How to Survive the Credit Crisis
What do fallouts like the Fannie Mae crisis mean for you? (Other than it’s probably not a good idea to spend the bulk of your paycheck on shoes.) News headlines are full of national credit woes, but it can be hard to spell out just exactly how these crises will affect the everyday career girl. Fortunately, the current economic waters may be rough, but they probably won’t sink you. That said, there are a number of steps you can take to make sure you stay afloat. Here, three tips to making it through the credit crisis.
Don’t overdo the credit cards. If you’re scraping to get by at the end of each month, turning to credit cards is not the answer. Swiping the plastic instead of cutting back on expenses can cost you much more than you think. Credit cards usually carry a higher interest rate than regular loans, and the charges can add up fast. Carry a balance of $3,000 for a few months, and you’ll end up shelling out hundreds of dollars in interest. Continue racking up charges, and soon you’ll be in over your head (which is far from where you want to be during a recession).
While you shouldn’t use credit cards to maintain a lifestyle that’s beyond your means, you don’t have to cut them out completely. Use them sparingly, and pay off the balance at the end of each month. If you are currently carrying a balance, make it a priority to pay it off ASAP.
Keep saving. If you have a 401K, money market account or an investment portfolio, it may look pretty bleak at the moment. With a shaky stock market and lower interest rates, certain investments are bound to suffer. This doesn’t mean that you should stop setting aside money or investing. (After all, many employers still match your 401K contributions, which is essentially free money.) What it does mean, however, is that you’ll want to take a hard look at your various accounts.
Call your financial adviser and set up a meeting to look over your investments. If you just have a savings account or money market account, it’s still a good time to review your assets. In most cases, you’ll want to keep setting aside a small portion of your income each month. If you have outstanding debt, however, focus first on paying it off. Then work on the savings end.
Stay current. If your checking account is dwindling, sometimes the easiest approach is to ignore the situation. Paying careful attention, however, is often key to avoiding larger financial problems. Read through your monthly statements, pay your bills on time, and if things start to get tight, look for ways to cut down on expenses.
The same is true for the news. Follow the headlines and consider how current events will affect you. Knowing what’s going on will help you manage your own finances and ride out the economic storm.