at a very low price. New cars are being discounted beyond the norm. Stocks are trading at multi-year lows. For those with cash, it can seem like a child in a candy store. Opportunities abound. For someone who has not planned, they may be on the opposite side and forced to sell something they cherish or are just barely hanging on. Opportunities are not the concern, but where the next dollar is coming from so the mortgage is paid is a priority.

Not only are we in a recession, but it is also January. It is not too late to add one more New Year’s resolution. That is to make financial planning an active part of your life and plan for the droughts during the rainstorms. There are many steps that can still be taken now to reduce expenses and hopefully allow you to be in a better position as the economy starts its recovery. These steps include refinancing a home. While housing prices have fallen recently, you may still be able to qualify for a new loan. While rates change daily, 30 year fixed rate mortgages are ranging around 5 percent. If you have a rate above 5.75 percent, you should consider refinancing. While the savings is only 0.75 percent, it is a 13 percent reduction in the rate.

Over a 30 year period, this may provide significant savings. Any reduction in the mortgage payment should be invested rather than lost in everyday spending. This way you will have a monetary reward in the future for making a wise decision today.

A review of your checkbook for the last two months may provide other savings opportunities. Take a look at the phone costs and see if there are new contracts at lower rates. Consider whether the landline is needed or if it can be switched to an Internet service. Do you really read all the magazines that arrive monthly? Can any of the service contracts be dropped or modified, thus saving on the rates?

Just because you are flying high one day does not mean there isn’t a mountain just ahead that without a change in what you are doing will still result in a crash landing. There are many financial planners in our area who offer a variety of services. These services include management of investments, estate planning, and overall planning (financial coach). Those who created and achieved their own wealth rarely got there without the advice from a variety of financial advisors. It is often said, “To achieve similar goals as your mentors, mimic what they have done to reach their goals.”

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