08061 Economic Survival strategies
“If we are looking for insurance against want and oppression, we will find it only in our neighbors' prosperity and goodwill and, beyond that, in the good health of our worldly places, our homelands. If we were sincerely looking for a place of safety, for real security and success, then we would begin to turn to our communities — and not the communities simply of our human neighbors but also of the water, earth, and air, the plants and animals, all the creatures with whom our local life is shared. — Wendell Berry, The Art of the Commonplace: The Agrarian Essays
It's not news that economic hard times are here. In constant dollars, over the last 30 years the average American worker has LOST 22% of his or her purchasing power. The less money you have, the bigger the impact this has been on you. The median net worth for American households has declined 39%, to the level of the early 1990s.
For anyone who isn't rich and is trying to live a reasonable lifestyle, things go from bad to worse. The bad news is that this process of economic dislocation and centralization of wealth will continue for the foreseeable future. It’s the design of the system.
If you think it’s been bad thus far, the last few years are only the leading edge of an economic crisis so terrible it will make the Great Depression of the 1930s look like good times. If you want to protect yourself and your family from these economic hard times, make changes in the way you live now.
If people are not concerned about this, they simply aren't paying attention to national and world events. Our entire economy is a stack of cards that can be knocked over at any time. Instead of looking out for the common good, powerful political and economic structures make decisions that hurt ordinary people and benefit special interests.
One of the lies of modern life is that politicians will look out for the interests of ordinary people. The truth is that politicians of both parties watch out for and guard the interests of the wealthy and the powerful. They could care less what happens to the poor and working and middle class families. If you don’t think this is true, just look at how they vote.
Political criminality is one of the four cardinal threats of this era and it is a threat to you and all you love. A second cardinal threat is economic irrationality.
The plain fact is that you have to look out for yourself and those you love and build communities of mutual support as a defense against the predatory politics and economics of our elites. In the near term don’t expect the government to do anything other than continue to take from you in order to give to the politically well-connected and to increase the general level of misery and despair within our communities.
The good news is you don't have to play their game. Even in the midst of these hard times, you can develop a more secure quality of life for you and your family or household. These basic survival strategies will help you cope with the future.
Learn about the big picture. We aren't experiencing a typical economic recession. We are past our peak. Having squandered our natural capital during decades of economic rationality, now we face the consequences of our gluttony and greed. Some of the big picture issues are:
- High oil prices are a big problem for all economies and high oil prices are not going away. We aren't finding any more cheap oil. The oil we are producing now is expensive, costing ten times more than conventional land-based wells. Deep water wells are even more expensive. While some are proclaiming our oil problem has been solved, that is an "all hat and no cattle" claim. It's oil and gas corporation propaganda, not scientific fact.
- Austerity is the name of the game for governments worldwide. Look for new proposals to cut social safety net programs as political criminals move to protect their friends government revenue streams and punish their enemies by ending the programs that benefit them.
- High oil prices have the same effect on economies as tax increases. As energy prices rise, people have less money for discretionary purchases. As they reduce those purchases, this has ripple effects all the way through the economy, resulting in more debt, more defaulted debt, lower revenues for government, and increased demands/needs for government services.
- The impact of these issues will be a decline in economic activity — which will inevitably mean less work and lower wages and profits. This process is already at work. Since 2000, wages (including profits of businesses) have increased at a rate significantly less than the increase in GDP in the US. Most people have not seen a raise, in real, inflation adjust dollars, since the1970s.
- The debt problem (government, business, and household) is so big it can't be solved without years of excellent economic growth, which we are not likely to see. Government receipts, business profits, and household income is flat, while debt for all (local, state, federal government, personal/household, business) is at 700% of the US national wage business (which is defined as wages, employer contributions for social insurance programs, and business proprietors income).
