Transcripts

"Money File"-Money Mistakes In Troubled Times

SUSIE GHARIB: Dealing with a family crisis is never easy, especially when there are financial issues to consider. From the money file tonight, some suggestions on how to make it easier for you and your family to handle those issues. Here`s Eric Schurenberg, managing editor of "Money" magazine.

ERIC SCHURENBERG, MANAGING EDITOR, MONEY MAGAZINE: A couple featured in a recent "Money" magazine article described how they responded to the tragic accidental death of their son. They bought themselves a new car, remodeled their kitchen, and took long vacations to Europe and the Amazon. "It was our therapy," explained the mother.

Psychologists and financial planners say this reaction is common. Faced with a death, a divorce, a job loss or other personal tragedy, it`s tempting to try to bury the pain in a frenzy of buying. The problem is, it won`t work. All it does is risk turning a personal tragedy into a financial disaster. Here`s what to do instead.

First, don`t make any major purchases after a traumatic event for six months. Once the initial shock has passed, you may find you`re not so keen to own that sports car after all. If you must make major financial decisions in the near aftermath of a tragedy, get advice. An outside perspective can save you from some expensive bad calls. Right after 9/11, for example, many people bought far more life insurance than they really needed.

Also avoid risk. Many people try to shake off the pain by chasing a hot stock or jumping to a new job. That`s a mistake. When you are shaken by tragedy, you want more financial security, not less. Finally, get involved with others. Spending time with your community, your friends and your interests will do a lot more to usher in lasting emotional recovery than throwing money around. To find peace during a difficult passage, the best rule of thumb is spend time, not money. I`m Eric Schurenberg.