by Brian on March 3, 2009
in Savings
Following in the footsteps of pretty much every other bank recently, E*Trade Bank has decreased the interest rate of it’s online savings account to a paltry 1.95%, a strong competition for one of the lowest rates among primarily online institutions.
It’s stock price has nearly been cut in half in recent weeks, and the banks actions are showing signs of this. All references to it’s popular “8x the National Average!” marketing slogans are now absent from the website.
What do you think? Will we see 1% interest rates from the popular online institutions in 2009?
As if the Financial headlines needed any help lately to further the ideals I hope to push on this site, today CNN Money alerted that Circuit City, the troubled electronics retailer, has failed to refinance their debt or find an agreeable buyer and will liquidate their inventory before closing for good.
There is no shortage of lessons to be learned from the demise of Circuit City, but two very real lessons about debt:
First, Circuit City’s closing was brought on, to a large extent, by an over-burdening amount of debt that the company took on. The reality of the situation is that whether you are Average Joe, or a hundred-million-dollar electronics retailer located across the U.S., saddling yourself with too much debt is a recipe for disaster.
If the economy were still booming, undoubtedly Circuit City would be continuing to operate and maintaining their large levels of debt. And while I’m sure Circuit City and many other companies as of late love to blame the economy for their woes, history has left us little doubt the economy will go through fluctuations of growth and drawback. If you are running a company for the long haul, you know this. You manage your debt, your cash flow, your expenses, and every other aspect of your business to thrive in the growth, and survive the declines. Circuit City poorly managed its debt and strategy to survive the decline.
The second lesson is much more personal. As a result of this one company and its ability (or lack thereof) to manage debt, almost 35,000 people will now be unemployed.
How many of those 35,000 have managed their personal debt accordingly to survive a lapse in employment? The story underscores that there is only one person who can be depended on, and that is yourself. You and you alone can manage your finances and your debt to survive an employer bankruptcy, a health tragedy, a family loss, an environmental disaster, or any other situation that could interrupt the normal flow of your income.
Make the choice - today and everyday - to manage your life in a way to thrive in the growth, and survive the declines.
