I hear from countless investors around the world every week. Many of them want to know what "else" they can do to protect their financial future, especially now that the markets could get ugly (again).
Here are a few quick thoughts:
1) Chart your course
A surprising number of investors tell me that things were going along just fine then - boom - one day they woke up and everything had turned into a disaster.
If only it were that simple. The truth is digging a hole takes time and a whole lot of effort. If you're in trouble now it's because you haven't been paying attention for a while.
Knowing what to do is only 10% of the game. The other 90% comes from having a plan.
I don't care if it's nothing more than on the back of an envelope or a Post-it like the ones that cover my desk. It's vitally important you have one.
Unfortunately, "Beating the S&P 500" doesn't qualify as a plan. Neither does "retiring in style." You have to plan for real-life goals.
For some people, this may be paying for a grandchild's education. For others it might mean building up $20,000 over five years to take that once-in-a lifetime trip, accumulating $300,000 to build a vacation home, or ensuring that you have $2,000-$10,000 a month to live on 20 years from now.
You have to be specific. That way you learn to control your money before it controls you. If you need help, find a competent financial advisor immediately and ask the right questions.
If you realize you can meet your goals by hitting singles, it makes no sense to constantly swing for the fences and risk striking out. Lower your risk and concentrate on the return of your money rather than the return on your money.
Not only will you sleep better, but chances are your returns will be more consistent for having done so.
2) Refinance your home (and everything else, too)
Interest rates have fallen for more than 30 years to near zero. They are unlikely to fall much further. If anything they are likely to rise. Nobody knows exactly when or how high they will rise, but that's not the point.
What's important to realize (and that many people have forgotten) is that the median 30-year mortgage rate is nearly 9%, or roughly 150% higher than the best rates available today. Even a minor uptick means you will lose huge amounts of purchasing power.
Obviously you have to pay closing costs every time you refinance, but the fees can be worth it if you plan to be in your house long enough to break even.
Here's how to run the numbers.