Eonomic Survival

Does anyone know of online sources about economic survival : what to do in a recession or depression ? How do you manage finances in high inflation and such ?

Thanks

I don't think too much of economic advice, worrying about such things only seems to distract me from what is important. My whole economic objective centers around getting someone to pay me enough to cover the costs of my life and my portion of the lives of 30 million + deadbeats, invaders, fools, and foreign governments, which is damn near half of it anyways. By the time I pay all that, what's left isn't worth worrying too much about. I stick it in a 401k and maybe an IRA unless I want to have a vacation and pick the most moderately diversified spread that's available. Then I forget about it. In twenty years, if there's anything left, I might take an extended vacation, something I've heard called retirement. Though if I survive that I will have to go back to work just to have something to do.

If you have enough money that you need to worry about how it is invested, you have a lot more than I do, and I would be of no help to you.

Transfer some of your wealth into food that will keep long-term. The cost of a 6 month auto insurance policy in food will see you through some pretty tough times.

Don't invest in the dollar, the u.s. or its markets.

Ouch that hurt.

Tis the season for investing. Remember the #1 rule of investing...buy low and sell high. This downturn in the markets is a HUGE buying opportunity.

Hey Chisel,
Down here in the ATL, we have a local guy with a nationally syndicated radio talk show with all kinds of advice on "saving money and keeping you from getting ripped off"; a consumer advocate guy... Clark Howard.

His website is full of advice and other resources on all sorts of stuff (scams to avoid, money management, etc.) clarkhoward.com . Lots of notes and links and things. He's also big into travel deals...

I just know there is useful stuff in there for you. He's extremely thrifty and is always advocating "financial preparedness".

Good luck.

WARNING: FREE ADVICE

Only spend money on that which will make you money.

Recently I heard a very good assessment of economists:

If you put 10 Economists in a room to evaluate what happened during a given period you will get a thorough analysis of how and why the economic event took place. Put the same 10 in a room and ask them to predict what is going to happen and you will get 12 answers with 15 scenarios. (This may have been on the Clark Howard Show)

I would focus on access to your funds/resources. Not that you want to stuff your mattress full of Franklins, but like they say in the investment world: A diversified portfolio is the best route. Keep some cash on hand, some at arms reach in a bank/savings institution, and other funds invested in companies or markets you are comfortable putting your money into. How you diversify/allocate funds into these areas is up to your personal comfort level.

Be careful with thinking you have cash that is easily accessible when it is in a money market. Money market funds may have some problems in the near future. The paper in which these funds invest can include asset-backed securities, and if there is a default on paying what's due, then the money market fund would need to go after the property that secures the paper.

Managing finances always starts with spending less than you earn or have. Then it progresses to stocking up with what you think you'll need and what will work. Stored food, stored currency, and money in the bank ( perhaps in various forms) go a long way toward peace of mind in uncertain times. Even camping gear is rightly regarded as a resource for hard (really hard!) times.

How to do well in varying conditions is the topic of endless discussions and you have many choices of "style" in advice ranging from buying and stocking a bunker in Montana to day-trading your way to millions this very afternoon. Nobody knows for sure because nobody knows for sure what will actually happen.

I find that the writers featured on this site: http://www.financialsense.com/ provide a good variety of viewpoints though they are not very specific on what mix of investments to have.
They do provide perspective on what's happening that is much more thoughtful and fact-based than what you get from TV.

In fact, as a rule, you should ignore what you get from TV because it might be disinformation and have resemblance to old time cowboys singing to the livestock as they rode around the restless herd at night....

Invest what you are comfortable losing.

Save what you can.

Stuff the mattress with some.

Stock up (no pun intended) on the essentials...especially toilet paper and duct tape.

When the market drops, everything's on sale. Unless you can sell at or near the peak, let any stocks that are going to survive ride.

+1 on the Clark Howard recommendation. Down-to-earth, usable advice.

As you do your research, remember the obvious – one size doesn't fit all. What works for me could be completely wrong for you and your circumstances. The first thing to do, regardless of the strategies you adopt, is to take stock of your own family's situation. Know on what and how much you're currently spending on a weekly/monthly/annual basis — with an eye towards "trimmable" expenditures. Sometimes an eye-opener.

