Some advice needed

[Charon]

A not so hypothetical question.

Suppose you found yourself cash rich (relatively speaking) in the current looming crisis. You have had minimal debt, two career family and have banked a nice sum over the past few years. You were bothered that the money was just sitting there, and maxed out a few Roth IRAs and have the 401K funded at the company contributor level. But you were hesitant to move the growing savings into the market because you felt the possibility that it would evaporate was more likely than seeing it balloon in profits. A CD would have been smart, probably.

So now, we are looking at a period where stock prices are volatile and downward trending - more so than before.

The cash represents about 1/2 the remaining mortgage (to 1/3 with a security reserve) that will be paid off within 7 years. The mortgage was 15 years at a good flat rate. The payment is easily affordable now, but a bit tight living on 1 income if you had too.

With a 2nd kid just arrived, the wife is looking at cutting back hours removing 1/4 of the family income. No issue NOW, but, your job in publishing (which is being slammed) has some uncertainties in the near future. The mortgage would be undoable on 1/4 income should you lose your job for any extended length of time.

For other debt you owe $8000 on your car which you can pay off and save $1000

The kids also need to have their college funds started.

So, given the possibility of high inflation (turning the cash into crap), potential unemployment or significantly reduced wages, etc. with the "new economy" -- what would be the smartest thing to do with the money that would protect it's value?

Charon

[Maverick]

My inclination would be 2 fold. Divest myself of as much debt as possible (car) and do invest in  some good mutual funds. The market downturn WILL reverse itself and the increase in gains over the next 2 years will be impressive IF you invest while the stocks are low. Do so with money you do not need for bills or food etc. Keep in mind that stocks are best viewed as a long term investment not short like a day trader unless you are really into gambling. The ones hurting now in the market are those who need the cash today and are over extended otherwise. If I had extra money I'd dump it in my mutual funds today and watch the value increase over the next year.

[Mojava]

 I would suggest buying land.  It is definitely a buyers market, it will only increase in value, and there are some great deals out there.

[Nwbie]

1. Pay off the car note
2. Put 1 1/2 to 2 years of mortgage payments in staggered 3 month and 6 month CD's
3. check out this site - http://www.collegesavings.org/index.aspx

4. look at investing in real estate - look at middle class area for buying homes or 2 flats for rental properties, There are a lot of middle class people looking for decent rental property right now... if you have close friends or relatives - look into starting a corp. - REIT - for investing, the group I have been involved with have done very well.. one important thing..need to setup an agreement ... all hardships notwithstanding... all investments must be invested for a certain period and if goal is to increase property portfolio, no returns on investment to be divested for a certain period... we agreed on 5 years..may be too long for some - I thought at the time 2 years was enough ..but am glad now that we agreed on 5 years.

[Bodhi]

1. Pay off the car note
2. Put 1 1/2 to 2 years of mortgage payments in staggered 3 month and 6 month CD's
3. check out this site - http://www.collegesavings.org/index.aspx

4. look at investing in real estate - look at middle class area for buying homes or 2 flats for rental properties, There are a lot of middle class people looking for decent rental property right now... if you have close friends or relatives - look into starting a corp. - REIT - for investing, the group I have been involved with have done very well.. one important thing..need to setup an agreement ... all hardships notwithstanding... all investments must be invested for a certain period and if goal is to increase property portfolio, no returns on investment to be divested for a certain period... we agreed on 5 years..may be too long for some - I thought at the time 2 years was enough ..but am glad now that we agreed on 5 years.

what he said.

[Toad]

Most CD's aren't paying much these days. You can preserve capital there but it won't be growing very much.

I am personally looking at income producing properties, particularly rental homes. There are some buys out there and I think it will get even better. Plus, as mortgage rules are bound to significantly tighten even more the pool of potential good renters should expand.

And 10 years down the road when the housing surplus dwindles a bit the properties should have appreicated. So, income while you wait, gains after you sell.

Oh, yeah... some gold. But I think a lot of the gain in that was made by the guys that bought in back at $750

[john9001]

have two rental houses, if you are going to a landlord be prepared for headaches, renters are a PITA.

[Nwbie]

Most CD's aren't paying much these days. You can preserve capital there but it won't be growing very much.

I am personally looking at income producing properties, particularly rental homes. There are some buys out there and I think it will get even better. Plus, as mortgage rules are bound to significantly tighten even more the pool of potential good renters should expand.

And 10 years down the road when the housing surplus dwindles a bit the properties should have appreicated. So, income while you wait, gains after you sell.

Oh, yeah... some gold. But I think a lot of the gain in that was made by the guys that bought in back at $750

I agree on the CD's not paying much - but - i was looking that in the short term he needed to possibly get at that money quick for daily needs. the reason i say staggered is it is a bit of an insurance that you only take out what is needed and not - blow- it on frivolous items - which is easy to do..
-- as for being a landlord .. totally agree - helps if any partners you get are handy - or are construction workers - there are all the little annoying things that go wrong ..and seem to multiply as you go along.. thee main reason for not divesting investments is to make sure you have monies for all those little fix ups ..

[Hangtime]

Best place to dump cash in an inflation economy is in property that's in an area that does not have a high property tax burden.

This can be part of a common-sense defensive plan, and provide a nice vacation house well away from the suburbs or city.

Call it a 'vacation' property.. I got a chunk up in the catskills, about 3 hours north of NYC. We hunt up there, a buddy keeps a big old RV trailer on it. As my grandkid grows, I'll begin building on it.. hope to leave the family a nice little vacation home in the woods when I pass. It'll also a great sanctuary for the occasional family member that needs a little breathing room... which made it all an easier 'sell' to the family...

...they'd think I was loony If I told 'em the real reason I bought it.

[gwano]

I think the economy is going to continue to decline until we adjust to a global economy. we will continue to lose jobs and have retirements cut.
All this adds up to less money circulating  through the system.

If it were me I would reduce my debt as much as possible and just hold on until things begin to change.
very few of us are fully cushioned from this poor economic situation, and in my opinion, more jobs will be lost in the near future.

Sorry to seem so negative, but it is my gut feeling.

[whels]

6 steps to finantual security and live debt  free.

$1,000 to start an Emergency Fund
   Pay off all debt
   3 to 6 months of expenses in savings
   Invest 15% of household income into Roth IRAs and pre-tax retirement
   College funding for children
   Pay off home early


look here too. http://www.daveramsey.com/