We put the first iteration of a savings plan in place.  Our goal: Save $160,000 in cash, without shirking our other responsibilities.  The money we made toiling away at work would flow in and out as follows: (1) Contribute the maximum available to our 401k savings plans at work; (2) Pay the minimum payments for mortgage, school loan payment; (3) Pay for normal living expenses like food, utilities, car insurance, gas (3) Start an automatic investment account specific for sailing, and put all extra money each month in there.  We reviewed our typical spending habits spreadsheet that we had been keeping since 2004, we reviewed our take-home income, and then estimated the number that we had left over every month.  We set up an automatic withdrawal to take 100% of our leftovers directly out of our bank account at the end of every month and put it in a no load, large cap, growth index fund.  Easy peasy.  Done.  I metaphorically brushed my two palms together, job completed.  That wasn’t so hard, was it?  And we went about our business.

Six months later…

One day in October of 2007, I started my drive home from the office. The Vegas heat had just let up and the month of perfect 70 degree days began.  I opened the sunroof on my trusty and reliable 2000 Honda Civic and let the perfect temperatures muss up my hair.  I popped the button on my radio, ready to listen to Kai Ryssdal on Marketplace give me the economic news updates for the day.  I smile a little bit as “We are in the Money” starts to play.  This is Marketplace’s indicator that the market is up today.  Kai announces the Dow hit over 14000, then introduces his first guest.  

“The thing is, Kai, the market just keeps going up and up, despite the looming housing bubble on the horizon….”  

housing bubble....housing bubble……………………………………….housing bubble?

My brain thumbed through its filing cabinet to see what it had available for reference.  It returned to me empty handed.

When I was a kid, my parents loved to watch Louis Rukeyser talk about the economy on PBS.  While usually, my sister and I had free rule of the downstairs living room, on Friday nights the parents took over, kicked us out, and watched an old guy with grey hair and a suit blather on and on about “the market.”  I never participated, and instead whined incessantly about the fact that my parents had taken over my little corner of the world. Couldn’t they watch Mr. Rukeyser on the TV In their bedroom?  (...such a brat.)

In high school, I had odd jobs to earn my spending money.  Lawn mowing for my two grandmothers and my great aunt, coaching a few kids at softball.  In college, I was a Mad Scientist for a stint, worked as a clerk for a legislator, had a retail job at Dillards, and worked as a clerk filing papers at the Securities and Exchange Commission.  I went to school, did my jobs, then spent my money on food, clothes, gas for my car and midnight runs to get soft serve frozen yogurt at the Maverick Gas Station. I never bothered to learn about the economy.  I remember hearing about the ".com bubble" and I knew it annoyed people, but I didn't have any real concept of what a bubble might be about. 

So, when I heard the words "housing bubble" while driving to my new house in a suburb of Las Vegas where housing prices had been climbing 30%+ per year, with waiting lists, investors and flippers who were carrying around books like Rich Dad, Poor Dad...I thought: "well that sounds ominous."  And I carried on.

What else could I have done at this point? Besides, not to worry!  We have good jobs and a savings plan in place! Even if the housing bubble burst, we have some savings, right?

It did not occur to me that should the housing bubble burst, the stock market (and therefore my savings) would follow, and the employment market would fall right after that.  It seems so naive now, but on the day the stock market hit 14000, we were owners of a home with zero equity, student and consumer debt, and every last penny of our savings fully invested in the stock market.  We had exactly $0.00 in any liquid cash emergency fund.

Doesn’t that sound ominous?