Experts discuss shoring up finances while the economy is strong

MENASHA – It’s heady days for the American economy, and a good time to think about and prepare for the inevitability of leaner times.

A bullish stock market has been a tear this year with the S&P 500 closing at record highs in late summer, extending a run that began almost nine years ago. The uptick in the market comes as corporate earnings are up and unemployment is at record lows in the state and parts of the nation.

How long these conditions will last is anyone’s guess. Some expect a slowing, or downturn, of the market in the coming months. At some point, the economic boon will come to an end.

“We can’t control what happens to the economy or the stock market. Like it or not, economic changes, recessions and life disrupting setbacks happen,” said Alan Prahl, education and marketing manager with the Financial Information & Service Center in Menasha. “However, good preparation can help us be better prepared.”

Three Fox Cities financial experts offer up a few tips to pay down debt, plan for retirement and shore up finances while the economy allows.

Know what you have

Take stock of finances now: wages, debt, savings. Consider your long-term plan for retirement, and bolstering savings for unforeseen events.

“You want to have at least three months in your savings account, so you can continue with your payments,” said Karen Dickrell, a family living educator with the University of Wisconsin Extension Service-Outagamie County. “If it is a dual-income family, can you exist on one person’s income and put the rest into investments and savings programs?”

Plan

Prahl encourages workers to save using their employer’s 401(k) plan, setting aside at least enough money to get a full match from the company.

He also suggests using automatic payments to build an emergency, or other savings, fund using automatic bank payments between checking and savings accounts.

“If you had $200 transferred from checking to savings each month, after one year you’d have $2,400 and after five years — without adding any interest — you’d have $12,000,” he said. “Plan to have your emergency fund readily available, not invested in the stock market, where the value could plunge dramatically.”

He’s also an advocate of paying down debt to eventually free up funds for savings and investments.

Ups and downs 

Paul Hoffman, the corporate strategist with Provisions Wealth Planners in Appleton, said to approach investments and retirement as a long-term proposition: there are going to be ups and downs.

“I tend to tell people to not worry so much about that and get much more in tune with ‘What is the money meant to be used for?’” he said. “If you have a better grasp on that, then the 'When do you invest or how do you invest,' becomes easier.”

For instance, some of that money may be earmarked for retirement, inheritance, or a big vacation years from now.

“If we’re talking about 15 years, do we really care if the market is up or down this year?” he said. “The investment becomes so much easier when you have it clearly defined: what is that tool going to do?”

Hoffman said there no imminent signs of market conditions changing dramatically.

“There isn’t anything screaming we’re near the end of a bull market,” he said. “But often that’s what you hear right before a bear market.”

Student debt

Dickrell suggests people with student debt build payment of loans into their overall financial planning, including benefits provided by employers. Some businesses provide programs aimed at helping employees pay down student debt.

“Sometimes people are better off to take a position that doesn’t pay as much but will invest in you, some places will help pay off your student debt and student loans,” she said. “Seek those kinds of employers and programs that will help you.”

Dickrell also suggests looking at the long-term benefits, like a retirement plan, offered by a prospective employer and how it can be moved, or invested, if you take a job with another employer.

Do you have an idea for a career-related story, a unique job opening or career-related education? Drop me a line at nphelps@gannett.com or (920) 431-8310.