It seems that the Federal Reserve and the U.S. government are scrambling to end the recession. In fact, the Federal Reserve lowered interest rates by another quarter point to 2 percent on April 30, to help lessen the effect of the economic downturn. This is in addition to the IRS giving out payments to more than 130 million U.S. households early in May. The hope is that Americans will spend the money ($600 for individuals and $1,200 for families) to bolster the economy. But that may be wishful thinking.
"The buying power of consumers has gone nowhere. We're in a recession right now," an economist told Consumerreports.org.The rising prices of food and gasoline, and the decline of the housing market have put many military families in a pinch. And even though the government and the Fed have presented short-term solutions to this problem, it's up to military families to recession-proof their finances.
Check out the following tips from Consumer Reports to insulate your family's finances from the recession:
- Don't spend that rebate: The economic stimulus rebate is designed to get Americans to spend money and re-invigorate the economy. But if you're in debt, you should rethink that plan. Instead of going on a shopping spree with the rebate check, pay off any debt you may have incurred.
- Lock in your mortgage: If you're looking for a mortgage, look for a fixed-rate loan. But don't worry if you have an adjustable rate mortgage (ARM). ARMs are expected to reset at lower rates after the continued Fed rate cuts.
- If you don't have to sell your home, don't: The depressed housing market has made selling a home very difficult. If your family just received permanent change of station (PCS) orders and you can't sell your home right away, consider renting it out. Check out Military.com contributor Danielle Babb's tips for being a landlord.
- Set up an emergency fund: Prepare for any unforeseen financial emergencies by creating a savings fund. Try to save at least three to six months' living expenses. The best fund for a savings of this kind is in a money-market fund, that's not subject to price drops. If you need more information on the right kind of savings funds for your family, consult your on-base financial counselor.
During these uncertain financial times, it's important to save money rather than spend it. And, it's up to you to make sure that your family's finances are recesssion-proof.
For more financial advice or tips on saving money, visit Military.com's Finance center.