Funny about Money

The only thing necessary for the triumph of evil is for good men to do nothing. ―Edmund Burke

The Prepper’s Economic Guide to 2018

Now we’re all prepared for the next big disaster to descend on us, right?

Well, maybe not so much…at Coffee with a Cop last week, I did win a first-aid kit for the car. But that’s about as far as I’ve gone in the emergency-preparedness department. At least I’ll have a few band-aids, anyway, come the Apocalypse. {sigh}

However, there is something y-cumen in that we can prepare ourselves for, and it’s a lot more likely to happen than a Korean bomb dropping on our heads or a wildfire consuming Philadelphia.

Videlicet: let us speak of the next Great Recession.

Now, just as we’re having fun? Yeah: now.

We do know that what goes up must come down. As Leo Abruzzese, The Economist’s public policy consultant, notes in a prognostication for 2018, “If it [history] is any guide (and it is), the business cycle is coming to an end. The world economy tends to tip into a recession every eight to ten years, and the last one ended in 2009.” Further, he adds, “Recessions typically start when central banks, eager to keep economies in check, raise interest rates too far and too fast. On cue, America’s Federal Reserve will probably raise rates three times in 2018 after three increases in 2017.”

Higher interest rates, Abruzzese goes on to explain, “foretell an end to credit cycles as indebted companies and consumers default in greater numbers. . . . [They] can also produce big corrections in stockmarkets.”

If you’re a legacy follower of Funny about Money, words like these no doubt make you think been there, done that. And yup: we sure have.

Given that economies, like everything else, go up and down; that ours is now way up; and that anyone who can remember the Reagan administration and the Bush fiasco has, by now, figured out that the Republicans’ trickle-down economics dogma is a dangerous superstition, it behooves us to be prepared for the next big economic crash. That, I submit, is a lot more likely than a nuclear hit upside the head from Kim Jung Un or a hurricane in your living room (enjoyed by our friends at Planting Our Pennies) or a wildfire cresting the nearby hills (equally enjoyed by our favorite escapee from Chicago).

What can we do to prepare ourselves for the next “Great Recession”? One that, we can be pretty sure, is likely to fall under the heading of “Major Depression”…

Now is the time, IMHO, to look back on the G.R. and think about what we did right and what we did wrong. Consider these strategies:

1. Get out of debt! In other words…

Get out of debt!

Get out of debt!!

GET OUT OF DEBT!!!

Pay off your loans as fast as you can. And do not rack up any new debt.

If you have cash with which to pay off a mortgage, use it. Do it! Your financial adviser will have a freaking kitten, because of course you are earning one helluva lot more in the stock market just now than you’re paying on one of the present low-rate mortgages. My guy was furious.

But lemme tellya: If I hadn’t paid off the mortgage when I had the money, after I lost my job in 2009 (permanently, folks: “retirement” was not my choice), I would have lost my home. There is no way on God’s Green Earth I could have made payments on a home loan that amounted to 80% of $232,000. I’d have been thrown out on the street…like my neighbor across the road, like my middle-aged students who had worked hard all their adult lives and paid their bills every month, and maybe even like some of you. The only reason I’m writing this from my living room rather than from a low-income apartment, a motel room, or the 7th Avenue Underpass is that the house was paid for when the sh!t hit the fan.

Pay off all your other debts. Accelerate payments on your car. Do not buy a new car, or if you must replace a vehicle, buy one seriously second-hand. Accelerate payments on your credit cards, and once you have those cards paid off, NEVER charge more than you can pay in one month. If you couldn’t pay for it in cash or with a check today, just do without it until you can.

This takes some self-discipline. Probably the most direct and easiest way to summon that self-discipline is to manually keep track of your charging, as you go. Enter “pay off credit card” in Funny’s search bar (on the right side of the page) and you’ll find a slew of  suggestions for climbing out from under debt.

2. Save. Save regularly.

Establish a savings account at your bank or credit union and pre-pay yourself a percentage of each paycheck. If, for example, your goal is to save 5% of income for emergencies, arrange for the bank to make an automatic transfer on every payday.

Do not spend this emergency fund on anything other than a real emergency. It’s not a Christmas fund or a vacation fund. It’s a disaster fund. Keep it that way.

3. Build frugal strategies

Consider the regularly recurring expenses that you can do away with, should the evil day come.

Cable TV
Expensive mobile phone plan
Frequent meals out
Amazon Prime
Fitness plans
Subscriptions

Look closely at your credit card and bank statements and consider: do we REALLY need to pay for that? Is there a cheaper alternative? Can we do without it altogether?

Even if you don’t want to cut back now, at least know what you can cut back on.

4. Create a potentially money-making side gig.

This can be a hobby while money is coming in the door. Still, a hobby that can be monetized is a potential life-saver. Even blogging brings in a few bucks a month. And consider that, over at Budgeting in the Fun Stuff, Crystal’s dog-sitting enterprise — originally a side gig of the first water — has now evolved into a growing, paying business.

Any activity that yields a service or a product is potentially a money-making concern. Consider what you can do, start doing it as a hobby, and know in advance how you could convert it to a business.

5. Think ahead.

You’ll have to figure that one out yourself. You know your circumstances. Review them all and think about how you can economize — whether now or in the future — and how you can best work to recession-proof your finances.

Do it now. Let’s not be caught by surprise this time.

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Author: funny

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3 Comments

  1. This is good advice for any circumstances and I’m already doing most of it. Sure wish I could put more money in savings right now, but I’m def making progress.

  2. All of this is exceedingly good advice.

    I have both a car payment and a mortgage. The car payment is 0% and goes till 9/2019 and the mortgage is on track to disappear at the end of 2020. So hopefully the apocalypse will wait till then to materialize 🙂

    That being said, if we can make it through 2018, at that point if the proverbial sh*t should hit the fan I could cash in stuff and pay off the mortgage and car loan and not be in too much pain.

    I do need to figure out how to get a side-gig though – time is scarce around here as it is!

    • If we have a year or two to prepare by stashing money in savings and reconsidering the investment strategy, that will be good…

      I was lucky when the last recession hit that I had about two years of living expenses in savings. But will say that a) I sure didn’t expect a state job to go away (unheard of, in these parts) nor did I realize that at 64 it would have been nearly impossible for me to get someone to hire me even if the economy were rolling right along.