Getting an oxygen mask on: Protecting oneself monetarily

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?

Advertisements

42 Responses to “Getting an oxygen mask on: Protecting oneself monetarily”

  1. Omdg Says:

    What if the threat comes in the form of angry peasants (not literally) revolting to take down the learned elite?

  2. Taylor Lee @ Yuppie Millennial Says:

    What’s changing for me, financially:
    1. No more mortgage prepayment
    2. Prioritizing physical assets in case we need to hunker down (looking into back up generators, rain barrel systems, gardening) or if we need to leave (go bags).
    3. Reallocate and increase donations to American charitable causes like ACLU, SPLC, and Environmental Defense Fund rather than international ones.

    What’s staying the same:
    1. Keep maxing out retirement, ESPP, investing leftover money throughout the year
    2. Keep preferred allocation 2/3 domestic, 1/3 international

    I still do not want to be sitting on too much cash (more than needed for an emergency fund) because of inflationary risk. Though still trying to determine how much cash I want in our go-bags in case… Ideally there would be a small, light currency substitute I could keep that would maintain its value (my grandparents who survived their own country’s ethnic cleansing still keep a drawer of jewelry in their house for that reason). Not sure there’s any good choice there.

    • nicoleandmaggie Says:

      Yeah, metals are too heavy and jewels aren’t worth as much as they cost and are hard to exchange. Maybe uncut gems? Hard to say. My thought is that once you’re a refugee and have made it out of the country you should be able to access non-US assets electronically. While you’re still in the country cash should work.

  3. Leah Says:

    Why not put some toward physical assets that will be useful regardless what happens? I’ve been debating purchasing a new computer (mine is 5 years old and getting slow), and we are thinking now might be the time to do so before currency becomes an issue. Especially thoughtful for me because I use Macs and they’re made in China; what if we do end up in a trade war with them and the cost of our goods skyrocket?

    I am trying to be patient and cautiously optimistic and see what happens. I am ignoring the news — not listening to NPR like my normal daily habit. I can’t handle all the conjecture of what will happen, especially since I feel helpless to solve anything nationally. Planning to find some ways to put my efforts to work locally.

    • nicoleandmaggie Says:

      That makes sense. Not something I’d thought about, but prices for these goods will probably be going up in within the next couple of years. Though it isn’t clear if we’re going to go through inflation or deflation given the proposed policy plans. Uncertainty sucks.

      I don’t think it’s probably worth buying something as expensive as, say, a new car just yet unless a person needs one. There’s trade-offs with depreciating assets.

      I’m also avoiding news. Right now I’m using Scalzi and Wandsci as my only two points of media contact– filtering the most important things (currently: hate crimes, Steve Bannon pick) so I’m avoiding everything else.

      I don’t know if I can help solve anything nationally, but I also feel that it’s important for me to know that I’ve tried. More on that later this week though.

      Local is definitely really important and is where real change can be made that affects actual people. That’s probably the highest payout social activism for an individual. So thank you for your future service!

      • Leah Says:

        We did just “need” our new car and thus bought one, and I’m honestly relieved we did. It’s solid and gets good gas mileage for being a crossover-type SUV vehicle (we can get up to 30 mpg on the highway with careful driving).

        I don’t think it’s worth stockpiling food just yet. But it is worth thinking about all these things. I’ve got a bunch of “interesting” books my brother bought at some point in time when I was a teen that I used to read. They’re all about what to do to prepare for a government failing and what to do in the meantime. The #1 piece of advice is to write your “congresscritter” even tho the authors don’t think it will make much difference. I don’t remember the main advice for if the gov’t will fail. In any case, they maintain that working on your own skills and not being totally minimalist (as in, having a small stockpile of goods and personal items) is worthwhile no matter what happens in the world.

        I already volunteer with our local nature center as time allows. Mostly, in the summer. I’ve done about 50-60 hours this year (most personal and a few via my workplace). But looking hard at other opportunities and trying to figure out how to balance that with having a young kid and my work.

        I appreciate your thoughtfulness and rational approach here. It’s good to get a perspective that we don’t often read. Wish I could see more of your economist stuff.

