How are you preparing for the worst economic recession in 30 years?

1. Nov 15, 2008

gravenewworld

With unemployment fore casted to hit 8% or higher by next year?

How are you going to prepare for the strong possibility that you might get the pink slip and see your 401 k(s) become completely worthless?

2. Nov 15, 2008

WarPhalange

3. Nov 15, 2008

Jimmy Snyder

Obviously we'll cut back on charity. If that's not enough, we may have to let some of the servants go.

4. Nov 15, 2008

OrbitalPower

I'm becoming a mini-survivalist, not quite as extreme as these guys:

http://www.msnbc.msn.com/id/27244465/

Interestingly the article says a Utah business selling "underground dwellings" is seeing an increase in revenue.

5. Nov 15, 2008

Monique

Staff Emeritus
I've already stocked up on some non-perishable foods, call me an extremist

6. Nov 15, 2008

Staff: Mentor

Except by saving up a little cash so that you have a safety net with which to use while looking for a job, there isn't much you can do.
Why would a 401k become worthless? AFAIK, that's not really a possibility unless a person is absurdly stupid with the way they invested it (and I'm not sure there are any investments allowed that can lose everything). Most people with 401k's invest in well diversified mutual funds and the biggest risk with those is about a 40% drop over a year. If you invest properly, that isn't a big deal. The people it hurts most are those nearing retirment age who didn't shift their funds toward fixed-income like they were supposed to.

Last edited: Nov 15, 2008
7. Nov 15, 2008

Enthalpy

There is no such thing as a guaranteed "biggest risk". Money has no guaranteed value, assets have none. When the company that keeps your shares, your bonds, your deposits closes, you've lost usually.

In 1929, governments let banks disappear. In 2008 they don't, but governments don't have the reserves they pretend to inject in the banks, so either governments have to borrow it - creating problems in the future - or print it like they did in 1973, but then money itself loses its value. So maybe you'll still have you deposits available at the bank, with a similar amount of dollar or euro, but this will buy you less goods. Arguably a less bad choice for governments, and apparently the one they chose this time.

In Argentina around 2001, money lost 4/5th of its value and so did nearly everything. I understand the current crisis as very similar to the Argentine one, with governments injecting more and more cash they don't have - called monetary mass inflation.

Recent attacks by some government against "tax heavens" and notation agencies let me doubt this government has confidence in its own currency.

Remember not to leave everything at your bank. In Argentina, bank offices closed. Anyway, there is too little paper money for everybody. And the ugly side showed in Russia, where notes with odd numbers were declared valueless. No more legal tender, and not tender at all, I would say.

One may try to have money in different currencies to keep some if one loses its value. Not legal in every country. In some countries, bank accounts in foreign currencies are legal, but with the associated risks: bank closed, forced conversion...

Buy in advance what you need, like a home or land? At least you have it. Question is if they'll lose their value before or after money does.

Storing food at least prevents from quick starving. It probably won't save the value of all your asset.

Choose another country? Several countries is Asia and South America may have a better future than in North America and Europe. The ones with sound economic policies and that didn't invest in US banks. Preferably food exporters little affected by climate changes.

Advices by, for instance, our Argentinian forum members would be highly welcome!

Ingot we trust?

Last edited: Nov 15, 2008
8. Nov 15, 2008

Staff: Mentor

I have two 401K's. One is strictly fixed income and keeps going up. The other is diversified, and as far as I know, it's still OK.

I'm optimistic for the future, and I'm working on various proposals for research and development, and work next year, and the year after that. There's enough work and R&D to last me several lifetimes.

9. Nov 15, 2008

Topher925

I'm going to stop using money. I'm going to start trading fur and spices for goods and services like back in the old days.

My 401k is worth about 40 pelts of beaver fur and about 300 grains of curry.

10. Nov 15, 2008

gravenewworld

You give people farrrrrrrrrrrrrrr too much credit. People always need protection from themselves and their own stupidity. How many of the massive wave of baby boomers that are on the verge of retiring are going to lose a huge chunk of their savings during this recession? Most baby boomers won't have another 10-20 years to wait for their investments to fully rebound from a recession that could last 1,2, even 3 years.

11. Nov 15, 2008

BobG

The oldest baby boomers don't; the youngest do. Some will have to delay retirement a few years (I don't understand why retirement age for social security, etc, is so low, anyway).

