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Stress Test

Definition: Stress Test


The Federal government has been busy performing stress tests on the 19 largest banks in the US to estimate how much capital these institutions may need if the economy worsens. The results of these tests will be announced on May 4, and the final report should separate the banks on the road to recovery from the banks that would need more government bailout money.

Karin Maloney Stifler, a certified financial planner, suggests performing your own personal stress test to evaluate how long you could make ends meet after a lay-off or medical emergency. She outlines four pieces to this test: "Check the accessibility of your reserves; Determine where you can slash expenses; Assess income sources; Evaluate your support network." Give yourself a rating between one and five, and consider creating a better financial plan if you score less than three on more than one area.

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