• Beat the Bear With a Comfy Cushion
• Employ Your Inner Sherlock
• Feed Your Inner Greed
• Generation X's Last Best Hope for Retirement
• Penny-Pinching for New Parents
• What to Do When Layoffs Loom

Beat the Bear With a Comfy Cushion

Here we are in a bear market, and over and over, you've seen how it's a great opportunity to buy dividend-yield monsters like Bank of America (NYSE: BAC) and deep-moat leaders like sunglasses king Luxottica (NYSE: LUX) at bargain prices. It's good stuff -- if you're into that sort of thing.

But what if you're not buying stocks these days? What if you're in retirement, or getting close? What if you need income, not new stocks to buy?

If so, then depressed stock prices might actually be a problem for you. You might well need to use your money soon -- whether prices have recovered or not.

If that's you, then you need a different answer from the ones we give to the folks with longer time horizons. You need... the Comfy Cushion.

You were expecting... something else?
No, it's not something out of an old Monty Python sketch. The Comfy Cushion is a nickname for a simple but clever strategy for managing short-term market risk while keeping most of your portfolio invested in stocks.

While some financial planners will tell you to get entirely out of stocks once you're retired, I think just about everyone with an investment horizon of more than five to seven years should own some stocks. Maybe not the high-flying growth stocks you owned when you were younger and more carefree, but stocks nonetheless -- ideally, with dividends.

Consider: The last 10 years was a lousy time for large-cap stocks as a class, historically speaking. But look at how these big boring dividend stocks did versus a (very good) Treasury money market fund over that period:

Stock

Average Annual Percentage Return

Value of $10,000 invested on August 28, 1998

Altria (NYSE: MO)

13.3%

$34,892

Chevron (NYSE: CVX)

12.3%

$31,806

3M (NYSE: MMM)

9.6%

$26,974

Prologis (NYSE: PLD)

12.6%

$32,777

Carnival (NYSE: CCL)

3.9%

$14,672

Vanguard Treasury Money Market Fund (VMPXX)

3.3%

$13,836

Source: Yahoo Finance, Vanguard. Adjusted for dividends.

See what I mean? Wouldn't it be nice to harness those returns without risking next month's grocery money? That's what the Comfy Cushion is about.

The strategy's nickname, by the way, comes from a wonderful article written by Fool David Braze, a retired financial planner and all-around fount of retirement wisdom. It appeared in the February 2007 issue of the Fool's Rule Your Retirement newsletter, and it lays out David's firsthand experience with the strategy in great detail.

While you should definitely read David's full article to get the complete walk-through -- no need to pay, just grab a free trial to get access -- the essence of the approach is simple enough to describe here.

The inner secrets of the Comfy Cushion
The short explanation, as you've probably guessed by now, is that you'll take the money you anticipate needing in the near term out of stocks and park it somewhere less volatile. That's the cushion. Done right, this allows you to keep the bulk of your money in stocks well into retirement without losing too much sleep over Mr. Market's mood swings. At the same time, you'll ensure that the money you'll need in the near future -- y'know, to live on -- is safe and sound.

Here are the steps to creating your cushion. While they might look simple, hang on -- the devil is in the details.

Pretty simple, no? Here are some common questions:

Have other questions? Want a walk-through with an expert? Check out David Braze's article for the complete scoop. Full access -- to the February 2007 issue with that article along with everything else, including a members-only discussion board where you can ask any other questions -- is yours free for 30 days.

Employ Your Inner Sherlock

Let's face it: Few of us are as organized as we aspire to be. If my husband and I were to pass away tomorrow, we'd leave a small pile of unfiled financial papers, a recently updated will (score one for us), and numerous accounts with many variations of passwords, all maintained online. We do have a list of our major financial institutions and account numbers, but it was last updated in 2005, which, by my calculations, makes it ancient history.

We won't even mention how many times I've yelled across the house, "What's our vKey?" (That's the code Virgin Mobile requires before you can access your account.) Or how many times I've been coached by very patient account reps trying to help me: "Maybe your password starts with a 'U'?" And I'm the account owner, for Pete's sake. It turns out that my brain isn't such a secure place to store data after all.

In short, it would be possible for our heirs to get to the bottom of our finances and household affairs, but it would take some sleuthing. As a personal finance writer and spouse to Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter, I know better, but I don't always do better. 

