Every now and again, I think of my father and his goal to earn back the substantial fortune his mother had squandered that her father, the 19th-century buffalo hunter, had accumulated in the process of clearing the Plains of Indians and wild livestock.
She herself was an Indian woman: Choctaw. If you happened to know that and you looked at my father closely, you’d realize “yup! Injun lad.”
Not surprisingly, she had no inkling of what money was or how to manage it.
When she refused to accede to her husband’s demand that she abort the unplanned, late-in-life pregnancy that produced my father, said grandfather(again!)-to-be climbed on his horse and trotted off into the Texas boondocks, never to seen alive by her again. Supposedly, he shot himself, but when you get into the facts of the story, it looks suspiciously like he was murdered by a guy who had been an inmate where he — the father — had been a prison guard.
WhatEVER…the whole drama essentially burned a brand into my father’s psyche. It produced an obsession:
He would earn back the entire sum that his mother had squandered: $100,000.
Today, that wouldn’t seem excessively difficult.
Hell, I’m worth three times that…and what am I? A freakin’ teacher!
In those days, though, a hundred grand was a LOT of money. By 1962 (when he tried to retire), it would have been something in excess of $300,000.
Understand: my father dropped out and joined the Navy a year or two before he finished high school, out in the Texas boondocks. So his target actually represented much, much more money and MUCH more work than he understood. In today’s dollars, it would come to $3,131,660.
Can you imagine? For a guy who doesn’t even have a high-school diploma…
Well, he did it. By dint of canny investment and a lucky choice of investment counselors, when I went off to college in 1962, he had his 100 grand in the bank, and he retired from his job with a pocketful of dollars.
That didn’t last long.
Remember: this was a guy who did not understand the first thing about economics.
By the time I graduated with a BA, we had hit a recession and his vast fortune went down the tubes. He panicked, packed his bags, and went back to sea, leaving my mother in Sun City…a hole in the middle of the Sonoran Desert into which to dump elderly folks.
That which he did not understand — the mechanics of inflation and deflation — eventually came to pass, and by the time he died he did have a pile of dollars to leave to me, despite having moved into a rapacious old-folkerie.
All very nice…but the point to the story is that the workings of the larger economy have a much greater significance for the individual’s savings and retirement plan than most of us realize.
For one thing, you need to bear in mind that the absolute value of the dollar slips and slides over time. Sometimes, yes, over time the value goes up. But more likely, it will go down…and down…and down. By the time you’re ready to retire, a hundred grand will be worth….far from a hundred grand!
This implies, of course, that you need to inflate your savings goal by some extravagant factor if you are to arrive at a sum that can be expected to support you through your dotage. Take the amount you think you need to live in retirement and multiply it by about 3: that will probably be the minimum you’ll need to have on hand when you finally quit your job.
Just back from a junket to Costco…and waypoints. Belief HAS officially been defied now….
The plan was to traipse up to Costco in search of the usual bargain on gasoline. CC routinely underprices every gas retailer within several miles of a given store, right? While there, buy a few not-urgently-needed but nice-to-have grocery & household items, and also renew this year’s membership, which I’m told is officially running out.
Thank gawd they sell wine… That’s all i can say….. 8-o
Drive and drive and drive and drive and…every road in the goddamn city is under construction. Wherever you’re goin’ you really CAN’T get there from here. Arrive at the store north of the Great Desert University (WAY north…), which is about the same distance from here as the store in Paradise Valley but which, because of the relative penury of the surrounding populace (middle-middle class, not upper-middle-class and Richerati) will likely have a lower price on gas.
My membership is running out. Ask the lady at the entrance where to get it renewed; she says the easiest way is just to pay at checkout.
Ramble around the store ogling all the amazing eye-popping goods. Toss a bunch of stuff I don’t need into the cart. Make my way through the checkout line. Offer to pay for the membership renewal. She says I don’t have to do that now.
Yeah? Well…then why are they telling me to do that now? I figure she just doesn’t want to be bothered. Okkkayyyy….
Retrieve the Dog Chariot. Head for the gas pumps.
They’re mobbed.
But, being the canny type, I manage to slither into a line that has only three or four vehicles ahead of me.
Wait and wait and wait and wait, then wait and wait and wait and wait, and then wait some more.
