Local CPA gives tips to weather financial crisis
Certified Public Accountant and St. Charles Parish School Board Representative Al Suffrin wants residents to know that the recent government bailout doesn’t mean they can stop worrying about the state of the economy.
Residents still need to take several precautions to make sure they manage their finances and invest smartly.
Stocks plunged Dec. 1, with the Dow down 680 points after reports showed November manufacturing activity hit a 26-year low and that the nation has officially been in a recession since December 2007.
There were slight gains on Dec. 2, and stocks could manage a rally near the end of this year or the start of next year.
Suffrin says the recent bailout bill hasn’t helped much because it doesn’t address the root of the problem.
“The huge infusion of credit and debt into the economy does not solve the problem,” he said.
Suffrin feels it’s more of a band-aid approach.
“We need to seek better alternatives to restore liquidity in our economy,” he said. “I anticipate future congressional action and legislative proposals to consider overhaul and reform of U.S. financial regulation.”
Suffrin once wrote a weekly money column in the Herald-Guide and has some financial advice to share with residents about protecting their assets, like 401(k) plans. A 401(k) is a type of retirement plan that allows eligible employees to invest pre-tax contributions from their paycheck in various types of investments, like stocks, bonds and cash.
“The financial crisis that has evolved was caused by complex market economics,” he said. “The situation largely points to a systemic problem on Wall Street. There is no quick fix or easy answers.”
Suffrin says that in his view, the panic seemed to have been with the government – and not with the markets or the public – to push for passage of the bailout bill.
“During these difficult economic times, investors should be reviewing their portfolios with their CPAs or financial advisors to determine if their asset allocation meets their attitude towards risk, time horizon, and financial needs and goals,” Suffrin said. “In addition, people should be reviewing their personal financial statement to determine if they have too much debt and where or how it can be reduced.”
Because of the $700 billion bailout, a plan where the United States government paid off bad debts of mortgage lenders and some banks, Suffrin says local residents will notice some changes.
“Local residents will notice in the coming months that more credit will be available from banks and other lending institutions to individuals and small business owners or residents,” he said.
Suffrin says that the best advice for residents is to review their financial needs and goals with their financial advisor.
“The stock market is going through a significant correction based on many economic statistics pointing that the U.S. is in a recession,” he said. “However, the markets are resilient, and history has shown they will begin to perform again. As in all down markets, there are ‘buying opportunities’ that should reward investors over the long term.”
According to Suffrin, people do not need to be concerned about the 401(k) from a broad perspective.
“However, because of the U.S. and global recession, they should determine if their 401(k) investments meet their attitude towards risk, time horizon, and financial needs and goals,” he said. “People could lose money in their 401(k) should they move investments around inside their account if the security has gone down in value since it was purchased.”
Suffrin says employees may also have seen a loss in their historically conservative bond and equity investments inside their 401(k) because many of those assets have lost value in 2008. “However, it is only a paper loss if they don’t sell,” he said. “If the employee feels the investment is appropriate over the long term, then the value may go up enough in the future to produce an expected rate of return the employee hoped to achieve.”
But some residents are more cautious and choose to make local banking systems their source of investments. Suffrin says it’s important to know if the banking institution is insured by the federal government.
“Most banks do fall under FDIC insurance protection,” he said. “The FDIC has two tools you can use to check if your bank is insured and deposits covered. At the FDIC Web site (www.fdic.gov) you can use ‘Bank Find’ to determine if your bank is insured and who is the primary regulator.
“It is important to deposit money in banks covered by FDIC insurance because, should the bank become insolvent, your deposits up to specific limits will be insured by the federal government from risk of loss,” he said.