If you leave others behind
If you, like me, are a bit behind on the updating, here are some things you need to do immediately to get your affairs in order:

If you're left behind
How do you cope with the financial mysteries left behind when someone else dies? If the deceased didn't leave behind clear records (or hasn't updated them in a while), it's not so elementary, dear Watson. Here are the places to look to see if your loved one had other accounts, assets, or insurance policies:

Related Foolishness:

Feed Your Inner Greed

Ugly market we're having, isn't it?

My retirement portfolio has held its own -- I'm up about 1% since the first of the year, versus a drop of 12% or so for the S&P 500 -- but I know that a lot of that was due to the great run of Contango Oil & Gas (AMEX: MCF), which I bought in the low $30s in the spring of 2007 and sold at just under $90 a few weeks back.

Nearly everything else I'm holding is flat or down on the year -- Fidelity Puritan is down around 8%, and even my Berkshire Hathaway (NYSE: BRK-B) shares are down about 17% since the first of January. And my index exchange-traded funds are, well, looking like the indices. Not so good, in other words.

So am I worried? Not a bit. I'm worried about the broader economy, of course, and I'm more than a little worried about selling my house, but the markets aren't keeping me awake at night.

And they shouldn't be keeping you awake, either. In fact, bear markets can be a good thing.

Thinking like a billionaire
There's no doubt that bear markets are wearing, depressing events. Things just keep sliding and sliding, and the drops seem to be getting bigger over time. And every now and then, there's a sharp upward spike to get our hopes up -- is the bull finally back? -- only to be followed by another seemingly endless string of down days.

It's enough to make one lose hope. Of course, at the very simplest level, that's exactly what's happening -- one by one, investors lose hope and sell, the sellers outnumber buyers at the current price, and that selling pressure keeps prices dropping.

Put another way, more and more investors are becoming fearful, and their fears are driving them to sell.

Fear, of course, isn't necessarily rational, which means that rational investors can take advantage of others' fears. Put another way, you've probably heard Warren Buffett's maxim to "be greedy when others are fearful." He has made a lot of money over the years by buying good stocks when others were selling. So can we.

Making like Buffett
I'm not yet in Mr. Buffett's income bracket, but I've been pretty greedy lately. I sold Contango and some other stocks that I thought had run their course earlier this year, and I've been gradually investing the proceeds as opportunities come up.

There are two sorts of situations I've been looking at:

I also took a small position in General Motors (NYSE: GM), which isn't most investors' idea of a "good company" (to say the least) at the moment -- but is a global giant with still-vast resources that stands (to my eye, anyway) a pretty good chance of avoiding bankruptcy and being one of the two or three major global players in autos for decades to come. Risky? Sure, and I kept my investment small to limit the downside. But when it dropped below $9, down about 75% since last fall, I couldn't resist. There was just too much fear in that price.

Finally, at the moment, I'm looking hard at bank stocks. The large-cap corner of my retirement asset allocation is still a little underweighted, and I'm looking at the big haircuts Bank of New York Mellon (NYSE: BK) and Goldman Sachs (NYSE: GS) have had, and pondering the risks. How about you? Ready to get greedy?

To read more about bear market investing:

Generation X's Last Best Hope for Retirement

If older Americans are in trouble when it comes to their retirement planning, Generation X is in big trouble, because:

We Gen Xers are staring into a financial future bleaker than anything our baby boomer parents imagined.

From bad to worse
USA Today published an article that painted a grim future for the generation born from 1965 through 1980. The employer and social safety nets are gone. Life expectancies are on the rise -- so retirement will last longer. That might sound great, but with insufficient retirement funds, those years won't be so golden after all.

While time is less of an ally now, this problem can be solved.

Tick, tock!
The oldest members of Generation X are 43 years old. In 20 or 25 years, they'll be ready to retire -- if they have the nest egg they need. Unfortunately, it gets a lot tougher to amass that nest egg the longer you wait. Time is the enemy here. The less time you have to let your money compound, the more you'll need to come up with out of pocket every month to reach your goal.

Say, for instance, you figure you'll need $1,000,000 and a paid-off home to live comfortably in retirement. If you've been working on your home but not your nest egg, the battle is already starting to get tougher, and the longer you wait, the nastier it will get.

