How are you preparing for the economy?

[ungawa]

Thee have been some threads that have touched on these issues and of course there are the survival threads. I looked and did not find a thread like this one. I want to hear what people think about these things and what ideas they have to get through these tough times. MAYBE financial advice is best sought from financial experts. But we have a lot of well-grounded people on this forum and not every answer to life's problems lies in where to put cash. We may need some "life" ideas as well as financial ideas.

I'm concerned things may get worse. I'm also concerned that there may be inflation with the government's plans, even though there is none now. But that is not the point of my post, just providing background on my personal motivations.

Bad news - I bought my first house a year ago. So I am broke. I had to pull some cash out of IRA to make everything the way I wanted.

Good news - Taking cash out of IRA is tuff. But I sold at the top, and it covered not only the 10% penalty but also the taxes when you look at how far the market tumbled! About 80% went into my house, 10% went into durable goods, and the last 10% into misc needed stuff. So I managed to convert something about to have little value into stuff that is inflation resistant. And, fortunately, I bought the house at a reasonable price that was not inflated too much by the bubble.

So here I am. I don't have a lot of cash to weather the storm. And I have some low interest debt. If I had a lot of cash, I would be looking for investment deals for at least some of it. But I have the opposite problem. So for me there is more downside risk than upside potential. I'm thinking of doing a couple things that defy conventional wisdom but might make sense for me. I'm going to hedge at substantial cost when it should be a time to invest.

First, I am going to cash out another IRA. I am in my 30s so most of my IRAs are in mutual funds. Since I have little cash, they have to retain at least some value for me to have a safety net. I'm not certain I can count on that and I'm also concerned that if we go into real crisis the government may start meddling in these affairs to protect the markets. I need a little currency closer to home.

I'm going to have substantially more cash on hand than debt. I will not be paying off my debt. Credit may be hard to come by, and as long as my debt does no threaten me, I'd rather have the cash than be debt free and have nothing. Also, if there is inflation, the value of the debt will be less. If I start to get bit by interest then I will pay it off.

I'm going to convert some of the cash into inflation resistant assets. A meager amount will go to long-term food storage. I'm also going to buy some metals. If I already had a reserve of cash and extra money to invest, there is no way I would buy precious metals at these high prices. But I'm not in that position. I'm hedging so hard that I'm hedging against serious cash devaluation. And I'm hedging harder - I'm going to avoid gold because I am concerned about government involvement in gold if things get really bad. It's happened before.

These are probably all bad financial investments. But I don't think I'm in a position to invest right now.

What are you doing to prepare for the worst? It doesn't have to be financially related.

[Pector55]

Assure the family understands the difference between a want and need.
Clarify the differences in expenses and discressionary expenses. Do you need heat during the winter the same way you need to have 287 channels and 3 DVRs? Do you really need unlimited text messaging for your cell phone or can you just pick up the damn phone once in a while?

For necessary expenses like eating, differentiate between the need to have someone prepare your burger for $8 or buy the burger and do it yourself for $1 (at $2.49/lb). Mix that same pound of burger in with a can of sauce and .50 worth of pasta and feed the family for the night. Learn to cook and do some things with the family. My kids love helping to cook something, we save money, and you actually spend time with them. (no text messaging needed)

Buy in bulk but ration to assure you are not increasing consumption based on the larger supply. I buy at Sams and save a lot of money on those consumables.

I backed down on my 401k to expedite paying off debt this year. You must be disciplined to assure you are using your money to do that though. I only get paid once a month so I pay all the bills for the month at one time (gas and groceries are the only common exception).

Switch to using CASH instead of your debit card. I find it very difficult hand over cash.

Spend some time exercising with the family. It's cheap and honestly, in the past 2 years, I only got sick one time. In the process, I lost over 30lbs and feel better. I also taught my kids a lot about staying in shape.

There are a lot of inexpensive things to do. Instead of dropping a couple hundred bucks for a baseball game, we take the dogs for long hikes at the park, go fishing, etc. The kids love just getting out and exploring. Strap a pair of hip boots on a 10yr old, put him in the creek and don't worry whether or not he catches anything. He will have a blast ;-)
Convert your semi-autos to sniper rifles. Make every shot count. You really lower your ammo consumption. Shoot at longer distances (if possible) and take your bolt guns out more often. Trade a couple of guns for .22LRs and have accuracy contests with your buddies at 50, 75, and 100yrds. Bet $1 per 3rd groups just to add some fun to it.

[BIGSHOVEL]

I am maxing out all investments right now, switched as frequently as needed. Bonds are hot right now, equities are not. We have worked hard over the years and have zero debt exept a modest 15 year mortgage. I was always told to have a years worth of expenses saved and in liquid form. ING is paying handsome interest on a savings account. With tough times I keep cash at hand for those "deals" that come along from those who are less fortunate right now. I have actually bought some things recently as a steal from hard up folks. I am usure of what cash could or will be worth in the future so its hard to gauge how much to keep liquid. On the survival side stockpiles are up, food, water, ammo, alternate heat and power sources addressed. I hope I never need any of it but you never know. My wife is taking the NRA basic pistol course as a precaution as well, I wonder about her intentions some times. I may need to be fearfull of her soon enough.

