Financially Fit New Year

January 7, 2009 5:09:23 AM PST
Tips from Jason Tyler, Ariel InvestmentsQ: We don't want to spend too much time on the past, but the stock market was off nearly 40% last year. How does that stack up to the bad years in history?

JT: We've only had two years with 35% or more declines, and they were both in the 1930s!

Even more important than the market declines, we had significant fundamental issues:

· About 1 million homes lost to foreclosure over the past 18 months

· 6.5 % national unemployment rate, still climbing

Q: So as we prepare ourselves for 2009, what should we expect?

JT: As contrarians, we expect the stock market to do well this year. There is so much fear reflected in the markets and that is usually when you can experience the largest gains. In the 8 years where the market has dropped more than 15% in a year, it has experienced positive gains the following 1 and 3 years in 7 of the 8 times.

So as people prepare themselves for this year, three things come to mind:

1. 401(k) enrollment. For anyone still in an open enrollment period, make sure to at least get to the company match.

2. Gifting - this is a good year to gift assets to children or grandchildren. Since Assets are at depressed levels, you are able to transfer more, reducing future estate taxes.

3. Prepare for IRA contributions. Again, with depressed asset

Q: So, you expect the market to do well this year, what about foreclosure and unemployment rates?

JT: It will take longer for the economy to get back on track even if the market has turned around. That said; Americans should really be watching their spending and cut wasteful expenses wherever possible. Sit down with your family to devise a plan to reduce costs and most importantly, stick to it.

* This is also a good time to refinance. Mortgages are at a low right now with fixed rates in the low to mid 5% range.

* If you are struggling with your mortgage payment, take advantage of the resources that are available. For example, Neighborhood Housing Services ( offers assistance and advice for those who are dealing with mortgages issues.