7 Ways to Protect Yourself from a Recession

Just the word, "recession," is scary for most of us, but you can put many of your fears to rest. By adopting these seven basic principles into your life, the pain of a recession can be largely minimized.

1. Live within your means. Living within your means every day is just another way of saying that you should never need any additional consumer debt. Once you begin creating debt in your life, more inevitably seems to follow. Gas prices may be high, but buy that gas with a credit card at 27% and you'll see just how expensive it can be.

* Taken to the extreme, if you have a two-income household, you may want to try to learn to live off just one income. Think of the retirement you could fund with the other income. And if one of you should lose your job, you'll already be living on one salary.

2. Have a second source of income (or a third or a fourth). A second income source is never a bad idea, even if you just put in a few hours here and there. Job security is practically nonexistent now, and an additional source of cash flow increases your financial security.

3. Keep a long-term perspective with investments. Expect that there will be periods of time when your investments will lose money. But you only truly lose money if you sell. The economy almost always improves over time, so you'll make back all your money and then some. In fact, a recession can be the perfect time to invest money.

* As you get closer to retirement age, move your money into more liquid and lower risk investments. Otherwise, you may not have enough time to recover from any market downturns before you require access to that money.

4. Consider your risk tolerance. All the financial gurus have tons of charts and graphs that tell you how much of your money should be invested where, based on your age. But if you aren't sleeping well because your portfolio is down 12%, you may need to adjust your asset allocation. You should feel secure in your investments, not be in a state of panic.

* Don't sell while the market is significantly down, but when things improve you can move some of your assets into bonds or more stable blue-chip stocks.

5. Diversify your portfolio. Keeping your money in different investments will lower your stress and your theoretical losses. You'll also be less likely to do something impulsive. You don't have to get carried away; something as simple as dividing your money between your home, savings account, bonds, and stocks is sufficient.

6. Maintain a good credit score. In a recession, qualifying for credit can be challenging enough already. If you want to purchase a house, get a new credit card, buy a new car, or in some places even rent an apartment, you need to maintain your credit scores. Pay your bills on time and keep your credit card balances as low as possible.

7. Keep an emergency fund. An emergency fund is an important part of any financial plan. There are many reasons for this. If someone loses a job, there is money available that won't result in an investment loss if used.

* You never know when the unexpected may happen. What if your car needs a new transmission? Do you really want to be forced to sell some stock that will realize a 25% loss? What if you need money immediately? Some assets can take time to liquidate. And you may need even more time before you can access the funds.

The best part about these suggestions is that they'll serve you well all the time, not just during a recession. Recessions are never easy, but if you make a few small lifestyle changes, you'll ease your burden and reduce financial stress. 

Wealth Isn't for the Wealthy - Wealth is for the Smart!

Do you believe that being predisposed with the ability to become wealthy is the only way to earn good money? Fortunately, the reality is that wealth belongs to those who are smart in the ways they go about claiming and creating it.

Being able to make money even without having that background from the onset is definitely attainable, as long as you put some thought and creativity into your wealth making opportunities. Making solid financial decisions and choosing sound investment options are simply the best ways to become wealthy once and for all.

Here are three simple, yet effective, tips you can apply to your life that can help to create the wealth you deserve:

1. Break down your big goal. "I want to be rich!" Just about everybody you can think of has said this at one point or another in his or her lives. Being wealthy is something that most of us dream about - however very few are able to achieve - because we look at it as a large, insurmountable goal. Remember:


• Looking at your desired achievement as an overwhelmingly huge goal makes it very difficult to obtain. In fact, it almost always amounts to a mere dream if we overlook setting smaller, attainable goals towards that major goal. And that's one of the keys for becoming wealthy.


• Break your financial goal into smaller, more achievable ones that you can set reasonable timeframes on. You'll be surprised to see how you progress towards your huge goal once you set smaller ones that are much easier to achieve.

