The Big Bail Out Bill Passes and is Signed!

By Rachel Victoria, MSFS, former CFP

October 3, 2008

Was the Bailout a Good or Bad Idea?

Everyone has an opinion about the Big Bail Out Bill that was signed today.

Some say that our economy would have ultimately failed if the Bail Out Bill hadn't passed and the middle class would have suffered a trickle down effect of more major job losses and lack of credit for services that they buy and need daily to survive! 

Others are Mad that America's children and great grandchildren are going to end up paying for this for decades.  It's a big tab $700 Billon tab for the taxpayer and this debt will have to be paid back one way or another!

They say the whole goal was to free up credit and that it may take until the end of the year (or longer) to see "somewhat sub par normal" lending availability return. The real issue for all of us here is that almost every product or service you buy or utilize needs advance credit to manufacture or purchase their goods. For example:

How Credit Works in your daily life.

1. The auto manufacturer needs credit to buy or build the parts and pay the workers before they sell the vehicles to the dealers.

2. The delivery firms need credit to pay for the cost of delivering the vehicles before they get paid from the dealers.

3. The dealers need credit to buy the cars until they sell them to you.

4. You need credit to buy the car to get to work before you get your paycheck.

This trickle down effect happens with almost all of the services you need: groceries, utilities, clothing, medical, gasoline, insurance, cash from banks, and yes, even your beloved Wal-Mart!

So you can see that this Big Bail Out and the existing Recession will have an impact on you!

Here's what you need to do to protect yourself during this Recession:

1. Free yourself from corporate and government income dependency as soon as possible. Don't be financially dependent on just your job (that you could get laid off from) for income. (Amazingly, over 750,000 Americans have lost their jobs in 2008 so far!) The easiest way to do that is to create passive income!

2. Increase and diversify your income now. No one knows what economic sectors will be hit next in the continued recession or how long it will last. So, create several diversified sources of passive income, that way you will minimize your risk.

3. Hold off on any large non-urgent consumer purchases, unless you have at least 3-6 months of cash reserves available for emergencies. Keep your cash position high. The most valuable assets in a recession are cash and cash flow. So, use them wisely only for cash assets or passive income at the moment.

4. Pay special attention to paying your Medical and Heath Insurance premiums. The number one cause of Bankruptcy is for medical bills. Don't let your best protection lapse.

5. Ensure that your savings are in an insured account or backed by qualified securities. Remember, we just had the nation's largest bank fail.

Always remember that during any recession, there is usually a large transfer of wealth. The individuals who have passive cash flow will be able to take advantage of those opportunities when and if they arise and protect themselves from economic hardship.

To learn more (if not already here), please go to my website:
High Yield Income

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