6 Moves to Make Now

We have been harping for some time that CASH is king and that guaranteed investments are the place to be. That is still the case, (more than ever), because we expect the economy to remain sluggish due to reduced capital spending and more job losses. (Get our advice for recession-proofing your job here.)

Against that background, here are six money moves we recommend you make right now:

1. Keep bank deposits in FDIC-insured accounts only. In one of the few bright spots in the bailout bill, the amount of FDIC insurance was raised, as of October 1, to $250,000 per qualifying account. Keep in mind, however, that this is ONLY UNTIL the end of 2009. Click here to learn the must-known provisions of FDIC insurance.

   Dolan Warning! A friend of ours in the banking business recently told us that some banks, because of their problems, have LOST their FDIC insurance coverage. Check with you bank now to be sure that FDIC coverage is still in force there! All banks that have FDIC insurance must display a sign showing they have coverage. You can also call the FDIC at 1-877-275-3342, or use the "Bank Find" feature on its web site at http://www.fdic.gov/deposit/Deposits/insured/basics.html.

2. Look into money market mutual funds for your cash. In most cases, the rate will be higher than a bank savings account. Make sure that you stick with funds run by the big companies like Fidelity and Vanguard that have enough cash to support these funds should the crisis worsen. See Is Your Money Market Fund Safe? and How to Choose the Right Money Market Fund.


3. In your retirement plans (IRAs, 401(k)s, etc.), opt for conservative investment options ... especially ones that protect your principal and/or guarantee you income.


4. Be very cautious with international investments. This crisis extends far beyond the U.S. It is truly global, and other markets - especially emerging markets - could get hit even harder than U.S. stocks.


5. If you are in fixed income investments, look to corporate bonds. We expect them to outperform the market in the coming months. Also, rates on municipal bonds (munis) are attractive. If munis make sense to you from a tax standpoint, make sure that any bond you are considering carries at least a AA rating. At the moment, the rate of about 5% for AAA-rated bonds with maturities in the 15-year range looks especially attractive. Read more about muni bonds here.


6. If you are having trouble with your mortgage, you may be eligible for some help. The bill allows mortgage "cramdowns," which reduce the amount that homeowners owe rather than forcing them into bankruptcy. One of the "positives" in this bill is its goal to directly help homeowners by refinancing their mortgages into smaller, cheaper loans insured by the government.
   The problem here is that banks can't be forced to accept write-downs. Enticing them to do so would be expensive (with our money!), and enforced "cramdowns" would only serve to raise interest rates on all new mortgages, making the purchase of homes more costly, thereby prolonging the housing slump.

The Bottom Line: In all of your money matters, this is a time to stay CONSERVATIVE. Turn off all of the business cable networks and check Dolans.com every day for our advice to help you through these tough times. It may not seem like it sometimes, but the financial markets and the economy will recover. We'll get through this together and help you make sure that you have the funds to benefit when that happens!

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