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August 23,
2002 - Making money
projections on Wall Street these days is about as predictable as forecasting the
weather -- just a lot of high-paid people standing around being wrong. But just
because most of Wall Street seems to be making poor decisions with money doesn't
mean you have to follow suit.
Millian Toms, our local CPA, has several good
ideas on smart moves you can make with your own finances
until things settle down. But for those who already have
sizeable sums invested in the stock market, particularly in
mutual funds, Millian thinks "you should hang in there.
"If you
don't need it, don't cash it in. If you're in the average mutual fund, hang in
there. When you hit 65, remember to cash it in only as you need it -- if you
only need $3,000 a month, then only take out $3,000 a month,"
On
other money matters, stop listening to the panicked on call-in on talk shows.
Millian has more than three decades of experience as a certified public
accountant. She thinks it's normal people would, and should, be worried about
their finances at a time like this, but trunks they should seek answers from
experts, not Oprah.
Credit
cards, for example. "They should always be paid off," Millian says, smiling
because she knows that's not the case for most people. ,'But in an emergency,
take the money out of savings first because the earnings are so low. Credit
cards still have a high interest rate.
"And
don't use a time like this to get into 'card jumping,' with all these companies
offering zero percent interest for the first six months if you move your balance
to their card and then jumping in another six months. It destroys your credit
rating. Al1 those lines of open credit show up on your credit report."
Another
suggestion is to look at a home equity line of credit, which is different than a
home equity loan.
"This
is a loan where you borrow for a shorter period of time. The interest rates will
be considerably less than a credit card. The difference between this and a first
mortgage is that the lender can demand it back at any time, which is why it's
called an 'on demand note," Millian says.
"I've
never heard of anyone have the noted called in on demand, but they could. Even
if you're making all your payments on time, you might not be making credit card
payments on time. They really don't need a reason, but as I said, I've never
heard of anyone calling in a note," she added.
Then
there's always the straight savings or money market account, found boring and a
poor investment by many until the bottom fell out of their stock portfolios.
"If you
put in a dollar, you're always going to get a dollar back. That's not true in
the
stock
market -- it's a risk. And in a savings account you're still getting 2 or three
percent interest. I'd bet that sounds pretty good to some people right about
now, plus it's insured," Millian says.
Don’t
do a certificate of deposit right now,” she adds. Certificates of deposit
typically offer more attractive rates, but the purchaser must lock in for a
longer period of time. At today’s rates, Millian doesn’t think that’s a smart
move.
“Don’t
do one unless it’s only a 30-day deal. You don’t want to lock in too low.”
Finally, if you’re shopping for a good investment, Millian says bonds,
government bonds or treasury bills might fit, if you are in a high tax bracket.
“They’re not high return, but they’re guaranteeing the government or corporation
assuring the bond.
“One of
my clients inherited some municipal bonds and wanted to sell them and buy stock.
I advised against it and the client didn’t sell. Today, those bonds are bringing
in 7 to 8 percent interest.
“Do you
know of anything in the stock market that’s doing that well?”
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