Oct 7 in General discussion
The economy is looking sketchy....
The market is looking sketchy....coming up on a 15 year bull run, I think its safe to say a recession is on its way, if not already here. The biggest fear for most Americans is being able to continue making their payments on assets they own, so that they don't lose them in a worst case scenario.
One way I am adding in an extra layer of protection for myself is pulling $100k from one of my HELOCs just to have on hand for a worst case scenario. I'm holding it in a higher interest savings account so that I'm not wasting too much interest doing this. This is on top of my 6 month rainy day fund...just because the world feels so uncertain.
Here's how my numbers work out:
$100k pulled out of HELOC.
Monthly payment on that $100k=$1,250
(Investment property HELOC and this bank specifically charges a bit more on the monthly payment)
Monthly payment breakdown=$625 toward principal $625 toward interest
Interest earnings from $100k in savings acct= $2k/year or $166/month (This is just my simple money market savings account my bank offers. I may put it in a higher yielding 6 month CD which would cancel out the interest I'm paying altogether. But it would make the cash inaccessible for 6 months which kind of defeats the purpose of doing this if I needed the cash)
$625/month interest paid - $166 interest earned = $459/month lost.
$459 x 12 = $5,508 lost over a year to have the safety net that I can protect my portfolio for over a year in an absolute worst case scenario.
Most recessions aren't that long....So even if it does get bad, it should get back to good within 1-2 years. And I'm still confident in making at least some real estate sales during that time so I'm not completely living on these savings.
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The economy is looking sketchy....
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