What You Should Be Doing Now!

1. Start by re-evaluating your monthly expenses to determine how much money you need for necessary expenses.  Then determine how much you have remaining after you cover these expenses.

2. During difficult economic times, like the present, most people should maintain an emergency fund of at least 6 months of expenses.  If you have an exceptionally secure job you may be able to drop What You Should be Doing Right Now!it down to 3 months.  Always be sure to sure to maintain an adequate emergency fund.

3. Once your emergency fund is established pay off any high interest credit cards.

4. Put aside money for special one time expenses such as a new roof, a new car or a down payment on a house.  If you don’t own your own home give some serious consideration to saving up to buy one.  Decide how much you want to save on a monthly basis and start a systematic savings plan.

5. Now you can start investing! Determine how much you can afford to invest on a monthly basis.  Most people should start by investing in their company retirement plan up to the level that the company will match.  If you can afford to invest beyond the level of your company match, invest up to the maximum allowed in a Roth IRA.  This should be done on a monthly basis to take advantage of dollar cost averaging – investing the same amount every month. The 2009 contribution limit for a Roth IRA is $5,000 if you are under 50 and $6000 if you are over 50.  There is an income limit on your eligibility to contribute to a Roth IRA based on your adjusted gross income.   For 2009, your eligibility to contribute begins to phase-out at $166,000, if you are married filing jointly and $105,000 if you are single.

Maximize your Roth IRA

If you still have money to invest after maximizing your Roth IRA, resume contributing to your company retirement plan up to the maximum amount.  The maximum contribution limit for a 401k in 2009 is $16,500 if you are under 50 and $22,000 if you are over 50.

Diversify, Diversify

Invest your money in a diversified set of mutual funds.  Establish an asset allocation consistent with your timeframe and risk tolerance.  For most individuals this will vary from 50% to 80% in stock mutual funds, with the balance in fixed income investments.  The market is still priced very low and it is a great time to buy stock mutual funds.  However, the market will be very volatile over the next 6 – 9 months.  Dollar cost averaging into your retirement plans will help you take advantage of this volatility.

This is very general advice and everyone’s situation is unique.  Treat this advice as a general guideline and adapt it to your own situation or consult a Certified Financial Planner for guidance.

Photo by: dB encheci

About the author

Jane M. Young, CFP®, EA, MBA, CDFA

Jane M. Young is a Certified Financial Planner and co-owner of Pinnacle Financial Concepts, Inc. and Divorce Solutions, Inc. She has been a financial planner since 1996. She is also enrolled to practice before the Internal Revenue Service. Prior to becoming a financial planner Jane held several management positions at Digital Equipment Corporation and Quantum Corporation, where she worked for 14 years. Jane holds a Bachelor of Science degree in Business Administration from the University of Colorado and an MBA from the University of Colorado. She has also completed the two year Certified Financial Planner Professional Education Program with the College for Financial Planning.

Jane is very active in the community. She is the immediate past president of the Rotary Club of Colorado Springs and a past president of Leadership Pikes Peak. She is a graduate of the Leadership Pikes Peak class of 2004. She is a past president of the Financial Planning Association of Southern Colorado and a past president of the Pikes Peak Chapter of the National Association of Women Business Owners. Jane is also a member of the University of Colorado at Colorado Springs, College of Business, Alumni Leadership Team. Jane is a graduate of the Leadership Program of the Rockies class of 2009 and a graduate the Colorado Springs Leadership Institute class of 2011. She is also a member of the Estate Planning Council and Artemis. Jane was selected as a 2010 Woman of Influence by the Colorado Spring Business Journal.

As a fee-only financial planner Jane is a member of the National Association of Personal Financial Advisors, the Financial Planning Association, the National Association of Tax Professionals and the Alliance of Cambridge Advisors. She has been quoted in several local and national publications including The Wall Street Journal, US News and World Report, Consumer Reports, Investment News, MSN Money, Kiplinger Magazine, Financial Advisor Magazine, Bankrate.com and the Colorado Springs Business Journal. She also works as a volunteer instructor to new advisors with the Alliance of Cambridge Advisors and has worked as an adjunct instructor at the University of Colorado at Colorado Springs.

Jane is from St. Louis, but grew up in Colorado Springs. She enjoys skiing, golfing, traveling, hiking, painting and learning to speak French.

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