Bank failures have been splattered all over the news. And even if you don’t struggle with financial anxiety, you might be worried about how safe your money is in the bank right now.
And it’s not just that we need to worry about, unfortunately. The lurking banking crisis we seem to be in could have a ripple effect.
Some banks are watching their stock value tank in the stock market. Smaller banks are seeing their customers pull money out of their accounts… and those banks are worried about their own liquidity. This whole situation has everyone terrified of another financial crisis.
And it’s troubling no matter how well you deal with money. It feels especially bad if financial anxiety is a thing for you, like it is for me, and you’re worried about your own financial stability.
Before you do anything crazy – like pull all of your money out of the bank and shove it under your mattress – stop and take a deep breath. Remember, you can’t control what’s going to happen in the general economy. You can control your own money to the best of your ability.
Here are some facts and some things for you to focus on to help you through this potentially turbulent time.
Things Aren’t As Bad As They May Feel
If you listen to the news, things sound really bad. And yes, there is the potential for everything to get worse.
The truth is, only a small percentage of banks are having any sort of financial issues right now. A total of three banks have actually collapsed in recent weeks.
- Silicon Valley Bank, which primarily caters to start-up companies and venture capitalists.
- Signature Bank, which does serve a lot of “regular” customers, all of whom have their deposits insured by the FDIC.
- Credit Suisse, which isn’t an American bank at all, and another European bank is taking it over, but the impact is still relevant to our banking system.
As of the time this blog post was written, First Republic is also in serious financial trouble. It has a high percentage of uninsured bank deposits and 11 other major banks have put together a rescue package to keep it from failing.
The big concern right now is about how to prevent bank runs. This is where a bank’s customers all withdraw money at the same time. Normally this is caused by fear of financial instability or problems with the bank itself. Banks typically keep enough cash on hand to avoid this problem, but in the case of these American two banks, the normal safeguards didn’t work.
The government and the Federal Reserve are doing everything they can to avoid a market panic, which would probably trigger another financial crisis.
I know things feel unstable, but honestly, everything is as under control as it can be.
This Is Not the Time to Bury Your Head In the Sand
When the economy is precarious like this, it’s really easy to want to just turn off and not pay any attention to your finances. But it’s actually the most important time to pay attention to your finances.
If you have more than $250,000 at a single bank, you may want to consider moving some of it, especially if it’s within a single account.
Please note: the Federal Deposit Insurance Corporation or FDIC automatically insures deposit accounts up to $250,000. The federal government is working on putting safeguards in place to make sure people have access to their money, regardless of how much they have in their accounts.
That being said, you still may want to talk with your financial advisor about whether it is safe to keep all of your eggs in the same financial basket. My two cents: spreading your money out into a few different banks is another way to diversify and protect your finances,
Right now, if you don’t have more than $250,000 in a single bank account you probably don’t have to worry about losing your savings. But that doesn’t mean there aren’t moves you can make to boost your financial security. For one thing, you will want to make sure that you don’t have uninsured deposits, like savings in an institution that’s not FDIC-insured. And that’s just a first step…
Things are going to change. It’s probable that some companies will face cash flow problems and possibly go bankrupt. We have already heard announcements about major layoffs in several sectors.
Again, none of us can control what’s going to happen in the general economy. We can all control our own money to the best of our abilities.
Here are some ideas on how to do that.
Try to Act Logically Instead of Emotionally
Anxiety can make you do things based on your emotional state, like pulling all your money out of the bank, or selling all your stocks. Taking these actions might make you feel better in the moment, but they’re not necessarily the safest options for your financial future.
When you pull all the money out of the bank, you lose the potential to earn interest. If you stash all of your cash in a shoebox or under your mattress, your money’s at risk for fire. Someone could steal it. It’s not necessarily physically safe and it has no potential to grow.
Selling all of your stocks can also threaten your overall financial plan. You could end up losing a lot of money in the long run, because you’ll miss out on future earnings and growth. Plus you could end up with an expensive tax bill you weren’t expecting, which will drain more of your existing cash resources.
You don’t want to take impulsive actions. You don’t want to act emotionally when it comes to your finances. You want to take a breath. You want to stop and think.
Most importantly, you want to talk to your financial advisor before you do anything. That includes telling them how you’re feeling in the face of all this economic uncertainty.
I’m not saying there’s nothing to worry about. I’m saying anxiety and worry aren’t the same thing and anxiety can spiral out of control.
