This continues the two part financial planning series. Previously we discussed the importance of budgeting and the downfall and ease of credit card pitfalls.
In a down market it is ok to hunker down in safe places as well as places which have been dreadfully dangerous. FDIC backed banks, badly beaten down stocks, and commodities can all be apart of your financial planning and investing future in a down economy and beat up financial market.
Shopping Banks is Safe and Wise
Although banks are collapsing in on themselves, as long as the Federal Deposit Insurance Corporation (FDIC) insures the bank, you can leave your money in a bank with peace of mind. The FDIC insures up to $250,000 of your deposit, which means that you are guaranteed this money no matter what happens. Making sure that the bank you chose is FDIC insured is crucial; furthermore, many people have just lost money by giving their money to banks that were not FDIC insured. Even though interest rates are not the greatest right now, it is better than nothing. Take the effort and look around banks in your area for the best interest rates for savings accounts and certificates of deposit. Taking this extra effort really will pay off.
Savings accounts generally have a much lower interest rate than certificates of deposits. However, money can be taken out of savings deposits anytime, but money can only be taken out of certificates of deposit at certain times. If you have extra money that you do not need right away, placing it in a certificate of deposit is a good idea. You can find certificates of deposits that last for three months, six months, one year, two years, or even more. The longer the time period; the higher the interest rate will be. It may seem minuscule, the extra money generated by the interest rates can add up quickly.
Stocks, Commodities, & Dividends
Investing in the stock market is very risky at this point in time, making money in the stock market is still possible. Doing plenty of personal research on companies and stocks from the Internet or literature is the first place to start. Just be warned that the greater the return on your money, the greater the risk of losing your money. Some stocks to steer away from are bank stocks. The government may nationalize these banks, which would make your stock basically disappear.
If you are looking for stability and are willing to take a lower return, search for stable companies that are recession proof. These companies would include those items that people cannot live without. Commodities, like gold and oil, are also items that will virtually never completely lose their value in the present time. Also, if you feel uncomfortable about investing your money even after researching, you may want to consider hiring a financial adviser who will do the investing and research for you.
Another way to make money on the stock market is searching for dividends. A dividend is a certain amount of money a company will pay a shareholder for every stock of that company he or she holds. Some companies have no dividends while others have dividends as high as $4.00. Dividends vary from company to company with some paying quarterly and some paying biannually. However, be cautioned that companies can change the frequency or price of the dividend at anytime.
Planning financially, making money, and saving money are still very possible in a down, unpredictable market. Taking the time and extra effort to research about banks and the stock market is worth it. Look for high interest rates in banks and high dividends in stocks. Additionally, get debt paid off as soon as you can to avoid a bad credit score, credit collectors, and interest rates taking over your life. Lastly, do not forget to write out a budget, and specifically give a set amount of money to spend on your living costs and luxuries to avoid spending excessive money.
If you missed Financial Planning in a Bad Economy – Part 1 here it is.