Thursday, January 10, 2019

Financial Preparedness for What is to Come

We may be facing difficult economic times very soon. Or it may be a few years off. Either way, there will be another economic downturn. There always is. When it happens, it will be especially difficult for the folks who are living paycheck to paycheck (that's most of us), in debt up to their eyeballs and with little or no savings. Debt – whether personal, business or government – is bad. It creates stress and makes one much more vulnerable to economic downturns.

Financial preparedness requires eliminating consumer debt – credit cards, car loans, payday loans, personal loans and installment plans. This will mean you have to put yourself on a budget and stick with it. It will probably mean putting off major purchases, avoiding impulse purchases and denying yourself luxury items. It may mean taking bag lunches to work. It may mean selling your new car to get out of the loan, replacing it with an older model without payments. It may mean having a major yard sale to raise some money. It may even mean taking on a second job. It will take some sacrifice to eliminate debt in your life, but the benefits will be more than worth it.

Building some emergency savings will have to be done at the same time. Yard sales are a great way to bring in extra cash to do this. So is a second job in the evenings or on the weekends. Put the money somewhere safe, such as an insured CD or money market account in a stable bank or credit union (do your own homework or check with several companies that offer ratings on the soundness and safety of various financial institutions). Don’t worry about getting top interest. Safety and liquidity is your goal for your emergency savings, not growth.

Once your debt is paid off and you have accumulated some emergency savings, then you can then turn your attention to saving for long-range goals such as the purchase of a new car, a new home, or retirement. Use common sense, avoid overly-risky investments and seek professional advice of someone you can trust.

No investment is perfectly safe. Cash savings are subject to losing value to inflation. Stocks and mutual funds are subject to the ups and downs of the market. Land is subject to property taxes and eminent domain. Converting all your money to gold & silver and burying it in the backyard is subject to thieves. There are no guarantees in life. The best you can do is use reason & common sense, to remain vigilant and to take responsibility for ensuring your own future.

The single most important thing you can do now to survive any future chaos is to start taking responsibility for your own life.

Get back to the financial basics. Make sure you are spending less than you earn. Avoid taking on any new debt - don't use credit cards, payday loans or installment payment plans of any type. Pay cash or make do without. Build some emergency savings. Get on a budget or spending plan and stick to it. Avoid impulse purchases. Scale back your lifestyle sharply. Find the best bargains by doing comparison shopping, use shopping lists, clip coupons.

Why pay off debt if we are headed towards high inflation? It may be true that by waiting to pay off debt, you will be paying it off with cheaper dollars. However, there are other considerations. For one, debt puts you, your family and your assets at risk. Pay off your debts now while you are employed and you run less risk of losing your home or other assets if you become unemployed later. Besides, deflation may be in the future if things go a certain way. Or, even worse, a period where we experience both deflation (of major assets such as homes, land, vehicles because people simply can't afford them) and inflation (of food and everyday items that we must have at any cost) at the same time.

Debt can also be very stressful, especially in difficult times, which can be a real detriment to your health and your ability to make calm decisions at a time when you most need both.

Another reason is that debt can shackle you to your current job and circumstances, when what is really needed in bad times is freedom and flexibility.

Finally, people tend not to realize how fast interest, late fees and other penalties can add up. You may be paying off your debt later with cheaper dollars, but still be paying more in real terms because of all the added interest and penalties.

Taming the Family Budget, or How to Afford to Pay of Debt and Build Savings 

When I was a small child (the 1970s) the only telecommunications expense my family, most families, had was the telephone, and that was a land line, of course. TV programs were free over-the-air, and there was no Internet. Today, many families pay for a land line, multiple cell phones, special ringtones, cable or satellite TV subscriptions, extra movie channels, Internet connections, gaming and movie subscriptions (Netflix, Hulu, etc.), special apps for their $500 (or more) smart phones, even satellite radio subscriptions. For most families major savings can be found in this budget category.

Do you really need a smart phone? Do you really need the absolute latest (and most expensive) version of your smart phone? I have a regular cell phone myself, but it is the basic model that only cost me $19.99 (and I didn't have to commit to a plan). I can text and make phone calls on my cheap phone as easily as you can on your smart phone. A cell phone may be a necessity for many today, but all the expensive bells and whistles are luxuries you probably can do without.

We have allowed them to make us addicted to our smart phones and other electronic devices. Maybe its time to overcome our addictions and spend our money on getting ready for the future instead of funding those million-dollar bonuses of telecom executives. 

