Property Grunt

Wednesday, February 17, 2010

Keeping It Handy


Awhile back, I had a conversation with a well know real estate photographer. The subject of the 9/11 came up and he told me that his preparation for emergencies were some energy bars and a couple thousand dollars in cash.

Cash in its physical form does nothing. It is just money in suspended animation. It does generate interest when it is in bank accounts or marketable securities. The ROI is not much but the advantage is its liquid state.

Which brings me to this classic movie of the 1990's

NSFW for language.

One of my favorite quotes from that movie is from Clarence when his friend asks him why he is bringing a gun to a drug deal. It occurs near the end of the clip.

If there's one thing this last week has taught me, it's better to have a gun and not need it than to need a gun and not have it.

Clarence Worley

I am not promoting drug dealing or guns. However, if any of you are involved in either of those two subjects, that's your business and please keep it to yourself.

Right now cash is the gun. Any financial jam that we are now in, cash will solve it becasue credit sure as hell won't. We have countries like Greece that need a bailout and Iceland is now applying to the EU because their financial system is completely screwed.

Which begs the question, if you have a large amount of cash on hand and a mortgage, should you pay off your mortgage?

Honestly, it depends on your situation. But for argument's sake, let's say everything is secure in terms of employment, costs are under control and there is a reasonable rate on the mortgage. I'd be a little hesitant. First of all I am not a big fan of debt but we live in very uncertain times. I don't care what the experts say, whether we are in a recovery or depression, s**t is just bad.

That money used for the mortgage might be needed for something else that comes up. And even if you have perfect credit, loans are very, very hard to come by these days.

It all comes down to the basics, which is to look at the numbers. Can you survive making the monthly down payments? Would you breathe easier without the debt or without the cash at hand? What are your options if you need cash but there is none available.

I'll be the first to say that I hate any debt. Mortgages, credit card and student loans are on my hit list. I am all about the clean slate. But sometimes a clean slate will just clean you out.