5 old money rules that are no longer true
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The world has changed and, as a result, our outlook on money and how our finances are managed may have changed. I know mine have.
Tips that worked in 2019 or 2009 might not work now. So what Is job?
I stopped by the NBC Today Show earlier today and shared the top money “rules” that I think need to be adopted right now.
Pay off the debt first, then save money.
Favor savings before repaying your debts.
When it comes to debt management, I used to recommend a hybrid method of approaching saving and paying off debt at the same time. My other recommendation was to prioritize high interest debt before increasing your emergency fund.
But an uncertain economy and high unemployment rate change that equation. If you have lost your job or have no reserve for the rainy days of 6 to 9 months, your first step is to get money from the bank.
Focus on saving, saving and saving more. Meanwhile, to manage debt, take advantage of payment plans offered by credit card companies or credit relief programs to help those affected by the pandemic.
If an uncertain economy worries you about your retirement investments, do nothing and stay the course.
If you are really stressed out, stop and review your portfolio.
If stock market worries keep you awake, know that you’re not the only insomniac. But constant worry is a sign that you should, at the very least, take a look at your portfolio and make sure you are invested well.
Disclaimer: I’m not saying take all your money out of the market because of a bad night’s sleep. But it’s okay to pay attention to your emotions and review your investments if you’re anxious.
It remains essential to invest in a way that is both logical and personally satisfying. In order to make your money grow over the long term, a diversified equity portfolio is more advantageous than an interest-free current account. From there, it’s best to build a portfolio that suits your goals and level of risk tolerance.
If you revisit your portfolio, you may find that you are in fact overexposed to the stock market because you are not as risk tolerant as you might think. Maybe your perspective has changed since you opened your retirement account 15 years ago.
When our lives change, it’s worth re-examining all of our finances, including our retirement plans.
Before doing anything, it is always best to speak with a financial professional. If you have a 401 (k) at your workplace, there’s usually a pro you can talk to over the phone.
Never withdraw your 401 (k) early.
If you absolutely must, you can take advantage of penalty-free withdrawals from your 401 (k) before the end of the year.
The traditional advice is to avoid cashing out investments from your 401 (k) before the age of 59 and a half, in large part because you can incur heavy taxes and penalties and seriously threaten your retirement savings.
But my outlook has changed. These are exceptional circumstances, and tapping into your 401 (k) may be the only way to afford essentials like food for your family or paying your rent or mortgage.
Fortunately, Congress temporarily reduced the financial penalty for early withdrawals. Under the CARES Act stimulus package, an individual can withdraw up to $ 100,000 from their wallet in 2020 and be exempt from the 10 percent penalty, as long as the money is earmarked for reasons related to the pandemic. Plus, if the money is paid back over the next three years, you can avoid taxes. In short, retiring early now can be less of a long-term financial setback if you play by the rules.
If your 401 (k) is the only resource you have left to stay afloat financially, use it by all means.
Check your credit report once a year.
Check your credit report once a month.
Normally you are limited to checking your credit report for free once every 12 months, but that has changed. The credit bureaus have collectively agreed to allow consumers to check their credit reports as often as once a week through annualcreditreport.com.
The weekly allowance will last at least until April 2021 and, as I wrote in my recent article on credit report complaintsI urge everyone to review their reports at least once a month to make sure lenders are reporting your accounts correctly.
Complaints about credit reports are at an all time high in the current recession and you need to make sure your account status is reported accurately. For example, if you have a special payment plan like a deferral with a lender due to Covid-related constraints, your account should show “current” and not “past due” as per the CARES Act.
Financial success is always possible through hard work and getting out of the woods.
Do your best, but don’t try to go it alone. Ask for help.
No one is immune to the realities of 2020. You may have been following the traditional personal finance handbook. You might have saved up and worked hard. But doing things “right” still cannot protect you from a medical emergency, being fired or being discriminated against because of your race or sex. It’s always incredibly easy to fall behind or find yourself in a precarious situation.
This year has proven that financial success is not an individual effort. You have to have a support system. It’s important to seek help, ask questions, and contact people who can help you.
Check National Foundation for Credit Counseling for credit and budgeting support, as well as your local credit union who may have programs to help you get back on your feet. Your credit card company may also be able to change your payments to make them more affordable for a while.
Be honest about what you need and know that there are resources, information, and people who can help you. You don’t have to carry the burden alone.
COVID-19 has forced us to adapt in all aspects of life, including our financial lives. Don’t be afraid to let go of old ways of thinking and find a new way forward.