I'm relatively new at investigating all this y2k stuff (about 2 months now). And I'm convinced of the need to prepare for food shortages and electrical outages. But if y2k creates serious havoc, and millions of people lose their jobs, what bank is going to foreclose on all of the defaulting mortgage holders? And where would all those people go assuming they were foreclosed upon? In general, I think it's a good idea to be debt free, but I would rather use my available cash to build a food supply and buy some extra blankets. And if inflation runs wild, wouldn't I be better off? I'm open to your comments! Thanks. Seth

-- Seth Townsend (javaseth@aol.com), August 10, 1998

Answers

I wouldn't pay my mortgage off. If you have to flee from your home and won't be able to return to it, it is of no use or value to you. I think it is good idea to have vehicles paid off and credit cards if you have the extra cash. If you have a large sum of equity in your home, consider taking out a second or a line of credit to pay off debts and start buying food for storage. If inflation runs wild (which is what I think will happen), use your extra cash to purchase items that you can barter with, like cases of pork n' beans (I bought several cases for $6.00/case), ammo such as .22LR, sugar, coffee, items that are imported and will be hard to obtain. Hit flea markets and garage sales and purchase camp stoves and lanterns. I find them all the time for $8.00. Purchase several gallons of extra fuel. When I buy, I picture it as being on a camping trip and not being able to go to the store. What are the things you will need to surive if you can't purchase them? Good Luck.

-- bardou (Bardou@baloney.com), August 10, 1998.

Seth,

Ditto on most of Bardou's thoughts. I am not convinced of runaway inflation, however. If electronic banking goes down the tubes, and money is limited to the cash in circulation, that would lead to deflation of the price of goods in relation to the small amount of money available to purchase those goods.

That said, perhaps a lack of goods AND cash would balance out, goods and cash inflating or deflating roughly in sync.

As to your question about millions of foreclosures, that situation would crash the value of your real estate, you would have dumped valuable money down the drain, money that could be used to re-negotiate the balance owed to the lender.

In other words, suppose your home is worth $100,000 with a mortgage balance of $50,000. In a situation of mass nonpayment of notes and high foreclosures, lets say that home drops in value to $40,000. That would mean that even if the lender could resell your foreclosed home they would expect to lose at least $10,000. That would be an exellent time to ask "Rather than me walk away from my now essentially worthless home, would you consider taking payments on a mortgage of $35,000? (Feel free to use your own numbers in this example) At the same time you would not have wasted $50,000 paying off a home worth much less than before. Should the lender balk, you would have the cash to buy somewhere else, and the opportunity to negotiate with somebody more agreeable to your hardball tactics.

That is just a thought, and I'm sure the various sharp minds on this forum will be able to show me any faulty logic in my thinking, as none of the posters here are shy about pointing out dumb-ass ideas. ;-)

-- Uncle Deedah (oncebitten@twiceshy.com), August 10, 1998.

I agree with Bardou and Deedah! Paying of the mortgage is a waste. We refinanced to a longer mortgage so our payments would be less and lumped all the other payments(cars) with it, saving about $600 per month. We are using that to prepare for Y2K. If the shit don't splatter, we'll pay the sucker off !! :) Peace of mind helps us sleep better!

-- Dave (dave22@concentric.net), August 10, 1998.