Q: I recently read an article suggesting another economic recession may be looming. What's the wisest way to handle my finances during a period of economic uncertainty?
Jim: Your question is important and deserves the best possible answer. My friend and trusted financial expert Ron Blue offers the following:
Since inflation is an important element of any recession, it's critical to guard against four popular myths that are centered on this factor. They contain just enough truth to make them believable, but a closer look reveals why it's unwise to let them influence your financial habits.
-- Myth No. 1: Buy now because it will cost more later. The cost of computers and electronic equipment demonstrates that prices don't always rise. The question is not what something costs now versus the future, but whether you really need it.
-- Myth No. 2: Always borrow to buy. Two elements of truth support this myth: 1) "payment" dollars are cheaper than "borrowed" dollars; 2) interest deductibility reduces the interest cost on some loans. Unfortunately, it's also based on two highly questionable assumptions: 1) that the interest rate is less than the inflation rate and 2) that the cash that could be used for the purchase is earning more than the cost of borrowing.
-- Myth No. 3: You can never accumulate enough. Inflation often makes us feel like prices are increasing faster than our savings earn interest. However, if you spend less than you earn, over time the earning power of your money will always be greater than the inflation rate.
-- Myth No. 4: The rate of inflation is standard for everyone. This isn't necessarily so. If you plan to have a cash flow margin by living within a simple, workable budget, your personal rate of inflation will be substantially lower than the nationally reported rate.
While economic downturns are unavoidable, you can minimize their effects: Spend less than you earn, reduce your debt and build personal liquidity through savings and investments.
Q: My 13-year-old daughter is obsessed with a certain 23-year-old recording artist. Her room is plastered with his posters, she has four shirts with his picture on them, and she follows him on Twitter -- not to mention downloading every note he sings on iTunes. She isn't stalking him yet, but it's getting creepy. When does fandom become unhealthy, and how can I keep her from crossing the line?
Bob Waliszewski, Director, Plugged-In: Your daughter's behavior is nothing new. Whether it was Elvis, the Beatles, Justin Timberlake or others in between, adoring fans have screamed and fainted at concerts, memorized every song and displayed their affections in the weirdest of ways. Chances are it's a phase she'll grow out of.
That said, it's still important to have regular conversations with your daughter to affirm your values and keep her grounded. Part of this involves staying plugged into her world. If you haven't yet, listen to this artist's songs and watch his videos on YouTube. Also, Google news stories to stay abreast of his recent activities. Has he had run-ins with the law? Does he have a reputation for being a partier or womanizer?
Key to your conversations is to have them in a natural or relaxed setting -- perhaps as part of a one-on-one activity your daughter enjoys. Begin by asking about and then listening to what she has to say about this musician, and then follow up with your own observations. Be sure to applaud the positives, as well as share any concerns you may have uncovered. Then, allow her to react and respond. Your goal for her as part of this back and forth is to develop and exercise discernment that will influence not only her entertainment choices, but decisions in every area of life.
Jim Daly is a husband and father, an author, and president of Focus on the Family and host of the Focus on the Family radio program. Catch up with him at www.jimdalyblog.com or at www.facebook.com/DalyFocus.