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I wanted to go back on something I posted a few posts ago.  You probably SHOULD keep investing in a 401(K) or other retirement plan, at least up to the company match, if you are lucky enough to get one.  The danger is in continuing to put your hard earned dollars into this market through some kind of standard index mutual fund.

My co-worker argues with me: Oh, it’s dollar cost averaging!  We’re buying on sale! It’s OK to lose, because I have a 20 year time horizon!!  What a bunch of Bull!   Why should you lose two years or more worth of increases of any kind, and actually take a loss?Then, take the next two years after that, or longer God forbid, to get back to where your balances equal just your inital investment?

Dollar cost averaging is for dupes! It’s to make you believe it’s EASY to manage your own retirement, so that your employer doesn’t have to feel guilty about not offering any kind of fixed retirement plan any more.  Meanwhile, you will LOSE 4 years of any return at all, plus principal, if you are just following the “conventional wisdom”.

Investments experts are not “dollar cost averaging”.  They are sitting on the sidelines with their cash. The are investing in short ETFs, currencies, and corporate bonds, all of which you likely have NO access to in your 401K.  Only the dupes keep “buying” stocks at these crappy levels, because they haven’t taken the time to learn something and stop their contribution from going into the same old index fund.  OF COURSE Wall Street is telling you to keep contributing, so they have someone to SELL TO.

So, put your $$ into your retirement fund, up to the company match, to keep saving, but keep it in the government bond fund or the savings account fund. What the heck, why not EARN 3% instead of LOSING 20%.  Then in 2 years when the market slowly creeps back, THEN switch your allocations.  For everything you want to save beyond your company match, set up a self-directed ROTH.  Put as much as you can in there.  And LEARN how to invest, find other vehicles that are actually making money (they are out there).  Otherwise, you’re just throwing it away.

I’m not a finance expert, just a middle-class American watching the financial nightmare unfold in front of my eyes, and I’m deciding to do something about it.  Putting more cash aside, taking steps to bring in more cash, and save, save, save is the goal. I don’t have a $$ amount I’m trying to reach – yet – instead, the idea is to make sure that whatever happens, I’m not broke.

This is not about “personal finance’ or what to do with your retirement, or how to get out of debt. This is way more basic:  about having money in hand, or tradeable/sellable skills, or whatever is needed, to survive a massive economic blowout – and if the blowout doesn’t happen, I don’t think I’ll complain in that case either!

Here’s what I’m talking about:

- Figuring out how to save as much as possible, by buying less (or nothing), getting deals, and conserving.

- Finding best places to put the cash so it’s relatively sage – that is, the best rates on savings accounts, specific investments, other ideas. (Hint: This means NOT mean paying off credit cards first!)

- Making extra money – the fast kind, not the job kind; I’m not talking about overnight millionaires or anything, just ways to get a couple hundred (or maybe more!) coming in each week?

I think this crash is just the start.  Stocks may not come back because the wages and jobs aren’t there that are needed to fund consumption without credit.  We won’t have income because as customers we’re too broke to buy. It’s a vicious circle, and without credit no one’s going anywhere.

So, in the mean time, the goal is to keep cash coming in, prevent it from going out, and and do whatever it takes to protect your finances.  Inflation is going to be the next bugaboo, but one thing at a time for now!  I’m working on a list of ideas I’ll post here.

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Right now, you want to be in CASH. Saving cash, stashing cash.  i’ve moved my cash from a large national bank to a smaller, local bank with ZERO exposure to anything Wall Street and a higher reliability rating.  You can find out how your bank stacks up at Bankrate’s Safe & Sound Ratings. More bank closings are coming though, some say numbering in the hundreds.

Now that the FDIC is insuring deposits up to $250,000 (temporarily, through December 31, 2009), it’s feeling a little safer out there, but still – could the Feds handle a run on banks?  If you’re concerned about safety, keeping your cash in a savings account that pays .025% isn’t all that much better than keeping it under your mattress.  And who wants to be standing in line when they close the doors?

Some financial talking heads like Jim Cramer are saying keep anything you need for the next five years in CASH.  My suggestion is, keep anything you bring in in the next two years in cash too!  Unless you like gambling, what would be the point of putting your money into the market right now?  The market hasn’t hit bottom yet, and having cash when it does look like it’s finally pulling up is the best position to be in.

We’ll be posting ways to find as much cash as you can as fast as you can, by tweaking your budget, saving, and making more money.

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