How can you become financially secure considering the current chances in economic climate? Money Magazine keyed in tools on understanding the risks that the new economic climate poses including tips on adjusting to them in order to attain financial security. The article challenges people to get rid of old assumptions and take in new ones. It highlights seven new ways to achieve financial security.
Risk tolerance is about making or missing an important goal. Analyst T. Rowe Price suggests that relying on the volatility of the markets is not a wise move. The market lesson is: weigh the amount of risk you can lose and still meet your basic goals.
Save and rely on cash more. Analysts recommend redefining the scope of savings to include significant expenses such as tuition, a wedding, or a down payment on a house. Build an emergency fund before anything else. Consider your earnings potential. Instead of focusing on stocks and investments, think about human capital, or your capacity to earn while working on a job. Evaluate how secure your human capital is and make adjustments. Borrow cautiously. Be very conservative in borrowing for a mortgage or for college. Get a mortgage you can afford and put a 20% downpayment. Be wise about owning a home. Face the fact that owning a home will not make you rich but it has advantages. Have modest expectations when you do decide to purchase a home. Diversify. The best way is to go out and buy 16 new mutual funds that can kill two birds with one stone. T. Rowe Price recommends investing 20% of assets in emerging markets and the remainder in developed countries. Do not retire early. Delaying retirement for one year can increase your retirement income by 9%.