2. Avoid using credit if you can't pay by cash. One of the simplest and most effective tips for building wealth is to avoid credit. And what that means essentially is avoiding credit if you see no way to repay it in the short term. Remember:


• If it isn't possible for you to have the cash to settle your credit card expenses each month, then avoid making purchases with the card.


• By choosing to purchase only what you can afford to purchase with cash, you can undoubtedly start to create wealth for yourself.

3. Live within your means. Sure, there will be things you see that you want to do, acquire, or simply accomplish. However:


• If it's not financially easy for you to do something or acquire something, then perhaps you should leave it alone for the time being.


• It's very likely that something you aren't able to do this month or this year will be more than possible in the near future.


• You should only focus on doing things and acquiring things that you are financially able to without feeling stressed in the pockets. The more often you practice that approach, the closer you'll be to having financial freedom.

Creating wealth requires very little money and quite a bit of financial "smarts." The more reasoning, thought, and common sense you put into your financial decisions, the sooner you'll find yourself becoming wealthy. Count yourself amongst the masters of wealth by applying some creative thinking.

Achieve your financial goals by taking it in stride and believe that you are predisposed to the same wealth as anyone else!

Top 6 Tax Strategies for Maximizing Your Returns

There are a variety of ways to ensure that you don't pay more than your own fair share of taxes. You can save year round as well as at the very last minute, but a little bit of planning really goes a long way when it comes to income taxes.

Use these strategies now and throughout the year to maximize your returns:

1. Reference your old returns. Revisiting your old tax return paperwork can help you see how you've saved and owed in the past. Use your old returns as a guide and strive to make improvements over last year so you can pocket more money this time around.


• What deductions have you taken in the past? Did you take the standard deduction or itemize? Can you take any of the same deductions this year or implement new ones to improve on your results of the past?


• What tax credits or tax shelters did you take advantage of last year and years prior? Can you do the same thing this year as well?


2. Choose investments wisely. Make the most out of your investment income by putting your money in tax-free or reduced-tax investment vehicles. Check to see if you qualify for any tax breaks on your investments. These can translate to tax savings where you didn't expect them.

• In the future, find out the tax ramifications of possible investments to help you choose what vehicles to invest in.


3. Take advantage of tax shelters. Saving toward financial goals like retirement can help you cut your taxes. 401(k) plans and traditional IRA accounts allow you to defer the taxes paid on this part of your income for as long as several decades until you retire. 


4. Be wise with your deductions. Determine if the standard deduction is better than itemizing your deductions or not. If you keep a record of your tax-deductible expenses, you may find that your itemized deductions add up to more than the standard deduction. Consider your options closely to get the best possible results.

• Depending on your expenses during the year, it may be better to itemize your deductions in some years while in other years the standard deduction gives you a higher deduction. So keep track of your expenses and determine the figure anew each year.


5. Take advantage of available tax credits. There are a myriad of tax credits for different purposes, such as raising a child, paying education expenses, buying a home, and many more. Research available tax credits ahead of time and determine which ones you can take advantage of. You can save a lot of money at tax time with these credits.


6. Plan ahead for next year. The more you plan ahead the better off you'll be when tax day comes. Get a jump on your taxes by giving yourself ample time to plan and prepare. You'll savor less stress and more tax savings as a result.


• Monitor your income, check your withholding, and ensure that you're doing everything in your power to lessen your tax burden throughout the year. Every step that you take ahead of time is going to be one less worry when tax time finally rolls around.

The key to maximizing your return is in advance planning and preparation. Keeping these tax strategies in mind throughout the year will help you prepare for a good tax day every year.

How to Become a Savvy Saver

During these difficult economic times, you may be wondering how you can save any money when you're barely coming up with enough money to pay the bills. It's important to be open to all kinds of ideas when it comes to saving money. If you're willing to try anything to save money, your confidence will soar.

Consider these ideas to help you set aside funds for savings and investments:

1. When it comes to saving, attitude is everything. What you think and feel about saving matters.

* If you feel incredibly overwhelmed or pressured about saving, chances are that you'll avoid doing it.

