A while back someone thought up a “great new idea”. Rather than borrowing money from a bank, perhaps you could just borrow money from your 401k. After all you won’t need the money for years, and why not be your own banker and pay interest to yourself! It’s win win!

In this first part of the two part series I’d just like to point out that you’re investing for retirement so that a small amount of funds will grow into a large amount of funds a long time from now. If you take those funds out, then you lose the whole point of investing for retirement. And as everyone also knows, time is one of the largest factors when it comes to the value of compound. Therefore taking even a small loan out could have a gigantic effect on your total portfolio value in a few decades.

My home has probably dropped in value since I bought it three years ago. I don’t live in a high cost location, so it may not have dropped much. Nonetheless it really doesn’t matter to me because I need a place to live. I enjoy this home, and I thank God that he has provided it for my wife and I.

If you own a home and (hopefully) have a fixed mortgage than really nothing has changed for you. Dropping home prices didn’t cause the recession to hit home for you unless you work in the construction industry. It just means you feel bad if you have your house appraised, but ultimately you have to pay the same amount of money back to the bank and eventually your home will be paid for and worth quite a bit.

The markets are down, your stocks (and mine) have tanked. Although it gloomy looking at the 401k quarterly reports, please don’t neglect your portfolio in these tough times! Most experts agree that you should rebalance your investments every year or two. It’s likely that if your bonds are up your stocks are down. Therefore based on your desired asset allocation you might need to sell some of your bonds and buy more stocks to regain your desired allocation.

Rebalance to some degree forces you to buy low and sell high, and it also gives you a change to adjust your asset allocation if you need to for life events, nearing retirement, etc.

I spoke with my father recently and he mentioned that every February something major requires repairs at his home. Well, near the middle of May this year that happened to me as well.

Some of the expenses were expected, like having our auto and homeowners insurance due (read: big bucks). We did not expect, however, to have to replace the brakes in my wife’s car ($450) or have our garage door opener repaired ($160). Yikes.

Fortunately our emergency fund can cover these expenses, and after hyper-ventilating a little bit I realized that we’ve ultimately planned for these “unexpected” events by saving a little bit each month. It’s just that we didn’t know what we were saving for, and today we got to find out.

I think it’s worthwhile to think through a few what-if scenarios should the economic downturn continue. Let’s assume you (and I) are blessed and are able to keep steady employment through this downturn. What are you willing and unwilling to do to help out your friends and family?

I, for example, am not willing to help my friends and family pay their (too large) mortgage payment if they are struggling to get buy. I would allow some of them to move in with us, however, and I am willing to support them in other ways. I just don’t think it’s a good use of limited funds to help others pay an extra few mortgage payments that just may be delaying the inevitable.

Are there things you would and would not do in a similar situation?

Jobs are hard to find these days, and we’ve all taken a beating on our investments. Although most personal finance writers tend to state a combination of the obvious and what people need (”get out of debt, and stop being lazy”), I’d like to take a different tact today.

I’d like you to think about how you can improve your financial situation, not because it’s good for you and your family, but because you will be able to help others out that are struggling. Time are tough now, and it’s likely that we will all continue to struggle and worry for some time to come. It’s important to trust in God and avoid a hoarding mentality. Some people have been saving 10+% of their income each year for decades. Although I’m not in that group, I hope to be some day. Until then even I need to avoid the “me first” and “protect your own” mentality and be willing to help others in their time of need. Who knows. You never know who your generosity might touch in the future.

I’ve completed the move of this Blog from Today.com to here, and all I can say is Praise The Lord! To be honest I was growing quite peeved at Today.com, with all of their restrictions it really wasn’t worth the time and effort to get paid a pittance to be hosted there.

I’m glad to have my own space here at upgradeyourlife.buildingbiggerbarns.com, and my goal is to post a few times a month on self-help topics.

As my regular readers know this I cover health, fitness, and personal finance topics here and would consider this blog more of a general self-help blog than anything else.

People love to speculate, especially during tough times. Is the government going to raise taxes? Is my state going to be bankrupt? Will college cost $1MM a year in 20 years?

How should I know. In a country with a constitution that can be changed anything can happen. What I can tell now, however, is that as a country the US is spending more than it’s earning. You may be doing that as well, and how’s that working out for you.

Until we balance the US budget and start saving for our welfare programs, there are only two ways out of this mess: raise taxes or inflate our currency (i.e. repay our debts with dollars that are worth less). It’s likely both will occur, and saving in a Roth IRA will help you avoid a potentially large tax hit when you retire because funds grow tax free in a Roth.

A friend of mine recently told me “I can’t sell my house now, because we won’t get what it’s worth.” I hate to be the bearer of bad new, but market price is always the fair market value. You may THINK your home is worth more. It may even have been worth more last year or a few years ago. The fact remains, however, that the value of an asset it accurate if both parties are free from duress and are willing to complete a transaction.

Therefore it is fruitless to base your decisions on what your house WAS worth. If you sell your house now and buy another house, it’s probably that the new house will also cost less than it was worth.

As the title mentions, the best time to prepare for difficult times is during good times. I know, you’re thinking “thank you Captain Obvious”. The fact remains that most of us are short term focused when we should be (at least somewhat) longer-term focused.

Very few people thing of saving for a child’s college before they have kids. If you think it through though, do you expect to have more or less money after you have kids?

Use your brain a little bit and think about it. Perhaps you should be saving for your own college again, even if you’ve already graduated. If you think you might return to school some day to change careers or get an advanced degree it might be a good idea.