By now you have read or heard about the hit to the American financial services industry which occurred today. Bank of America® purchased Merrill Lynch in a $50 billion deal. Lehman Brothers filed bankruptcy and AIG borrowed $20 billion from its subsidiaries to bolster its capital as it faces potentially disastrous credit downgrades. On top of all this Washington Mutal looks to also be on its way towards filing bankruptcy. But the main question is – what does this mean to you the regular bank custommer?
Today the New York Times, answered questions from readers about the impact this crisis has on consumers and investors, while Yahoo Finance and the Wall Street Journal listed out “10 Ways to Protect Your Finances From the Crisis”. Both are really well written articles that I would recommend you all to check out, especially if you feel lost during this time of change.
Below we have highlighted some points from both articles that speak to the average consumer:
NYTimes: For those who are young, it makes little sense to, say, cease your contributions to a 401(k) account or move all the money there into cash. After all, at some point (soon hopefully), the market declines will hit a bottom, and you’ll want to be buying then. If you are in an industry with direct exposure to financial services, it would be especially wise to build an emergency fund of some sort in case you were to suddenly lose your job.
NYTimes: Mortgage Rates – At the moment, they’re down from where they were a couple of weeks ago, so if you lock in today you’ll be guaranteed a decent rate. It is sometimes possible to benefit from a drift down in rates during your lock-in period too; ask your lender or mortgage broker how this can work and, as always, keep a close eye on any fees you might charged for this privilege.
Yahoo/WSJ: Banks Filing for Bankruptcy – The Federal Deposit Insurance Corporation (FDIC) guarantees deposits up to $100,000 per person. If you have to hold more than that, spread it across multiple banks. As a taxpayer you are paying for this insurance. Use it.
Yahoo/WSJ: Focus on your taxes – The worse this crisis gets, the more they will end up putting the taxpayer on the hook to prevent a meltdown. No matter who wins the election taxes are going up. This is because of our gigantic federal deficits. (If you think Lehman Brothers was bad, you should look at Uncle Sam). And you can forget about any talk of tax breaks.
Lastly, don’t panic! Our society is built on bad news and because of that consumers are quick to make decisions that don’t need to be made. It is to early to know how things are going to turn out, so keep your head up and stay prepared.
NYTimes.com read full article here.
Yahoo Finance read full article here.