THE FINANCIAL CRISIS: I HAVE LOST ALL CONFIDENCE IN THE SYSTEM AND HEADLESS PUNDITS. HERE IS WHAT I AM DOING...
Sure, I've been affected by this financial mess. Probably in much the same way you have. I've been forced to suffer through the lengthy, often unnecessary, and definitely unhelpful analyses by the so-called "experts" on the nightly news and business channels. My retirement account has been throttled to the tune of nearly a 45% loss.
The value of our home is certainly less than it was when we purchased it a year ago, and we are surrounded by a slew of homes that are for sale or have been foreclosed upon. You're probably saying, "Yeah, yeah, I've heard all this before! So what else is new?" Well, I'll tell you what else is new. For the first time as a United States citizen, I will admit to having lost confidence in the system, as well as in a large portion of American society.
When I say I've lost confidence in the "system," I mean the overall functioning of our nation to protect its citizen's interests and financial stability. I'm not saying I don't trust that the FDIC will replace the funds in my accounts should my bank go under, or that I'm worried my government savings bonds will suddenly become worthless (although lately I have pondered the idea). What I mean, is that the ones who should be looking out for the interest of the common investor, i.e. financial advisors/managers, the SEC, CEO's of major corporations, mortgage lenders, and the rest of those who should be concerned with the best interest of their clients and customers, are failing us.
So, after all that, here is what I'm going to do.
KEEP PAYING MY MORTGAGE
While my home's current value is not even close to the price we paid for it last year, we still need a place to live. Now, I realize it wasn't the best investment I could have made, but it's ten times better than I would have done putting my money in financial stocks a year ago. I have confidence that if we all stick it out for five to ten years, we'll be back in the black and well on our way to our home being one of the best investments available.
LEAVE MY RETIREMENT ACCOUNT ALONE (what's left of it at least)
I cringe and my face turns bright red every time I think of my hard-earned money being held by those same financial firms that our tax money is bailing out. Still, I know that I have to be patient and wait out all those who are jumping ship on their investments. At this point, it's really a mute point. It's too late to save my profits, and my tax-deferred contributions can't be removed without penalty, so here I sit and wait...and wait...and wait.
PREPARE FOR NEXT TIME...BECAUSE IT WILL COME
This section consists of four sub-steps:
* CONTROL THE SITUATION - Shockingly, the crisis we are experiencing isn't that terrible as it seems if you've been planning for it. It should come as no surprise after the tech bubble burst that we now find ourselves in a similar situation caused by yet another bubble. By preparing for the worst and adhering to the other steps listed below, I've managed to control my situation relatively well.
* LIMIT DEBT - Having a 15-year fixed-rate mortgage as my only debt has come as a godsend during this credit crisis. Less debt means fewer bills in the mail, which means more money to save. The less debt you have, the more prepared you are, and the longer you can last during a recession.
* BE PREPARED - I'm not letting my guard down. Just because one bubble has burst, doesn't mean there aren't more looming just around the corner. There have been rumblings of credit cards being the next big shockwave to hit, and who knows what else. I'm not taking anything for granted at this point.
* STASH CASH - While all the financial advisors are screaming for everyone to plunge more hard-earned money back into the markets to gobble up "discounted" stocks, I'm staying conservative. Government savings bonds, money markets funds, and some cash stuffed in the bank (safety deposit box included) is the way I'm going, at least for 2009. We'll see what happens after that.
This post is written by Kris Calhoun...Kris is a former Hotel Manager and now stay-at-home dad...
Read about financial systems here...