Nickeled and Dimed

If this is your first time visiting Nickeled and Dimed you may want to see what we are about , read about me, or read our introductory post.

In Cleveland, Ohio, 133 homes sold for $1 in 2008.  In Detroit, Michigan banks have resorted to paying investors to take foreclosed houses off their hands.  Combine that with interest rates being five percent or lower and the $8,000 homebuyers credit and there has never been a better time to purchase a home.

The deals don’t end with real estate.  The auto industry is also being forced to offer incredible deals in an attempt to move inventory.  Toyota is offering zero percent financing on 11 different models. Hyundai is offering to make your payments for three months if you lose your job.  No matter where you look, you will find good deals right now.  Restaurants, grocery stores, air lines, hotels, amusement parks, sporting events and nearly anything else you can think of are all offering incredible specials right now in an attempt to keep sales up during the recession.

But if all these great deals are out there, why are people still not buying?  Because very few people were financially prepared to take advantage of the recession forced yard sale.  Instead, they are finally getting around to paying off their debt and building emergency funds.  It’s great that our savings rates are finally rising, but had we had our finances in order before the crisis we would be able to take advantage of one of the biggest buyers markets of all time.

Here are a few ways we can make sure we are prepared to take advantage of the next economic downturn:

Pay off debt

Debt is never good, but it is an even bigger killer during a recession.  Not only does it suck up cash flow that could be used to take advantage of the great deals, it also puts you at risk of having your credit lines decreased or taken away all together.

Being free of all consumer debt during a recession will both limit your risk of being effected by it and increase your chances of profiting from it.

Build as big of an emergency fund as possible

While most personal finance experts will tell you a three to six month emergency fund is adequate, if you want to be in a position to take advantage during a recession you should aim higher.  Most people run a much greater risk of losing their jobs during economic downturns and will likely take much longer to find a new job if they are laid off.  Thus, a larger than normal emergency fund will be needed to protect you from extended unemployment.

By saving a year or longer emergency fund you can protect yourself from job loss and put yourself in a position to spend money guilt free.

Raise your FICO score

During recessions banks and other lending institutions become much more stingier with their money.  Instead of lending money to anyone who walks through the door, only the most credit worthy applicants are approved for loans.  Your FICO score will almost single handedly determine your credit worthiness.

Your FICO score will determine whether or not you get to participate in the next yard sale.  Improve yours and protect it at all costs.

Make yourself indespensible at work

Job loss, or the threat of job loss, is the biggest reason for not spending money during a recession.  Make yourself indespensible at your job and you will remove this barrier.  Whether it is switching jobs to a recession proof field (healthcare, etc.) or simply increasing your importance at your current job, you have the ability to significantly decrease your chances of losing your job during recessions.

If you are secure in your job you are free to spend more money during an economic downturn.

For most of us, survival is our goal during this financial crisis.  Just being able to put food on the table is the top concern for many.  But by preparing our finances before the bad times hit, recessions can be used to boost our lives instead of inconveniencing them.

Survive this recession.  Use the strategies above to prosper during the next one.

Please continue sending me any personal finance related questions, suggestions and story tips to josh@nickeledanddimed.com.

 If this is your first time visiting Centsability to Wealth you may want to see what we are about or read our introductory post.

We all know the housing market is in the toilet.  You may also know that this past April congress implemented a $7,500 tax credit to first time homebuyers (first time homebuyers are defined as not owning a home in the last two years).  This credit was to be paid back, interest free, with 15 yearly payments of $500.  The idea was to stimulate the housing market and get people to start buying homes again.  Obviously, the goal wasn’t accomplished.

Now Congress is back at it, and they are upping the ante this time.  As part of President Obama’s stimulus package, the Senate yesterday voted to double the homebuyer tax credit to $15,000 (or 10 percent of the purchase price, whichever is less)!  They will also drop the restriction of being limited to new buyers and will get rid of the payback obligation.  And in order to keep investors from taking advantage of the plan, you will forfeit the credit if the house is sold within two years of buying it.

$15,000 is a whole lot of money.  Will this new, larger tax credit do more to boost the housing market than the first one did?  I have no idea.  But it is certainly making me consider buying a home this summer. 

With our apartment lease ending in June, Courtney and I will soon be looking for a new place to live.  Originally we were set on renting for another year, but this latest development may change things.  With prices at all-time lows, and now what is basically a $15,000 discount being added in, would it even be wise not to buy now if we know we will be buying sometime in the next two or three years?

