The following appeared on our home page in Ocotober 2008 at the beginning of the financial crisis. becuase much of the information presented herein is still valid and useful today, we have preserved it here.
The Economic Crisis
A wise man once said that a recession is when your neighbor gets laid off, a depression is when you get laid off. This is going to be the case during this period of economic strife as well. As long as you can minimize its direct impact on you, you can weather the economic downturn. Unfortunately, not everyone will escape:
But on the other hand…
In short, most people who have been living the survivalist lifestyle and who strive for self sufficiently should be able to get through this economic scare without life-changing upset. As long as you can stay employed or have a source of income, you will come out far ahead of what the media is referring to as "main street."
Keep in mind, the people that are losing the most money are the people who had the most to loose. Big cats with big investments are worth 30 or 40 percent less than a year ago. So the rich are a little less rich. But for many living folks from paycheck to paycheck, the high cost of gas has a bigger day-to-day impact than the low price of stock. So don't let this talk about the worst economic crisis since the 1930s get you down. That's nothing but political scare mongering
Right now, we are nowhere near the low point of the Depression. We are also far better off than we were in the late 1970s and early 1980s when inflation drove interest rates up to around 20% and unemployment was in double digits. While layoffs are starting, they are nowhere near as bad as they have been in the past. So while Captain Dave always recommends being prepared for the worse, this isn't it.
Maintaining Employment and Cash Flow
They key to surviving an economic downturn is cash flow. You need to do whatever you can to keep your job and maintain money flowing into your bank accounts. You may loose some of your retirement savings, but that is a problem you can address in the future. A low 401k balance is unlikely to result in you being homeless. A lack of income might. So focus on short term financial survival and worry about the long term a little later when things stabilize.
To retain your job, do everything possible to be the last man laid off. That means working hard, staying out of trouble, and maintaining a good attitude. But it also means don’t willingly change employers unless the writing is on the wall or it is in a high risk area, such as mortgage broker. You want to be the person with seniority and avoid being the last hired, first fired.
What are high risk jobs? Jobs that are dependent on the economy. For example, being a new car salesman is high risk right now because people just aren't going to be buying new cars at the rate the were a few years ago. But on the other hand, with more people hanging on to their older vehicles, there could be an increased demand for mechanics. Or maybe you can make some side money stripping old parts out of junked vehicles and selling them on eBay. People are going to be keeping older vehicles running longer, and that is an opportunity.
The building trades also suffer during tough times and with dropping prices, no one is building new homes or renovating old ones. But they will still need to make repairs. I maybe able to defer putting on a new roof put on until thing look brighter, but I will have to be pretty broke to avoid calling the HVAC repair guy when my air conditions conks out in July.
With the exception of elective surgery, jobs in the medical field are also resistant to downturns. People still get sick, have accidents and need hospitalization. Government and education jobs are also somewhat resistant to cut backs, specially for people with seniority.
To take a look at why we are in this mess and what might happen next, click here to see Captain Dave's Best Case and Worst Case Scenarios for the economic crisis.
Cause and Effect
It should come as a surprise to no one that home values in Florida, California, Nevada and much of the North East spiraled up and ridiculously fast rates. Everyone know there was a housing bubble, and anyone who was a student of history know that it would eventually pop. What they did not know is that it was jot just speculators who got caught.
Unfortunately, people either ignored or were ignorant of what the bursting of the housing market bubble would mean to the complicated, interwoven and inbred structure of our financial markets. If someone know that a couple million folks being behind on their mortgages would cause the failure of some of our largest banks and financial companies in the world, they were keeping quiet. I think it is safe to say that no one really thought the shock wave from the housing market bubble bursting would suck 40 percent out of the stock market in 12 months, or 20 percent in a 10 days.
So thanks to Fannie Mae and Freddie Mac buying mortgages from people with no down payment and no reliable income, we are all going to suffer. And not only are we losing any money we had invested in the stock market, we will probably have to pay higher taxes in the future. It's not fair, but then, life is not fair. That's why we prepare.
How to Prepare
Captain Dave has always said that if you are prepared for one major disaster, you are probably 80% prepared for another. So if you have a high level of personal and family preparedness, you are in better shape than 95% of the populace. Here are some suggestions to weak your preparations for this economic crisis: