Ask Money

From India: what to do?

Chris Farrell Nov 13, 2008

Question: We are currently relocated for a year in Bangalore, India with a July 2009 date to come home. My husband is an IT consultant who has a retailer for a client so in naturally worried about a job when we return to America. The company gave no raises this year but we did receive a $7-8,000 bonus. My husband and I have started to discuss what to do with it–pay down the mortgage or invest in non-ira stocks to have some cash savings?

We have no other debt except a home mortgage and a vacation home mortgage and we have solid retirement investments (although these economic times are hard on the mutual funds and blood pressure!) plus a non-retirement money market account. We will save money by being an expat as many of our costs in India are picked up by the company. We have three children, the oldest is 13 and youngest is 9 so there will be some college costs coming up in the next 5 years.

We have discussed other forms of investment–do you invest in a business, or buy more property? Is there a more creative way to invest the money or is it better to “keep it simple stupid” approach? We have always valued you advice and was wondering what your thoughts are. Thank you, Monica, Bangalore, India

Answer: It must be a fascinating to live in India at this time. The economies of the U.S. and India are closely intertwined, and American companies have spent billions in investment dollars expanding in India since 2000, transforming urban centers. More recently, a number of Indian companies went on a global corporate buying spree. But now the global economic crisis is hitting the Asian giant hard.

Anyway, on to your personal finance question. Yes, as you know, I am a big believer in the KISS approach–keep it simple, stupid. I also believe in seizing an opportunity when it comes along. Right now, as you say, you have a unique opportunity to truly build up savings because you’re living the ex-pat life. Take advantage of it. If it were me, I would stash away as much money as possible into safe investments that would preserve the value of your capital while making you a bit of money. Of course, none of these investments, such as Treasury bills and FDIC insured CDs, are very exciting.

Your new-found savings stash can do double duty when you come back. First, it’s your safety money in case it is hard to find a job. It buys you or your husband or both of you time to look for a good job. But, let’s say that you come back with jobs waiting for you. Then the savings is your opportunity fund. It’s a safe bet that over the next several years those households with cash will have the ability to snap up bargains. You can also use the money to help out with college if that turns out to be the best use of the savings.

That’s why I would recommend primarily focusing on increasing your cash savings. I think you are in a wonderful position. If you want to have some fun, put a slice of money into an equity index fund on the theory that the stock market will rebound at some point. Or you could take that slice of money and put it into a 529 college savings plan.

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