For the short term, the population of squirrels in my neighborhood has grown too high anyway. It's time to start trapping them and eating them.

Actually, I'm more concerned about the government cutting spending on things like missile defense than I am the current recession, although the recession could make the consequences of reduced defense spending a lot more serious.

I'm doing nothing to prepare since, for some reason, I decided this was a good year to spend most of my savings on lawyers. On the other hand, at least I don't feel so bad about splitting up my 401(k).

12. Nov 15, 2008

Staff: Mentor

My younger daughter prepared me for this a few years ago by spending all of my money so I have none left to lose.

13. Nov 15, 2008

misgfool

Feels good, doesn't it?

14. Nov 15, 2008

Staff: Mentor

I need to thank her. Now I have no worries. :tongue:

15. Nov 15, 2008

OmCheeto

I don't have any kids, so I had to do that myself.

Some of the aforementioned plans are on my list:
2008 charitable contributions: ~$1000 2009 forecast charitable contributions: ~$0

Of course, I have some of my own:

Transfer high interest rate credit card balance to zero interest rate card.
annual savings: $2k Continue to perform electrical energy conservation experiments on myself: Summer 2007: 18kwh/day Summer 2008: 12kwh/day November 2007: 26 kwh/day November 2008: 20 kwh/day projected annual savings:$500

Stop buying my homeless acquaintance two pints of swill everyday at the bar
projected annual savings: $650 (he says he'll pay me back some day. really. he will. "think of me as an investment" ) And last but not least, as I've mentioned before, now that the market has corrected itself, for the first time in my life, I'll be investing$100/month in the market until I retire in 8.3 years. Or until I'm layed off, fired, or quit.

16. Nov 15, 2008

Staff: Mentor

In your first post, you said "completely worthless" which is quite a bit different from "a huge chunk".

In any case, I'm not a big fan of helping stupid people who should know better. Managing a 401k is pretty easy.

17. Nov 15, 2008

turbo

My wife and I saw this coming a few years ago, and we bought a small, easy-to-heat cabin with a garden spot and almost 10 acres of wood-lot. We sold near the top of the housing market, and banked the money. Our two chest freezers are full of food, and I process and can additional food, too.

The Maine economy was in a bad downturn a few years before the rest of the country got nailed. We read the signs accurately, adjusted accordingly, and will just ride this out. A lobsterman bought the little house next door to my father's place. He owns his boat free and clear, unlike many others, and can afford to keep fishing for now, though the depressed price of lobster and the high cost of diesel are squeezing him. Many younger fishermen can't afford to pay the loans on their boats, buy fuel, and try to keep their families fed and they are leaving the trade. The largest and (usually) busiest builders of commercial fishing boats have laid off most of their staff - no orders.

We left the town that we last lived in because the tax base is dominated by a huge pulp and paper mill with 3 high-speed on-line coated paper machines. If that business failed (even with a "temporary" shut-down of one or two machines) property taxes would soar, even while people were losing their jobs, and losing their homes to foreclosure.

We moved to a much smaller (population) town with a tax-base that is comprised mostly of farm-land, wood-lots, residential properties, etc, so when the ax falls, we should be OK. The town will be stressed but not devastated.

18. Nov 15, 2008

Monique

Staff Emeritus
you can always use her as your retirement :uhh:

My boyfriend predicted that this was going to happen a few years ago (bursting of the housing bubble, banks in crisis), nobody believed him, most people are still in denial, but he was right.

19. Nov 15, 2008

edward

20. Nov 15, 2008

turbo

I was investing during the build-up to the savings and loan collapse, and while my co-workers were urging me to jump into our 401K's real-estate fund (earning 20% or more per year at the time) I stayed out. When the crash came, the fund's assets were frozen and my co-workers were despondent. One of my fellow regional salespersons lost over $250K in that crash , and he had one daughter in Middlebury College ($) and another who had just been accepted.

You don't have to be a rocket scientist (or an economist) to see when a sector of our economy is too highly leveraged and/or over-valued. Hopefully, the companies comprising majority of my current portfolio will hang on, weather the storm, and begin to increase in value and attract new investment in a few years. I don't need to tap my retirement savings now - I pity those that must.

Last edited: Nov 15, 2008