Episode-770- Modern Financial Survival — 43 Comments

  1. I have not even got through the housekeeping yet, and I’m already pumped for this show.

    Jack, thank you for telling it to the audience straight (pre-housekeeping). Everybody needs to step up and inform themselves as best they can, and *then* make decisions for themselves.

  2. Just finished listening, That was another of the great podcasts. Lots of wake up and smell the coffee, get your head screwed on right and do what is best for ourselves in there. Kind of gives us that “Kick” in the shorts when we may have been a little stagnant for a while.

    Thanks Jack


  3. Wouldn’t it make mathematical sense to take money out of your home equity loan (even if it is adjustable) and shorting the S & P? If the market is going to crash at some point this seems to make sense. Even in the rate goes up considerably on my HELOC when the (*##OU hits the fan the short would go up in value far faster and you would successfully arbitrage.

    • @Ric, no unless you have a working crystal ball and know exactly when and for how long to take out contracts on it. In other words no.

    • I agree with Jack, that idea is essentially putting the title for your house on the craps table at Vegas. I wouldn’t gamble where my family sleeps. The old adage is that the market can keep irrational longer than you can remain solvent.

  4. Jack – I didn’t take your comments to be an attack on the Catholic Church, and hope my comments didn’t infer that. I do agree with your comments in today’s show about the document, which has caused quite an uproar among Catholic bloggers for what it said about solutions (world bank, etc) and what it didn’t say about the causes of the current financial crisis (debt). Fortunately, the recommendations are not Church teaching, just the opinion of this group within the Vatican.
    I did read all the comments from yesterday and am quite impressed with your knowledge of Church history, which is, of course, quite intertwined with world history. although much less for about the last 100 years.
    Please keep up all the great work you do keeping us informed and motivating us to be better prepared for whatever may come in the near and distant future.

  5. Jack,

    Really enjoyed the show as it was a great follow up to yesterday.

    In the show (and in some past ones I’ve listened to) you seem to be against mutual funds. I assume that is because it encourages people to invest mindlessly. I was wondering what you thought of index investing ala John Bogle? If the market tanks, you lose with index funds same as anything but in the meantime you get good diversity and your costs are low. Some smart folks have made a convincing argument that people who try to pick individual stocks and time the market are losers in the long run.


    • I dont want to speak for Jack, but he has talked about what he does not like about Mutual Funds in other shows.

      If I remember correctly, his main reason was that Managers of 401k programs and other financial liars are locked into how much of one kind of mutual fund they can hold. Meaning that they are required to hold a certain percentage of small cap, mid cap, and large cap funds. They cant (by law) re-balance when times really call for it.

      Also, of course, you’re locked into whatever stocks are held in that particular fund (though I dont recall if Jack takes umbrage with that).

      Anyway, the sense that I get from Jack is that he does not like the lack of flexibility that is oftentimes associated with holding mutual funds. I happen to agree with him on this point, but I do hold some from time to time. If the economy is heading in a very definitive positive direction that you feel confident in, then holding small caps and mid caps can be awesome. When times are uncertain (and the economy is rough) I only hold large caps. Some may consider this stupid…but I have my reasons for this approach.

  6. That was one of the grimmer podcasts that I’ve heard. Not that I’m complaining, quite the opposite: it would be a disservice to treat the subject otherwise.

    It’s going to be interesting how the consequences of the Schumer “sell the USA to foreign slumlords” law/legislation will work out. I’m sure that Chuckie Boy is salivating at the prospect of tens of millions of erstwhile members of the middle class licking the boots of red chinese masters, but I suspect that the Feds will pull the rug out from under these foreign slumlords at some point and simply nationalize private property formerly held by the foreigners–as good a way as any to incite war. Or, heck, why stop there–nationalize all private property, institute a huge VAT tax, and be done with it. Of course all of that will end in disaster, but that’s what assclowns do is it not?

  7. On saving 20%, that’s child’s play.

    Continuing to cut costs to live well below my means, and still have a quality life, I’m saving 50%

    Once the car loan is paid in January (under 2 years to payoff a 4 year loan) that number will get closer to 60%

    After hearing Jacob the other day my new goal is 75%

    Thanks Jack, a lot of this wouldn’t be possible without the proverbial kick in the ass you gave me a couple years ago.


    • On bonds TIPS have always been too squirrelly for me.

