Resist the Impulse to Panic Over Finances By ALINA TUGEND

[Demeter]

http://www.nytimes.com/2008/03/22/business/yourmoney/22money.html?_r=5&ex=1363924800&en=fc2e9e21a5b1efb4&ei=5088&partner=rssnyt&emc=rss&oref&oref=login



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A major investment bank has collapsed, and the Fed is cutting interest rates to stave off a recession that we may already be in. More and more people seem to be having trouble making their mortgage payments, and credit card delinquencies are up. Short of putting our heads in the sand and hoping it all passes, what should we do with our own finances? According to the experts, the best advice is to not panic. Consumers who have managed to avoid the excesses of the last few years should sit fast, the experts say. As for those who ran up credit card debt, exhausted their lines of credit or did not put away much in savings — in other words, acted as millions of other Americans did — they should use these unsettling times as an opportunity to review their finances. But financial analysts warn that they should take time to consider their options. “Don’t do anything rash based on what you see in the news,” advises Greg Daugherty, executive editor of Consumer Reports, put out by Consumers Union. “You will inevitably do something wrong.”

The first thing to do is take stock of your life. Determine how secure your job is, which, in these uncertain times, may not be easy. If your job is relatively safe, step back and look at your financial situation. Next, take a hard, realistic look at your debt. It may be somewhat painful, but now is the time to ask some difficult questions. Greg McBride, a senior financial analyst with Bankrate.com, suggests starting with these: Are you having trouble keeping up with your debt payments? Are you relying on debt to keep up with your lifestyle? Consumers, Mr. McBride said, have been drawing on credit in recent years, but some “are finding that the well has run dry.” He suggested that you “ask yourself whether you can honestly afford the lifestyle you’re living.”

A good indicator that things are going in the wrong direction, he said, is if your credit card balance has been rising in the last year but your savings balance has been falling. “As interest rates are on the decline, it serves as a real tail wind to debt repayment,” Mr. McBride said. “More of each dollar goes to principal rather than to the interest. So each dollar goes further as interest rates fall.”

Now, what about investments? First, experts say, consumers should confirm that their investments are covered by the Securities Investor Protection Corporation, an independent organization set up by Congress in 1970. If a brokerage firm or other insured firm fails, the investor corporation covers $500,000 of a customer’s assets, of which $100,000 can be claimed for cash. Keep in mind that money market funds are securities, not cash, said Stephen P. Harbeck, president and chief executive of the S.I.P.C. The good news is that membership is not voluntary; when a company registers with the Securities and Exchange Commission, it is required to be a member of the investor protection corporation. Be sure, however, that when you make out a check to your broker, it goes to a member of the S.I.P.C., Mr. Harbeck said. There are cases where corporate entities that are part of the same holding company are not members of the investor corporation. You should ask brokers whether their firms are members, or you can check out members on the investor corporation’s Web site, www.sipc.org. If your investments are in a company not covered, then you are not covered.
But Mr. Harbeck said the S.I.P.C. is a floor, not a ceiling; each investor also receives a prorated distribution of customer assets depending on how individual situations are resolved....

[Sherman A1]

1. Avoiding Panic

is always good advice. This didn't happen over night and won't go away. I am just sitting tight on what little investments I have and trying to hold down spending, shopping for the best deals I can get whenever I do spend.

[couriousg]

2. They say that but..

While you stay in the market, the smart money is getting out! Actually, according to the editor of Forbes magazine, it's too late for the "little guy" to do anything now. All of the FED's actions have been to create confidence in the market, but that certainly doesn't mean that things are good or that it's going to get better anytime soon. The FED is just trying to prevent another run on the banks. That's what happened to Bear Sterns.
I think the FED needs to let the market correct. Actually, the DOW should be around 10,000 by now but since this is an election year, it would be bad for the Republicans for the market to crash.
So, instead I'll just gain a little, lose a little...nothing has moved in months and you can't adjust your portfolio for the long term when the FED is playing games!