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Personal Finance

The Prepper’s Economic Guide to 2018

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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.

Helping a Millennial Future-Proof Their Finances

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If you are a parent of a Millennial, a friend of a Millennial, or a Millennial yourself, it’s time to start dealing with the some of the difficult financial realities that today’s youngest working generation is dealing with. Millennials may have come of age at a difficult economic time in American history, but this doesn’t mean that they can’t have a better future on their own terms. Millennials will benefit from some traditional financial methods for security and future wealth. There are also some financial techniques which will benefit Millennials in particular. If you have influence in the life of one of these young people, help them out with this kind of advice.

 Some of the specific financial problems that Millennials found thrust upon their laps over the past decade were related to the 2008 financial crisis in the United States and around the world. Many young people found themselves graduating from a college without a job to go to and with tons of student debt to their names. Fortunately, the worst of this is over, but many young people are still not fully recovered.

 This is a good time in history for young people to specialize in skills that will provide them with adequate improvement moving forward. Some employers even pay for their new hires to get an updated education. For specialized fields, there are simply not enough qualified people to fill the jobs. Disappointed Millennials who still haven’t found an application for their major may be well-served by calling it a wash and acquiring new skills which can be had without spending a great deal of money on a new degree.

 For Millennials who have families and children, there is even greater reason to future-proof finances. This can be done in many ways. Acquiring wealth in many forms: through career, through saving, through investment, through equity in a home, and even through life insurance. Life insurance policies are very affordable for young people, because they are statistically more unlikely than some to die within the term of the policy. If the worst were to occur, life insurance could help a Millennial preserve their wealth for the people that matter most to them.

 Some Millennials are future-proofing their finances by increasing their knowledge to compensate for the lack of financial opportunity that was available to meet them when they graduated. By becoming more financially savvy, young people are investing in new opportunities, saving with better intention than previous generations, and living on less with greater satisfaction than typified more materialistic cultures that characterized some segments of earlier generations.

 If you count yourself among this generation, then there are many ways for you to make the most of your money in the long term. Get savvy and always make financial preparedness a priority. If you learn how to spot opportunities and make the most of what you have, you’ll likely end up in a better situation than those who squandered the roaring economies of several previous generations. Future-proofing money isn’t easy for Millennials, but it’s worth the effort.

Convenience Cost?

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Is there such a thing as a “convenience cost,” or did I just make that term up? By it, I mean the minor cost of avoiding a minor hassle. Or, I suppose, a middling-large hassle.

Here’s a practical question attached to this fine philosophical matter:

Are you willing to spend a few cents a gallon more to avoid trudging several miles to get a better price at a different gas station in a different neighborhood? Do you do that regularly, or only when circumstances make you feel more reluctant than usual to have to drive around to get the best price?

This afternoon I have to traipse to the Mayo Clinic. At that time of day, it will be an hour’s drive each way: Two hours of doing battle on the cutthroat streets of Phoenix for the privilege of spending 15 minutes with my doctor in hopes that she can send me to the right specialist.

My car doesn’t have enough gas to get out to the far side of Scottsdale. And if you think prices at the local QT are exorbitant, you ain’t seen nuttin’ till you see how much a ritzy-titzy market like Scottsdale will bear. So I need to buy gas before heading out there.

Rationality suggests that I should drive down to the slum Costco that I normally habituate, because — given the emptiness of its customers’ pockets — that Costco sells the cheapest gas in town. While there, I could pick up the several items I need from that honored store.

This of course would require me not only to drive several miles in the opposite direction from the Mayo but also to get out of the car and walk across the parking lot, something I’m not fond of doing in that sketchy shopping center. The fewer trips I have to make there, the better: both because staying out of Costco means keeping more money in my own pocket and because it really isn’t the best of all possible shopping experiences.

Between here and the Mayo, only slightly out of my way, resides another Costco: a much more upscale Costco. They have more goods of the sort I covet, and one feels no need to pack heat while strolling from the car to the door. And… I have to get something for this weekend’s potluck. Lately I’ve found the Costco closest to me — the downscale Costco — rarely has anything very appealing. The last time I was there, they didn’t even have the standard Costco quinoa salad, to say nothing of decent bakery. Chances are good — very good, I’ll bet — that the Paradise Valley Costco will have a much better selection of bakery.

To be safe, I need to buy gas now; not drive all the way to the Mayo, halfway back, and another ten miles up to the fancy Costco and back.

There is a QT right around the corner. They extort stupefying amounts of money from their customers, because the station is on the only road that passes through the Dreamy Draw, carrying commuters from Moon Valley and points north down to their jobs in central and downtown Phoenix.

The Costco at Paradise Valley Mall also charges more for gas, because it’s conveniently close to Tatum Blvd, which bears commuters from North Phoenix and Scottsdale. But by the end of the day — around 5 p.m. — the lines will be out to the main drag, I will be tired and unhappy, and I surely will not feel like standing in line and pumping gas. And it’s questionable whether I can get all the way out to the Mayo and then up to that Costco on a quarter-tank of gas.

