With the constant fluctuation of economic indicators, often conflicting advice of leading investment gurus, and the legal battles of Wall Street, even the savviest investors are looking hard at their portfolios and re-assessing risk. Consumer indicators are shaky, unemployment (though stabilizing) is at historic highs. But smart investors still have options, and it usually makes a lot more sense to invest your cash wisely rather than hiding it under the mattress. Remember to keep some assets liquid for financial security, although most of the options below have a very short time frame if you need to convert to cash. A carefully researched, planned approach can help you earn a return on your hard earned dollars without getting in over your head.

1. Treasuries (“T-bills”)

T-bills are backed by the government and are considered extremely low-risk investments. These notes are issued to raise funds and pay for government projects, and are some of the most solid investments you can buy. After all, you can choose the maturity date according to your planning needs, and time frames span from several weeks to several years, with varying levels of return depending on the time frame. T-bills are usually offered in increments of $100, and within the past two years the government decreased the minimum investment from $1000 to $100, making these an accessible investment regardless of how much you have to invest.

2. Bond Funds

The principle behind bond funds is basically that of a mutual fund comprised of bonds rather than stocks. Offered by the government and by investment firms, these diversify types of bonds and allow for a higher return. By combining the low risk of a bond with the potential for higher than average returns through different bond vehicles, you get the best of both worlds with a lot of downside protection. Make sure to educate yourself on the types of bond funds as there are a plethora of options out there.

3. Money Markets

Banks are competing hard for your deposited dollars these days, and this is one case where consumers can benefit from the current economic downturn. With so many competing offers, you may snag a higher interest rate on a money market account than some bonds and CD’s. A monkey market account consists of relatively low risk, high quality short term investments (similar in theory to a type of mutual fund). A few caveats- the higher the amount of cash, the higher the rate you’ll likely be offered, and make sure to check to see if the rate is fixed or a ‘teaser’ rate that is only applicable for 90 days (or some other finite timeline). Money market accounts are FDIC insured up to $250,000.

4. CDs

CD’s are notorious for being safe places to stow cash. Rates vary based on time frame, like bonds, but Certificates of Deposit are issued by banks rather than the government, and have a locked interest rate. Typically, there’s only a small penalty if you need to liquidate the CD before it matures. And while rates aren’t as high as the return on stocks or some bonds, it’s still a great way to earn some interest on your cash.

5. 401k/Retirement Accounts

Employer sponsored 401(k) plans offer a place to park pre-tax dollars to help save for retirement. While many employers cut matching contributions during the recession, even a 1% match is free money. Allocate your retirement portfolio according to your risk tolerance. If you’re self employed or your employer doesn’t offer a match, consider a traditional IRA or a ROTH IRA based on your tax needs and years to retirement.

When she’s not watching the DJIA tank, Melissa Tamura writes about online schools for the Zen College Life blog. She most recently ranked the best accredited online colleges.

Hopefully you rebalanced your investment portfolio at the end of 2009 to capture tax losses, but you can do it now if you haven’t already and have those losses for 2010. However, you should look at more than just your portfolio. It’s time to look at all the places you keep money to make you’re not being hit with new fees.

Review Your Checking Account
If you have direct deposit, then you may not worry whether your checking account carries fees. However, some employers don’t offer direct deposit. If your employer is one of them, it’s time to check your account for fees. You should be able to find a fee list online. If not, call customer service and ask. If they charge fees for calls, teller services, monthly account maintenance, low balance, etc., it’s time to move your money. Your first try should be a local credit union, which is probably fee-free. If you can’t find one of those, some major banks offer fee-free accounts. You could even ask your bank if they have one and inform that you’re prepared to find a new bank if they can’t switch you into it.

Review Your Savings Account
I’m not saying you should move your savings account each time a different bank shows a slightly improved rate. You should, however, check this account for fees, too. For example, last year I had to remove my money from Everbank after they more than tripled the minimum balance and doubled the associated low-balance fee. We weren’t in danger of triggering the fee, but we wanted the flexibility and they didn’t offer it.

Review Your Brokerage Account
This is a tricky one, because your investments may be tied up for a short while if you have to move them to a new brokerage. However, you should still check your brokerage account for new “account maintenance fees.” Those fees were one of the reasons I left E-Trade several years ago. They didn’t tell me they’d introduced the fee until they sent me a statement four months after they levied it and then said they couldn’t reverse it because it had been more than 90 days. Even when I said I wanted to close the account if they didn’t reverse the fee, they didn’t budge. So I closed the account and I’m never going back.

