May 13th, 2009
How to Take Advantage of the Downturn
What’s interesting about the recent economic downturn is that while the news is not great, there are some ways that it’s possible to make positive financial lemonade out of the lemons coming out of the financial situation.
Use lower rates to refinance your debt: We refinanced the mortgage at 4.25% for a fixed 30 year; we were doing fine with a 5.85% fixed 30, but this is even better. If you have debt, see what you can do to refinance it. You may also consider consolidating debt since there are tax advantages to a mortgage that there aren’t to other types of debt, but be careful: if you got into consumer debt by overspending, you must get your spending in line in order for this to work out for you long term or you’ll end up in exactly the same place.
Buy at sales, price reductions, closeouts, and liquidations: When the economy is this bad, laws of supply and demand come into effect–reduced demand results in increased supply, and sellers must reduce their prices in order to sell just about anything. If sellers actually go out of business, while unfortunate, often gives lots of opportunity for buying goods at discounted prices. If sellers are willing to let things go for a song and you’ve got the cash saved up to buy, you’re in the driver’s seat.
Keep investing: Don’t stop your investment plan. The best time to buy into a market (if you’re into market timing, which I’m not) is when the market is down. If you have the kind of investment plan I do, you’re buying in regularly anyway–just don’t stop. I know of one coworker who stopped investing when the market went south by 20%–and hasn’t gotten back in. She’s missing out on the current 30 plus percent gains that have been happening the last few months with any new money–money that could have gone into the market when the market was in full retreat.
There’s some pluses–not many of them, of course, but there are some–to an economic downturn. Take advantage of low interest rates, slow sales, and the retreat in the stock market by using your money wisely. If you’re prepared, you can do well even when the economy is putting out more lemons than the domestic automakers.
Good advice and a good attitude for the current economic climate. When and with who did you refinance? That’s a great rate and I would love to be able to refinance to 4.25%. I’m at 6% right now. And totally agree on the sentiment to continue investing. Everything is on sale, buy low, sell high.
Another good part is it eased some of the inflationary pressure we had going. This is great if you are one of the 92% who is still employed.
If you’d be interested in exchanging blogroll links let me know.
Thanks.
We used Amerisave, which the last I checked was advertising rates at 4%, but I don’t recommend them.
Hey Bill,
I’ll try to get to you when I do some blog maintenance tomorrow (it’s been a rough few weeks here).