Brad

[schmol]

I have been stocking up on food and water(55 gallons drums from sams)have about 2800rds of ammo for my AR/G27 and looking to get some more. The one thing I'm not sure of is how much cash to have on hand, anyone have suggestions on this issue?? I'm considering cashing in a IRA that would put in the 20k range of liquid cash and maybe buying some silver metals for backup.

As for debt, I have a car payment, one credit card(almost paid off) and my mortgage...other than that just normal expenses.

[SHEPHERD321]

I've invested in a few respirators, some more guns and ammo. Now I need a bullet proof vest and more first aid gear.
I haven't spent anything on metals. If I was relying on trade, MREs might be a better choice.
It all just depends on how far down you think the economy will go.

[D*Compound]

anyone building an underground bunker???? Or a Concrete Safe room in thier homes???

what about large holds of fuel for generators?

[Siobhra]

I rent a room and don't even have an apartment. Not much I can do.

[edstephan]

I am investing in brass, copper, nitrocellulose, forged aluminum, steel, plastic, a years supply of food, silver and a bit of gold.

Ed

[Mohaa Player]

I have been working steady and getting plenty of overtime with my company(Armored Car Company)and I have been doing rifle stock refinishing on the side which I'm getting a web site up for soon since work has been picking up.I'm doing better right now then I ever did.My wife is finishing her last semester to get her Paralegal degree and then that's another income which will be better then mine.I'm just glad I'm where I'm at right now because I had bad times before and hope all you guys on this site our doing good and the ones that are not I hope things turn around for you and your family.

[dc dalton]

OK, a lot of great info so far ... I may repeat some of it but you know me when I get on a roll

We sat down and went through every expense we had and looked at each one and asked:

a. Do we really need this

b. If we do need it is there a way to cut the expense down

Over a year ago we bought a commercial freezer, used but in perfect shape. We started buying food in bulk when it was on sale. We travel once a year to Clifton, NJ to a restaurant supplier that is open to the public and get all our dry and canned goods (20 pounds of pasta for $5 is my idea of a deal, and it's the best pasta you will ever have)

We started stocking the freezer with ONLY sale items. Like last week Shoprite had Perdue chicken wings at $1.24 a pound .. so we load the cart up. We watch the sale fliers each week and besides one or two necessities we only 'sale shop'..... We also bought a Food Saver pro and repack all our meats before freezing them ... last a ton longer.

We also started a respectable sized garden last year and will do more this year. We had fresh veggies all summer and fall, they tasted a HELL of a lot better and you know what? It was great to go tinker in the garden to 'de-stress'. Tootie canned a bunch for the winter and next year will be doing a LOT more canning.

We also bought something that has saved us a ton of money that most people might not get ... a meat slicer. Not an expensive one, it was about $200. We were always throwing our stuff like pieces of a roast, a chicken or things like that. Now when we have left over roast I will slice it into for sandwiches. So we aren't throwing away food and we are saving money by having sliced meats for lunches. You would be amazed how much you can save over time.

Heat wise we switched to coal 2 years ago. We were running a tank and change each month (you do the math) and now we heat the house for the entire winter for just over $1000.... the savings is amazing and if the power goes out we still have heat and something to cook on. (actually saved our asses during the ice storms of Jan 2006 when we had no power for 5 days)

We cut out just about all 'going out' (not much to do in the Poconos anyways) ... we will play a game, read or watch movies on TV.

We MIGHT eat out once a month. She cooks everything from scratch and we have estimated our meals cost us about $15 a day (for two people) ... you cant feed two people at McDonalds for that and our food is healthy.

As far as investments we are gold and silver people (more on that in a bit) and of course firearms (they are going up faster than anything else right now). Now to gold and silver and your comment about them being 'too high' right now ... to that I would answer gold is high BUT silver is dirt freaking cheap! Silver was just over $20 an ounce last January and is now $12.67 (todays spot, up $3 an ounce in 3 months) .... while I will say I seriously expect gold to crack $1300 this year I am more interested in silver and I honestly believe it will not only go back up past $20 I expect to see mid to upper 20s and here is why.

Once all this assets destruction is over and with all the money the government is 'throwing' at the problem inflation is going to snap back like a rubber band on steroids! When that happens gold, silver, oil and many other commodities are going to go through the roof!

Now with gold let's say you buy today at $927.10 and let's say it runs up to $1300 (a realistic number) your profit (actually it's not profit but I'll explain that in a bit) is $373 or about 28% (at the sale). Now with silver you buy at $12.67 and it can easily hit $21 (as I said it did last year) your profit is $8.33 or 40% ... and again I can easily see silver doing $25 - $30 an ounce once inflation really gets going. So that's why I like silver better than gold, more potential for profit.

Lastly, I was saying 'profit' on selling gold and silver but it's not really profit. What has more than likely happened when these metals run up is the US dollar has dropped so your buying power with a paper dollar is less YET the metals have 'equalized' that loss in buying power... same with oil when it runs up, it is equalizing out for a dropping dollar.

Last summer the dollar dropped down into the 71 range and then via some slick manipulation the FED was able to run it back up into the mid 80s. Once all this new money hits the street and the assets stop deflating expect to see the dollar in the low 70s again if not lower.

And yes we like 'cash on hand too' BUT remember when the dollar drops your buying power is hurt unless you have something to hedge inflation.

Well I'm exhausted after typing all that!