financial literacy
BY DARYL C. HANNAH
Is Your Money Safe?
5 Ways to Protect
Your Personal Finances
It’s safe to say the economy has suffered its
share of blows over the past few months. In
September, one of the most convulsive months
in American financial history, we saw four major banks fail, two investment banks turn into
commercial banks and Congress reject the first
of two $700-billion-plus bailout plans designed
to help put the economy back on track.
But while much of the conversation surrounding the financial crisis has centered
around large banks and wealthy CEOs, little
time has been devoted to shedding light on
how the crumbling economy will affect personal bank accounts, 401(k)s and IRAs.
“If Congress fails to act right now, a lot
of people will lose their job,” Henry Paulson,
the Secretary of the Treasury, told reporters
before the first bailout plan was rejected. A
credit freeze, resulting from shaken confidence
in the economy, could have a snowball effect,
bringing credit lending to a halt and making it
harder for businesses to retain jobs and individuals to obtain credit to buy homes, he said.
On Sept. 29, the day the bailout bill failed to
pass in Congress, the Dow Jones Industrial Average
fell 777.68 points—the biggest one-day drop in
history—and Standard & Poor’s 500 index fell 8. 77
percent, its biggest drop since October 1987.
While it remains unclear how low the market will
sink and how many more banks will crumble, there
are some definitive things you can do to shore up
your funds:
withdrawing from your 401(k) is not the answer.
Thanks to the Federal Deposit Insurance Corp., bank
accounts are insured up to $250,000. That means your
money is safe, even if your bank shuts down or is sold.
Don’t Make Any Drastic Moves
Watching the news while considering your 401(k)
is tough, but don’t make any drastic moves. It’s important to stay calm. Closing your bank account and
Adjust Your Spending Habits
The days of buying on credit are over for a while.
That means no more racking up high credit-card debt
and simply paying the minimum each month. As the
market tightens, the credit market is drying up.
Take time to reassess your finances and look for
ways to cut costs without seriously impacting your
life. It’s important to stop spending money on things
you don’t need. Wait until the market recovers to
think about making frivolous purchases.
