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Shoving Your Money Under Your (Bank's) Mattress

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We've all the heard the story of the man who kept his savings hidden under his mattress at home. "Ha, ha," we all think. I'd never do that. First of all, it's not safe: what if someone robbed the house? But second and more importantly: that money is just sitting there, doing nothing. Not even earning interest. The sensible thing is to have that money somewhere safe, like a nice savings or even a money market account.

Which, sad to say these days, is really not much different than shoving your money under a mattress. Even worse, it's not your mattress: it's the bank's mattress. There your money lays, wasting away as climbing inflation turns it to dust. Or at least whatever dust is worth. How much is that, exactly?

We've all been part of the conversation about what a terrible two years it's been. Banks have been bailed out by the federal government, and some have failed altogether. The markets took a nosedive in 2009, with estimated loses in the early part of the year of more than $3 trillion dollars in lost wealth. Let's not talk about the drop in the real estate market brought on by the failure of certain toxic mortgage backed-securities, which in turn resulted in the global credit collapse. It may seem like the 1st Bank of Under-The-Futon is the safest place to be right now.

But consider this. In 1958, the US Consumer Price Index (CPI) was 28.90. By 2008, that number had risen to 215.30. What would have cost us $28.90 half a century ago would now cost $215.30. Generally, the CPI rises about three percent a year. What that means is that, if your money is earning a rate of return of three percent interest a year, it is retaining its same value from year to year. Your dollar saved is still worth a dollar the next year. Anything less and your money is actually disappearing.

So what exactly are the so-called "safe" investments offering in terms of returns? A one year CD will get you anywhere from one to two percent. Maybe that's why I've heard them called "cash disappearance" certificates. A one-year T-bill offered 0.36 percent as of December 18! If these are your ideas of investment, let me be straight with you: you need a new plan, a new conversation, because right now you are shoving your money under the financial equivalent of a mattress. I urge you to reset your thinking for 2010, and starting making money rather than losing it.

It's still a little scary out there, I know. Where should I look for those good rates of return? How can I turn my mattressed money into a cash machine?

1. Real Estate: this is news to most people, but the real estate market cycles. It goes up, then down, then up again: it always has, and it always will. As the population is growing, people will need land. Right now the price of land is at garage sale prices that will not be seen again for years. By now, sell high.

2. Bankrupt Businesses: the credit crunch and depression have driven many businesses into bankruptcy. Not because they were necessarily bad businesses, but because the owners didn't really understand the business conversation. Buy a business, and build yourself a cash machine better than any bank can offer.

3. Invest in Ideas: if you or someone in your family has a great idea for a new service or product, don't shove that under the mattress with the rest of your money. Get out there and make something of it. Find a coach who can help you turn that concept into cash.

4. Spot your Skills: what can you do that someone else would pay you to do? You have a skill, either a talent that you have developed or something that's been trained, that can become your new cash machine.

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