Photo courtesy of terren in Virginia

My fellow Americans, your government has been hard at work over the last couple weeks drafting a 451-page bill filled enough provisions to make your head spin. Billed as a bailout for the country’s financial system, the “emergency economic stabilization” plan contains quite a few important provisions. To save you the trouble of sifting through all 451 pages, I’ve highlighted below some of the more important legislative accomplishments.

• Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds. I think this means reduced tariffs on wool and wool products will continue through 12/31/2014. Good to know those who can’t afford their home heating bills this winter can bundle up with cheaper wool sweaters.

• Sec. 317. Seven-year cost recovery period for motorsports racing track facility. This one should be popular with all those NASCAR fans with their C.P.A certification. Hard to tell much from the actual language in the bill, but it sounds like the government is extending the time some “motorsports racing facility” has to recover building costs. Whew, glad they got that one hammered out–our economy was surely doomed without it.

• Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children. According to the text, this provision allows for an “exemption for certain wood shafts” from excise tax. The shafts are manufactured for use by children, but cannot be less than 5/16 of inch in diameter and must not be “suitable for use with a bow.” I guess that eliminates the shaft taxpayers received in the passage of this bloated bill.

• Sec. 601. Secure rural schools and community self-determination program. This section takes care of the “Reauthorization of the Secure Rural Schools and Community Self-Determination Act of 2000. Unfortunately, I have no idea what that means, but considering this section alone accounts for 49 pages of the overall bill’s text I can only assume it is something important. Forgive me, but I got lost when I hit the subsection that called for job creation in areas whose objectives would be to “control noxious and exotic weeds” while providing “improvements in forest eco-system health.” You can see how a regular guy like me could get lost in the “noxious weeds” of these 49 pages.

If you would like to read more about these critical pieces of legislation, you may view the full text here (pdf format). I’m sure you will be as comforted as I am to know that finally all the rural, wool-sweater wearing kids toting wooden arrows with no bows to the motorsports track are finally taken care of. Whew–What a relief!

Most economists agree we have not in fact suffered a recession, but for the rest of us the pinch is undeniable.   There are plenty of tips out there for ways to save money in tough times.  Since those are so well-covered, I decided to put together a short list of unique strategies to recession-proof your household–just in case.

• Stockpile non-perishables using coupons from eBay.  I’m surprised at the number of mega coupon clippers who still don’t know that many clipping services make their “products” available on eBay. That’s right–you can buy coupons on eBay, often times in lots of 10 or more for just a dollar or two.  If you frequently go through a product with a long shelf-life, look on eBay for a coupon for that product.  Maximize savings by combining store sales with your stash of coupons and you can realize some significant savings.  Remember to watch those expiration dates.

• Create your own home survival kit.  Any prepared homeowner should have a basic first aid kid and emergency equipment including, flashlights, batteries, water-proof bags, matches, non-perishable food, water, and first aid supplies (tape, gauze, over-the-counter analgesics, etc.).  Even if you are not preparing to live as a genuine survivalist, it still makes sense to have a cache of supplies on hand.

• Spread some cash around, at home.  In times of disaster, natural or otherwise, it is possible that ATM networks and banks will be unavailable for cash withdrawals.  For this reason, it makes sense to keep a small amount of cash at home.  Put the money in a safe, lockbox, or keep it well-hidden.  It’s also a good idea to keep it in separate areas so your whole stash isn’t discovered by a thief.

• Get a side hustle.  I’ve mentioned in previous posts my affinity for side hustles–a part time opportunity that you maintain along with your full time job.  A side hustle can provide money in a crunch if you get a pink slip from your regular job.  It can also help supplement a debt snowball, or the beefing up of your emergency fund.  For maximum diversity, it might make sense to try a side hustle in a separate industry from your full time gig.

• Learn to entertain yourselves.  In addition to the economic benefits of things like frugal family fun nights, these events have a way of preparing you for the worst.  Not long after we relocated to our current city, a strong hurricane made landfall a few hundred miles from us and maintained much of its strength as it passed over.  We were without power for a few days, and practiced some of the frugal fun night activities such as “Power’s Out” and “Game Night”–both themes are filled with activities we could engage in without power.

Taking these types of steps does not make you an alarmist, it makes you prepared for the worst while you hope for the best. We continue to hope for the best for our country’s economy, but there is little doubt we will hit some speed bumps along the way.  Be prepared by taking these steps to recession-proof your household.