FINALLY pull up to a gas pump.
Stick my Costco card in.Clickety hummedy click. Then stick my debit card in (Costco doesn’t accept AMEX credit cards)…and….
PLONK! Am told my cards are no good.
Annoyed, I stalk across the lot and retrieve the attendant.
No problemo! saith he.
He sticks my Costco card in. Clickety hummedy click. Then sticks my debit card in. And PLONK! We’re both told to take a flyer at the moon.
He proposes to hold up the ever-longer line with some sort of hoop jumps. I say f’geddaboutit! Because I happen to know the QT in Sunnyslop is charging the same rate Costco is.
Drive and drive and drive and drive and drive and dodge construction zones and drive and slip through a short-cut i know and drive and drive and finally arrive at the QT.
Whip up to an unoccupied(!!!!!) pump and…and…lo and sumbiche! Find the price is a bargain $5.21 a gallon — yea, verily: the same bargain price that Costco was charging!
Five. Dollars. And. Twenty-One. Cents. A. Gallon!!!!!!!!!!!
It cost THIRTY DOLLARS to refill that quarter of a tank.
CAN….YOU…IMAGINE?
Well, thought I crabbily.There go any ideas about a weekend in Prescott. Or maybe in Yarnell. Or, oh Helle’s belles, even in freakin’ Sun City!
Hmmmm…
Okay, so between you’n’me and the lamp-post, that is the LAST time I visit a Costco to buy (or attempt to buy) gasoline. We have not one but two QT’s practically within walking distance of the ’Hood. And since about half the time (or more), the main reason I go to a Costco is not to shop in the CC but to buy gasoline, that is gonna mean a WHOLE lot less of the Funny Farm’s budget will be spent at Costco stores. I may not even bother to renew my membership. Enough being enough, after all.
One is left wondering what this state of annoying affairs foreshadows for supplies of day-to-day cost-of-living goods: food, diapers, soda pop, motor oil, coffee, tea, toothpaste, shampoo, hot dogs, steak, broccoli…. If the cost of fuel has gone up THAT much across the board, then suppliers and marketers will have to raise their prices accordingly.
This probably is a good time to stock up on things like paper goods (a far better time than we saw in the last Great Paper Panic). And on nonperishable foods. And canned goods. And stuff that can be stored in a freezer.
Because…clearly grocery prices are headed for the stratosphere.
And if you garden? Well then, garden like crazy, my friend! I’m thinking I may build a raised garden in the backyard right now. A bunch of things — summer squash and peppers and tomatoes and if you have any skill even things like corn will grow now. Then, in Arizona an amazing variety of veggies and fruits grow in the fall and winter.
It’s never too late to learn the fine art of canning….
TODAYYYY….and tomorrow, and tomorrow, and tomorrow… So many changes are emitting from the covid-19 crisis, we can’t keep track of them. We can’t even keep count of the ones we already know about or anticipate.
This morning the pooch and I passed one of the affable gay gents who live at the corner of Feeder Street EW and Feeder NW, also walking his dogs. Small talk was exchanged, largely about the startling switch in weather, which dropped in a day from the 100s to the 80s. I remarked that people are already putting up their Hallowe’en decorations — and that Hallowe’en is my favorite holiday.
“Mine, too,” said he. But…as though we were on the same record groove, we just about sang in unison, “But I don’t think we’ll be participating this year.”
“Nope,” he added, “we’re not opening the door to whatever anyone on the other side is carrying.”
Hallowe’en devolves into a gigantic block party here. Everybody in the more threadbare neighborhoods surrounding the gentrifying ‘Hood trucks in their kids (no kidding: trucks, busses, vans, pickups!) and swoops up and down the streets, while the locals greet them from tables set up in the driveways. A great deal of eating, drinking, and costume-admiring takes place, and much fun is had by all.
If any of that happens this year, though, pretty clearly it won’t be much…
There’s been some talk around the’Hood about setting up tables in the park and just letting people come and take whatever they want. Not, possibly, the greatest idea…and it’s hard to see how that would eliminate the possibility of spreading the disease around.
So I think we’re all afraid that Hallowe’en, a cherished tradition, is about to be a thing of the past.
