“I don’t know what to do,” said my good friend Rob after inviting my wife Jo and me to dinner for the third time in two weeks. “I know I should do something. Every time I think about it, it scares the hell out of me! Maybe I should just hide everything under the mattress.”
Rob is a sharp guy—he’s done well for himself and his family. He also recently settled the last details of his parents’ estate. Upon banking part of his inheritance, the branch manager magically appeared, introduced himself, and invited Rob into his office to discuss “some really good rates” the bank had to offer.
Not even the drive-through window has helped Rob fly under the radar. It still takes but a few seconds before the manager appears and starts his pitch. Rob has started to wonder if the drive-through tellers have a bright yellow “sic ‘em” button.
Rob is a veteran subscriber to Miller’s Money Forever. He reads our material faithfully and isn’t shy about asking questions. He knew for two years this large influx of cash was coming, and he’s made it a point to learn how to handle it.
Up to that point, Rob’s wealth consisted of home equity, retirement plans managed by others, and some collectibles. Now he has a sizable chunk of cash to invest, and he’s understandably scared.
So far, Rob has lots of book learning under his belt, but little real-life investing experience. Every option we discussed at that third dinner evoked a “Yes… but!” After much back and forth, I finally realized Rob’s Achilles heel wasn’t a lack of investment knowledge. Instead, it was his fear.
And Rob is not alone. The following morning, I received a timely message from subscriber and regular correspondent, Bee H. She shared a laundry list of places to put your money—banks, real estate, precious metals, annuities, a mattress—and all the horrible ends that money could meet in those places. Government seizure, market crashes, eminent domain, theft, inflation… the list went on.
Bee’s concerns are not unfounded. I even shared them with Rob under the heading: “See, you aren’t alone.”
Rob’s response: “Wow. She’s reading my mail! I’m stewing over this very same issue…”
Then it hit me hard: What are they afraid of? Not the market and investing, but rather the adverse consequences of government behavior. After nearly every “Yes, but,” Rob expressed fear about what the government might do: a haircut, bailout, bail-in, outright confiscation. Call it what you will.
These fears cross partisan lines. We all have some sense—even if we can’t quite put our finger on it—that our personal and economic liberties are threatened. Heck, every time I look in the sky now, I scan for NSA drones. If I see a tiny speck, I look at the television camera, wave my hand, and say, “Hi, Mom!”
Many of my friends—Independents, Libertarians, Republicans, Democrats, even a Green Party member or two—have told me, “For the first time in my life, I’m afraid of our government.”
Commonsense Alternatives to Your Mattress
If you’ve been reading my articles for any length of time, you know I worship at the altar of practical wisdom. So, my response to Rob and Bee came from that same place.
Maintain perspective. You can’t get rid of these political risks entirely (although a little international diversification will help). Vote for the candidates you think are least likely to make things worse and move on.
Learn the rules, pay your taxes, and fill out the proper forms. You don’t have to like it, but the punishments for noncompliance can be harsh. Behaving yourself is the best route.
Plan and execute a retirement approach that will be successful despite foolhardy government action. This is more challenging than it was for our parents’ generation, but it is within your reach.
Pay off debt. Rob told his accountant he was going to pay off his house with part of his inheritance. His accountant replied, “No! That’s a terrible plan. Invest the money! You can earn better returns than the interest rate on your mortgage.”
Are you kidding me? Rob’s a rookie investor who’s scared to death, and his accountant is telling him to go into the market with borrowed money? Hell, that guy might as well have shown him how to buy on margin while he was at it! Rob held his ground, saying, “I plan to get out of debt and stay that way.”
Keep saving. Once you’re out of debt, start making those debt service payments to yourself each month, first. Then live on the rest. Concerns about government confiscation or higher taxes should motivate you to save even more. If the worst comes, you want to have enough left over so you and your family survive.
Get a financial checkup. Find a good financial planner, preferably one with a fiduciary responsibility to you (not all have that). Mark your goals, set a realistic plan, and check in annually.
Never turn over all of your money to a money manager. Some money? Sure. But ultimately, the only way to protect your money is to learn how to invest it yourself.
The first time you click your mouse to make a real trade, your heart will be racing. It’s an emotional experience, but each trade—good or bad—teaches you something and brings more confidence.
Understand the motivations of brokerage firms, insurance agents, and banks. Rob experienced this in action. The branch manager offered him a “special rate” on a CD that wouldn’t even keep up with inflation.
Brokers and captive houses will gladly do a free financial checkup and encourage you to put your money in their company-sponsored funds. The same is true of insurance companies. While there may be better options, they push for what compensates them the best. Caveat emptor!
A money manager with a fiduciary responsibility must put your interests ahead of theirs. You want advice from people who are not stakeholders.
Always ask, “Are there better options available?”
Learn the lessons pundits cannot always teach. When you make an asset purchase, write down why. What is your stop loss, and what are your earnings targets? When you sell, investigate what made you successful or what happened that caused you to lose money.
You’ll take some losses. Just don’t panic! They don’t have to be expensive learning experiences. As a wise old baseball coach once said, “Make your outs count!”
Doing nothing is a choice. It’s an expensive one at that, as your cash loses its buying power to inflation. Invest to protect, invest for income, invest for growth.
- Take a giant leap of faith… in yourself. Trust your ability to learn, assess a situation, control your emotions, and exercise sound judgment. You’ve already honed those skills in other areas of life; now it’s time to apply them to investing.
Throughout history governments have taxed, spent other people’s money, and made stupid rules. People have succeeded anyway, and you can be among them. Our free weekly newsletter, Miller's Money Weekly, can help guide you through the traps and pitfalls of personal finance and help you navigate toward a retirement on your own terms. Sign up now, for free. The article Is It Time to Hide Your Money Under the Mattress? was originally published at millersmoney.com.