Wednesday, January 29, 2014

Steps to Solid Financial Footing

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        There are lots of concerns that the United States will not be able to continue to pay its debt back.  Our federal government continues to borrow and yet the economy appears to deteriorate.  Many people have not been able to find jobs following extended periods of unemployment, and therefore they are no longer even counted on unemployment figures.  They live with relatives and they continue to collect food stamps, food bank services, unemployment, and then welfare.  Employers are closing. Others are shrinking their companies as much as they can to stay afloat.  If the US experiences an economic collapse, then the ripples of such will reverberate all over the world, and so these are unsure times for everyone.
      The logical choice is for the federal government to slow spending.  They could stop new projects, or even take spending to 2007 levels.  Still, as much contact as I have with my Congressman, and our two Senators, they are not listening to me.  They continue to do as they wish, without listening to the growing numbers of their constituency who believe that spending should be reined in.
                      I don't like feeling powerless about this, and I'm sure most Americans don't either.  There is nothing more than this you and I can do, but we are still, at this moment, in charge of our own family finances.  These are some things you and your family might do in order to tighten your financial ships.

                Build a Financial Emergency Cushion

                    The single most important thing financial advisors tell us that is deficient in most families, is a cash cushion.   Families should have three to six months of bill money saved for emergencies.  Most of them believe that nothing else should happen before this is achieved.   A cash cushion for job losses and emergencies should exist before an emergency, before a vacation, before a new car is contemplated.  Most of us, (myself included for a large chunk of my young life) don't have this, because we think, "If I waited until I had three months saved, I would never have had children, never have bought anything !"   The reality is that three months CAN be saved, but that six months will take some doing.  Perhaps the compromise is to save three months worth of bill money initially, and then gradually add to emergency savings until six months of bill savings is achieved.

                Build a Budget

                        Although everyone knows they should have some type of budget, very few actually do it, or know how.   A budget can be built by listing all your definite expenses on a monthly basis. (Things like mortgage, rent, insurance, recurrent bills, car payments,  electricity, food, phone, tc.      Then, add to it, your recurrent and additional expenses, like educational expenses, cable tv, clothing, entertainment, etc.    Take a hard look at what can be shaved.    Many US families are paying a mortgage insurance premium as part of their mortgage payment because when they bought the home, they did not have 20% equity.  After a few years, many families could have an appraisal done, and drop this mortgage insurance premium, as it may comprise $100-$300. of the mortgage payment.  This money could be saved !    Homeowner's insurance has risen sharply, but you may wish to speak with some other companies.  Make sure you are comparing the same level of homeowner's insurance, but Nationwide might cut you a break over another company.  Geico might save you some money.  Allstate may be a better deal for your personal situation.  Each year, evaluate whether you are paying too much homeowners of car insurance for your needs.   For entertainment, do you need to go to movies or would Netflix at eight dollars a month meet your needs ?    Create a workable budget and then stick to it.

            Save and Pay Yourself First

                    Create several bank accounts and then at work, have some money send to each when you are paid.  The concept of paying yourself first, even a little money, can help to ensure savings. Then live on the remainder of your paycheck.

             Explore Second Hand Sources

                     I have always been at least open to the idea of buying something lightly used.   In the past few years however, I have been shocked at how many excellent values can be found for very little money using second hand sources.   Craigslist allowed our daughter to furnish her entire home, including large appliances for very little money over about four months.  She has a lovely home now, and some of her appliances are better quality than the ones I have, and my home was custom built and had everything new !    Craigslist, second hand shops, Goodwill, Consignment shops, and Ebay all have excellent buys if you will take the time to carefully read and analyze the possibilities.  First, explore the possibility of getting something used, or perhaps purchased, and then never used.  People in the US relocate often for jobs, and this leaves them unloading everything from wedding presents to appliances, often things which were never used, but simply sat in closets. It would be new to you !

                Stock Food Ahead

                Use some sense as to how you purchase food.   You don't have to spend the gasoline and time to go to all the grocery stores and pick up all their weekly specials.  You might find that going to one store every two weeks and buying their specials makes sense, and then the second week going to another store for their specials.  Try to set aside enough storage in order to buy up things you actually use during a sale.  I stocked up on dog food recently.  I bought quite a few potatoes two weeks ago.  I don't use a lot of paper towels but I stocked up when I got some for 49 cents a roll, on special.   Set enough of your food budget aside for some emergency food.  Freeze dried food by mail may be smart, but if you are moving next year, then be careful how much of it you amass.

            Consider Precious Metals

                 It isn't wise to dump your retirement account in order to go out and buy gold, but financial advisors and planners believe that a diversified portfolio is the best way to protect everyone from all the ups and downs of life in the modern world.  Precious metals do belong in a diversified plan.
                 Gold is down at around $1200. an ounce.   This is still pretty pricey for most of us.   However a half an ounce gold coin of ingot might not be.  Make sure it is kept in a safe place.    Platinum is more than that, but holds its value, better than the dollar will.    Silver is presently only $20. a troy ounce, and is therefore a very good buy. It is presently cheaper than it's one troy ounce production cost, and this is unlikely to last long.   Palladium is another excellent precious metal. It ranges from $750-$800. per troy ounce.   Others are also beginning to buy copper ingots.   This is an excellent way to introduce children to the concepts of saving, money markets, and history.   I think that silver ounce coins are an excellent gift for young people.

           Pay Down Any Debt You Can

               It makes sense to divest yourself of anything you really don't need anymore, and to take that money and pay down any debt you might have.  This would certainly make sense in difficult economic times.

          Stay safe, make intelligent decisions and stick to them.  Find inexpensive ways to entertain yourself and your family, and stay prepared.


Sunnybrook Farm said...

I would add that storing food might not be enough, you may want to have means to grow food and weapons to hunt with. The drought in California could put additional pressure on food supplies and could be a tipping point later this year.

JaneofVirginia said...

I agree with you absolutely. We have amassed seeds, hunting supplies, and car parts for routine maintenance and repair. However, a lot of families are just starting in this process and need step by step strategies from the very beginning. Thanks very much for your post !

K said...

All excellent advice.

Gorges Smythe said...

I'm afraid there are going to be a lot of shocked people before long. Your advice is good.

JaneofVirginia said...

Thank you, Gorges. It's a starting point. Thanks for posting.

JaneofVirginia said...

Thank you, K. This should probably be a regular series here. Thanks for posting.

BBC said...

I'm doing just fine, have next to no dept, plenty of food, a bunch of cash stashed away, etc, etc.

JaneofVirginia said...

Good plan to weather coming storms.

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