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sabrinamariI I bet every one of you has been following the economic news a little more closely than in the past. Nevertheless, I want to make sure that you know about this challenging new development.
Quite a few folks depend on their HELOC (Home Equity Line of Credit) to take the place of a cash emergency fund. For them, any serious financial crisis means tapping this line of credit to survive.
While this is not a good idea, I won't harp about it here. To find out more about starting or plumping up your cash emergency fund, go here (for general principles/guidelines): http://sabrinamari.livejournal.com/319583.html and here (for step-by-step instructions on setting up an emergency fund money market account by yourself): http://sabrinamari.livejournal.com/318742.html.
I want to call your attention to the fact that financial institutions across the country are lowering HELOC limits based on computer modeling of dropping home values, and folks who have written checks off of a HELOC in the recent past may find their checks rejected *even if these checks do not exceed their previously established credit limits*.
Brian Preston, whose "Money-Guy" podcast is featured on iTunes, recently released an episode in which he reads a letter from GMAC Mortgage. This notice informed one of his friends that their credit limit had been lowered---effective immediately---and that any recent credit line checks they might have written would bounce.
In fact, two of his friend's checks did bounce.
Now, that person must find another way to pay the original bills, all related bounce check fees and face a stormy economy without either a cash emergency fund or HELOC credit.
You can find the podcast, hear the text of the letter, read a summary of what he says and follow key links---including an explanation of why this is legal---by going here:
http://www.money-guy.com/protecting-yourself-u-s-banking-system-under-stress
What should you do now, to elevate your chances of getting through this economic downturn in the best possible way?
I can't tell you what to do, but I can tell you what we have been doing:
* With great sorrow, I've drastically cut my monthly automatic purchases of mutual fund shares and diverted the money into our joint emergency fund. At the moment, we have just under a 3 month reserve. In economic hard times, this is not nearly enough. My job is now guaranteed only through December (a recent development due to a state budget cut of 22.4 million dollars).
Although a down market is a GREAT buying opportunity on Wall Street, I need to plump up our reserves as much as I can by the end of the year. My honey has cut his 401k contributions back to the minimum required to get a full employer match, and the rest is going into our joint reserves.
* I've taken on additional work, teaching a course in the fall at Rutgers. That will add several more thousand dollars to our joint reserve.
* We are revisiting and transforming our budget together, fully combining our finances. We are, however, each keeping a small independent emergency fund---about one month's reserve each. I call my fund the "Michael Goes Crazy Account," and his is the "Sabrina Goes Crazy Account". This way, if either of us loses it, the other has some private money with which to deal with the problem.
So, to be clear, our combined emergency account holds about a 3 month reserve, and our independent accounts are enough for 1 month each. All new discretionary income will be used to:
1.) pay off emergency bathroom repairs (currently ongoing)
2.) pay off Michael's remaining debts, and
3.) plump up our joint emergency fund
You should also be aware that a bank has has failed. It was FDIC (Federal Deposit Insurance Corporation) insured, so all individual depositors were guaranteed up to $100,000 each, while joint accounts were guaranteed up to $200,000 (IRA accounts were protected up to $250,000).
To check if your bank accounts (including IRAs and CDs) are fully FDIC insured, use the Electronic Deposit Insurance Estimator tool, found here:
http://www.fdic.gov/edie/index.html
Ok, friends: let's do everything we can to protect ourselves and our families during this stormy time. It's our responsibility to meet these challenges as wisely as we can. No one else is going to save us---we have to save ourselves.
Quite a few folks depend on their HELOC (Home Equity Line of Credit) to take the place of a cash emergency fund. For them, any serious financial crisis means tapping this line of credit to survive.
While this is not a good idea, I won't harp about it here. To find out more about starting or plumping up your cash emergency fund, go here (for general principles/guidelines): http://sabrinamari.livejournal.com/319583.html and here (for step-by-step instructions on setting up an emergency fund money market account by yourself): http://sabrinamari.livejournal.com/318742.html.
I want to call your attention to the fact that financial institutions across the country are lowering HELOC limits based on computer modeling of dropping home values, and folks who have written checks off of a HELOC in the recent past may find their checks rejected *even if these checks do not exceed their previously established credit limits*.
Brian Preston, whose "Money-Guy" podcast is featured on iTunes, recently released an episode in which he reads a letter from GMAC Mortgage. This notice informed one of his friends that their credit limit had been lowered---effective immediately---and that any recent credit line checks they might have written would bounce.
In fact, two of his friend's checks did bounce.
Now, that person must find another way to pay the original bills, all related bounce check fees and face a stormy economy without either a cash emergency fund or HELOC credit.
You can find the podcast, hear the text of the letter, read a summary of what he says and follow key links---including an explanation of why this is legal---by going here:
http://www.money-guy.com/protecting-yourself-u-s-banking-system-under-stress
What should you do now, to elevate your chances of getting through this economic downturn in the best possible way?
I can't tell you what to do, but I can tell you what we have been doing:
* With great sorrow, I've drastically cut my monthly automatic purchases of mutual fund shares and diverted the money into our joint emergency fund. At the moment, we have just under a 3 month reserve. In economic hard times, this is not nearly enough. My job is now guaranteed only through December (a recent development due to a state budget cut of 22.4 million dollars).