      Series I bonds are issuing at 4.6% through the end of the month.

      I’ve been buying them all year in lieu of 1yr CDs that pay 1%

      Will be interesting to see how the rate is adjusted at the next issue.

      • I-Bonds are something I should talk about more. As they are from the Federal Government they will be the last to be defaulted on. Thing to realize is

        1. Not marketable (can’t be resold to another holder, only redeemed to the issuer)
        2. The interest rate is a factor of inflation plus a fixed rate, the fixed rate has at times been zero
        3. Can’t be redeemed until a minimum of 12 months after you purchase them
        4. Must be held at least 5 years to be redeemed with zero penalties (though after 12 months you only give up the last 3 months of interest)
        5. Limit of 5,000 dollars a year per buyer

        • Excellent points Jack.

          I’m not 100% sure, but even though they are unlikely to be defaulted they can be called if I remember right.

          You are correct on the Zero %, that’s why you have to watch them like a hawk.
          Even with a rate of 0%, with the inflation rate right now they still pay almost 5X what most CD’s do. For now….

          Due to the liquidity limitations they should only be used to diversify long term monies and are an advanced investment vehicle.
          That’s why I have less than 3% of my assets there 🙂

    • Jake, I agree with you regarding saving 20%. It can be done pretty painlessly provided that you have a relatively steady income stream and aren’t just barely scraping by on necessities. My wife and I were able to cut our expenses around 20-25% by just being conscious of every dollar and cent that flows in and out of our life (a la “Your Money or Your Life”).

      However, the one issue that I have with Jacob’s goal of 75% is that it requires SIGNIFICANT lifestyle changes for most people, to the point of the proverbial “turning your life upside down”. I’m not saying it can’t be done and it isn’t a worthwhile goal, but I know for me that there’s no way I can get there absent getting out from under my mortgage (currently $240k on a very modest home — I live outside of NYC) AND being able to leave full-time employment in order to have more time to concentrate on homesteading and home production activities.

      Kudos to you for getting to 50%! That’s quite an accomplishment in this day and age. Hopefully I’ll be able to catch up to you in another couple of years….

      • Christopher-

        Awesome expense reduction you have achieved. Congratulations !

        You are correct, it is a massive change that is not accomplished overnight and most of us have mitigating factors.
        I’ve been working my plan for over 6 years now fine tuning it all the way.

        For some background we are currently renting at $1,000/mo and handling things primarily on my income after losing the house and savings in 2004 after a layoff.
        Working from home saves me a ton of cash and lets me work 14 hour days more easily to maximize my income streams.

        The real reason I’m doing this is at 42 I’d like to retire in 5 years or so, and will by 50 at the latest, and be on a homestead.
        That said I can’t just go cold turkey into that massive a change so I’m living like it’s already happened and reducing expenses at every turn.
        Last week we cancelled our iPhone plans and will save $2,000/yr on that alone.
        Electricity has been reduced to almost subsistence usage to keep the bill down, and I have one 2.8w LED bulb on in my office during the day.
        There are no ‘but it’s only $20 a month’ conversations in our household.

        We still live a very comfortable simple life and I have no plans of being a hermit like my great grandfather was – he died with a nice savings but was the most miserable person I’ve ever known.

        Almost spit my beer out laughing after hearing Jacob talk about his pile of f-you money – that’s exactly my plan.

        Sorry for the rambling reply, but I’m hoping your story and my story can inspire others to do the same.
        We all want the homestead with solar panels and chickens, but we can’t flip a switch and make it happen.
        Nor will we be happy if we go from $300 light bills like I’ve had to having to use way less after a move to the country.

        Keep up the great work Christopher and do what makes you happy !


      • Jake,

        So I guess in your case the “disaster” of losing your home and savings may turn out, in the long run, to be one of the best things that ever happened to you? I can certainly relate, having gone through a very rough patch during an attempted career change a few years back. We burned through all of our savings, and we almost lost the house AND our marriage, but we made it through. Luckily I was able to go back to my old field (civil engineering and construction) and we were able to get moving in the right direction again.

