The Star-Ledger Archive
COPYRIGHT © The Star-Ledger 2008
Date:
2008/09/16 Tuesday Page: 047 Section: BUSINESS Edition: FINAL Size: 592 words
Series: THE BIG MELTDOWN
How
to protect your money during the financial fiasco
By
KARIN PRICE MUELLER
STAR-LEDGER STAFF
It's okay to finally call this a financial crisis. It's okay to admit you're
worried.
This is a time for measured moves, says Jerry Lynch, a certified
financial planner with JFL Consulting in Fairfield.
"Don't be stupid," he says. "...Have a good plan and
stick to it."
To help, The Star-Ledger asked some financial advisers to offer advice for families
with different money situations.
PROFILE No. 1
Single
woman, age 24, with a salary of $40,000 a year. She rents an apartment and contributes 10 percent of her salary to her 401(k).
She has $2,000 in a money-market account and has $35,000 in credit card and student loan debt.
*
What she should do: "Short term, I would suggest that she stops paying into the 401(k) plan
at the level she is and pay down the credit card debt," Lynch says.
* What
she shouldn't do: Refinance her student loan. "She should continue to pay off the student loan at the current
amortization," says Reed Fraasa, a CFP with Highland Financial in Riverdale.
PROFILE No. 2
Married couple, age 32, with two salaries totaling $120,000 a year and
two kids, ages 4 and 2. They owe $250,000 on their mortgage, $20,000 to a home-equity loan and $5,000 in credit cards. They
have $30,000 in an emergency fund and both contribute the max to their 401(k) plans.
* What
they should do: "Make sure that they have the maximum credit line available on the home-equity line," Lynch
says. "I like that they have $30,000 in the emergency fund which would be helpful in the event of a layoff, but they
should pay off the credit card debt even if they have to reduce the contribution in the 401(k)."
* What they shouldn't do: Anything drastic. "Continue to invest in
their 401(k) account, maintaining a very diversified allocation. The next six months will be a buying opportunity for these
long-term investors," Fraasa says.
PROFILE No. 3
Married
couple, age 55, both work with total income of $150,000 a year and two kids, ages 19 and 16. They owe $75,000 on their mortgage.
They plan to pay in full for college using 529 plans (balance: $100,000) and their home-equity line of credit. They would
like to retire at age 60, and they contribute the max to their 401(k) plans and IRAs. The wife's company is talking about
layoffs.
* What they should do: "See if the bank will increase the
line of credit to whatever is the maximum," Lynch says. "Always have access to the money in your home, especially
if you think you may lose your job."
* What they shouldn't do:
Sell out of everything. "Most people add risk by selling at the wrong time," Fraasa said.
PROFILE No. 4
Married
couple, both 70, both retired. Income of $25,000 a year from Social Security and $80,000 a year from a pension. They have
no primary mortgage, but owe $50,000 in home equity and $12,000 in credit cards. They have $500,000 in retirement accounts
and $300,000 in three savings accounts.
* What they should do: "If
their IRAs are invested in bank accounts, the FDIC coverage is only for $250,000 per IRA, so they may want to review that,"
Fraasa says.
* What they shouldn't do: Leave their
cash accounts as is. "They should put the savings into three accounts: one in his name, one in her name and one joint,"
Lynch says. "This will allow the accounts to be insured up to $300,000 if the bank is FDIC insured."
