Financial Preparedness – MUST be built in GOOD times!

Everyone knows times are not good and although we’re told they’re getting better – they clearly seem to be getting worse.  I’ve recently had an experience that has severely highlighted financial preparedness for me, I’d like to share the lessons I’ve learned in the hope that others can avoid my current situation – allow me to give you some background:

The company I’ve been working for was financially stable – strong even – several months ago.  We weren’t worried about the economic crunch and were certain we’d move through it.  My wife and I had a financial reserve that we were actively growing, but not aggressively.  Certainly not as aggressively as we could have been.  In fact, we had become fairly complacent in adding to it.  While our long term food storage was fully stocked, we live off our 3 month supply and rotate through it – replenishing monthly or so.

About 3 months ago we were getting close to needing to fully stock our 3 month supply when suddenly the company I worked for received a fine from the SEC.  The issue with the SEC was quickly cleared up and taken care of.  However, the bank decided that they needed their legal department to ensure they were not liable for anything – so they froze our accounts.  We were told (by the bank) that it was a temporary issue that would quickly be taken care of.  For what ended up being a little over two months many of us worked without getting paid.  By that time however, several people had been unable to hold on and had to quit.  The company had been trying to run without any operating capital (in a business that requires much capital to operate) and had been trying to use revenues for operations expecting the situation to be temporary.  Long story short – the company died.

Two months and one week after after receiving my last paycheck, we decided to close the company.  That was 3 weeks ago.

It has now been 3 months since I last had any income and a couple weeks ago we depleted our financial reserve.

If you haven’t discerned the message of my post yet – it is this: Financial chaos can strike at any time and it is IMPERATIVE that you have at least a 3 month reserve put away while times are good.  It is also important that you keep your food storage fully stocked and prepared for a financial crisis!  TEOTWAWKI does NOT always look like a disaster to everyone around you.  Suddenly losing your job – especially if you’ve already gone without pay for a while is truly The End of The World As YOU Knew It.  In fact, it is extremely possible for you to be living through TEOTWAWKI without anyone around you being aware that TEOTWAWKI has happened.

Three months reserve

So, for those who are unsure – why three months of reserve?  Well, let’s take a look at what it takes to get back on your feet if you suddenly lose your job and need to find a new one.

Presumably, you were not expecting it so (like me) you don’t have any job leads primed.  In fact, you probably haven’t even thought about looking for a job for a long time.  Now you suddenly have to research and develop job leads, update your resume and start applying everywhere.  Once you’ve spent a couple days sending out applications, you have to wait through the interview, callback and so on process.  The most frustrating thing I’ve realized out of this: Employers are NOT working on YOUR timetable! They want to analyze all the applicants and work through them all.  You may be the right person for the job, but they are not going to move rashly on it.  For some jobs they have an application deadline that you have to wait for before they can even start making a decision.  This process can easily take up to a month.  Meanwhile you’re continuing to try to develop new job leads and trying to go through the same process with as many as possible.  Let’s say that within a month you’ve landed a new job and you’re starting to work there.  At a minimum you will not get a full paycheck for two weeks.  In many situations, you will be paid two weeks in arrears.  This means you’re waiting at least 3 – 4 weeks before getting a paycheck.  That easily puts you at two months before you have income coming in again.  Hopefully things will move much quicker for you – but there’s also a chance that they won’t move this fast – hence the extra month in reserve.

By having three months income in reserve, you are creating a buffer for yourself to allow you to lose your job and find another without major financial interruption to your family.  You’ll still have to pay bills during the time you’re finding a job and it’s hard to job hunt without a phone, gas or the internet.

If you’re thinking ‘there’s no WAY I can put aside that much in reserve’ – think again.  Sure, it will probably be tough and definitely be tight  while you’re putting it aside – but think of how tight it will be if you are having to find a job with no money put aside!  Right now you can take a pinch and get it taken care of – if you put aside 30% of your income for one year, you’ll be there.  It will be a rough year and if you think you can’t do it you’re fooling yourself.  Consider what adjustments you would make if you had NO income!  You’d cancel the cable, you’d cut the phone usage, you’d limit your driving, you’d quit eating out, you’d stop buying extra junk, etc.  DO IT NOW!  Make all those sacrifices right now – for the next year – cause if you don’t and something happens – your creditors and utilities will make all the decisions for you!

Living without income once your reserve is depleted

We made some mistakes with our reserve.  First, it wasn’t as large as it should have been.  Second, we believed that our situation would quickly be remedied and we weren’t as prudent with it as we could have been.  Third, our fuel (gasoline) reserve was depleted and not fully stocked – requiring us to spend our financial reserve on gasoline.

I also want to point out that we don’t use credit at all.  We don’t have credit cards and won’t borrow money.  Living on credit to get through a financial crisis is a horrible idea in my mind (our President seems to like it though).

We ran out of money about 3 weeks ago.  By money I mean liquid cash that we had stored here at home in our safes – NOT in a bank.  Since then, it has been a matter of liquidating assets in order to survive.  Believe me, we’ve had to make decisions we were not happy about!

The quickest way to get cash that I’ve found is to get a loan on your guns from the pawn shop.  This isn’t desirable at all, but it works to get you some cash fast.  The good thing about it is that if you’re able to get back on your feet quickly you can retrieve your assets.  I absolutely have not pawned all my guns, and I’m not recommending that, but I have many guns that are not essential to my personal defense – those are the ones I’ve pawned.

Another way to quick cash is to sell reserve ammunition.  I’ve sold several full ammo cans in the last couple weeks.  It’s a sacrifice to do so, but it’s a solution.

I wrote an article some time ago about buying silver as a way to store value in your financial reserve. There have been several comments on that post stating that silver and gold are a bad idea for TEOTWAWKI reserve.  To some extent, they are correct.  However, they’re all looking at it from a complete societal collapse.  Right now though, in my personal TEOTWAWKI the coin shop is more than happy to buy my silver and gold from me.  My advice is, once you have your three month reserve put aside, continue living on less and buy gold and silver as a further term reserve.  It takes little effort to liquidate and given the high price of gold right now (when I’m cashing it in) has been a good investment for me.

Related Notes

When this hit us, our 3 month food supply was low – which is normal since we live off it.  Over 3 months later, we’re still living off it and will be able to for at least another month or so (we clearly had more than 3 months worth).  In hindsight though, I wish we’d had a larger stock overall.  We’ve run out of many things such as cheese, tortillas, etc and are getting a bit low on our meat supply.   My advice from this lesson would be to make sure that your 3 month supply is always stocked and over stock as much as you can.  If we didn’t have our food storage – I have no idea what we would have been doing to feed ourselves and our 8 kids!

While we’re happily employed we tend to completely ignore the job market, including our personal job finding network.  Life starts happening and we adjust our surroundings.  A critical part of being able to quickly jump to a new job is keeping up with your network contacts and not losing everything you develop every time you hunt for a job.  There’s a fantastic site that was built for exactly this reason called JibberJobber.  Not only does it help you keep your network, it is a good set of tools to help you manage your job search.  I believe it’s well worth maintaining an account there as part of your employment preparation (it’s free to check it out).

In conclusion, I implore you to get a 3 month reserve set aside as soon as you can!  Once you have that, continue investing in solid assets such as silver, gold, steel (guns), and lead (ammo).  Those are all assets that usually hold and often increase in value that can be liquidated to get you through a crisis if needed.  Believe me when I tell you that TEOTWAWKI doesn’t have to be a societal collapse – I’m going through a personal hell right now while society chums on with its merry self.