Are we headed for a full blown recession? – unfortunately experts say YES! And it’s predicted that this could drag on for up to 7 years or more.
We haven’t seen the full affects of this crisis yet. All the financial gurus and even the President are reporting this as a MAJOR crisis.
“The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war.” Alan Greenspan wrote.
This is serious. “This is more serious than it has ever been.” Suze Orman, Personal Finance Expert says on Oprah.
How Will This Crisis Affect You?
Here’s a rundown of what is actually happening and how it will affect you given by Suze Orman on the Oprah Show:
- When the economy starts to collapse, you have high unemployment, when you have high unemployment, more people can’t pay their mortgage so they have to foreclose on their homes.
- People foreclosing on homes means less property taxes being paid to local governments. Less property taxes for the local governments means less money to pay for service jobs such as firefighters and police force.
- Cuts will be made on state and local jobs, more people will loose their jobs, meaning more people will lose their homes, meaning less property taxes will be paid.
- Also, property taxes will be raised for those who still own their homes, making it harder for even more people to keep their homes, and more people will go into foreclosure. And the cycle will continue to go, and the economy will get worse and worse.
- Soaring gas and food prices will only make it harder for people.
- Credit is going to be nearly impossible to get. It will get harder and harder to borrow money for cars, homes, small businesses, etc. Credit card limits will go down.
- It’s going to take years for your money in the stock market to recover the major losses that are happening now.
- 401K’s are being cut in half, people won’t be able to retire.
Wow…..this is scary! Really scary if you have a lot of debt or are unprepared to deal with it.
How To Protect Yourself and Your Family:
1. Pay cash for everything – If you can’t afford it, don’t buy it or just wait till you have the money to pay for it up front.
2. Keep your car for up to 10 years – Stop upgrading your cars to the newest model every 3 years. Make sure you have regular maintenance done on your vehicle so you don’t have a major breakdown that costs you thousands of dollars to repair.
3. Downsize – Move to a smaller more affordable home or apartment. Get rid of extra possessions you still owe money for or that cost you to keep; boats, jet skis, motorhomes, etc.
4. Live off one salary and bank the other. Make sure you put it in a bank account that is FDIC insured!
5. Pay off your debt. As the credit card companies lower the amount of credit they will give you, your FICO score may be negatively affected without you knowing it. So make sure you keep an eye on your credit limits and check your credit report regularly.
6. Make sure your money is in FDIC insured accounts.
Cash should be in FDIC insured bank accounts, treasury bills and bonds or treasury money market accounts. If they aren’t MOVE YOUR MONEY TODAY to a safe FDIC insured account!
7. Think about renting. The housing values are predicted to continue to fall for the next several years. If you are able to sell your house now for a profit its much cheaper still to rent than it is to own. You can put the money from the sale of your home into FDIC insured accounts, sit tight, and when the market starts to go back up, buy again.
8. Have an emergency fund! You should have enough money in the bank to keep yourself afloat if you or your spouse lose your jobs.
9. Look into a second income stream. Something with very low startup costs, but with the potential to make good money.
10. Make sure you have good health insurance, life insurance, and disability insurance. Focus on prevention (eat right and exercise) so you don’t have to pay for expensive medical bills if something major happens to you or a family member.
11. If your young, sit tight on your retirement account – if you have 10-25 years before you’ll need your retirement nest egg, you should be fine as long as your invested in good quality mutual funds and diversified.
12. If you need to retire in the next year, your money should NOT be in stocks. They should be in CD’s and treasuries.
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