What about you guys?  Would this new tax credit make you any more likely to buy a house this year?  Do you think people should factor it into their decision to buy or rent?

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com

Technorati Tags: personal finance, homebuyer tax credit, housing market, congress, senate, president obama

 If this is your first time visiting Centsability to Wealth you may want to see what we are about or read our introductory post.

The State of California has currently in the midst of a major budget crisis (who isn’t in some sort of financial crisis right now?).  In their latest attempt to make ends meet, the state has decided to withhold tax rebates from their citizens.  Without some sort of bailout, the future looks pretty grim for the state of California.

Recently, California received an offer for that bailout from an unlikely source.  The marijuana producers and distributors in California have volunteered to pay taxes on their illegal operations in an effort they claim would provide the state with at least a billion dollars in additional revenue.  Here is an excerpt from their site:

California is in trouble (again) with its budget. As this is written (August, 2008), there are plans to cut one billion dollars from important rapid transit projects. There are also plans to cut back welfare for the elderly and disabled and to cut back drug treatment programs for prisoners. Cutting back on important programs will simply cause more problems in the future — with higher demands on the budget.

In order to try to make up the shortfall, the state of California is in negotiations with Indian casinos for a portion of casino revenues. The amount of money to be gained is between $200 million and $500 million per year. However, this battle has been going on for years with no quick resolution in sight — and it wouldn’t fill the budget gap, anyway.

We offer a solution.

The producers and sellers of marijuana offer the state of California at least one billion dollars in additional tax revenue every year – and nobody is arguing.

What will this do?

• It can fill the current California budget gap all by itself. No more disputes about what to cut and the legislators can take the summer off.
• It can fund rapid transit.
• It can fund welfare for the elderly and disabled.
• It can fund drug education programs in schools and other drug abuse prevention efforts.
• It can fund prisoner treatment programs, thus reducing crime and saving even more tax dollars in the future.
• It will stop needless prosecutions of sick people for marijuana offenses.
• It can provide for safe and well-regulated medicinal marijuana supplies for the sick.
• It will stop the transfer of billions of dollars per year to foreign criminal gangs.
• It will boost local economies.
• It will get marijuana out of the criminal underground.
• It can provide for regulations on product quality, content and warning labels, and product liability insurance.
• It will save billions of tax dollars currently spent on useless criminal prosecutions for marijuana.
• It will free up police and courts for addressing real crime issues. 
• It will help the balance of foreign trade and boost the value of the dollar internationally.

The Marijuana Producers and Distributors of California make a simple request:

TAKE OUR MONEY PLEASE!

Now before I get into my opinion on the matter, let me say I do not use marijuana nor does anyone in my close circle of friends and family.  So I have no agenda here. 

With that said, I think legalizing marijuana is a phenomenal way to not only help get us through this severe recession, but to also wipe out our enormous federal deficit.  Aside from the multi-billion dollar tax revenues the government would receive from marijuana becoming a cash crop, legalizing it would also save billions of dollars in the costs of enforcing the laws against it and prosecuting (and imprisoning) those who violate the laws.

I realize this is a “touchy” subject.  There is no doubt that marijuana is harmful to those who use it.  But is it any more harmful (or addicting, for that matter) than alcohol?  Most studies suggest that it is not, and that in fact alcohol may be the more harmful of the two.  Here is one link suggesting this.  Simply google “alcohol vs. marijuana” and you will find countless others that say the same.

I understand this is a slippery slope.  “Where does it end” is a fair question in this debate.  For example, once we legalize marijuana, is cocaine next?  Heroin?  Acid?  This is something we would have to clearly establish before the move is made.  Where is the line drawn and what is off limits for this legalization.  We would also have to put restrictions on it similar to alcohol, with an age limit, etc.

Whether you agree with the legalizing marijuana or not, one thing is very clear in this matter, we are losing the ”war on drugs“.  In my opinion, if the people who want to smoke marijuana are going to do it whether it is legal or not, and there is evidence to suggest that it is not more dangerous than other drugs that are currently legal, why should the government not earn significant money off it?

What are your thoughts?  Do you think this is something that should be seriously considered?  Are you comfortable with legalizing marijuana if it meant a strong boost to our struggling economy?

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com

Technorati Tags: economy, legalizing marijuana, California budget crisis, taxes, personal finance, money

Lately there has been a lot of debate about whether the United States will continue in deflation or if it will soon turn to massive inflation. 

I’m sure most of us know that inflation means rising prices while deflation means falling prices, but beyond that they have a profound effect on our economy, both on a macro and micro level.  While neither would ever be considered good, they have very different impacts on our finances.

Here is a more thorough look at each and how they effect us:

Inflation

Inflation is a sustained increase in the level of prices for goods and services.  As the level of inflation rises, the value of your money decreases.

What inflation means to your finances- Inflation beyond the standard level is basically like taking a pay cut at your job.  As inflation increases, your purchasing power decreases.

As a simple example, let’s look at pizza.  If a pizza cost $10 before inflation and you made $100 a week, you could buy 10 pizzas a week if you wanted to.  If during a period of inflation the cost of pizza rises to $20 and your wages do not increase, you can now only buy 5 pizzas a week. 

On a micro level the only way to combat inflation is to increase your earnings.  If the value of your dollar increases, you simply need to make more dollars to counteract this.  Inflation is especially hard on your savings, as any money stashed in accounts with a lower interest rate than the level of inflation will immediately begin to lose value with no way to combat it.

On a macro level, inflation is a redistribution of wealth from the poor and midde classes to the upper classes.

One group that may benefit from inflation is those in serious debt.  In times of sudden, rapid inflation debts essentially become interest free.

Deflation

Deflation is characterized by a sharp decline in the general level of prices for goods and services, often caused by a reduction in the supply of money or credit.

What deflation means to your finances- On the surface, deflation may not seem like such a bad thing.  The idea of significantly lowered prices for goods and services might even seem like it would be good for your finances.  But deflation is nasty on an economy.

The largest side effect of deflation is unemployment.  As prices fall, business make less profits and are forced to cut employees and/or eventually go out of business.  This is what happened during the great depression and this is what our country is seeing now as you can’t turn on the news without hearing about the lastest job losses.

On a micro level, deflation effects every social class equally.  While inflation typically takes money from the poor and middle class and redisbributes it to the wealthy, deflation takes money from everyone equally.  However, if you are financially responsible, have the money to buy, and are lucky enough to have job security, deflation is a great buyers market. 

On a macro level, deflation is a disaster.  It completely stalls the economy, creates historic levels of unemployment and can eventually to recessions into depressions. 

Which One Should We Be Rooting For?

Obviously the real answer is that we don’t want either, but let’s assume you have to pick a horse in this race. 

From a personal stand point, there could be reasons to root for deflation over inflation.  As I said before, it can be a great time to buy, especially large items like cars and houses, for those that can afford to do so.  But if you are concerned with the economy as a whole, inflation is much less damaging.  And it is hard to argue that we are all better off when the economy is better off.  Inflation is generally a sign of a growing economy while deflation is a sign of a stagnant one.

I’m not sure whether our immediate future holds more deflation or a shift to rapid inflation, but I do know that either way I’m going to keep paying off my debts and saving.  Inflation and deflation are temporary phenominas.  They come and go.  Getting yourself in good financial shape is a move that can help you fight off both, or at least make the damages from them minimal.

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com.

Technorati Tags: inflation, deflation, economy, personal finance, unemployment, money

This is the second in a two part series on what the country would look like if everyone suddenly became financially responsible (click hereto read part I).  If this is your first time visiting Centsability to Wealth you may want to see what we are about or read our introductory post.

Yesterday we talked about the short-term consequences of the entire country suddenly becoming financially responsible, and it wasn’t pretty.  With people choosing to pay off all their credit card debt, save for retirement, build adequate emergency funds and make all the other financially wise decisions, the country begins to lose millions of jobs.  The historically high unemployment creates unseen levels of crime and hikes in taxes.

Despite all this, people kept being responsible with their money, with the belief if we could make it through the initial horrors, our long-term future would look much better.

We made it through.  Barely.  Here’s a look at the long-term future of our new, financially responsible economy:

The Job Market

With people saving at least 10 percent of their salary for retirement, the age at which people retire begins to go down significantly.  Soon, most people are retiring in their 50’s.  This helps create a consistently stable job market with positions opening every year for the next wave of workers.

And with people taking control of their own finances, the government begins to save billions of dollars on welfare and unemployment, which they use to infrastructure and energy projects.  This creates even more jobs.

