This experiment began several years ago when I received a brochure in the mail advertising silver bullion coins as an investment vehicle. The “hook” was, “We will sell you two silver eagles for the price of one, if you agree to read our special report on silver.” When I saw this, I thought, “I could give one of these coins to a friend who was having money problems as a touch point for her prayers.” I sent her a coin and a notebook with instructions. Every day we prayed that the Lord would grant her wisdom in the area of finance. Every day she made an entry in her notebook.
The initial experiment was extremely successful. At the end of six months, her attitude towards money was radically different. She began to systematically eliminate her consumer debt. She changed some behaviors that were sabotaging her financial situation. Then towards the end of the six month experiment, she was able to move into her own home for the first time in her life.
Finally, when the participants are ready, they will give their coin with a blank notebook to a friend or a family member who is ready to change their relationship with money. In this way, friendship and blessings will keep flowing forward forever, even into eternity.
My parents retired to southern Florida. Life is a little bit different down there. The town where they once lived was hit by two category three hurricanes in one year. I was there for one of those storms. Their senior living facility evacuated to a designated storm shelter where we spent the night in darkness listening to the howl of a wind that gusted to over 130 miles per hour. The next morning the storm was gone. Some of the town had been torn to pieces. In some instances one building that had been destroyed stood next of a building that appeared to be completely untouched. However, in some instances preparation made a difference. The trailer parks in town were equipped with hurricane anchoring systems. They did a good job weathering the storm. Outside the city limits there were obviously different building codes in force. Out in the county it appeared that an angry giant picked up those trailers and threw them around like so many toys. Those trailer parks were not ready for the storm.
I admit I am a bit paranoid. I am one of those people who have called seven out of the last five recessions, but I don’t think the signs are looking very good. If they are smart, the people living in Florida are always ready for a storm. They keep an unusually large amount of bottled water and canned goods on hand. They make certain they have flashlights, batteries, candles, a camp stove, and other supplies. They know there is a chance they will not have access to groceries or water for a week if a really big hurricane hits their town.
Are you ready for the storm?
The best preparation for the storm is a secure job. If there is a downturn in the economy, how likely is it that you will hold on to your job? Are there any ways you can improve your value to your employer? I know of one instance where an employer shut down his entire operation. Then he reopened it as a single employee operation. I know the one employee. He is worth so much more to his boss than his salary, he held on to his job through a complete shutdown of a company!
Household debt will make you extremely vulnerable to excessive storm damage. Are you debt free? Your creditors won’t care if you lost your job. They expect to be paid on time. If you can’t meet that car note, expect that the repo-man will visit you home in the wee small hours of some morning.
I have spent so much time ranting about the importance of an emergency fund that I have grown tired of listening to myself talk. If you don’t have at least $1,000 in cash money, you have an emergency. One car repair can send you to a credit card charging an effective annual interest rate of over 20%. If you don’t have at least three times your monthly take home pay in insured savings, you will find yourself, like the people in Florida who did not stock up on storm supplies, waiting in line to get water from the state National Guard trucks, if you remembered to fill up your car before the storm. During 2010, 4.5 million Americans were out of work for a year or more. That is why Suze Orman bumped her recommendation for an emergency fund from six months expenses to eight months expenses.
If you have investments, make certain you stay the course through the storm. Maintain your balance between equities, bonds, and cash. During a bull market it is easy to watch your portfolio grow from 50% stocks to 70% stocks without doing anything. But if your plan calls for 50%, your ship is becoming dangerously top heavy. It could capsize in the storm. Sell something, secure in the knowledge that what goes up will, at some point, come down. If you are cautious you will be in a position to buy shares of quality companies at dirt cheap prices when everyone else is just trying to walk away with a few intact possessions after the storm passes.
After a seven year bull run, the stock market is heading down. Auto sales are at record highs fueled by subprime loans. The transportation indices are heading down. Manufacturing jobs lost in the last recession have been replaced by low paying service jobs. The median household income is still below 2006-2007, the beginning of the last recession. Service jobs can be less secure than higher paying manufacturing jobs because they are tied to smaller capital investments. It is easier to shut down a restaurant than a billion dollar factory.
I am not in the business of making predictions since I can’t seem to get my crystal ball to function properly. I don’t know when the next storm will come, but I do know with certainty that another major hurricane will hit Florida at some time in the future.
Will you be ready for the storm?