Freddie Mac. Fannie Mae. AIG. Lehman Brothers. Suddenly, names that should symbolize the financial strength of American capitalism have become a burden on it. The financial crisis is delivering a new blow to our fragile economy. So what is the good news here? The good news is that the American financial system has proven to be amazingly resilient to repeated shocks including the 1973 oil embargo, stagflation in the early 1980’s, the stock market crash of 1987, the S&L crisis, and the technology stock bubble that popped in 2000-2001. The good news is that severe tests to our financial system can prompt positive and necessary responses. For example, surging gasoline prices are prompting substantial investments in alternative energy, while taking the edge off the American love affair with gas guzzling SUVs. That’s healthy. Similarly, the exposure of the hazards of sub-prime mortgages and high-risk lending practices should prompt appropriate regulations, and it should also help to reshape our own habits around spending, saving, and living within our means.
At a time like this, it is important to take stock of your own financial situation and to take whatever steps necessary to safeguard your business and your investments. You need good information and good advice. Here are a few ‘virtual friends’ to turn to, to gain insight and perspective and to make sure your own financial house is in order right now:
Gain some perspective. If you want a deeper understanding of how our financial system works, read The Age of Turbulence by Alan Greenspan, former Federal Reserve chairman. Despite the ominous title, you will come away reassured that our unique blend of free markets and governmental oversight of money and financial liquidity has created tremendous ‘shock absorbers’ for our economy and the flexibility to make corrections and prosper when financial disruptions do occur.
Develop your own investment strategy. This tip comes from Bill Pitzer of www.autocareforum.com. Bill pointed me to some valuable information available as a link on his site. Under “Paul Merriman’s Blog” you will find a wealth of information about building your own wealth. Get answers to current issues regarding the financial markets, as well as articles on investment basics, mutual funds, market timing, and retirement.
Make sure your money is protected. If your bank failed, would you know how to file a claim with the FDIC? You can visit www.ehow.com/information-1023-insurance.html for the answer to this and many other question and many others, and for checklists on how to shop for insurance of all kinds.
Reassure yourself about the financial strength of your insurance company. And while we’re on the topic of insurance, AM Best is a 100-year old industry rating service that you can use to see how your carrier stacks up against its competitors. Find them at www.ambest.com.
Laurie Sherman is Co-owner of Blendco Systems, LLC. Blendco manufactures a full line of detergents and waxes for the professional carwash industry. You can contact Blendco at: www.blendco.com.