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View Full Version : WHAT TO DO WITH MONEY????


BUBSDAD
08-01-2011, 03:08 PM
Hello all,
The more I watch what is going on in this country the less secure I feel with where my money is going. I am currently contributing to a ROTH IRA that is worth a little bit. I only have debt on my home and land. I also save cash that can be gotten to fairly easily in an emergency.

I am seriously considering cashing out my IRA and putting that money toward debt or turning it into usable assetts(food,fuel,clothing,etc..). The more I think about it the more I second guess myself.

I was hoping some of you that are close to my age(32) wouldnt mind to share what you are doing to prepare for the emmediate and distant future.

wally

grumble
08-01-2011, 03:27 PM
I'm sure you'll get a lot of opinions on this. Here's mine.

DO NOT cash out the IRA. At your age, the future value of that money is far too valuable to lose. With compounding, its current value could easily multiply by ten times by the time you retire. In addition, the Roth IRA, unlike other retirement accounts, can be transferred to your heirs and still retain the tax-preferred status.

"Ah," you say, "but what if any of the bad things we talk about here should occur?" Well, if the world ends, I gave you bad advice. But, if the world DOESN'T end, and your IRA is gone, what are you going to live on, buy gas with, and use to pay your taxes in order to keep that paid-for place you live?

The world moves fast when you're 30. Later in life, time speeds up while your needs slow down. You want to get things done now, when in fact now's the time you should be taking slow and steady steps toward whatever future you think may be in store. You should be moving toward preparing for what you think may happen, but don't burn the bridges you'll need if you're wrong.

neparose
08-01-2011, 06:42 PM
JMO, but I'm with Grumble on this, for the same reasons stated. budget your income to supply those things you listed, now. The only time i would touch that IRA would be in dire, extreme circumstances, becuase once its gone, its gone. Hope for the best,[contributing to your IRA] but plan for the worst.[stock a pantry, plan alternative fuel sources, and keep on the lookout for good deals on speciality clothing, ect..] And keep working that morgage down! passing the soapbox down the line now..
rose

TigerAl
08-01-2011, 11:18 PM
First of all, congratulations on having no debt on depreciating assets. You sound way ahead of the game at a relatively young age.

Taxes are a big deal over time. Don't cash in that Roth, add to it as you can. No reason to pay down a mortgage. Hard to get to that asset in an emergency. When you have a mortgage what you are doing is paying that loan back with inflated dollars. When I bought my first house I was envious of my boss who had a similar house, but his pmt was 138.00 a month. You will be in that position someday. Life is a marathon, not a dash. Keep doing the sensible things you're doing.

sally
08-02-2011, 02:26 AM
Since the government has voted itself another $2.4 trillion slush fund this week, I think the chances that it will raid 401(k) or IRA accounts are slim. And the elections are next year. So your investment is probably safe. But you are going to need a real hedge against the 80's style inflation that will hit us when the credit ratings agencies downgrade us to a Double-A rating. Since we aren't doing anything to address our debt levels, I don't know that they will hold off for long.

krapgame
08-02-2011, 02:46 AM
Dittos on the congrats! I wish I were in that position.

You didn't say anything about what your mindset or goals are so this may or may not apply. You did mention having land, so I'll assume that you have it for the purpose of some degree of self sufficiency, either now or in the future. If that be the case, I would seriously look at diverting some of your discretionary cash toward buying long term tools and equipment now that you may need later. Especially stuff that is subject to inflation or to becoming harder to get. I've been accumulating older equipment for small scale farming for about 15 years now and can tell you first hand that it has 1) gotten much more expensive and 2) gotten MUCH harder to come by. Expect that trend to continue.

I've seen the argument of payoff mortgage early vs. hold onto it and inflate it away. I understand the merits both ways and offer the following for your consideration. First, I wouldn't cash out the IRAs for debt service, except as a last resort. However, I also wouldn't count on inflation to completely treat the debt situation either. If you're treating your house/land as an investment that you plan to cash out later, then let it pay our organically. If you're treating it as your "castle" so to speak, I'd start servicing that debt as aggressively as I reasonably could. That's our situation here; we're developing the place for the ability to provide for us for the long term and have no plans to go elsewhere. The sooner we pay off the property, the sooner that interest each month can be used for something besides paying a bankers paycheck.

