Examining Last Week’s Market Dip

The DOW sparked fears on Wall Street last week when it took a near market crash. While regulators have not given a specific reason for the stock market dip, people are looking at their retirement plans and wondering what should they do. Tell Me More turns to Louis Barajas for more on managing your retirement money, and the state of the economy.

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ALLISON KEYES, host:

I'm Allison Keyes and this is TELL ME MORE from NPR News. Michel Martin is away.

What should we make of that wild and weird way up and way down day on the stock market last week? And should we be worried about how it affects our IRAs, our 401k accounts? Joining us now to say whether we should be is Louis Barajas. He's a financial planner and author of the forthcoming book "My Street Money." Welcome, Louis.

Mr. LOUIS BARAJAS (Financial Planner; Author, "My Street Money"): Thank you for having me, Allison.

KEYES: So, are you worried about your own money after that day?

Mr. BARAJAS: You know, I was worried not about what's going on in Europe right now. I was more worried about what actually happened for the person who triggered that, you know, the wrong, I guess, sell order and what was happening. But I guess what I heard this morning already is that the exchanges have gotten together and are trying to, you know, fix that problem. I think that for most people right now, what they're worried about is that they're still kind of shell-shocked with what's happened with the prior, I mean, you know, the last couple of years. And they just got scared again.

And I've noticed a lot of people going onto my Facebook page talking to me about what should I do? Should I get out of the market now? How is this going affect my retirement? But most people are more concerned about how it's going to affect their retirement more long term. They're thinking they're going to have to be a burden to their kids because they're just not going to have enough money for retirement.

KEYES: Yikes.

Mr. BARAJAS: Yeah. So, I don't think it's the economy that's happening. I think what's happening is people aren't saving enough and, you know, this will mull over, we'll get over it. I think what people are concerned about is that over the last couple of years their accounts are down. They haven't seen them really go back up a lot. And they're still out of the market. And I think at this time they need to be back in. I think this is a wonderful opportunity to get back in the market.

KEYES: Louis, do you have any theories on why the Dow dipped and then came back the way it did?

Mr. BARAJAS: Well, yeah, you know, first of all, there's the big scare right now is that we have the problems in Europe, especially with Greece, that we have all the, you know, the European nations that owe a lot of money. They might not be able to pay their bonds, the debt that they owe to other countries. And so that's what sparked it all.

And then what sparked it all is we also had a mistake that was made by, I think it was a hedge fund manager who sold, instead of pressing a million orders being sold for a specific stock, he pressed like a, the B, which was spelled billion.

KEYES: The whole fat finger thing.

Mr. BARAJAS: ...the market fell a thousand points. But people thought it had to do with the European economy, which it didn't.

KEYES: So, let's go back to our money for a minute. People who are watching their retirement plans, what immediately should we be doing?

Mr. BARAJAS: Well, what we immediately should be doing is, again, practicing, you know, the three things that I always talk about it's diversification, discipline and patience. And people need to make savings a habit just like, you know, this morning I didn't want to go work out, but I got up and I made it a habit and I ran my three-and-a-half miles and I just feel a hundred times better now.

And so what happens is we need to make savings a habit. The problem is that people have control over their retirements. They're just not saving enough and there are ways that you can save more. And one of the best ways, again, is through your own retirement plan through work where you have money taken away from your checking account into your retirement account, into, you know, or your wage account, your payroll account.

And that's all we have to do because I think the biggest concern really is not even about retirement, it's that most people that I talk about on a daily basis or they're on my Facebook page or emailing me, they're really worried about their relationships down the road, the relationships with their children. And they don't want to be a burden to their children. What they do want is they want to save enough money to have financial dignity in their lives so they can live a consistent lifestyle.

Most people these days are really practical and they're realizing that they may not have all the money in the world to do everything they want to do when they retire. But they just want to have financial dignity, have enough to have that, you know, health care, be able to make their mortgage payment, be able to travel just a little bit and that's what I think most people are concerned about.

KEYES: How realistic is that? I mean, I hope my parents aren't at home thinking, that girl better not be moving back here.

Mr. BARAJAS: Well, to be quite honest with you, if we don't save more, it's not realistic and people are going to have to work longer and longer. I mean, technically what's happening is, you know, Social Security is being pushed up in ages, meaning that instead of being able to retire at an early age of 62, we won't be able to retire till 65, 67 or maybe 70. And people are going to have to work longer.

And we're just not saving enough. We've become we've got to the habit of overspending. Now, it's hard to say that right now when the economy is hurting and people don't have any jobs. But I still see people who do have jobs. And, again, that's around 90 percent of the U.S. population and they're still overspending. And we need to think about creating and making savings a habit. Savings for our emergency reserves, savings for our retirement.

But until we do that, we're going to face, again, some harsher realities down the road. You know, you don't need a crystal ball to know what kind of lifestyle you'll have if you're spending all your money now and you're not saving for the future. And so we need to focus on what we can have control over and that's our own behavior.

We can't control the European nations, we can't control what's going on at Apple, we can't control or at Disney. We can control our own lifestyles. And I want us to focus on, you know, the people that we care about the most. We don't want to be a burden to our parents. We don't want to, you know or to our children. And that should put enough pain in us to really start thinking about we need to do something and we need to do it today. Now...

KEYES: Louis, let me interrupt you and ask you a question, though.

Mr. BARAJAS: Yeah.

KEYES: Many African-Americans and Latinos are kind of reluctant to put their money into stocks. Do days like that, the whole dramatic market mood swing keep more people of color out of the market?

Mr. BARAJAS: You know, it does. And the reason is why, is we lack the education and we lack information. You know, the simple common rules of thumb when we talk about investing is buy low, sell high. And what happens is that we do the opposite because we don't have that background. My parents didn't invest in the stock market.

And so, you know, we have to think of these times when there's a lot of volatility is to get in. These are opportunities for us. So what's going to remove the fear for a lot of people of color is that they need more information. And that's why, for example, I write the books the next book that I'm writing called "My Street Money," a street level of money, is to give people education and advice at the level at which we can all understand.

Because my parents didn't have that opportunity. And when I was growing up, I didn't have that opportunity. Luckily I had a very good education, and I realized that this stuff isn't, you know, brain science. It's not something that is out there that only the rich people can have access to. With the invention of mutual funds, the average person, the person that I call on my street has access to the same type of investments that the rich people do.

KEYES: Louis, that is good to know and that is your final thought today.

(Soundbite of laughter)

KEYES: Louis Barajas is a personal finance expert and author of the forthcoming book, "My Street Money," - God, I've got to take those shoes back. He joined us from his home office in Irvine, California. Louis, thanks for joining us.

Mr. BARAJAS: Thank you, Allison.

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