Listen To Jim’s Latest Podcast On the U.S. Financial Crisis
The newswires are now filled with story after story which seem to be laying the groundwork for very turbulent times ahead for the U.S. economy. I think there is a way out of this and today I issued a press release with my own solution. Whether or not my plan or any other will be enacted in enough time to turn things around is the big question. I felt compelled to write this blog article today not to panic you, but to get you thinking about the possibility of a serious financial storm ahead. Now is the time to get your financial house in order and make some common sense preparations just in case a worst case scenario does develop. For those that don’t watch all of those boring financial cable channels or read the Wall Street Journal, the enormity of what is happening right now may not be trickling down yet to the man on the street. The failure of FNMA and Freddie Mac, over two dozen banks, Lehman Brothers, Merrill Lynch, Bear Stearns, AIG, and the FDIC running out of money, all point to the next two to three years being some of the worst economic times we may see in our lives.
What Can You Do To Prepare For The Coming Financial Storm?
1. Do You Have Enough Money In Reserve?
Experts usually suggest about three months of your living expenses to be set aside in an account as a backup in case of a job loss or other financial emergency. Based on the dark clouds on our economic horizon, I would suggest that you might increase your reserves from three to six months of living expenses. As important as having financial reserves, is being able to gain access to them should you need to. Be very careful about what bank or financial institution you deposit these funds with and to be safe, maybe spread it out over two or three. This is not a good time to run out and buy a new car or make any unnecessary purchases of luxury items. Do not make matters worse by adding an additional debt load to your family’s budget.
2. If You Are A Renter, Check The Public Records Monthly
If you a renter and your landlord gets foreclosed, you will be evicted. Every day I read stories of families being put out on the street with just a few days notice. Some landlords even have the audacity to agressively pursue tenants for rent payments even when they are not making the underlying mortgage payment. A story I saw on our local news channel profiled a landlord that was in foreclosure and still collecting rent from his tenants. In one case, the tenant was being evicted from the home by the bank and that same day the landlord was attempting to pocket another month’s rent! If this is not financial fraud, I don’t know what is. Had this family paid another rent payment, they would have lost that money and still had nowhere to live. While they could pursue the landlord in court to get their money back along with their security deposit, they may have little chance of collecting if the landlord ends up in bankruptcy. To prevent this happening to you, go to your county’s website and find out how you can view legal filings online. Once a month I would make it a habit to go online and pull up the address of the home you are living in to find out if there are any foreclosure filings. Foreclosure can take several months, so if you stay on top of this you won’t be surprised. If you do find out that the home you are renting is in foreclosure, I would contact an attorney right away to find out what your options are. I recommend Pre Paid Legal, a legal service that provides unlimited access to attorneys for $26 per month.
3. Common Sense Ways To Stock Up On Necessities
If you have a family like I do, the weekly trip to the grocery store can be quite a hit to the wallet. While I am not going to go out and suggest that you start buying dried food and guns, I do think it makes sense to stock up on some essentials. For example, canned food can last for months or even years. I am not suggesting this because I am expecting a food shortage, but if you have a job loss, you may simply not have the funds to make a big trip to the local grocery store each week. Keeping a pantry full of canned soup, canned vegatables, rice, pasta, and other items that keep well such Top Ramen, can’t hurt. With a modest amount of money, you can buy enough of this kind of food to feed a family for a couple of months if you need to. It may also make sense right now to start being more frugal with your grocery purchases. Less meat, more pasta, rice, and vegatables can be a big money saver. Additionally, if you come across any sales that is your opportunity to stock up on these items.
4. No One Really Has Job Security Today
Now is a good time to brush off your resume’ and start looking at what jobs are being advertised. Websites such as Monster.com and your local newspaper’s classifed section are good places to start. The idea is to begin to develop an awareness of the job market, who is hiring and who is not. What industries appear to be growing and which are shrinking. If necessary, perhaps it is time to even consider a different industry if the one you are working in is on the decline. It never hurts to be prepared to make a move so you are not blindsided by an unexpected pink slip.
5. Take A Close Look At Your Investments
Even if you have your money in what have been considered traditional conservative investments, you may want to take a second look. So-called safe investments like certificates of deposit and annuities may actually represent high risks due to the rash of bank failures and now the potential failure of insurance giant AIG. On the subject of fixed annuities, remember that guarantee is that from an insurance company. If the insurance company goes bankrupt such as is now almost a certainty for AIG holders of AIG annuities may become worthless. Take a look at this article which outlines the reality that individuals that own AIG annuities and life insurance policies may end up with catastrophic losses.
Many of you have asked me for a recommendation of a fee based financial planner. The only name I can trust is my longtime friend and associate Robert Yetman. He can be reached at 877.996.5232 and offers a free consultation. You can reach him by e mail as well. Bob has written some really excellent blog articles in recent weeks, especially on the banking crisis and how to determine the safety of a given bank. I would recommend checking out his blog as well.
6. Be On Your Guard Against Scams
During times of economic uncertainty scams and all manner of financial fraud will increase. A recent example of this has been all of the fraud associated with the foreclosure crisis. People operating as foreclosure consulants robbed homeowners of any chance of avoiding the loss of their home. Not only did they end up homeless, but lost any small amount of equity they may have been able to use to rebuild their lives. There are countless scams occuring right now that are clearly associated with the bad economy. One scam that I have written about previously involves advertising homes for rent on Craigslist and collecting rent and deposits from multiple people. The problem; the scam artist does not even own the home. The unsuspecting victims lose what amounts to first and last month’s rent and a security deposit, an amount that can add up to several thousands of dollars.
Pray today and ask God for wisdom. Ask Him for peace and to help you as you prepare for these very challenging months ahead. Pray for our leaders that they take the responsible steps necessary to bring confidence back to our financial system. Pray for those that are already in need, losing their homes, and facing financial hardship in your community right now.
On a personal note; I am always hesitant to write about gloom and doom. I don’t want to needlessly scare anyone. As a Christian, and as a financial writer that thousands of people follow, I can not be derelict in my duties and not sound the alarm when it is necessary. There is more than smoke here, there are flames and things look very very bad. I can not think of a time in my career that I have been more concerned about the economy. If I can answer any questions, please send me an email. If you need advice on your investments, I encourage you to talk with a Christian financial professional as soon as possible.
Helping you make the most of God’s money!