3 Dangers to your 2010 savings plan
Paul Lim of The New York Times recently published an article on the three dangers to investment in the United States; earnings risk, valuation risk and policy risk. Overall, the risks facing investors in this first year of the new decade appeared to centre around the effects of fluctuating government policy and the ability of companies to fulfill the expectations of shareholders.
It’s a fantastic article, but bypasses the dangers affecting people trying to save dimes not diamonds.
So what are the dangers this year for your savings plan?
Obviously if you’re someone who stays clear of the stockmarket, danger isn’t as real and present as it may be for incorrigible investors. Here are three easily averted troubles in 2010 for all money savers.
Manana Manana
2009 was not a good year for investments. 2009 was the worst year on record for consumer condidence. In Australia, most of us escaped the full ramifications of the crash, although it had some long-term effects on retirement plans and superannuation.
Commentators suggest that the experiences of 2009 cannot be used as an excuse to disengage entirely with our finances.
Rather, they say the lesson from 2009 is that a finance plan cannot be just about investments, it has to be about savings and spending as well. Resting all your financial hopes on the stockmarket. The danger of becoming cynical after the events of 2009 should not be allowed to damage your savings plan.
Stress
A volatile economy does nothing to alleviate stress, and 2010 looks set to be another rollercoaster of a year. Unemployment is high, and the market may or may not stay solid over the next year depending on which writer you read.
The more stressed you are, the quicker you spend money. While every year is bound to include a lot of stressful experiences, 2010 may be interesting financially. Spending money or not sticking to a budget is a common reaction to stress and may be one of the things to bring you undone this year. The only solution is to keep to your original savings plan, and resist the urge to start saving tomorrow. After all, 2011 will no doubt bring with it it’s own highs and lows.
D-d-d-debt
Debt is going to be catchcry in 2010. After all, most of us are in it and 2009 caused our credit spending to go somewhat haywire, governments included. Spending patterns that include a reliance on credit cards or don’t allow you to pay off your debts in time must be overthrown in 2010.
Reduce, consolidate and settle is the mantra for 2010 (someone should probably tell K Rudd about that one- it’s just his cup of tea).
Make 2010 your first year without credit cards, or the year you take advantage of low interest rates and pay off part of your mortgage.
Regardless of what 2010 holds, it’s fair to say that a detailed (and frequently revised) budget is an essential to successfully marshalling the financial dangers of this year.
Whatever happens, if we can stick to our saving goals, lower our debts and set up our emergency funds, then 2010 should be a good year. The riskiest thing I intend doing with my 2010 is skydiving.
What do you perceive as the greatest threat to savings in 2010?
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