On March 1, I wrote a post entitled “The Most Important Financial Lesson?” which basically outlined that the most important financial thing to do is not lose money and since I wrote that post, Silicon Valley Bank went belly up and today New York Signature Bank has also gone belly up.
I suspect that 2023 is going to be a very rough year for all asset classes and perhaps it was fortuitous or karma expects me to give back some important lessons learned to the community so it’s time to hunker down and hope for the best but plan for the worst.
Today’s financial lesson centers around banking and saving. Here are some banking rules I live by…
Rule 1 – Don’t put all your precious money eggs in one basket. I have half a dozen bank accounts for a variety of reasons but the main one is to keep some money always available to me in the event a bank gets shutdown or there is fraudulent activity on the account and it gets frozen.
Rule 2 – Don’t put all your precious retirement money eggs in one brokerage firm. Just like banking, I have several brokerage firm accounts for different purposes: Roth IRA, IRA, 401k, etc. and while it’s a hassle to receive so many statements from different firms I do it so as to not keep all my eggs in one basket. This is a lesson that everyone should have learned from Bernie Madoff but you’d be surprised how many people still put all their eggs in one basket.
Rule 3 – Don’t borrow all your money from one firm. As a general rule, I don’t carry much debt but I do borrow via credit cards for all sorts of things including 0% balance transfers. The reason you don’t want to have just one bank that you borrow from is because you want banks competing for your business.
Rule 4 – Don’t fully trust any bank or firm. The website WolfStreet had a very interesting post about how Silicon Valley Bank had a Moody’s rating of A3 then a few days later went straight to Default. How can a rating go from excellent to crap over a couple of days? Trust no one with your money!
There are many more rules coming but that’s all for today. Keep your money safe!