Financial Tips from The Ultimate Suburban Survivalist

An excerpt from my book, The Ultimate Suburban Survivalist …

Why The Economy is NEVER Going Back to the Old ‘Normal’

From 1995 through 2009, America’s central bank, the Federal Reserve, flooded the economy with trillions of dollars through increased money supply and easy credit. This triggered a massive consumption boom along with several bubbles such as the stock and housing bubbles. All of this created artificial “stimulated demand” as consumers bought and bought and grew more and more indebted as they spent beyond their means.

In other words, the lifestyle we enjoyed for 15 years was based on a lie.  It was like living a high-falutin’ lifestyle paid for with bad checks.  Eventually, those bills come due.  A sustainable lifestyle – the “new normal” is actually at a much lower level.

Another reason why we won’t see the old normal any time soon is because many of the actions taken by both the Bush and Obama administrations in the name of “stimulus” are not stimulus at all.  The bank bailout is a pass-through of taxpayer dollars to well-heeled con-artists on Wall Street. Another name for it would be legalized fraud. 

Sure, these ruinous bank bailouts may have helped reinflate the bubble, but they may also worsen the coming crash, as the bill for trillions of dollars in debt and derivatives comes due.   As Martin Weiss wrote on MoneyandMarkets.com :  “The Treasury’s plan primarily shifts the burden of toxic assets from the private banking sector to the public. This can only (a) bloat an already-ballooning federal deficit, (b) damage the credit of the U.S. government, and (c) raise the risk that borrowing costs will surge for nearly everyone.”

How to Get Your Financial House In Order

Are you in debt up to your eyeballs?  That’s not a good place to be – it’s stressful, and it may become untenable in a time of rising unemployment and falling incomes.  The common-sense thing to do is pay off your highest interest-rate debt first.  I don’t advocate cutting up credit cards – you might need them in a real emergency – but I’m all in favor of burying them in a water-proof in the back yard to keep you from using plastic unnecessarily. 

One thing many survivalists recommend is to pay off your mortgage.  The best reason to pay off a mortgage is to have emotional peace of mind.  But I can also think of a couple of reasons NOT to pay off your mortgage:

Why You SHOULDN’T Pay Off Your Mortgage Right Away

1) You might need that money – especially if you’re preparing for the End of the World as we know it.  I’m much happier with a fat cash cushion.  In fact, if you can pay off your house, one option would be to NOT pay it off and put the money in an interest-bearing account.  As long as mortgages stay tax deductible, you’ll come out ahead of the game.

2) The value of your home may go down.  In fact, it may go down a lot.  So how will you feel if you’ve sunk all your money into your home and it is worth less every month?

3) It’s much more important to pay off credit card debt and other high-interest debts.  As long as you have a low rate of interest on your home loan, that’s the last debt you want to pay off. 

4) The next person to get “bailed out” may be you.  As election time nears and the folks in Washington panic, expect more bailouts – never mind how they’ll be paid off later. 

What You Should Do Starting Now

Pay one extra payment a year on your mortgage.  This can save you hundreds of thousands of dollars in interest and years on your mortgage.

Pay off your credit cards every month.  Credit cards are one of the most expensive kinds of debt. Interest rates can run as high as 25% for credit-card holders who are late with a payment or have low credit scores.  If you have multiple credit card balances – ouch — focus on paying off high-interest-rate cards first. But don’t do a balance transfer without reading the fine print.

Get rid of auto loan debt.  Next to credit cards, auto loans often carry the highest interest rates that many consumers pay. 

Double-check the figures on any medical debt.  Many things can end up on your medical bill that shouldn’t be there. For example, an insurance company will use a code for a procedure and your doctor incorrectly inputs the code – this gets kicked out by the insurers’ computer and you get stuck with the bill.  The insurer WON’T pay unless you bring it to their attention.

Take a good hard look at your current spending.  It’s tough to change spending habits, even wasteful ones.  Streamline for more efficiency and stop wasting money on frivolous or impulsive items. Shop like you’re preparing for the end of the world … because you are.

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