Thursday, May 28, 2009

Having A Hard Time? ...some good advice ... From someone who has been there and done that!

How To Prepare For Hard Times

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If everyone is not asking this question right now, they should be. One thing we can be sure of is that hard times are ahead. The government is printing money like crazy, which will bring inflation. At the same time, people are losing jobs, so incomes are down. The hostile parts of the world seem to think the U.S. is weak now, and are showing signs of defiance and aggression. There could be war - many wars - in our future. Attacks on the U.S. may be more likely. The foolish will not prepare, but the wise will. But how? And who can best tell us? Probably 2 groups: those who have been there. And those with a good track record of dealing with disasters.

Personally, I have a few slender qualifications. I remember the Great Depression very well, and how many of us managed. And also the shortages and inflation of the following WWII years, and how we managed then. Also, my training as an economist gives some depth. As a former investor, I did duck out of the stock market just ahead of the last crash. And I did learn how to help some 5000 poor or homeless people move up, over 18 years of starting and running charities. Beyond that, I can only summarize some suggestions from some of the better experts out there. Here then, is my summary, for whatever use it may be:

1. Hold on to your savings!

If you are in the stock market through 401Ks or whatever, this is not a good time to be there. Stock market experts expect some bear-market "bounces" (translation: a very temporary uptick in the market). These are a good time to sell your equities. Bonds? Get some expert advice first. The U.S. is flooding the market with U.S. bonds, with world-wide effects. Could you lose money or pay penalties if you get out of your stock investments? You alone will have to decide whether it would be worth losing some in order to preserve any of your savings at all. There may not be many future opportunities to get out with at least some of your savings intact.

Where to re-invest? Banks (ordinary deposit banks, not investment banks) are insured by the government, up to $250,000 per account. They don't pay much interest, but your savings are safe. Bank CDs pay a bit more, and can be "laddered" (example: bought at times that will cause some of them to mature every month or quarter, etc.) for those who need to live on the interest. Gold coins are a good investment. Keep them in a bank deposit box, not at your home. Paper investments are a risk. Investment in commodities (but not real estate for the present) are not likely to become worth zero. Investments should be liquid (easily and quickly sold, or in cash or near-cash.)

2. Protect you and yours from theft and crime.

Police departments will be cut. Crimes will rise. In the Great Depression, crime rates stayed low. But that was because, compared to now, there was almost no crime before the Depression. Now, however, crime rates are already high. They can be expected to get worse. Tighten up your home security. Do not keep valuables there. You should have a gun, but only if you get trained in how to use it and to keep it safe. Train yourself and family in how to be safe personally, whether at home or away. Consider living in a small town if you can. Crime rates are usually much lower there.

3. Cut your spending severely.

Pretend you have lost your job, for instance. Then cut your spinding about in half. That is severe, but not nearly as severe as it would be if you actually lost your job! So pretend now and sock the money away. How? Maybe move to a much cheaper residence. It would help if there were room to have a vegetable garden, maybe some chickens. Maybe sell your new car and get a good older car. Sell your 2nd car. Arrange car pools, etc. Stop buying clothes. Stop buying almost everything! Entertain yourself at home.

Don't wait! The purpose of this is to start putting money away as soon as you can, in case you lose your job or have to take a pay cut. And if those don't get you, the coming inflation will mean your future income will not go as far. Start now!

Your new motto: "make do, patch it, mend it, fix it, use it up, wear it out." That was the Great Depression motto. It works. Clothes were passed from kid to kid, from family member to other family members. So were dishes, furniture, etc.

4. Get as much additional income as you can right now, while you still can. Right now it may be possible to get an extra job or sell services like yard care in addition to your main job. It will be hard on you, but later on, those extra jobs will be very scarce. And it will bring in more money for your to save.

5. If unemployed, take ANY JOB YOU CAN GET. Part-time, menial, anything that is not illegal, immoral or harmful to your health. Even if it does not pay enough to live on. You are better off with some money coming in than with zero money coming in. And you can always be looking out for better work, better deals. The important thing is to have at least some income. And you will feel better having at least some work.

6. Sell everything you can possibly do without. Sell it now, not later. Now there will be more people to buy, and at higher prices. Later on, when depression and inflation are worse, not so many. Try eBay, Craig's list, yard sales, garage sales, used books. Sock the money away.

7. Start a vegetable garden. And plant some fruit trees. This looks like a long depression, so you may have time to wait for them to start bearing fruit. During the Great Depression, most of the U.S. lived in towns of less than 5,000 people. There were many vegetable gardens. We had a big one in a vacant lot next door, shared with the family on the other side. We also had a tiny, 2-atory barn and barnyard, attached to a chicken house and chicken yard, at the back of the small lot of our rented house. (Most people did not own their homes then.) We kept a milk cow there and her calf. The annual calf was slaugtered and stored as cuts of beef for us by a freeze-locker business in town. We had about a gallon of fresh milk a day. My dad would stake the cow out, using a long rope, using a vacant lot as a pasture for her, before he left for work. He would bring her home when he came back at night. My sister and I turned the handle of the churn to make butter. We had plenty of fresh eggs, and chicken once a week. Surplus chickens were frozen as "fryers" (6 months old) in our commercial freeze-locker downtown. At that time, there were no home freezers, and very few electric refrigerators. We had an ice-box, built like a refrigerator but with an wooden door, and an ice man delivered blocks of ice for it. A tree in the back yard provided cherries. Mother canned surplus vegetables in jars. It all helped, and helped us stay healthy as well as well-fed.

8. Do all you can to protect your and your family's health. Most of us already know what to do. Eat right. Sleep enough. Exercise. Drop bad habits. No sweets (sugar means tooth cavities.) For most of us, lose weight. Read up on staying healthy. You won't be able to afford risking bad health.

9. Get out of debt and stay out. Don't borrow money. Close your credit cards. Buy only what you have cash-on-hand to pay for. Any debt you have increases your financial danger.

10. Get what good financial advice you can - carefully. When I invested in the stock market, I subscribed to a few stock market newsletters. The best one was from Martin Weiss. It was through his advice that I got out of the stock market just before the last crash. You may have seen him on TV or when he testifies before Congress, or have read his interviews in the Washington Post or Business Week. He was one of the few to predict this Meltdown and when it would happen accurately. He has a free newsletter as well as a subscription one, which I can recommend.* Also his new best-seller, "The Ultimate Depression Survival Guide " ** His credentials for giving disaster advice are excellent.


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