Before I could move to thinking about the horrors that are going to be inflicted on other people and what I can do to mitigate their influence, I first had to think about taking care of my family.
Worry 1: Nuclear war. This suggests not dropping everything and moving to paradise (where people are safer many other ways), because paradise is a more likely to be a nuclear target than is our current redstate for both geographical and population reasons. Plus my mom said: “Evidently when Nixon started drinking heavily during Watergate, the defense secretary alerted the military that they were not to follow Nixon‘s orders without checking with him first.” So there’s some hope there.
We’re going to skip worry 2 because that doesn’t have a monetary effect. Worry 3, the one about interment/mass deportation/nazi treatment of minorities/trail of tears, is less of a problem for us because I’m 100% Euro-mutt and by the time they get around to checking state registries to see that DH isn’t, we’ll have had plenty of warning since they’ll already have started taking other groups. But still, we would need assets to flee. For people in higher priority minority groups, this could be a primary concern. :(
That leads us to Worry #4 which is already starting to happen: Another large recession. The recession will happen first because markets and businesses hate uncertainty and second because Republicans and Trump both are proponents of policies that will cause recession. If either of them get their way, we’re in for one. The Republican one will be smaller than the Trump one.
Knowing that a recession is happening, what should you do? It’s hard to say what to do with money that’s already in the stock market. Personally, I’m just going to let what’s in there ride out the next 2-8 years although this may turn out to be a poor decision. The question is what to do with our new money. This is especially important for us because there’s a non-zero chance that DH’s company will go out of business when federal funding dries up (and then I will have to cut down on savings).
Since this recession isn’t necessarily your standard Republican-caused recession, it isn’t clear that standard methods of thinking of the recession as an investment opportunity are the right ones. If things get really bad under a Trump presidency, we could lose a lot of the property protections we’ve had since the Great Depression or before. If he does something to the Fed or grabs assets (for example, if worry #5: Russia taking over happens) or defaults on federal debt, nothing will make sense anymore. So… should one dollar cost average in stocks during the recession and buy bonds before the recession… not all that clear.
When I looked up what to do in this kind of a situation, I got a lot of really stupid prepper sites. They’d say things like, “if you expect hyper inflation, pay down your debt first”… which is the opposite of making sense (fixed-rate debt is good to hold in inflationary environments). Or “if you don’t trust the government, invest in real estate” as if the government isn’t who enforces property rights. Super stupid. Don’t pay attention to those websites– in fact, I’m not sure they’re even trustworthy in terms of straight-forward things like emergency supplies just given their stupidity.
Right now, I think the best idea is to play it super cautious and to put excess money in cash and cds. I think there will be a lot more warning about getting rid of FDIC or changing those kinds of rules than there will be even for defaulting on US debt (which I think is unlikely to happen, but it was a campaign suggestion so not outside of the realm of possibility), which means that those dollars should still be somewhat safe.
Of course, the dollar itself may not remain safe. I looked up what to do when you think the dollar is going to crash and after ignoring all the prepper sites, it looks like a mix of foreign currencies is the best bet– the Swiss Franc, the Japanese Yen, and so on. Every single one of these is potentially risky, but a mix may be a reasonable addition to one’s portfolio. Gold and silver, the prepper’s favorites, are probably not the best idea because they’re probably already over-valued (and definitely don’t buy the actual metal– it is heavy and will be difficult to exchange for fair value). I worry about investing too much in, say, Chinese or Russian assets or assets in some Latin American countries because there’s always a possibility that the government will just seize foreign investments for itself.
The latter paragraph is most important if you think you will have to leave the United States. Staying in the US, it should be more ok to keep your assets in dollars and in mostly US companies because you’ll still be buying things in the US and hopefully making money in the US so you’re more insulated from shocks than if you had to flee the country (you’ll still feel the price increases, but they won’t be as disastrous). If you are thinking you may have to leave the country, then definitely put more foreign stock indices into your portfolio (don’t switch it entirely– when the US sneezes, the rest of the world gets a cold). We’ll be staying in this country unless my worry #3 happens because really we have no place else to go.
All of the above are secondary concerns, however. If you do not have an emergency fund that can support you for at least 6 months of job-loss, then that should be your first order of business. Save for a regular recession. If you’re a tenured academic, your job is probably still safe in the short term, but make sure you could handle a 10-20% future paycut (again, probably not likely to happen immediately). Do a financial fire drill. What could you cut?
Paying down the mortgage is pretty irrelevant for us at this point. But mortgage pre-payment may be a good idea if it has a better return than your bank account and you don’t want to be in a position where you may have to short-sell (and you wouldn’t foreclose).
So what we’re doing:
In the short term, we will continue to max out our retirement accounts and put money into 529 accounts in the same stock/bond percentages that we had been. (I’m assuming 529s won’t be seized given their popularity with the wealthy.) We will continue to do this until DH loses his job. All extra money, instead of being put into taxable stocks, will accumulate in our savings account. This contradicts our next mortgage post because that was written before the election back when all I thought we had to worry about was DH’s job going under. We are also no longer going to be so free with money– no more cosmetic car repair, for example. We will, however, be upping our charitable donations including charities like the ACLU that aren’t tax exempt. That’s because now that I have a saving plan and emergency escape plans (are your passports up to date?), it’s time to start thinking more about other people.
Are you changing your monetary plans?