Review Your Credit Cards
Credit card companies are cutting limits and hiking fees and interest rates all over the place. If you don’t carry a balance, interest rate hikes are moot, but you need to know if they’ve cut your limit. They should send you a letter when they change your account, but check your account online monthly just to make sure.

Review Your CD Due Dates
If you have any CDs expiring this year, mark the due date on a calendar so you can notify the bank immediately about your intentions. If you wait more than 10 days, the CD will automatically renew and lock your money in for another term unless you pay a high surrender fee.

Check Your Credit Report
While you’re doing all this, why not check your credit report, too? I use annualcreditreport.com to check one free report every four months: January, May, and September.

A once-a-year checkup is a good way to start the year, but always be vigilant about changes to your account because they can happen at any time. The sooner you take action, the less risk of getting hit by a fee.

The end of the year is just over two months away, and at least three weeks of that will be gobbled up by various holidays. So, take the time now to assess what you need to do to maximize your money by the end of the year.

Spend Down Your FSA
If you have a flexible spending account, any unused funds will vanish January 1, 2010. Remember, this is your money that was magically whisked from your paycheck before you received it. To avoid losing it, you need to use it up. So check the current balance and then start scheduling doctor visits, refilling prescriptions, and stockpiling supplies. Review your plan to make sure which appointments/purchases qualify.

Reassess Next Year’s Contributions
Take a look at your budget and expenses. Did you need to scramble to use up the FSA funds? Then perhaps contribute less next year. On the other hand, does anyone in your family have a major medical expense coming up? Maybe you should increase it. Look at it this way, you’ll spend this money either way. If you put it in an FSA, it will reduce your tax base and actually save you money.

Take Stock of Your 401K
If you stopped contributing during the crash, take a good look at your accounts and see if it’s time to get back in. This is also a good time to rebalance your portfolio. The economy has drastically changed – it might be time to get out of some sectors or into others. If you hold a variety of mutual funds, see if one has grown faster than the others and is now out of balance.

Estimate Your Taxes
If you’ve received a raise, run a small business in your spare time, had a major life change, or a major life issue, take a look at your tax bill. You can go to IRS.gov to use the withholding calculator. It’s not perfect, but it will give you an idea of whether you’ve under- or overwithheld. If it’s the former, change your W-2 to withhold additional funds and avoid a penalty. If you’re latter, decide whether you want to that money back now, and change your W-2 to withhold less, or plan ahead for how you’ll use that refund when it comes.

Maximize Your Tax Deductions
If you’re going to owe more than you thought, look into maximizing your tax deductions. For example:

  • See if you have any real stock losers that you can write off against capital gains or $3000 of ordinary income.
  • Are you just shy of the 7.5% of AGI minimum to deduct health costs from your taxes? Go see the doctor. If you have something big coming up next year that will put you over the limit, delay all other health costs until next year, too.
  • Are you debating whether to buy a car now or in January? Buy before the end of the year for that one-time new car tax deduction.
  • Make a few charitable donations or clean out your house and donate the decent stuff to a charitable thrift store.
  • Take advantage of Cash for Appliances. Upgrade your HVAC or water heater to also take advantage of the related tax credit (make sure it qualifies for both, first.)

If you listen to news radio for any length of time, you’ll hear several commercials touting gold as the current best possible investment. As a guaranteed way to protect your money and the safest investment ever. So should you invest in gold? The simple answer is yes, but not the way these people are suggesting.

Gold’s Place in Your Portfolio
If you have a well-rounded portfolio, then gold and other precious metals have a place in them. Because they generally move against other investments, they’re considered a hedge against inflation. It should not be your entire portfolio, nor should you aim to own a big pile of gold unless you like looking at it.

Does Gold Lose Value?
Like any other investment, gold can lose value, and in fact has lost value. Because its value is based in US Dollars, the price of gold has risen and fallen over time. Its price is influenced by world events, inflation, and current market sentiment. In fact, gold lost significant value between 1980 and 2008. If you bought gold bars or coins in 1980, you probably still haven’t fully regained the value relative to inflation.

How to Invest in Gold
There are four primary ways to invest in gold: gold coins, gold exchange-traded funds, gold mutual funds, and gold futures.

Gold Coins
If you want to personally possess your gold, then you need to buy gold coins or bars. The advantage is that you own the physical gold. The disadvantage is that it’s more difficult to quickly trade.

Gold Exchange-Traded Funds
Gold ETFs buy gold and hold it for its investors. You then buy shares in the fund as you would any other fund. This is significantly easier to buy and sell, but you don’t directly possess any gold.

Gold Mutual Funds
Gold mutual funds generally invest in precious metal mining companies, rather than the metal itself. It’s a stock fund like any other stock fund, but one that focuses on a specific market segment. If you have a diverse portfolio, you can include gold and precious metals as one segment.

Gold Options and Futures
Gold is traded on the commodities market like oil and other resources. You can trade on the expected future value of gold, however this activity should be reserved for experts only. It’s very risky and you can easily lose money.

Will Gold Protect You in an Emergency?
Many people are touting gold as a way to possess a liquid asset in a major emergency or global meltdown. The idea is that gold has intrinsic value and therefore can be used to buy things if the dollar is severely devalued. Personally, I see a couple of problems with this theory.

First, most people don’t own or understand the value of gold. A store clerk isn’t going to accept your gold krugerrand in exchange for a bottle of water. Most banks won’t exchange gold for cash – it must be sold to a dealer, which doesn’t make it truly liquid. If the dollar collapses, you’ll have to learn to barter your gold for goods, but no one will agree on what it’s worth. In addition, people may doubt whether a gold coin or bar is real. We can estimate the value of gold jewelry, but we’re not used to looking at it and valuing it in monetary form.

Second, and this gets pretty theoretical, but ultimately gold has no intrinsic value. It’s a hard lump of stuff that comes out of the earth. You can’t make fire or energy with it easily. Therefore, it really only has a representative value. Europeans looked at gold and decided it was worth something. The Mayans looked at cocao beans and decided they had value. In order for an object to be useful as a medium of exchange, it must have an artificial value placed upon it. Gold, and all other precious metals, are currently valued in US dollars and the price rises and falls on the spot market in relation to other factors increasing or decreasing the demand for gold. If the economy collapses, the spot market may not continue to exist, which would eliminate the primary method of attaching value to gold.

If you’re going to hoard something in expectation of a disaster, hoard food, blankets, and other items you can actually survive on. Gold won’t keep you warm at night. However, if you just want to diversify your portfolio, then a 5% stake in a precious metals is something to seriously consider.

I’ve purposely not looked at my 401K account this week. I did check it a month ago to see if I needed to rebalance. At that time, I’d lost 2% less than the broader market and was well-diversified, so I didn’t change anything. I still don’t plan to. There are still a few things you should do about your investments during this crisis, however.

Don’t Panic
I know it’s hard, but panicking won’t do you any good. There’s absolutely nothing you can do to fix this and there’s no stock you can buy that is guaranteed to reverse your losses right away or avoid additional losses.

Invest in Index Funds
If you hold individual stocks in your retirement accounts, it might be time to move that money into a diverse range of index funds. It’s hard to predict when or how much a specific stock will recover. Although you do risk missing out on a huge recovery if you shift the money to an index fund, you also avoid the risk of losing even more money on a stock that fails to recover.

Personally, I would choose at least the following index funds:

  • S&P 500 Index Fund
  • Small Cap Index Fund
  • International Index Fund (Europe and Asia)
  • Value Fund

You could also consider an Emerging Markets Fund, but it’s a bigger risk. If you want to invest in a couple of sector-specific funds, energy and health will most likely be winners in the coming years. Real estate might not be a great sector to get into for a while, but it’s a choice only you can make.

Increase Retirement Contributions
The old rule says that you should buy low and sell high. If you’ve got a long time horizon (say 20-30 years), then now is the time to increase your contributions as much as you can comfortably afford. If you have a 401K match, increase contributions up to the limit on the match, then deposit the rest of your contributions into a Roth IRA (if eligible). If you don’t have a match, contribute the max to a Roth IRA instead.

Don’t Try to Time the Market
Don’t try to buy a fund right now to lock in a specific base price, because you may not get today’s price. You could get tomorrow’s price and no one knows what that will be. Instead, continue the traditional method of dollar-cost-averaging. Invest in your retirement plan throughout the course of the year, rather than all at once. That will be easier on your budget, too.

Don’t Get Fancy
Your retirement account is not the place to try shorting stocks or buy options. Keep it simple when your future is on the line.

Look for Losses in Taxable Accounts
If you had taxable gains earlier in the year, now is a great time to harvest some losses, especially if you own financial stocks that appear unlikely to recover in the near term. You can always re-buy them in 31 days if you think they’re a good buy in the long term.

