I think we would all agree that Americans are living in uncharted times. The current administration and both political parties are taking us down a path that could lead to major changes in our lives. The Constitution we grew up with can no longer be counted on for protection. The bad news is that there does not seem to be an end in sight. The good news is that there are ways we can prepare for an uncertain future by addressing certain issues head-on.
- Recognize that you do have choices in life to be proactive vs. reactive. Having a plan for the future and being proactive should give you a greater sense of confidence that you’re doing all you can reasonably do. You will have every reason to believe that in uncertain times, you’re more prepared than most. Consider the millions of people who could be caught without ever having thought about planning for the uncertainties that the future might hold.
- The President promised that the new Health Care package would save money. We are finding out now that there is no way to save money by adding 30 million uninsured people to the rolls especially when health care costs rise at three-to-five times the rate of inflation each year. Health care providers are upping their premiums in anticipation of the huge expenses they will be forced to take on by covering everybody for any pre-existing conditions. I am not advocating that universal care is a bad idea. My concern is the way in which the government went about dictating how health should be delivered without sufficient debate from all stakeholders. Something has to give. You and I will get less health care and pay higher prices and taxes to compensate for all those who are not paying their share. No amount of fraud prevention can make up the difference. No amount of efficiency can help. Have you ever heard of the government cleaning up its act or doing anything efficiently?
- Maintain your health, lose weight if you are overweight, stop smoking, eat better, and exercise more. Get a full check-up now. Get your shots up-to-date. Depending on your age, get that long overdue colonoscopy. Get an ultrasound scan (much cheaper than a CAT scan and catches the major stuff). It’s time to plan your own health. Get needed dental work done. Fix what ails you now. With our heath care system about to undergo massive changes, we may not be able to get the degree of health care we’ll need later. Your health care dollar may never be worth more than it is today.
- Do everything you can to secure your current job. Don’t take it for granted. Plan your job security. Figure out how to be more efficient and productive. Take on extra work, do more than expected, act conscientious, smile, dress well, don’t complain, and don’t be a loaner. Protect that job, it may be the last one you have for a while. Remember, when someone else loses his/her job, we’re in a recession; when you lose your job, we’re in a depression.
- For those in the workforce, maximize your employment options by getting as much practical education as you can afford so you can qualify for higher paying jobs and expand your career plans. There’s a saying by a local California university that goes like this: It’s better to spend two years of your life working for a degree than the rest of you life working without one.
- Make sure you have a cash reserve or a line-of-credit to hold you over a rough period if you get laid off. Do everything you can to avoid losing your home and equity. Plan ahead!
- Graduating high school students should enroll in a nearby Junior college for the first two years. Expecting a parent to spend $30,000 to $40,000 a year plus, just to attend a four year college is unfair when the first two years could be spent at a local JC for next to nothing in cost. After your student has proven his or her commitment by earning good grades, having a summer job or internship, staying out of trouble, and working toward a serious major, then and only then consider a modest Junior/Senior year completion at a more prestigious school if that’s what’s important to you.
- When it’s time to replace your car, consider fixing it instead, or if you have to replace it, consider a used car brand that is known for running 250,000+ miles with minimal maintenance. If you must buy a new car, consider all your costs including maintenance and resale value. Go for utility, gas mileage, and reliability before style, gadgets, and horsepower. Most people don’t realize how fast cars depreciate. If your kid wants a car at 16 or 17, don’t feel like you have to buy it. Tell him or her to find a job, then consider helping with the purchase price of a good used car with the operating expense and insurance paid in full by your kid. Same goes for a $50 a month mobile phone.
- Find another family in your neighborhood and shop at Costco, Sam’s Club, or similar big box discount chains. If needed, split those large quantity items between two families so you get good prices and don’t tie up too much money.
