With the economy possibly recovering, possibly worsening, and possibly experiencing a dead-cat-bounce (false recovery), many people are scrambling to figure out what they should do financially, so here are my top 5 recommendations.

Shore Up Your Emergency Fund
If you don’t have an emergency fund, make sure you start saving at least 10% of your income every month. I know this is hard, but you should do it. After a year, you’ll have saved just over one month’s salary, which should get you through a small rough patch. If you can’t swing 10%, shoot for 5%. If you can’t swing that, shoot for anything you can manage. The key is to give yourself some sort of cushion. Do this even if you have to stop paying down debt. Ideally you need 3-6 month’s salary on hand.

Pay Down Debt
This is step 2, to be undertaken only after you’ve built an emergency fund. Once you’ve got a cushion of at least six months’ living expenses, you can start paying down debt again, but don’t stop saving.

Check Your Credit Reports
You get three free credit reports annually at annualcreditreport.com. I space them out so I can monitor my credit every four months. I don’t usually buy the credit scores, but you could if you’re curious. Checking your own credit score will not ding your credit. If you find any errors, have them removed. Not only do creditors check your reports, but so do insurers and prospective employers. Keep them as clean as possible!

Avoid Major Purchases on Credit
Now is not the time to make major purchases on credit unless you have the money to pay them off at the end of the month. If it’s an emergency, see if you can get one of those “no payments for 12 months” deals and then pay it off within that time to avoid interest. I say this knowing that we’re about to buy a new washer/dryer. We also planned to buy a new fridge, but decided to wait a few months to decide what we need and what fits in the space. We plan to buy new furniture, but not all at once. We want to live in a house for a few months to get a feel for it.

Build Your Contact Network
This isn’t strictly a financial move, but it could be if it ensures that you keep your job or helps you find a new one. Join LinkedIn, attend Meetups and industry events, anything to get your name out there and expand your network. You should also check in with former colleagues regularly so you’re on their mind if something comes up.

I know, I know you’ve been hearing all this advice for months. Guess why? It hasn’t changed. Not only are these good moves for right now, they’re good moves for always.


One Response to “Make These Five Financial Moves Now”

  1. Pablo from LoanTuts.com on July 9th, 2009 4:21 am

    I like your “Shore Up Your Emergency Fund” tip and would like to add something – The recession tends to tempt people to take the “rainy day” savings more than they should.

    We should practice more self-control these days :)

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