You don’t have to go far to hear or see the news that tough times may be coming. Matter of fact, the stock market reports I get from Investor Guide Daily are clear on one thing. The money is moving. And then there is the government’s acknowledgement of the possibility of a downturn, a recession, whatever . . . with the recent passage of a “stimulus package” for the economy. We all know about the subprime/real estate bubble collapse, and now we are starting to hear news that a second level of loans called Credit Default Swaps is becoming a possibility. On top of this is the extremely exciting possiblity that our own national government policies toward free trade, health care, immigration, defense spending, and taxes may be in for an overhaul under a new president.
Still, you might ask, in the security of your own personal finances, what has all this to do with me? You have a plan in place don’t you? Well, it is time to really stick with your plan. It should still be very fresh since you probably went over it, at least in your mind, when you made those New Year’s Resolutions. But right now it is really important to look at it with several filters in place.
First, are there any places in your year long plan where your expenditures, for taxes or insurance, or new purchases intersect unfavorably with your expected incomes? For us the months of March, April, and May are important in this regard because not only do our taxes come due, (corporate, personal, and real estate) but the deposits we pay to reserve our spots in the concession business during the summer also have to be paid. Luckily for us I followed my own advice here and by checking the online site I discovered that the fair board had moved the due dates up two months. Whoops, there goes the interest we were going to earn at ING. But that’s what I’m getting at here. Your plan and everyone else’s plan may no longer be in sync.
Second, is your money in savings, MM, CDs, bonds, stocks (indexed or traded individually) or real estate. The wisdom here appears to be to settle in for the long term. Now is not the time to be flipping real estate, or trying to time the market. On the other hand, how have you allocated the emergency funds – short term savings or MM, timed and tiered CDs, or do you just have it hiding under a mattress? T likes to tier her larger CDs so that she can take advantage of any uptick in the interest rates, no more than $10K to an instrument, but now, with the Fed responding so quickily to the demand of the banking and loan industry, she has had to adjust her thinking to $25K to lock in what’s available now and get the higher rate per dollar advantage too. And maybe not so conversely, she has begun to invest in blue chip dividend stocks that time has proven will outlast whatever the market throw at them.
But, and this is a big but, both she and I have begun talking about what we would be able to use a in bartering situation should the economy actually come to that. We are both capable of physical labor, we both have extensive retail experience, we have had plenty of practice living frugally, but aside from these qualities what else do we have that someone else might want in trade for food or gas or some other commodity that may become scarce in the future? This idea wasn’t in our plan even two months ago but now it is.
Third, you have a monthly budget, right? But you may have made it up based on predicted income and prices from two months ago. Right now, we are in the process of reviewing the prices of our basic expenditures to see what is going on and one thing is standing out. The Target stores are the best market place to buy quality for price. And strangely enough, and probably because of the competitive pressure from the large marts (wal mart, costco, sam’s) the chain grocery stores are next in the savings department. Still, since the first of the year, we have had to increase our allocated percentage for groceries from 15 to 20 percent and decrease our entertainment amount by 5%.
Fourth, and for us this is always the hardest part, where are you in relation to your community? Do you know what the current plans for development are? What about the local public transportation system? Our ridership is up 6% since the start of the quarter. What about the community garden? Is there one, NOPE. Should we find out why and what we can do about that, YES. I know our plan didn’t call for any of these latter ideas but by reviewing the plan in the light of current events, I could see that sticking to the plan meant adding to it when it is necessary.