What steps have you taken to better prepare your household for a slow economy?

 
Photo courtesy of Michael Casey

After news began trickling out of Washington that we may be due another stimulus check, Pete from Bible Money Matters put together a great post asking why not just create your own stimulus check?  With news of the government (taxpayer) supported bailout plan dominating the news recently, I thought I would use Pete’s same logic by providing a few ways to create a personal bailout plan of our own.  After all, many of the problems on Wall Street could have been avoided if bankers and government regulators had applied the same common sense approach to money management that many of us out here in the real world apply every day.

• Don’t spend more than you earn.  Unlike the government, regular citizens cannot print more money or borrow it from foreign countries to sustain spending beyond what we are bringing in.  No, here on “Main Street” that behavior leads to debt, and not the kind that can be bailed out by taxpayers.  Create a household budget and stick to it.  If you don’t have the cash for something then you simply cannot afford it.

• Live frugal.  If more people lived well within their means there would be no need for this proposed bailout.  Just because opportunities abound to overspend, and there are people ready, willing and able to help you do it, doesn’t mean you have to take advantage of those opportunities.  Apply this logic to the housing market.  Just a couple decades ago people were perfectly content to live in homes with modest square footage, three bedrooms, and a small garage for knick-knacks and tools.  Now days everyone needs a bonus room, home office, double garage on a one acre lot.  To finance this “American Dream” many people leveraged their financial future borrowing over half of their income to support a house payment they really couldn’t afford.

• If you have debt, pay it off and fast.  There are various ways to pay off debt, but at the heart of all the plans is the basic idea that if you live on less than you earn you will create excess money that can be applied to your current debts.  That’s really all there is to it.  Some people line up their debts by interest rates, making larger payments on the higher interest debts first.  Others prefer the debt snowball method of paying balances off smallest to largest.  I don’t really care how you do it, just do it!  And don’t let people convince you that debt is good, or that if it is low-interest you are better off investing the money.  If you aspire to be debt free, tune out the naysayers and make it happen.

• Create an emergency fund.  With debts paid off, and living a frugal lifestyle, savings should be your next priority. Build a healthy emergency fund of 6-12 months of expenses–the more the better.  Many financial planners suggest 3-6 months of expenses saved, but I personally would sleep a lot better knowing my family could survive comfortably for a year in the event of a major emergency such as a layoff or illness.

• Don’t suffer a spending relapse. Often times when people reach this stage of their financial recovery they backslide into bad habits of excessive spending.  Think of times past when the government got control of spending, balanced a budget and shrunk the national debt, only to see spending increase as national events changed the political landscape.  The government does not get the idea of an emergency fund, because in their mind a surplus is simply money unclaimed by a new spending plan.  Do not repeat their mistake–keep money in your personal surplus set aside for emergencies and keep your spending in check so you don’t have to dip into these savings to finance bad habits.

In some cases the best form of education we can receive is to be provided examples of how not to do things.  The poor money management lessons from our Congress are a great example of this type of negative behavior modeling.  Whatever you do, don’t follow their lead with your own finances.

You can tell it is an election year because there is talk of the government passing out another taxpayer-funded economic stimulus check.  I mentioned a few weeks ago the possibility of receiving a second stimulus check, and it appears from recent rumblings in Washington that the prediction may come true.  We used our payment to stimulate credit card companies, and add to our savings account, while others are now the proud owners of plasma televisions and iPhones.

Teaching a Man to Fish

A great article over at Moolanomy pointed out the similarities in giving additional stimulus checks and a famous Chinese proverb:

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”

I agree with Pinyo’s sentiments, and would add that by distributing two stimulus checks in the same year we are setting a bad precedent for rough economic times in the future.  Imagine five years from now, after years of economic expansion, we hit another snag.  Maybe this time it is the demise of the student loan industry, or maybe credit card debt finally reaches such epic proportion that borrowers en masse begin to struggle to meet minimum payments.  Citizens will once again be clamoring for another stimulus check, citing 2008 as the year the “government” sent out two stimulus checks to “help the economy.”

Save One, Spend One

Full statistics are not yet available, but I would suspect a large percentage of households put the first economic stimulus check in savings accounts.  Many others probably used the check for debt repayment.  I personally find nothing unpatriotic about either one of these plans.  However, it was the hope of most politicians that recipients would take the checks and spend, spend, spend.  What they failed to count on was a majority of the citizenry is up to their eyeballs in debt, and without a dime in savings.

