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Investment losses, job loss or downsizing, an upward adjustment on your adjustable rate mortgage (ARM), and higher prices on everything from gas for your car to rice on the table are only some of the current factors that could derail your financial planning for your golden years.
When your income is not covering all your expenses, it can be tempting to simply cut out the expense of saving for retirement. But there will always be negative consequences to those actions. If you simply stop saving, you'll almost certainly reduce the amount of money available to you when you decide to retire, and you may even have to postpone your retirement.
Control Your Spending
Controlling spending starts with understanding how you spend. If the numbers are not in your head, take time to review your spending for the last few months, or even for the last year.
Once you have the list of expenses, comb through for savings.Here are some relatively painless cuts: Reduce the number of restaurant meals or frequent less expensive restaurants, trim auto expenses by finding someone to share your commute, increase the deductibles on homeowner's and auto insurance, and delay major discretionary spending such as an expensive vacation or new vehicle.
Create an Emergency Fund
Perhaps the biggest key to financial stability in a bad economy is your job. If you lose the job or are asked to take a lesser position, you could lose income, health insurance, and retirement benefits all at once. Protect your income by making yourself indispensable at work, keeping your skills up to date, and staying attuned to external and internal trends that could affect your employer's balance sheet. If your company is publicly traded, pay attention to the stock price, read reports to the shareholders, and keep up with the news.
Even if you don't feel personally threatened by the current scary economic news, consider some preventive measures. Inoculate your retirement savings against future incursions by creating an emergency fund that, in a crunch, could pay up to six months of your expenses; and apply for a home equity line of credit-easier to get when you are not in dire financial straits-to use if the unexpected should occur.