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5 Tips on Weathering the Economic Storm
(10-07-08)By Dick Kretz, Managing Partner
There’s no doubt that these are very difficult times for many sectors of the economy. On Friday, October 3, Congress voted to pass the “Emergency Economic Stabilization Act (EESA). This agreement is intended to bring a gradual return of normal functioning to our highly stressed credit markets through a $700 billion financial boost. While this sum is exceptional, it is important to understand that it is not an “expense,” although it is likely to result in higher taxes for Americans. These funds represent an investment used to purchase or insure sub prime and low quality debt that have led to the bank failures we have seen so far.
Like all investments, it remains to be seen if the American taxpayer will earn or lose money on this investment. While none of us is happy to have to rescue organizations that may have acted irresponsibly, loosening credit for businesses, state and municipal governments, and homeowners will be essential to weathering the mortgage crisis, as well as the related economic impact driven by Wall Street and corporate America.
While this bill should have a positive impact, it will take time for the markets and the economy to recover from the volatility we have experienced in recent weeks. Common sense – and history -- tells us that at times of great uncertainty, major changes can lead to very big mistakes. Here are a few important things you can do to protect your financial future until the economy settles down:
There’s no doubt that these are very difficult times for many sectors of the economy. On Friday, October 3, Congress voted to pass the “Emergency Economic Stabilization Act (EESA). This agreement is intended to bring a gradual return of normal functioning to our highly stressed credit markets through a $700 billion financial boost. While this sum is exceptional, it is important to understand that it is not an “expense,” although it is likely to result in higher taxes for Americans. These funds represent an investment used to purchase or insure sub prime and low quality debt that have led to the bank failures we have seen so far.
Like all investments, it remains to be seen if the American taxpayer will earn or lose money on this investment. While none of us is happy to have to rescue organizations that may have acted irresponsibly, loosening credit for businesses, state and municipal governments, and homeowners will be essential to weathering the mortgage crisis, as well as the related economic impact driven by Wall Street and corporate America.
While this bill should have a positive impact, it will take time for the markets and the economy to recover from the volatility we have experienced in recent weeks. Common sense – and history -- tells us that at times of great uncertainty, major changes can lead to very big mistakes. Here are a few important things you can do to protect your financial future until the economy settles down:
- Don’t panic. Now is not the time to make rash financial decisions. And don’t feel you have to go it alone – make time to speak to your business advisor about your concerns, and especially before you make any financial decisions.
- Monitor the health of your bank. The easier, more collaborative relationship you enjoy with the banker who knows you can change overnight if they’re bought out by an out-of-state institution. To check the health of your bank, visit http://www.bankrate.com/brm/safesound/ss_home.asp
- Review your loan covenants. If you haven’t looked at these recently, pull them out right away to ensure that you in compliance. If not, a stressed bank can pull your loan.
- Confirm your FDIC coverage. Make sure that your bank accounts are FDIC insured and that all accounts – personal, operating and payroll accounts – are under $250,000. If you are unsure if your accounts are FDIC insured, call your bank or visit http://www.fdic.gov/EDIE/ to determine if your accounts are covered.
- Manage your business for the long term. Even though the short-term is scary and you may need to make some adjustments, don’t abandon your long-term plans.
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