For instance, assume you can get an 8% annual return on your investments. Depending on how much you've got socked away, here's how much you'd have to invest every month to retire with that $1,000,000:

Years
Remaining

Starting
From $0

Starting From
$50,000

Starting From
$100,000

25

$1,051.50

$665.59

$279.68

20

$1,697.73

$1,279.51

$861.29

15

$2,889.85

$2,412.03

$1,934.20

10

$5,466.09

$4,859.45

$4,252.82

5

$13,609.73

$12,595.91

$11,582.09

Unless you're a leading-edge Generation Xer who's already got a decent nest egg -- and statistics show that there aren't many in that camp -- this may well be your last realistic chance to retire comfortably at a reasonable age.

Start soon, but start smartly
Time may be running out, but that's no reason to panic. Even the oldest members of Generation X can retire comfortably without stretching beyond the contributions they're likely eligible to make across both their 401(k)s and IRAs.

To get started, make these three priorities:

The diversification part is particularly important, as investors in Bear Stearns or Countrywide can attest. Almost nobody called the size and speed of their implosions accurately. If they were the only companies you happened to own, then you might have been wiped out.

One of the big benefits of a broad index fund is the fact that you get a stake in many generally successful companies. In an S&P 500 fund, for instance, you get a stake in 500 companies. If a dozen or so of them hit the skids, then you still own 488 others that should mute your downside. Just look at the wide swings in performance for a handful of companies in the S&P 500 index over the past year:

Company

Change

D.R. Horton (NYSE: DHI)

(31.36%)

AT&T (NYSE: T)

(24.38%)

Carnival (NYSE: CCL)

(20.70%)

Lowe's (NYSE: LOW)

(20.07%)

ExxonMobil (NYSE: XOM)

(8.15%)

Amazon.com

4.54%

Apache (NYSE: APA)

47.58%

While the index itself is down 10% over the past year, it has done far better than some of its constituents. I admit that this is a crude example of diversification, and I'm not suggesting you own nothing but a single index fund. But even the stock pickers among us can recognize that having at least a portion of their savings in a broad-market index will cushion them -- even if they've happened to pick the next abject failure within that index.

There's still hope yet
All is not lost for Gen Xers, but if the power of compounding money isn't put to work today, that dream retirement will be just that. So start saving with vigor, diversify appropriately, and make your retirement plan a reality, not an abstraction.

If you're ready to get started and need advice on making sure your golden years will be as comfortable as possible, join us at Motley Fool Rule Your Retirement. We offer a 30-day free trial without obligation to subscribe. To learn more, click here.

This article was first published June 17, 2008. It has been updated.

Fool contributor Chuck Saletta is a Generation Xer who's actively working on his retirement plan. At the time of publication, Chuck owned shares of Lowe's, and he's very glad it's not the only thing he owns. Amazon.com is a Motley Fool Stock Advisor recommendation. The Fool has a disclosure policy.

Penny-Pinching for New Parents

Babies are adorable, drooly, fun, smelly, and ... expensive. The U.S. government estimates that it will cost $269,520 to raise a kid born in 2004 to adulthood, and that doesn't include the opportunity cost of that money not being invested. But babies are an investment, one with immense dividends, and no matter how expensive it gets to raise a child, most of us decide it's one of the most worthwhile ways to spend our hard-earned money.

But does it have to cost so much to raise a baby? That's what Elizabeth and Robert Brokamp (TMF Bro) have been investigating ever since the birth of their son, Lukas, in 2000. Below are some of the cost-saving strategies and tips they've gathered in the blissful years (and two more children) since, beginning with some general points and then moving to more specific money-saving ideas.

Specific ways to save ...
On feeding: Make your own baby food. If you think this sounds like a big pain, don't despair. Try making big batches of pureed veggies and fruits, then freezing them in small portions. Bargain Buys for Baby's First Year suggests freezing the portions in ice cube trays, then bagging the cubes in freezer bags for easy portions.

On the nursery: You can go hog-wild on nursery decorations and furniture, especially if you get sucked into the "Why would you want anything less than the best for your baby" mentality that gets perpetuated at the baby super-stores. Decked-out nurseries are something for parents and friends; babies couldn't care less. They like black and white, pictures of other babies, and photos of mom and dad, and aren't particularly picky about whether the crib bumper matches the diaper stacker. Why do you need a diaper stacker anyway?

We were less than crazy about some of the nursery decorations available because of quality and the exorbitant prices. We turned to Demco.com, a library site where we were able to purchase posters of such classics as Charlotte's Web and Where the Wild Things Are (for just under $10 each). Adding to the décor is framed artwork from the other little children in our lives.

