How to Survive the New Depression
Welcome back!
Photo Courtesy of Improv Everywhere
It appears we’re on the verge of a new Great Depression. Unemployment is up, wages are stagnant, inflation is up, major corporations and banks are collapsing left and right. There hasn’t been this much instability in the international economy since the Great Depression.
The old Boy Scout motto is ‘Be Prepared” and that’s a great creed to live by. Nothing in life is guaranteed.
So, how can you prepare for this?
Maintain Calm
The people responsible for this mess aren’t losing any sleep, neither should you. Things may be getting bad, but they’ll only get better. The nature of the capitalist systems is a series of up and downs. Bad fiscal management by the Federal Government and the Federal Reserve has smoothed out the grooves for the past 30 years or so, the problem is that you CAN’T get rid of the ups and downs. That’s just not the way it works. That’s why it’s important to prepare for the valleys just as much as the peaks.
FDIC Backing
Your money is generally safe in a bank. You should be monitoring the financial health for your bank. Since most banks are publicly traded, this information is freely available. Don’t trust that the bank will always be there. Many banks have failed already. Luckily the FDIC has your deposits insured up to $100,000.
So, what if you have more than $100,000 cash in the bank? First, you shouldn’t have that much money in a savings or checking account to begin with. If you’re truly investing your money, passbook accounts are terrible places to keep your money. Your money should be invested in mutual funds, retirement funds, bonds, etc. So, what if you do have more than that in the bank anyway? Split it up, there is nothing to prevent you from spreading your cash around to several different banks. That way you’re completely protected.
Credit Unions
If you’re completely disgusted by the banking system, like my wife and I, you don’t have to continue participating in it. Join a local credit union. You’ll have more of a say in how your money is handled. Credit Unions are not for profit, so they won’t be consolidating and joining bigger banks and then making stupid multi-billion dollar investments that will bring down the economy. Credit, above all things, are local, which is great. Credit Unions can also get you a car loan, mortgage and other products. Your money is also insured by the Federal Government under a separate insurance program as the FDIC.
Invest in Foreign Markets
Any good investor diversifies his investments for greater returns. There are huge opportunities to invest in markets other than the USA. There are places in the world that are booming right now, despite the current troubles. Many mutual funds run funds based on foreign assets and currencies. The returns on these investments are usually pretty good. It is also a good idea to invest invest in Foreign Currencies and Minerals.
The dollar is currently weak against most foreign currencies, so hedge your bets and buy foreign currencies and hold them. Chances are their value will go up and you will make a profit when you convert them back to dollars (or use them when you travel). Also, many people advocate buying precious minerals like Gold and Silver. I don’t know much about this, just that you should be very careful investing in this fashion. There are a lot of scam operations out there.
Make Budget Cuts
Most people can cuts back and throw things out of their budgets without too much pain. Make a monthly budget of all your in-goings and outgoings and then see what you can cut out. This will allow you to live in your means and save more money. Start going with less.
Consolidate Debt or Get Rid of It
Debt is basically a form of slavery. Avoid it at all costs. That’s easy to say if you don’t have any debt. But what about if you have debt? Consolidate it, reduce it, pay it off. Your mortgage should be your only debt on the books and even then your goal should be to pay that off as quickly as possible. Don’t let anyone own you and you will have much less to worry about.
Shop Frugally
Be careful in how you spend your money on your weekly expenses like food and clothing. Don’t eat out as much. Buy your groceries at places like Walmart and Aldi, where you’ll get the most for your money. Don’t go the mall, you’ll always overpay. Read sales flyers every Sunday and clip coupons.
Maximize Income Earning
You can do this by getting a second job or starting your own home based business. There are many things around the house that can make you money that won’t cost you much to start. Chances are you have hobbies or skills that you can monetize. I wrote a guide a while back on how to make money with things around the house.
Inventory Your Assets
Make a database or spreadsheet of everything you own. That way you have an idea of your assets in case you need to start sellings things to get by. You may lose your job tomorrow. It’s important to know what you can sell tomorrow to buy your families groceries.
Refocus your efforts at work and Shine
If you’re worried about your job, work harder and do a better job. Make yourself irreplaceable. If you think you might be on the chopping block, polish your resume and be prepared for the worst. My general rule career wise is to ALWAYS be looking. Always be on the lookout for new opportunities. Don’t expect your life to work out because you think you deserve your job. You don’t deserve anything in this type of economy.
