“Where should I put my money now?”

Vicki, Mark and I have been doing radio interviews all week to help promote Your Money or Your Life. One question we keep getting is “Where should I put my money now?” First of all, it’s important to remember that the primary message of the book is all about the importance of accumulating a nest egg and then putting it in conservative investments that can grow without too much risk. Given that context, here is what we’ve been suggesting listeners do with any spare cash they want to invest:

1. Pay off your debt. Who needs Bernard Madoff to take our money when we can just fleece ourselves by maxing out credit cards and only paying the minimum amount due each month? Research shows that those who pay just the minimum often end up paying two to three times the cost of the item in interest payments. Paying down loans can be a great way to triple your money.
2. Be sure to have the equivalent of at least six months of expenses available to you in some form of accessible cash (savings account, money market, etc). Savings is always smart, especially in lean times like these.
3. While the economy is in flux and no one yet knows where it will settle, it’s important to preserve your hard-earned capital. If you don’t want to just keep your cash in your mattress, then we recommend investing in CDs or Treasuries (even at 0% interest).
4. If your company matches your 401(k) contributions, continue to invest in the stock market. Depending upon your risk tolerance, you may choose to continue to invest in the market anyway since many experts believe that there are lots of undervalued stocks available right now.
5. If you have the need and the cash (or can arrange for 0% financing), consider investing in durable goods. The retail market is suffering, and well-made cars, washing machines, refrigerators, lawn mowers and the like are surprisingly affordable right now. As always, do the math — since in some cases used may be a better value than new.