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    Home»Retirement planning»Consumer survey: Five steps to protect your finances against recession
    Retirement planning

    Consumer survey: Five steps to protect your finances against recession

    November 15, 20224 Mins Read
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    ROCHESTER, NY- According to Forbesmost economists are predicting a recession in 2023 or early 2024, and one at Johns Hopkins says it will be a big lie. These are anxious times for all of us. But one of my favorite quotes is this. “Worrying is like paying interest on a debt you don’t owe.” Instead of worrying, let’s prepare. So I sat down with a finance whiz. Jarrett Felton owns a wealth management company in Rochester called invest. And he says the ABCs of planning for a recession start with the letter A.

    Analyze your finances.

    “Coming home and leaving. What goes in and what goes out,” Felton said. “And really making sure that among those expenses, what are your needs, what are your wants.”

    Then remove those desires and use that money to pay off credit card debt. It’s number 2.

    “These interest rates are ferocious!” said Felton “18 to 25% on the interest rate of a credit card?”

    It hurts. How many? He points the rule of 72.

    “You take the interest rate you get on your money, divide that by 72, and that’s the number of years for your money to double or the balance to double to pay it off on your credit card if you don’t. don’t pay leave on time.

    For those who are not financial wizards, let me explain. Let’s say you have $5,000 in credit card debt. To find out how quickly your debt will double, the rule of 72 says you divide 72 by your interest rate. If your credit card interest rate is 20%, you divide 72 by 20. This equals 3.6. This means that if you pay the minimum, your $5,000 credit card debt will double to $10,000 in about 3.5 years.

    So less debt means you can save more. This brings me to number 3. Pay yourself first. Each paycheck automatically deposits a fixed amount into a savings account.

    “And now if you look at the high-yield side of the space for a savings account or a money market, you can see much higher rates than what you saw a year ago,” said Felton.

    The return is the interest you earn on your savings. A high yield savings accounts currently have a yield as high as 3.60 percent. Compare that to your typical savings account with a return of 0.01%.

    And that makes a difference. Let’s say you have $5,000 hidden away in a savings account. And you save $50 per paycheck or $100 per month. In a traditional savings account with a yield of 0.01%, you will have $6,200.55 in one year, or only 55 cents more than if you had stuffed the money under your mattress. But if she puts that same $5,000 in a savings account with a high yield of 3.60%, you’ll earn almost $6,399.67 in one year and almost $12,520.72 in 5 years.

    And that brings me to rule number four. Be patient. don’t panic. If you have a retirement plan, it’s hard not to react when the market crashes. Felton says to take a deep breath. Do not sell.

    “If you sell, well it’s a loss because you’re scared and you sell. You press the panic button. Eject! I’m out of here. This is what you probably want to avoid doing.

    Instead, stay the course. Commit to your plan. It’s number 5

    “You have to commit to writing it down on paper and understanding it and receiving it first, in order to develop a plan and a roadmap, and then implement it,” Felton said.

    I have already implemented one of these tips. I transfer my savings to a high interest savings account. And in doing so, I increase my yield by more than 300%. Remember. Do not worry. To prepare.

      For related stories: consumer alert

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