  4. Revanche @ A Gai Shan Life Says:

    I was all for money in the market but now I’m thinking along much the same lines as you. I won’t pull anything currently in there out of the market just yet, but I had intended to dump a lot more in and now I won’t. I have to do a bit more research into whether it makes sense to keep expanding my real estate portfolio as I had intended to do.

    We’re definitely Asian, no matter that we’re first and second generation here, so I know if things get so bad as to go down the deportations / internment camps / trail of tears route, I’m going to react to the first rumblings, not wait. But on the same note, I don’t want to consider leaving when this is my country too dammit. Still, unless I’m ready to dig in with a bunker and ten or more years of supplies, that isn’t going to be a sustainable solution. Mind, I’m not entirely against doing that. The stubborn in me is strong. But the stupid is not, and so I do have to consider when we have to cut our losses.

    A lot of what’s happening now is familiar to the older folks in my family and some friends so I’m not being complacent about how bad this COULD get.

    • nicoleandmaggie Says:

      My DH passes for white, but his family is where it is because of previous government intervention against a minority. It is difficult to be complacent.

      If the recession hits, there may be real estate deals in the SF bay area again. Personally I would put off on buying if you can hoard cash. But take that advice with a grain of salt– I can’t see the future.

      • Revanche @ A Gai Shan Life Says:

        It saddens me how many of my white or white-passing friends know it’s important not to be complacent because of personal family history. But I guess that just underscores the reality that it CAN happen here. It does happen here.

        You’re right, I have been holding off on buying, hoarding cash waiting for the bubble to pop, but a recession feels about the same. I think. This might be a really weird recession. It would be useful to see the future in this case.

  5. millionaireyet Says:

    The mortgage is paid off, and we have an 8-month emergency fund (Suze Ormen’s influence, and, being academics, I feel safer with that amount, although I do have tenure). So, we are throwing most everything but the kitchen sink to investments, mostly index funds and dividend mutual funds. What we’re more anxious about is that we are a same-sex couple, and I fear that we won’t be considered legally married by next year.

    Funny(?) side note: I called the day after the election as “I Married A Canadian Appreciation Day.” That was followed by “I Can Speak a Foreign Language So I Can Move There Appreciation Day.”

  6. scantee Says:

    I got pretty nervous this past summer about Trump being elected, so I moved from an aggressive to conservative asset allocation. I’ll continue to max out retirement using that allocation. Not that it matters much, if civilization as we know it gets torched. Outside of that, yeah, I’ll probably hoard cash. In terms of actual next steps, the biggest thing i need to do is get f-ing Volkswagen to buy back my diesel car so that I can pocket and sit on that money. I called them this morning and sat on the line for an hour due to “extremely high call volumes” and eventually hung up before being connected with a representative. I imagine there are a lot of other diesel owners who are panicked and looking to expedite the buy back process.

    Novel diversification is something I need to explore more (how DOES one digitally buy some Swiss Francs?). The first place my mind went after Trump was elected was a nightmarish Handmaid’s Tale sort of scenario so it might be helpful to try and stock up on everyday luxuries like, you know, birth control, that we take for granted in our everyday lives that might fetch a good price on a black market. (And can I just say, oh my god, I can’t even believe I just typed that last sentence because I am the least fear-driven conspiracy theorist I know so it sucks, but suddenly feels necessary, to have to entertain these doomsday scenarios.)

    Thank you for the passport suggestion. Passports for my children is absolutely something I will begin working on this week.

    • nicoleandmaggie Says:

      You use foreign currency exchange ETFs. Fortune and other respectable magazines have lists of ETFs for individual currencies, but a company out there may have combined them which would be easier to deal with.

  7. chacha1 Says:

    Ah man, hit the wrong button and a whole big long thing disappeared. :-( We haven’t talked about what-ifs yet. Pretty much all we can do, in any case, is to keep stashing cash.