Although a down market is a GREAT buying opportunity on Wall Street, I need to plump up our reserves as much as I can by the end of the year. My honey has cut his 401k contributions back to the minimum required to get a full employer match, and the rest is going into our joint reserves.
* I've taken on additional work, teaching a course in the fall at Rutgers. That will add several more thousand dollars to our joint reserve.
* We are revisiting and transforming our budget together, fully combining our finances. We are, however, each keeping a small independent emergency fund---about one month's reserve each. I call my fund the "Michael Goes Crazy Account," and his is the "Sabrina Goes Crazy Account". This way, if either of us loses it, the other has some private money with which to deal with the problem.
So, to be clear, our combined emergency account holds about a 3 month reserve, and our independent accounts are enough for 1 month each. All new discretionary income will be used to:
1.) pay off emergency bathroom repairs (currently ongoing)
2.) pay off Michael's remaining debts, and
3.) plump up our joint emergency fund
You should also be aware that a bank has has failed. It was FDIC (Federal Deposit Insurance Corporation) insured, so all individual depositors were guaranteed up to $100,000 each, while joint accounts were guaranteed up to $200,000 (IRA accounts were protected up to $250,000).
To check if your bank accounts (including IRAs and CDs) are fully FDIC insured, use the Electronic Deposit Insurance Estimator tool, found here:
http://www.fdic.gov/edie/index.html
Ok, friends: let's do everything we can to protect ourselves and our families during this stormy time. It's our responsibility to meet these challenges as wisely as we can. No one else is going to save us---we have to save ourselves.
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no subject
Date: 2008-07-30 05:39 pm (UTC)(Just curious)
no subject
Date: 2008-07-30 05:44 pm (UTC)no subject
Date: 2008-07-30 05:48 pm (UTC)no subject
Date: 2008-07-30 05:51 pm (UTC)no subject
Date: 2008-07-30 06:01 pm (UTC)But who am I to talk. My money is all imaginary pixels. They could go "POOF" with a push of a button.
Where's my rifle, Amos?
no subject
Date: 2008-07-30 10:01 pm (UTC)no subject
Date: 2008-07-30 10:00 pm (UTC)no subject
Date: 2008-07-30 10:10 pm (UTC)* The joint emergency account is actually a Vanguard money market fund which is *NOT* FDIC insured, nor is getting a great interest rate right now. I'm weighing the possibility of transferring most of those funds into a new high-yield internet money market account that offers me both things.
I love Vanguard, though, so it's painful to do this, plus there's the effort involved. But in this economic climate, it may be worth it.
* My personal emergency fund is in Emigrant Direct, which *IS* FDIC insured and offers an OK rate---in the past, it offered a great rate. Now I'm eyeballing it too, to see if it should be moved.
* My TD Ameritrade account is the designated 2009 festival travel fund: it gets $55 a month, and by mid-summer next year should have enough to fund either our FSG entry or our FSG handfasting---probably the latter.
* Michael's personal emergency fund is in Flagstar, an internet money market account.
Most people don't like having alot of accounts because it can be confusing and requires upkeep. Perversely, I enjoy this. I like to see my money growing all over the place.
And another thing...
Date: 2008-07-30 05:56 pm (UTC)I think TPTB are deliberately working to keep the true nature of the pickle we're in under wraps. Mass panic is destablizing. Lack of faith in the government is destablizing. Can't allow a run on the banks, you know.
They have lied, lied, lied to us for years. They have lied for decades about climate change science. They lied about the war in Iraq. We know they are lying. Why aren't we rioting in the streets? Why is it that the artists who are pointing to the emporers bare butt are mostly aging hippies like Niel Young?
I'm pleased to note that Denis Kucinich (love, love, love that guy) has put forward a motion to begin impeachment procedings against a certain, redneck perpetrator of high crimes against the state. And Carl Rove was cited today for contempt of Congress. So - yay!. Someone is paying attention. Not enough someones, but someone or two. That's better than nothing.
Personally, I think the best way we can protect ourselves is to move somewhere with a low population density and an abundant supply of clean water. Grow our own food. Install solar technology and composting toilets. Get off the grid. Buy a gun and learn to shoot it.
Re: And another thing...
Date: 2008-07-30 10:14 pm (UTC)That's amazing.
Moving to a place like the one you describe sounds wonderful, but trying to get a mortgage worth having right now requires:
A) Great credit (check)
B) Lots of cash---in addition to a fully funded emergency fund (nope)
C) A steady and dependable income (nope)
So, no lovely self-sustaining farmlette for me yet. Sigh!
Re: And another thing...
Date: 2008-07-31 12:25 am (UTC)I'm actually there . . . it's Alaska (no income tax, no sales tax in Anchorage *and* the annual PFD check, which this year will be just a smidge over $2000 per person) and yet . . . I'm planning a move to NJ. Maybe y'all should move up here, instead!
Plenty of fresh water (10,000 glaciers + 100,000 lakes)
Caribou, Moose and Bear hunts are legal
Salmon, trout, grayling, dolly varden for freshwater fishing
Halibut, rockfish, etc for saltwater fishing . . . .
Our long daylight summers have us growing world record veggies. yummmmm
There are still opportunities to homestead, too. (Live on State land, build a home and after a set number of years the land is yours) Unfortunately not near town - but if you're willing to live off the land . . .
Oh yeah, and we're the largest State in the Nation, but our pop. is 650,000.
I think that fits your criteria.
QUILT foods proves
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