Saturday, July 18, 2009

“The wise man (or woman) built their house upon the rock.”

Weathering the storms of the economy


It’s hard to drive down any street in America and not see that we are in a shaky economic time. For sale, foreclosure and going out of business signs line every roadway and are stuck in the ground of every vacant lot. Experts cannot agree on the severity or the length of this economic down turn. Some even avoid the words “depression”, “recession” and “collapse” in order to preserve peoples hope but we all see what is going on around us. With no firm advice or opinion on how long this will last or how bad this will get we all need to prepare now for this to be a long term situation.


I manage a business in downtown Jacksonville and at the end of last year the partners of the business and I were discussing the economic situation and trying to decide what we were going to do to ensure our viability for the future. At the time I remember saying to them, “We really aren’t feeling it,” and “I don’t think we will be affected. “ One of the partners looked at me and said, “The companies that prepare now and change their habits before the problems start will be the ones that survive.”


So we went to work looking at every aspect of our business and what we could do to ensure our survival. We wrote a budget, renegotiated contracts, reduced expenses, looked at other more steady sources of income and reduced our dependence on debt among other things.


Because we did this and continue doing this as other companies fold and fail around mine I can sit with confidence knowing that we have done everything we can to shore up our position and prepare for the worst. It is a good feeling and this is a something that as I thought about it I wanted to feel in my own personal life. I decided that I could apply these same principles in my home that I do at work and felt that I wanted to share this with others so they can have that same peace of mind.


1. STOP WASTING MONEY!
I thought that I would be a little less than subtle with the title of this section by titling it as I have. Have you noticed that something strange and different is going on around you? You may think that I ask this in jest but the reality is that usually when things change they require a definite and sure change in behavior, but so few are doing this. Obviously if someone has lost their job it changes their habits, but what about those who haven’t been fully hit with these problems yet.


Stopping the waste within your expenses is absolutely necessary to get you financially prepared for what may come. The first step in doing this is to sit down and prepare a spreadsheet of all of your reoccurring expenses and all of your other expenses for the previous couple months. The key is to look for places to reduce your expenses and to get rid of things that are not necessary.
This may mean a few less cable or satellite channels. Maybe it means that you can’t keep that boat slip or storage unit. Whatever it is remember that every dollar that you cut out of your expenses adds up. I will never forget one Saturday after our company had taken this approach to proactively prepare for the economic downturn my boss called me and said that we were all meeting at the storage unit to clean it out because it is $100 a month that we do not need to spend. At the time I thought it was silly for us to be worried about a $1200 a year bill with the millions of dollars that we spend on operating expenses but when I really thought about it, it was a true way to show an attitude and policy change. You and your family have to have the attitude of saving everywhere and in any way that you can.


One thing that most people would not think of is to renegotiate their current expenses and contracts. Bank loans, cable bills, phone bills, insurance and other things can be renegotiated. Remember these businesses NEED your business and money. I have seen firsthand companies reduce anywhere from 25% to 50% and all I have had to do is ask. You should always get several bids from different companies and use this as leverage and if the current company won’t match then maybe it is time to switch. Obviously be careful about early termination fees on contracts, but keep in mind that these companies want your business long after the contract ends. Use that to your advantage. Try not to extend your contracts unless absolutely necessary.


Don’t take no for an answer. The most common statement I heard was, “It is against company policy so it can’t be done.” One thing I know for sure is that for every rule there is an exception. When sitting down and doing this for my business I called up all of the company representatives for every vendor we worked with. I met or had a phone conference with everyone of them and explained what I was doing (reducing expenses), what my goals were (how much I was willing to spend) and what I wanted from them (To meet my price). They all appreciated my candidness and were a lot easier to deal with once they knew that I didn’t want the sales pitch.


2. Write a budget and build a reserve
The next step is to take your now newly revised expenses and write them into a budget that covers at least 12 months. This is critical to this process because without goals it is hard to achieve anything. This should be something that your whole family is involved in because it requires a commitment of all of the money spenders in the family. You may even want to have the whole family sign off on it, something that we do in the business community, to show everyone’s personal commitment to the changes. Once this is done you have to make sure that any exceptions to the budget be discussed as a group and agreed upon by the group before the money is spent. Having a monthly household meeting to discuss where you are on the spending in the budget and to make any suggested changes that are necessary to keep within your agreed upon expenses.


