Enron, Bernie Madoff, stock market crashes, the mortgage crisis, high gasoline prices and empty retirement accounts have hurt many people's financial dreams. Widespread unemployment causes many to draw down their savings or borrow against their retirement plans. Thousands lost their homes to foreclosure. If any of these things happened to you, there are ways you can regain some of your personal financial security, and ways you can benefit from your losses.
If you lost money in your stock market investments or were the victim of failing hedge funds or dishonest investment managers, here's one happy piece of news: You have good tax write-offs if you held your securities in taxable accounts, and an accountant can show you how to best take advantage of them. However, the only way to recoup your portfolio value is to continue to invest -- perhaps a bit more conservatively. Focus on making frequent, regular small investments in highly rated dividend-paying stocks and conservative growth stocks. This strategy is called dollar-cost-averaging. Reinvest your dividends when you make your regular investments. Continue this strategy of regular investing even through down markets. If the companies you invest in are high-quality, over a few years you will have accumulated a decent-size portfolio. When interest rates rise, consider moving some of your portfolio out of any under-performing stocks into bonds. If you must trade speculative stocks, do so only with the income from your dividends and bond interest.
The chances that the value of your home will recover are good. It may take a few years, but unless unforeseen influences such as a decline in the quality of the neighborhood take place, it may some day be worth what you paid for it, or perhaps more. The key is to be patient and apply for any mortgage modification or refinance into lower interest rates for which you are eligible. The bank where you pay your mortgage will be able to help you determine your eligibility.
If your retirement savings were in bad investments or yo8u had to spend it to live through the recession, unemployment or medical emergencies, your only solution is to continue adding to your account as much as you legally can. If you borrowed against your retirement accounts, you will be able to pay back the full amount. Allowable contributions change from year to year, so your financial advisor or accountant can recommend when you are ready to make a contribution. Study where your investments went wrong, and avoid making the same mistakes. If you had your retirement funds invested in speculative stocks, invest this time in well-diversified conservative and highly rated mutual funds. Again, regular contributions will provide substantial accumulation over years. Avoid panic selling. Allow the mutual fund managers to do their jobs in knowing when to sell and when to hold. Historically, the securities markets have recovered from all crashes.
High Cost of Living
Higher costs of living combined with no increase in income is another financial loss. It can be seen in your lifestyle, but it also affects your ability to save money. You have no control over the price of the things you buy, but you do have control over what you buy. Scrutinize your lifestyle and expenses to see where you can cut back. Then save that money. Again, small amounts put away in conservative investments that either pay dividends or interest will accumulate over years and eventually amount to large amounts of money saved. The key is to be vigilant in avoiding unnecessary expense.
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