There were a few other factors that contributed to foiling politicians’ plans for increased consumer spending.  Rising gas and food prices ate up a large chunk of stimulus payments, reducing what people were willing to spend towards a television or new clothes.  The real estate debacle also spooked many homeowners, who decided to toss the check in their emergency fund as a hedge against future problems meeting their mortgage payments.

Perhaps a second stimulus payment would spur economic spending, but I’d rather “the invisible hand” allow this to happen naturally, and without the artificial inflation of disposable income from yet another economic stimulus check.

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It is becoming more and more difficult for me to watch any form of television news.  The other day I was in a doctor’s office and one of the 24-hour cable news channels was blaring from the waiting room television.  They cited an article from the Minneapolis Star Tribune that asked the rhetorical question, “Why are we so miserable?“  The commentators when on to cite gas prices, a down economy, the war in Iraq, inflationary fears, declining home values, and the rising costs of health care and food all as sources of our collective misery.  I surveyed the waiting room and several people were silently nodding their heads in agreement.

Over the next hour or so every single news segment presented had a negative slant.  They documented families passing up on vacation because of high gas prices.  They found a couple out and about who were all too happy to tell us about their mounting credit card debt, and falling home value.  I’m not naive to think that people are not really impacted by all these economic factors, but I can’t help but wonder if we shouldn’t be more responsible for our own happiness.  When did we turn the job of making ourselves happy over to politicians and media pundits?

The Pursuit of Happiness

Our founding fathers had it right when they documented our inalienable rights to “life, liberty and the pursuit of happiness” in the Declaration of Independence.  They did not guarantee our happiness, but guaranteed our freedom to go after the things that made us happy.  The execution of that plan would be up to us, but we now look to others to create happiness for us.

I am happy.  My family is happy.   There is little anyone in Washington, or in the media, could do or say to change that.  From a broader perspective, we are fortunate to live in an era of unprecedented personal wealth with high salaries, a healthy job market and access to one of the finest health care systems in the world.  That’s not to say our systems are without flaws, but when compared to other parts of the world, or other periods of history, we have it pretty well off.  I am free to move my family from one corner of the country to the other if we so desired.  I make a choice every morning about where I get up and go to work.  And if I find myself hating that job I am free to go look for another job that I love.  If I can’t find one I am free to work from home, be a full time parent, or start my own business.  I was provided public education through the 12th grade, and given all the opportunities that went along with it to learn and participate in extra-curricular clubs and sports.  I freely chose where to attend to college, who I married, where to buy a home, what type of car to drive, and what programming I watch on television (a shrinking list, these days).

I guess what I’m trying to say is that we as Americans take many of these freedoms and opportunities for granted.  As a society we’ve survived civil war, two world wars, a great depression, recessions, real estate bubbles, gas shortages, and terrorist attacks on our country and our interests worldwide.  We will survive these rough times as well.  We will persevere.  It may take a little longer to bounce back than the most impatient of us would like, but it will happen, eventually.

Are You Better Off than You Were Eight Years Ago?

The media likes to ask this question in the frame of a dig against the lame duck occupant in the oval office.  No one is spared, regardless of their political party affiliation.  But it is a ridiculous question when you think about it.  Are you better off now than you were eight years ago?  Yes, I am.  In eight years I’ve been blessed with two wonderful children, made a career change to a more enjoyable line of work, relocated to a new city, earned raises from my employer, returned to school to finish my undergraduate education, and enjoyed the development of new technologies. Those sources of my happiness had very little, if anything, to do with what is happening in Washington, D.C.

And if I had answered no, I am not better off today than I was eight years ago, who would I have to blame? I guess I could start with myself.  If I had not pursued the completion of my education I may not have been able to change jobs, move to a new city, and enjoy salary increases along the way.  If I had not married my soul mate I would not have been blessed with two wonderful kids.  These moves did not come without sacrifice.  We racked up some debt to cover the additional costs of my attending school.  I spent many nights away from my family sitting in a classroom (until I discovered the joys of online education).  I stuck it out at a job I didn’t like because I needed the benefits and earnings to pursue my education because I knew it was the path to something better.  I spent many weekends locked away in a study room at a local library preparing for tests, writing papers, and reading monotonous text books.  I could have simply given up.  I could have skipped all forms of reading and learning, and been content coming home from my dead-end job and parking myself in front of the television for six hours watching mindless television programs.  But I was too busy pursuing happiness, and thankfully I found it.