Doing all of the above won’t stop that sick feeling you have in your stomach. The only cure for that is putting it right out of your mind. Don’t look at the statements, don’t think about your losses. Just move forward. The market will recover eventually and it will take your retirement account up with it if you stay the course.

No. Sorry to burst your bubble, but anyone who guarantees that your average stock market return will be 8% is lying to you. Even most of the experts touting that figure are merely repeating the claim made by other experts. Except that it’s not the whole story.

The Average Stock Market Return Depends on the Period
A few years ago, a magazine (probably Money) demonstrated that you can make the average stock market return be any number you want, depending on the period you choose. You could choose a decade with an average 20% return, which would certainly prove that the market is a winner. Some people say 8% since World War II. Many cite 1926-2000. Other cite 1980-2007.

The Average Return Depends on the Stocks
In addition to the chosen period determining the average return, so do the stocks chosen. Some experts cite the S&P 500, others look to the total US market, some include international stocks, too. Whatever number you want, you can find some segment of the market to provide it.

According to Money, the Vanguard Total Stock Market Fund returned 3.5% for the last ten years. The S&P 500 index returned 2.9%, or zero after inflation.

The Average Return Isn’t Based on Real Investments
Of course, all of these averages are determined by computer models. You’d have to hold each stock in the chosen category with equal weight, no expenses, and for the exact same period. No buying or selling in between. Real people can’t possibly hope to achieve that. Partly because most people who could have started investing in 1926 are dead. Many of the people who could have started investing immediately after World War II are now drawing down their investments.

The Average Return May or May Not Include Expenses
Some experts tally the return with expenses, but most don’t, for the simple reason that computer-based charts don’t have any. Plus, how do you decide what those expenses are? If you look at one mutual fund for a specific period, then you can calculate that, but if you look at the stock market from 1926-2000, it can’t be done. Broker fees vary, as will your returns once expenses are factored in.

The Market Moves in Cycles and You May Not Hit the Right One
Finally, and this is the real kicker, the market moves in large cycles. You may have a couple high-flying years, followed by a few negative years, with a few middling years mixed in. If you were to buy in during the high-flying years, and then have to retire during a major negative turn, you’d wind up with pretty poor returns. Many people who retired in 2000 found themselves with dismal savings despite having million dollar portfolios just a year or two earlier.

So What Should You Do?
The first thing you should do is recognize that experts can cite all the statistics they want, but no one can promise you that you’ll see the same return. Usually, that statement is followed by the one that “past performance doesn’t predict future performance.”

The second thing you should do is invest anyway. Even the most paltry portfolio should at least keep pace with inflation, which is more than a savings account can do. You should also diversify your portfolio with international investments, real estate, bonds, and several classes of U.S. equities. That will help shield you from wild swings in any one segment. Although the major global markets are increasingly moving together, certain elements (like stocks and bonds) do still move opposite each other.

When planning for the future, I envision a 4% average stock market return. If I get to 8%, that’s fantastic, but I’m not going to count on that. I’d rather be conservative in my estimate and then be pleasantly surprised. I’m sure my future heirs won’t mind a slightly larger inheritance either.

Most people are aware of the importance of diversifying their portfolios. What they aren’t clear on is how to do that, and then how to proceed once that’s done. It’s not enough just to choose the right balance of investments. You also need to rebalance them once a year to ensure that your investments are on track with your goals.

How to Diversify the Portfolio
The first step to investing is choosing a diverse portfolio of investments. You can take several strategies to find the right asset allocation:

If you choose a risk-based chart, you should decrease the risk as you age. The closer you are to retirement, the safer your money should be.

You’ll find a wide range of options within each of these categories, so research carefully to compare expenses, performance, and the type of investments they hold. Then allocate your money accordingly. If you have a 401K, you may be able to allocate your money automatically every month, but you’ll have to choose a method for carving up investments in taxable and personal non-taxable accounts.

How to Rebalance the Portfolio
As the market moves, different sectors or asset classes will zoom while others lag behind. Mark a date on your calendar each year to rebalance your portfolio to your intended allocations. That reduces the risk of steep slides and climbs. Using a calendar date to rebalance also prevents you from trying to goose your returns by delaying the rebalancing. I did that once, and watched the stock collapse the day before I planned to sell it. If I’d gotten out when I should have, I would have made $18,000. Instead I made $6,000.

