When you’re in the midst of a crisis, it’s important to have the right tools at your disposal.
If you don’t have a good plan for what to do, you may find yourself stuck in a rut or stuck with a bad mortgage, a bad job, or an expensive medical bill.
Here are a few things to keep in mind: The first step is to understand what the problem is, and what it means for you.
It’s a lot easier to say, “I need help” than it is to find a solution, says Andrew Schurr, CEO of CreditCards.com.
“So the first step to fixing it is knowing what it is.”
The second step is making an informed decision to start taking action.
This is what happens when you make the first move: “We know what it looks like,” says Schurrr.
“We have some data that supports the fact that there is a problem.”
The third step is knowing your risk profile.
If it looks bad, take a closer look.
“It can be a big, big risk,” says John Schmitt, founder of Schmitt & Co., an investment bank.
If your risk is low, you should get in touch with your broker to see what steps they can take.
You’ll be more likely to find the right solution, he says.
A more recent example is a high-risk portfolio that includes a mortgage, credit cards, and other investments that have a high return.
If this portfolio doesn’t pay off, you can still find a way to turn it around.
“If you have a portfolio of stocks that have good returns and you’re at risk of bankruptcy, that’s a great asset for your plan,” says Paul Vigna, chief investment officer at Vignas Capital Management, a brokerage.
The fourth step is identifying the best time to make the change.
If the change hasn’t happened yet, it may be a good idea to start planning now, says Schmitt.
If all else fails, call your broker, says Vignes.
“Once you’ve identified the problem, there’s no better time to do it,” he says, adding that a quick phone call can save you a lot of grief.
A lot of the time, this isn’t a problem with your own financial situation, but a problem that’s been plaguing the financial system for years.
It could be something that affects all Americans.
Here’s how you can help: Find a broker that has a good reputation and a good record of managing risky portfolios.
For example, the Vanguard Group, or a large mutual fund.
Make a plan to pay off a mortgage or a credit card at a later date.
Make sure you have sufficient funds to cover the new payment.
The more you can put away in retirement, the more you will be able to save in retirement.
Learn how to invest the money you want.
Invest in small- to medium-sized companies.
For instance, start investing in small companies like hardware stores and furniture stores.
You can also invest in real estate, and see how your returns will compare with similar businesses.
The second thing you can do is set up a 529 plan.
These plans offer tax-advantaged accounts that let you put your money into a different type of account.
That way, you’re not contributing the same percentage to the federal or state retirement accounts that you’re contributing to a traditional 401(k).
If you are considering a 529, remember that you have to follow certain rules, says Jim Smith, chief of the student-directed savings portfolio at PNC Financial Services.
For one, it has to be a tax-deferred account, which means that the money is tax-free, says Smith.
For another, it can’t be invested in a particular type of asset, such as a mutual fund or stocks.
If that’s the case, Smith says you’ll have to change your investments every two years.
And it can only be done in the first year of the plan, he explains.
So, if you’re thinking of going to college, you might want to check with your school about getting an affordable 529 plan in the offing.
You could also look into saving money with a 529 that doesn’t require you to contribute to a specific account.
But remember that even if you have an affordable account, it could take some time to accumulate the money and then start contributing, says Joseph Schuster, chief executive of PNC Wealth Management, which manages more than $2 trillion.
“For the most part, you won’t have time to put away as much as you want,” says Smith, who advises his clients to keep a regular log of their expenses.
If they’re looking for an easy way to save money, he suggests starting a 401(m) plan, which is a traditional IRA that’s matched with a regular paycheck.
For a better way to start saving, try the 401(p) or the 529 plan, says Jason Purdy