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Dealing with a Changing Economy

A Changing Landscape
No matter where you turn, signs are fairly clear that there is a change in the economy on the horizon. Retail sales figures, consumer confidence levels, corporate earnings and the stock market all point to, at the very least, a change in the health of the U.S. economy. Some analysts point to signs of a recession.

We have recently passed the 2 year anniversary of the OurFamilyPlace.com website. Throughout that 2 year period–in the midst of one of the biggest booms and economic expansions in American history–we have cautioned and even warned of the distinct chance of an economic correction. We’ve urged our visitors to maintain their financial common sense and to keep a firm grip on their budget. We’ve shown ways to get the most value out of their money and to maintain control of their family budgets in case the economic situation made an adjustment. If you are not already concentrating on getting your arms around your financial situation, now is definitely the time!

Take a Financial Snapshot
Grabbing hold of your situation means finding out first where you stand now. Take time to create a family budget, then maintain it with all your ability. Get a copy of your current credit report to see where you stand financially. This will give you a couple pieces of important information: The level of your indebtedness (where the money is going and how much) as well as your up-to-date credit history. A couple of options for credit reports are https://www.freecreditreport.com
, where you can get a free copy of your credit report.

Pay Down Your Debt
Concentrate on a plan to reduce your debt exposure. If you are like millions of other Americans, your credit card debt is likely excessive and the biggest problem. First, cut up all but one of your cards to avoid adding additional debt. Next, if you are a homeowner, you may want to consider a small home equity loan, which can consolidate your debt and allow a single payment with a generally lower interest rate. In addition, your interest on such a loan may be tax deductible (check with your financial or tax advisor). Before you take a home equity loan, though, closely examine your financial situation and compare offers.

Maximize Your Savings
With unemployment at its lowest rate in decades, with inflation negligible and with incomes rising, one would think that, as a nation, would would be making a real effort to boost our savings. In fact, the exact opposite has happened over the last 10 years. The most recent analysis of savings as a percentage of income indicates that we are at the lowest savings rate in our history (actually, we are in negative territory–spending 
more than we earn rather than less). Everywhere we look we see brand new SUVs and homes, expensive clothes and toys but anemic or non-existent savings. It is a situation that may have maintained itself indefinitely if things kept growing, but will fade quickly when the economy turns. The solution is so simple that it almost sounds silly: Spend less. Save more.

Send Your Money to Work
If the money you have now is not effectively working for you–gaining interest, for example–get it off to work right now! Millions of consumers maintain checking accounts that not only pay no interest but charge monthly fees. Get an interest bearing checking account or money market account so that you gain interest on your funds. Online banking resources often have the highest returns, do to their lower cost of business (they do not have to maintain expensive branches).

Change Your Spending Habits
Throw the words “I want” out of your vocabulary. Replace them with “Do I 
really need?” Start immediately by putting a tight lid on discretionary or unneeded expenditures. When it comes to spending money, practice the word “No,” when you’ve frequently said “Yes” in the past. We have a number of money saving tips here on the OurFamilyPlace.com site.

Develop, Work and Maintain a Budget
Having a budget plan in force is one of the best ways of getting and keeping control of your financial situation. It can give you a clear road map of where you are presently and where you want to go financially. See the section devoted to 
developing and maintaining a budget for hints and a budget worksheet.