These are pretty basic:

• How old are you? Close to retirement? If so, it might be prudent to adjust your 401k's investment mix to something more conservative. In my own case — retired for 5 years and 63 y/o — I'm more preservation- and income-oriented vs. 10 years ago when I was more risk/growth-oriented. Regardless of your age, you may feel like more conservative is the way to go for awhile.
• Do you have sufficient liquid emergency savings (other than long-term 401k-type) for unforeseen expenses or, say, huge increase in home heating costs?
• How's the debt load relative to your income? Lots of high-interest credit card debt? Might be wiser to take a discretionary, say, $2000 and payoff 12-18% interest rate credit card debt vs. putting that amount into a 4% money market (unless you have no other emergency savings).
• Are there optional monthly expenses that can be trimmed? Like the 300-channel top-tier cable package with high def, DVR and premium movie channels? Currently paying for home newspaper delivery when TV news and/or internet news sources will do? Back the end of '05, when I told my wife — the queen of gift-givers — how much "we" spent on gifts that year, even she gulped hard.
• Maybe teaming up with friends/neighbors/family to buy certain food items or other consumables in large bulk from Costco or similar (I admit to being a Costco junkie) and splitting the cost. Some stuff, modest savings; other stuff, big savings.
• Speaking of food, would a backyard garden be feasible?
• Would your employer/your job be vulnerable during an economic downturn, such that a job change to a more stable situation is advisable before things turn ugly?

Parting shot: Inflation is where everything becomes more valuable except money.

I try to play by a set of basic rules:
Spend less than you take in.
Live within your means.
If you can't afford to pay cash for something save until you can.
Avoid debt.
Use cash whenever possible.
Put something of each paycheck away as savings.
If you find yourself in debt pay it off ASAP. Even if it hurts.
Know the difference between a 'need' and a 'want'.
Don't keep up with the Joneses.
The Joneses are living large by living on debt.




Another one.

If you placed all the economists end-to-end they still wouldn't reach a conclusion.

Thank you all for the insights and links.

Although my retirement isnt that far away, I really dont have much money to invest in risky portfolios. I also spend very little on myself (e.g. I make/fix my own office furniture instead of buying). But I am not that strict when it comes to spending on the wife and kids.

Expanding our pantry is one of the strategies we have followed lately. We try to hunt for deals and so forth.

I will read and print useful stuff from clarkhoward.com and financialsense.

Thank you all.

Know the difference between a 'need' and a 'want'.


hehehehe

I know the difference so very well. This is why websites selling EDC stuff havent got much of my money, inspite of my drooling all the time.

I like to keep an eye on urbansurvival.com including the free daily update (especially).


to XBANKER: Excellent advice!!!

I am no expert, in fact I am a theorist mostly, but here goes:
Keep it as simple and diversified as you can and you can't go wrong. It is called a diverified portfolio for a reason. You do not want to invest in only one stock. You also do not want to put all your worth in one form. Invest in some things that have inherent value such as gold, silver, and platinum. Keep these things on-hand in a safe place, and a secret. The values of things that change independently of each other can be a great asset. Eliminate the middle man whenever possible. Why pay commission to a broker when you don't need a degree to broker? Buy when values (demand) are low and sell when values (demand) are high. Keep it as tangible or as liquid as you can. Maybe these are two different things, I'm not sure. An off-shore account in a powerful, neutral country might be a good idea in case TSHTF here in the US and the banks get commandeered or whatever it's called. I don't know.
In order to reap dividends, you must have some money invested in stock. Also, for local barter if the economy gets killed, you should have a supply of surplus consumables with as indefinite a shelf-life as possible, such as canned goods and ammunition. If you value it, so too will others. If others value it, so should you, and so have some to trade.
Another economic safegaurd to have, probably the most important one of all, is a basic, marketable skill that most people in today's world take for granted to the point that they would always rather pay for it, such as mechanic, electrician, and even gardener.

I also found this site

http://www.betterbudgeting.com/index.htm

That's what all the brokers try to tell you to save their own behinds. This market is nowhere near the bottom. It's on the verge of a long and ugly slide into the abyss.

Have you been through hard times? If not, it can seem scary.

