We are already experiencing the worst recession ever and, if you listen to the media, we are circumnavigating around the whirlpool of a double-dip recession, and at any time can drown into it.
We all have to be prepared for the worst. In particular, we have to avoid making financial mistakes which we may have made before.
Here are some tips for surviving this crucial monetary period:
1) Don’t stuff your cash in your Almirah
Bank failures have become a very common phenomenon in the U.S. and so many folks have been securing their cash in their own homes. However, you do not need to worry if you deposit your money in an FDIC-insured bank as your hard-earned cash is much safer there than your home as they are now covered up to $250,000 per individual.
2) Don’t run for oddly high savings rates
Now that the Federal Deposit Insurance Corporation’ (FDIC) insurance levels have increased, you need not get caught in the hands of a faltering institution. One sign of a troubled bank is when they are offering significantly higher interest rates for savings accounts and CDs than the current market rates. Keep away from those banks.
3) Don’t skip payments unless…
The ability for many to pay back debts has faded away just like the Imperial Parrot and so defaults are happening everywhere. You have to avoid falling into this “trap” because that is what it is. If you skip your monthly payments, you are going to hurt your credit rating and have a debt collector as your new best friend. Trust me, avoiding the problem will only make it more treacherous.
4) Don’t borrow from your 401(k)
I know it is tempting to borrow while knee deep in enormous debt. However, if you borrow, you could be making a huge mistake. Borrowing from your 401(k) is a double whammy as you are not only eliminating your pre-tax money, but also paying it back with after-tax earnings. Owie! If you are going to borrow, then do so using loan options other than your 401(k). I know you will later thank me for this.
5) Don’t assume your job is safe
We have already lost 760,000 jobs this year in the USA. The next one may be yours. You can’t take your job for granted today – you have to prove that you are a valuable asset for your company. Depending on your role, you may need to take on the mask of a problem-solver, someone who can and is generating enough revenue to remain in the company.
6) Don’t count on the government to bail YOU out
You have to hatch the chickens yourself and should not count on the politicians to do the right thing for you. Government bailouts generally benefit Wall Street rather than Main Street and so the advantages to you may be minimal.
If you are facing trouble with your mortgage, you should work with your borrower and work something out. Do not wait until the Housing Rescue & Foreclosure Act arrives to rescue you as it may not.
7) Don’t let existing lines of credit close
Are you smart about your credit? You need to keep your current accounts open as most banks and other lending organizations are tightening their lines of credit. If you have old credit accounts with good credit history, your credit score will certainly get boosted. You can make use of your home equity line of credit in case you lose your job. However, try to use your home-equity as your last resort.
Do you have some helpful tips? Please share with our readers by commenting below.