Expect and design for contraction. This big picture description points to a coming time of radical economic contraction. Our experiences 2008 to date are only the beginning of this time of economic sorrows. The economic irrationality of the past decades has to shake out of the system and that will take time. It will be a long grind, probably marked by moments of punctuated equilibrium where we experience a sudden fall. There will be some up times, and when they come, make the most of them, but the general trend over the next few decades will be generally down the economic slope. You need a plan for how you will get through these coming problems. To design for contractions means that you design with the expectation that you will have less income and access to fewer resources in the future than you do now. This is what iPermie is about from page one right to the end. So, as the saying goes, "Make hay while the sun shines." If you have extra money, invest it in sustainable living — superinsulate your dwelling, install solar hot water, maybe some solar PV or wind generation, etc.
Characteristics of a design for contraction include:
You can’t spend your way to happiness. The advertisements and political talk that encourage this are the economic equivalent of a financial methamphetamine addiction. Sure, you feel better for a while. Then you have to spend more money to get "high,” and then even more money. Pretty soon you spend your money and you don't get any high at all. As you panic, you spend more money and more money. Then comes the crash as the bills come due and you can no longer escape the consequences of an extravagant lifestyle. Close your ears to the lies of advertising! Turn off your televisions and ignore all advertising. Your life will not be better if you buy advertised products. Your kids will not be smarter if they wear designer clothes. In fact, if you buy advertised products, your quality of life will deteriorate. You will have less money, more stress, and your family will be at risk of the many evils that derive from financial stress.
The borrower is the slave of the lender. Lies ride on debt’s back. Avoid debt like the plague it is. Never finance frivolous consumption on credit cards. Avoid the payday loan shop. Stay out of pawn shops unless you want to buy something at a cheap price. As long as you have a mortgage, you are not the owner of your house, the bank is the real owner, and a sudden drop in your income could put you out on the street, homeless. You would completely lose your investment. By making extra principle payments with every monthly payment, you pay less interest over the life of the loan.
Never take out a home equity loan for vacations, remodeling, or any kind of consumer spending. Don't consolidate credit card debt as a home equity loan. This puts your house at risk for your frivolous consumption spending decisions! Lower income people must in particular beware of predatory loan schemes. Never take out a loan that has a prepayment penalty. If your property is paid for, do not, under any circumstances, get another mortgage. Debt-free housing is one of the most important survival strategies for the upcoming hard times.
Sometimes we can’t avoid debt, especially if we have no financial reserves, no medical insurance, and get sick. In those cases, pay off the debt as quickly as possible and build up financial reserves so you aren’t at the mercy of high interest rates when emergencies happen.
If you are only making minimum payments on credit cards and loans, or accumulate large debts you simply can't pay due to medical problems, you should investigate bankruptcy.
If you have financial assets and debts, sell your financial assets and pay off your debts.
Choose co-housing. This is a fancy name for "more than one family living together in one large household." The day comes when individuals of low and moderate incomes will not be able to live alone as single person households, unless they own their own housing free of debt or are in some kind of government subsidized housing. This is true for single mothers with kids. Two or three smaller families living together can do so for less money than each would spend operating a separate household. Co-housing works for house purchases too. Three families could go together and buy a triplex.
If possible, go car free. This is perhaps the one choice that can save the most money. Operating a car, including the capital cost of the automobile, insurance, taxes, repairs, interest, etc. can easily top $3K-5K/year. It is much cheaper to take the bus or the occasional taxi, or even to rent a car a few times a year than to own a car. This may require moving to an area with adequate public transportation and access to shopping, as well as changing jobs. Those thoughts would challenge anyone affected by it, but getting the geographies of your life “right” is a major step towards a more sustainable way of living.
Stop buying new stuff. Reduce, reuse, recycle, repair, restore, make it over, make do, do without. Shop at flea markets, garage sales, and thrift shops. Never buy new furniture, new appliances, new clothes, new home decoration items. Always look in the "after market" first. If you can't find what you need, then you consider buying something new. If you shop because of emotional needs, get into counseling. Never spend money to cheer yourself up or because you are emotionally upset about something. If you do buy new, buy quality that will last. I use canning jars, a pressure cooker, and cast-iron cookware originally bought by my grandmothers more than 60 years ago. When I die, those who follow me will still have those items to use. Given the trashy quality of many new products, you may find the quality heirloom products at thrift stores and flea markets.
Use energy with extreme frugality. The cost of energy over time will be up. There are ups and downs but the general trend is clear. Invest in extra insulation, solar hot water, solar PV, solar air heaters, whatever makes sense for your situation.
