Credit Crunch

[MOBIUS]

Do we have a practical thread about this? As in what precautions people are taking?

Basically I have paid down as much debt as possible, e.g. all my credit cards, a chunk off the mortgage - that sort of stuff...

Savings are essentially ****ed because of the interest rates, though I'm lucky to still be paying £500 a month into a 12% interest account that is due to mature in June or July, I forget which. Other than that, I have a chunk of change in a high interest current account (again fixed for another 6 months or so), and a diversification into Gold, which was doing really well until recently, but was also a hedge against the falling £ - though that has been rallying.

I've got (had!) a 5 figure sum in ISA trackers, which I decided to leave to weather the storm before it was clear just how tits up the global economy was. Luckily it is Euro stuff which has been less badly affected - but I am too scared to see by how much it's fallen (I'm guessing about a third)...

Finally, I have a bunch of money in a number of specifically picked shares that I think will be insulated from the current goings on and actually take advantage of the current climate.

One just spiked +52% by close of business today (ahead of a certain Ford announcement this evening US time regarding the upcoming Chicago Auto Show)...

This might just be the auto equivalent of Google guys!

[Asher]

Why would you want to save?

Spend, spend, spend! Do you have a 106" LCD HDTV yet? If not, go spend.

Be a good citizen.

[MOBIUS]

I've been doing that as well...

[DanS]

The most important thing to do in this situation is to fight fear. Paying off credit cards should be done in all financial seasons, so there's no change there. Cut expenses to the bone to do it. I'm not paying extra on my mortgage, however, because that would reduce my financial flexibility if I lost my job (better to have the cash or invest in something that I can access within a week or so -- even stocks do reasonably well in this regard).

This is a great time to invest, no matter whether in small chunks or large. Especially for relatively young people. Sometimes at times like these, people lose heart in investing, because their accounts are down so much. Or are fearful when other people have lost so much. These are normal human reactions, but it is important to invest when things are low -- you are getting a discount.

Index stock and bond funds are great because they have low fees and they are diversified. It's dead simple to do. There's no need to be more exotic.

[snoopy369]

The S&P 500 is having a sale

[DanS]

45% off

[snoopy369]

It's Employee Pricing Plus Plus Plus at the DOW! Get TRIPLE our employee discount!

[VetLegion]

My stocks are down 40-60%, I don't even bother looking any more. I have a modest amount of cash (I don't spend my entire salary) with which I don't know what to do. I'm ready to bet on further falls in stocks, but we don't have short-selling on the local bourse.

I was looking into derivatives, there seems to be a huge European market with all sorts of exotic options such as leveraged short selling and the like. The problem is, I have no experience at it and I fear manipulation by the issuers so I'm reluctant to join the fray.

[Lorizael]

Let's see. I've got a few hundred dollars in an ing savings account with an ever shrinking interest rate. I've got about a hundred dollars in my checking account. I've got a credit card that I pay off every month. And I just bought a car.

The interesting thing about buying a car right now is that dealerships really, really wants to sell you a car, but the lending banks really, really don't want to give you the money to do it.

I'm saving right now for when I move in July-ish, but that's about the only concern informing my financial decisions at the moment.

[Rufus T. Firefly]

I'm in a weird situation I call The Unbearable Lightness of Being Me.

I owe: nothing. No credit card debt (finally paid off in 2007), no student loans (mine were paid off years ago, my wife's were paid off recently, my daughter has a loan-free student aid package), no mortgage, no car loans.

I own: nothing. No house, no car, no plan to acquire either until late 2010 at the earliest. My most valuable asset is either my laptop or my antique Ulysse Nardin wristwatch, I'm not sure which.

So the whole credit crunch is something I'm just reading about rather than experiencing. Right now all my my wife and I are doing is maxing out our retirement fund contributions while building a large cash position; when we get back from Afghanistan, we'll get the lay of the land and figure out what to do with the cash.

[rah]

No credit card debt, own our cars, the house is a only a few years from being paid off, paying cash for daughter's college, enough liquid assets to cover us for a couple of years if anything happens. You'd think that would put me in a good position but watching our 401k accounts lose over a quarter of million dollars in the blink of an eye really sucks. I wish I wasn't so close to wanting to use those funds. It may delay retirement by a few years.

[Asher]

No debt, small savings account, own my car...but the SO graduates shortly with an engineering degree from Canada's top engineering school, so he'll be bringing home the bacon. Our plan is to continue to use my salary to pay for everything, then all of his will be funneled into a savings account...in 2 years we'll make a massive downpayment on a house/condo, and get the privilege of being in debt.

[Jon Miller]

Stupid student loans, and 2 more years of a car loan. Other than that little debt (just need to remember to pay off the credit card every month, for a while I had a bit left on it, but than I took out another student loan).

JM

[Arrian]

Our only debt is our mortgage. We're doing fine there. We overpay every month by a few hundred bucks, so we're chipping away at the principle a little faster than we otherwise would be. I know there are reasons to not do that, but I makes me feel better. I have a deep and abiding hatred of debt.

As discussed in the stock market threads here, we've put a fair chunk 'o change into index funds/ETFs. We also got a 12-month CD at 4% a while back, figuring that was better than our savings account (2.75% or so, last I checked).

We're extremely lucky. Not only do we have jobs, but we both got bonuses. Mine was solid. My wife's has its own gravitational force.

Our spending habits haven't changed at all. We did make one purchase that was out of the ordinary, but that's b/c it was seriously on sale. So now we have a pool table. We will be giving some contractors jobs soon (some new carpeting and refinishing hardwood floors). I'm still pondering solar panels. Come spring, I'll set up a couple of consultations with local companies. We are also thinking about swapping out one of our cars for a station wagon. That's probably about $10k right there.

-Arrian

[Starchild]

Student loans that I don't have to start paying back until after my Ph.D, a few hundred quid on the credit card that I'm paying off each month. Alas, my savings account has a pathetic rate of interest and I can't put aside enough each month to do anything more than make a token gesture to saving.

Fortunately, my job is recession proof for the next couple years. I mean, I'd have to screw up majorly to be thrown off the degree. Like unleashing the zombie virus we made as a side project.