All across the country, people remark on how little traffic they see on the roads, even during rush hour.
Yesterday morning there were more drivers on the road than the last time I was out at that hour, but for 8:30 or so, it was far from normal rush-hour traffic. Inside the parking garage for the high-rise where the dentist resides, there were no more than half a dozen cars on the first floor. The place was effectively empty, most office types presumably working from home.
Then we have the disappearing restaurants…
Most restaurants that have managed to cling to life here are fast-food joints (where people drive through to pick up food) and places that have converted their sit-down business to pick-up or delivery. Many popular joints have just shut down. The venerable Carlos O’Brien’s, a favorite dispenser of gringo-Mexican chow (it’s white folks’ food — not the real stuff), is now a bull-dozed plot of dirt. We’re told a damnable QT will be stuck on that lot. QT’s, if you haven’t had the delight to find them in your parts, are like 7-11’s on steroids: overpriced gas pumps, junk food, and a corporate tradition of hosting every vagrant for miles around.
The loss of Carlos O’Brien’s is a huge setback for light commerce in the North Central area, where it has long been a favorite for business lunches and tourist dinners. Replacing it with a grungy QT is a disaster. LOL! Count up another 2 dozen families in the vicinity of that intersection, moving to Scottsdale! Or lovely Gilbert.
Assuming any of them can get jobs that pay enough to allow them to move someplace else…
In a more constructive vein, though, the whole Amazon/pick-up at the store parking lot/Instacart phenomenon sure changes my thinking about shopping. Why trudge to a series of grocery stores, burning gas every inch along the way, when you can post a list and have some marginally employed wretch deliver the stuff right to your door? The sole drawback to delivery services is that most Americans don’t eat fresh produce, so the poor flunkies who hire out for $7/hour + tips have NO clue how to pick out fresh vegetables, salad makin’s, and fruit.
That issue is solved, however, with a Sprouts right around the corner. If it were safe to do so, I could walk to that store. But even so…I’ve refilled the car’s gas tank a grand total of three times since the covid fiasco launched on April 1, and just now the tank is still half-full. At two bucks a gallon, by limiting grocery trips to fresh produce, I can order an awful lot of Instacart deliveries for the $90 a month I was shelling out B.F. (Before Fiasco).
Considering that my time, when I’m actually working, is worth $60 to $120/hour, why on earth would I want to spend that time driving around the city to Safeway, Costco, AJ’s, Sprouts, Home Depot, Lowe’s, Walmart, and the various other grungy venues? I mean, c’mon: ONE HOUR of converting Chinese math to English will pay for a month’s worth foisting the grocery shopping onto Instacart shoppers.
We’re going to see major changes in the way people live: not just in the way they work but also in their home lives, shopping habits, and family planning. Yesterday the dentist’s excellent young hygienist and I were chatting. By coincidence, she happens to live here in the ’Hood, making her one of the Gentrifiers. She and her husband have a couple of young kids. They’ve teamed up with other parents to hire someone to come in and supervise a half-a-dozen kids in online learning. You know…if this works and middle-class working parents discover that it can work…well…why would you send your kids to a public school when for a fraction of the cost you can get all the advantages of a private school and none of the frightful disadvantages of public schools????
Some of these young parents are gonna figure that out, and when they do, the discovery will spread. Public schools will become more frankly what they already are: day-care centers. But when middle- and upper-income parents tumble to the fact that they can get far better, private school-level education by homeschooling under the supervision of a certified teacher, whatever remains of the public schools will become more frankly what those schools already, de facto, are: day-care for the working poor. And the nonworking poor.
Cost to parents? Well, consider. Hereabouts a public school teacher earns around 40 grand a year — or less, if we’re talking about the lower grades. Let’s say we have three sets of parents, who band together to hire someone tutor a total of five kids for nine months, shepherding them through the online learning process. If each family paid a hired teacher $10,000 per child, that’s a WHOLE lot less than they would pay, per kid, for private or parochial school, and the teacher would be paid more than s/he would earn in private or public schools. Children could get socialization through community athletic teams, churches, clubs, music lessons, art classes, drama clubs, Scouting, volunteer activities of all kinds. How would this be worse than warehousing them in a prison-like school all day? Might it not be significantly better? And, when you take into account the cost of clothing, school supplies, transportation, meals, and all the other expenses incidental on public education — including the breathtaking property taxes on your home, which in these parts go mostly to support public schools — would it really cost that much more?
