I don’t know about you, but I’m pretty tired of all the doom and gloom in the headlines. Yes, financials are in trouble. Yes, people got mortgages they shouldn’t have & companies lent money they shouldn’t have. Yes, eggs cost more. Yes, oil is up and that’s bad. No wait, now it’s down and that’s bad. Yes, the sky is falling. Yes, you name it.
But really, is it necessary to pounce on “the next whatever” seconds after one crisis is dealt with? It’s like there’s some master list out there of banks and financial institutions that are in trouble, and a bunch of vultures moving from one to the next before they’re even completely dead. I’m not saying there’s a conspiracy or anything, or that people didn’t get greedy. I’m just saying that I’m sick of it. And that fancy headlines grab readers, and readers grab advertisers, and advertisers pay the bills.
But what it also does is create more panic, worry and fear. I don’t know how many times I saw the questions “is my money safe?” and “should I hold off on doing blah blah blah with the economy like it is?” in various forms yesterday.
First, no money anywhere is completely safe. The world could end today, and you’d be out of luck. Of course you’d probably be past caring at that point. Yes, such and such bank MIGHT be failing. (In fact, because of how banks work, banks are more LIKELY to fail if everyone panics and withdraws their money.) But if your money is in an FDIC insured bank, take a deep breath and read how it works instead of panicking:
According to the FDIC, if you have $100,000 or less per depositor per insured bank, you’re covered. If you have $250,000 or less per depositor in an IRA at an insured bank, you’re covered. For more details, visit the FDIC’s web site.
The bank down the street from me failed a while back, and you know what happened?
They changed the sign to the name of a different bank.
Now, probably there was more going on behind the scenes, but that was the most noticeable change as far as I could tell.
If your money is in a credit union, chances are your shares are insured by the National Credit Union Administration, which has limits similar to the FDIC. Their web site states that, “Not one penny of insured savings has ever been lost by a member of a federally insured credit union.” and “If a federally insured credit union does fail, however, the NCUSIF will make any necessary payouts to the credit union’s members. These payouts are usually done within 3 days from the time the credit union closes its doors.”
If your money is in a brokerage account, it’s probably protected by the SIPC. According to their mission, “When a brokerage firm is closed due to bankruptcy or other financial difficulties and customer assets are missing, SIPC steps in as quickly as possible and, within certain limits, works to return customers’ cash, stock and other securities.” A news release on the SIPC’s site also states that “In addition to the protections provided by SIPC and the SEC’s net capital rule, the SEC requires registered broker-dealers to place client assets into accounts segregated from the brokers’ own proprietary funds and securities. As a result, clients are protected from the firm’s trading losses.” Check with your brokerage account to see if you are covered.
Finally, don’t base your financial decisions on “what the economy is doing”. Base them on your individual situation and what you can reasonably anticipate for the future. This means that if you have a 20% down payment on a modest house that you can easily afford, a decent job, health insurance, 6 months or more in an emergency fund, and money to spare every month, a reasonable person might conclude that you can probably afford a house – even though “the economy” is freaking out. But if your gut still wrenches at the thought of buying the house, maybe you shouldn’t do it despite the reasonableness. It just depends on your own situation.