Friday, August 17, 2012

What are You Doing with Your Cash?


There’s so much advice online, on television and in print media about how to protect your assets from the feared, impending economic collapse. However, disparity reigns. It’s almost impossible to find two sources that agree with each other.

Some financial “experts” will try to tell you they know the safe way to invest your money. Others will say, “Cash is King,” and by that they mean real, in-your-hands cash, not “digital” cash that you have tied up in banks or stocks or bonds. Others say that cash will soon be worthless; you need to invest in precious metals, because gold and silver won’t lose value even if the dollar fails. And still others say that cash will soon be worthless and so will precious metals, because once the monetary system fails, people will be wanting practical items, and gold isn’t good for eating, wearing or building.

So my question for you is, what are you doing right now with your cash? Are you still investing? Are you keeping it in the bank? Or are you stashing it somewhere safe? Are you diversifying? Buying precious metals? Stocking up on supplies and items to barter? Are you of the mindset that cash will be king, or that cash will be toilet paper?  Or, maybe you are looking at it percentage-wise? (i.e., keep 30% of your assets in cash, the rest into other options).

I’m not asking for numbers, of course, and I’d rather you didn’t give any. But just in general terms, how are you protecting your assets?

14 comments:

  1. It's nice to have you back. I invest in tangibles. Items I feel will help us through the rough times. I give a list but it would feel this page. A bit of gold and silver doesn't hurt either.

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    1. Thanks Stephen. Sounds like a good plan.

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  2. There will never be such a thing as economic collapse. We have money because it is just so darn useful.
    A few decades ago Ireland had an economic collapse of sorts where people could not get their money out of the banks. Pub owners acted as record keepers for transactions between individuals so that things could keep moving. Once the banks reopened everyone settled up their accounts.
    Any situation where people are not so desperate that they are willing to take gold is a situation where gold will not be particularly needed. The best thing to do is to have good record keeping of your money in case of a hiccup in the financial system and life your life as you would normally. You will regret no having a 401K 40 years from now because you assumed that money will be useless.

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    1. Thanks Paul. What about Argentina? Their collapse was not so friendly.

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  3. Buying usefull stuff while I still have a job (dehydrators, pressure canners, mason jars, etc.). Still investing in 401k & a also few coins.

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    1. DFW, that sounds pretty similar to what we are doing. Thanks for responding.

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  4. There was rioting with the Argentina collapse, however nothing in the collapse would point to doing things much differently. If there are any lessons to learn from the Argentine example, it would be to take as big a loan as possible and do some hobby farming. Another lesson would be to keep as little cash as possible due to the risk of hyper-inflation. Regardless Argentina came out of their crisis.

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    1. Only by ignoring what was actually going on, was the press able to make noises about Argentinas recovery.

      Pensions, savings, have been confiscated by the government, and their are severe cash restrictions.

      The Argentinian countryside is very dangerous. You are generally safer in the cities. This does not even include the many towns that lost their rail service and became complete ghost towns. Anyone who had assets in those towns would have lost everything.

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  5. I have a Roth and 401K. There have been numerous historical collapses but timing them is impossible. That my employers at various times have matched contributions adds up to free money, and should always be taken advantage of.

    I also have a fair amount in near cash investments (CDs, et cetera), and cash on hand for emergencies.

    You normally would want a balance of short term and long term savings/investments. The key is in the savings. Returns are likely to be low for some time, so the key is reducing your spending so that you can increase savings.

    Your amount of savings has always been at least as important as your return on investment.

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    1. Russell, we've dropped our 401k contributions down to the amount matched by our employer. Seems like a good idea to have the cash be more obtainable at the moment. Using it to build up savings, like you were saying. Thank you for the input.

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  6. Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Although one of the world's wealthiest countries 100 years ago, Argentina suffered during most of the 20th century from recurring economic crises, persistent fiscal and current account deficits, high inflation, mounting external debt, and capital flight. A severe depression, growing public and external indebtedness, and a bank run culminated in 2001 in the most serious economic, social, and political crisis in the country's turbulent history. Interim President Adolfo RODRIGUEZ SAA declared a default - the largest in history - on the government's foreign debt in December of that year, and abruptly resigned only a few days after taking office. His successor, Eduardo DUHALDE, announced an end to the peso's decade-long 1-to-1 peg to the US dollar in early 2002. The economy bottomed out that year, with real GDP 18% smaller than in 1998 and almost 60% of Argentines under the poverty line. Real GDP rebounded to grow by an average 8.5% annually over the subsequent six years, taking advantage of previously idled industrial capacity and labor, an audacious debt restructuring and reduced debt burden, excellent international financial conditions, and expansionary monetary and fiscal policies. Inflation also increased, however, during the administration of President Nestor KIRCHNER, which responded with price restraints on businesses, as well as export taxes and restraints, and beginning in early 2007, with understating inflation data. Cristina FERNANDEZ DE KIRCHNER succeeded her husband as President in late 2007, and the rapid economic growth of previous years began to slow sharply the following year as government policies held back exports and the world economy fell into recession. The economy has rebounded strongly from the 2009 recession, but the government's continued reliance on expansionary fiscal and monetary policies risks exacerbating already high inflation.

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    1. I think Argentina is a good indicator of what can/will happen to the US if we keep spending like we are. I'm scared to go through what they went through. It's been over a decade since their 2001 crisis, and they are still feeling the effects. Imagine how much worse it can be in the US: our population is almost ten times theirs and our population density is twice theirs.

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  7. We invested in gold and silver a few years back and that has been good for us. We are starting a new business and that investment is helping to pay the expenses. :)

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    1. Thanks Nancy. I heard recently that silver is expected to outpace gold regarding rising value. Don't spend it all!

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