Another change: thinking once, twice, three times about whether you really need to do X, Y, or Z. Do you have to run that errand now — seriously? — or can you fold it in with another trip and do them both tomorrow? And can you manage your time better by limiting the number of shopping junkets and errands, by making them all happen together, by organizing time and tasks at home and at the office before venturing forth?
Case in point: It’s time, at last, to pull out the heat-fricasseed, dead potted plants, run up to Lowe’s or HD, and get some new seeds and plants to spiff up the gardens. So there I am along about 9 a.m., about to get up from the computer and thinking, reflex-style: “I need to go to Home Depot.”
But then another thought strikes: Do I?
Do I really need to jump in the car, burn a gallon of gas to schlep to Home Depot, Lowe’s, and waypoints…right now? Suppose instead I were to pull out the dead foliage, sweep up the dead leaves and debris, and haul all that stuff out to the trash or the compost heap now?
If I put off the Home Depot trip for another day, could I combine that junket with a trip to the Walmart supermarket that’s on the way toward the HD? That way I get to tedious errands out of the way in one foray through the traffic. The yard and plants are already cleaned up and ready to receive their new plants. And I have a whole extra day in which to think about lay out the new plants and pots. You know…actually plan? What a unique idea!
Planning: for trips, for shopping expeditions, for projects that require retail purchases… It’ll be good for you and me, but not so great for our retail friends. By noon I got one helluvalot more done around the yard than I would have if I’d charged out of the house and made for Home Depot and Lowe’s, and tomorrow the shopping trip to one or both of those fine emporia will be far more organized, far less catch-as-catch-can than it would’ve been today.
What it means is that I’ll buy a whole lot less on that gardening expedition than I would have today, because now I know how much space is really available for new plantings, how much of the existing plants I may be able to revive, and even — lo! — which pots I’m tired of and will put away until next year.
Meanwhile, we have the work environment, fast merging with the residential environment:
My son is now pretty certain that his employer will NOT reopen its fancy new digs in Tempe, but will continue to do business in the work-from-home mode. They are, however, keeping him on as a manager. This means that he has to ride herd on the underlings, some of whom are about as bright as freshman comp students, and he has to do it remotely. If that doesn’t sound like a bitch of a job, I don’t know what does. Frankly, riding herd on a bunch of Herefords would be a lot less mind-numbing and infinitely less annoying.
I tried to elicit some hint as to whether this means he will consider moving to his dream Tiny House in the middle of 60 acres in southeastern Utah…didn’t get far with that. He probably suspects (rightly) that if he sets up an outpost in the boondocks, his mutther won’t be far behind: a prospect guaranteed to induce cardiac arrest in an adult man.
If M’hijito decamps to Utah or some such, why in the name of God would I stay here in the unholy, crime-ridden realms of L.A. East? Why would anyone do so, if they could carry on their jobs online from some scenic plateau in Colorado, and if they could educate their children from home?
Think of the sheer number of the changes we’re looking at here, to say nothing of the seismic social alterations they imply.
Anyone who can do any job that does not require them to be at a worksite five to seven days a week could, in theory, live wherever they please. How many of us regard “wherever we please” as an eave-to-eave tract of stick-and-styrofoam shacks with a fine commute in to a miserable office? As a far-flung suburb where we must live to put our kids in a decent public school, with an hour-long commute to and from the office? As a crowded city where the kids can’t be allowed to play in the front yard without a housekeeper or a parent watching over their shoulder every moment, lest they be approached by a child molester? Where everyone has a big dog not because they so love German shepherds and pit bulls but because they need an animated, fully armed burglar alarm to alert them to intruders?
