In the wake of recent events in the financial markets, many consumers are questioning the safety of their savings and investments, and wondering how they can protect their financial security. While it is impossible to predict what will happen, there are some steps you can take today to safeguard your money.
Ask about strength and stability
The first step is to become more informed. Before investing your money or securing a loan, do some research to locate a reliable banking partner. Not all financial institutions were involved in the subprime crisis, and many, including TD Bank, remain financially sound and stable.
Meet with a representative from the bank and ask her/him to tell you about that bank’s financial standing. You should come away informed about the bank’s overall management, capitalization, credit ratings, risk management strategy and ability to lend money.
Maximize FDIC coverage
Next, get up to speed on deposit insurance. The Federal Deposit Insurance Corporation (FDIC) insures customers’ deposits in banks and other financial institutions. Congress recently increased FDIC deposit insurance from $100,000 to $250,000 per depositor through December 31, 2009. This applies to funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs) in FDIC-insured institutions. Learn more about FDIC coverage and rules at www.fdic.gov, and talk to your bank about ways to maximize your coverage.
Protect your home
A home is the most valuable asset for many local residents, and protecting that asset is a top-of-mind concern as home prices fall and the cost of living increases.
If you already own a home, consider staying there and avoiding costly upgrades until home prices resume their steady appreciation of value. In the meantime, meet with your lender to determine whether you can refinance at a lower rate. Check to see if your monthly mortgage payment would be lower after refinancing, and if you would save money after considering closing and refinancing costs.
Also, if you’re considering borrowing against your home, think carefully about what you’ll use that money for and how you’ll pay it back. Work with a banker to assess your needs and put you in a stronger financial position.
If you’re shopping for a home, you may be able to benefit from historically low interest rates and reduced home prices. Make sure you work with a reliable, trustworthy mortgage banker who can fully explain the various financing options available to you, and guide you through the decision-making process. Steer clear of lenders who offer loan terms that seem too good to be true.
Review your portfolio
Market fluctuations are part of the financial cycle, and the ultimate impact on your investments is often determined by a number of factors. Your specific investment needs and decisions depend on your tolerance for risk and your timeline, and now’s a good time to schedule a meeting with your financial advisor to review and position your portfolio for the short and long term.
When you meet with your advisor, be sure to update her/him on any life changes, such as marriage, divorce, births and the addition of college tuition or health-related bills. These kinds of changes can affect your overall investment strategy and timeline.
No matter what stage of investing you are in, avoid making hasty decisions or changes to your portfolio based on news from Wall Street. Making investing decisions based on emotion rather than information may prove detrimental in the long run.
Manage expenses
If you haven’t yet done it, now’s an ideal time to establish a family budget and savings plan, and stick to it. Set aside a minimum of 5 to 10 percent of your salary in a separate account for savings. If you have credit card debt, pay it off. Try to pay off the credit card balance every month, or at least make a payment that is in excess of the minimum due.
To ride out these challenging economic times, you can take proactive measures now to manage your finances. Stay informed, and keep the lines of communication open with your bank. If you have questions about your money, ask. Your financial institution should be your partner in your journey toward financial confidence and security.
Fred Graziano is Regional Banking President of TD Bank
