Financial plans need to change with economy

BY JOHN A. WILLIAMS Comments 0
Published: January 8, 2009

When faced with a slowing economy, some investors may be wondering what their financial strategy should be.

Nick Massey, an Edmond certified financial planner and owner of the Householder Group, said investors should continue to plan for the future while cutting debt now.

Nick Massey

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"Although we’ll have periods of sunshine so to speak, the next several years are not particularly rosy years for the economy,” he said. "In a slow economy or even declining economy, debt is the absolute worst thing you can have because you have to pay it off with more expensive dollars.”

Massey said it can be tempting to pull money out of the stock market and retirement plans completely or to cut back on spending.

"As an individual it is a good thing to spend less, save more and get out of debt. From the perspective of the whole economy, that’s the worst thing that can happen. The economy needs people to spend,” he said.

Liability insurance

During tough economic times, some people might be tempted to cut back on their home and auto liability insurance policies. But Michelle Schaefer, an Edmond Farmers Insurance Group agent, said that would expose individuals to a far greater liability if they had a claim such as a car accident or damage to a home.

"Having enough liability is important because as the cost of cars goes up, it costs more to replace them,” Schaefer said. "As the costs of medical procedures go up, you have to have proper coverage for any injuries that happen.”

Schaefer said she has noticed a trend among some drivers to keep their vehicles longer in order to save money. "People are keeping cars longer, so they’re not replacing them. As the car ages instead of trading it off they’ll just take the full coverage off and do just liability only,” she said.

It is important to look to the future, Massey advised. "So there are many people who for whatever reason, bad luck or bad decisions, find themselves a little over their heads right now,” he said. "However, it is important to continue to invest, and not be scared of a slower or down economy.”