I broke one of the fundamental rules of this forum. I have been glued to the TV watching the news in the past week... Still sleeping fine, but if I start thinking about it, I am getting worried about the economy and I find myself second guessing the size of our EF. I am not worried about fluctuations in our retirement portfolio, I am worried about putting food on the table if things go horribly wrong...
Until recently I was defiantly positive about the future of the US economy. But I have to say that the events of the past week have put a damper on my enthusiasm. Talks about financial collapse, great depression, unemployment going to 20%, DOW plunging another 50%, and seeing fear in the faces of our "leaders" in Washington are really making me feel financially vulnerable. I went from the "let's make money" mode to "let's survive this s**t" mode". My pantry is starting to look like my grandmother's pantry (she lived through the great depression and one world war) and I find myself assessing our financial situation to make sure we have enough cash reserves to survive this downturn.
We have, at our current burn rate, 6-7 months worth of living expenses in pure cash, we have 4-5 months worth of living expenses in relatively stable bond funds and the rest of our taxable investments is invested in the stock market (Not part of our EF, but available as a last resort - right now about 2 years at current burn rate, but of course subject to fluctuations). In case both of us lost our jobs, we would undoubtedly reduce our burn rate, but including Cobra, I think our cash+bond stash would last us at least 1 year. I have a very good handle on our spending so I think that number is actually on the conservative side.
If my wife loses her job she should also get 6 month pay as severance which would cover a whole year worth of expenses at full burn rate. I would get almost no severance if I lost my job, but we don't need my income to pay the bills. Right now, no immediate indications that layoffs are imminent, but of course who knows...
While I felt like it was a perfectly adequate plan under normal economic circumstances, I am worried it might not be enough if we go through a multi-year, nasty recession. So while I am not considering any changes to our retirement savings plan (401K, IRA), I was wondering if we should be beefing up our cash reserves by directing new taxable savings to cash. Of course it seems to be the wrong time to be doing that (when stocks are getting cheaper), but it might ease my worries in the short term. I also reason with myself that, if stocks get even cheaper in the next few years and the "imminent collapse of the financial system" is not looming over our heads anymore, then we'll have a big stash of cash to invest in the stock market.
My wife says, don't change anything. She feels that her job is secure (pharma) and that "everything's gonna be alright" . But of course she doesn't watch the news!!!! Why can't I be more like her?