Finally, buy nursery lamps from your Home Depot or Lowe's; they are much cheaper there than in any of the baby stores or catalogs.

On baby gear: There are so many big-ticket items you may need to buy for your baby, including strollers, car seats, and cribs. If you need or want to buy retail, try not to buy at retail prices.

Shopping end-of-season sales, trolling the Internet for good deals, and looking for manufacturers' websites where discontinued models are on sale are just a few of the ways to save.

A word of caution: No bargain is worth compromising your child's safety. If you are going to use "pre-owned" equipment -- such as strollers, cribs, or high chairs -- make sure you do a thorough inspection. Know the safety specifications for baby supplies, and check companies' websites for recalls. Some police stations will perform a safety check on car seats. You can also get safety information from many books about parenting on the cheap, as well as on the Internet. Two Fools sent in these sites as good resources: The National Safe Kids Campaign has plenty of general safety information, and the National Highway Traffic Safety Administration has a website with recall information on car seats.

On clothing: We've always been able to keep clothes expenditures to a minimum. How? No, not by insisting that plaid set of overalls really does match with the polka dot shirt. Our daughter Noelle makes up these great combinations on her own, we promise.

If you feel funny about your baby wearing used clothes, remember this: babies have absolutely no idea what they're wearing. Lukas prefers to be naked, but if he has to wear clothes, he is just as happy in the gently worn, clean items we've been given as he is in the clothes we bought at the store. Not only that, but he and all other kids grow an inch an hour, which means the clothes are often almost new anyway.

On toys: Babies don't need a lot of fancy toys to be happy. Our youngest, Zoe, thinks we're the cat's meow, and we didn't cost her anything.

As a result, you can:

For more Foolishness:

What to Do When Layoffs Loom

If you get laid off, you can only hope you saw the writing on the wall long before your company announced its cuts. You can only hope you leave with an impressive work history, great recommendations, and updated skills. You can only hope.

Unfortunately, not everyone is so prepared when the boss delivers a pink slip.

Here are some things you can do starting today -- whether you think you face a layoff or not -- to keep yourself relevant on the job:

Act as if your job is always on the line, even if you're still on the company payroll. Strive to make yourself more valuable -- not just to your current employer, but also to any potential employers you'll need to win over in the future.

Imagine yourself interviewing for a new position . Can you point to specific ways in which you've improved your skills and grown on the job? If so, keep up the good work.

Document your accomplishments. Update your resume regularly to reflect your ever-increasing skills on the job. You can use this information during your performance review and salary negotiations or, should the worst happen, for finding other employment quickly.

If, however, you've been coasting in your current position, it's time to take some initiative. Try these surefire ways to increase your value as an employee:

Work while you're at work. According to a Gallup poll, most of us spend an average of 75 minutes a day using our office computers for activities other than work. Online shopping, online gaming, and personal email are just a few of the ways we waste our employer's time, to the tune of a more than $6,000 loss in productivity per employee per year. Do yourself (and your boss) a favor and keep the other activities to a minimum.

Hit the books. Take continuing-education credits at your local community college, enhance your computer skills with an advanced course relevant to your work, or look for weekend workshops that target a developing skill related to your job. Your employer may even have a program to help defray the costs. Take advantage of these paid continuing-education opportunities. It might be your old employer who writes your ticket to a fabulous new job, once you've updated and expanded your job skills. 

Be visible. Perception can be everything. You can be a productive, highly skilled employee, but if you continually skip company-wide events or staff meetings, others may perceive you as a slacking off. Make sure you attend functions where your presence will indicate commitment, arrive at meetings on time, and volunteer for tasks that will raise your profile in the larger organization. 

Look like you care. "Dress for success" means different things across different work cultures, of course, but there are always limits. Even if your work doesn't require that you wear a suit every day, make an effort to look well-groomed, up-to-date, and ready to assume your supervisor's job.

Communicate your ambition. Ask your supervisor what you need to do to progress in the company. Overtly expressing your ambition is the first step in setting high expectations; be ready to spring into action after that. Your supervisor may hand you extra challenges and responsibilities; these are your opportunities to differentiate yourself from the pack.

Even if you are never faced with a layoff, acting as if one will happen can enhance your value as an employee. Who knows? It might even win you a promotion.

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