* However, if you embrace the concept of saving and get behind the idea that you're paying yourself for the future when you save, you'll be quite excited about saving every payday and demonstrating some real saving savvy.

* Avoid convincing yourself that you "can't save because there's just no money left after paying the bills." Instead, tell yourself you will save something every week.

* In general, it's best to focus on positives and an "I can do it" attitude for saving money.

2. Make a conscious decision to save money. Write this down and put it on a sticky note on your bathroom mirror: "I will save some money today." Then do it.

* Sometime each day, put some money aside for your savings, no matter how small the amount may be. Maybe you'll save your change or maybe you'll skip a cup of coffee or soda, but you will set something aside.

* Deposit your daily savings into an account each week.

3. If you must, start small. Even saving $5 or $10 per week is something. It signifies a commitment on your part to save.

* It shows that you believe saving is important and that you can, in fact, succeed at it.

* Starting small to work toward a larger goal shows you have saving savvy.

4. Set a minimum weekly savings goal and promise yourself to exceed it. If you're starting small, make an effort to exceed your minimum amount.

* So, if you establish a weekly minimum goal of $7, anything over that amount is "gravy."

* Read on to see where you can find some "gravy."

5. Use coupons every single week at the grocery store. You can find coupons in newspapers, grocery store flyers, and all over the internet.

* Your grocery receipt lists at the bottom how much you saved with coupons.

* Take that amount of cash out of your purse and place it in an envelope for the bank.

* Whether it's fifty cents or $4.50, it's money you saved.

* Place your grocery savings into the bank where it will do some real good.

* Now that is saving savvy.

6. Learn from others who demonstrate saving savvy. Interview friends or family members who show they know how to manage money. Do you have a sister who's an avid saver? A friend who always pays cash for his cars?

* Ask to sit down with them and gather some of their saving savvy tips.

* When did they start saving?

* Where did they learn about saving money?

* What tips for "beginners" do your saving savvy friends have to share with you?

* Keep your mind open and pen in hand. Write down their tips.

* Then, decide which tips will work for you and apply them in your life. 

Keep a positive attitude and make a personal commitment to save. Set a weekly minimum savings goal and learn from the savvy savers you know. Practicing savvy saving will lead you to a brighter future.

How to Build a Savings Plan for Your Children

One of the best ways you can provide for your children is to create a savings plan for them when they're young and contribute to it gradually. As your children grow, so, too, will their savings.

You may also consider investing for your child, provided that the investments are wise and promise a decent return over time.

Creating a savings and investment strategy can be beneficial for both you and your children so when they grow up they'll be in a solid financial situation during their college years.

Consider these options to build savings for your children:

1. Open a savings account. This is the most basic option available to you. Savings accounts don't have a high rate of return, but what they do offer is a safe place for you to put your child's money over time.

* When opening an account, read the fine print about fees and minimum deposits, so you can choose something that works for you.

* The savings accounts available to you may actually vary from bank to bank, so look at a few different options before you settle on the best savings account for your child.

2. Invest in a CD. A CD or Certificate of Deposit is a low risk, low return type of investment that typically locks your funds in place for a specific period of time. The term length you choose may impact the interest rate. You can choose the term length, such as 5 years or 10, 15, 20, and so on, depending on your needs.

3. Invest in a College Savings Plan. Also known as a 529 plan, this is a tax-advantaged plan designed to encourage saving for higher education expenses. Growth on these accounts from interest is tax-deferred, and, when needed, withdrawals may continue to be tax-free when applied to specific educational expenses.

* There are two different types of 529 college savings plans. The first is a prepaid tuition plan and the second is a savings plan. Each of these types have different basic mechanisms for use and are available in specific areas, so check with your state for what would work best for you.

* Prepaid tuition plans are available in 13 of the 50 states and allow for pre-purchase of the child's tuition based on the current rates. They pay out when the beneficiary enters into college.

