Weathering Tough Economic Times—12 Tips for 2012

As reported by FINRA on December 22, 2011:

Tough economic times have taken a toll on many Americans over the last couple of years. But making sound financial decisions and saving for the future can help you weather financial storms. The start of a new year is a great time to take stock of your finances, so the FINRA Investor Education Foundation has put together these 12 practical tips that can help keep your finances on course in 2012.

  1. Start a Rainy Day Fund. Set aside at least one month of your current salary (and work your way up to three months) in a federally insured savings account. This will give you a cushion to handle medical bills, a short job loss, a surprise car repair or other financial emergency—and help keep your finances under control.
  2. Handle Credit Cards With Care. Keep your credit card spending in check and try to pay your credit cards in full. If you have accumulated holiday debt, pay it off as quickly as possible. If you cannot pay your whole monthly bill, at least pay more than the minimum due. Every dollar you pay above the minimum payment can reduce the amount of interest you will pay. Getting a handle on monthly bills and expenses can help keep you from overusing credit cards. Resources at can help you track your spending.
  3. Check Your Credit Report and Score. Good credit and financial fitness go hand in hand. Start the new year by requesting a copy of your free credit report. Call (877) 322-8228 or visit Check to be sure your credit history is accurate and correct any discrepancies immediately. You can also request your score from the site. There will likely be a fee to obtain your score—but it’s an important number to know, since it’s what lenders use to help them decide not only whether you get a mortgage, a credit card or some other line of credit but also the interest rate you are charged for this credit. To learn more, read How Your Credit Score Impacts Your Financial Future.
  4. Shop Around For Financial Products. Comparison shopping for financial products—including credit cards, loans and investments—is as crucial as shopping around for a television or phone plan. FINRA has resources to help you evaluate and compare credit cards, bank fees and loan rates. Saving even a percentage point or two on a loan can make a big difference to your bottom line. And when it comes to investments, be sure to visit FINRA Market Data Center, and use FINRA’s Fund Analyzer to compare fees on mutual funds and exchange traded funds.
  5. Don’t Leave Money on the Table: Contribute to Your 401(k). Too many workers leave free money on the table by not contributing enough to their 401(k) to receive their full employer match. According to a recent study, nearly 3 in 10 workers (29.4 percent)—and 43 percent of workers age 20 – 29—fail to contribute to the full extent of their employer’s match. Here’s another way of looking at it—taking full advantage of the match literally doubles your savings, even assuming no increase in the value of your investments. For more information, read FINRA’s Investor Alert, Why Leave Money on the Table—Make the Most of Your Employer’s 401(k) Match.
  6. Avoid Payday Loans and Other Money Drains. During difficult economic conditions, some Americans might be more tempted to use alternative forms of borrowing, including auto title or payday loans, advances on tax refunds, pawn shops or rent-to-own plans. Steer clear, since these borrowing methods are likely to levy higher interest rates than those charged by banks, credit unions or credit card companies and can drain away your money.
  7. Don’t Overdraw Your Checking Account or Debit Card. Making ends meet during an economic downturn can put a strain on family budgets. While overdraft protection may seem like a helpful feature on a checking account or debit card, overdraft fees can add up. To avoid that expense, balance your checkbook regularly and consider opting out of programs that automatically approve ATM and debit card transactions.
  8. Do a Background Check on Your Financial Professional. Far too few investors have reported checking the background of their investment professional with a state or federal regulator. Investing a few minutes of your time to take this free and easy step could save you time, money and other trouble down the road. FINRA BrokerCheck® is a free tool that allows investors to check the professional background of brokerage firms and individual brokers.
  9. Keep Your Insurance Coverage Current. The start of a new year is a good time to assess whether your insurance coverage aligns with your needs. You want to make sure that recent life changes have not left you under- or over-insured. If your children have left the home and you have paid off your house, you might need less life insurance than someone who is financially responsible for others, or has a mortgage.
  10. Diversify Your Investments. Volatile markets can make investing a challenge, but spreading your investments both among different asset classes—meaning stocks, bonds and cash—and within each asset class can reduce your risk. For more on risk and smart diversification strategies, read FINRA’s Managing Investment Risk.
  11. Save for College Using Tax-Advantaged Accounts. If you have children, save for college using tax-advantaged savings accounts such as a 529 plan or Coverdell Education Savings Account. The FINRA Foundation’s state-by-state survey found that less than one-third (only 31 percent) of respondents with financially dependent children have money set aside for college. Of those who are saving for college, less than one-third reported having used a tax-advantaged savings account. The earlier you start—the more financially prepared you will be to cover the rising costs of higher education. Compare college savings options, analyze 529 plan expenses and more at FINRA’s Smart Saving for College resource center.
  12. Find Free, Reliable Financial Education Resources in Your Community. In communities across the country, the FINRA Foundation’s partnerships with organizations like the American Library Association and United Way Worldwide have made it easier to find the help you need to keep your finances on track. The Foundation’s grant-making programs have built a network of hundreds of partnerships with libraries, social service organizations, schools, universities and others to expand access to research-based financial and investor education information. For additional information and resources, visit Smart Investing@Your Library and Financial Education in Your Community.

If you (or someone you know) have questions or concerns about your investments or other securities matter, please contact the Law Offices of Mitchell S. Ostwald at 916.388.5100 or email us at