- Shop smarter. The “I saved money mindset” is a complete misnomer. If you wouldn’t buy an item when it sold for $100, you can’t say that you saved $30 when you bought it on sale of $70. Let that sink in. We like to justify that we saved money. But you had to be prepared to spend the full $100 in order to “claim” that you saved any money by paying only $70.
- Buy only what you absolutely need and very little of what you want. Consider the true cost of everything you buy. The typical worker has to earn about $1,600 to have enough left to spend about $1,000 due to the marginal Federal and State income brackets. Read this again, and let it sink in. Take a few minutes to add up how much of every dollar you earn goes toward some form of taxes. There’s federal, social security, Medicare, unemployment, disability, state and local taxes, excise taxes, phone taxes, utility taxes, etc. When you finally get what’s left, you are taxed again when you buy consumer goods or when save or invest money and pay capital gains tax on the profits.
- Conserve utilities in every way possible: Use less water, electricity, and natural gas. Flush only when needed. Convert to minimum landscaping to reduce water usage (a must in parts of California). Turn down your thermostat in mild climates. Plan your trips around town to conserve fuel and carpool when you can.
- For those who have to relocate, consider a modest three bedroom, single story home. Do we really need those huge four bedroom split level homes with the large, high maintenance yards? Try to find a one-level home with easy access. These homes will retain their value more so than huge four bedroom, split level, high maintenance homes. Beat the rush! Retiring seniors will buy small three bedroom homes at a premium because they don’t want to or can’t climb stairs in their old age. Also, if you plan on moving to another state, find one that has no state tax.
Inflation and Government data
- Inflation is defined as too many dollars chasing too few goods and services. As the government prints more money to increase the supply or to pay down its debt, it will take more dollars to buy tomorrow what you could have bought today. The Fed calls it “Quantitative Easing”, which is a euphemism for “creating trillions of dollars out of thin air and using the proceeds to buy debt instruments issued by the Treasury.” Inflation is inevitable regardless of what politicians say or how they try to disguise it. Note that our government has conveniently left the cost of food and other items out of the annual inflation rate calculation. Have you even noticed the hidden inflation? Next time you shop for food, note that the jar of pickles or box of cereal you buy regularly may be the same price, but it contains a fewer ounces?
- Naturally, if the Fed prints trillions of dollars backed by nothing, the purchasing power of an individual dollar decreases. When you buy anything that is expected to perform over time, make sure you buy the best quality you can afford. Your dollar may never be worth more than it is today. Even if you invest and make what you think is a decent profit, inflation and capital gains tax can eat up profits to the point where you might have ended up with the same amount of money had put your cash under the mattress.
- The government is also manipulating the unemployment data. Those who have given up finding jobs are no longer counted in the monthly unemployment statistics. We are close to a point where about half the working adult population is gainfully employed while the other half depends on the government (the working tax payers) for nearly everything in their lives.
- Consider a small quantity of gold and silver coins in your physical possession, but don’t go overboard. Gold and silver have been traditional hedges against a weak dollar and high inflation. Buy only gold American Eagles, Krugerrands, and Maple Leafs. Consider small denominations (1/4 or 1/10 oz.) which are available for about 8% above the spot bullion price of gold and, most importantly, easy to sell and spend if needed. Stay away from commemorative type coins and ingots, they may require assaying to verify purity. When you buy silver, buy 1 oz American Eagles (about an 8 to 10% premium). Don’t pay for high grade/high premium coins or commemorative editions. You will pay a huge premium for collectible coins or numismatics when you buy them, but will likely loose that extra value above the gold or silver bullion content if you need to sell in a pinch. American Eagles are easy to sell/trade and are widely accepted. Think of gold and silver as insurance and not just an investment. In times of uncertainty or financial instability, many investors turn to precious metals as hedges against unforeseen disasters.
