The recent news of the financial turmoil on Wall Street is unsettling. For younger folks like me, it’s even more unsettling, because my generation has never been old enough to remember financial problems like this in the past. Older folks know that we’ve rebounded from situations just as bad or worse than this one. One thing that we need to remember is that this is what happens in a free market. The market corrects itself by snuffing out companies that took on too much risk. This is why I disagree with all of the government intervention and bailouts on a philosophical level. On a practical level, I agree that it had to be done, or the future of our financial sector would have been very grim. Also, we need to realize that the government isn’t just bailing out these large corporations for the sake of helping a bunch of rich executives. They are thinking about the consequences that would ensue for the average customer of a company such as AIG. It’s a tough situation, but there is always a light at the end of the tunnel.
When it comes to life and personal finance in general, you must see the positive side of every situation. It’s the healthy thing to do. The people that become wealthy during times of crisis are the people that seize opportunities when the economy is down. So, the questions is, “Where should you put your money?” Should you hide it under the mattress? Should you dig a grave for it, and forget about it for 10 years? The answer is simply “no”. Here are three steps to take to secure your money during financial turmoil.
Step 1: Make minor changes to your investment style. Continue doing what you do best with your investments. If you let it sit under your mattress, it will rot far much longer and at a more devastating rate than a couple of hiccups in the financial market will do to it. When you buy during times like this, you are buying a seriously discounted price. You’re gains a months and a few years from now will be worth sticking it out.
Step 2: Start looking at real estate as a long-term investment. There are always people that need to rent. If you buy a house without the intention of flipping it right away, it’s hard to go bad with real estate. It has a great long-term track record. Now is the time to buy, and you can scoop up many steals right now. There are plenty of banks and private owners willing to dump properties for 30% to 40% less than the appraised value.
Invest a portion of your money in treasury and municipal bonds. Don’t put 50% of your money into the bond market, but the bond market is a great way to safe guard your return on investment when the market is down. Typically, when the market is bad, the bond market interest rates go up. Municipal bonds are totally tax free. You won’t get rich on the bond interest rates, but it’s a guaranteed interest rate that will wipe out some of your losses from the stock market.
We must think independently, and do our own research during these times. We cannot rely on the mainstream media to feed us all of our information about the economy. They will preach gloom and doom all day long because that’s what generates ratings. It’s amazing how “good news” is considered boring to our culture. Whenever I hear good news in my life, my heart skips a beat. But in the news world, bad news makes their hearts skip a beat. Don’t get too frustrated about your 401k and IRA accounts. Just know that the more you pour into those accounts, the more shares you are buying at a discounted price. Look for the light at the end of every tunnel, and you’ll be sure to find it.