In time, job placement for all college grads nears 100 percent.

The Housing Market

With people only buying as much house as they can afford, and making wise purchases, home prices begin to stabelize.

With no more speculative real estate investing, emotional buying or ARM loans that get janitors into $500,000 houses, the wild swings in home prices cease to exist.  A steady five percent appreciation is seen in nearly all homes.

Those who can afford to buy a house save for a 20 percent down payment and then purchase one within their price range.  Those who cannot afford to buy a house, rent (and pay their rent on time each month).

Other than a few random cases, foreclosures become a thing of the past.

Social Effects

Since financially responsible people are much more likely to tithe, charitable organizations begin to thrive to the point that the government no longer has to help.  Welfare and unemployment are now run through charities with little government involvement and very few people in need of using them.

Poverty is mostly eliminated and while there is still a wide gap between the top and the bottom of net worth spectrum, the difference is shrinking.

Not to be confused with socialism, this new economy still rewards people based on their individual abilities and work ethic, however people unable to make a large income are able to over come their fate with wise financial decisions.

As a result of cutting poverty, crime sees an enormous decline.  Not only does this allow people to feel more secure it again reduces taxes due to needing less law enforcement.

Summing Up

This little two part series on what the economy would look like if we all became financially responsible is based on nothing but my own opinion.  While I do think a lot of it is very realistic, it’s impossible to know what would actually happen  and I am not an economist.

But the point of this is to show that it may not necessarily be a good thing for everyone to become frugal.  Yes, the long-term forecasts look good, but in my opinion the short-term ramifications would be too much to overcome.

The point is that capitalism needs a balance of spenders and savers to survive and thrive.  While I will certainly be doing every I can to become financially responsible and encouraging others to do the same here, it will only work if others continue to spend money.

We are currently seeing the results of what happened when our economy went too far towards the spending spectrum.  A dramatic shift the other way could be just as devasting, or worse.

Please continue sending any personal finance related questions to centsabilitytowealth@gmail.com.

Technorati Tags: personal finance, economy, money

This is the first in a two part series on what the country would look like if everyone suddenly became financially responsible (click here to read Part II).  If this is your first time visiting Centsability to Wealth you may want to see what we are about or read our introductory post.

Every day on Centsability to Wealth we discuss being financially responsible.  From living within your means to paying off debt to saving for retirement, all of us here are striving to be as responsible with our money as we possibly can.  But what if everyone became financially responsible?  Specifically, what if everyone in the United States did the following:

• Paid off the entire balance of their credit card each month.
• Saved at least 10 percent of their income towards retirement.
• Built an adequate emergency fund.
• Bought only what they could afford.

Could Capitalism survive on a population of “savers”?  In a two part series we will examine what the country would look like after such a transformation.  Today we will discuss the short-term, tomorrow we will look at the long-term.  Keep in mind that the results I talk about are based strictly on my opinion and are entirely hypothetical.

Short-term- The Collapse of the US Economy

The short-term consequences of a nation suddenly shifting to being “thrifty”, especially one like ours that has been based so much on spending and debt for so long, would be massive and felt in nearly every sector. 

Unemployment

First and foremost, unemployment would rise to Great Depression levels or higher.  Several industries that employ massive amounts of people would be wiped out by a nation of responsible spenders.  Here are some of the industries most effected:

• Credit Card Companies- Since people are no longer carrying credit card debt, the only profits credit card companies are making are the two percent merchant transaction fees.  They are forced to either drastically change the way they do business, or go completely under.  Either way, enormous amounts of people lose their jobs.
• Pay Day Lenders- This industry thrives off the financially irresponsible, charging triple digit interest rates in order to help people spending beyond their means continue living pay check to pay check.  So when the nation shifts to saving and investing, they are completely wiped out.  And for a business growing faster than fast food restaurants, this means another gigantic hit to unemployment.
• Auto Industry- Already hanging by a thread, the new, frugal version of America puts the nail in the coffin for the auto industry.  With people now waiting five to seven years before buying a new car, and mostly going for used cars when they do buy, auto manufacturers are forced to drastically cut production and lay off significantly more people.
• Fast Food Restuarants- With people scrambling to cut expenses anywhere they can, they start packing lunches for work and cutting out trips through McDonalds drive through.  The fast food industry is forced to close large numbers of restaurants and yet more jobs are lost.

