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   Sunday, Dec. 15, 2019 U.S.V.I. Business & Career Guide    

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Make Your Finances Y2K Ready, Too
by Ricardo L. Reguero

     It's not enough to make your computers ready for the Year 2000. Your finances need to be Y2K ready, too.
     The Year 2000, or Y2K, is a worldwide problem resulting from the way computers used to be programmed. To save storage space, programmers used two digits to record dates (e.g., "1999" would be represented by "99"). As a result, computers will not recognize the year 2000 and will think it is 1900. That may not sound like a big deal, but consider what would happen if a computer determined that your taxes were due in April 1900 instead of April 2000. The time and energy spent addressing the mistake would be bothersome, to say the least.
     Y2K may be different from perhaps any other significant event in recent history, because we know that it is coming. This gives us an opportunity to prepare in advance. But how significant is Y2K's impact likely to be? And what can be done to prepare for it?
     No one knows for certain how financial markets will be affected by the Year 2000 computer problem. Some predict global disaster. Others predict an insignificant impact. The truth is likely to be in the huge gulf between those two predictions.
     Financial institutions, fortunately, had an early start on Y2K and are believed, for the most part, to be compliant. But some government agencies, utilities and healthcare institutions are lagging - and Y2K has an immovable deadline.
     Companies that are internally compliant may also be affected if their suppliers are noncompliant. Last year, when a couple of suppliers went on strike, production at General Motors was virtually brought to a standstill, resulting in billions of dollars worth of losses. What will happen if major manufacturers like GM have problems in their supply chain?
     Most U.S. companies have been addressing Y2K for years, but many foreign countries have barely begun addressing the issue. Still, that does not necessarily mean there will be widespread problems. Many emerging countries are less reliant on computers than the U.S., and if they are using computers, they may have new models that are already Y2K compliant. Like Y2K, conversion to the Eurodollar was expected to cause major disruptions in Europe, but it didn't. Y2K alarmists may also be sounding a false alarm.
     Even if corporate America is largely Y2K compliant, panicking consumers could cause more problems than Y2K itself. If, for example, consumers become concerned about the safety of their banks, bank runs could result. Most banks will have extra cash on hand just in case.
     In spite of Y2K uncertainty, individuals should not be alarmed. However, some precautions may be warranted. The most important financial tool we can use may be common sense. Do not panic, but consider that Y2K could affect your finances in some way. Take sound, well-thought-out steps to minimize the impact, such as the following:
     Keep financial records current. While financial institutions are generally believed to be prepared for the Year 2000, there may still be some glitches. It is important to keep the most current copies of all financial records, including bank accounts, retirement accounts, insurance policies, and records of investments.
     Consider obtaining copies of your credit reports from the three major credit bureaus, which include the TransUnion National Consumer Relations Center at 800-916-8800, Equifax at 800-685-1111 and Experian at 888-397-3742. Credit reports may be available at no charge or for a nominal fee. Check your reports to ensure that they accurately reflect your financial status and keep them in a safe place.
     You may also request a Personal Earnings and Benefit Estate Statement from the Social Security Administration (SSA), which will document your payments into the system. The SSA plans to send this statement to all workers over age 25 this year, but requesting one will help ensure that you have the records you need. To obtain the statement, fill out Form SSA-7004, which is available at your local SSA office or by calling 1-800-772-1213.
     Keep Cash on Hand. Anticipating potential short-term delays relating to Y2K, consumers are advised to keep enough cash on hand in case there are interruptions in credit card transactions and ATMs. Make a list of all expenses and ensure that you have enough cash on hand to cover about a month's worth.
     Consider Your Asset Allocation. Although no one knows what will happen, Y2K could cause volatility in the stock market. If this causes you great concern, you may wish to change your portfolio's asset allocation. Asset allocation refers to the percentage of assets allocated to various investments, including stocks, bonds and money market funds. How you reallocate your portfolio should depend on your tolerance for risk, your investment time horizon and your personal feelings about the impact of Y2K.
     Keep in mind that if you liquidate taxable stocks, bonds or mutual funds, capital gains taxes may be due if the investments are sold for more than you initially invested in them. Consider how strongly you believe the market will be affected by Y2K, then calculate your potential taxes. Doing so will help you to understand the impact of shifting your portfolio, so that you are more likely to act based on logic, rather than emotion.
     Dollar cost averaging. Consider dollar cost averaging your investments in stocks and mutual funds. Dollar cost averaging gives the investor an opportunity to use market volatility to his or her advantage. Here's how it works. The investor decides on a set amount to invest at regular intervals, usually once a month, regardless of the price of the security. Because the amount invested is consistent, the investor is buying more shares when prices are low and fewer when they are high. However, you should be aware that dollar cost averaging does not assure a profit or protect against loss in declining markets. It involves continuous investment in spite of fluctuating price levels, so you should consider your ability to continue purchases in periods when prices are declining.
     Make informed decisions. The more you know about Y2K and its potential impact on your investments, the better the chances are that you will make the right decisions. Talk to your financial advisor before taking action.
     Regardless of Y2K, it is important to have a sound financial strategy in place. It may be prudent to make some preparations for Y2K, but your overall financial decisions should be driven by a sound strategy with long-term financial goals.
     Ricardo L. Reguero is the general agent for Allmerica Financial's Puerto Rico office in San Juan. He is a registered representative of Allmerica Investments, Inc., Allmerica Financial's registered broker-dealer. He can be reached at 787-763-1905.

Make Your Finances Y2K Ready, Too
   Keep Cash on Hand. Anticipating potential short-term delays relating to Y2K, consumers are advised to keep enough cash on hand in case there are interruptions in credit card transactions and ATMs. Make a list of all expenses and ensure that you have enough cash on hand to cover about a month's worth.
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Y2K Ready or Not?
   There are some simple steps you can take now to help avoid problems and embarrassment in January. If you are not comfortable downloading software from the Internet, seek out the advice of a local consultant who can advise you. Or you may contact
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