I’m thinking it may be worth the cost (four to eight cents a gallon) to fill up — or maybe partially fill up — at the nearby QT, so that I don’t have to drive down south to get gas now, nor take a chance that the amount in the tank will take me halfway to Payson and back with enough left over to get down to the cheaper Costco.

That way, I would have the option of not going to the nicer Costco on the way home from the doctor’s office (should one not happen to feel like shopping for anything by then), and I could be certain that the car wouldn’t run out of gas. And I wouldn’t have to pump gas late in the afternoon, when I will hate it even more than I normally hate it. Which is a lot.

So we have two choices:

  1. Drive to the dumpy Costco now, some miles south of the ‘hood and get gas for as much as eight cents a gallon less than it costs anywhere else.
  2. Whip around the corner to the overpriced QT, eat the gouge, and acquire at least enough gas to get to east Scottsdale and back…for a whole lot more than a fair price

I’m leaning toward the QT. The savings in time and aggravation would be worth paying a couple dollars more.

And that would be “convenience cost.”

$$$ and All: Clinging to Control

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Something there is about making a list to keep the onerou$ little ta$ks under control… That, of course, would mean the onerous bookkeeping tasks that, given the reins, you would ignore until the planet freezes over.

What’s about it is that there’s something ridiculously satisfying about checking off chores, one at a time, as DONE!

The mountain of money paper that comes into this house beggars belief (to say nothing of beggaring me).

  • Five bank accounts
  • Four investment accounts
  • Four health insurance policies (Medicare, Medigap, Part D, long-term care)
  • And bills coming from more directions than I can reckon

87 berjillion bills came in to make life a little more miserable this month:

  • Property tax: raised over $200
  • Car registration: almost $400
  • Painter’s bill: three thousand buckolas
  • $260 power bill: holy sh!t
  • $153 water bill: holy sh!!t
  • Gerardo: $120 for working himself and his underlings half to death…

So it goes.

You can see why I hate doing the bills.

On the other hand, paying off the loathèd car loan in a bull market was smart. Very, very smart. When times are good, my guys can crank the money (and yeah, they are guys: if there’s a lady financial manager among them, they’ve kept her hidden from me). After ponying up $3,000 for the painter and something over 16 grand to pay off that effing loan, total net worth is barely down a few thousand bucks.

How do they do that?

Oh well: I guess that’s what I pay them for.

So that was encouraging.

Also encouraging: I’d allowed about $800 for the Venza’s 2018 Arizona registration — really, registration rates here are just exorbitant. But not, as it develops, that exorbitant: the bill, which came this month with less than 30 days’ notice to pay up or be cited, was “only” $386. So that adds about $34 a month to this year’s budget allowance…nice. I guess. One meal out, anyway. 🙂

Next year the amount will be lower: Arizona’s registration bills drop as your car ages. Part and parcel of our bat-brained legislators’ astonishing stupidity: cars pollute more as they age, and so it would make sense to give people a break for buying newer, more fuel-efficient and less polluting vehicles and to whack them for hanging onto the stinking junkers. Here, we always go in the opposite direction of common sense.

So this is the most difficult of the set of tasks to do today. Others:

  • Clean pool, re-install Harvey the Hayward Pool Cleaner. Dive in after he breaks loose from his hose, rescue him from the bottom, reattach, fix, get him going again.
  • Haul trash to the alley. Pick up dog piles as part of this joy.
  • Finally get around to ensconcing the Blue Barrel in its new home, out of my way in the garage.
  • Organize completed client journals’ essays; confer with bidness partner on rest.
  • Call handyman to come rebuild patio roof.
  • Re-install dog safety pillows in back of car.

Now for a nap before having to spring back to life for choir rehearsal. And so, away…

Equifax Damage Control

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Topmost on the list of today’s chores: Call the accursed credit bureaus over the latest identity theft caper at Equifax. Fortunately, after previous exploits, I have phone numbers that go to humans.

Usually. Experian, first on the call list, has a special number to ask about the Equifax fiasco. They’re saying wait times are up to 30 minutes. And of course, they have loud, annoying Muzak to keep you alert and make your head hurt worse.

But in less than 30 minutes — by far — a living creature picked up the phone, one who sounded like she had a fair number of IQ points between the ears.

She said it’s an option to change one’s PIN, but clearly she had been coached not to dispense advice. But it seems pretty obvious that anyone who busted into your account is going to have your PIN and also will have all the information needed to change the PIN. So instead of adding that kind of hassle, possibly to no avail, I put a 90-day fraud alert on the account.

This seems to be the path of least resistance, for two reasons:

a) It means than ANY time anyone tries to create a new credit or bank account, you get a phone call to that effect; and
b) Experian shares the fraud warning with the other credit bureaus, meaning you don’t have to kill time in other punch-a-button phone mazes.

