Despite the rhetoric from today’s politicians, the economy is in terrible shape, job-wise.
We continue to hear, almost daily, of hundreds and sometimes thousands of jobs being lost either to corporate bankruptcies or to overseas competition. The forthcoming trade deals will only magnify the problem. Expect many more layoffs in the near future and as America’s future way of life.
You ought to be preparing for that inevitability right now. How? By aggressively saving lots of cash while ALSO paying down your debts, leave out none. Pay down and pay off, all your debts: loans, credit cards, mortgages, financing, medical bills, tuition bills, even bank account overdrafts. If you do lose your job, you want to be able to survive for the many years it is taking many people to find a new job.
You know the old rule was to save at least 6 months of salary as a cushion in case you lose a job. In the old days it took a maximum of 6 months to find a great-paying job. That was the OLD rule. MY OPINION, MY RULE: save 24 months of salary as a cushion, for it is now taking people as much as 24 months to find a new, good-paying job.
Whatever form it is in, when you owe too much, life and living becomes very, very ugly. Hunting for a job when stressed out by the possibility of going bankrupt is no picnic. So, if the day does come that you lose your job, you will be happy that you acted now to ensure you won’t be pressured by financial anxiety and fear later on.
Those in debt were twice as likely to think about suicide End Note 1.
To get to the point of being comfortable in the eventuality of losing your job you have to release your ego and the ego of everyone else in your household to permit your family to be able to reduce unnecessary outgoing flows of money to be able to save cash to store it either in the bank or a wise investment that can quickly be turned into cash as needed. You may even have to downsize, like corporations are doing, but, in your case, downsizing means moving to a smaller, more affordable home or to sell of your luxury goods like your second and third autos or RVs, etc.
Ego will color every thought and every attempt to see clearly and will make the process of facing the music a difficult task for everyone in your household.
A little debt may be heathy for the economy. But when debts become too large to be comfortably maintained, fear and anxiety rises. Those two emotional evils will cloud judgement and grip the mind leading to confusion, depression, inability to focus, and many other negative thoughts, and much worse.
The number of debts, source of the debt and reasons for debt are key correlates of suicidal ideation. End Note 2.
When you can’t rapidly pay down on the principal, you have too much debt.
Instead of mortgages remaining the same for long periods of time and rolling it over at renewal, you ought to be paying the principal down and noticeably shrinking your mortgage by paying the maximum extra amount. Your credit cards should carry NO BALANCE. All other large debts ought to be crushed as rapidly as possible by paying the principal before interest gets compounded into making debts worse.
It is very common for very smart people to fail to understand the basic principles of finance and therefore get caught in what is called the “Luxury Trap”: faking wealth and then trying to live up to that lie.
Example of “luxury traps”:
- replacing a perfectly good automobile with a high-priced luxury car though you already have trouble making ends meet.
- buying a gigantic home, or to sustain a huge mortgage, when you know you will suffer financial anxiety when it comes time to pay the monthly payment.
- taking an expensive vacations on credit when credit cards are already a problem.
But, if you are one of the lucky ones who are financially comfortable, and re sure you will be so into the future, then, by all means, spend money to help give our economy a badly needed boost.
END NOTES
- “Personal debt and suicidal ideation”, By Meltzer, Bebbington, Brugha, Jenkins, McManus, Dennis. Psychol Med. 2011 Apr;41(4):771-8. doi: 10.1017/S0033291710001261. Epub 2010 Jun 16.
- ibid.
