Great Depression II In the 20s and 30s W.W.I was simple the World War. Maybe we'll start referring to 1929-1932 as G.D.I because it was simply the first of it's kind.

I don't want to be a doomsday nutcase, but I am deeply scared about the world we live in. I'm not scared of life ending - I'm scared about catastrophic economic collapse. Something that can shake the world more than a 10.0 earthquake, a worldwide wipe out of retirement savings, financial institutions, and debt/credit.

Grandpa Bouchard, my mom's dad, was nearly vibrating a few months back because he was so excited about the massive collapses he predicted would be coming in the near future. He was never specific, but he felt like many banks would fail and we might just see times not-so-different than those during the Great Depression. He was envious that I was young enough to experience it, learn from it, and make it out on the other side someday. I guess it is possible that much of what is remaining of his retirement savings could get wiped out. I certainly hope not because if that turns out to be the case then the Average Joe will be in a much worse predicament.

I was reading a few articles and they didn't scare me - but that's because I already scared myself by wildly speculating what could happen.

So many of the banks out there are interconnected such that the rapid failing of a few could bring down the whole lot of them. The Fed pretty much had to bailout AIG a few days ago. If they didn't I think things could have quickly become exponentially worse.

It's no wonder my favorite commodity (silver) has spiked (along with gold, oil, etc) - these things are considered "safe" thus many are buying them up because they don't know exactly what stock will lose them their life savings next. At least gold and silver have a REAL value to fall back on...

Labels: doomsday, economy, money, recession, retirement, silver, stock market

  ¶ 11:30 AM 4 Comments

  Adventures In Wealth Building The goal is to be able to retire someday without caring whether social security pays me a dime.

You get there basically by increasing your net worth to the point that you can support your lifestyle via stuff you've saved. Net worth is basically this: Take everything you owe anybody (debt) as a negative. Next take everything you have (cash, 401K, IRA, house, cars, giant bars of gold, etc) as a positive (asset). Put those together and you'll have your net worth.

It's very common for a recent college graduate to have a large negative net worth. To increase it, you have to keep paying off debt while trying to gain less new debt while adding to your assets. I signed up at Net Worth IQ to help me track it over time.

I'm happy to say that I made the switch from negative net worth to the positive side in early 2008. I still have $25K of the $36K of college debt left, and I have a huge amount of mortgage debt - which sucks because I owe more on my house than it is even worth now that homes dropped in value. However, I've been stashing money in a Roth IRA, regular IRA, and a 401K. Plus, I just paid off all of my credit cards and I paid off both of my cars as of last month (I used that tax rebate everybody got to make the final payment!).

I just made it into the positive - so I have a long way to go. I hope to be on track by the time my early 30s hit. Check out this formula to see if you are on track:
AGE: Your current age (you can use decimals to be more exact)
$$: Your annual spending. This is not what you make, this also should not include most of your debt (like student loans). This is today's dollar amount that you spend on living or want to spend (food, travel, clothing, property taxes, car payments). Basically the things you'll be paying when you're an old geezer.

Target NET WORTH = (AGE/166 - 0.15) * AGE * $$

That is what your net worth should be today...based on this semi-common premise: "You will need 20 times what you annually spend to retire at 72".

I'm way behind...where are you at?

Labels: debt, money, net worth, retirement

  ¶ 1:33 PM 1 Comments