Financial crisis, if played correctly, can be an opportunity to put yourself in a better financial position. Here are 5 tips to protect yourself and take advantage of adverse conditions.
1. Make sure your cash equivalent money is stored in FDIC insured accounts and that you are under the FDIC limits. All savings, CDs, money market accounts, etc. should be backed up by the FDIC. Make sure you stay below the $100,000 individual and $200,000 joint account limits per institution. If you have more money, open accounts in multiple institutions. You can also use revocable trusts to receive an extra $100,000 of coverage per beneficiary. Just make sure the revocable trust is set up properly.
2. Make sure your investments are federally insured via the Securities Investor Protection Corporation (SIPC). SIPC insures investments in brokerages up to $500,000. If you have more than that at one individual brokerage, open an additional account and move the money around. Be aware that SIPC coverage ensures you get your stocks or bonds back if the brokerage fails, it doesn't protect the actual value of the investment.
3. Put some cash under your mattress. Cash on hand is always a good thing in times like this. I have a friend who stores $20,000 in a safe at home. If you can stomach having that much cash at home, take one month of salary and store it someplace safe.
4. Don't panic. Don't let the media drive you into a frenzy. The media need to create stories to attract readers. The more sensational the better. I can personallly tell you that visits to my stories has gone up dramatically over the last couple of days. But the reality is that most Americans are unaffected by what happened to Lehman and Merrill. They still have their jobs, are still earning a paycheck, and will be fine.
5. Seize the opportunity. These are exceptional financial times and that's often when the most moeny can be made. Investors get rich when they buy low and sell high. Stocks are much more attractive today than they were 1 or two years ago. Get ready to invest. Sure, the market may still go down, but in the long-run it will go up. Remember, the best buying opportunities are when pessimism rules the street.
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