My wife, my students, my friends and my colleagues often ask me, “What do you think about the stock market, the economic outlook? Why are interest rates on my bank accounts so low? What will happen to the economy and my money in the future?”

My wife always tells me there must be an easy answer from the financial experts to these and related questions.

There is! Nobody can see the future in financial markets. But that’s not the answer anyone wants to hear.

So, let’s assess where we are in order to have better insight into the future. Interest rates are relatively low, often less than one percent, depending upon how long a period for which you are willing to commit your money, how much money you want to invest and how much risk you can take.

As an aside, now is a good time to pay down or pay off your credit card balances that are likely accruing interest at annual rates, compounded daily, of 12-18 percent if you have savings earning one percent or less.

Some of the good news is that the stock market, as of now, has recovered over the past six months a substantial amount, but not all,of what it lost from June 2008, through the first quarter of 2009 when it declined 30 to 40 percent depending upon what type of stocks you were investing.

Also the decline in housing market values and housing activity seem to be bottoming out and even slowly increasing in many parts of the country.

Conversely, unemployment, a lagging economic indicator, is likely to go higher for the next three to six months nationwide, particularly in some regions that have been hardest hit by the economic downturn. Also, expect to hear about more small to medium sized bank failures and Ponzi schemes unraveling over the same six month period.

The overall outlook suggests that we will have a gradual economic recovery over the next two years accompanied by upward pressure on interest rates that will affect savings and credit card rates. The basic rules of personal finance still apply.

First, be a disciplined saver and investor. Saving, not spending, should be your priority.
Second, don’t run up credit card purchases beyond your ability to pay off the entire bill each month.

Third, shop and compare to get the best return on your savings and investments consistent with your willingness to take risk.

Fourth, all investment decisions begin with three questions to answer. How much do I have to invest, for how long, and how much risk of loss of my original investment can I tolerate? Also, you should not invest in things you don’t understand.

Stocks, bonds and real estate, although in different risk categories, are likely to be beneficial long term choices as they have been historically. But first you have to have the financial discipline to save and invest.

Building wealth is not about your income. It is primarily about your saving and spending choices. For example, the amount most young people spend on a daily Starbuck’s latte, or a pack of cigarettes or their cell phone bill are major annual expense items.

The financial markets will recover. There is no magic silver bullet for making favorable financial decisions.

It is all about deciding what you want, i.e. your priorities, and then deciding what you are willing to give up ( ike leisure time, convenience items,and instant gratification or bad habits) to get it. This applies to job choice, investments, and virtually every other decision you will make. 

Part of the potential problem is in taking the time to make well thought out decisions, and doing your homework in evaluating the choices that will best help you achieve your objectives.

I recommend reading an article titled, “10 reasons you aren’t rich” if you want to be like the people described in the best selling book “The Millionaire Next Door.”

I’m not suggesting as the song says “Don’t worry, be happy.” I am saying that financial discipline and well thought out decision-making will payoff.