I have, framed, a copy of my social security statement that they send you in the mail from time to time.

It accurately shows my Social Security wages for all the years that I've worked.

The reason it's framed is because in tax year 2000 I had a good - very good - working year.
By tax year 2002, through some statistical fluke, my social security earnings were EXACTLY 10% of what I made in 2000. It wasn't until 2005 that I got back to 50% of what I made in 2000, and it's only been in the last 2 years that I've gotten within 25% of my Y2K income.

There's a few things that I've learned having been through a few recessions (but never a depression, thank the great spirits).

First of all, don't use debt to buy anything that won't be worth more than you paid for it in 10 years.

For us, that means we can't buy a new car with debt, because we can't pay cash for it. If you think that old clunker is "too expensive" to fix up, or it's burning too much gas, look at it this way. You can buy a new car, and make payments on it, and spend FAR MORE in a year than even an engine replacement and tranny replacement on an old car.

Next - cash flow, cash flow, cash flow. It's so important to manage your cash flow.
This is a painful, miserable job, but you gotta do it. Keep track of what you spend. There's 2 ways to do it. a) Give yourself a cash allowance and when you're out of cash, you're broke. or b)Put everything on a charge card that you MUST pay every month.

Don't subscribe to anything - not television, not magazines, not newspapers, none of it. I like Tracfone because it's a simple, pay for what you use deal. No monthly charges.

Inflation Hedges
Inflation is horrible, worse than anything, because it makes saving miserable. There's not much you can to to avoid inflation, buying precious metals is a slight offset, but even that can be a less than great investment. One hedge you can do is to manage your commodity buying (fuel oil) with locked-in pricing, but that's not a long term solution and all futures contracts have a high negative risk.

In general, debt makes inflation worse, so the less you have the easier it is to manage.

The number one rule for investing is the same as the number one rule for gambling. NEVER use any money you can't afford to lose.
For a lot of us that is all we need to know about either.
The Sock

Good thread, sorry I missed it earlier. I'm one of those debt free guys; I have no loans outstanding. I pay off my credit card each month to keep the interest payments at $zero. I really hate monthly payments.

I've been thinking about getting a new truck; when I looked at the price of a new one in the same model, I realized that it would cost a significant chunk of savings and nothing would change. Then I'd have to fix it up to get the same capabilities of the truck I have. I'm considering getting a new/remanufactured engine and changing the clutch in my old truck. It would cost more than I could sell the truck for today, but it would cost much less than a new truck AND my taxes and insurance stay at the lower rate. I could easily get another 10 years out of it with no car payments and low taxes/insurance.

I hate mortgages. I did a spreadsheet a few years ago comparing tax write-off benefits of a mortgage, with the same funds going to a saving account and gaining interest. Suffice it to say that lowering your mortgage payments saves a huge amount of money. Pay off as much of your principle as early as you can to reduce your interest outlays. I have little pity for any of the folks who got caught up in the sub-prime debacle. There's no free lunch, so if something looks too good to be true, expect it to try and take a bite out of your ass. Now lending institutions are looking to get bailed out and folks are having their homes foreclosed. It's a tough situation all around, brought on by greed.

There's no way I could afford to buy the house I live in. Instead, I pay half my GF's mortgage as rent. She gets her principle paid off earlier and I don't pay increasing rent on the much smaller condo-apartment I was in before. It's better for both of us.

Other than that I live below my means, it keeps me cash-flow positive.

Old news to some — new to others:

Russ touches on an important point. Not only for the reason he cites, but incrementally prepaying one's home mortgage can be an important — and relatively painless — retirement-planning strategy. For most, a mortgage payment represents the single largest monthly expense. It follows that eliminating this expense before retirement is a good thing (unless you're one of those who believes that leveraging is a good thing ).

Hypothetical: $150K mortgage; 30-year term; 6.5% interest rate; P&I payment $948. Paying the equivalent of one extra payment a year by increasing the monthly payment $79 ($948 ÷ 12), the mortgage pays in-full in ~24 years ... ~6 years early ... and eliminating $~66.5K in payments. Increasing the monthly prepay to $150 pays off the mortgage 9 years early.

Use one of the on-line financial calculators to play with "what ifs."