        One thing I told my wife then and I tell her now is that we are NEVER going through that again. Now, we live well below our means and save money as much as we can. We don’t use credit EVER. I’m building up our food production around permaculture, but with a F/T job plus a 3-3.5 hour RT commute and two little ones at home, it never moves as quickly as I’d like it to. But, most importantly it IS moving

        My goal is also to be pretty much disconnected from the regular corporate world within 4 years (one year in on the 5-year plan), earning money by working for myself on several income streams (engineering consulting, tilapia farming, renewable energy and permaculture design are some of the things I’m starting over the next couple of years), having adequate time to devote toward homesteading activities (reducing our reliance on outside systems), and most important being able to always be there for my kids while they’re growing up and spend REAL time with my wife. With planning and a little luck, having run the numbers we should be able to get there.

        Best of luck in completing your journey. Just knowing you’re headed in that direction and seeing small results here and there is liberating in itself, isn’t it?


        • BINGO! It’s NEVER going to happen to me again either.

          Seems to take forever though doesn’t it ?
          It’ll snowball after a while, and suddenly you go “what do I do with all this extra cash and time”.

          Balance is the key.

          I wish the very best for you and your family on your journey.
          It feels great getting there !


  8. Jack,

    You mentioned paying off debt. Since our 401ks will most likely be confiscated at some point for the greater good, would it be a good idea to cash them out to pay off a mortgage or credit card debt?

    – TP

      • bluprint — It would indeed go to the bank, but it would get me out of debt. The more I think about this the more I like the idea of cashing out a portion of my 401k to pay off my mortgage. I realize that I will take a 10% hit and pay taxes on the distribution, but the fact that I would actually get my money, not pay any more mortgage interest and become 100% debt free is very appealing. Curious if there are any flaws to this approach.

        • @The Prepper, also remember if you have money in a ROTH 401 or IRA you can get out all the money you put in (not the interest) with no tax or penalty.

    • I thought about this too and would like to know jack’s thoughts. I believe if you use it to pay off a mortgage it would be taxable income, so there might be big taxes if you pay off in lump sum. I’m still a financial noob, so I could be wrong.

      • @Scott, I have NO IDEA where you got that idea but paying off a mortgage isn’t going to create taxable income. You would loose the “mortgage interest deduction” but that is not an actual loss. That deduction may make buying smarter then renting but it doesn’t make continuing to have a mortgage a good idea at all.

  9. Hi Jack, I haven’t listened to this show yet, but in my life those first two tips on how to prepare for the collapse overlap for me. What do you do if your in debt, would you still suggest saving at least 20% of income, or put it torwards debt. I can’t decide what’s more important. Thanks again for all your great podcasts.

    • I would try to do both depending on the debt load/class but honestly the right way is

      1. Save at least 1K and 2K is better while paying the minimum
      2. Now put every extra penny you can on the smallest debt
      3. When the smallest debt is repaid take all the money you were paying on it and roll it up to the next debt in line
      4. Wash rinse repeat until all debt is gone

  10. Yeah Jack could not agree more on the land prices, I have been watching for a long time and man they finally started to come down a little but not a lot.. The only reason why I think they even came down at all is the erosion of older folks 401k’s and so forth.. I just bought 10 acres with a log home and I am starting to move in tomorrow slowly but surely.. I did not steal this home and land but I did get it at a fair price, cheaper is always better but I had trouble selling mine and these people wanted my home and I wanted there so it worked out for the both of us and this is where I am retiring at hopefully in another 10 years..

  11. Jack,

    I can only say one thing about your show today, and it’s this:


    This is the kind of show that makes me want to listen to TSP almost every day during my long slog to/from NYC (3-3.5 hours round trip). Lots of clear-headed analysis unencumbered by political viewpoints combined with solid advice of things to do to help weather coming events. After listening this morning, I got to work ready to take the day head-on! Thanks!

  12. Scott if you have no savings it is most important to get that asap. If you spend all your “extra $” on bills as soon as something happens poof you are back in debit. Stop the leaks in your money bucket first. It can be very surprising how many small leaks you can find when you look close. Build savings, debit snowball. Then go from there.

    We did it backwards we built 6 month ER fund first then hit all the debit. Because we are always facing the possibility of a strike or lay off. I was in a car crash then had some farming accidents and broke my back several years of bad luck and klutziness. Also was diagnosed with fibro and blew out both thumb joints. Over the last 4 years I have yet to find a way to earn $$. We are lucky that the kids are grown and hubby’s job is good when he is working. In our case we really needed that ER fund. I guess I have to say I don’t earn $$ my job is to keep that money bucket from leaking. We currently save about 53% of his pay check. That should go up quite a bit as food production takes off. We currently only have our mortgage pmt I am getting ready to slam $$ to that so it is gone forever.

