How do I secure my money?

[Trusty Mutsi]

I've heard this mentioned a few times on the podcast, so here's my question: how do I secure my money? My wife and I have no debt except for our house. We have a good chunk of money in CDs (about $30,000), and have a 401k at work. We have almost no cash in the house.

What's some good places to start for securing my family's finances?

Thanks for any help!

[ModernSurvival]

I discussed this on today's show which was just published. Hope it is helpful to you just remember I am not a Financial Adviser and you have to in the end always make your own decisions.

[Trusty Mutsi]

I discussed this on today's show which was just published. Hope it is helpful to you just remember I am not a Financial Adviser and you have to in the end always make your own decisions.

Totally understood. I think another thing I need to focus on is to educate myself on a lot of things (politics, economy, stocks, gardening...)

[BigDanInTX]

Trusty, you have to understand that no one can legally answer that question.  You would need to consult a financial advisor regarding this.  Making specific suggestions could bite anyone who makes them in the ass because if you do drop your money somewhere and lose it all, they could then be liable in a lawsuit.

In a general sense, don't put it all in one place.  There's no way of knowing what the market will do.  The signs seem to be pointing downwards, but you need to decide what's best for you.

Don't put it all in gold/silver.  It is useful in some scenarios, but not all.  Don't put it all in domestic stocks/bonds/funds.  That way, you have something you can rely on if things do go south.  Don't keep it all in cash.  It's hard to store that much.

Check out this document, a compilation of posts from a guy who went through the Argentina economic meltdown.  He discusses money stuff and you may get some ideas from that...
http://sparc.areyouprepared.org/archive/Terrorism%20and%20Civil%20Disturbances/ArgentinaMeltdown.doc

Also, think about what marketable "primitive" skill you have or can learn.  This lets you have a career option to fall back on...something that will always be needed no matter what level of collapse occurs.  This will ensure that you will be able to have income of some kind.  For me, it's carpentry.  I've always been interested in it and it's something I could fairly easily do if there are no computers to program anymore.  =-]

[Stein]

What I do is make a list of bad things that can happen and try to figure out what I would need to get through that in the short term.  This tells me how much cash I should have very quick access to.

Prior to the current nonsense, my worst-case scenario was an evacuation due to a natural disaster, or a bug-in without power or access to banks/debit/credit cards.

I figured if I had a few thousand in cash, we would be fine.  Now, I am adding major banking disruption to the list and want to have at least three months of expenses in cash money available.

Then, I move outward to medium term issues like medical problems, job layoff, etc.  Keep moving out and put together a plan to address them.

Essentially, we have 3 months in cash, another three months expenses in a savings account and then it gets illiquid pretty fast.

[BigDanInTX]

Also, you mentioned your money is in CD's.  I don't think I'd pull it out if you risk facing fees for doing so unless you were certain it was worth it.

[Trusty Mutsi]

Thanks for all the help guys!

I have another question:

Back when the great depression hit, were the people with cash the ONLY ones with any money left, or were those with savings in the bank also okay?

I'm asking because I'm afraid if we have another "great depression" anything I have outside of silver/gold coins will be worthless.

*Sigh* I have so much to learn about economics that a high school student probably knows. I need to find someplace to start learning the basics.

[ColdHaven]

I know very little about economics, but I can honestly say that I have learned alot from listening to Jack's podcasts. I don't have a comprehensive idea of stocks and such. I would probably understand more of what he is saying if I did. What I do know is that I have my money in different areas. Like BigDan said don't have it or any resource all in one place. I keep water and food in more than one place, and the same should be about finances. Not like I am rich anyway...but still it does matter. 

[Stein]

Thanks for all the help guys!

I have another question:

Back when the great depression hit, were the people with cash the ONLY ones with any money left, or were those with savings in the bank also okay?

Back then, there was no FDIC so if your bank shut down you were out the money.  Many, many banks shut down and many people lost their money.  Since the FDIC was introduced, no insured money has been lost, but tons of uninsured money has.

Today, I feel semi-comfortable with money in savings and uncomfortable with money in money market accounts.  I have more cash than normal to protect against any potential withdrawl delays.

I fully believe that USG would make insured deposits whole no matter what.  If those dollars are worth anything at all, they will find a way to get them to you or risk unbelievable backlash.

[ModernSurvival]

Another option is ING Direct for a savings account.  You can get 3% for a plain savings account there and they are pretty damn stable compared to the other banks right now, FDIC insured, etc.  3% ain't much but my local bank is paying, .15 yes POINT ONE FIVE on basic savings and 1% on a money market right now.

Like I keep saying all your money (even is cash or liquid assets) should not be in one place.  ING is a good place for a big chunk of cash you can do with out short term but might need at any time.  They also have damn good CD rates even pretty short term ones 6-24 months.

I don't know why more folks don't use ING for savings, not the end all be all mind you but at least they pay something decent and are insured and on good financial footing.  My buddy just asked about "safe investments" and I told him about ING and he says, 3% sucks, .  I asked how his 401K was he bitched,  , I asked what his bank payed and he mumbled.     What else can you do for a person?

