The country’s economy seems to be going to the dogs. Whenever I switch on the television or pick up a newspaper all I get to see are the images of those bespectacled, intellectual looking economists and financial experts hollering about the economic crises describing it with terms ranging from ‘a financial catastrophe’ to ‘the largest after the Great Depression’. The announcement of bankruptcy by the 158-year-old securities firm Lehman Brothers and AIG’s bailout by the Federal Government has shaken the confidence of the country, for sure.

What does this mean to an average American like me, who has been paying taxes regularly, has a little amount of savings and investments here and there and a few loans to pay off. Will this mean all my savings will be eroded or that I need not pay back my loans, with the government’s decision to bail out the large investment firms? I was confused.
I sharpened my ears and eyes a bit to really understand what’s going on around me. From what the experts and analysts suggest and from my own little experience, these are my learning’s on how to handle the situation now.

1. Don’t act in haste
There is no need to panic and liquidate all our investments now, unless we need that money desperately. If the horizon for your investment is five years or over, it is then wise to forget about the funds invested in the bonds or stocks now and wait for things to improve. The bulls and bears keep coming in cycles. So if there is a slowdown now, then an upside is to follow certainly. So just wait and watch. Senior members close to retirement could consider realigning their financial portfolio to invest in inflation protected securities and single premium immediate annuities (SPIAs) with the help of qualified financial analysts.

Also if you follow the news carefully, you will realize that the holding company of Lehman Brothers was only filing for bankruptcy. Which means investors and customers of the group’s mutual fund unit, Neuberger Berman and the asset management unit are clearly insulated from the crises. Likewise Bank of America’s buyout of Merrill Lynch only means that the customers of the latter will now have account in a different bank.

2. Take stock of your situation
What people usually tend to do during such situations is either panic and liquidate all assets or just shut up and sit idle until things become better. What you can also do is have a re-look at your financial portfolio, analyze your debts, assets, risk appetite and the like. It makes sense to talk to a financial analyst, explain your goal, income, expenses, horizons and future plans. The analyst who has a hang of the current situation will be able to suggest plans to utilize your funds better and sail through the situation. Websites like moneyStrands also help you in giving a precise picture of your financial situation that will aid in better decision making.

3. Look out for other modes of investment
Okay the stock markets go yo-yo, interest rates on deposits go down, credit card rates and other consumer loan interest rates are up. But there are still some traditional forms of investment that are largely insulated from these global phenomena. Investment in precious metals like gold and silver makes sure that your investments are largely safe from such financial breakdowns. The yellow metal’s price has been on the rise over the last few years and it makes sense to add it to your portfolio now. You could also try buying foreign currency, what with the value of the dollar sliding.

4. Don’t abstain from repayment of loans
Just because the Federal government has assured a $700 billion bailout for financial institutions it does not mean you do not have to repay your car loan or your mortgages. It doesn’t work that way and your bank wouldn’t spare you either. Abstaining from repayment will only affect your credit ratings negatively. So the next time you approach a bank or a financial institution for a loan, you will be asked to pay up a higher interest rate for your loan, or worse still you wouldn’t be sanctioned a loan at all.

5. For the extreme risk takers
If you have a high risk appetite and do not mind taking a chance you could consider buying homes that are being foreclosed or auctioned because of non-repayment of loans by buyers. If there is a house that you missed buying because of lack of funds at the time of selling, or it is in a locality which you like, or if it has become more affordable now, then this is a good time to invest in the property.

You have to be extremely careful in checking the papers to make sure that the person selling the property is the first buyer. Else you will have two or more mortgages to pay back. The rules for such purchases differ from state to state. You could check the local courthouse to see if there are any houses coming up for auction or foreclosure, you could then consult your attorney to check the papers and the rules to follow. Do not act in haste but exercise extreme caution when making such purchases.