How To Protect Your Money In a Rocky Economy

Rents are high almost everywhere, but house prices and mortgage rates are too, So does it make sense to buy a house if you can actually find one, or is it better to hold off? And the markets, well, they're all over the place. And oh yeah, a couple banks failed. Should we just put all our hard earned savings inside the mattress until things calm down? Fortunately, we've got some answers from two Bloomberg personal finance journalists. Claire Ballantine to

not panic. That's really great advice. At the same time, don't let that lead you to not pay attention to what's going on, I think, and Craig Giemona, I think the sort of Yolo. Attitude of the pandemic really has faded. They're here to help us sort through money decisions in volatile times, So I would say, maybe don't go with the Mattress route. I think one thing that's become very clear over the past few weeks is that if you have under two hundred and fifty thousand dollars in a

Federal Deposit Insurance Corporation insured bank, you're fine. That being said, most savings accounts in traditional banks aren't paying a lot in interest. It could be a good time to think about other options to keep your cash liquid but still

earn more a return. Yeah. I think that's been one of the interesting side effects of interest rate hikes is that we're coming out of an era of easy money, low rates, and there's a lot of people with money sitting in a savings account at whatever their bank is that is making nothing or next to nothing, and there are better options, right. I mean, at Goldman, Saxes, Marcus, they offer high yield savings account that have become very popular.

You can get three point seven five on a savings account, and you can do even a little bit better if you're willing to lock that money up with a certificate of deposit. I mean, you can go up to four point seven five. It obviously depends on the amount of

time you're willing to lock up that cash. But I do think for personal finance people, people that are looking around saying I got a little spooped by everything that's gone with the banks, they're checking their accounts, there are ways to move money from those accounts that are really yielding nothing or next to nothing and start making some returns on that cash, and three point seven five or four percent or better. You know, depending on which day of the week it is, you're kind of doing better

than even the market. Yeah, no question, you know. It was the worst performance for the SMP five hundred, I think since two thousand and nine last year. So there was a lot of people that, after a bull market that was running and running for years and years, went to cash, and the big debate about whether cash is trash and what you can do with your cash. There are great ways to put your cash places to earn

more money. You just have to take a look and be willing to move into a different account that a different bank, perhaps, especially if you're looking to do something with your money right now. I at least, I'm not super excited about putting more fresh cash into the stock market at the moment, but looking at some of these higled savings accounts and CDs, it's very safe and very attractive rates. Craig, you mentioned that treasuries had become popular.

Bonds are often a place where people go in stocks get volatile, should people be looking to put money in bonds. So we're coming off a year where I mean there's always been this rule in finance that the average person wants to have sixty percent of their holdings in equities forty percent in bonds, and you know, that's just sort of one of those rules of thumb. It's been around for a long time, and last year that was one of the traumatic things I think for people was that

that did not perform well. Just because of how turbulent things are. The Fed is jacking rates. That's had a big impact on bond prices. You do have to be careful obviously in the bond market. You know, people will go to bonds when they're scared. So it's been an extremely turbulent environment, but bonds are an option. I mean, yields have been strong, and I think you're seeing the sixty forties start to rebound a bit, which is what

people expected coming into this year. Yeah. So one thing that I think regular investors, everyday people would be wise to take away from this is that treasuries are still very safe, very safe in a very good way to put your money in bonds and kind of hedge some of your stock exposure. I think there's been some concern with all the banking turmoil that rates could drop, that maybe the Federal Reserve would be forced to pause their

rate hikes or even cut rates. I mean, it's an open question now whether that's going to happen this year. But we saw the Fed raise again, so that should give people some feeling of assurance that, you know, treasure are still a good place to be. And again it's still the US government the safest thing there is as far as investment. So I think that's still a place that a lot of people are looking at as far

as protecting their money. Claire, you said you don't know how good you would feel about putting fresh money into the stock market right now. Let's say you do want to put money into the market. It's a little bit lower now where there are some kind of rules of the road. For the moment when stocks are down, it's a good time to put money in. You should buy the dip. That being said, an important point to look

at within that is valuation. There is a narrative that whenever stock prices come down, that means stocks are cheap, and that's generally true, but there's some nuance within that. And one important thing to notice that stock valuations have been so high for so long that even though we did have that big drop in stock prices last year, it still hasn't flushed out all of that overvaluation. There are different sort of complex measures that Wall Street uses

to determine if stocks are cheap or not. From talking with a couple of analysts, I think the takeaway is that they're not quite cheap yet. It's going to take a while for valuations to really come down. That being said, you can still make money in the stock market, especially if you have a longer term time horizon. But I think just it's important to sort of dispel that narrative that stock prices dropped, so now is a good time

to buy. And I think whenever we talk to financial advisors or ask them questions about how to explain this to regular people. They basically say, do not try to time the market, that this is not something that the average person should be attempting to sort of figure out our stocks cheap? Is this the bottom? But that you know, if you have a longer term goal, that stocks are probably part of your portfolio. There's no question about that. Yeah.