Educate Yourself
Knowledge will only make you more valuable on the job market. But I’m not just talking about schooling. I’m talking about educating yourself on how this economy works, how capitalism works, how socialism works, how international finance works. If you understand how these things work, you can successfully plan your life to weather the storms. Most people don’t know what derivatives are or mortgaged backed securities. They should.
Save Save Save
You should be saving 10% of your income right out of your paycheck before you spend it. Open an account at ING Direct or HSBC Direct or your local credit union. It’s important to have a cushion of money in the bank in case you lose your job or something catastrophic happens.
Closing Thoughts
One thing to keep in mind is that things WILL get better. That’s the nature of capitalism.
Related Articles:
10 Things Around the House That Can Make you Money
9 Ways to make Money Selling Your Stuff in An Emergency
How to Cut Advertising out of Your Life
You Don’t Need a New HDTV to Get Digital TV
I won’t deny it, HDTV sure looks nice when properly presented. However, I’m in no rush to invest in a new television. We’ve had the same TV for almost ten years and it’s showing no signs of death, even though the power button broke off.
The desire for a fancy flat screen HDTV is very strong for both of us. But it’s something that we are refusing to invest in for the foreseeable future. We have TV now, why pay more to watch it when what we have works fine? This is a question more of us need to be asking ourselves before we make large purchases.
A big misconception about HDTV is that you will need a new HDTV to get through the HD transition or get HDTV at all. This could not be farther from the truth.
If you have cable TV, you do not need to worry about the digital transition. Your cable company already does it for you. As do satellite providers.
The government is also giving us two $40 coupons to buy Digital TV converter boxes that will convert the over-the-air HD signal to fit on older TV’s. Walmart has these digital converter boxes for $50. Minus the $40 coupon, HDTV costs you only $10 plus tax. Not a bad deal, though you’ll need an antenna. Go here to send away for your government digital tv coupon.
What about all those fancy HD only channels that aren’t over the air? A little secret is that most cable receivers can decode the HD channels and convert them to fit into a regular TV. Sure, the picture isn’t as great but the content is still there and still looks pretty darn good. I know for a fact that most Comcast DVR’s do this.
We’ll probably upgrade our TV when our current one dies and cannot be repaired. By that point, fancy flat screen TV’s will cost much less and we won’t have to pay the ‘first adopter tax.’
SmartyPig Evil – Updated
When I first heard about SmartyPig, I was intrigued. It is a new way to have goal based saving. I’m a big proponent of setting goals and achieving them and especially tracking them.
The neat thing about SmartyPig is that is allows you to open your goal to the public and allow them to contribute to your goal. This sounds like a nice idea, if you see the world through rose colored glasses and think grass is made of sugar.
You won’t find many people out there who want friends or family to know what they are up to financially, especially if you have the type of family you need to keep that kind of information away from.
But these aren’t the true drawbacks of SmartyPig. The ultimate problem with SmartyPig is that it all it does is to promote consumerism; which is something we need to get away from.
Sure they let you save money, easily and with a high interest rate. But read the fine print. You cannot withdraw your money electronically. They give you a debit card that can be used at ATM’s and for purchases. They offer coupons for discounts at retailers when it’s time to make your purchase. That’s the only way you can access your money. ATM’s have limits. You can’t get at all your money at once. It’s not suited for an emergency fund.
I’m all for encouraging people to actually pay cash and save for the things they want. But the goal of this blog is to teach the world that you can go without. We should be saving to save money. Not to spend it.
People need to save to have a cushion for emergencies, to save for a house, to save to have kids, to save for the future. Not for a flat screen TV or the latest gadget from Apple.
So, in my opinion, SmartyPig is evil in that it encourages consumption that our society can no longer maintain.
As for saving money, I recommend ING Direct and HSBC Direct. Both are pretty good. ING Direct is by far the best.
Avoid SmartyPig in my opinion.
Updated 8-6: One of the founders of SmartyPig chimed in to let us know that SmartyPig now allows you to transfer your money out via ACH, the same way it goes in. So, you can easily get it to your bank account when the goal is finished. My wife and I want to build an emergency fund, maybe we’ll give it a try.
