7 Easy Steps to Financial Recovery

Everyone is taking a look at how they can get their money back on track to financial recovery. A new study says U.S. households' net worth dropped by $11 trillion, a decline of nearly 18% during 2008. You can increase your net worth even in this economy by following these 7 easy steps:

1. Be a long term investor. Investors tend to extrapolate recent trends. If investments are going down, they think stocks will continue to go down and they stop buying. That's usually a wrong strategy because you will consistently buy at the top instead of buying low.

2. Don't be a market timer. Studies have shown that market timing which is the practice of buying and selling securities over a period of hours or days or weeks is useless. Rebalance your portfolio once a year. By rebalancing I mean if you target 50% growth for your goal, then once a year sell off the amount that represents over 50% of your growth position. If it has gone below 50%, then leave it alone.

3. Don't over spend. In times like this, you don't want to make frivolous purchases. Although there are bargains to be had, concentrate on making your money work for you. Buying boats, cars, televisions, etc. doesn't grow your money. Putting your money into IRAs, RothIRAs, SEPS, 401Ks, 403bs, can grow your money over time.

4. Maintain Diversification. Don't chase after the hot asset class of the week like foreign or tech. Spread your money over various asset classes (large cap, small cap , short term bonds, international, etc.) and over various asset styles (growth, income, balanced, etc).

5. Take advantage of tax-free and tax-deferred savings opportunities. Even if your employer doesn't offer a matching 401K, it is still in your best interest to maximize your contributions to your own 401K. You get double benefit- growth in a personal retirement plan and a tax savings which puts more cash in your pocket now.

6. Keep a stash of cash handy for emergencies- like the roof leaks, the car needs repair, or you may need money to support you while you look for another job. Emergency cash should be easily accessible without penalties for withdrawal.

7. Work with a trusted fiduciary advisor, coach, or mentor. By a fiduciary, I mean someone who is committed to putting your interests first. Look and ask for the ADV Part II form from a financial advisor to see conflicts of interests and how they are paid. For a coach, ask to see a contract or agreement that outlines how they are paid and any referral fees they may get.

By following these easy 7 steps to financial recovery you can get back on track with your personal finances, increase your net worth and feel better about your financial future.(Frean Alix LaRocca)