With everything going on in the financial world lately - the Treasury taking over Fannie Mae and Freddie Mac, the collapse of Lehman Brothers and IndyMac Bank, and the government bailout of AIG - it’s no surprise that investors are wondering if their money is safe.

Thankfully, there are safety measures in place for various types of accounts and investments.  Here is a rundown of the different safetynets in place for each type of account or investment you may have:

Banks:  Bank deposits are ensured by the Federal Deposit Insurance Corporation (FDIC).  Basically, the FDIC insures deposits up to $100,000 per owner, per bank.  If you have $100,000 or less in your name at any FDIC-insured bank or savings association, you have nothing to fear.   Since the limit is per owner, that means you could actually have more coverage than you think (for example, if you and your spouse have a joint account with $300,000 at one bank, $200,000 is insured - $100,000 for each “owner”).

Continue Reading Keeping Your Money Safe

Personal finance columnist Brett Arends of the Wall Street Journal discusses reasons to stay in the market…

Click here to watch the video.

The recent financial news - banks failing, the Treasury taking over Fannie Mae and Freddie Mac, the stock market dropping several hundred points in one day - may have you feeling a bit helpless when it comes to your finances.

While you may not be able to make the market go back up or keep banks from failing, there are steps you can take to make your finances as strong as possible in these tough times:

1.  Fund your emergency fund.  It’s more important than ever to have an emergency fund, in case you lose your job, have unexpected medical expenses, or have a major house repair, so that you don’t have to sell investments (while they’re down), or rack up credit card debt.  The general rule of thumb is to have three to six months of living expenses set aside for emergencies.

2.  Reduce debt.  If you have high interest credit card debt, the greatest return you can get right now is to pay off that debt.  Start by calling your credit card companies and asking for a lower interest rate (if you have a good credit score, you could get your rates down to 8-12%, which is much better than paying 20+ percent).  Then make the minimum payments on all of your credit cards except the highest interest rate card until paid off.

Continue Reading Smart Money Moves to Make In Tough Times

Investing in the stock market is a lot like driving on a long road trip.  At some point, you’re going to run into pot holes and rough patches.  When that happens, you should definitely drive with more caution, but you have to keep on going if you want to reach your destination.

Similarly, if you’re investing for long-term goals such as retirement, you will encounter some market volatility, probably several times along your journey.  While you may be tempted to pull over and wait out the rough times, it will delay or may even prevent you from reaching your goals.

So what should you do when the road to investing gets bumpy?

Buy Low, Sell High:  The whole premise behind investing is to buy low and sell high.  You can’t do that if you pull out of the market or stop investing when the market goes down.  If you’re investing for the long-term, you should be glad when the market is down, because then stocks are “on sale” and you can pick up more shares at a lower price.  Who doesn’t love a good sale?

Diversify: One of the best ways to defend your portfolio against market losses is to have a portfolio that is properly diversified.  If you review the history of the stock market, you’ll see that the best performing assets vary from year to year and that it’s not easy to predict which asset class will perform well in any given year.  Therefore, by having a mix of asset classes, based on your risk tolerance, your goals and your timeframe, you are more likely to meet your goals.  In addition, having a mix of asset classes reduces your risk of loss, since you won’t have all of your eggs in one basket.

Continue Reading When the Road to Investing Gets Bumpy

You’ve heard about the importance of having an emergency fund, but Erin Burt at Kiplinger.com takes this concept further in her Essential Emergency Kit article.

The goal of an emergency fund is to have funds set aside in case you lose your job, have unexpected medical expenses, or have some other short term financial need that is unexpected.

The emergency kit is a complete emergency strategy.  The emergency kit is similar to the emergency fund in that it is protecting you against a job loss, unexpected medical expenses, etc., but the emergency kit is also intented to make sure you’re ready for bigger emergencies, like a natural disaster, or even worse, a man-made disaster.

How is an emergency kit different than an emergency fund?  An emergency kit includes:

• an emergency fund to cover three months of living expenses (start with $1,000 if 3 months of living expenses is too big of a goal)
• making sure your car & home owners insurance is up to date
• updating your life and disability insurance to protect your family in the event of your death or disability
• making your wishes known by updating your will, healthcare directive and other estate planning documents
• creating a survival kit with food, water, and supplies
• creating an evacuation strategy in the event of fire, flood or other natural disasters

These are just a few of the items Erin discusses in her emergency kit.  To learn more, please read the full article, Your Essential Emergency Kit.

Your Essential Emergency Kit - Kiplinger.com.