I think the smartest thing to do, and what advisors tell me as well is that you set aside a portion to invest each month or every six months, and you do it regularly. The issue that some people get is that, you know, maybe they have too much in their hild savings account and think I need to deploy all of this into stocks right now. We're doing that sort of gradual timing I think makes a lot more sense.

So one of the most popular features that Bloomberg runs periodically is this article called what should you do with ten thousand dollars right now? I'm going to put you both down on the spot. We've been talking about various kinds of investments. If you have ten thousand dollars and you want to invest it, what would you do with it right now? One thing I'll say right off the top is buy I bonds. I bonds are a savings

vehicle that the government offers. If you can navigate the notoriously wonky Treasury Direct website, it might be worth it. I'll take you a few minutes. But ibonds got super popular. They're meant to protect against inflation. They have a yield that basically moves up and down based on inflation. So, as you can imagine, it's been super hot the last year. People were plowing into I bonds. You can buy ten thousand dollars per year per person, so you could put

some in your kid's name. It's a very good savings vehicle. The money is basically locked up for five years. You know. There's various rules around when you could take the money out, how much interest you would forge. Again, if you have money ten thousand dollars that you want to protect, you want it to be safe. I think I bonds are up there on the list of things. You know. My first answer is going to be to put it all on doagecoin. But besides that, I think disclaimer Claire is kid. Yeah,

I'm getting on the doagecoin. But so I like the I bonds answer. I think I'm gonna go slightly different. I'm going to say, put it in a CD. The reason I'm going there instead of I bonds is that one less time that your money is locked up. Also, with I bonds, the rate does change based on inflation, and so we're seeing inflation come down, those I bond

rates may come down pretty soon. And most importantly, the websites for any digital bank are going to be a lot nicer and more user friendly than the Treasury Direct website, which is notoriously something out of the early two thousands Internet era. It's a great environment for savers. If there's one good thing that comes out of all of this, it's that and Americans are going to get a better

yield on their savings. We may even see that longer than you know this whole crisis plays out, because banks get competitive and you know, they don't want to be the first to drop their rights. So it really is the time to look and explore the options that banks are offering for your savings. I think another thing that has become a little bit in turmoil lately for a lot of people is the workplace in their own jobs. We've seen a lot of people decide to quit their jobs,

take a new job, drop out, entirely. If you're one of those people and maybe you're thinking it's time for something new, what are some of the things you should be considering when it comes to quitting your job or taking a new one in this kind of tumultuous environment. This is another thing that really went into the spotlight

in the pandemic that suddenly offices were closed. I mean, this was a massive shift in society and culture, and people were moving anywhere, working remotely, so and you know, the Great Resignation was a story that got written about quite a bit that people were just quitting their jobs. I mean, I think the pandemic pushed people to re examine all facets of life in some cases, and there was a lot of quitting. I mean, the quits rate, which is a government statistic, was through the roof for

a long time. You know. Frankly, a lot of that stuff has settled down. I mean, there has been a massive amount of tech layoffs. I think tech has been the hardest hit. The headlines are I think a little bit scary for average people who are sitting there the mortgage payment is due, you know, they're paying for their kids school. Maybe the kid is getting ready to go

to college. So I think there's a people that are doing the financial math, and I think the sort of yolo attitude of the pandemic really has faded, and that people are looking out there saying, you know what I mean, Look, maybe I don't love this job, but it's a job. I like the steady paycheck. From where I sit, it's a tricky time to be doing some of the risky stuff that we saw in the pandemic because the job

market has just cooled off so much. Yeah, I think the days of quitting your job without a backup plan are mostly over. Some people are still going to do it, obviously, but now people are prioritizing safety. They're looking more at their savings accounts, They're looking at how much everything costs, and unless you're super young and super you know, into risk, the decision to leave your job is going to be a bit more fraught than it was during the pandemic.