The same thing goes for cable or satellite TV. Do you really need to have all the movie channels? Do you really need all the HD channels? Do you really need the expanded package with all the sports channels and all the music channels? Or can you get by just fine with the much less expensive basic package?

Or better yet, do away with TV altogether. Radical idea, but somehow humanity survived for thousands of years before TV, so technically it is possible. 

Reduce your entertainment expenses. We may hate denying ourselves, but entertainment is a purely optional budget expense. Eliminate it. Learn (or re-learn) how to have a good time for free or nearly free. Start a family game night. Play with your kids in the backyard. Invite friends over for a weekend cook-out or a movie night (with the DVD checked out from your local library for free). Next week they can invite you over.

Read a book (checked out from the library for free, of course) instead of going to a movie. Libraries are a wonderful source of free entertainment. In addition to books and magazines, many libraries today also offer audio books, movies on DVD, music CDs and even board games that you can check out. Many have story times for young children and lecture series for adults you can attend for free.

Give up the vacation away from home this year. Instead of heading for the beach or Disneyland or wherever, stay home. Spend a week visiting local museums, zoos, botanical gardens, historical sites, parks or wildlife refuges. Go on a picnic or nature hike. Go fishing at a local lake. Play Frisbee with your kids in the backyard. Or just relax at home, thinking of all the money you are saving.

Reduce you home energy use. Turn off lights, TVs and electronics whenever you leave a room. Set your thermostat to conserve energy. Consider replace old appliances with new, energy-efficient models. Super-insulate your house. Consider installing energy efficient windows. Many power companies offer free or low-cost home energy audits for their customers, which can identify weak points in your home's insulation and other energy wasters, along with advice to reduce your energy use. 

Related Articles:

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Friday, January 4, 2019

The Skills You Really Need to Survive in Good Times and Bad

This list is not the typical list of wilderness survival and bushcraft skills that will enable you to survive should you ever live through a plane crash only to get stranded on a deserted island for years. Rather, it is a list of real-world skills that will prove extremely useful not only in a future of economic and political chaos, but in everyday life should TEOTWAWKI not happen anytime soon.

1) Situational Awareness and the OODA Loop - Situational awareness is more than just paying attention to what is going on around you, though that is an important start. It also means both knowing what to look for, and how to assess (make decisions about) your surroundings.

The end goal for situational awareness is correct action. The bridge from simply paying attention to taking correct action is the OODA-Loop. OODA Loop is an acronym for Observe, Orient, Decide, and Act. The Loop aspect is that one should be constantly looping through OODA since situations and circumstances change constantly. For a fuller explaination of this skill, please see my article on Situational Awareness and the OODA Loop.

2) Know how to be a "Gray Man" - The gray man knows how to fit in with his city, especially among his neighbors and co-workers. He doesn't stand out as anything particularly special or noticeable. He and his house, vehicle, and family blend in with their community. They look and act like they belong, and don't draw unnecessary or unwanted attention.

3) Know how to not look like a victim - This is somewhat similar to being the gray man, but not exactly. Don't make yourself a target by wearing expensive, flashy clothes, jewelry & accessories, or driving an expensive car. Don't make yourself a target by appearing easy prey - wear practical clothes and shoes, pay attention to your surroundings, and walk confidently, head up. Don't bury yourself in your smart phone or IPod. Practice situational awareness and the OODA Loop.

4) Self-Defense - This is the "guns and ammo" skill set, but it is so much more than just guns and ammo. Self-defense starts with awareness (see #1 above). The next step is avoiding trouble whenever possible (see #3 above, as well as my recent article Strategies for Surviving a Riot). Also, know and avoid the bad neighborhoods and potential trouble spots in your area.  

Hardening your home is also wise. Putting up fences, installing steel security doors, and increasing external lighting (perhaps motion sensitive) are great ideas. Consider a security system or a doorbell with camera and monitor. Another option is a multi-camera CCTV system with DVR recorder, which can be had for under $200 (here's one such system on Amazon).

I do recommend that most folks own and learn how to use guns, and to carry on an everyday basis if you can legally do so (know and follow the laws in your area). Don't just target shoot at the range, you need to take a good self-defense firearms training course. Consult with your local gun dealer - they will be able to guide you to appropriate courses, and make you aware of local gun laws. 

5) Protect your privacy.  Identity theft is a tens-of-billions of dollars industry in the US alone. And government intrusiveness into our private lives knows no bounds. Learn how not to be a victim. Guard your personal records - driver's license & Social Security numbers, banking & financial information, medical records, etc. - as carefully and diligently as you guard your gold & silver. 

