I’m not sure scared is the right term. Concerned, yes. Aware, yes. Taking precautionary measures, yes. Scared, well no.

Our economy, our financial system, is certainly in disarray. We have a falling dollar, and a slowing economy… but we’ve had these before.

The recent actions of the Federal Reserve Board may have been necessary to restore equilibrium to the financial system. Hopefully, this is not a precedent, but a learning experience.

Instead of reacting in fear, realize that there are things that you do control. These are the actions that will change your outlook completely.

Go back to the drawing board.

Here are eight steps to take back control.

1. Review your budget
   Add up your basic monthly expenses. Rent or mortgage payment, utilities, phone and cable services, loan repayments, food budget. All the basics.
2. Establish your emergency fund
   Make sure that you have sufficient emergency cash in a savings account at your local bank to carry you for 6 months. Step one to feeling more in control.
3. Be aggressive with your spending and saving
   One way to offset declining investments is to save more money. The dry cleaner becomes your enemy. You’ll find that what you have
   in mini-storage could easily fit in the attic. Cancel the health club membership; get outside for a run instead. Take your lunch. Subways, not cabs.
4. Secure your excess cash
   If you’ve got substantial cash in a money market account, you may want to move it to a short-term CD. You may think your money market account is FDIC Insured. It’s not.
5. Take a defensive position
   In your IRA and 401K accounts, you may want to take a more
   conservative position for now. Have a financial professional look at your
   allocation and suggest changes for you to consider (Our office can do this for
   you.).
6. Roll out that second job
   If you’ve got a potential second source of income, now would be the
   time to get that going.
7. Service
   Each of us knows someone who’s in worse shape than we are. Offer to help. I will guarantee that this will end any pity party you’re having.

There are a million expressions that apply…you fill in the blanks

When the going gets tough….._________________________.

Winners never quit, and _____________________________.

Cream rises…_________________.

You get the idea.

• Q. What is a credit score anyway?

  If you went to the doctor to get
  your annual physical, and you found out found that your cholesterol was high,
  that you were borderline diabetic, that you failed a stress test or that you had
  the beginnings of osteoporosis, what would you do?

  Well, your credit score (FICO
  score) is like a financial physicial. Developed by Fair Isaac & Company (
  hence the acronym), FICO credit scoring is a method of determining the
  likelihood that you will pay your bills.

  Like it or not, (fair or not)
  FICO scoring has become widely accepted by lenders as a reliable means of credit
  evaluation. A credit score attempts to simplify an individual’s financial
  profile into a single number. Although it is not revealed how these scores are
  computed, The Federal Trade Commission has ruled that the process is
  acceptable.

  Numerous factors affect your score
  such as:

  • The amount of time your credit has been established
  • Total credit line versus credit balance
  • How often you’ve applied for credit
  • Whether you own or rent
  • Length of time at current residence
  • How often you’ve moved
  • Employment history
  • How long you’ve worked at your current job
  • Late payments on charge accounts
  • Negative credit information such as bankruptcies, charge-offs, collections, etc.

  There are really three FICO scores
  computed by data provided by each of the three bureaus––Experian, Trans Union
  and Equifax. Some lenders use one of these three scores, while other lenders may
  use the middle score.

• Q. How can I improve my score?
  • Pay your bills on time. Delinquent payments and collections can have a major negative impact on a score.
  • Keep balances low on credit cards and other "revolving credit." High outstanding debt can affect a score.
  • Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix -- it probably won't raise your score.
  • Pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.
  • Make sure the information in your credit report is correct. It won't affect your score to request and check your own credit report. If you find errors, contact the credit reporting agency and your lender.
• Q. I regularly receive offers from credit repair agencies. Is this a good idea?

  A consumer credit counseling service will help you get out from under credit card debt, but it's your money, and effort that gets the job done.

  A credit counseling service will negotiate with your creditors. They’ll arrange a repayment schedule, they might even be able to lower the interest rate on your credit cards. Important: Using a credit counseling service can affect your credit rating. Your creditors will note that your bills are not being paid according to the original credit terms.

  However, the consequences related to credit counseling are far less severe than a bankruptcy.

  Remember that even though most credit counseling services are nonprofit organizations, they still charge a fee for their services. Most agencies get at least part of their compensation in payments from your creditors.

  If you're considering using a credit-counseling firm, you should interview at least two different firms. This FTC site gives advice on the questions to ask in the interview.

  The National Foundation for Credit Counseling can help you find agencies in your area, or even counsel you online. There is also a professional certification process that turns out Certified Consumer Credit Counselors.

  Ask the firms that you interview about whether their counselors have this certification, and if you can be assigned to a certified counselor.

  From paycheck to paycheck….

  How can this be? We’re both professionals. Combined we earn over $ 225,000 annually. We’re strangled by our mortgage payment @ $4,000 per month. We could downsize, but we don’t want to sell into this market. What do we do?

  The message:

  My guess is that your mortgage payment is not the real problem, and you’re in good company. We’ve seen clients with substantial six-figure incomes with nothing of substance to show for it.

  Savings is down the list of priorities.

  If the joint after tax income is $150,000, then your mortgage is less than a third of your net income. That’s not outrageous. If everything else were managed properly, the mortgage would not feel like a burden.

  So, go back to basics.

  • Do a Cash Flow analysis
    Analyze all your expenditures over the past 3 months. Everything. All the charges, debit cards, checking accounts, and ATM cash withdrawals.
  • Separate them into categories
    1. Debts, Insurance, Basic Expenses
    2. College Funding, Retirement Plan Contributions other Savings
    3. Vacation, hobbies, miscellaneous

    We find that people with a problem don’t complete this process. That would be a bad sign.

  • Fight through it
    Once you’ve finished be rigorous about priorities. You’ll probably find there’s a lot you can do without. You may want to close some of the credit accounts if they appear to pose a problem.
    

  It may still be a good idea to downsize your residence, even if you find you can ultimately afford it. Living within your means is the new opulence. You’re better off putting the excess cash into savings.

  That home equity is not the sure bet it used to be is clearly an understatement.