Consider what life would be like if…
You could do your job and do it well wherever you happened to be, with no need to visit the home office more than once every two weeks to a month…
You could get about everything you need to carry on a comfortable life delivered to your home via Amazon, Instacart, USPS, FedEx, and UPS…
You could provide your children with the kind of education they would get from an upper-middle-class public school or a fancy private school for a fraction of the cost, anywhere you choose to live…
You could do those things from any venue that you desire: an elegant San Francisco-style city, a homey small town, a desert island, the back of an RV, a sailboat tricked out as a yacht, a ranch in the middle of nowhere, a perennial college campus…as you wish, with few or no restrictions on where you choose to live…
Think of how much less gasoline you’d use…just you alone, to say nothing of entire nations of Americans, Europeans, Asians, Africans…and whatnot.
You would have a choice over how your child is educated, and you could oversee the quality of their education.
Your kids could spend their days in a quiet small town, suburb, or countryside.
Bullying would not be a daily issue that they would have to learn to cope with.
Neither would widespread use of drugs.
Neither would easy-come, easy-go sex.
Because you would spend so much less on gasoline, so much less on real estate, so much less on local and county taxes, so much less on work and school clothes, so much less on cars to accommodate at least two working family members, so much less on impulse buying, you could live a whole lot better on a whole lot less money. You could travel more and save more for retirement. You could save up enough to send your kids through college, without saddling them with a lifetime of debt.
Mmm hmmm…. There’ll be some changes coming from the covid disaster, that’s for sure. But…what if they’re not all as bad as we fear?
So Mr. Trump, our mentally ill President, just crashed the economy with one of his acts of lunacy. The Dow is down over 600 points, and that was after showing some signs of instability in the past couple of weeks.
Like it or not, China is a major trading partner for the US. Shut it off, and we cut off our own nose to spite our proverbial face. Trump’s act of spite will harm every business in this country, large or small. Mine, for example, the smallest of the small: Trump just closed my business. China has always been pretty woozy about sending money beyond its borders, so when you’re selling a service to clients on the mainland, getting paid can be a challenge. When I decided to quit using PayPal and found that Bank of America couldn’t figure out how to accept a wire transfer to a business that has an apostrophe in its name(!!), that left only Western Union as a way to transfer payments owed. This was questionable enough as it stood, but now that the Moron in Chief has cut off trade with China, it presumably will be impossible.
Presumably, indeed, I will never be paid for the two difficult academic articles I just finished editing and preparing for publication. And presumably after this The Copyeditor’s Desk will get no (zero, zip) further business from its bread-and-butter clients in China.
That is about as micro- a micro-example of this fiasco as you can get.
And lose a whole lot of income for the American middle class.
Mark my words: The Trump recession will make the Bush recession look like a walk in the park. If you have any illusions that you can survive it, now is the time to prepare yourself and your affairs. How?
First, pay off debt. Pay all your outstanding credit cards right now. If you owe a lot on a mortgage, it may be wise to sell your house while it’s still worth something and rent someplace until such time as this recession comes and goes. If you have a car loan, pay it off if you can, or get rid of the car if you can.
Do not take on any new debt. Do not buy a car. Do not buy a new house or apartment. Do not go off on some expensive vacation or indulge yourself with anything that requires you to charge up more than you can pay off at the end of a billing cycle.
To the extent possible, place investment funds in money market, CD, or other relatively “safe” instruments. These will not make money for you, but they won’t lose much, either. Get out of securities.
Charge nothing on a credit card that you cannot pay at the end of the billing cycle out of your bank account. Pay off credit cards at the end of each month or, if that is a challenge for you, simply stop charging on credit cards. If you can’t pay for something with cash, don’t buy it.
If you’re a retiree with most of your life savings in an IRA, 401(k) or 403(c), the timing of this latest moment of lunacy could hardly be worse. Along about now, retirees with deferred investment instruments have to make their annual “required minimum withdrawal”: a forced withdrawal of a percentage of savings, so that you will have to pay taxes on it. With the market extremely depressed, two things happen:
A drawdown generated by the required percentage will be substantially less than normal (think of it this way: 10% of $100 is $10. But if one day your $100 loses $60 (say 1 stock market point = $1), then you get 10% of $40. That would be $4. Which ain’t a-gunna be enough to live on. And of course the remaining $40 will not rebound to $100 or even to $96 very soon, because it will be short 10% of the funds you would, over time, reinvest to recover the value of your losses.
There aren’t a lot of ways to prepare for a little catastrophe like that. One way or the other, you’re not going to have enough to get by. But you’ll be a lot less likely to have your house foreclosed out from under you and your car towed off to the impound yard if you don’t owe anything on them.
