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Protect Yourself In This Unique Market

Since the 1970s, South Florida has rebounded from FIVE recessions. Power Financial Credit Union has rallied through them all serving only South Florida from 1951. We have identified five things all South Floridians need to do to protect ourselves in this unique market.

  1. We need to understand our mortgages. During the worst of the recession, Florida ranked #1 in foreclosures and in the number of home mortgages with delinquent payments. With construction back to being our #1 industry, there will be even more homes available on the market.  Understand that the interest rate on a fixed rate mortgage will not change over the life of the loan so your monthly payment will always remain the same. This loan is best suited for families who wish to remain in the home for a significant amount of time. Alternatively, an adjustable rate mortgage is better suited for families who wish to stay in their home for a short period of time. The low interest rate will remain fixed for a set period of time before increasing. For example, a 7-1 adjustable rate loan will remain fixed for seven years then will reset to current market rates on the eighth year. While figures, facts and outlooks were hazy, the one thing that was clear during the recession was the fact that many South Floridians did not fully understand their mortgages.
  2. We need one year of savings. For years, we were told to save for six months of hardship. However, the Great Recession saw an increase in the number of long term unemployed workers (those unemployed 27 weeks or longer) reaching an all-time high of 4.3% by March 2010. As of January 2013, the Bureau of Labor Statistics reported 38.1% of all unemployed people had been out of work for more than six months.  Four years after the official end of the recession and the numbers are still frighteningly high. For those back at work, proper household management should be the number one priority to save for an additional six months of hardship.
  3. Reduce our debt load. We live in the tourism capital of the continental U.S so most South Floridians are seasoned travelers. It is rare to meet someone from South Florida who has never been on a cruise or taken an international flight. Being privy to all the best travel offers means an endless cycle of fun being financed by our credit cards. We use travel as a popular South Florida example but any number of factors can replace travel. The point remains the same; we need to understand that carrying around significant debt during a recession is like playing Russian roulette. Give yourself the flexibility to survive the next recession by contacting your credit card companies about reducing your rates. Even transferring your debt to a lower interest card is an option to reduce that debt faster.
  4. Diversify our portfolio. South Florida is also one of the retirement magnets of the continental U.S. so we saw more retirement account losses than most during the recession.  Baby Boomers lost an average of $117,000 in retirement accounts. While most 401Ks are slowly rebounding from the recession, the lessons learnt have been universal. Moving away from all-stock portfolios and employing a mix of stocks, bonds and other assets is ideal.
  5. Expect another recession. We need to understand that recessions are a natural part of the business cycle and occur every few years. Historical data shows a recession in the U.S. every six to seven years since 1947. Knowing this, proper financial planning is mandatory for surviving the next recession in South Florida. Members are encouraged to visit our Power Investments team for a free diagnosis of their financial health and receive help to prepare a manageable path for the future.