Wall Street Hits Main Street

For the most part people aren't sure exactly how this economic crisis will directly impact them. As I have said many many times I love Suze Orman. I also listen to Ric Edelman's weekly radio show online. I also like Michelle Singletary at the Washington Post. Personal finance has been one of my personal hobbies/personal growth areas since about 2005 when I bought my house. I read a lot of books, magazines, blogs and online articles on the topic. Below is the list of ways I have learned that we will be impacted on an individual basis.

1. Layoffs
I blogged several months ago about what it was like to have to layoff some of my co-workers/friends. And we are still feeling the impact of the loss and restructuring. But the job losses are not over. A staggering 2.6 million jobs disappeared in 2008 and the pain is only getting worse with 11 million Americans out of work and searching. Unemployment hit a 16-year high of 7.2 percent in December and could be headed for 10 percent or even higher by year's end. I have said this several times. Job security no longer exists. All of us are vulnerable.

2. Credit Card Limits Reduced
Even if you have a high credit score and a blemish-free payment history, your credit limit may have been cut. Credit card companies are trying to reduce their risk. The easiest way to do that is have less credit available to their customers.

3. Limited Student Loan Lending
It's not just banks and mortgage lenders that are suffering. The student loan industry is in crisis. Private lenders are going under and some state agencies and large banks, including Bank of America and Wachovia, have stopped issuing student loans. I know this is happening because my niece is going through this turmoil now.

4. Money Market Mutual Funds Safer
To stave off investor panic after one prominent money market fund "broke the buck," or posted a small decline in value, the government has promised it would cover any losses. Not all funds are covered in the new program, so check with your fund company if you are worried. With this added protection, money market funds are now just as safe as bank savings accounts.

5. More Incentives to Open Bank Accounts
One result of the credit crisis is that banks are trying to attract more deposits. Chase is currently offering $125 (at least in New York City) to open an account with direct deposit. Citibank is beefing up its "Thank You" rewards program. Refer a friend, and Bank of America will give you both $25. Remember, low fees and high interest on savings are more important than one-time incentives when choosing a bank.

6. Easier to Get a Loan With Good Credit
Don't forget, even in the current crisis, banks want to stay in business. So they are continuing to make loans to borrowers with good credit records and plenty of assets. There are good deals on home equity lines of credit and businesses have found short-term loans easier to come by since the bailout talks began.

7. Harder to Get Loan if You Have Weak Credit
If you have a tarnished credit history, don't expect to get a loan any time soon -- even if you're willing to pay high interest rates. Banks continue to tighten their lending standards as the credit crisis deepens.

8. More Store Deals
The results are in and the stores did not meet their projections during the holiday sales. So expect to find even more deals and steals.

9. Investment Returns Are Down
We all know the stock market is down. Just look at the returns on your 401K. The worst thing you can do is panic and sell at the bottom. Instead, make sure your investments are diversified and use the upswings to sell some stocks if you realize now that you've taken on more risk than you can handle.

10. Stimulus plan tax provision
One tax provision would provide a $500 tax cut for most workers and $1,000 for couples, at a cost of about $140 billion to $150 billion over two years. The individual tax cuts may be awarded by withholding less from worker paychecks, effectively making checks about $10 to $20 larger each week.


Has anyone else identified other ways we will directly be impacted by the current economic crisis?