I have to say, for the first time in my adult life, I’ve begun to think seriously about decamping to some other country. Permanently.
Apparently one of the best places you can go to live as an expat is Panama. A little town called Boquette, to be precise. Check out the real estate in this place! How about the view from this hovel, 3520 square feet in a gated community, for about $100,000 less than I could get for my house today…
Crime levels are low in Boquette. The local expats say there’s lots to do and the weather is great. Medical care, we’re told, is more than adequate and is reasonably priced.
Two of my friends have already moved to Mexico. They’re both ecstatically happy. One is a native speaker of Iberian Spanish…but Spanish is easy to pick up if you don’t already have it. Especially if, as happens to be my case, you speak two other Romance languages and have a spattering of Latin.
Lookit this thing: it’s easily a hundred grand less than I could get for my house here, and it’s freaking gorgeous. Much, much nicer than my house, and 1478 square feet larger.
Did I tellya soor not? The biggest sell-off in history, for cripes sake. I hope you were braced.
My financial guy hasn’t had a word to say…he’s probably still dodging flying bricks down at his office. We’re pretty well diversified, but IMHO diversity ain’t much help when everything, everywhere is skateboarding toward Hell. Any of us who has any money in the market at all has lost a fair amount of our proverbial shirt.
Well, one good thing about it: this time I can’t lose my job. One bad thing about it: I don’t have a job to lose. 😀
As The Economist‘s Leo Abruzzi observed a few weeks ago, it’s time. Surely another recession is no surprise to careful observers. I will say that a vast, brain-banging market crash is a bit jolting…but with the regime that we have in charge of the country, I suppose it’s not surprising, either.
We have 3½ years before we can clean out the White House. Even if Trump is impeached — one would not like to see harm to happen to another human being, but one would welcome a successful move to evict the man — we would still end up with Pence and Ryan. Unlike the present incumbent, Mr. Pence is not a freaking fool. And that makes him far more dangerous than the Orange Buffoon. Ryan is smarter than Trump, but he also is a bat-sh!t extremist who would like to drag this country back into the 1950s, socially and culturally if not militarily and economically.
He and Pence are peas in a pod that way
You could reasonably argue that America has not faced such great existential danger since the start of the Civil War.
Even if we manage to clean some of the crazies out of Congress in the 2018 mid-terms, it will not change the fact that our leadership and our nation are dysfunctional to the point of stalling out.
Meanwhile, we proles face a more immediate danger: How we are going to eat, what we are going to do if still more jobs are lost to us, and what chance do we have of attaining to or surviving through retirement if most of our savings go down the toilet?
At this point, it sure as hell doesn’t look good for yours truly: without a job and now too old to get a job, I depend on my savings and Social Security to live. SS covers less than half my living expenses. And the government forces me to take a “required minimum drawdown” from my IRA, which means enforced selling of shares at a time when I can’t get what they were worth a week ago. Fortunately, I don’t have to take that until later this year…but if memory serves, it took one helluva lot more than 10 or 12 months for the economy to recover from the Great Recession.
Mean-meanwhile, if my son loses his job, he may very well lose his home. My house is paid for, but his decidedly is not. I can no longer afford to help him with the mortgage payments, which he took over quite some time back. If his father can’t fill the gap, he could very well be magnificently screwed.
What to do? If you still have a job, hang onto it but don’t assume you can do so for long. Make nice to the boss, rise and shine, but stash every spare penny into savings, build a side gig if you don’t already have one, and pay off as much debt as you can.
And for godsake, VOTE IN THE 2018 ELECTIONS.
In case you missed it:
“Trump was pitching the economic benefits of the GOP tax law in Cincinnati as the drop in the market intensified. The Dow fell 500 points while Trump touted rising wages and accused Democrats who refused to applaud him during the State of the Union of being ‘treasonous.’
“All three major cable networks showed the falling stock ticker on screen during Trump’s speech, and Fox News cut into his remarks when the Dow’s drop on the day hit 1,000.”
—Sylvan Lane, “Dow Falls More Than 1,000 Points in Biggest Daily Point-Drop Ever. The Hill, February 5. 2018
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.
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.
