PIC Current

Financial crisis will hit everyone, but there are ways to avoid the worst
by Colin Lovett – PIC Current Producer

Courtesy of Star5112

First they pass the gigantic bailout bill on Friday.  A total of more than $700 billion.  And the markets drop. But we figure, give the traders the weekend off and they’ll come back more confident on Monday. Right? Nooooooo. I guess we forgot to send the message of good times to markets in Asia and Europe.  

While we were fast asleep in the US, they panicked.  So our Wall Street traders got to work Monday morning and saw the blood on the floor in Europe and Asia.  Then they panicked, giving themselves and us more financial black eyes. If the bailout was so critical, why are the markets still in free fall? 

One word: credit.

The world financial system has been hit hard by a credit crisis.  You might think this is about bad mortgages. But they were just the spark that lit the fuse. 

The problem started with investors borrowing huge sums to buy bad mortgages.  When those mortgages fell apart, investors were left with a lot of debt they can’t repay. This problem has spread to the banking system, which made those loans in the first place and are scared to lend anyone more money.  This is leading to fear in the markets and to kitchen tables across America.

The Federal Reserve says it will help by opening the tap of cheap money for banks to borrow.  Reports say the fed may offer as much as $900 billion in credit in try and get banks to start lending again.

As we’ve said for over a week, this crisis will hit everyone.  But there are things you can do to protect yourself. 

Here are five steps everyone can take to help themselves:

1. Don’t Panic.  As the traders on Wall Street and around the world have shown, panic will lead to bad outcomes. 
2. Save Money. As my friend Lee said in his post last week, cash on hand can help your family survive tough times, including layoffs and unexpected medical bills.
3. Cut Spending.  This can help you save money and reduce your debt.  Taking public transportation is one way to avoid rising gas prices.  You can also look for ways to save on your food budget.
4. Know What Services are Available to You.  You might be surprised.  More people now qualify for food stamps. There are also programs to help people get health care.
5. Get Training to Prepare for a Better Jobs.  If you have a job and are worried about layoffs, now is the time to get training.  With recent job losses across the country, more skills can mean the difference between unemployment and getting a job that will pay you a decent living. 

We’ll be following the financial crisis over the coming weeks to keep providing you with explanations of the latest news and ideas you can use to improve your situation.  Our sister site, The Beehive, has great tips to help you with money, jobs, health care and more.

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