Develop additional sources of income. Multiple sources for critical functions is an important aspect of permaculture design. Support for your personal income is one of the most important demonstrations of this in permaculture design. With the risky economy continuing, it is not prudent to put all of your income eggs into one basket. You could get a second part-time job. Or you could start a small micro-business, something simple like baking bread or pies from your home, or mowing lawns, or doing laundry and ironing for other people. Buy stuff cheap and resell for a little more at flea markets or swap meets. Clean houses. Grow vegetables to sell to your neighbors. Don't be taken in by schemes that want you to pay money for people to teach you how to make money, or by multi-level pyramid sales scams. Develop an honest business, providing a service or product that people regularly need. Multiply your income streams and protect yourself from future economic hazards.
Be frugal with your food. Prepare meals from basic ingredients. Don’t pay for high-priced mixes, boxed, and frozen prepared foods. Bake your own bread. Make your own snacks and fun foods. If you have access to some land, grow as much food as you can.
Save some money each month. Conserve cash! Even if it is only $5 from each paycheck, stash it away. Life is full of surprises, and unexpected expenses that send you to the pawn shop or pay day loan service or run up your credit cards can be real financial problems for you and your family. Work to build your household savings. Keep some of your savings as food, always have at least two or three months of basic food staples on hand (more is better) in your house to insulate yourself from the mood swings of supermarket pricing and the risks of sudden emergencies and crises.
Beware of the two income trap. Many families feel they need two incomes to survive, and in some cases this may be true. However, with both parents working outside the home, the family acquires significant additional expenses, including transportation and perhaps child care/babysitting. The family also loses the economic contribution that the stay-at-home parent could make. Do the math on your two incomes. Make sure that both parents working outside the home is a net economic benefit and not a net loss over the long run. A parent working at home is a net economic asset to the family. The additional time a parent can devote to in-home activities makes it possible to save money in many areas of life. A "work at home parent" can participate in part-time businesses the family may start. Home schooling becomes a possibility, at least through the elementary grades, and this is a great blessing for families.
Watch out for expensive money-pit bad habits. If you smoke, quit. Not only is smoking expensive, it hurts your health and medical care costs big bucks, even if you have insurance. If you must have a bad habit, pick something cheap.
Spend your money locally. Support local businesses, eat at local restaurants. If you can get control of your retirement funds, invest them in local enterprises or in accounts in credit unions. If you have other funds to invest, find local food businesses to invest in. This could go as far as actually buying farm land, and renting it to someone to produce with you receiving a share of the crop (usually paid in the form of cash). If you do this, require your renter to manage the land organically. You may need to receive a little less cash rent if you do this, but you will be building your capital — the land — by investing in the organic methods.
Don't give in to despair and don't feel sorry for yourself. Sow blessings and kindness and you will reap blessings and kindness. By living more frugally and sustainably, you aren't going second class. You will have a first class, worry-free lifestyle.
The people to feel sorry for are those, of whatever income category, who buy into the super-consumer lifestyle. Their self-image is bound up in how much stuff they have. They are never satisfied. They always must have more stuff, new stuff, better stuff. If they aren't spending money, they feel depressed. While they may have flashy clothes and lots of new possessions, these things enslave them to banks, corporations, and credit card companies. Such people will have real problems adjusting to the realities of life in coming years.
Design your life so that you have control over your life. This will make you less vulnerable to crises and emergencies. Now is the time to reduce the amount of stress, risk, and emotional trouble in your life. Frugality is the doorway to economic security.
Leave no one behind for the wolves to devour. Do your part to support the local safety net. Support organizations that help the poor with your time as well as your financial donations.
Do your part to design and implement an economy of abundance to replace our economy of scarcity. This will grow from the bottom up, without centralized command and control as people stop participating in the manipulated systems of consciousness that dominate and direct our activities against our own interests and towards the interests of the economic and political elites. We reject the paternalism of the existing system where we assume that others know best and we are simply to do what we are told as we learn to trust and believe in ourselves. The steps described in this chapter are the beginning of that process of economic liberation.