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Subject: |
Three Things to Do Right Now to Protect Your Assets |
| Date: |
2009-03-23
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Three Things to Do
Right Now to Protect Your Assets
By Al Jacobs
www.onthemoneytrail.com
At the risk of sounding alarmist, I must report that many Americans are
suffering severe financial distress: record numbers of homes in
foreclosure; personal and business bankruptcies on the rise; massive
job terminations reported daily; corporate securities values
plummeting. Unless you're among those fortunate few untouched by
current economic conditions, you should be taking action to protect
your assets. Let me offer three suggestions to assist you:
1. Protect your home.
Those of you with homes purchased between 2002 and 2006 are at greatest
risk. Values began rising dramatically following the 9/11
terrorist attack, as a combination of low down payments and unrealistic
loan standards induced many persons to lever their way into
unaffordable homes. During this period sales prices increased
dramatically, topping out in mid-2006. Thereafter values
declined, wiping out equity as if it never existed—which, in fact, it
never did. Today, many houses are worth far less than the
mortgage loans encumbering them, referred to as upside down or under
water. Added to the problem is an increase in mortgage loan
payments resulting from scheduled rate adjustments provided in those
mortgages.
If your home has negative equity or payments you cannot afford, you
must take action. The first thing to do is approach your lender
to request a loan modification so the terms are something you can live
with. Responsible lenders will prefer to change the terms of a
loan rather than commence foreclosure action that may result in
acquiring an unwanted property. As for approach, contacting your
lender personally will be far better than hiring one of these "loan
modification specialists" now coming out from under the rocks. In
most cases these outfits merely take an up-front fee from you and do
little or nothing to resolve your problems.
2. Protect your securities.
It’s finally clear to the most naïve among us that holding a portfolio
of stocks, bonds, or mutual funds is no guarantee of perpetual
prosperity. Those of you who thought corporate securities only
went up now better understand the terse reply of financier J. Pierpont
Morgan responding to an inquiry as to what the market will do: "It will
fluctuate!" This is why you must take charge; investment
decisions cannot be left to your broker or your financial advisor.
Become familiar with the investment world. Subscribing to the
Wall Street Journal and Barron's Weekly is a good start.
Participate in and conduct your own research in every decision
involving your holdings. Never authorize a brokerage
establishment or individual stockbroker to maintain a discretionary
account. Avoid involvement with anyone soliciting your business
through telephone or mail. Steer clear of the manipulated
markets: annuities, foreign-currency trading, options, precious metals,
penny stocks, and the like. Finally, consider doing your business
with a discount brokerage such as Charles Schwab or Quick & Reilly,
or over the Internet.
3. Protect your stash of cash.
If you’re paying attention to our government"s leaders, it's your duty
to stimulate the economy. A tax credit equal to both the state
and local sales taxes is available on new car purchases up to
$49,500. To stimulate home sales, a credit up to $7,500 is
offered to first-time purchasers. And as head cheerleader,
President Obama exhorts us to get out there and spend . . . spend . . .
spend. It's funny, but I thought profligate spending got us into
the mess to begin with.
I’ll offer a different message. Cut down on your spending and
hang onto your cash. If it gets sticky, you'll need the dough to
see you through the tight spots. Never forget the universal rule:
When the going gets tough, cash is king!
Al Jacobs has been a professional investor for nearly four
decades. He is a nationally syndicated columnist and appears
regularly on ProducersWeb.com, DrLaura.com and SheKnows.com. He draws
on his extensive expertise in real estate, mortgage, and
securities investments to counsel millions on how to invest wisely and
spend prudently. He is the author of Nobody's Fool: A Skeptic's Guide to
Prosperity. Subscribe to his financial column, "On the Money
Trail," at no cost or obligation, and sign up for his Life Stages Reports
by visiting www.onthemoneytrail.com.
Permission
granted for use on DrLaura.com.
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