Where Should You Put Your Money in a Depression?

Okay, so the title is probably a little bit inflammatory.  I’ve heard more than a few people talking about what they should do with their money during an economic downturn.  Of course there probably isn’t any one answer to this depending on your circumstances but I am doing a couple things to give myself some peace of mind.

Step 1:

We keep about $1000 in cash on hand.  I keep this in a safe and don’t use it to “loan” myself money etc.  It pretty much just sits there.  The main motivation for keeping this money on hand is to use it during a natural disaster if I’m not able to access my bank accounts.  The recent economic issues have only strengthened this strategy for us.  If there was a massive run on the banks, it’s nice to know that I’ve got a little bit of cash available to cover food and essentials for a week or two.

Step 2:

We keep our money in a credit union.  If you’ve been a reader for very long here, you know that I’m a big fan of credit unions.  My experiences with them have shown me that I’d much rather do business with an organization that is not trying to make a profit from my deposits.  The bottom line is that I receive better rates on my savings and also get lower loan rates if I need a loan.  Their fees are much lower than traditional banks as well.

With the recent economic issues, I’m feeling even better about my decision to exclusively use a credit union.  Our credit union didn’t take on any risks with subprime mortgages and they service all the loans they make.  Because they service their loans and keep them on their books, they applied much stricter guidelines for getting a loan in the first place.  That discipline has kept them financially strong during these times.  In the end, it’s something that’s worth looking in to if you have any concerns about your current bank.

We received a letter today from our credit union telling us that the recent legislation that was passed included additional protections for our savings accounts at the credit union.  Our insurance limits have been raised to $250,000 on each of our accounts.  This insurance is provided by the National Credit Union Administration (NCUA) and is basically just like the FDIC insurance at normal banks.

Step 3:

We are keeping our HELOC open in case we need to draw on that money in a long term emergency.  Of course that assumes that the credit union will continue to leave the line of credit open to us.  So far it’s still there and I would have thought they would have yanked it by now if they were going to.

Step 4:

We are paying off our credit cards each month and have very high limits on them in case we need it.  The only time I think I’d resort to that is if we hit total Armageddon in America.  I absolutely despise the idea of having any credit card debt.  It’s just one more tool in our bag of tricks.

So, these are a few of the things that we are doing to help us feel in control of our finances during these unstable times.  We feel that the steps we are taking are giving us the security we need to weather this storm and provide us with money in any scenario we can imagine.