Wednesday, September 8, 2010

Nickels & Dimes

I just finished reading a book called Crash Proof by Peter Schiff, published in 2007.  In the book, he predicts everything that has happened with the real estate crash and other things.  The only thing he predicts that hasn't happened yet is the devaluation of the dollar.  Basically, what he says is that the US is paying the Chinese IOUs for all the imports we buy, and when the Chinese realize that the IOUs aren't worth anything, they're going to stop accepting them and the dollar will be worth nothing.  At the end of the book, he asks readers to think not just about themselves, but about their friends and family.  So I thought I'd share with you the simplest thing he advises--if you want to follow his advice, that 's great.  It can't hurt.  :-)  If you want more info on his other strategies, you can read the book.  Or ask.  ;-)

I didn't know until recently (maybe you did!) that our money is not really worth anything.  It used to be based on the gold standard--so a dollar was actually worth a dollar in gold.  When we went off the gold standard in 1971, the government just started printing money, and even our coins aren't worth their face value. 

The exceptions are nickels, which are actually worth a bit more than their face value, about 6 cents, and pennies made before 1983 (1982 and older), which are actually worth about 2 cents (their melt value).  Quarters are only worth about 4 cents, etc.  If you can find quarters, dimes, silver dollars, and 1/2 dollars minted BEFORE 1965, they are made of 90% silver, and they are worth about 15x their face value (a dime is worth about $1.43).  Eisenhowers and 1/2s were made with a percentage of silver for a few years after 1965. gives all the values. 

I don't know about you, but I don't have thousands (or even hundreds) of dollars to invest in silver and gold (the US govt tends to confiscate gold in times of crisis fyi).  But I do have lots of nickels and old pennies.  So, I'm saving all my nickels and pre-83 pennies and looking for junk silver--those old coins.  They are rare, but you can find them every once in awhile. It's a little thing that makes sense and doesn't cost anything.  Having our own garden & shopping locally for as much as we can and stocking up on all those items that are imported is another thing he mentions that makes sense to me (and something that we've been doing). 

Maybe it sounds like I think the sky is falling.  The thing is, we started doing some of these things in 2006/2007.  (not the coins thing because we didn't know about that then, but stocking up--and I really wish we had known about the real estate crash!!! we would have saved money instead of 'investing' in our house)  That's how we made it through the past few years--we had 6 months income saved and we had a ton of food and other items stocked up. I always bought our kids' clothes a year ahead during the sales--with handmedowns, I didn't have to buy clothes.  SendOutCards helped a lot, too! If we hadn't been doing these simple things, a little at a time, it would have been even tougher on us.  As our lives show you, you never know what's going to happen in the future. It's better to be prepared than not be--not only will you be able to get through tough times, but you'll be able to help others, too.

A great site that tells you how to stock up a year's supply of food for $10 a week:


Kelly said...

Not trying to sound "smarter than thou" but I saw the real estate collapse as it was building up. I still lived in Phx when it was getting crazy-people standing in line to get a lottery ticket to be able to have a chance to buy a house at way more than it was worth a year prior-that kind of thing. I wondered who the people were that were paying such high prices for a house! I thought to myself, this isn't going to end well.
Anyhow, where would you sell the nickels and pennies?
Funny story from my childhood: My younger sister and I were at home with babysitter and we wanted to cook hot dogs and marshmallows outside. Didn't have any, nor any money, so I broke into parents' piggy bank full of silver dollars-the real thing. We spent $13 on food that was probably worth 5 times that amount! I think I was about 7. I think I got in a lot of trouble. Haha!
We want to move so that we'll have a place to store food. We don't even have a place for all of our stuff, let alone extras!
Still enjoy keeping up with what's going on in your life!

worryfreemom said...

I don't think I would sell the pennies and nickels, but they would be viable currency. I'm obviously not a financial guru, but I think that if the dollar falls, the perceived value will go up even higher--silver isn't actually worth more, it's just that the dollar is worth less. The idea is that you still have currency on hand that actually means something in the marketplace. According to Schiff, were the dollar to fall, imports would be very expensive, but things actually produced in the US would be very cheap (for people with real currency, not with fiat money like the dollar).

I knew things were crazy with the housing market, but I also thought we were very smart with our house. Had we bought our house in 06 instead of building it, our mortgage would be at least 50% higher than it is now. Because we did all the work ourselves and paid cash for 1/3 or more of the house, we should still have a tidy amount of equity--we didn't build with a profit margin based on the market. The house cost what it cost to build + the land. And our payments (our only debt was our house!) were well under the 30% guideline. We did everything right, supposedly. Our house now is valued below, not only what we owe, but below what it would cost to build it! And that's not including the land! It feels like we should at least be able to get the cash out that we put in, but that's essentially gone because appraisers are not allowed to give fair appraisals by the banks. We have probably lost almost 50% of the equity in the house. (again, equity that equaled the cash we put in, not some random number--and I know that improvements aren't 100% of the value, but we didn't have to pay for labor, which costs as much or more than materials) Had I known, I would have sold the house when we still could.

Unfortunately, along with the housing bubble, Ryan's business was one of the first to fall, and it will be one of the last to come back. That we were NOT prepared for.

Kelly said...

It's hard when you've done everything "right" and then still don't have anything to show for it! We're in that boat with our Maybelle property. When we bought it, we got 2 irrigated acres for less than what 1 acre was going for, and building ourselves would have given instant equity. Under the old rules, that is! Now it would cost us a fortune to build and we could get way more house/land for that money if we just buy someone else's place. We'll lose about a third of our equity (actual cash put in) if we can sell at what we've been told we should get for it. The county actually keeps raising the value even when I appealed their decision becuase nothing is selling for MORE! Our dream of having our custom home with very little, if any, debt is fading quickly. We now realize that buying an existing home is the way to go, but finding one we like isn't so easy!
Thanks for clarifying the coin issue. I've always kinda thought it'd be silly to stockpile gold for use in an economic disaster. What good is a brick of gold when I need food to feed my family. A loaf of bread for a brick of gold? Coins makes sense though. Just might start saving them!

worryfreemom said...

I know you're disappointed about your property. BUT you are SO blessed to be living life mortgage-free. And, despite the cramped space, you're still able to have your chickens and your goats. That is such a blessing--one that seems more appealing to me every day. I would love to never, ever have a mortgage again! ;-)

I'm with you on the gold thing. Apparently, there are now some places where you can store gold and link it to a debit card. But, still. I like the idea of being able to purchase what I need. That's why I like the nickels and dimes (and junk silver)--much cheaper to buy than gold, it's 'regular' money that people are familiar with, it's portable, and it has 'real' value. And if the sky never falls, my kids will have a cool collection of old money someday. ;-)

Kelly said...

That's a good way of looking at it (the coins)! Yes, we are very blessed to be mortgage free (though we owe on the Maybelle property) but we're ready to move that equity to a more suitable home. There are options out there, just need to find the best one.

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