As a Realtor, the most common question that’s asked of me is “how’s the real estate market?”  Everyone has their own rehearsed response to that question, but there’s never a cookie cutter answer for every type of client.

Uncertainty has now permeated both the Real Estate Market AND the Stock Market.  It’s a confusing and challenging time for both casual investors and the professionals.  With higher fuel prices, food prices, job cuts and a slow Real Estate Market, it would be expected to find some worry in the average consumer.

Here are some tips to weather the storm and keep your head on straight:

1) Don’t Panic, but understand what’s going on:

Yes, things are not looking too rosy right now.  There does not seem to be a near-term end to higher gas prices, banks and other financial institutions are trying to drum up liquidity from other nations to stay afloat and it looks like we’ll have a new President who would like to raise taxes (whether that’s a good idea or not is up to you.  I’m not going to get into politics).

In my few years of investing I’ve been through a couple of cycles including the dot-com fiasco of the 90’s and the Real Estate run up of the new millennium.  Markets go up, markets go down, that’s just the way it is.

The times that I’ve been hurt the most is when I’ve either let panic enter the equation, or I held on to investments “hoping” that they would come back to their former glory.

Take the time to sit with your investment person once or twice a year and determine if what you’re doing is making sense (if your investment person is yourself, look over your portfolio).  Are there stocks in there that are tanking?  Why are you holding on to them?

A good way to determine if a stock or mutual fund is worth keeping is determining whether or not you would buy more of it if you had more money.  If the answer is “no” cut it and move on.

As I’ve mentioned in previous columns, people spend more time planning their vacations than understanding what’s going on with their finances.  Don’t be that person.

2) Continue to budget:

My guess is that the people who are going to be hurt the most by the rising cost of fuel and food are people who don’t budget.  They will continue living the same standard of life, and wonder why ends don’t meet at the end of the month (“Too much month at the end of the money”).  Most people are on a fixed income, they have the same number of dollars every month.  It’s a simple idea: If prices of goods are moving up, you can’t buy as many things.  However, there will be those who don’t get this.

Here’s a simple budgeting plan:

Before the beginning of the month, take your take home pay and write it at the top of a piece of paper.

Now subtract out all expenses you are expecting during the month starting with food, mortgage, savings/investment etc. until you get to zero.  Every dollar should be spent on your budget by the time you are finished.

Doing this will give you an idea of what you can afford every month and will limit overspending.  As food prices go up, you will probably need to cut back in other areas.

3) Continue to invest:

Since the inception of the stock market, returns on investment have averaged roughly 10%.  Some years were up, some years were down.

I have yet to meet someone who has become considerably wealthy, stuffing cash under his mattress.

A person investing $500/mo getting 10% on his investment (the average return of the stock market) over a course of 30 years will have over a million dollars in the bank.  $820,000 of that will have come from compound interest.

The smart squirrel gets fat.

4) Evaluate your personal situation:

We’re already seeing the effects of a slower economy.  Starbucks will be closing 600 stores in the next few months.  Other companies following suit – Eddie Bauer, Foot Locker, the Gap, etc.  It’s most likely that we will continue to see this trend over the next year.

Are you in a profession that could see job cuts?  If so, do you have a fall back plan?  Maybe now is a good time to take those night classes you were thinking about, or sock away some extra dough in case you need to float yourself for a couple of months.

5) Don’t listen to the “experts” on TV:

One thing I learned from the dot-com days is that television is one of the worst places to get financial information.  Every show has fifteen different viewpoints for every topic so there is rarely ever a consensus and it leaves the viewer confused and frustrated.

In 2000 I saw “analysts” excited about the “new bull market” and recommending tech stocks like nobody’s business.  Nobody knows the future and can predict where the stock market is going to go.  It’s up to you to control YOUR finances and position yourself the best way you can in an up OR down market.