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Taking Advantage of a Down Economy

While it's disheartening to hear about the number of people struggling right now to make ends meet, a down economy can actually be a good thing for some people. If you didn't load up on bad debt over the past couple of years—and are still in a good place—you may be in a position to take advantage of current economic conditions.

Go shopping

During an economic downturn, a lot of things go on sale. In retail, clothes, furniture, electronics and big-ticket items are being marked down. Car and home prices are dropping, too. Coupled with low rates on loans, it's a great time to buy if you have the money. Plus, the IRS is giving some attractive tax breaks for home and car purchases in 2009 (visit www.irs.gov for more information). It's also a great time to spend on home improvements. Builders and remodelers are being hit hard by the current lack of consumer spending, meaning they may be willing to do the job for less than usual—and they'll be happy to have the work!

Invest in the stock market

When stock values are low, it can be a great time to invest. You may want to try a technique called dollar-cost averaging. This is when you invest set amounts of money at regular intervals, like 401(k) contributions. When the market is down like it is now, you are actually buying more shares for the same amount of money. It's like buying stock on sale. When the market rebounds, you'll own more stock that is increasing in value.

Do some estate planning

In 2009, you may gift up to $13,000 to other individuals tax-free. If you are married, both you and your spouse can contribute this amount. This kind of annual gifting allows you to transfer funds—tax-free—so others can enjoy it immediately, rather than after your death. It may also reduce your estate tax liability by removing assets from your estate during your lifetime.

Low stock prices also provide an opportunity to pass money to the next generation. The $13,000 exclusion isn't just for cash gifts. Stocks count, as well. If you transfer stock that has a low value today, but which you anticipate will bounce back in the future, you can give the gift of increasing stock while completely avoiding transfer taxes.

At Local Government Federal Credit Union—which you are eligible to join if are a local government employee or volunteer—we can assist in all of the areas mentioned above. Rates on auto, home and home equity lines of credit are low (currently as low as 3.75 percent for a two-year a adjustable-rate mortgage). In addition, our financial planners can help you build a stock portfolio and plan for your estate—and these services are all free of charge! Call us at 877.367.5428 if you want help taking advantage of the current economic climate.