Fed Cuts Interest Rates: What to Do Now

It's official. The panic in the U.S. markets has joined all of the other U.S. exports overseas. For the first time in history, a group of the world's Central Banks joined in unison to lower interest rates.

Has it helped? In a word, NO!

Frozen lending cannot be thawed in a day. Lending has dried up because of lack of trust. If I lend money to you today, can I trust that you will still be there tomorrow to pay it back? All the dead wood of insolvent businesses and consumers will have to be cut away before that crucial trust can return.

We also can't help buy shake our heads at the irony here. It was loose lending that created these problems in the first place. So, who in their RIGHT minds could possibly think more lending will solve them?

Cutting interest rates to 1.5% - the lowest in four years – will not stem the tide. This concerted effort on the part of central banks is a reactive move. What's needed is a pro-active one: someone with the intestinal fortitude to go in and get in front of the train … not get behind the caboose and pull, which is what the government is currently doing.

So what should you do in the wake of this move?

1. Ignore the financial pundits who tell you to not look at your 401(k) statement. Look at it! $2 trillion is gone. You need to stop the loss of blood. Find safer alternatives within your plan.
2. Don't chase yields. We understand that this latest Fed move punishes savers, but beware of come-ons for unusually high interest rates. Be thankful that you still have cash. Remember it is return OF capital and not return ON capital that really matters now.
3. Expect higher tax rates next year. The government is printing so much money in a panic effort to hold back the tide that we all will have to eventually pay for it. Across-the-board tax increases are just around the corner. So, talk to a tax preparer NOW to help you weather a bigger drain on your income next year.
4. Start living within your means. Too many people went overboard with easy credit over the past six years by buying "stuff"… and stuff doesn't matter. It wears out; it breaks; it becomes out-dated. Hold your family closer and you'll be much the better for it.

Dolan Bottom Line: Now is the time to make smart moves with your money. You know we give it to you straight – you should be concerned. But that doesn't mean you should be scared. Here are 7 ways to protect your money now.

Keep checking in with us at Dolans.com, and we'll be in touch regularly with the latest news to guide you every step of the way!