If you’re rebalancing 401Ks and IRAs, then compare the performance of your current holdings with your targets. If one has zoomed up, sell a little and use the proceeds to buy more of something that’s below your targeted allocation. This is also an opportunity to adjust the risk level or asset allocation classes if your needs have changed.

If you’re rebalancing a taxable investment, it gets a little more complicated. When you sell high-flyers, reduce the tax impact by selling a loser. Be hard-nosed about this – don’t let your emotions prevent you from selling a stock that’s going in the tank. The odds of it recovering are not good. Trust me. I rode Lucent all the way down. You can use losses to write off all your capital gains, plus $3,000 (in other words, you can have a capital loss up to a maximum of $3,000.)

Don’t Hold the Same Assets in Multiple Accounts
If you’ve saved the max in your retirement accounts and still have money to invest, don’t just duplicate your protected holdings. Instead, branch out to cover more sectors or asset classes. According to Money, you should hold your taxable bonds in your retirement accounts and keep your stock funds in your taxable account so you can harvest the losses.

Once you choose a diversification plan, select your investments, and set a date to rebalance, you can let your money grow without worrying about it day and night. I use a combination of asset classes and risk for my asset allocation. What’s your approach?

Now that you’re confident your accounts under $100,000 are safe and you don’t need to pull your money out of the bank, you might be wondering how much money you should keep in any bank.

Keep Less than the Maximum Insured Amount
Personally, I wouldn’t keep anywhere near $100,000 in cash anywhere, unless it was part of the down payment for a house. Sums that large should be invested in order to earn a larger return than the paltry 1-3% you can earn on a savings account.

However, if you do need to keep a large amount in cash, don’t put more than $90,000 in a non-retirement account at any financial institution. If you earn interest, you could quickly go over $100,000 if you have more than that in an account. By keeping no more than $90,000 in an account, you have some room for growth.

Disperse Large Savings Between Several Banks
One of the victims of the IndyMac failure was a man who’d put his life savings of more than $200,000 in five CDs. He’d been told he could protect it by adding the names of other family members to the account. He lost nearly $30,000 in the collapse.

However, for short-terms needs, I’d put $80,000 in three different banks – note, that means different financial institutions, not different branches of one institution.

Invest Large Amounts You Don’t Need in the Short Term
Equity and most bond investments are not insured, but they offer a better return than you’d receive from CDs or cash savings. Unless you need a large amount of cash in the next three years for a home purchase or college, invest it. If you’re not sure how aggressive you should be in your investments, seek the advice of a certified financial planner who charges by the hour (rather than through commissions.)

Check Yearly to Ensure You’re Not Over the Limit
Mark a date in your calendar every year to review all of your bank balances and shuffle the money around if any one account is at or near the insured limit. That way, if something should happen, you can relax while everyone else rushes to the bank in a panic.

These suggestions are simple on the face, but they can go a long way towards ensuring that your money is fully insured or working hard for you if it’s not insured.

There are two kinds of personal loans – the loans you receive from banks and the loans you receive from individuals. For most people, personal loans from individuals take the form of family loans, but they can also be fraught with tension. Now, you can also give or receive personal loans to people you don’t know. Prosper and the Lending Club are two of the top sources for personal loans. Virgin Money is the leader in the field of family loans.

Prosper Personal Loans
Prosper is a loan servicer that facilitates personal and small business loans between strangers. Borrowers receive a lower interest rate than you would from a bank or credit card company. You can borrow up to $25,000 for debt consolidation, a car, a business, or almost any other purpose. You create a loan proposal and then individuals bid to fund it. You make the payments to Prosper, which then distributes the proceeds. According to Prosper, they have an average annual rate of return of 6.18% to 8.52% and a default rate of 1.44%. They have been in operation since February 2006 and have issued 5,427 loans.

Borrowers undergo thorough credit checks and must adhere to lending standards. Prosper then rates the loans from AA to HR. The lower the rating, the higher the interest rate and rate of return.

For investors, the upside is the chance to help someone while also receiving a high return on their money. You can spread your risk by loaning small amounts to a variety of people rather than a large amount to one person. The downside is that there is no guarantee the loan will be repaid. The same could be said of a stock market investment, though.

For borrowers, the upside is the lower interest rate you pay. You also receive the loan anonymously, so your friends and relatives don’t have to know about your debt. The downside is that you only have up to three years to pay it back. With credit cards, you could probably spend forever paying it off and your creditor would be happy to let you do just that.

