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What Recent Economic News Means For You

What the Recent Economic Turmoil Means For You

It's only Hump Day and so much has happened in the financial world in less than a week. Can you imagine if Angelina Jolie and Jennifer Aniston announced they've been having an affair behind Brad Pitt's back? Well, all this economic news is even bigger than that would be. Because while that buzz would last for some time, of course, it's yet to be seen how far reaching the effects of all the recent turmoil will be and how long it will continue.

It's really amazing how much can change in just the course of a few days. The Federal Reserve made not one, but two cuts to the interest rate that applies to banks when they borrow money overnight, and it had to bail out 80-year-old financial institution Bear Stearns when its investors essentially made a run on the bank. Bear was reporting $17 billion on its balance sheets just last week but its buyout bail comes out to about $240 million. There's worry that other big financial institutions will face the same desperation in the near future. Find out what all of this news means for you when you

  • Although interest rates are dropping, tighter credit terms mean that you may not be able to capitalize on lower rates because it's harder to get approval for a loan. On top of that, home prices are continuing to fall and you might not have any home equity left to borrow against.
  • Make sure that you have some cash reserves in case times get tough — that means consider increasing your emergency fund to six months of living expenses instead of three.
  • Don't panic, but make sure that your investments are allocated in accordance with your risk tolerance and time horizon.
  • If you're invested in Bear Stearns' proprietary mutual funds (possibly in your 401(k)) you lost money when the shares value plummeted to $2. Also, your shares will be of JP Morgan Chase stock because they bought Bear Stearns.
  • The Fed's main concern right now is fixing the financial sector at large, so take control of your personal finances by paying off your credit card debt and getting your financial act together.

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chiamollie chiamollie 8 years
"Can you imagine if Angelina Jolie and Jennifer Aniston announced they've been having an affair behind Brad Pitt's back? Well, all this economic news is even bigger than that would be." That is funny, I guess... but it also kind of sounds like you are talking down to us. Just because we are females doesn't mean we can't understand the situation without a dumb celebrity analogy. Sorry, just rubbed me the wrong way...
angelfromlsu angelfromlsu 8 years
ilanac13...5.25% is still an incredibly great rate and the market rarely hits that low often. You shouldn't refinance if you can help it.
bellaressa bellaressa 8 years
Ohh wow, thanks Savvy for posting this- I have been concern as the rest of you. Jen, I know how you feel and I wish you luck.
princessjaslew princessjaslew 8 years
all i can say is i'm really glad i don't have any bear sterns stock. but with the economy going the way it is...what else can one do to invest for the future?
nancita nancita 8 years
"Can you imagine if Angelina Jolie and Jennifer Aniston announced they've been having an affair behind Brad Pitt's back? Well, all this economic news is even bigger than that would be." So true, so I'm glad you are talking about it. Great to know...I hadn't considered that i might have a Bear Stearns mutual fund in my 401k.
ilanac13 ilanac13 8 years
i bought my house about 2 years ago and i'm still trying to figure out what the impact is. i locked in a rate of 5.25% and now that it's so much lower i want to refinance it. i'm worried that since the market is so bad - if i ever need to sell it - i won't be able to get a lot of money for it - and that's making me nervous. i guess i'd like to pay off as much of it as i can now so i can be a bit more mindful of selling prices. as for the Bear Stearns stock - i was at the gym watching this on CNN and it's amazing to see that JP Morgan Chase bought the stock for 1% of it's value in order to bail them out - and that in a matter of a day - things have TANKED. our economy is really suffering. it's scary.
SDTransplant SDTransplant 8 years
My boyfriend and I are also trying to buy a condo that's a great deal and I've been hesitating to shop around for mortage loans because the rates are so high. I wish fixed-rate mortages weren't tethered to long-term Treasury bills and were more closely linked to the rate cuts the Fed's been giving us like ARMs are, but no luck. I really don't want to get an ARM though since they're the reason so many people are SOL in the first place!
jen22 jen22 8 years
The market is horrible. I have two degrees. Its been three months and I still can't find a job, let alone get an interview. Its really scary right now.
SkinnyMarie SkinnyMarie 8 years
I actually can't wait to buy a house. Though the job market is scary with cut backs, and there is fear of not being able to pay for your house because you have lost your job, I don't think that we could get these rates again very soon. Lashell I would consider getting a roommate or a friend to move into the condo once you get it. It will help with the bills and security. Even if you could pay the mortgage yourself take the rent money and put it away for a "ohh crap" time.
SLH04 SLH04 8 years
The news is driving me crazy...I want to buy the condo of my dreams because it is at a great price but am very nervous because of what the future brings. I might have to step out on faith!
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