Editorial

Time for 'don't just do something, sit there' advice?

Tuesday, September 16, 2008

First it was Bear Sterns, then it was Fannie Mae and Freddie Mac, and now it's Lehman Brothers, and it will soon be the AIG insurance giant.

AIG could be the first company on the Dow Jones index to go bankrupt in the history of the index.

Financial news like this means little to most of us, and that's probably good. It's a case of "don't just do something; sit there."

While you're sitting there, make sure your inaction includes extra purchases that can run up your credit card debt. The mortgage crisis has already made it harder to obtain loans, and credit is likely to become harder to get over the future months.

Take this time to get a spending plan in place that will put you in as strong a financial position as possible. The credit crunch means the national economy isn't likely to be booming anytime soon.

But although Lehman Brothers is a bank, it's not like your corner financial institution which is insured by the Federal Deposit Insurance Corp.

Unless you have more cash than the vast majority of us, all of your money is safe in an FDIC facility.

While the FDIC insurance limit is $100,000 per person per bank, it doesn't end there. You could have another $100,000 in an account owned by your incorporated business, $1 million in "payable-on-death" accounts for your heirs, and you can also have $250,000 in an IRA -- with the FDIC standing behind the entire $1.45 million.

If you've been watching your stock market investments -- whether in the form of an IRA, mutual fund, 401K or individual stocks, you know we're going through scary times.

Simple certificates of deposit or other safe investments are attractive for anyone with extra money to put away right now. Still, especially with inflation becoming an issue again, the stock market has historically been the only place for money to grow enough to keep up with its declining purchasing power.

For your specific situation, check with your banker, broker or financial advisor.

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