Thoughts, ideas, suggestions and education from financial adviser Jim Ludwick, Founder of MainStreet Financial Planning, Inc. of Odenton, MD; Washington, DC; New York City, and Santa Barbara, CA

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Saturday, August 20, 2011

Important Message to Clients and Other Correspondents


Saturday morning August 20, 2011
Starbucks, Monroeville, PA

I don’t want to be sending out “Important Messages” very often. However, our 24/7 media, which most of us access to some extent or other, leaves me no choice. Volatility in the markets (stock, bond and housing) leads to angst. I feel your pain and my pain.

Thursday was another bad day in the stock market. What did yours truly do? Most of you know the answer. I was a buyer. Sold nothing and bought more index funds. Put excess cash to work. If it was a good by at X, then it’s a better buy at X minus 9 percent.

Remember the three buckets of money? (If you don’t, email me for my chart and explanation)

I have more than three years cash in bucket one. How about you? I have another 2-3 years of expenses in bond index funds and a balanced index fund for mid-range bucket two. The asset allocation for my wife and I is 75/25 in bucket three. This is long term money, at least five years away from need.

Am I concerned about our economy and our country? You bet.  Rumors in Washington are forecasting draconian budget cuts beginning Oct. 1st.  Could a recession in the DC metro area be in the offing for the first time since the end of the Vietnam War? One missive I got yesterday played up that outcome.

For those of you in CA, NV, and FL, it looks like housing and affiliated industries will keep economies there in a longer recession that I ever figured.

So what can we do? 1. Live beneath your means and prepare for cuts in social security, medicare, and other federal and state government services. 2. Don’t take on more debt. 3. Pay down current debt. 4. Understand the big picture from several viewpoints (not just your favorite outlet) 5. Communicate with your elected representatives and/or help new ones get elected.

Thanks for listening. Jim at advice only dot net.