  8. bogart Says:

    Aside from considerations others have mentioned, I think I will take what has happened as motivation to clear out and straighten up our house, that is, to prepare it as if we might be renting it out, selling it, or simply leaving it vacant for a time in the foreseeable future. Best-case scenario, I end up with a neater and nicer house. To the extent that this process involves hiring professionals (though not spending money unnecessarily is also on my to-do list), I am thinking it would be appropriate to hire members of our local community who are African-American and/or recent immigrants (which here means principally Hispanic, though there are some other immigrant and/or refugee populations in our area).

  9. Donna Freedman Says:

    Amen on the financial fire drill (she said modestly, knowing it was her own article to which the Grumpies linked). That’s actually the first chapter of “Your Playbook For Tough Times,” because you need to know where your money is currently going before you can decide to change it — either because tough times are here or because you want to redirect your spending.

    My retirement plan from a previous job had always been invested conservatively. It will stay that way. Both my partner and I are working on building cash reserves vs. putting money anywhere else at the moment.

    Our basement full of foodstuffs and our ability to turn scraps into great meals are certainly helpful. So is mostly off-the-grid entertainment: reading, games, walks, gardening, hanging out with friends, providing occasional child care.

    I am sad about the election. Also determined not to let it get me down to the point where I can’t be part of the solution.

  10. Dave Says:

    I actually have the reverse thoughts…. If Trump abolishes the estate tax of moving money into the US. At the moment the tax free threshold on the estates tax is only $60k for non-citizens. This limits how much I would have in the US. I like to have money in accounts in different countries for political risk diversification. My father was a refugee from Nazi Germany. I don’t think Trump is going down any kind of route like that, the worst case in my mind is rising inflation and trade wars…You can get round the inheritance tax by setting up an institutional structure in your own country (like a trust or retirement fund) that gets around this, but then that reduces the political diversification advantage. OTOH I live in Australia, which is probably one of the safest countries politically.

    • nicoleandmaggie Says:

      I was considering contacting you about jobs in Australia (Canada is too popular and too close), but then we discovered that DH’s field of expertise is only done at one of the universities there and there’s no industry. Since I don’t speak Dutch, German, or Japanese, and I don’t want to move to Italy, we’re kind of stuck in the US unless things get really bad and DH decides to become a generalist.

      • Debbie M Says:

        My experience is that Dutch speakers mostly also know English, so you would at least have some time to learn that language.

      • nicoleandmaggie Says:

        One can never actually learn Dutch. The slightest accent and they act like you cannot possibly be understood. (In my personal experience.) Plus there’s all those vowels we don’t have.

      • Debbie M Says:

        Ha!

      • Linda Says:

        One of my colleagues moved to the Netherlands several years ago and has been doing well professionally and personally. She has taken Dutch classes, but I don’t think she’s fluent. Maybe the people working in corporate are less demanding of Dutch fluency. ;-) Either way, I don’t think anywhere in Europe is safe from this racist, conservative, anti-Islamic backlash we’re seeing, either.

      • nicoleandmaggie Says:

        That’s probably true, though currently only maybe France is remotely as officially blatant about it in Western Europe.

  11. Cloud Says:

    I’m honored to be one of your news filters! I hope I don’t lead you astray.

    We already did our financial fire drill when I quit my job, so feel like we’re in good shape. We are debating whether we should start moving some money to NZ, since given that my husband is from there, that would be where we’d flee if it came to that. There is a high PITA cost to doing this, but because we think we want to split our time between here and there when we retire, we might just go ahead and do it. Not that the NZ dollar is a noted currency of refuge or anything- just that it would be another place and one that would make sense for us long term, anyway.

    But, I’m feeling less despondent after reading things by several people whose political instincts I trust that point out that Trump is sitting atop a very, very shaky coalition. As in, the main factions hate each other and have goals that are in actual opposition to each other. @HeerJeet on Twitter had a thread last night laying out how the Democrats could use Ryan’s plan to demolish Medicare as a wedge, and it makes a lot of sense, particularly when I remember that two important states with large AARP populations (AZ and FL) have Republican senators who loathe Trump.

    So now, I’m thinking hard about what I can do to help destabilize that coalition. I’ll be writing a post about that soon, maybe even tonight.

