JUST IN TIME | The do’s and don’ts of credit

Our challenging economy brings about plenty of uncertainties, but you may be better able to weather a storm if you have certain financial safeguards in place.

Here are some suggestions that may help you maintain a solid financial footing. 

What to do

•Do pay off debt — As challenging as it may be, make debt reduction one of your top priorities, particularly credit card balances with high interest rates.

•Do consider refinancing your home — While mortgage interest rates are still low, you may want to lock into a fixed-rate loan.

•Do look for ways to scale back — Consider moving to a smaller, more affordable home or apartment.

At the same time, sell possessions that you no longer use — such as an exercise bike or collections of items that no longer interest you — and save the money.

•Do try to live on one salary — If you and your partner are both employed, strive to live on one income, and put some or all of the rest in savings. Be sure some of that money is deposited into accounts that are accessible for emergencies.

•Do negotiate — Ask for lower rates on credit cards and for discounts on merchandise.

If there are sign-up fees for a particular service, see if that fee can be waived. In lean times, some retailers will agree, just to keep you as a customer.

•Do pay cash for purchases — Spend only what you have in hand right now; put off purchases that require you to add to a credit-card balance.

•Do enrich your salary potential — Learn new skills, take on some different responsibilities at work or even start a small, part-time business.

In a downturn, the expertise you bring to a position may help make you invaluable to your company or give you options should you be downsized.

What NOT to do

•Don’t raid your retirement account — You’ll typically pay a 10-percent federal income-tax penalty for removing the funds early, and you’ll shortchange your future.

•Don’t let insurance lapse — Keep your home, disability, life and car insurance coverage current. If something happens to you during a down time, you’ll need that protection.

•Don’t co-sign a loan — It’s risky unless you’re sure you can shoulder the entire burden yourself. Even if the co-signer is trustworthy, there’s no guarantee he or she won’t default.

•Don’t take on additional debt — Thoroughly evaluate any outlay that results in debt. A student loan for your child may be a reasonable debt, but a big credit-card expense is not.

As you decide what credit is best to take on, it never hurts to know where your credit score stands. There are many companies that will provide you with your credit report for a small fee or no cost at all.

The best plan is to be well-informed and not to make impulse decisions. 

EMILY WANG HAWKINS is a State Farm agent in Madison Park. To suggest future topics or more information, visit www.myagentemily.com, or call (206) 588-0416. To comment on this column, write to MPTimes@nwlink.com.