What To Do In (or Before) a Financial Crisis

Dear Jack-

In case your history books haven’t shown it, 2008 was, on many fronts, a financial disaster.  The financial markets imploded.  Credit was frozen.  Stocks, bonds, and even money markets were pummelled.  Financial institutions over 100 years old went belly up.  Banks closed.  People stopped spending.  Comments everywhere screamed a repeat of the Great Depression.  One author described it as “The Year Trust Evaporated.”  Writing two-thirds of the way through April 2009, the worst seems to be behind us, but we can never be certain.  Many lessons were learned and many principles held true amidst chaos everywhere else.  Here’s five things we’ve told our clients to do and to keep doing:

  1. Establish or maintain a $1,000 emergency fund in an FDIC-insured account as quickly as you can.
  2. Payoff all remaining short term debt (credit cards, auto loans, consumer loans) you and your household have remaining.
  3. Add to your emergency fund the equivalent of three to six months living expenses in your FDIC-insured account.
  4. Accelerate payments on long term debts as you are able to (mortgages, education loans, etc.)
  5. Invest long term money as you can, as we may never see these prices again.

My guess is that by the time you read these principles, they will still hold true.  Some advice is timeless.  Till next time, Jack.



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