7 Best Strategies During the Financial Crisis

It's easy to lose focus and panic during a financial crisis. There are brighter times ahead so get your head out of the sand and start right away. Here are 7 strategies for you to review and keep in your back pocket so that you can stay on track to protect and build your assets back up:

1. Make a budget. Budget is a dirty word to almost everyone. So let me put it this way- watch your cash flow. Track what goes on and what goes out. Get on a money diet. There are many free and lost cost tools to help your track your finances like Mint, Wesabe, and Quicken. Find one you like and use it. You'll be surprise too at how easy it is to pay bills online, too.

2. Get out of debt. Easier said than done, right? Start with consolidating all of your cards to a low or no interest one and then start paying off that one. You will be paying down more of the principal than the interest which helps it go down faster. Meanwhile tear up the ones you own until you get the debt under control.

3. Make cash work for you. Get your cash out of the coffee can, or from under the mattress and invest it. That's right, invest it. If you are nervous that we are headed for a depression, then invest in something that will guarantee your principal back like a bank account or certificate of deposit. If you don't, those dollars under the mattress are a guaranteed loss. They are guaranteed to buy less and less goods and services by the amount of inflation we have each year. And you don't want that.

4. Pay off higher interest debt with low interest funds. Cash is king right now. If your savings is 3% and your mortgage is 8%, then it's obvious to start using your savings to pay down the mortgage. Don't do this until you have enough cash in the bank for emergencies like fixing the roof, car repairs, etc. Be on the extra safe side and have enough cash to support you for 6 months in case you lose your job.

5. Keep contributing to tax deferred plans. Don't stop believing, and don't stop saving for retirement. Believe me that one day you will want to stop working and when that day comes you are going to need the funds to support yourself. Tax-deferred funds in a pension, 401K, 403b, etc. are the fastest way to accumulate money. Be brave and keep contributing the maximum. You will be glad you did years from now.

6. Have an investment strategy and stick to it. Many of you who did not have a strategy to look at in this crisis are the ones that panicked and sold everything and now wonder if they did the right thing. The federal government is spending like crazy and that means inflation is on the horizon. That means you need to be invested in equities to keep up with taxes and inflation. Buy and hold is my favorite all time strategy. It is easy, boring, and was thought up by Pulitzer Prize winners in economics and favored by some of the (still) wealthiest people in the world.

7. Don't abandon diversification. Just because one sector is doing so well that you want to bet the whole farm on it is chasing performance. Stay disciplined with a diversified strategy. Cash for emergencies, equity investments, fixed income investments, and real estate should help you stay ahead of the game. Avoid the temptation to chase after high yield high risk investments to make up for losses in the past.

By following the 7 strategies above you can rebuild your portfolio and protect it from taxes and inflation. In tight times like this, many scams will be floating around. If you focus on your personal financial strategy to build wealth, you will be set for brighter times ahead.

Article Source: http://EzineArticles.com/?expert=Fern_Alix_LaRocca

AKPK expects higher debt problem cases

Kuala Lumpur: Credit Counselling and Debt Management Agency (AKPK), an agency set up by Bank Negara, expects a surge in the number of financially-distressed individuals seeking counselling and debt management services this year.

Chief Executive Officer Mohamed Akwal Sultan said more people might not be able to meet their financial commitments in view of the current economic downturn.

There could be more lay-offs and shorter working hours, rendering people in a tight spot for money.

"Last year, the number of counselling services increased to 41,447 from 25,320 in 2007," he told Bernama.

"AKPK also handled 11,958 cases involving debt management programmes in 2008, an increase from 7,614 cases in 2007," Mohamed Akwal said, adding that he expected more cases on credit cards and housing loans.

The Association of Banks in Malaysia (ABM) recently lowered interest rates for credit cards by between 0.5 percent and 1.5 percent for Tier-1, Tier-11 and Tier-111 credit cardholders.

Late payment fees will be slashed to a minimum of RM5 and a maximum of RM75 effective March 31.

However, many parties viewed the interest rate cut as not good enough.

Mohamed Akwal said the reduction would only benefit the 40 percent who currently elect to leverage on the credit made available under the credit cards.

It may also encourage this group to make more regular minimum payments to move from Tier-III to Tier-I to enjoy the lower interest rate.

He said credit cards should be used as an electronic means of payment mechanism and not a source of long-term credit.

Interest rates for credit cards will normally be higher than other secured loans as the risk is higher.

However, interest rates on credit cards in Malaysia are still one of the world's lowest.

"Though the non-performing loans in Malaysia are not as bad as in the United States, it is crucial for the people to live within their means and only buy things they can afford," he said.

AKPK's counselling services are available to all individuals who need help to manage their personal debts with financial service providers regulated by Bank Negara.

However, there is a qualifying criteria for AKPK's assistance, he said.

An individual has to have an income after meeting his or her expenses, total debt does not exceed RM2 million, not under advanced litigation process and is not a bankrupt.

For financially-distressed individuals, who met the qualifying criteria, AKPK will offer a debt management programme (DMP) to restructure their loans or extend repayment period and flexibility in loan repayment amount to suite their cash flow.

"As long as the DMP applicant abides by the terms and conditions, banks will not take legal action," he said.

According to the profile of individuals who have enrolled into AKPK's DMP, Mohamed Akwal said it was the Malaysian men who were the most debt-ridden.

"In a household, it is usually the man who is the main breadwinner and manages the household. As such, they are the ones who normally take loans," he said.

Mohamed Akwal said AKPK's counselling and DMP are available at all its eight branches in Penang, Perak, Melaka, Johor, Pahang, Terengganu, Sabah and Sarawak.

Two new branches in Kota Baharu and Alor Setar will be opened this year, he added.