Be especially vigilant with your computer. At a minimum, always use a firewall, maintain an up-to-date anti-virus program, and regularly scrub your computer with one or more anti-spyware programs. Only do business online with well-established companies you know and trust. Avoid over-sharing on social media.

Talk to your children about the importance of privacy, and what they should and should not share with their friends, teachers, and other people. 

6) Budgeting & Personal Finance - Prepping can be expensive. And even if a complete economic collapse does happen, we need to be able to pay our bills until then. Having the ability to make, and stick to, a budget or spending plan is essential. Personal finance is a skill set too often overlooked, in my opinion.

We all know the basics we should be doing financially. Spend less than you make. Get on a budget or spending plan. Avoid new debt. Pay off old debt. Reduce your expenses. Build some emergency savings. Get adequate insurance with a financially sound company. Plan for future expenses. Know how to invest intelligently. Improve your job skills and make yourself more employable (see #7 below).

All much easier said than done. Here are some articles of mine to help you get started:

7) Employability - The ability to make a living, working for yourself or someone else, is absolutely key to future survival. To make a living, you have to have the skills needed to convince someone to pay you to work for them directly as an employee of theirs. Or, to convince them to pay you for the goods or services you provide if you are self-employed. The ability to sell will always be important, as will the ability to negotiate. 

Having the ability to make, repair, or do something useful is crucial. Learn a trade, in addition to professional skills. Have a back-up career in mind. Have a hobby that could be turned into a business if needed. Soft skills - good work ethic, positive attitude, good communication skills, the ability to get along with co-workers, time-management, etc. - are more important than many people realize. Work on improving them. Take some classes at a local community college. Brush up on your computer skills. Learn bookkeeping/accounting. Learn Spanish for the workplace. The more you know, the more employable you will be.

Check out these articles:

8) Self-Reliance/DIY -  Take responsibility for your own life and success. Your company isn’t going to protect you. The government is going to take care of you. You family and friends have enough problems of their own. Don't wait around for the government, your parents or anyone else to help you. Don't sit around whining that life is unfair, or that someone else has it so much better than you. Learn to take care of yourself. Self-reliance is not anti-social or selfish. In fact, building self-reliance may be one of the most generous things you can do, because the reality is that you will be of little help to your family, friends & neighbors if you are the one in need of help. 

A major part of building self-reliance is gaining knowledge, learning skills and taking responsibility for your own life. The more you know, the more you are able to do and the more you are actually willing to do for yourself, the better off you will be

9) Healthy Living - Being healthy is important to our ability to prepare for and handle emergencies. More than that, our healthcare system is an expensive mess, and will only get messier and more expensive in the future. Getting sick can ruin a person financially and destroy even the best-laid plans. 

Under the broad skill category of healthy living, I include eating right, getting and staying fit, avoiding getting sick, and knowing first aid and CPR. Also, being aware of alternative medicine to promote wellness and healing will become increasingly important as expenses rise and traditional medical treatment becomes rationed. We also need to address any addictions we have now (smoking, abusing drugs or alcohol, etc.) before any SHTF event.

10) Mobility - Naturally, this includes "bugging out" to a safer location should your present home become too unsafe. Knowing where you are going (your bug-out location, and a back-up location or two) and when you'll go is important. Being ready to go means a packed bug-out or INCH bag. It means knowing what else to grab and stuff into your vehicle if you have time. And it means having a vehicle in good condition when its time to go. An emergency is not the time to have to deal with a flat tire, bad transmission, or worn-out brakes. All this stuff needs to be planned out ahead of time!

But, mobility might also mean being ready to move to a new location in order to follow job opportunities and other considerations. If the economy slowly gets worse (or suddenly falls of a cliff), you might have to move in order to make a living, or just to find a safer place to live. A possible viable alternative is to adopt a gypsy-like lifestyle, emphasizing the ability to escape danger and follow opportunity. Just something else to think about. See my article Gypsy Survival - A Different Prepper Strategy for more on this idea. 

Bonus Skill: A Second Language - Like it or not, we are living in a much more global society these days, and borders are becoming a quaint, old-fashioned idea if the progressives get their way. Knowing a second language (or even a third) will become an increasingly valuable skill to have. Being able to communicate in multiple languages will help you in your everyday life, and will even help make you more employable. For most English-speaking Americans, Spanish is the obvious second-language to learn. However, your chosen career field or other circumstances may dictate a different choice for you.

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