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Investing difficult, necessary

Making investments or saving money during uncertain times can be a difficult challenge, but it is a necessary part of preparing for the future, says LSU AgCenter family economist Jeanette Tucker.

“The recent anthrax incidents and threat of future terrorist attacks have affected many individuals' perception of control over our lives,” Tucker says, adding, “Some individuals are even questioning the wisdom of saving for the future.”

“Interestingly enough, if people felt such a level of anxiety during World War II when there was great uncertainty, it was not reflected in our national savings rates, which were the highest ever during the early 1940s,” the LSU AgCenter specialist says. “Of course, there also were product shortages and war bonds back then and no such thing as Visa and MasterCard.”

Anxieties caused by the recent acts of terrorism somewhat parallel those of individuals who are diagnosed with a life-threatening disease, according to Tucker, who says illusions of immortality — or at least living to a ripe old age — may be shattered by such circumstances.

“Individuals wonder if they will live long enough to retire, and that's a very unsettling feeling,” she says. “It can also lead to actions that are counterproductive for you and others.

What does the future hold? Of course, nobody knows or can predict, Tucker concedes. “The past is not particularly instructive now, because we are in uncharted territory,” she says. “What we do know is that people who control what they can about a bad situation often have an easier time coping than those who don't.”

To help you cope, Tucker offers these “prudent precautions for these uncertain times”:

  • Maintain an emergency cash reserve equal to three months to six months of expenses. Keep this money in more than one place, such as both a bank and a money market mutual fund.

  • Back up all of your computer files, especially personal finance records, and keep your virus software updated.

  • Keep a reasonable amount of canned foods and bottled water at home in case food supplies are disrupted.

  • Prepare a will and review beneficiary designations on IRAs and other retirement accounts. Name a contingency executor and beneficiaries for estate planning flexibility. You also should get your financial records in order, prepare a living will and get a life insurance needs analysis if you think you don't have sufficient coverage to protect your dependents.

  • Believe that you have a bright future and act and invest accordingly. To do otherwise jeopardizes your financial security and that of your family. Next year there will be increased contribution limits and catchup provisions (for persons ages 50 and over) for both IRAs and tax-deferred employer retirement plans. Make the most of them.

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