Be sure to specify that the extra is to pay on the principal. Otherwise, they could split it between both interest & principal similar to another payment.

Some basics;

1. no debt. ( house to be the exception)
2. cash/ savings on hand for emergencies, job loss etc
(3. reduce monthly expenses)
4. carry insurance

tro

"4. carry insurance"

Insurance is good but keep the deductible as high as you can. The difference between a no-deductible policy and one with a high deductible is huge. Often enough of a difference to cover the higher deductible in a years worth of payments. Keep the amount of the deductible in an interest bearing account so your still covered.

Once you have the deductible covered further savings can be applied to further raise the deductible.

Beware of taking on debt through loans that require backing by insurance. Taking out a loan for a new car often requires an expensive and wasteful comprehensive insurance policy to protect the value of the loan. This can greatly increase the actual cost of a new car.

Used cars that are a few years old are often much better bargains. The lower price may allow you to pay cash and even if they are financed the required insurance can be much less costly. A double benefit.

How to Survive Hard Times
by Robert Wayne Atkins, P.E.

http://grandpappy.info/indexhar.htm

Excellent point Art. Especially significant with homeowner's insurance.

And speaking of homes, if your home loan carries an interest rate >7%, do an analysis to determine if a refinance would be cost effective. Choosing right lender obviously key, and closing costs need to be factored into the payback analysis, but a typical $200K balance @ 7% should reduce down to ~5.5%, with a ~$200 reduction in payment. Continuing with the original payment retires the loan in 21 years. Despite turmoil in the mortgage markets, if you're creditworthy, can still easily obtain a competitive mortgage.

Finally, with soft/declining RE values pretty much everywhere, look at your home's valuation on the tax rolls. If you bought your home within the last 3-4 years, quite possible you can file a (supported) request to have valuation marked to today's value, thus reducing property tax. I did it in California mid-90s, and dropped property tax by ~$400.

Thanks for the Grand Pappy link. Good stuff.

Another couple of small tips: Contemplate what your paying for 'convenience'.

A coworker would drop by a coffee shop every day before work. Her typical cost was something like $4 for a fancy coffee and $2.50 for a pastry. Five days a week and four weeks a month she spends $130 a month.

An alternative would be to get coffee and the danish at home. Set her coffee machine to start brewing before she gets up and keep pastries on hand the total cost is about $1.50 Or about $30. Saving a smooth $100 every month.

I started bringing my lunch instead of eating out. The difference is about $20 a week or $80 a month.


Look at those cable bills. Used to be you got something for $20. Now most are well over $50 a month for 45 channels of 'nothing on'.

Ask around and see what channels you can get if you have an antenna. Digital TV may provide a good picture even with poor reception. Even if you only get a couple of channels what are you really missing?

I had cable and went to an antenna. I still see most of my favorite shows and I fill in the difference with movies I get free from the county library and the internet. The antenna, amplifier and cables cost about $100. The cost of two months cable. Now I save $50 a month and have for several years.


When running a computer there are a lot of good free programs:

Only a fool would go on the internet without a firewall, anti-virus and an ad-ware remover and pop-up blocker. But why pay money if you don't have to.

One of the better firewalls is Zone Alarm and it's free for personal use. Lavasoft's Ad-Aware is an effective mal-ware remover that is entirely free. Spybot-Search and Destroy is a combined anti-virus and malware remover that is free. Spyware Blaster, an immunity type unit, is another and is also free. For anti-virus AVG is well rated and it is entirely free.

Browsers: Firefox and Opera are free and more secure than IE.

Operating systems: There are many Linux based OSs out there for free. Ubuntu is entirely open sourced and is well supported.

Open Office has many features in common with MS Office. Difference is that it is both more secure and it's free.


A neighbor used to spend $50 a month for a gym membership. He took a few months worth of that membership and invested in some free weights and a stationary bicycle and started walking around the block for exercise. Because the gym is in his home both he and his wife exercise far more often. They are thinking of getting more equipment and because they haven't paid for a gym membership in over a year they can afford to.


Saving money is always good and it is hard to beat free.

Save those nickels because even though each of these suggestions is only a small gain of maybe $20 to $50 the difference between financial security and being in debt is often a matter of a few dollars a month. Every little bit helps.