Eight assets to count on during tough times
If you're feeling the financial pinch, don't fret. There may be ways you can either generate, or save, some extra cash.
A sign for Wall Street outside the New York Stock Exchange (July 15, 2013). Keeping your banking flexible can be key to avoid getting stuck with one financial institution.
Mark Lennihan/AP/File
We've all gone through periods where money is tight. Perhaps we've had a job loss, or dealt with a major unexpected expense. Or maybe the economy has been chaotic, creating sharp market downturns.
It's times like these when it's nice to have things to count on. If you look around, you'll realize you have assets at your disposal to get you through. Some can generate extra income. Others will give you stability.
1. Dividend Stocks
It's always good to have at least some income-producing stocks in your portfolio. There are many stocks that reward investors with quarterly payments, often with yields that are far higher than the interest offered on bank accounts. You often will sacrifice growth for the income, but that's okay when you're having some financial troubles. Look for companies labeled as "Dividend Aristocrats," for having increased their dividends every year for the last 25 years. This list includes solid companies like Procter & Gamble, Coca-Cola, Johnson & Johnson, and ExxonMobil.
2. Your Home
As long as you're not behind on your mortgage payments and have some equity built up, your house can help you through a challenging period. Your house is not a liquid asset, so it's not as useful as some other things you may have at your disposal. But it may be possible to get a home equity loan or line of credit to give you extra cash. If you're really in a pinch, you could always move into a less expensive location and rent out your home, pocketing any difference.
3. Bonds
Depending on your age, you may not want to own a lot of bonds yet, but it's nonetheless nice to have some. They're great for generating some income during hard periods, and can serve as a nice stabilizing force in your portfolio. And the income is often tax-free. Rather than researching individual bonds, look for well-performing bond funds such as the Vanguard Long Term Tax Exempt Fund (VWLTX) or the Fidelity Municipal Income Fund (FHIGX).
4. Your Emergency Fund
Hiding a million dollars under a mattress isn't the best financial move, but you do want to maintain a good quantity of liquid cash at your disposal. Financial advisors recommend having at least three months of living expenses in a savings account, money market account, or CD to get you through. If you anticipate a job loss, a medical procedure, or a period of financial strain, consider bolstering this account with extra cash, if you can. Cash doesn't make you a lot of money these days, but it's nice to have a lot of it during challenging times. (See also: 6 Emergency Fund Myths You Should Stop Believing)
5. A Roth IRA
In general, you should try to avoid withdrawing money from retirement accounts before age 59 ½, because there are taxes associated with doing so. But one of the nice things about a Roth IRA is that you can withdraw your contributions at any time without penalty. That's why some financial advisors say it's okay to think of your Roth IRA as part of your emergency fund. Be careful, though. You don't want to withdraw more than you've contributed, and you should come up with a plan to replenish those funds so you're not costing yourself future dollars in retirement.
6. Precious Metals
Gold and silver have always been investments of choice during times of trouble. Metals have lost a lot of value in recent years in the low interest rate environment, but they've ticked up recently as interest rates have risen and the stock market has lagged. Precious metals are useful when banks are unstable, when there is major political uncertainty, or when inflation is out of control.
7. Your "Stuff"
Look around your house. You probably have a lot of items that you could probably part with if finances get tight. Old books. Clothes. That mountain bike you rarely ride. Check eBay, Craigslist, or other resources for places to sell your items. It just might help you get through a tough stretch.
8. Your Talents
You're good at something. Ceramics. Singing. Graphic design. Writing. Whatever it is, see if you can leverage it for extra income. Look for freelance work, or sell your wares on sites like Etsy or Shopify. Who knows? Maybe it could bring you not only temporary income, but a whole new lucrative career.
This article first appeared at Wise Bread.