[Beetle]

I have defered comp in ING and in my credit union which is paying 4.4%.Plus it's insured And I keep socking it away. Wohooo

[ModernSurvival]

I have defered comp in ING and in my credit union which is paying 4.4%.Plus it's insured And I keep socking it away. Wohooo

Excellent!  4.4%  looks pretty good right now compared to the alternative the last 12 months! As one can clearly see!



I actually have a lot in Australian bonds which I picked up back when you could lock in 7.5% for two years.  Those days are over for a bit but just a few months ago it was as easy as making a phone call. 

[ModernSurvival]

As I was!  Austrialia is right now paying 7.5% coupon rate on a 12 month bond.

THERE IS an exchange rate risk, talk to your adviser before you act, yadda, yadda, etc.

http://www.bloomberg.com/markets/rates/australia.html

[BigDanInTX]

I use ING as well!  $50 per week automatically withdrawn from my bank account.  I kind of just ignore the fact that it's there.  Makes saving money alot easier!  I had to draw down on the account after I was laid off, but it's building back up now.  =-]

[Stein]

As I was!  Austrialia is right now paying 7.5% coupon rate on a 12 month bond.

THERE IS an exchange rate risk, talk to your adviser before you act, yadda, yadda, etc.

http://www.bloomberg.com/markets/rates/australia.html

Australia sounds like they are having massive problems, as we are, so the default risk is something to think about.

That said, how does one go about buying a government bond from Australia?  I looked into it briefly about a year ago and didn't see anything.  Can you buy them directly like we can in the US or do I need to go through a broker?  I use Fidelity and Vanguard and didn't see anything on their website.

[steel]

As I was!  Austrialia is right now paying 7.5% coupon rate on a 12 month bond.

THERE IS an exchange rate risk, talk to your adviser before you act, yadda, yadda, etc.

http://www.bloomberg.com/markets/rates/australia.html

Australia sounds like they are having massive problems, as we are, so the default risk is something to think about.

That said, how does one go about buying a government bond from Australia?  I looked into it briefly about a year ago and didn't see anything.  Can you buy them directly like we can in the US or do I need to go through a broker?  I use Fidelity and Vanguard and didn't see anything on their website.

I thought about this also since you get higher rates in overseas markets.  Everbank is one place to do this http://www.everbank.com/001CurrencyCDSingle.aspx
but you have to pay an exchange fee of .75% on each end of the transaction (1.5% total).   That really knocks down the higher rates you get.  Add in the currency exchange rate risks and it's a no-go for me.

[SueDonim]

I'm toying with the idea of a foreign account, but not sure where.  Europe is in the tank.  Asia is as well.  Australia has lots of problems too.

On the plus side, Australia has a better retirement system (they call their pensions superannuations or superfunds).

Japan is supposed to be more stable, but they pay nothing in interest and you have the currency risk.  You might as well keep it in US in that case.

So not sure about this one.

Plus, IMHO, it seems that in the short term, the US$ will get stronger.  Since the rest of the world has caught up to us chaos-wise, the dollar has strengthened in a flight to quality.  I still think in the long-run, all the money the Fed is printing (not to mention the additional regulation under Pres. Obama (let's face it, I'm not sure even Palin can make McCain electable)) is going to be inflationary.

So my thought is, go with insured accounts in the short term, but be prepared to allow for more inflation in 2009.

Tough call though, and I am stumped as to the best course of action.

[BigDanInTX]

Yeah, we've recently heard news reports that alot of the greed involved in the lending mess was done all over the world.  Evidently, they saw how much money Americans were making doing it so they tried it too.  That said, foreign investment may not be the answer or the umbrella everyone thought it would be.

If you can wait out the real estate bubble, it may be an answer.  When people sell off their rental property, it may be a good time to have cash available.

[ModernSurvival]

One of the biggest real estate sales in the history of the world is about to occur, if you have cash you may want to keep it liquid to participate in the thrift sale we are about to see, good point Dan.

[BigDanInTX]

I overheard something on Talk Radio on the way home today.  There are stocks in a classification known as "Defensive Stocks".  These are companies that do well in hard times because they have products people have to purchase no matter what.

According to http://www.investorwords.com/cgi-bin/getword.cgi?id=5500&term=defensive%20stock:

A stock that tends to remain stable under difficult economic conditions. Defensive stocks include food, tobacco, oil, and utilities. These stocks hold up in hard times because demand does not decrease as dramatically as it may in other sectors. Defensive stocks tend to lag behind the rest of the market during economic expansion because demand does not increase as dramatically in an upswing.

[Stein]

One of the biggest real estate sales in the history of the world is about to occur, if you have cash you may want to keep it liquid to participate in the thrift sale we are about to see, good point Dan.

I would love to pick up some land, but don't expect massive fire sales up here in the NW unless things get much worse than they are.

I saw on the news that florida homes are starting to sell, dude bought a $250k house for $80k cash.

[BigDanInTX]

LOL...  he bought a house formerly valued at $250k for $80k.  By buying it at $80k, until it is re-assessed by his local taxing "authority", it's still only worth $80k.  I get what you're getting at though.

That's the kind of bargain I want, but here in Texas, we have somehow escaped some of the housing price devaluations at such an extreme.  It would take alot here in Texas to get that kind of deal...