    In short sit down with pen and paper do the math over and over find a plan that fits you then work the plan. Hint if it doesn’t hurt a tad you missed something try again.

    • Nice job on the 53% Roundabouts !!

      Eliminating debt and reducing dependencies on other systems sure helps trim things back and stretch a dollar.

      You are so right about if it doesn’t hurt you missed something.
      For us it hurt initially but we settled right into the new way before long.

    • Roundabouts,

      First, great job on being able to save over 1/2 your income even with ongoing issues (aren’t those “issues” called “life”?). That’s quite an achievement!

      You said, “It can be very surprising how many small leaks you can find when you look close.” Truer words were rarely spoken. It’s why I’m such a big believer in the “track every cent that comes in and out of your life” program central to Your Money or Your Life. The 20-25% that my wife and I cut were pretty much just the result of being aware of where our money was going each month. No budgets, no real hardship or sacrifice — just awareness.

      Best of luck in getting the mortgage paid off — but if you’re already saving over 50% I’m sure you’ll get it done!

  13. Just a quick follow-up to my earlier comment right as the show was being released…

    I have since listened to this show twice and I am definitely putting this in one of my personal Top 10 TSP episodes (admittedly, I tend to favor the money / finance / economy / debt-reduction / investing episodes).

    Thanks again for this one, Jack. I like having this one to share with non-survivalists.

  14. Another damned good show, Jack. I just stopped my 401K contribution (at least for a while.) This was tough, because my company does match 100% up to 6% of my salary. HOWEVER, I need to build my cash reserves, I currently have no debt except for my mortgage, and am considering re-financing my home at a 3.5 interest rate for 15 years. I figure I can have that paid of in 10 as soon as my wife goes back to work. So them I’m 50, no debt, no mortgage, and a good 15 years to add to my savings during my peak earning period with a paid-off house.

    Nutty plan for nutty times? Or just soooo stupid that it’s brilliant?

  15. For those out there with small retirement funds if you are worried about the money most funds will allow you to take it out for purchase of a “primary residence” or for pay for school. You will have to pay taxes on the money you take out but it is an option for getting the money. I went from one company to another and the new company did not allow me to roll over from the second. The money was under $3000 so I withdrew it and put it towards the home I have now. My current employer has stopped doing matching contributions so I stopped contributing and am putting the money into separate bank account & silver with a 50-50 split. If any one would like to talk with me more about this I am more than happy to discuss things.

  16. Though I essentially agree about land ownership, I also am deeply concerned with the USG’s unconstitutional land grabbing
    though the EPA and IRS. Though I have prepped, I am focusing on keeping my ownership in US assets very light as I dislike the idea of confiscation (legalized theft). My own goal is to relocate to Latin America, esp. if you-know-who is re-elected.

    • @Stormchaser you sound like a guy who won’t build a house because a tornado might destroy it some day. I own my land, it is mine, if anyone tries to take it they are going to get a real fight. If more people would see it that way we wouldn’t have much to worry about.

      • @Jack. I rather expected your response, and that is fine but for everyone reading this, there is a discussion/debate going on over ‘Fight or Flight’, and certainly the ‘Fight’ decision sounds more noble and I’ve considered it myself but if you do your homework, you will find myriads on both sides of the issue. Ultimately, every man and woman must decide for themselves what is right for their own lives.

        Oh, and the tornado analogy is not really appropriate. You don’t KNOW a tornado is coming until very possibly the last minute. We we DO know is a financial meltdown is coming (already started) and if we are diligent in our history, we know what follows, which is bigger government, tyranny, and a whole host of other problems. Sorry, that dog doesn’t bark.

        Good luck living in tyranny. Yep, its noble, and I salute those who choose that option. Myself, I prefer to live abroad and insure that the ideals of America live on in that manner.

    • Good point Jack. Several people have suggested a separate savings just for taxes, either in cash, gold or silver. If I had 5 years of taxes saved up outside my normal savings, I would be feeling pretty good.

      The other side of the coin is that Americans really need to develop a sense of personal property rights.

  17. Was this the episode where Jack mentioned that current US debts are greater than available cash (or something similar to that?). I was looking for the data on that statement to share with some other folks. Thanks!