In some ways, that, you know, can be a bit of a good thing. And that, you know, people are thinking more about their finances, they're looking at their next steps, but people still are looking for different jobs. You know, the economy is on pretty solid footing right now. A lot of places are hiring, even if some are laying off workers. So it's not to say that no one

should look for a new job right now. It's just the time to put more consideration into it versus any spur of the moment quitting like we had seen the past couple of years. If you aren't going to make that leap, make sure you have enough savings to do that. Make sure you have a bit of a plan. You know, I'm going to give myself this long to do whatever and find myself. And I also think take a closer look at the job market, right I mean, you're absolutely right.

The unemployment rate remains low. The participation rate, I think has ticked up a tiny bit as far as the number of people that are actually looking for work, which is a good sign. So there's labor shortages in places in the economy, particularly in places where a lot of people got laid off when the pandemic hit, you know. But at the same time, I think you're seeing a lot of white collar jobs go away. When you think about Wall Street's been pretty hard hit. I mean, the

credit sweeting has affected thousands of people. The banks are taking a look at cost the big tech companies where you talk to people whose kids are graduating college. Right now, it is rough out there as far as where people are going to find good white collar jobs. So to me, the job market is complicated and it's a bit of a mixed picture. I would just think about it, like Claire saying, think about it a little bit before you

take that leap. When we come back, is now a good time to tell your boss you want to raise Claire for a while? There is a lot of talk about how working from home in jobs can do. That would be the new normal, But any employers are now demanding people come back at least two or three days a week, So is that kind of a thing in the past now? A lot of people during the pandemic had jobs and cities maybe, and then they moved out to Boise or Cleveland and now they're working remotely, which

is all well and good. But say you want to quit your job then and you're still living in Boise or Cleveland. A lot of employers now aren't is keen on remote work, So maybe you'll have more trouble finding a remote work job than you did in the past, or you have to find a job in the new place that you're living, so it gets a little more complicated, especially if you have moved. Is now a good time

to ask for a raise? Always a tricky question. I think this was another pandemic trend, another thing where the great resignation. People felt free to leave their jobs. And I think part of the reaction with inflation running as hot as it was was that companies were saying, I'm going to pay up to keep talent, so there was leverage. People were getting big raises to jump to new jobs.

That's a big reason why it was happening. And then you saw the reaction of Okay, I don't want to lose this person, so I will give them a raise. I mean, the answer to this question is tricky, but I think the bottom line is you have to take a look at what's going on out there with white collar work and how many people are getting laid off. I mean, I think the reception to the raised request right now is going to be a little cooler, tepid, however you want to think about it than it was

a year ago, two years ago. Yeah, Well, in the counterpoint to that, I would say is that some people may be thinking it's going to get worse from here in terms of the job market and the economy. So do you put the ask in now or do you wait six months when we could be in a recession.

I think that's also on people's minds. And you know, that's not to say everyone should go ask for a raise, but if you think you deserve one and you're going to ask at some point, you know, I think it is worth keeping an eye on these trends in the economy. If you're at a company that has had a round of layoffs and people are gone, you're probably doing more work. You know. The bottom line is that if you're left standing, if you survived, maybe you're doing a job that two

people used to do. And also, by the way, if you survived, that means that you made the cut. So I think again, if you're doing the job of two people, that's something you always have to watch out for and talk to your boss about. It's just that the vibes have definitely changed here the last six months, and it is a tricky time, Claire. How much should people have sort of saved if they can to prepare if they lose their job. Yeah, so most of the experts that I talked to say it should be a bit more

than maybe you had in the past. The standard advice is three to six months worth of living expenses. That's sort of the gold standard to always have as a cushion in case you lose your job, in case something bad happens. That being said, we know from some of the studies out there that a lot of Americans just don't have the ability to do that. So anything is better than nothing, I think, is the takeaway. Some people just don't have the ability to put extra money away

like that. But if you can having a bit more in your savings or a bit more in some kind of cash like instrument, this is where how yould savings accounts can come into play. Extending that to nine months worth if you're living expenses, even a year can be super smart just in case you know, you do happen to lose your job. Sometimes, you know, younger people might not need to have as much. They have more flexibility,

less dependence and things like that. But in general, I think now is the time to look at your savings and your emergency fund and maybe boost that if at all possible. Someone said to me that a way to reduce your expenses is go through your credit card statement and look at all of the things that you're subscribed to figure out which ones you can do away with. Maybe that's only, you know, ten bucks a month, but that really can add up. And I know I'm subscribed