Since a fraud alert will let you know if anyone tries to use your information to acquire credit in your name, and since I already have a “freeze” on all my credit bureau accounts thanks to the vast Maricopa County Community College District hack, I think I’m going to let it go at that. Rather, I mean, than spending half the day navigating telephone punch-a-button mazes. It might be good to change bank account numbers again, but that is SUCH a huge hassle…it probably would be better to simply access credit union accounts online about once a week and check for any unauthorized transactions.

Understand: frequent bank account checks will have to become a permanent habit for everyone. Hackers know better than to use stolen information right away. They’ll often wait a year or more, by way of getting around various inconvenient alerts and hassles you’ve set up to foil them. Since these devices foil you, too, after awhile you’re likely to let them lapse.

The type of fraud alert that is shared among all three companies lasts only 90 days. You can get a seven-year fraud alert, but to do so you have to jump through hoops at all three companies, and you have to show that you’ve actually been a victim of an identity theft using your private information. Whether you can renew the 90-day thing or not, I cannot tell.

Another permanent habit: get used to filing your income tax returns at the earliest possible moment. One handy use for your stolen data is to file fraudulent tax returns in your name claiming large refunds — meaning you get no refund until you jump through hoop after hoop after migraine-building hoop to prove it wasn’t you.

Now…to find out how to sign on to a class action suit against those craven morons… Olson & Daines, an Oregon law firm, is already organizing one. You can go here to notify them that you’d like to join the class action. And if there’s ever been an event that demonstrates loud and clear why class action suits are valuable and should never be curtailed, this one is it. Equifax knew this hack was going on from May through July; they knew about it long enough for their top executives to get their money out of the firm’s stocks before the news hit the public media.

Without your permission, they collect data on you that is none of anyone’s business but yours — spying on you, really. Though this data, gathered in one place, renders you extremely vulnerable, they do nothing to encrypt it, and so naturally sooner or later some hacker steals it. Now you are screwed and the worst that happens to them is that their stock loses a few points…after their executives have pulled their money out.

With the government defanged — and if the right wing has anything to say about it, permanently enjoined from regulating business models like this — citizens have very little recourse other than through legal action.

Ain’t life in the 21st century grand?

Fun & Games with Equifax

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Amazing. A hundred and forty-three million people get all their private financial information stolen from Equifax, an organization that snoops into your business and accrues data about you without your permission — without encrypting said data. Adding to this latest entry in the Annals of the Floored and Flabbergasted, Equifax executives knew what was coming down the pike, so sold their stock in the company before the news hit the street.

So. If your personal information hasn’t already been stolen, chances are pretty good it’s gone now: 143 million is one in two Americans who may be a victim of this latest heist. What can you do?

You’re not helpless, interestingly enough: there are several strategies that will help protect against the effects of identity theft.

• Freeze your credit bureau accounts. You have to call all three credit bureaus to have each one apply a freeze. It ensures that no one — including you — can set up a new bank account, credit card, mortgage, or the like without your knowing about it.

This is probably the best move you can make. It does add some hassle to your life. Any time you want to take out a loan or open a new bank account, you have to un-freeze at least one account — usually Experian. This is made slightly less inconvenient by the fact that you can limit the period that it’s unfrozen, having it refreeze after x number of days. Which sounds good until you realize that you have no way of getting the people your dealing with off the dime: invariably, they don’t get around to asking for a credit report until after the un-frozen period ends.

• Monitor your credit card and bank account statements. You should be doing this anyway, but now that’s even more true. Check each statement promptly after it arrives for any transactions you don’t recognize, and if you suspect fraud, call the card issuer or bank immediately.

• Set up fraud monitoring on your accounts. Equifax proposes to give its victims a year of free fraud monitoring — conveniently, through its own subsidiary.

This is problematic. First, one year of monitoring ain’t much. If bad guys have your Social Security number, you don’t have a year-long problem: your problem is going to last the rest of your life. After that year, you’re going to have to pay for the privilege. And second, if you sign up for the service offered by Equifax, you have to give up your right to sue the bastards — or to be part of a class action suit.

There is some wrong-doing here: they knew about this on July 29, plenty of time for the higher-ups to unload stock. We proles didn’t learn that our personal data was on the way to the Dark Web until yesterday. So no: you do not want to forego your right to sue, and no: you do not want to agree to accept arbitration.

Paid identity fraud monitoring is probably unnecessary. You can accomplish the same thing for free or for very little by freezing your credit bureau accounts, keeping a sharp eye on your financial statements, and also checking the EOB (explanation of benefits) statements that come from your health insurer for any treatments you didn’t receive.

• For free, you can monitor your credit reports. By law, credit bureaus are required to give you one free credit report a year. Since three credit bureaus dominate the privacy-invasion landscape, you can arrange to stagger requests for reports, so that one comes in every four months, giving you a recurring view of activities reported to the credit bureaus.

The federal government has a free identity theft recovery program for people who believe they’ve been victimized. When you review the complicated, time-consuming steps required to respond to an attack on your identity, you realize exactly how serious this vast breach is. It is, in a word, a fiasco.