While the pressure is on for Washington to act quickly and approve a stimulus package, it's still going to take time to see any results of such action. So how will consumers survive through the coming quarters, until the economy stabilizes? When Terry Anderson, President of Wealth by Design & Management, was asked for his thoughts on managing personal finances during a recession, three themes emerged:

Greenwood Village, CO (PRWEB) February 10, 2009 -- While the pressure is on for Washington to act quickly and approve a stimulus package, it's still going to take time to see any results of such action. So how will consumers survive through the coming quarters, until the economy stabilizes? When Terry Anderson, President of Wealth by Design & Management, was asked for his thoughts on managing personal finances during a recession, three themes emerged:
•    Run a household as if it were a business. When corporations experience profitable years, raises, bonuses, promotions, and new investments abounded. However, when profits are down, a company tightens its belt, implements a hiring freeze and restricts business travel. Yet, on a personal level, consumers too often cling to a particular lifestyle and resist making changes in the expenditures department. "Businesses would not likely survive with an approach like that," says Anderson. "In order to adapt to this market, consumers need to reduce spending and find more frugal methods of managing necessary household expenses." For some, that will mean small changes, but others may need to consider delaying retirement or working part-time in retirement. Revisit financial goals to reassess risk tolerance and adjust expectations.

•    Take advantage of down market opportunities. There is a silver lining in the current financial cloud. "Now might be a good time to convert a Traditional IRA into a Roth IRA," suggests Anderson. "While income taxes on the amount being converted still must be paid; lower account values now mean the tax liability on a conversion may be lower."
Although investment accounts are down, so are gas prices, home heating costs and even car prices. Additionally, interest rates are low and if they continue to fall, mortgage refinancing could generate significant monthly savings. For first-time homebuyers, housing prices are obviously good news. Plus, there's a tax credit of up to $7,500 for qualified first-time homebuyers who purchase their house after April 8, 2008, and before July 1, 2009. Although the amount of the credit over the next 15 years must be repaid, there is a break on current-year taxes at a time when budgets might be tight.

Tax loss harvesting is also a possibility. Remember, even if losses exceed the annual $3,000 allowable deduction limit, excess losses can be carried over to a future year. That strategy could be especially beneficial if the capital gains rate increases in the future.

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