You have to have a written budget, without this you will never be able to get your spending under control.


Financial Reserve
There is nothing more comforting than knowing that you have money set aside for any circumstance or emergency. A lot of people get discouraged with this because they feel that because they can only put away so little they shouldn’t burden themselves with saving. Every dollar that you save is important. Your ultimate goal should be to save at least 3 months of your normal expenses. I know that some of you just said “ya right.” This will not happen overnight, but what you need to do is sit down and decide how long you feel you can take to reach this goal and write this monthly savings deposit into your budget. Hopefully with all of the expenses that you cut out in your first step of preparedness you can see this as being a more manageable and achievable thing.


Food Storage
Having food storage is something that is always good to have even in good economic times. With all of the natural disasters and now the possibilities and realities of manmade and economic disasters this is a necessity. This is another thing that you will have to take one step at a time. Start with 1 week, then go to two weeks, then to a month and on from there. Look at your income and expenses and write a certain amount of money into your budget to be dedicated to this every payday. I promise you that one day you will be happy that you did this. The ability to feed your family no matter what comes your way is something that will give you peace of mind.


Avoiding Debt
Although some debt is sometimes necessary, especially in these times it should be avoided if at all possible. Having credit available for emergencies or using it to purchase a house, car or to pay for furthering your education is usually not a bad thing as long as you are keeping the payments within your means. Store credit cards, loans for furniture and other things that could be saved for is a recipe for disaster. Bankruptcy is on the rise in our country and it is mostly because people continue to live above their means. If there is something that you want as a family and it is not a necessity, set a reasonable goal for when you can get it and add the monthly amount of money that you need to put away to reach that goal. The anxiety of debt collector’s constant calls can be so demoralizing. If you are at a point where there is no way of getting out of the hole of debt maybe bankruptcy is the only option that you have. The key though is getting your expenses and your dependence on debt under control. There is no shame in admitting a mistake unless you continue to make the same mistakes over and over again.


3. Government and Community Resources
In addition to preparing to take care of your family with your own resources you should be familiar with resources that are out there when you are in need. Since most of us have never been in some of these situations people are missing out on many programs that were set up and paid for with our taxes. Unemployment, Medicare and Medicaid, food stamps, utility bill assistance, food banks and many other programs are available in your area. You should research them now and write them down. That way you are familiar with them if you ever need them instead of scrambling to find out when you are in the midst of the problem.


4. Giving Back
One thing I have always believed in is paying it forward and making deposits in the Karma and Blessings bank. There are a lot of people hurting out there and the community can use all the help that they can get. You should know your neighbors, they will be the people there to help you if you fall on hard times and you should be there for them in return. Schedule a neighborhood cook out. Get to know the people who live around you.


If donating money is not possible, donating your time is just as valuable. Volunteering to help make repairs on a neighbor’s, coworker’s or friend’s home is a great thing to do. Volunteering with aid groups can not only help the community but it usually benefits the volunteer more than the recipients. There is a T.V. commercial ad on right now that I believe is from KIA that I think sums it up well. It says “We are in this together and we will get through this together.” This is the attitude that we should all have in our hearts. Don’t be found with a zero balance in your Karma and Blessings Bank account when you need to make a withdrawal.


Building on the Rock
I titled this article the wise man built his house upon the rock. I am sure that most of you have heard the children’s song that is based on a scripture passage from the Bible. I am not sure of the original writer but it goes like this:


The wise man built his house upon the rock,

The wise man built his house upon the rock,

The wise man built his house upon the rock,

And the rains came tumbling down.


The rains came down, and the floods came up,

The rains came down, and the floods came up,

The rains came down, and the floods came up,

And the house on the rock stood still.


The foolish man built his house upon the sand,

The foolish man built his house upon the sand,

The foolish man built his house upon the sand,

And the rains came tumbling down.


The rains came down, and the floods came up,

The rains came down, and the floods came up,

The rains came down, and the floods came up,

And the house on the sand washed away.

This song has many meanings to me but the one that associates it best with what I have said in this article is that the more we prepare the firmer our foundation is, or in this case, our house is built upon the rock.

You need to remember that this is an ever continuing and changing effort. If you change your attitude and you and your family commit to doing things different, when the storm comes you will not be in the foolish man’s house, you will be in the wise man’s and you will have the comfort knowing that your house did not wash away.

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