The Housing Market

After seeing millions of jobs lost, an historically bad housing market sees the bottom completely drop out.  Not only do foreclosures begin to double and triple, the renting market also falls out.

As a result of losing their jobs, people can no longer afford to rent homes, much less buy them.  The number of homeless people rises to an all-time high and the lack of home buyers and renters pushes the job losses even higher in the housing sector.

Soon, it is not uncommon to see entire neighborhoods vacant.

Crime

With job losses through the roof, and so many people now fighting to survive, crime rates begin to significantly rise.  While this does create a temporary increase in law enforcement jobs, it also deepens the economic woes severely.

People who are already not going out as much due to being more responsible with their money nearly stop going out all together as the threat of crime increases.  Even less money is spent, and you guessed it, more job loss.

The unbelievable number of people who are now homeless are forced to break into vacant houses and cars in an attempt to survive.  Looting becomes more and more common as stealing becomes some peoples only way to eat.

Taxes

The large increase in law enforcement needed to fight the rise in crime causes the first wave of tax increases.

Next, the massive amounts of people collecting unemployment benefits forces a further hike in the tax rate.  When unemployment can no longer support the unemployed, the government is forced to create more assistance programs, and again raise taxes.

Soon, those fortunate enough to have a job are lucky to be taking home 50 percent of their pay after taxes.

Summing Up

In short, the short-term effects of the entire nation become financially responsible are devastating.  The level of unemployment alone could be enough to break the economies back for good.  Those who do survive the job cuts are forced to spend a huge portion of their salary supporting those who weren’t.  The threat of crime eliminates most venues of entertainment outside the home.

Tomorrow we will look at what the long-term future of the new economy would look like if we were able to survive the horrific short-term.

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com.

Technorati Tags: personal finance, economy, money, unemployment

Once a week I will run an “open mic” segment where I will post a question emailed by a reader of the site and attempt to answer it to the best of my ability.  I encourage everyone to also participate in the question by posting answers or additional questions in the comments.

Todays question comes from Anna Roberts in Salt Lake City, Utah.

I am a 66 year old wife, mother and grandmother of eight.  Now that my husband is retired, I want to be smart about our finances, but I also want to continue doing special things for my kids and grand kids.  My question is with the current financial crisis should we all be looking out for ourselves and putting as much money away as possible, or should we be doing our part to turn things around by spending money on ourselves and our loved ones to try and boost the economy.

This is a question I hear a lot lately, should you be doing your part to boost the economy by spending money, or should you be saving more than ever.  The answer, as always, depends on your own situation.

If you are in great economic shape, have your debt paid off, an emergency fund saved and your retirement accounts fully funded, right now is a great time to buy almost anything.  If you have been looking and saving to buy a house or car, there has rarely been a better time in US history to do it.  With interest rates at historic lows and prices falling at an alarming rate, right now is a phenomenal time to purchase a big ticket item.

If you are one of the few people lucky enough to be in financial shape, right now is the time to loosen the frugal belt a bit.  I’m not saying to abandon all the princepals that got you where you are, but if you find a good deal, don’t be afraid to take advantage of it.  Eventually this country will have to start spending again and the financially responsible will have to lead the way.

If, on the other hand, you are not in great financial shape, you should ignore the pundits on TV advocating you to spend and continue on your frugal path.  Before you can worry about the macro economy you have to get your own micro economy under control.  The economy will recover at some point.  By spending beyond your limits in an effort to help, your personal economy may not.

Your needs come before the economies needs.  Always look out for yourself first.  Be honest with yourself and assess your situation.  Are you in a position to start spending a little more money than normal, or do you still have work to do with your finances?

If you have the extra money, spend it.  Take advantage of the fantastic deals and get something you have always wanted.  If you don’t have the extra money, let this be further motivation to become financially free so that the next time an economic crisis hits (and there will be a next time) you are prepared to take advantage.

What advice do you have for Anna?  Are you changing your spending habits in this buyer friendly economy?

Please continue sending us any questions, suggestions and story tips to centsabilitytowealth@gmail.com

Ben Steverman has an excellent article in BusinessWeek called 20 do’s and don’ts for 2009.  After interviewing several of the top financial advisers in the country, Steverman compiled this list of 20 things you should, or should not do with your personal finances in 2009:

1. Don’t try to predict the future.

We are in the midst of an unprecedented market, Steverman says.  Trying to predict the bottom of this market, or an individual stock especially, is a sure way to lose money.  Instead, continue making steady contributions to your investment accounts.

