A lot of classic financial advice is timeless, but some ideas have to be adjusted with the times. It’s essential to evaluate your practices and techniques at regular intervals to assure they’re working for you. CNN Money dismisses some classic rules in favor of more modern ones. We’ll share them with you and give you our take.
1. Risk: Don’t assume ill-informed risks. Research your investments thoroughly, and at that point you take the plunge and assume the risk. Only invest with how much you can risk to lose and still maintain your goals.
2. Cash & Emergencies: It’s extremely important to have an emergency fund that is independent of your investments. Even if you’re unable to finance both an emergency fund and investments together, save for the emergency fund first. Have 6-8 months of living expenses saved for the fund. Take time to assess what an emergency would really be defined as. You can put these savings away in a high-yield, short-term bond.
3. Debt: Be extremely conservative about attaining debt. Debt is sometimes necessary for businesses and buying homes. However, you want to be positive about your ability to manage the debt for its entire term. Evaluate the terms and compare with the market average. However, if you can make it without acquiring debt in these times, consider doing so.
4. Homes: Owning your own home can be important, but it must be understood that home ownership is not a lucrative investment. Make sure your home’s liabilities are manageable and fairly low. The “hardly wealthy” took mortgages on excessively expensive houses, and they have a hard time managing them. Cough Damon Dash, Robin Givens,…Until you find that home for you, continue to rent.
5. Diversification: The old adage that diversification will shelter you from any downturns is no longer true. It’s important to reallocate your funds in high yield funds and international, diverse bond funds.
6. Retirement: There’s no denying that people in these times are retiring later. You can’t afford to assume you’ll be able to work a little longer and rely on that to get by if your money doesn’t stretch. Due to invariable factors like health and layoffs, you still need to work on the other rules mentioned in this post!
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