Financial Preparedness

Be prepared. ~ Boy Scout Motto                                                                                                              

JP Morgan prepares for trouble before trouble arrives.

“We prepare for low rates, high rates, stock price down 40%, credit spreads going up, bond rates at 8%, high yield at 15%,” Dimon said. “And JPMorgan can handle all of that.”

As a retiree, I believe it is important to prepare for possible financial issues before issue arrives.

Here's what we've done to be prepared.

• Lower interest rates - We own long term bonds, up to 20 years maturity, that pay 4-5%. The teens were horrible with bonds paying less than 1% for 10 years. That made depending on fixed income in retirement difficult.
• Higher interest rates -  We have cash in money market funds that can be used to buy bonds at 7% and higher if rates should get that high.
• Higher inflation - We owns tangible assets such as real estate, precious metals,  and commodity equities.
• Stock market declines of 40% - we have social security,  dividends, interest, and rental income that cover current expenses if needed for several years. 

However, other than a water distiller and a couple months of non perishable foods, we are still not prepared for "black swan events" such as a U.S. default, hyperinflation, nor a nuclear war.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial nor prepper advice. Please consult a professional advisor.

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