    Of course, this requires the Democrats to not waste time on pointless infighting and get to work, always a risky bet. But it was the first glimmer of genuine hope I’d felt since Tuesday, so I’m holding onto it.

    • nicoleandmaggie Says:

      Yeah, I read that thread about Paul Ryan and Medicare. That is politically extremely stupid of him. Lots of people who work with Paul Ryan talk about how smart he is, but I don’t generally see it given the likely outcomes of most of his economic proposals. I have to assume he’s just going extreme and hoping for a compromise that gets closer to what conservatives would think was ideal if they understood economics.

      As a professional in this policy space (not that economics matters these days), I’m fairly certain that Obama was trying to goad Ryan into a Medicare/entitlement compromise maybe 6 years ago so that Obama could get credit for working with Republicans to shore up a program that has a big looming problem and Republicans would get the blame for cutting a program much beloved by voters (aka, older people). But they didn’t work together enough for that to happen.

      • Cloud Says:

        I think he’s smart enough, but a true believer on this stuff, and that probably limits his insight on how is Medicare “reform” is going to be received.

        But I suspect he fully understands how horrible it is that Bannon is in the WH right now. People are calling him today to complain about that. Normally, I don’t think it does any good to contact an elected official who doesn’t actually represent you, but these are not normal times. So who knows.

      • nicoleandmaggie Says:

        I emailed him about being good on racism shortly before the Bannon news.

      • Rosa Says:

        I think if they do the “reform” in a way that doesn’t touch Boomer aged people, and screws those younger, it might pass. Lots of unions have gone along with pulling the ladder up, and too many people think “it’s going to be all gone before I get that old anyway” about both Social Security and Medicare.

      • nicoleandmaggie Says:

        ALL proposed entitlement reform is structured as sunset legislation. It rarely passes regardless, even sensible changes with small effects. Deconstructing has never happened without replacement by an even more generous program.

      • Cloud Says:

        Finally, a good thing about the fact that the AARP starts recruiting around age 50! We can join and tell them we expect them to fight to keep Medicare…

      • Linda Says:

        I’m turning 50 next June and have already started receiving the AARP invitations in the mail. Maybe I should join and do as you suggest!

      • nicoleandmaggie Says:

        They’re a very powerful organization. And, importantly, they care about *future* generations of older people, not just current older people. So they’re very good at mobilizing their enormous base to protect programs related to aging.

  12. NVCzUx3+b5umnV7nYYlJmuHB64PFat6Z839GuodB8Bs= Says:

    I’m just going to keep doing what I’ve been doing – saving for retirement and paying down my mortgage (I already have a 6-month emergency fund). I figure if the market dips, I’ll hold on, and if it implodes, I’ll have bigger things to worry about.

    However I am doing some shopping now with a notion of trying to check out of the spending economy as much as possible for the next four years. It is probably a pointless gesture (and I would still support locally owned businesses with my purchasing power) but I feel frustrated and scared and not sure how else to protest.

    I’m also donating and contacting representatives – thank you for your donations list earlier. I’m looking forward to more thoughts on all this insanity in the near future.

  13. bogart Says:

    Not sure if anyone is still reading here (or should be) but it’s occurred to me that several things seem likely in the future. My tax rate will go down — the obvious answer here is, use the savings to make donations to appropriate organizations, that’s a no brainer. But also, it may mean it makes sense to turn an old 403b I still hold into a Roth — if I can (need to check, it’s an employer-contribution plan, not an employee-contribution plan so am not totally sure of the rules). Then there’s … at some point the market will crash. Surely. Which would mean I should wait until it does that to convert. Maybe. And finally, inflation will return. Not 100% sure of the implications of this for us (major debts are low and fixed, and what’s not, I could pay off with cash tomorrow if I needed to), but it must be coming. Heck, it’s surprising it has been so low/absent for so long.

  14. Grumpy Rumblings 2016 Year in blogging | Grumpy Rumblings (of the formerly untenured) Says:

    […] Getting an oxygen mask on:  Protecting oneself monetarily […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: