Wednesday, September 17, 2008

THE Economy's tanking . . . what should you do now?

By l.t. Dravis

NEW YORK – Wednesday, September 17, 2008 – THE DOW DROPPED 445 POINTS TODAY . . . So, What should you do about the crisis on Wall Street, taxpayer supported government bailouts, the mortgage meltdown, bank failures, rising unemployment and persistent predictions of an extended recession?

The first and best thing to do is sit tight . . . no matter how hard it may be . . . and think through the implications of what has happened in the past few weeks before you make any decisions about your money and your financial future.

And, while you’re thinking, here are a few things you’ll want to keep in mind.

In an uncertain economy, cash is king . . . so hold on to as much of it as you can.

Don’t buy anything you don’t absolutely need and avoid debt at all costs. Translation: If you can go to someone else’s home for the holidays and save the cost of that kitchen remodel you were dying to do, do it.

Forget about buying the larger house in a buyer’s market . . . for now . . . the experts predict that we won’t see the bottom in the housing market until 2009. So, if you can wait, wait.

Don’t waste time switching banks. You’re insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000.00 per account in any commercial bank. If you’re worried because you’re fortunate enough to have more than a hundred grand laying around in any account, find a better place to put your money (like a CD or other interest bearing instrument) . . . TODAY!

The Securities Investors Protection Corporation (SIPC) protects investors like the FDIC protects bank depositors so, your investment portfolio, subject to investment ups and downs, is secure. In other words, even if you’re a Lehman Brothers or Merrill Lynch client, you can conduct business as usual without losing too much sleep. Double-check with your financial advisor before you make any moves to invest, divest, or diversify.

If you have a 401K account, don’t chase specific investments because when you do, you increase the chances you’ll lose. Even if you’re losing money in your 401K account and your employer continues to match your contributions, stay with it because you’re getting a fifty percent return on your money . . . where else can you get that kind of return? By the way, always talk to a professional financial consultant before you make any moves with a 401K account . . . there’s too much at stake not to.

Pay off all credit card debt before you spend money on anything else . . . look at it this way: You’re guaranteed to make twenty-plus percent on every dollar of credit card debt you retire. You can’t earn that kind of guaranteed money in any traditional investment so get with it!

Insurance companies typically put money into broadly diversified investments which means they are less likely to be hammered by mortgage-backed securities than investment banks. Insurance companies are also required by state and federal law to maintain significant reserves against potential losses. The bottom line? With the exception of an AIG which specializes in insuring mortgages held by banks, keep on paying those premiums. In any case, always, always make sure you’re being covered by a top-rated company . . . if not, switch today.

Should you start stuffing cash in the mattress?

It never hurts to have cash at the ready but with today’s easy-access banking system (extended hours, Saturday hours, supermarket branches even open on Sundays, and a nationwide network of ATMs) you can leave the mattress alone . . . for now.

Remember that like the weather, the economy is unpredictable; it is moved and shaped by internal, external, and sometimes mysterious forces and it will continue to expand and contract whether you like it or not.

However, in the short-term, this economy is not looking good.

Consumers are too debt-burdened to shop the economy out of its current doldrums and for the first time in a long time, tight credit standards have jammed businesses, banks, and large financial institutions into the same sinking boat as consumers.

It’s going to take some time and some strong leadership, and unprecedented consensus governing in Washington, D.C. to turn this economy around which means we aren’t likely to see any serious improvement until spring, 2009.

In the meantime, the best way for you to get through the coming months of economic uncertainty is to do everything you can to create a solid return on your employer’s investment in you, put at least six months’ of living expenses into a liquid investment account, refinance your mortgage to the lowest possible fixed rate, and pay off as much debt, especially credit card debt, as you can.

If you’re looking for a little solace from one of the nation’s best-known leaders, consider the following quotation:

“You know, in this business, you don’t have any control over what the press says and how they portray things. And that’s their prerogative. But I think anybody who looks at it objectively has trouble making the case that somehow this is a bad economy.”

- Dick Cheney – Vice President of the United States of America – 2000 - 2008

Don’t you feel better now?

Copyright © 2008 by LTD Associates West, Ltd. All rights reserved.

If you have questions, comments, or concerns, Email me at (goes right to my desk) and since I personally answer every Email, I look forward to hearing from you soon.


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