2. Do keep enough cash available.

Here Steverman advocates something Centsability to Wealth believes strongly in, an emergency fund.  “With extra cash available”, Steverman says, “you can avoid selling investments to pay for expenses in an emergency”.

3. Do invest internationally.

International markets have been hit even harder than ours.  And some, like China, still have very promising long-term outlooks.  Steverman argues that this is not the time to bail on your foreign investments, in fact, it may be the time to add more.

4. Don’t try to pick one winning investment. Diversify.

With prominent companies going under left and right, now is not the time to put all your money in one stock.  Stick with the time tested strategy of diversification.

5. Do think about energy efficiency.

Financial advisor Russell Francis recommends taking advantage of $500 energy tax credit that can be used to cover the costs of making your house more energy efficient, by adding more insulation, replacing doors and windows, etc.  The credit was rescinded in 2008, but is back for 2009.  Basically the government will pay you to save money on your energy bills.  Definitely something to look into.

6. Don’t stop contributing to 401(k) and other retirement accounts.

If you have at least ten years before retirement, this is a great time to be investing in your 401k.  The article has a great quote from advisor Sidney Blum, “more money is made at the bottom of a market than the top”.  Amen, Sidney.

7. Do live below your means. Save.

You can only invest if you have money left over each month.  Continue to look for ways to spend less and save more.

8. Don’t make sudden moves.

Decisions based on fear and emotion aren’t good for your finances.  Steverman recommends ignoring day-to-day news and focusing on your long-term investment plans instead.

9. Do pay off expensive debts.

Not many investments are offering the 7 to 20 percent return you can save in interest payments by paying off credit card or car loan debt.  Before you get serious about investing, plug the holes in your boat by paying off debt.

10. Don’t give up on stocks.

“Historically some of the best periods for stock market returns have been during dismal economic times,” says Paul Winter of Five Seasons Financial Planning in Salt Lake City.  Stocks are on sale, they aren’t toxic.  Take advantage of sales on stocks as you would a sale on anything else.

11. Do track your spending.

You can’t cut your spending if you don’t know what you are spending your money on.  Keep thorough records of your spending.

12. Don’t pay high management fees.

It doesn’t matter how high the return on your portfolio is if your fees are eating all the profits.  And in a down market like this, fees can really bite you.  Shop around for the lowest management fees available.

13. Do review your credit reports.

Your credit score may not have ever been as important as it is today.  With an excellent credit score you can borrow money practically for free right now.  Mortgage rates are at historic lows and cars are offering zero percent financing on virtually anything.  But with a less than great credit score you could be left on the outside looking in.  With lenders cutting down you may find it very difficult to get a mortgage at all right now, much less a good rate.  Watch your credit score and do what it takes to get it to the top level.

14. Don’t follow the herd.

Steverman uses my favorite quote from Warren Buffet here “Be fearful when others are greedy, and greedy when others are fearful”.  Don’t jump ship on your investments just because everyone else is.  Instead take advantage of people selling at such low prices and invest more.

15. Do write down an investing plan and budget, and stick to them.

Like we talked about with goals, Steverman highlights the importance of having a specific plan for your finances and sticking to it.

16. Don’t forgo necessary insurance.

Skimping your insurance coverages is not the proper place to save money.  Make sure you are properly protected against worst case scenarios.

17. Do check out your financial adviser.

With more money managers looking like crooks everyday, you would be wise to do a full investigation on anyone you have managing your money.  Ask proper questions and look them up on online databases.  Steverman says the Financial Industry Regulatory Authority’s BrokerCheck is a good place to start.

18. Don’t invest in anything you don’t understand.

Do your homework.  Don’t just invest in a hot stock tip.  Know what your money is going into.

19. Do make sure safe investments are actually safe.

Make sure your bank accounts are federally insured to cover the full amount of money you have in them.  If they aren’t, change accounts.  More bank failures are coming.  Make sure you are protected if your bank comes next.

20. Don’t take more risk than you can handle.

While this is a great time to invest, you should not try to make up all your losses with one move.  A classic mistake is “following one investing mistake by making an even bigger one.”, Steverman says.

Following these 20 dos and don’ts for 2009 will give you a good basis for your financial decisions.