It can make you lose sleep. It can make your stomach hurt. It can give you headaches. It can make you cry. It can affect your mental health, your emotional health, and your physical health.
It can make you more likely to either act irrationally or ignore everything completely, both of which can hurt you.
Part of getting the anxiety under control is taking control of your situation the best that you can. The other part is talking to somebody about it. Because the fear and the anxiety are real.
Take a Hard Look at Your Current Budget
I know this is difficult right now, because everything is more expensive due to inflation. But wherever you can, you may want to cut back on your spending.
I’m not talking about essentials, like basic groceries, but maybe you buy the cheaper brand of cereal for a little while. Maybe you have a couple of days a week where you eat whatever is in the house instead of getting DoorDash.
Maybe you eat out less or cut your transportation costs. Or you can have buy nothing days where you literally just don’t buy anything. If you have five streaming services, you could maybe cut back to four.
You don’t want to skimp on necessary medical care. You don’t want to skimp on taking care of your pets, your kids, or your car, but for anything you can cut back on this might be a good time to do it.
I realize that what’s necessary in your life isn’t the same as what’s necessary in my life. Your cutbacks will be based on what’s comfortable for you. Take a look at what you can let go of right now and know you can add it back in when things feel more financially stable.
Find Other Potential Income Streams
It’s hard to do this when you’re dealing with heavy anxiety, but finding additional income streams can help you make sure that you’re not stuck in a situation where you have no money coming in.
This could be a side gig, a second job, or a renting out some space. You can sell things on your website, Etsy, eBay, or other sites. Creating a second income stream will be helpful if your main source suddenly disappears. At least you’ll have some money coming in from somewhere, and that can help keep you afloat.
Keep Some Cash on Hand, Just In Case
I’m not talking about withdrawing thousands of dollars. But having between $100 and $500 in cash on hand, even up to $1000 is not a bad idea, just in case things get absolutely crazy.
I don’t expect them to, but it is always better to be prepared.
And having cash will probably help alleviate some of your anxiety because you’ll have money you can see and feel that won’t disappear in a bank collapse.
Reevaluate Your Investments
If you are heavily invested in bank or tech stocks, it may be a good time to talk to your financial advisor about rebalancing your current and retirement portfolios.
No one is sure if it’s a good time to cash out or to buy in right now. And no one knows what the rebound is going to look like.
But if you are at all concerned about your investments, take a look at the stocks, bonds, and other investments in your portfolio, then talk with your advisor about what can be done to protect your financial assets.
Do Everything You Can to Avoid Rising Interest Rates
Especially if we end up in a global financial crisis, you want to keep your debt as under control as you can. Not as easy as it sounds, I know. But not increasing debt will help keep you in better financial shape.
Stay away from high-interest rate debt, like credit cards. If you have to take out loans, look for the lowest possible interest rates and make sure to never skip a payment. Some loans have triggers in place to raise their interest rates if you miss a payment or don’t pay on time.
Prepare Yourself for a Financial Crisis
I’m not saying a financial crisis is going to happen. But between bank failures and inflation and layoffs, you may feel like you’re in the middle of one anyway. And if it does happen, you’ll be much better off if you’re prepared than if it hits you out of the blue.
Start by following the steps I listed above. Those are good, simple ways to make sure your financial stability remains relatively intact.
Next, get a copy of my Financial Recovery Workbook and go through the exercises. Fill out the worksheets that come with the book. They can help you avoid a disaster or give you some ideas on different ways to increase your resources or even find hidden resources. Plus, the workbook can help you figure out the best ways to manage any debt you have right now.
This book is designed to help you recover after a personal financial crisis, but everything in there will also help you prepare to survive and thrive during and after a personal or global financial crisis.
Click on the button below to find out more about the Financial Recovery Workbook and buy your copy now.
Take a Deep Breath, Everything Will Be Alright
I know this is scary. Trust me, my financial anxiety is high right now and I pay attention to all of this because it’s my industry.
Ultimately, the global banking system will not collapse entirely. Financial institutions and central banks are working to ensure that depositors’ money is safe and bank deposits are available to people who do want to withdraw money.
The global economy has weathered systemic banking crises before and it will do it again.
The most important thing is to acknowledge what is causing your anxiety, talk to someone about how you’re feeling, and discuss ways to calm down the anxiety portion of your feelings, so you can address the parts that are real.
You do have control over your own finances. That can help you feel more secure when everything around you seems like it’s falling apart. Take that control, prepare yourself for whatever may come, and you’ll be better off, regardless of what happens.