5 Tips to Cope with the Financial Crisis
Many women are frightened as they watch the changes the economy is going through. Women account for roughly 50% of the boomer population and typically outlive men. The uncertainty about the future and the changes that are happening make women wonder what they should do and what do the changes mean to them? Here are 5 tips on what you can do:
1) Are you protected in the current financial crisis?
If you own a checking, savings, or certificate of deposit, you should make sure that you are insured by the FDIC. The FDIC insures up to a $100,000 per financial institution, per-person. A joint account that holds less than $200,000 in checking, savings, or Certificates of Deposits at an FDIC-insured institution would be insured. Call and check where you stand. That phone call could save you a lot of grief.
2) Could your money market account break the buck?
Money market mutual fund accounts are considered a safe place to keep your cash and they have always lived up to that in the past even though they are not guaranteed by the FDIC. The Reserve Prime Money Market fund broke the buck-meaning that it\’s net asset value fell below $1.00 a share. Most institutions will come out of pocket to keep their money market accounts from breaking the buck because it would hurt their brand and their business too much if they had a money market fund failure. Fidelity and Vanguard are producing public reports on the holdings in their money market funds. Call or go online to the institution that holds your money market mutual fund account and see what they are saying or not saying about their funds holdings.
3) Are your funds exposed to endangered financials?
I always believe in sticking to your long term financial plan and remaining patient amidst the storm is the best course of action for anyone. But there are some mutual funds that have high exposure to Lehman Brothers, AIG, Merrill, and the like. Now is the time to look at your mutual fund holdings to see how many risky companies they are holding. Many funds will have new management and it is good to know how they plan to deal with the current economic crisis. Review your mutual funds to see how much you are exposed to these and other institutions and if there is new management. Make your decision to stay or sell based on that. Remember, too, that there are tax consequences when you sell.
4) Should you stop investing?
Lackluster stock market returns can\’t continue forever. The market has a history of posting gains after periods of losses. The long boom of the 1980s and 1990s, for example, followed another lost decade between 1972 and 1982. So you shouldn\’t give up on investing in the stock market. In fact, it\’s probably a better time to invest than any time in years. Just be careful to stay diversified. No one can predict what sector or style will do well in any one year so keep your money spread out, but keep adding to your portfolio.
5) Take a deep breath and relax.
It\’s important to do what you need to do to protect your assets. Get some support by making an appointment with your Financial Advisor or a Financial Coach to review your holdings and voice your feelings. But no matter what you do, you cannot bring your risk down to zero. You are always taking some amount of risk and that means you will always have the potential to lose money. Most millionaires have lost money time and time again, and I am sure you will, too, at some point in your life. The point is to do what you can so that even when you lose money, it doesn\’t wash you away. A bit of a loss won\’t keep you from food, shelter, or a smile on your face.
2009© Fern Alix-LaRocca CFP® All Rights Reserved