* Savings plans base your account earnings on the market performance of whatever underlying investments there are, such as mutual funds, for example. These plans are administered by the state and available in 49 of the 50 states and Washington D.C.

4. Utilize a custodial account. This is a savings account or certificate account held in a minor's name. The dividends are registered under the social security number of the child, though your name will be listed as the custodian for the account.

* With this type of account, you can transfer funds to the minor while still managing the account. Once the funds are deposited, they become the property of the minor and can only be used to benefit the minor.

* When the minor reaches legal age, funds are turned over to him or her.

These are just some of the options available to you for preparing for your child's future. When you consider the costs associated with raising a child and sending him or her to college, it makes sense to put a plan into place as early as you possibly can.

3 Safe Investments with Moderate to High Returns

Investing can be a little scary for most people - especially if your expendable income is limited. As you know, all investments have an element of risk; however, it's wise to seek out those opportunities that will minimize your risk while earning decent returns.

The true key to making an investment safe is by investing in a time-tested "top dog" where the return on investment is moderate to high.

Consider these types of investments for your portfolio:

1. Bonds. Bonds are a safer investment than stocks. This is because a stock is an investment without a guaranteed return, while a bond is similar to a loan and has a promised return, plus interest.

• There is a difference between promised and guaranteed. No investment can be guaranteed but with bonds, you know what to expect. Look for investments with a low probability of default (the chance that the company would close its doors or file bankruptcy). 


• Bonds are generally paid back to you by the end of the year. However, the terms can be different for each agreement.

• The larger the bond, the larger the profit. But remember, you're always going to make more money on a higher interest bond. So, you may be better off investing your funds in one high interest bond rather than two lower interest bonds.

2. Stocks. As mentioned, stocks can be risky but, in order to earn a high return, some level of risk must be involved. You can minimize your risks by choosing one of the safer stocks (such as constantly thriving defensive stocks) to invest in.

• Companies, such as Pepsi (PEP), McDonalds (MCD), The Procter & Gamble Company (PG), Johnson & Johnson (JNJ) and Wal-Mart Stores Inc. (WMT) are some of the safer choices in the stock market. These companies also place a high value on shareholder satisfaction.

• Investing in defensive stocks, which are reliable and have proven their longevity and profitability, allows you a small blanket of security that you wouldn't get investing in the newest, hottest companies, which can tank at any moment.

• Keep in mind, when investing in stocks, there are no 100% safe choices, but you can minimize your risk by buying stocks of a time-tested and profitable company. Or spread out your risk by investing in profitable, long-standing mutual funds where your return is based on a portion of a whole portfolio of stocks.

• Stocks are a better choice for your long-term financial planning goals. If you're a cautious investor, look for a long-standing solid company to invest in.

3. Multi-family real estate. Now is a great time to invest in a multi-family dwelling. Due to the housing meltdown, there are many multi-family units priced to move quickly.

• A multi-family dwelling is a safer investment than a single-family home because you're able to retain more tenants. Therefore, if one tenant decides to leave at the end of their lease, you still have other tenants set up in other units that are still generating income.

• Multi-family dwellings are more profitable than single-family homes. For example, if you have three 2-bedroom units renting for $700 each per month, you're bringing in $2,100 per month. As opposed to the one, smaller income from just one tenant.

Developing an investment strategy takes patience and an honest assessment of your risk tolerance. Real estate investing has always been a popular investment. Owning a fully occupied multi-unit rental property guarantees a monthly return provided you budget for maintenance and other contingencies.

Bonds are safe, but they have the lowest return. However, a few hidden gems in the market offer high interest rates. Stocks offer a higher return but the return isn't guaranteed and you expose yourself to greater risk.

A smart strategy is to spread your risk and return through a diversified portfolio of investments, some with lower risk and others with moderate risk. Only go for high-risk investments if you have money to burn! This strategy will let you enjoy consistently positive returns throughout the years.