All of that said, I personally prefer to invest my money in places that the .gov can't as easily get their hands on it. That means fruit trees, farm equipment, PMs, etc. and not IRAs or bank accounts. Yes, I could still lose everything, but not so easily by the stroke of a pen by a bunch of fiscally irresponsible bureaucrats. For the record, I'm about 10 years older than you are.

BUBSDAD
08-02-2011, 03:04 PM
Dittos on the congrats! I wish I were in that position.

You didn't say anything about what your mindset or goals are so this may or may not apply. You did mention having land, so I'll assume that you have it for the purpose of some degree of self sufficiency, either now or in the future. .

Thank you all for the replies.
I have just over five acres(3 wooded, 2 clear, all hill) I have a spring fed creek running across my property, but the spring is on my neighbor two doors up the hill. We've been in this location for six years and have never seen this spring go dry. About a half acre of my land is good for garden, the rest is pretty to look at but not great for growing anything. Goats?

I am currently putting 4% of my gross into the roth, and 11.5% of my income into an emergency checking account, that we also use to pay property taxes, dr visits, car tags,ETC...(the stuff that only happens once as year or is unexpected when it does come).

My wife and I talked money last night and pretty much decided to keep the roth and keep contributing to it for now. We did trim in some places and freed up an additional $100.00 per month to spend on making preparations for an emergency situation. We are unsure where to start but we know we've gotta have more food in the house so that is what we decided to start on first. We plan on doing research on this forum to help us work out the rest.

thanks again,
wally

krapgame
08-02-2011, 08:39 PM
It sounds like you're taking a reasonable, well balanced approach. Let me throw out a couple more ideas to consider.

1) what if you reworked your mortgage? IF you could get the same or lower rate as you have now, and IF you reworked it to a new, full 30 year term, that would free up additional cash now. DO NOT borrow more, simply increase the term. If you're financially disciplined (it sounds like you are) then you can take the difference between your current payment and the new payment to set aside for other purposes. If you end up not using all of it for other purposes, you can apply it as a principal payment monthly, quarterly or whenever you want. If you ended up not using any of it for other purposes and paid it all back each month, it would be the same effect as making the payment you are today, and you would achieve roughly the same payoff date that you have now.

2) Basically the same idea with your IRA. Cut the contribution to 2% instead of 4, set on the difference and if you don't use it you should be able to contribute it in a lump sum at the end of the year. The loss of interest on it for the partial year would be pretty minimal.

In doing these 2 things, along with what you're already doing, you may find that it could position you to have several hundred dollars extra each month to use toward your preps. Say you could gain $500/month instead of $100/month, that's $6000/year instead of $1200. How much could you shore up your prep position in a year at that rate? After a year, you go back to applying the money to mortgage and IRA, just like you are now. There will be some interest ramifications on the back end, but the peace of mind from being better prepped now may be worth it to you. These ideas definitely take MAJOR financial self discipline to work out. I wouldn't recommend anyone who is prone to making bad decisions with their money even consider this.

On your property, unless your 5 acres is on a sheer cliff, there is quite a bit you can do with hillside ground. Fruit trees, vines and brambles aren't too picky about where they live and will do just fine on a hill. We've been putting as much of our otherwise unusable space to service in that way here. Livestock will do fine as well, just be careful not to overpopulate them so much as to cause an erosion problem. Chickens and hogs especially come to mind.

Then there's terracing. Patience, on this board, has posted much about what he's done with his 1 acre hillside. I know him personally (neighbor) and have seen myself what he has accomplished. In 5 years or so, he turned a red clay hill that drops about 25' in 80' into 3 flat 20'x100' productive gardens. Lots of hard work to be sure, but a testament to what can be done if you are determined.

Storing food is great, and I recommend it. However, when the food is gone, then what? I personally believe in stocking at least 2 seasons worth of seeds and learning how to plant and tend them. Open pollinated varieties preferably.

I'm not a financial advisor, nor do I play one on the Internet. I've simply outlined some things that we have done and have worked for us. You should consult your own advisor or tax professional before making any decisions regarding any of the financial ideas I've posed here.