How to Protect Yourself During the Current Financial Crisis

The current state of the American economy is very scary. In the last couple of decades, Americans have learned how to buy everything with credit. No one saves for a house anymore. No one saves for a new car. No one saves for a shopping trip to the mall. Everything we purchase now is usually with credit. Think about it- when was the last time you went to the grocery store or the mall and witnessed someone paying with cash?

We have learned to live outside of our means. We have taught our kids, albeit not on purpose, that if you have credit cards, that means that we have money for anything, including dinner out. My son thinks that we can "charge" dinner. He does not understand that anything we "charge" will have to be paid back- sometimes with high interest. Unless you pay your entire monthly credit card bill, you will be hit with interest incurred from every single purchase. Most people have over extend themselves- from charging daily living expenses to mortgaging a house they can not afford.

Suzy Orman recently stated a few tips to help everyday consumers:

Do not panic. Do not pull your money from your bank, cash in your retirement or sell stocks. You should stay calm. This is a hard economic time, but you will get through this tough time. Keep in mind, you can not control what the government does, but you certainly can control your own actions.

Check every institution that your money is in. Make sure that your money is safe. In order for your money to be safe, it needs to be in an FDIC insured account. Examples of FDIC insured accounts are banks, money market accounts and also money market deposit accounts. You will never lose any of your money in an FDIC insured account.

If your money is in a credit union, make sure it is insured by NCUA. NCUA is the National Credit Union Administration. NCUA works just like the FDIC. NCUA insures 98% of all the credit unions. Only 2% are not insured by NCUA, so you need to make sure your is.

If you choose, you can also move your money into a government backed account. Some examples of government backed accounts are treasury bills or treasury money market accounts. Treasuries are safe because they are backed by the United State Government. Since it is government backed, you will never lose your money. If necessary, the government will either print more money or raise taxes to make sure your money is paid back to you. These are as secure as it gets.

Pay down your credit card debt. Because of the financial crisis, a lot of credit card companies are going to be shrinking all account holders' credit limit. Never be late on your credit cards. If you are late, even one day, your credit score will go down. If your credit score goes down because of a late payment, any company that you have a credit card with has the ability to raise your annual percentage rate, simply because you were late on one card.

Never cancel insurance. Health, life and car insurance are necessity. Think of the repercussions if something happens to you and you do not have insurance. That is a big no-no.

Do not stop investing in your retirement plans. Keep contributing to your retirement accounts, as you were prior to this meltdown.

Finally, stop spending money on what you can't afford. Use cash only. People who respect money and pay their bills tend to respect themselves more. Cashers (people who only use cash) have a better quality of life. If money is tight, only spend money on necessities, not wants or needs. Now is not the time to splurge on anything you can not afford. Change your thinking today to be better off tomorrow.