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How Is the Current Financial Crisis Affecting Your Family?
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“Why the bailout may not be enough" read Friday's headline on CNN.com (money.cnn.com/2008/10/02/news/economy/morebailout_barr.fortune/index.htm). Must my hopes be dashed even before the House passed the $700 billion rescue package? Apparently so. The well-labeled Troubled Asset Relief program would allow Treasury Secretary Henry Paulson to buy bad mortgage assets in an attempt to get bank loans flowing through the economy again. "The key is to vanquish the fear that has left banks hoarding cash—and potentially strangling growth by withholding the credit consumers and businesses need," according to the article.
Despite the so-called "rescue" of our nation's banks, which the President signed into law the same afternoon, the Dow still plunged more than 300 points Friday, and I’m not sure why.
All I know is that Suze Orman’s (www.suzeorman.com) worried face has been on television newscasts nearly every night for the past two weeks, warning everyone not to buy anything they don’t absolutely need. This is the voice I hear as I’m shopping in Target and trying to stick to my short list of “needs” while stifling the “wants” that emerge every time I see a “Sale” sign or sticker.
Everyone is watching what they spend and keeping a close eye on their savings accounts. According to CNNMoney.com, “The current stock market chaos isn't just bad news for hedge-fund managers—it hurts the millions of Americans that actively manage their investment portfolios as well as the millions more who have 401(k)s or IRAs for retirement as well as 529 plans to save for their kids' college tuition. And as skittish investors have been holding onto their cash or hiding their assets in Treasurys, even more conservative savers are seeing lower returns” (money.cnn.com/galleries/2008/news/0809/gallery.how_crisis_affects_you/index.html).
OK, now I’m officially in the skittish club. Talk of the “credit freeze” only adds to my anxiety. The credit freeze not only affects the ability of individuals to obtain loans, it also affects businesses large and small, which often rely on banks to borrow money to meet their operating expenses, including salaries, on a short-term basis. “This isn't just an accounting problem,” reads the same article. “If your employer can't meet those payments, that means that you may not get your salary, or you may get laid off.”
It’s very tempting to avoid the news entirely when so much of it is dire. When we’re worried, our children sense it. When we’re stressed, we tend to take it out on our spouses. Money matters are the number-one reason why marriages fail. So what can we do to calm our nerves and restore peace in our families?
• “Don’t panic, stay the course,” as financial planner Allan Roth recently told Money Magazine. "If you can't be right, at least be consistent. We're allowed to feel the emotions, but how we react to them is going to be far more important than any short-term swings." If you are a mid-career investor, Money says to consider “dialing back your stock exposure somewhat, although you don't want to hunker down completely in bonds and cash. Lightening up on stocks will give you more short-term stability” (money.cnn.com/2008/09/30/retirement/crisis_savings.moneymag/index.htm).
• “Save for tomorrow, be happy today” reads another headline by Money senior editor Walter Updegrave, who offers a three-fold approach to conquering our fears and finding peace of mind: (1) Set goals, (2) take steps to achieve your goals, and (3) control debt (money.cnn.com/2008/09/22/retirement/tomorrow_today.moneymag/index.htm?postversion=2008092406).
• Financial honesty is the key, emphasizes Orman, which means buying only what you can afford now. "People, stop living the financial lies that you have been living. If you don't have the money to pay for something, can you just not buy it? Can you wait? Can we start looking at keeping our cars for 10 years rather than getting a new one every three?" (www.oprah.com/slideshow/money/personalfinance/20080918_tows_suze)
Finally, someone is speaking my language! Money experts are actually agreeing on something and offering similar advice. Now I need to set up a family meeting so that we can review our budget and financial goals. I also need to focus on all the things we do have rather than what we don’t. If we count our blessings and take stock of what is truly valuable in our lives, then money does not reign supreme. Call me an idealist, but I still believe that it’s love that makes the world go ’round, not money.
The challenge will be remembering that the next time my daughter begs for “one more Pet Shop pleeeeaaaase” or my husband frowns at the grocery bill. I will take a deep breath and remind myself that they are nervous, too. I’ll give them an extra hug or word of encouragement because some of the best things really are free.
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