In 2009, the housing and financial markets continued to struggle and the unemployment rate continued to rise, leaving many to wonder how they should plan for 2010. Virginia Cooperative Extension has advice on making solid financial plans for the New Year.

"We recommend saving three to six months of your salary in savings, in the event of unexpected expenses or a job loss," said Jennifer Abel, a family and consumer sciences agent in the Arlington Extension Office.

Although financial experts have made this recommendation for years, it remains more important than ever with the current economic downturn. According to Abel, some Virginians who have lost their job have had more time to search for a new one because they have both unemployment benefits and an emergency reserve fund. Of course, a savings account will also come in handy with other types of emergencies, such as a flat tire or a trip to the hospital.

"Although a traditional savings account would be a good place to put three to six months of income, most banks have a low interest rate for these types of accounts," Abel said. "Explore your options such as a certificate of deposit or a money-market account. While a CD usually offers a higher interest rate, you only get this rate if you leave your money in it for a certain period of time. On the other hand, most money-market accounts have higher interest rates as well, but they often have a minimum deposit of $500, $1,000, or more."

Abel explains that the ideal savings account will generate interest and remain "liquid," or easily accessible to the client. In addition to saving for the unexpected, Abel encourages Virginians not to forget about the expected, such as retirement or college tuition for a son or daughter.

"Everyone should continue to save money for retirement, even during an economic downtown," Abel said. "Many employers offer retirement benefits and ways to save money for retirement, but if yours does not, consider opening a Roth or traditional IRA."

Although the stock market has remained volatile over the past year, a diversified set of stocks remains the most common way to save for retirement. "If history proves right, the stock market will have a greater return than other investment strategies," said Abel, who cautions that the stock market is best equipped for long-term investments of more than 10 years. "Do not put money into the stock market that you will need in the near future."

Abel also urges Virginians to prioritize spending for their needs, like housing, food, and medical expenses. "We do also encourage people to include discretionary money for fun, low-cost activities so that the budgeting process does not have to be burdensome," she added.

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