- Save as much of your income as possible. Notice I said save, not invest. Consider staying in cash until a solid trend shows itself in the market. I realize the market has been going up and up, but is it sustainable? We may think we are in a bit of a recovery at times, but it could crash right back down again without much warning. Paying down a mortgage is a good way to invest extra cash. However, many investors recommend holding a low interest long term mortgage and doing something else with the extra cash. If you feel you must invest in the market, go conservative and take full advantage of your company’s 401K matching plan. Monthly deductions with dollar cost averaging can help protect your investment as the market fluctuates. Find a strongly recommended financial advisor; but beware, they are all out to make money and you will pay for their services one way or another. Learn the difference between a Roth IRA and regular IRA, stocks and bonds. Don’t invest all your retirement in your company’s future. If you are not into detailed market and stock analysis, at least diversify your portfolio. Finally, keep some liquid assets readily available if you become unemployed.
Be prepared for the unexpected
- Keep some extra canned foods, water, basic medical supplies and other necessities in reserve. Be sure to rotate your supply often. Order 90 day supplies of all regular medications. You never know when you’ll need these in the event of an earthquake, hurricane, flood, riots, or an act of terrorism. Consider some basic give-away sustenance of food rations for those neighbors who will come begging at your door if they are unprepared. Hold out a small amount of cash in small denominations (5’s & 10’s) for emergency conditions when you can’t get to an ATM.
- Every family should have a plan and be practiced on how to handle disaster. Think about family safety if push comes to shove. Those who have prepared for disaster may be victimized by those who have not prepared. Recent disasters around the globe have shown us that people can be civil in times of crisis. However, that may not be the case in certain areas of the United States. We’ve all seen recent events were riots were the rule and the police had their hands tied by the rules of engagement constrained by political correctness.
Do your Part
- Email and call your congressional representatives on every important issue. Have email and phone lists at the ready. Legislators should be representing the will of the people. Do your part in holding them to their pledges. If you don’t like your local candidates, consider supporting candidates in other states who will help bring this great country back on track. Listen more to different talk radio programs to get both side of the issues… then decide.
- Beat it into your thinking that there is no such thing as government funded, government backed, or government insured. The government doesn’t make anything. Its only source of money is from tax payers (you and me) and the printing press, which historically has led to inflation. Use the term tax-payer funded in your vocabulary so you and those you talk with will start to realize that you and I are paying for every penny the government spends. Nearly 47% of the population pays no taxes. That number will continue to rise. Guess who’s paying their share! Politicians promise “no new taxes.” That’s the big promise that all governors, legislators and presidents make in the beginning of their terms. We should know better by now.
- Read, read, and read some more. With 76 million baby boomers over a ten year period migrating from big spenders to tight wads…from earning to drawing down their investment equity, what will happen to Wall Street? What will happen to our economy? With no end in sight to immigration and related problems, and health care benefits being reduced, what will happen to your lifestyle? Most people are too busy or simple don’t want to think about these issues. Some believe the government will solve all their problems, while others believe that the government is the source of all the problems. You decide!
- Recovery from the financial and social quagmire we are in may seem impossible. But, have faith, this country has been through tough times in the past, when ships were made of wood and men were made of iron. I say that with a little sarcasm because we are a softer generation now. We’ve spoiled ourselves in many ways that will make it difficult to do what has to be done.
Learn how to be a first responder
- Finally, one of the most important actions you can take is to learn to be a first responder for natural disasters such as earthquakes, hurricanes, floods, or man-made disasters like riots, chaos, terrorism, or war. What will you do if you need emergency services and there’s little chance of help showing up in time? How will YOU protect yourself and your family NOW if push comes to shove or if the SHTF. Think about the possible scenarios and impacts and do your best to prepare physically and mentally. Consider a self-defense weapon to protect your family when emergency services can’t be there to respond. Learn how to use your weapon. Make an action plan with your family for times when your security may be threatened. Practice the plan with your family and be prepared to execute it. You will at least rest more easily knowing that you understand the possible outcomes and have done something about them. Ignoring the issues you need to think about now could lead to a disaster for you and your family.