to lots of things that I've wholly forgotten about. Craig going from work to a little closer to home. A lot of people now are trying to figure out renting versus buying. It's a tough calculation to make. How should people be thinking about that? Yeah, it is very tricky. That's another one of these classic personal finance questions, rent versus buy. You know, there's the old idea that if you're renting, you're flushing the money down the toilet, you're

not building any equity. The bottom line is that it is very very hard to buy a house right now, you know, with what's happened with mortgage rates. I mean, mortgage rates were down around three percent for the better part of two years, you know, and you had a whole host of people across the US refinance to two point seven five. And so the problem with that is those people don't want to move. So people that refined in the pandemic, you know, they might not love their house.

Everyone finds things to hate about their house. But to take out a new mortgage now at six and a half, that just doesn't make any sense. So the fallout from that is that it's very, very hard to find affordable homes to buy. There's a tremendous pent up demand from a millennial generation that was a little slow to get into the housing market. But as you have a very big down payment, it's just a tricky time. There's not

a ton to buy. You know, the markets in the suburbs of New York and Boston have stayed extremely hot, you know, places where the job markets are doing well. So it's a very tricky time to buy for all but a very few people. Rent is high too, but I just think that there's a lot of people that you just have to find rent that hopefully you can

still save money while renting. That is really the move. Well, and then you have people like of my generation, I'm twenty six, and you know, they're looking at what they're paying in rent, which is in New York at least extraordinary, and the dream is to buy a house. But you know, we just talked about savings and how hard it is

for people to save. You know, you're trying to come up with a down payment for a house, even if you can swing maybe the monthly payment, and it just feels impossible to save up that much money for that after the break. Is sinking your money into a house still a good investment? So for people who are fortunate enough to actually have the money to buy a house. Traditionally houses have been a very good long term investment. Is that still true? Like can you still get your

money back and then with a house? That's another reason why nobody wants to sell right now, or why people don't want to buy right now, is because, I mean, our home price is going to fall another twenty percent. I mean we're still in this bit of a limbo phase where the economy by some measures, is on solid ground. There's certainly some distress signals out there, some warning signs, but there's a feeling that this could get really bad.

I mean, I think the message you get from experts about this is, look, if you're going to buy a house, you better be willing to live there for a while. The days of a quick flip where it's just going to go up by one hundred thousand dollars in two years and you can move on. That seems like it's on pause at the very least, that a house is

still going to be a good investment. If you're looking for a place to raise your family and you're willing to live there for fifteen years, it's probably still going to pencil out despite the elevated rates. But things have changed and you do have to be careful about making that decision. I mean, other big thing is that we have a massive generational housing shortage in this country. There is simply a shortage of places to live. There's not

enough apartments, we don't build enough. Zoning is a problem, There's not enough houses. So I think that's an argument for on the longer scale, home prices going up because people need a place to live and we just don't

have enough in this country. Yeah, I've definitely heard talking to personal finance advisors that if you're buying a house and you're thinking is your forever home, You're going to be there until you retire, then of course it makes sense to not be paying money in rent if you're going to do that, but especially if you may have to move for work. That's where the calculus gets kind of hard. Claire Craig. We've covered a lot of ground

here here. To give somebody one piece of advice to kind of put in their pocket and take with them, what would it be. We always joke a little bit on the Personal Finance team when we call up advisors. The first thing they all say is don't panic. Easier said than done in times like these when you're seeing headlines about bank collapses. But you know, I think the thing that you take away from talking to advisors and reporting on these stories, it's just that this is a

long term thing. You know. It's not really about some quick way to make money in crypto or there's there's really no way to game the system, right. It's a sort of a steady as you go strategy. So that's what I take away from sort of the don't panic advice, which is that it should be a long term game and it's very difficult to time the market, and you just have to be rational about this and save as much as you can and put that money in places

that is safe and can get you some yield. Yeah, and I would say it's good to just take a look at what all you're doing. The set it and forget it method is really good in a lot of ways, and it prevents you from, you know, maybe making mistakes because you're panicking. But also just be aware of these things.

Be aware of what's in your four oh one K and what kind of yield you're getting on your savings accounts, where all of your money is in these different accounts, and how much you are planning to save for the future. Claire Valentine, Craig Jamona, thanks for coming on the show. Thank you, thanks for having us, Thanks for listening to us here at The Big Take. It's a daily podcast

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