View Full Version : Rainy-day money

12-13-2002, 08:52 AM
It's awful that it took the death of a relative to provide it, but for the first time in my life, I have a chunk of cash that I can put away as "rainy day money", to act as a safety net in the event that I lose my job or some other financial tragedy strikes. I've listened to a few experts, so now it's time to listen to some people that live in the REAL WORLD....

Question: How do you all keep/bank/invest YOUR rainy day fund?

simple savings?

12-13-2002, 09:18 AM
I suggest that you invest in some finely crafted wooden furniture from your local furniture maker.... :D

Alan D. Hyde
12-13-2002, 09:27 AM
It's certainly desirable to have a certain amount of liquidity. How much is reasonable will depend on your personal goals, habits and circumstances. Generally, highly liquid money is going to give you a lesser rate of return.

The first "investment" to make is to pay off any debt you may have, particularly any high-interest rate debt. For example, if you pay off a credit card on which you have been charged interest at the rate of 9%, you have just received a guaranteed, no-risk, return of 9%.

It's kind of silly to put money somewhere, and pay tax on 3% earnings, while paying non-deductible 9% interest on consumer debt service.

If you haven't already done so, I'd make sure your pantry and woodshed (or oil tanks) are full, and that you have a good supply of whatever standard items are necessary to carry on your daily life.

Our money, remember, is not value. It has no intrinsic value. It is only a token for value. The cash you hold depreciates in value every year (via inflation). The prices charged for the items you buy with it, increase.


[ 12-13-2002, 10:30 AM: Message edited by: Alan D. Hyde ]

12-13-2002, 09:39 AM
Well, I do have a hankering for a nice new kitchen table.... cherry frame, black walnut top... a loose reinterpretation of arts & crafts design... salivating yet? ;)

Donn, thanks for the link. You're the King. I did read that thread while it was active. Really what I'm fishing for is not suggestions of what I SHOULD do, but rather a straw poll of what individuals ACTUALLY do. I suspect there's a difference between the two.

Retirement's not the issue. My 401 is pretty well on its way, and it has 40 years to grow. This is strictly "Oh, S**t!" money that will let me sleep a little easier, knowing that I have 4 months worth of overhead stashed away. Architecture is a highly cyclical field.

[ 12-13-2002, 10:45 AM: Message edited by: Sailortect ]

Bruce Hooke
12-13-2002, 10:43 AM
My emergency money is in a money market fund - it earns a little more interest there (which is still not much given where interest rates are these days) than it would in a regular savings account, but I can withdraw it on short notice if I need to.

Scott Rosen
12-13-2002, 10:59 AM
Originally posted by Alan D. Hyde:
Our money, remember, is not value. It has no intrinsic value. It is only a token for value. The cash you hold depreciates in value every year (via inflation). The prices charged for the items you buy with it, increase.

AlanAlan, how true that is. US dollars are nothing more than our government's promise to pay--it's a debt instrument, not real money. That's where precious metals can serve as a hedge. The governments of the world haven't yet figured out a way to inflate the gold supply. It is real money, a true store of value.

And, no, I'm not a gold bug.

12-13-2002, 12:30 PM
Much depends on other factors, but paying off debt is always good- you can always borrow it back if you need cash. But no debt means freedom, from your job if wanted, worries about making the payments,etc.

Alan D. Hyde
12-13-2002, 12:38 PM
To pursue Scott's point a little...

U.S. currency is what economists call fiat money that is, it's a naked promise to pay, not backed by any reserves of gold or silver, or any other asset of intrinsic worth.

Any currency is token for value, as words are token for thoughts.


James R
12-13-2002, 01:57 PM
Well here's my 2 cents worth:

Pay off debt. Start with the stuff with the highest interest first. Remember that you're paying interest with after-tax income. IOW if you're in the 50% marginal tax bracket (not hard to do in over-taxed Canada) you have to earn $200 just to pay off $100 worth of interest. Then, and this is the tricky part, make the payments that you would otherwise have made to the bank or credit card companies to yourself. It'll be as if you're paying yourself interest. And it'll be tax-free. Of course you have to have the discipline to actually pay yourself and not get into debt again. Do keep some aside for emergencies.

I'm assuming of course that you do have some debt, most of us do. Also remember that there is good and bad debt. Pretty much anything that loses value quickly: a car, a widescreen tv, etc. is bad debt. A house can be considered an investment and falls into the good debt category. The house itself loses value over time but the land it's built on doesn't.

[ 12-13-2002, 03:28 PM: Message edited by: James R ]

12-13-2002, 09:39 PM
A Walnut table with a Cherry frame? Sounds exceptionally unattractive.
I have long ago determined that MOST (I said most, not all) Architects should stick to designing buildings, and let those of us that are trained in designing furniture do our job. After all.... I don't try to design buildings... (too often) :D

12-14-2002, 05:39 PM
Don't overlook land as a diversified investment component. There is only so much of it......

Find a vacant lot or a fruit orchard, etc., in an area where you think a city will grow towards.

Pick a city that is mainly residential, spends an unusually large amount of its tax income on its school system, and has a school system that features relatively small classes and produces well-above-average students.

Land in such cities will appreciate extraordinarily in value due to the pressure of people to be residents in such cities, thus gaining access for their children to that school system.

Peter Malcolm Jardine
12-14-2002, 05:59 PM
My investment has been in rental properties. Keeps my cash flow high, the properties appreciates, the mortgage gets paid by someone else. I put enough down to have positive cash flow, and as the property appreciated, it allowed me a prime rate line of credit if I needed quick money. Expenses have risen a little recently, and its a little more work, but its safe, and it generates a real income at the end that is indexed directly to inflation. Buy brick, in a good location, and keep it in good shape. I pay my winter heating expenses as I go, so I have more play money in the summertime. I am selling two of them this coming year and buying a larger property, and my profit over seven years (besides rental income and mortgage decrease) has been 30% increase in the value of each building.

Alternate route? Put your money in the highest yield 3 or 5 year you can find, and secure a line of credit against the money... should get 1/2% BELOW prime for secured. You still are getting return, and have some flexibility. :D

12-15-2002, 08:10 AM
... Yeah! Buy up farm land, or woodlots, and bulldoze down the trees, and put them through chippers. Then you could build cheap houses and plant scraggly little non native specie saplings, and sell the lots to idiots who don't know a Bradford pear from a Dogwood, or vinyl siding from cedar, for an enormous profit! Then you could take that money, and buy up some inland wetlands, and fill in the wetlands with toxic waste, and build more houses to sell to more idiots! It's a "win, win" situation!

Ian G Wright
12-15-2002, 12:19 PM
Winter is well underway, why not rent a chalet in Murren or Gstad until Easter then buy a decent boat? That will give you time to decide on the 'bike. Budget for a modicum of wine wimmin and song, the rest you can fritter away.
Well, it worked for me.
Spend it all before you die.