Advice on How to Prepare for the Worst

Posted by: Ben Steverman on August 04, 2008

Economic downturns make people feel vulnerable. Tough times remind us how precarious our financial security can be.

You think of the horrible possibilities: You could lose your job. You could get sick with little or no health insurance. You could be forced to tap retirement saving, permanently hurting your standard of living in later years. And even if you hold on to all that, you could see the value of your investments tank.

Amid all the gloom and doom (which I noted in a post this morning), how can you protect yourself? There are a lot of useful suggestions in a BusinessWeek online special report, “Defending Your Money.”


Here are a few highlights:

1. How to cut your property taxes.
Writes Will Andrews:
After remodeling his house and adding a new kitchen and 20% more square feet to the home’s size, “Our happiness was boundless until we got a letter from the town assessor’s office stating the assessed value of our property had been hiked 37%—and that our property taxes were going to rise nearly 40% based on our new assessment.”

2. David Bogoslaw wrote on
positioning your investment portfolio. Among the tips: “The single biggest mistake investors make is over-reliance on their own company’s stock,” according to one source.

3. Ricky McRoskey explains 10 ways to protect that portfolio: cash, Treasuries, TIPS, foreign government bonds, shorter-maturity bonds, options, short-market funds, consumer staples and dividend-paying stocks, corporate bonds and preferred stocks.

4. Karyn McCormack examines the pros and cons of low-cost, limited health insurance, and whether you should buy your health coverage from a TV infomercial star who otherwise sells cleaning products.

5. How you should prepare your finances for the possibility you’ll be laid off or other fiscal disasters. “Financial planners always advise keeping at least six months’ worth of expenses in a liquid account, like a money-market—advice astonishingly few Americans take,” Beth Piskora writes.


6. If you get laid off, Carl Winfield has some tips on how to get the best severance package. And this video has some advice on negotiating a package, as well as useful strategies for holding onto a job.

7. One way to prepare for the worst is to save more, I wrote here. A slideshow lists 25 specific suggestions for trimming spending.

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Reader Comments

Ancillary

August 6, 2008 07:29 PM

This is a great resource! I agree that things are getting worrisome. I feel that we should all be taking our own financial education seriously. Books, tapes, whatever. Soak it all in. I signed up w/ iTunes to subscribe to the InvestTalk radio show podcast, which I'd read was a good one – so I can listen to the show whenever I want. I don't end up listening to all of them, but I've been learning a lot just by playing them when I remember that I've got them. It's good to have financial advice on demand. This is where the shows and blog are: http://blog.investtalk.com

Bud Labitan

August 7, 2008 12:37 PM

Paperback Book Announcement: "The Four Filters Invention of Warren Buffett and Charlie Munger. Two Friends Transformed Behavioral Finance." by Bud Labitan
http://www.lulu.com/content/3215722
ISBN 978-0-6152-4129-6

Description: The book examines each of the basic steps they perform in "framing and making" an investment decision. This book is a focused look into this amazing invention within "Behavioral Finance."


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About

Businessweek’s Emily Thornton, Amy Feldman, Ben Levisohn, and Ben Steverman focus on matters great and small for investors, from the views of a hot fund manager to an explanation of the latest products devised by Wall Street’s rocket scientists. Exploring trends in any area, from bonds and stocks to closed-end funds and futures, always with an eye towards giving investors a better understanding of the sometimes confusing and often chaotic world of finance. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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