Lending Club Personal Loans
The Lending Club is very similar to Prosper. The risks are the same. They claim an average rate of return of 12.38%. Their default rate is 0.0%. However, they have only been making loans since May 2007 and have only issued 928 loans.

Lending Club requires borrowers to have a minimum credit score of 640. Based on the borrower’s credit history, the loan is rated A through G, with A loans receiving lower interest rates and having less risk.

The upsides and downsides are the same as they are for Prosper.

Virgin Money Family Loans
Virgin Money is owned by Virgin, but was formally an independent company known as CircleLending. Rather than manage loans between strangers, they facilitate loans between friends and family members. In addition to personal loans, they also manage mortgage loans and student loans. These are true family loans, which means everyone knows everyone.

The old adage says that you shouldn’t lend money to friends and family members, yet thousands of people do every year. Parents loan to children, uncles loan to nieces and nephews, friends loan to friends. Many of those loans lead to strife because the lender sees the borrower spending money and wonders why their loan wasn’t repaid instead.

Virgin Money’s goal is to take the stress out of family loans. You choose the interest rate and the payment schedule, and they complete the paperwork and tax documents. They can also service the loan for an additional fee. They do recommend adhering to the Applicable Federal Rate (currently 3.18%) for loans over $10,000 in order to avoid having the funds classified as a gift by the IRS, but you can choose a rate of 0%.

The downside is that you’re introducing a third party into a family or friendship. For business investments between friends and family members, this is probably a great idea because it confirms the business relationship. I don’t know if my parents would have wanted to use a service like this to loan me college funds (which they later forgave.) They’ve also said they’ll help my husband and me with our down payment, but we don’t want to have strict repayment terms governing those funds. We expect to pay it back, but we don’t know when and we don’t know how quickly.

The other downside is the loan fee. Virgin Money charges fees ranging from $99 to $2499 depending on the type of loan and level of servicing. Depending on the size of the loan, that could be a substantial cost.

Personally, I might consider Prosper or Lending Club for investment purposes, but my relationship with my parents is good enough that I wouldn’t want to involve Virgin Money in the family loan process.

Yesterday, as you probably heard, the Federal Reserve Bank cut the key overnight interest rate by 75 basis points. The LIBOR (London Interbank Offered Rate) has also been dropping due to credit concerns. So, you may be wondering what this means for you. The answer is that it depends on how your finances are arranged.

Credit cards: You may see your credit card interest rate fall slightly, but probably not by much. This is one place where lenders can actually make money.

Mortgages: If your prime-rate, adjustable-rate-mortgage is pegged to a Treasury rate, the Fed rate cut could reduce your mortgage rate. Unfortunately, many loans are pegged to the LIBOR instead. This is especially true of subprime and ALT-A loans. Although the falling LIBOR may help some of them whose interest rates are resetting, the decline is too incremental to make a big difference in their ability to pay.

If you’re in the market for a new fixed-rate mortgage or a fixed-rate refinance, this cut is excellent news for you. Contact several lenders to find out their current rates and offers. They may ask you to jump through a few additional hoops, but it’s worth it if the home you want to buy is reasonably priced and you can lock-in a low rate. Nickel discussed the low mortgage rate he received just today.

Student Loans: If you have a variable student loan, you may or may not see a reduction in your interest rate. Like many mortgages, student loan rates are often now linked to the LIBOR.

Auto Loans: If you’re in the market for a new car, check out the different rates available. Although offers from dealers may not change much, your local bank or credit union may be offering a reduced rate.

Employment: The Fed rate cut was partially intended to encourage corporate borrowing. Lower rates make it easier for banks to find money to lend, and corporations are the largest borrowers. That said, a rate cut probably won’t affect your employment directly. Many experts aren’t predicting large lay-offs even if a recession does occur. Your employer may reduce spending on optional projects, but your job is probably safe unless you’re in the banking/housing industry.

Savings: The Fed rate cut does mean the interest rate on savings accounts, CDs, and other accounts will fall. If you have a CD that is about to expire, research your options carefully before rolling it over into a new one. You may find better vehicles for your savings right now.

Investments: If you’ve checked your portfolio recently, you know it’s hurting. The rate cut was intended to stimulate the market, but the experts I heard on NPR weren’t sure how effective it would be. They did say that it may have been enough to avoid a panic sell-off, but it probably won’t send anyone’s stock soaring. Monitor your investments, but don’t make any sudden moves if you’re investing for the long haul.

The Fed may cut the rate again in two weeks, but for now, continue your frugal habits and don’t stress about the fluctuations of the Fed.

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