May 012012

What would happen to you if the bottom suddenly dropped out of the economy?

There’s a reason economics is called ‘the dismal science’.

Much of economics is not at all scientific.  It is imprecise, unrepeatable, and based on each economist’s personal value system – they say that if you get ‘n’ economists in a room, you’ll end up with ‘n + 1’ opinions about the economy and what to do about it.  We’d never have recessions, depressions, slow-downs, crises, or everything else bad if economics was an exact science.

So predictions of upcoming economic doom and gloom should always be viewed with skepticism (or perhaps with optimism, in the hope the predictions are more likely wrong than right).  But just because economists seem to be wrong more often than they’re right doesn’t mean that our economic future is guaranteed to be trouble-free and positive.

Indeed, at present, it seems we’re busy barely dodging economic bullets at a much greater rate than normal.  For example, will the EU and the Euro collapse?  The last year has seen a steady stream of articles grimly predicting its collapse, followed by reports of political saves guaranteeing its future.  Who really knows what will happen.

What about China?  The storm clouds also hang over China on a regular basis, with commentators saying that China is about to go into a ten plus year period of decline or zero growth (either of which would cause extreme political risk for that country’s leaders).  On the other hand, even if it is ‘business as usual’ in China, if that country finally revalues its currency up to where economists tell us it should be, we’d lose our source of low-priced goods, one of the few bright things on the US economic horizon this last decade or two.  What would Walmart do if it could no longer buy just about everything at extraordinary low prices any more?

What will we all do if the price of gas continues to go up?  Are our own country’s economic problems solved by more deficit spending, or by less?  Some people think one, others think the other, and the only two things that are certain is that ‘more of the same’ is not the right approach, and that both the ‘more spenders’ and the ‘less spenders’ can’t be simultaneously correct.

There are lots of things that might go wrong, economically, either for us personally – ie, we lose our jobs and can’t find appropriate alternate employment – or for the country as a whole – ie, lots of people lose their jobs and those of us fortunate enough to keep them have to accept pay cuts.

Here’s just one example of potential doom and gloom economic scenarios being discussed – although this article starts off with the scary headline about the economy facing a ‘fiscal cliff’ but doesn’t really build on the promise of the headline, and instead talks not about falling off a fiscal cliff, but hoped for best case scenarios instead.

As we’ve said elsewhere, you’d not be reading this blog if you base your life on hoped for best case scenarios.  So the ongoing level of potential economic disasters that are being discussed, especially when set alongside our far from resilient national and world economy currently, have to be noted.

What would you do if you lost your job?  The thing is that much of our prepping pre-supposes an ongoing supply of money to cover the costs of our preparing for future adversity.  It is possible that in time, a well prepped household will reduce its outgoings and its reliance on income continuing to come in, but until that point, you definitely need money.  Furthermore, a future situation where you can ‘live off the land’ doesn’t mean you just relax and take it easy all day – you’ll be working as hard as you’ve ever done, but at practical tasks such as producing food and maintaining shelter.  And even in such a case, as long as there is a ‘rest of the world’ outside of your retreat, you’ll still want to occasionally get comfort and convenience items to help your life.

One practical suggestion, such as it is, for what to do if you lose your job.  First, if you’re married or in some other stable domestic partnership, spread the risk.  Don’t both have the same type of job, and definitely don’t both work for the same company.  That way you hopefully won’t both have your income disappear simultaneously.

Secondly, give some thought to how you can develop a second income – perhaps from a hobby you have.  Whatever your interests are, the chances are you can see some ways to use your knowledge and contacts in that field into a money-making activity.  It doesn’t have to make you a lot of money while you’re fully employed, but it is good if you can at least do some ‘proof of concept’ trading so you know that, if you need to, you can grow that activity in the future.  This also gives you the start of some trading history and gives you a chance for word to slowly spread and for your reputation to slowly grow, so if/when you need to make it your main income source, you are not starting from nothing.

Third, you should focus in, now, on how to cut down your monthly outgoing costs and how to maximize your ability to achieve economic independence.

Your prepping will help you reduce your energy consumption and cost, and should also help you reduce your reliance on expensive pre-cooked foods and enhance your ability to cook good quality food from fundamentals at much lower costs.

Delay buying a new car by a year (or two, or three).  This one thing alone will make a huge difference to your monthly outgoings.

Just a few lifestyle changes can help you appreciably reduce the amount of cash you need each month to live on, making you much less vulnerable to economic hard times, and freeing up your remaining income to invest in prudent preparing.

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